Document:

Exhibit 10.23

 

NEW ENTERPRISE STONE & LIME CO., INC.
  EXECUTIVE BENEFIT PLAN

 

New Enterprise Stone & Lime Co., Inc., a corporation organized under the laws of the State of Delaware, (the “Company”), and its affiliated companies, wishes to provide a supplementary deferred compensation benefit as a reward to certain officers and other key employees of the Company and its Subsidiaries and to provide certain of such officers and key employees with the opportunity to defer the receipt of certain compensation to be paid by the Company.  In furtherance thereof, the New Enterprise Stone & Lime Co., Inc. Executive Benefit Plan permits the Company to make contributions to the Plan on behalf of eligible officers and key employees and permits them to elect, as permitted by the Committee, to defer certain compensation in accordance with the terms hereof.

 

The Plan is hereby amended and restated effective January 1, 2008 (the “Effective Date”) to achieve compliance with the requirements of Section 409A of the Code.  All amounts earned or vested before and after the Effective Date are subject to the terms of this Plan.  The Company reserves the right to amend the Plan, either retroactively or prospectively, in whatever respect is required to achieve compliance with the requirements of Section 409A of the Code and regulations issued thereunder.

 

1.               Definitions.

 

Whenever used herein, the following terms shall have the meanings set forth below:

 

“Account” means a deferred compensation account established for a Participant in accordance with Section 2 which includes the Retirement Distribution Account and In-Service Distribution Account(s).

 

“Affiliate” means, with respect to a person or entity, a person that directly or indirectly controls, or is controlled by, or is under common control with such person or entity, or with respect to a person, a person who is an Immediate Family Member of such person or a trust the beneficiary or beneficiaries of which are persons who are Immediate Family Members of such person.

 

“Base Compensation” means, with respect to an employee, regular annualized salary for the then current pay period in which it is paid, and excludes, without limitation, bonuses, commissions, expense reimbursement, payments from, and contributions by the Company to, any insurance, pension or retirement, savings, severance or other employee benefit plan.

 

“Board” means the Board of Directors of the Company.

 

“Bonus” means the amount earned by the Participant under the Company’s annual bonus compensation program, or such other bonus as may be designated by the Committee for deferral hereunder.

 

 

“Cause” means a Participant’s (as determined by the Committee, in its sole discretion):

 

(a)                                engagement in any type of disloyalty to the Company, including without limitation, fraud, embezzlement, theft, or dishonesty in the course of his/her employment or other service to the Company, or otherwise breaches any fiduciary duty owed to the Company;

 

(b)                               conviction of any felony or a misdemeanor involving moral turpitude;

 

(c)                                entering of a plea of guilty or nolo contendere to a felony or a misdemeanor involving moral turpitude;

 

(d)                               disclosure of any confidential, proprietary, business or technical information or trade secret of the Company or of any of its Affiliates; or

 

(e)                                breach of any agreement with or duty to the Company or any written Company policy;

 

provided that, if “Cause” is defined in a Participant’s employment agreement with the Company, if any, then “Cause” with respect to such Participant has the meaning ascribed to such term in such employment agreement.

 

“Change in Control” means:

 

(a)                                the sale, transfer, assignment or other disposition (including by merger or consolidation, but excluding an underwritten public offering of the common stock of the Company) by stockholders of the Company, in one transaction or a series of related transactions, of more than fifty percent (50%) of the voting power represented by the then outstanding common stock of the Company to one or more Persons (other than to Persons who are stockholders of the Company on the date that the Plan is adopted by the Board, or to Affiliates of any such stockholders); or

 

(b)                               the sale of substantially all of the assets of the Company, or

 

(c)                                the liquidation or dissolution of the Company.

 

Notwithstanding the foregoing, (i) a transaction shall not constitute a Change in Control if its sole purpose is to create a holding company that shall be owned in substantially the same proportions by the Persons who held the Company’s securities immediately before such transaction and (ii) in the event of a transaction that would otherwise constitute a Change in Control hereunder, the Committee, as constituted immediately prior to such transaction, in its discretion may vote to deem such transaction not to be a Change in Control.  Furthermore, a transaction shall not constitute a Change in Control unless it satisfies the definition of “change in control” within the meaning of Treas. Reg. 1.409A-3(i)(5).

 

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“Code” means the Internal Revenue Code of 1986, as amended, and regulations issued thereunder.

 

“Committee” means the Executive Committee of the Board or such other committee appointed by the Executive Committee pursuant to Section 12.

 

“Company Contribution” means the Company contribution credited to a Participant’s Account, in an amount determined in accordance with Section 2 and Schedule A as amended from time to time by the Committee.

 

“Deferred Compensation” means any amount deferred pursuant to Section 3(a) hereof.

 

“Deferral Election” means the election form which an Eligible Employee files with the Committee to participate in the Plan.

 

“Disabled” or “Disability” means “disabled” or “disability” as such term is defined in the Company’s group long-term disability plan, as may be amended from time to time; provided, however, that such Disability constitutes a “disability” as defined in Treas. Reg. § 1.409A-3(i)(4).

 

“Eligible Employee” means an Employee who (a) is a member of a group of selected management and/or highly compensated employees of the Company and (b) is designated by the Committee as eligible to participate in the Plan.

 

“Employee” means any individual employed by an Employer on a regular, full-time basis (in accordance with the personnel policies and practices of the Company); provided however, that to qualify as an “Employee” for purposes of the Plan, the individual must be a member of a “select group of management or highly compensated employees” within the meaning of Sections 201, 301 and 401 of the Employee Retirement Income Security Act of 1974, as amended.

 

“Employer” means the Company and any Subsidiary and other affiliate of the Company the employees of which, with the consent of the Company, participate in the Plan.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Good Reason” means (a) a material diminution in the Participant’s base compensation, (b) a material diminution in the Participant’s authority, duties, or responsibilities, (c) a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Participant is required to report, including a requirement that the Participant report to a corporate officer or employee instead of reporting directly to the board of directors (or similar governing body with respect to an entity other than a corporation), (d) a material diminution in the budget over which the Participant retains authority, (e) a material change in the geographic location at which the Participant must perform the services, or (f) any other action or inaction that constitutes a material breach by the Company of an agreement under which the service provider provides services; provided that, if “Good Reason” is defined in a Participant’s

 

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employment agreement with the Company, if any, then “Good Reason” with respect to such Participant has the meaning ascribed to such term in such employment agreement.

 

“Immediate Family Member” means a person’s spouse, parents, lineal descendants, siblings, nieces, nephews and the spouse of any of them, including adoptive relationships.

 

“In-Service Distribution Account” means the account maintained for a Participant to which Deferred Compensation and Company Contributions are credited and pursuant to which benefits are payable in accordance with Section 6(c).

 

“Normal Retirement Age” means age 65.

 

“Participant” means an Eligible Employee on whose behalf the Company makes a contribution to the Plan.

 

“Person” means an individual, partnership, corporation, limited liability company, trust, joint venture, unincorporated association or other entity or association.

 

“Plan” means the Company’s Executive Benefit Plan, as set forth herein and as the same may from time to time be amended.

 

“Plan Year” means the 12-month period commencing each July 1 and ending each June 30.

 

“Re-Deferral Election” means an election to change the form and commencement date of payment with respect to all or a portion of an Account by filing an election change consistent with the requirements of the Treas. Reg. 1.409A-2(b), or any succeeding regulations.  The Committee reserves the right to and discretion to reject and disallow a Re-Deferral Election for any reason and at any time.  A Re-Deferral Election as to an Account:  (i) will not be effective as to any payment from such Account scheduled to be made within 12 months of the Re-Deferral Election; and (ii) shall cause the first payment to which such Re-Deferral Election applies to be deferred by 5 years from the originally scheduled payment date.  A change to the form and commencement date of payment pursuant to Section 6(d) shall not be deemed a Re-Deferral Election.

 

“Retirement Distribution Account” means the account maintained for a Participant to which Deferred Compensation and Company Contributions are credited and pursuant to which benefits are payable in accordance with Section 6(b).

 

“Rule of 75” means the sum of a Participant’s age and the Participant’s Years of Service, but only if such sum is 75 or greater.

 

“Separation from Service” means a cessation of a Participant’s employment by the Company that constitutes a “separation from service” within the meaning of Treas. Reg. 1.409A-1(h).

 

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“Subsidiary” means any corporation (other than the Company) that is a “subsidiary corporation” with respect to the Company under Section 424(f) of the Code.  In the event the Company becomes a subsidiary of another company, the provisions hereof applicable to subsidiaries shall, unless otherwise determined by the Committee, also be applicable to any company that is a “parent corporation” with respect to the Company under Section 424(e) of the Code.

 

“Unforeseeable Emergency” means, within the meaning of Treas. Reg. 1.409A-3(i)(3), a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Participant’s beneficiary, or the Participant’s dependent (as defined in Section 152 of the Code, without regard to Sections 152(b)(1), (b)(2), and (d)(1)(B)); loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the service provider.

 

“Vesting Date” shall mean June 30 of each Plan Year.

 

“Year of Service” means a 12-month period beginning on a Participant’s first day of participation in the Plan or anniversary thereof provided the Participant is an Employee at the end of such 12-month period.

 

2.               Company Contributions.

 

Each month the Company shall credit to the Account of each Employee who is an Eligible Employee at the end of such month a Company Contribution equal to the applicable percentage set forth in Schedule A, as amended from time to time, multiplied by the Base Compensation earned for such month.  In addition, the Company shall credit to the Account of each Employee who is an Eligible Employee at the time a Bonus is paid a Company Contribution equal to the applicable percentage set forth in Schedule A, as amended from time to time, multiplied by the amount of such Bonus.  With respect to Employees who first become Eligible Employees in a Plan Year, the Company shall credit to an Account established for such Eligible Employee a Company Contribution commencing on and after the earlier of the July 1 or January 1 first following the date on which such Employee first became an Eligible Employee, or such other date determined by the Committee.  Unless otherwise determined by the Committee, the Company shall continue to credit Company Contributions to each such Account until the applicable Participant ceases to be an Eligible Employee.  Company Contributions attributable to Base Compensation shall be credited to Participants monthly in accordance with procedures to be adopted by the Committee, and Company Contributions attributable to a Participant’s Bonus shall be credited as soon as practicable following the payment of the Bonus to the Participant.

 

3.               Election to Defer Compensation.

 

(a)          Employee Deferrals.  If permitted by the Committee in accordance with Schedule A as amended from time to time, the Participant may elect that up to 50% of the Participant’s Base Compensation otherwise earned during a calendar year commencing after the calendar year in which such election is filed with the Company, and up to 90% of the

 

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Participant’s Bonus earned in such future calendar year, shall be compensation deferred under the Plan.  Subject to the last sentence of this Section 3(a), elections with respect to Base Compensation and Bonus shall be made prior to December 31 of the calendar year preceding the year in which the Base Compensation is to be earned, or such earlier time as may be established by the Committee.  Notwithstanding the foregoing, if permitted by the Committee, in the case of a Bonus that constitutes “performance-based compensation” within the meaning of Treas. Reg. 1.409A-1(e), or any succeeding regulations, an election to defer such Bonus may be made at any time that is at least six months before the end of the period of at least 12 months during which the Participant may earn such Bonus.  Elections to defer Base Compensation and/or Bonus amounts are irrevocable at the end of the election period established by the Committee, provided that, the Committee in its sole discretion, may accept revocations of elections to defer Base Compensation up to December 31 of the calendar year in which the Participant files a Deferral Election.

 

(b)         New Eligible Employees.  If a Participant is newly designated by the Committee as being eligible to elect Deferred Compensation in accordance with Schedule A, the Participant may make a Deferral Election within 30 days after such Participant first becomes eligible to make such a deferral election with respect to Base Compensation and Bonus earned after such Deferral Election in the calendar year of the election.

 

(c)          Form of Election.  The election described in Section 3(a) shall be made in writing substantially in the form attached hereto as Exhibit A as applicable, or in such other form as the Committee may prescribe from time to time, to the Committee within the time specified herein.  With respect to the amount deferred, an election to defer Base Compensation and/or Bonus amounts will remain in effect year-to-year until changed or revoked, but as of the deadline established by the Committee for making elections, the election becomes irrevocable for the immediately following year.

 

(d)         Credit to Accounts.  All Deferred Compensation with respect to a Participant shall be credited to the Participant’s Account when such Deferred Compensation would otherwise have been paid to the Participant but for an election pursuant to this Section 3.

 

4.               Accounts.

 

(a)          In General.  The establishment and maintenance of, and credits to and deductions from, a Participant’s Account (whether under Section 2, 3(a) or 4(b), or otherwise) shall be mere bookkeeping entries, and shall not vest in the Participant or his beneficiary any right, title or interest in or to any specific assets of the Company.  Separate subaccounts under each Account shall be established to record each year’s Company Contributions and Deferred Compensation, if any, and the credits and deductions with respect thereto (whether under, Sections 2, 3(a) or 4(b), or otherwise).  Such separate subaccounts shall also be established where separate Deferral Elections are made with respect to Base Compensation and Bonus.  A Participant’s Account shall consist of a Retirement Distribution Account and one or more, but no more than 3, In-Service Distribution Accounts, as established and maintained by the Company.  The annual amount of Deferred Compensation and Company Contributions deferred, if any, shall be credited by the Company to the Participant’s Retirement Distribution Account and In-Service

 

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Distribution Account(s) in accordance with the irrevocable Deferral Election of the Participant.  The maximum amount that may be allocated to the Participant’s In-Service Distribution Accounts is 50% of any annual Company Contribution, subject to the aggregate limit specified in Schedule A, and 100% of any Deferred Compensation.  In the event no Deferred Compensation or Company Contributions are elected by the Participant to be credited to the In-Service Distribution Account(s), any such amounts shall be credited to the Retirement Distribution Account by default.

 

(b)         Earnings and Losses.  With respect to participating employees, earnings and losses shall accrue on the balance in the applicable Participant’s Account (and each subaccount) at the rate or rates specified in advance of the effective time of the applicability of such rate or rates, and from time to time, by the Committee.  Such rate or rates need not be a fixed rate, and may be established by reference to an index or indices, or a return (whether positive or negative) on a specific investment fund or funds (including without limitation, if permitted by the Committee, hypothetical investment alternatives from among which Participants may select in accordance with procedures established by the Committee).  In the discretion of the Committee, insurance may, but need not, be purchased as a vehicle of investment for Participants’ accounts.  Earnings and losses shall be credited ratably to Participants’ Accounts (and all subaccounts) as of the end of each calendar month, and, with respect to any particular Participant’s Account, shall continue to be credited thereto until all amounts are distributed with respect to the Participant’s Account (and, as applicable, the subaccounts) in accordance with the Plan.  Upon final distribution, any accrued earnings shall be credited to the Participant’s Account (and each subaccount) and distributed therewith, and any accrued losses shall reduce the amount of distributions hereunder.

 

5.               Vesting and Forfeitures.

 

(a)          Fully Vested Credits.  A Participant shall always have a 100% vested and nonforfeitable interest in the subaccounts of his or her Account attributable to Deferred Compensation.  Subject to the last sentence of Section 5(c), a Participant shall have a 100% vested and nonforfeitable interest in all subaccounts of his or her Account (including those attributable to Deferred Compensation and Company Contributions) upon the attainment of Normal Retirement Age or the Rule of 75.

 

(b)         Forfeitable Credits.  Subject to the last sentence of Section 5(c), a Participant who terminates employment prior to attainment of Normal Retirement Age for any reason other than for Cause shall have a vested and nonforfeitable interest only in that portion of the Company Contributions credited to his or her Account and the earnings or other credits attributable thereto that have become vested in accordance with this Section 5(b).  Provided that the Participant remains in continuous service with the Company through such Vesting Dates, Company Contributions shall vest according to the following schedule:

 

(i)                                     As of each Vesting Date, any Company Contribution allocated to a Participant’s Account more than one year but no more than two years prior to that Vesting Date will be 40% vested.

 

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(ii)                                  As of each Vesting Date, any Company Contribution allocated to a Participant’s Account more than two years but no more than three years prior to that Vesting Date will be 60% vested.

 

(iii)                               As of each Vesting Date, any Company Contribution allocated to a Participant’s Account more than three years but no more than four years prior to that Vesting Date will be 80% vested.

 

(iv)                              As of each Vesting Date, any Company Contribution allocated to a Participant’s Account more than four years prior to that Vesting Date will be 100% vested.

 

(c)          Forfeitures.  The non-vested Account balance of a terminated Participant shall be forfeited as of the date on which the Participant’s employment with the Company terminates for any reason other than for Cause.  The entire subaccount balance of a Participant’s Account that is attributable to Company Contributions and earnings thereon shall be forfeited as of the date on which the Participant’s employment is terminated by the Company for Cause.

 

6.               Distribution of Accounts.

 

(a)          In General.  Distribution from a Participant’s Retirement Distribution Account shall be made at the time and in the form prescribed in Section 6(b).  Distribution from a Participant’s In-Service Distribution Account(s) shall be made at the time and in the form elected by the Participant in a Deferral Election filed by the Participant and in accordance with Section 6(c).

 

(b)         Retirement Distribution Account.

 

(i)                                     Time of Payment.  Subject to Sections 7, 8, 9 and 10, and except as provided in subsection (ii) below, distributions of the Participant’s Retirement Distribution Account shall commence or be made on the last day of the thirteenth month following the later of the Participant’s attainment of Normal Retirement Age or the Participant’s Separation from Service.

 

(ii)                                  Form of Payment.  The Participant’s Retirement Distribution Account shall be distributed in one of the following forms, as elected by the Participant in writing in their Deferral Election or pursuant to a Re-Deferral Election: (1) in annual installments over 3, 5 or 10 years; (2) annual installments over 3 years beginning on the third anniversary of the later of the Participant’s attainment of Normal Retirement Age or Separation from Service; or (3) in accordance with the following schedule:

 

	
 
    	
Payment Date
    	
 
    	
Percentage of Retirement
   Distribution Account
    	
 
    
	
 
    	
Third Anniversary of later of Normal Retirement Age or Separation   from Service
    	
 
    	
10%
    	
 
    

 

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Fourth Anniversary of later of Normal Retirement Age or Separation   from Service
    	
 
    	
25%
    	
 
    
	
 
    	
Fifth Anniversary of later of Normal Retirement Age or Separation   from Service
    	
 
    	
50%
    	
 
    
	
 
    	
Sixth Anniversary of later of Normal Retirement Age or Separation   from Service
    	
 
    	
Remainder of Retirement Distribution Account
    	
 
    

 

(iii)                               Default Form of Payment.  Unless elected otherwise by the Participant, the default form of payment of a Participant’s Retirement Distribution Account shall be annual installments paid over 3 years.

 

(iv)                              Changes in Distribution Elections.  A Participant may elect to change the form and commencement date of payment of the Participant’s Retirement Distribution Account by filing a Re-Deferral Election.  Limitations on the form and commencement date under a Re-Deferral Election shall be determined by the Plan Administrator in its sole discretion.

 

(c)          In-Service Distribution Account.

 

(i)                                     Time of Payment.  Subject to Sections 7, 8, 9 and 10, a Participant’s In-Service Distribution Account shall be paid to the Participant commencing in the calendar year irrevocably elected by the Participant in the Deferral Election pursuant to which such In-Service Distribution Account was established.

 

(ii)                                  Form of Payment.  Distribution from an In-Service Distribution Account shall be distributed in one of the following forms, as elected by the Participant in writing in their Deferral Election: (1) in annual installments over a period not to exceed 4 years, or (2) in one lump sum.

 

(d)         Change in Time and Form of Election Pursuant to Special Transition Rules.

 

(i)                                     To the extent provided by the Plan Administrator, a Participant may, during the period extending from January 1, 2007 to December 31, 2007, with respect to all or any portion of his Account under this Plan that is scheduled to be paid after December 31, 2007, make new payment elections (which shall not be considered Re-Deferral Elections) as to the form and timing of payment of such amounts as may be permitted under this Plan, provided that no portion of the benefit subject to such an election shall be payable before January 1, 2008.

 

(ii)                                  To the extent provided by the Plan Administrator, a Participant may, during the period extending from January 1, 2008 to December 31, 2008, with respect to all or any portion of his Account under this Plan that is scheduled to be paid after December 31, 2008, make new payment elections (which shall not be considered Re-Deferral Elections) as to the form and timing of payment of such amounts as may be permitted under this

 

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Plan, provided that no portion of the benefit subject to such an election shall be payable before January 1, 2009.

 

(e)          Small Benefit Cash-Out.  The Plan Administrator reserves the right to immediately cash out a Participant or Beneficiary if the value of the Participant’s Account, together with any other deferred amounts under agreements, methods, programs, or other arrangements treated with the Plan as a single nonqualified deferred compensation plan under Treas. Reg. 1.409A-1(c)(2), is not greater than the applicable dollar amount under section 409A of the Code and the regulations issued thereunder Section 402(g)(1)(B) of the Code as of the date the Plan Administrator elects to cash out the Participant’s Account.

 

7.                         Death Benefits.

 

(a)          Prior to Termination of Employment.  If a Participant is an Employee at the time of his or her death (including an Employee who is Disabled), such Participant’s beneficiary or estate, as applicable, shall be entitled to receive the greater of (i) the death benefit specified in Schedule A less the amount of any prior Account distributions, or (ii) the Participant’s entire vested Account balance at the date of death.  Such benefit shall be paid to the Participant’s beneficiary or estate, as applicable, in a single lump sum no later than 60 days following the date death occurs.

 

(b)         Following Termination of Employment.  If a Participant dies following his or her termination of employment, but prior to the commencement of Account distributions, the Participant’s vested Account shall be paid to the Participant’s beneficiary or estate in the form and at the appropriate time applicable to the Participant’s Retirement Distribution Account under Section 6(b).  If a Participant dies following his or her termination of employment and after the Participant’s vested Account balance has begun to be distributed to the Participant in accordance with Section 6, the remaining vested Account balance shall be distributed to the Participant’s beneficiary or estate, as applicable, in the manner and at such times as the Account was being distributed to the Participant prior to his or her death.

 

8.                              Disability Benefits.

 

In the event of a Participant’s Disability, if the Participant remains Disabled for a continuous period of 18 months, the Participant’s entire Account balance shall become immediately and fully vested at the end of such 18-month period.  The Participant’s Account, notwithstanding any election to the contrary, shall be paid in the form applicable to the Participant’s Retirement Distribution Account under Section 6(b), provided, however, that the Account will commence to be distributed upon the expiration of the 18-month Disability period and not upon Normal Retirement Age or Separation from Service, if applicable.

 

9.                              Hardship Distributions.

 

In the event that the Committee, upon written request of a Participant, determines, in its sole discretion, that the Participant has suffered an Unforeseeable Emergency, the Company shall pay to the Participant from the Participant’s Account, as soon as practicable following such determination, an amount necessary to meet such Unforeseeable Emergency, in a

 

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manner consistent with Treas. Reg. 1.409A-3(i)(3), after deduction of any and all taxes as may be required (the “Hardship Benefit”).  Hardship Benefits shall be paid first from the Participant’s In-Service Distribution Account(s), if any, to the extent the balance of one or more of such In-Service Distribution Accounts is sufficient to meet the emergency, in the order in which such Accounts would otherwise be distributed to the Participant.  If the distribution exhausts the In-Service Distribution Account(s), the Retirement Distribution Accounts may be accessed.  With respect to that portion of the Account which is distributed to a Participant as an Hardship Benefit in accordance with this Section 9, no further benefit shall be payable to the Participant under this Plan.  Notwithstanding anything in this Plan to the contrary, a Participant who receives an Hardship Benefit in any calendar year shall not be entitled to make any further deferrals for the remainder of such calendar year.

 

10.                        Change in Control.

 

Notwithstanding any other provision of the Plan to the contrary, if a Participant has a Separation from Service with the Company or its successor within the two-year period following a Change in Control that is the result of a termination without Cause or is a resignation for Good Reason, the Participant shall become immediately and fully vested in his or her entire Account balance and distribution of the Participant’s Account shall be made to the Participant in a lump sum as soon as practicable (but in no event more than 30 days) after such termination.

 

11.                    Competition Restriction.

 

If, while employed by the Company or during the two-year period following termination of employment by the Company (other than a termination pursuant to Section 10), a Participant becomes engaged, whether as principal, agent, investor, distributor, representative, stockholder (other than as the holder of not more than five percent (5%) of the stock or equity of any corporation the capital stock of which is publicly traded), director, partner, employee, consultant, volunteer or otherwise, with or without pay, in any activity or business venture, anywhere in the U.S.A. within the markets where the Company actively does business at the time of such termination, or within the five years prior to such termination, that designs, manufactures, markets, sells or distributes products or services that are competitive with the products and services of the Company, or, in the case of Participants who have entered into employment agreements with the Company, if such Participant breaches a non-competition covenant or similar restriction in such agreement, the Participant’s entire balance of the Participant’ Account, whether vested or nonvested, shall be immediately forfeited.

 

12.                    Administration; Interpretation and Amendments.

 

(a)          The Committee.  The Plan shall be administered by the Committee.  The acts of a majority of the members present at any meeting of this Committee at which a quorum is present, in person or by phone, or acts approved in writing by a majority of the entire Committee, shall be the acts of the Committee for purposes of the Plan; provided that the otherwise applicable procedures of the Committee, to the extent inconsistent with the provisions of this sentence, shall control.  If and to the extent applicable, no member of the Committee may act as to matters under the Plan specifically relating to such member.

 

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(b)         Powers of the Committee.  The Committee may make such rules and regulations and establish such procedures for the administration of the Plan as it deems appropriate.  Without limiting the generality of the foregoing, the Committee may, in its sole discretion, (i) determine the extent, if any, to which amounts in any Participant’s Account shall be forfeited (whether or not such forfeiture is expressly contemplated hereunder); (ii) interpret the Plan and the elections under the Plan, with such interpretations to be conclusive and binding on all persons and otherwise accorded the maximum deference permitted by law, provided that the Committee’s interpretation shall not be entitled to deference on and after a Change in Control except to the extent that such interpretations are made exclusively by members of the Committee who are individuals who served as Committee members before the Change in Control; (iii) establish and amend Schedule A hereto; and (iv) take any other actions and make any other determinations or decisions that it deems necessary or appropriate in connection with the Plan or the administration or interpretation thereof.  Unless otherwise expressly provided hereunder, the Committee, with respect to any credit to an Account, may exercise its discretion hereunder at the time of such credit or thereafter.  In the event of any dispute or disagreement as to the interpretation of the Plan or of any rule, regulation or procedure, or as to any question, right or obligation arising from or related to the Plan, the decision of the Committee, except as provided in clause (ii) of the foregoing sentence, shall be final and binding upon all persons.

 

(c)          Amendment.  The Committee may amend the Plan as it shall deem advisable, except that no amendment may adversely affect a Participant with respect to Company Contributions or Deferred Compensation previously credited to a Participant’s Account unless such amendments are required in order to comply with applicable laws, or to ensure that the deferrals and distributions hereunder satisfy the requirements of Section 409A of the Code and do not result in the inclusion of any deferred amounts in income of Participants under Section 409A(a)(1) of the Code.  Notwithstanding the foregoing, the Committee and the Company shall not guaranty the tax status of such deferrals and shall not be responsible for payment of any taxes resulting from the application of Section 409A(a)(1) of the Code.

 

13.                        Assignment and Alienation; Funding.

 

(a)          No Assignment or Alienation.  Rights or benefits with respect to Company Contributions and Deferred Compensation credited to a Participant’s Account under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, prior to actually being received by the person entitled to the benefit under the terms of the Plan; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, attach, charge or otherwise dispose of any right or benefits payable hereunder shall be void.

 

(b)         Beneficiary Designation.  A Participant may designate in writing, on forms to be prescribed by the Committee, a beneficiary or beneficiaries to receive any payments payable after his or her death and may amend or revoke such designation at any time.  If no beneficiary designation is in effect at the time of a Participant’s death, payments hereunder shall be made to the Participant’s estate.

 

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(c)          No Funding.  Credits to a Participant’s Account hereunder shall not be treated as (or as giving rise to) property or as a trust fund of any kind; provided, however, that the Company may establish a mere bookkeeping reserve to meet its obligations hereunder or a trust or other funding vehicle that would not cause the Plan to be deemed to be funded for tax Purposes or for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.  Except as otherwise provided in the Plan, all payments from a Participant’s Account hereunder shall be paid in cash from the general funds of the Company (or such trust or other funding vehicle, if applicable).  The right of a Participant to receive such payments by virtue of participation in the Plan shall be no greater than the right of any unsecured general creditor of the Company.  Nothing contained in the Plan, and no action taken pursuant to the provisions of the Plan, shall create or shall be construed to create a trust of any kind, or a fiduciary relationship between the Company or its officers or the Committee, on the one hand, and the Participant, the Company or any other person or entity, on the other.

 

14.                        Notices.

 

All notices under the Plan shall be in writing, and if to the Company, shall be delivered to the Committee or mailed to its principal office, addressed to the attention of the Committee; and if to the Participant, shall be delivered personally or mailed to the Participant at the address appearing in the records of the Company.  Such addresses may be changed at any time by written notice to the other party given in accordance with this Section 14.

 

15.                        No Rights to Employment or Other Service.

 

Nothing in the Plan or in amounts credited to a Participant’s Account pursuant to the Plan shall confer on any individual any right to continue in the employ or other service of the Company or its Subsidiaries or interfere in any way with the right of the Company or its Subsidiaries and its shareholders to terminate the individual’s employment or other service at any time.

 

16.                    Exculpation and Indemnification.

 

To the maximum extent permitted by law, the Company shall indemnify and hold harmless the members of the Board and the members of the Committee from and against any and all liabilities, costs and expenses incurred by such persons as a result of any act or omission to act in connection with the performance of such person’s duties, responsibilities and obligations under the Plan.

 

17.                    Claim Procedures.

 

(a)          The Participant, or his or her beneficiary hereunder or authorized representative, may file a claim for benefits with respect to Company Contributions and Deferred Compensation credited under the Plan by written communication to the Committee or its designee.  A claim is not considered filed until such communication is actually received.  Within 90 days (or, if special circumstances require an extension of time for processing, 180 days, in which case notice of such special circumstances should be provided within the initial 90-day period) after the filing of the claim, the Committee shall either:

 

13

 

(i)                                     approve the claim and take appropriate steps for satisfaction of the claim; or

 

(ii)                                  if the claim is wholly or partially denied, advise the claimant of such denial by furnishing to him a written notice of such denial setting forth (A) the specific reason or reasons for the denial; (B) specific reference to pertinent provisions of the Plan on which the denial is based and, if the denial is based in whole or in part on any rule of construction or interpretation adopted by the Committee, a reference to such rule, a copy of which shall be provided to the claimant; (C) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of the reasons why such material or information is necessary; and (D) a reference to, this Section 17 as the provision setting forth the claims procedure under the Plan.

 

(b)         The claimant may request a review of any denial of his claim by written application to the Committee within 60 days after receipt of the notice of denial of such claim.  Within 60 days (or, if special circumstances require an extension of time for processing, 120 days, in which case notice of such special circumstances should be provided within the initial 60 day period) after receipt of written application for review, the Committee shall provide the claimant with its decision in writing, including, if the claimant’s claim is not approved, specific reasons for the decision and specific references to the Plan provisions on which the decision is based.

 

18.                        Arbitration.

 

Any dispute, controversy or claim arising out of or under the Plan, if a mutually acceptable resolution does not result through negotiation, shall be submitted to arbitration which shall be exclusive, final, binding and conducted in accordance with the rules of the American Arbitration Association applicable to commercial arbitration and shall be nonappealable except in accordance with such rules.

 

19.                        Governing Law.

 

The Plan shall be governed by and construed in accordance with the laws and judicial decisions of the Commonwealth of Pennsylvania, without regard to the application of the principles of conflicts of laws.

 

20.                        Captions.

 

The use of captions in the Plan is for convenience.  The captions are not intended to provide substantive rights.

 

14Exhibit 10.24

 

STOCK RESTRICTION AND MANAGEMENT AGREEMENT

 

AMONG

 

PAUL I. DETWILER, JR.,

 

DONALD L. DETWILER AND

 

NEW ENTERPRISE STONE & LIME CO., INC.

 

 

Dated:  March 1, 1990

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
1.
    	
DEFINITIONS
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
1.1.
    	
“Allowed Portion of Non-Voting Stock”
    	
 
    	
1
    
	
 
    	
1.2.
    	
“Allowed Portion of Stock”
    	
 
    	
1
    
	
 
    	
1.3.
    	
“Allowed Portion of Voting Stock”
    	
 
    	
1
    
	
 
    	
1.4.
    	
“Applicable Federal Rate”
    	
 
    	
2
    
	
 
    	
1.5.
    	
“Appraisal”
    	
 
    	
2
    
	
 
    	
1.6.
    	
“Appraiser”
    	
 
    	
2
    
	
 
    	
1.7.
    	
“Certified Statements”
    	
 
    	
2
    
	
 
    	
1.8.
    	
“Closing”
    	
 
    	
2
    
	
 
    	
1.9.
    	
“Closing Date”
    	
 
    	
2
    
	
 
    	
1.10.
    	
“Common Stock”
    	
 
    	
2
    
	
 
    	
1.11.
    	
“Company”
    	
 
    	
2
    
	
 
    	
1.12.
    	
“Competitor”
    	
 
    	
2
    
	
 
    	
1.13.
    	
“Customer”
    	
 
    	
2
    
	
 
    	
1.14.
    	
“Designated Directors”
    	
 
    	
2
    
	
 
    	
1.15.
    	
“Discharge For Cause”
    	
 
    	
2
    
	
 
    	
1.16.
    	
“Discharge Without Cause”
    	
 
    	
3
    
	
 
    	
1.17.
    	
“Earnings Per Share”
    	
 
    	
3
    
	
 
    	
1.18.
    	
“Employment Qualification”
    	
 
    	
3
    
	
 
    	
1.19.
    	
“Free Transfer Period”
    	
 
    	
3
    
	
 
    	
1.20.
    	
“Fully Electing Remaining Stockholder”
    	
 
    	
3
    
	
 
    	
1.21.
    	
“Independent Accountants”
    	
 
    	
3
    
	
 
    	
1.22.
    	
“Independent Committee”
    	
 
    	
3
    
	
 
    	
1.23.
    	
“Irreconcilable Dispute”
    	
 
    	
3
    
	
 
    	
1.24.
    	
“Mental Disability”
    	
 
    	
3
    
	
 
    	
1.25.
    	
“Net Worth”
    	
 
    	
3
    
	
 
    	
1.26.
    	
“Nominees”
    	
 
    	
4
    
	
 
    	
1.27.
    	
“Non-Voting Stock”
    	
 
    	
4
    
	
 
    	
1.28.
    	
“Offer”
    	
 
    	
4
    
	
 
    	
1.29.
    	
“Offer Notice”
    	
 
    	
4
    
	
 
    	
1.30.
    	
“Offered Stock”
    	
 
    	
4
    
	
 
    	
1.31.
    	
“Offered Voting Stock”
    	
 
    	
4
    
	
 
    	
1.32.
    	
“Offered Non-Voting Stock”
    	
 
    	
4
    
	
 
    	
1.33.
    	
“Offering Date”
    	
 
    	
4
    
	
 
    	
1.34.
    	
“Permanent Disability”
    	
 
    	
4
    
	
 
    	
1.35.
    	
“Permitted Transferee”
    	
 
    	
4
    
	
 
    	
1.36.
    	
“Preferred Stock”
    	
 
    	
4
    
	
 
    	
1.37.
    	
“Prime Rate”
    	
 
    	
4
    
	
 
    	
1.38.
    	
“Prohibited Action”
    	
 
    	
4
    
	
 
    	
1.39.
    	
“Purchaser”
    	
 
    	
4
    
	
 
    	
1.40.
    	
“Put Notice”
    	
 
    	
5
    
	
 
    	
1.41.
    	
“Put Shares”
    	
 
    	
5
    

 

i

 

	
 
    	
1.42.
    	
“Qualified Transferee”
    	
 
    	
5
    
	
 
    	
1.43.
    	
“Recognized Transferees”
    	
 
    	
5
    
	
 
    	
1.44.
    	
“Remaining Stockholders”
    	
 
    	
5
    
	
 
    	
1.45.
    	
“Remaining Voting Stockholder”
    	
 
    	
5
    
	
 
    	
1.46.
    	
“Remaining Non-Voting Stockholder”
    	
 
    	
5
    
	
 
    	
1.47.
    	
“Replacement”
    	
 
    	
5
    
	
 
    	
1.48.
    	
“Retirement”
    	
 
    	
5
    
	
 
    	
1.49.
    	
“Stockholder”
    	
 
    	
5
    
	
 
    	
1.50.
    	
“Trade Secret”
    	
 
    	
5
    
	
 
    	
1.51.
    	
“Trust Agreement”
    	
 
    	
5
    
	
 
    	
1.52.
    	
“Voting Stock”
    	
 
    	
5
    
	
 
    	
1.53.
    	
“Voting Trust”
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.
    	
RESTRICTIONS ON TRANSFER
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.1.
    	
Restriction on Voluntary Transfer
    	
 
    	
6
    
	
 
    	
2.2.
    	
Offer by the Stockholder
    	
 
    	
6
    
	
 
    	
2.3.
    	
Stock to Which Offer Relates
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.
    	
OTHER EVENTS TRIGGERING TRANSFERS
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.1.
    	
Transfer by Operation of Law
    	
 
    	
7
    
	
 
    	
3.2.
    	
Cessation of Employment in Certain Cases. i
    	
 
    	
7
    
	
 
    	
3.3.
    	
Permanent Disability or Death of Stockholder
    	
 
    	
7
    
	
 
    	
3.4.
    	
Put Options
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
3.4.1.
    	
Put Option By Stockholder in the Event of Discharge Without   Cause
    	
 
    	
8
    
	
 
    	
 
    	
3.4.2.
    	
Tenth Anniversary Put
    	
 
    	
9
    
	
 
    	
 
    	
3.4.3.
    	
Put of Allowed Portion of Voting Stock
    	
 
    	
9
    
	
 
    	
 
    	
3.4.4.
    	
Rights Of Remaining Stockholders
    	
 
    	
9
    
	
 
    	
 
    	
3.4.5.
    	
Election to Apply Section 5.1 or 5.2
    	
 
    	
9
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.
    	
PERMITTED TRANSFERS
    	
 
    	
9
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.1.
    	
Transfer to Spouse, Lineal Descendants or Trusts
    	
 
    	
9
    
	
 
    	
4.2.
    	
Transferor to Trust Treated as Owner
    	
 
    	
10
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.
    	
PRICE AND TERMS
    	
 
    	
10
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.1.
    	
Terms and Conditions for Sale of An Allowed Portion of   Stock
    	
 
    	
10
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
5.1.1.
    	
Price
    	
 
    	
10
    
	
 
    	
 
    	
5.1.2.
    	
Net Worth
    	
 
    	
10
    
	
 
    	
 
    	
5.1.3.
    	
Earnings Per Share
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.2.
    	
Terms and Conditions For Sale of All Common Stock
    	
 
    	
11
    
	
 
    	
5.3.
    	
Payment
    	
 
    	
11
    
	
 
    	
5.4.
    	
Insurance
    	
 
    	
11
    

 

ii

 

	
6.
    	
PROCEDURES
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.1.
    	
Acceptance of Offer
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
6.1.1.
    	
The Company
    	
 
    	
12
    
	
 
    	
 
    	
6.1.2.
    	
Remaining Stockholders
    	
 
    	
13
    
	
 
    	
 
    	
6.1.1.
    	
Exercise
    	
 
    	
13
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.2.
    	
Release from Restriction
    	
 
    	
14
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
6.2.1.
    	
Free Transfer Period
    	
 
    	
14
    
	
 
    	
 
    	
6.2.1.
    	
Public Offering
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.3.
    	
Conditions of Release from Restriction
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
6.3.1.
    	
More Favorable Transfer Requires Re-Offer
    	
 
    	
15
    
	
 
    	
 
    	
6.3.2.
    	
Pledge or Encumbrance
    	
 
    	
15
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.4.
    	
Nonrecognition of Certain Transfers; Additional Capital   Stock
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
6.4.1.
    	
Agreement to be Bound
    	
 
    	
16
    
	
 
    	
 
    	
6.4.1.
    	
Transfer Not in Accord with this Agreement
    	
 
    	
16
    
	
 
    	
 
    	
6.4.1.
    	
Additional Capital Stock of the Company
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.1.
    	
Necessary Documents
    	
 
    	
17
    
	
 
    	
6.2.
    	
No Sale to Competitor
    	
 
    	
17
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7.
    	
MANAGEMENT MATTERS
    	
 
    	
17
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.1.
    	
Management Policies and Resolution of Management Disputes
    	
 
    	
17
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
7.1.1.
    	
Selection of Voting Directors
    	
 
    	
17
    
	
 
    	
 
    	
7.1.1.
    	
Selection of Emeritus Directors
    	
 
    	
18
    
	
 
    	
 
    	
7.1.1.
    	
Designated Directors
    	
 
    	
18
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.2.
    	
Co-involvement and Management Disputes
    	
 
    	
18
    
	
 
    	
7.3.
    	
Cash Flow Controls and Maximizing ROI
    	
 
    	
19
    
	
 
    	
7.4.
    	
Establishing Specific Corporate Policies
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
7.4.1.
    	
Management Evaluations
    	
 
    	
19
    
	
 
    	
 
    	
7.4.2.
    	
Other Policies
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.5.
    	
The Board of Directors
    	
 
    	
19
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8.
    	
MISCELLANEOUS MATTERS
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.1.
    	
Arbitration
    	
 
    	
20
    
	
 
    	
8.2.
    	
Endorsement on Stock Certificates
    	
 
    	
21
    
	
 
    	
8.3.
    	
Covenant Not to Compete
    	
 
    	
21
    

 

iii

 

	
 
    	
 
    	
8.3.1.
    	
During Employment
    	
 
    	
21
    
	
 
    	
 
    	
8.3.2.
    	
After Termination of Employment or Sale of Stock
    	
 
    	
21
    
	
 
    	
 
    	
8.3.3.
    	
Modification for Enforceability
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.4.
    	
Specific Performance
    	
 
    	
21
    
	
 
    	
8.5.
    	
Liquidation of Corporation
    	
 
    	
22
    
	
 
    	
8.6.
    	
Stockholder Wills
    	
 
    	
22
    
	
 
    	
8.7.
    	
Notices
    	
 
    	
22
    
	
 
    	
8.8.
    	
Time Periods
    	
 
    	
22
    
	
 
    	
8.9.
    	
Successors and Assigns
    	
 
    	
23
    
	
 
    	
8.10.
    	
Titles Not to Affect Interpretation
    	
 
    	
23
    
	
 
    	
8.11.
    	
Invalid Provision
    	
 
    	
23
    
	
 
    	
8.12.
    	
Governing Law
    	
 
    	
23
    
	
 
    	
8.13.
    	
Subordination
    	
 
    	
23
    
	
 
    	
8.14.
    	
Modification
    	
 
    	
23
    

 

iv

 

STOCK RESTRICTION AND MANAGEMENT AGREEMENT

 

This STOCK RESTRICTION AND MANAGEMENT AGREEMENT dated as of March 1, 1990 is among PAUL I. DETWILER, JR., a resident of the Commonwealth of Pennsylvania , DONALD L. DETWILER, a resident of the Commonwealth of Pennsylvania, and NEW ENTERPRISE STONE & LIME CO., INC., a Delaware corporation.

 

BACKGROUND

 

The Company has purchased certain shares of capital stock and undertaken a recapitalization of its remaining shares of capital stock.  The Company currently has authorized two classes of capital stock: (a) Common Stock, $1.00 par value, which is divided into two different series, one of which is voting Common Stock and the other of which is non-voting Common Stock; and (b) Preferred Stock, $100 par value.

 

Paul I. Detwiler, Jr. currently is the record owner of 10,250 shares of the Company’s voting Common Stock and 157,645 shares of the Company’s non-voting Common Stock, and Donald L. Detwiler currently is the record owner of 10,250 shares of the Company’s voting Common Stock and 101,680 shares of the Company’s non-voting Common Stock.  The Stockholders do not own any shares of Preferred Stock.

 

The Stockholders and the Company have agreed that it would be in their respective best interests to set forth in writing the restrictions on the transfer of the shares of Common Stock and the obligations relating to the disposition of the shares of Common Stock which each will have to the other, as well as certain rights that each of the Stockholders will have in the management and operation of the Company.

 

NOW, THEREFORE, intending to be legally bound hereby, the Stockholders and the Company agree as follows:

 

1.                                      DEFINITIONS.

 

The following terms shall have the meanings ascribed to them when used in this Agreement:

 

1.1.          “Allowed Portion of Non-Voting Stock” shall mean an amount of a Stockholder’s Non-Voting Stock which, when added to all other transfers of Non-Voting Stock by such Stockholder pursuant to this Agreement (including pursuant to Section 3.4 hereof (relating to certain put rights)), is not more than twenty percent (20%) of the amount of Non-Voting Stock held by such Stockholder on the date hereof.  For purposes of applying the twenty percent (20%) limit, transfers to transferees permitted under Section 4 of this Agreement (relating to transfers to spouses, lineal descendants or trusts) shall not be taken into account.

 

1.2.          “Allowed Portion of Stock” shall mean either an Allowed Portion of Voting Stock or an Allowed Portion of Non-Voting Stock.

 

1.3.          “Allowed Portion of Voting Stock” shall mean an amount of a Stockholder’s Voting Stock which, when added to all other transfers of Voting Stock by such Stockholder 

 

1

 

pursuant to this Agreement (including pursuant to Section 3.4 hereof (relating to certain put rights)), is not more than twenty percent (20%) of the amount of Voting Stock held by such Stockholder on the date hereof.  For purposes of applying the twenty percent (20%) limit, transfers to transferees permitted under Section 4 of this Agreement (relating to transfers to spouses, lineal descendants or trusts) shall not be taken into account.

 

1.4.          “Applicable Federal Rate” shall mean the lowest applicable federal rate as determined under section 1274(d) of the Code.

 

1.5.          “Appraisal” shall mean the valuation of the Common Stock conducted by an appraiser as required by Section 5.2 of this Agreement.

 

1.6.          “Appraiser” shall mean the appraiser performing the Appraisal, which appraiser shall be selected by agreement of the Stockholders; provided that if the Stockholders are unable to agree, the appraiser shall be selected by members of the Board of Directors of the Company.

 

1.7.          “Certified Statements” shall mean the certified financial statements of the Company prepared by the Independent Accountants.

 

1.8.          “Closing” shall mean the actual transfer of shares of Common Stock by the Stockholder to the Company or the Remaining Stockholders, as the case may be.

 

1.9.          “Closing Date” shall mean the date of Closing.

 

1.10.        “Common Stock” shall mean the Company’s common stock, $1.00 par value per share, which is issued and outstanding.

 

1.11.        “Company” shall mean New Enterprise Stone & Lime Co., Inc., a Delaware corporation.

 

1.12.        “Competitor” shall mean any person or entity conducting a commercial enterprise engaged in business operations which compete directly or indirectly with the Company.

 

1.13.        “Customer” shall mean any person, division or unit of a business enterprise, or unit of a government agency, with whom or which, at the time of termination of a Stockholder’s employment by Company, Company has a contract, or is negotiating for a contract, or has submitted a bid which has not yet been accepted or rejected, or is preparing a bid to be submitted.

 

1.14.        “Designated Directors” shall mean those directors of the Company designated by each Stockholder to fulfill the functions set forth in Section 7.1.3. of this Agreement after the death of a Stockholder.  Each Stockholder shall designate the same number of directors, but not less than three (3) to serve as his Designated Directors.

 

1.15.        “Discharge For Cause” shall mean termination of a Stockholder’s employment by the Company if such Stockholder has been convicted of a crime or has participated in, benefitted from, or not acted to prevent, a known fraud against the Company or if, in the Board of Directors’ opinion, such Stockholder’s conduct as an employee has evidenced a repeated willful 

 

2

 

failure or refusal to perform those functions necessary or desirable for the efficient operation of the Company’s business activities or to develop and promote the business opportunities of the Company.

 

1.16.        “Discharge Without Cause” shall mean a termination of a Stockholder’s employment by the Company other than for Permanent Disability, Retirement or death, and other than for Discharge for Cause.

 

1.17.        “Earnings Per Share” shall have the meaning set forth in Section 5.1.3 of this Agreement.

 

1.18.        “Employment Qualification” shall mean, with respect to any transferee of shares of Common Stock pursuant to this Agreement, a requirement that the transferee, or the spouse of the transferee (or, if applicable, the beneficiary of a trust which is a transferee hereunder, or the spouse of any such beneficiary), be, and have been for the immediately preceding two (2) years, active in the management of the Company as of the time of the transfer.

 

1.19.        “Free Transfer Period” shall mean the sixty (60) day period following the expiration of the time provided in Section 6.2.1 of this Agreement for election to purchase by Remaining Stockholders, except as otherwise expressly provided in this Agreement.

 

1.20.        “Fully Electing Remaining Stockholder” shall mean a Remaining Stockholder who has elected to purchase the full portion of share of Offered Voting Stock and Offered Non-Voting Stock available to him pursuant to Section 6.1.2 of this Agreement.

 

1.21.        “Independent Accountants” shall mean the independent accountants engaged by the Company to audit the Company’s books and records.

 

1.22.        “Independent Committee” shall mean a committee established by the Company’s Board of Directors which will consist of not less than four (4) directors (but in no event will it be an odd number of directors), none of whom will be stockholders or officers or employees of the Company.  The members of the Independent Committee will be appointed by the Board and will consist of at least two (2) directors who were originally nominated by a Stockholder (or his Recognized Transferee(s)) and an equal number of directors who were originally nominated by the other Stockholder (or his Recognized Transferee(s)) pursuant to Section 7.1 of this Agreement.

 

1.23.        “Irreconcilable Dispute” shall mean a dispute which arises between the Stockholders with respect to any matter requiring the decision of the Stockholders in their capacities as holders of the Company’s Voting Stock, which dispute, if unresolved, is reasonably anticipated to have a material adverse effect upon the business, operations, properties or assets of the Company, and which dispute the Stockholders have attempted to resolve between themselves unsuccessfully.

 

1.24.        “Mental Disability” shall mean a Permanent Disability affecting a Stockholder’s mental capacity but not his physical capacity.

 

1.25.        “Net Worth” shall have the meaning set forth in Section 4.2 of this Agreement.

 

3

 

1.26.        “Nominees” shall mean the nominees for the position of director nominated by the Stockholders pursuant to Section 7.1 of this Agreement.

 

1.27.        “Non-Voting Stock” shall mean all shares of non-voting Common Stock, whether now owned or hereafter acquired.

 

1.28.        “Offer” shall mean the offer made pursuant to Section 2 of this Agreement.

 

1.29.        “Offer Notice” shall mean the notice of an Offer required to be made by Section 2.2 of this Agreement.

 

1.30.        “Offered Stock” shall mean the shares of Common Stock which are the subject of an Offer, and shall include, for purposes of Section 6.1 of this Agreement (relating to acceptance of the Offer) shares of Common Stock which are the subject of a Put Notice.

 

1.31.        “Offered Voting Stock” shall mean shares of Offered Stock which are shares of Voting Stock.

 

1.32.        “Offered Non-Voting Stock” shall mean shares of Offered Stock which are shares of Non-Voting Stock.

 

1.33.        “Offering Date” shall mean, unless otherwise specified in this Agreement, the date on which communication of an Offer, in the form of an Offer Notice or otherwise, is received by the Company.

 

1.34.        “Permanent Disability” shall mean a physical or mental incapacity, certified by a licensed physician of the Company’s choice, which prevents a Stockholder from carrying out the full-time employment of the Stockholder with the Company for a period of one hundred eighty (180) consecutive days or a total of two hundred seventy (270) days within any three hundred sixty-five (365) day period.

 

1.35.        “Permitted Transferee” shall mean any of the spouse or lineal descendants of a Stockholder.

 

1.36.        “Preferred Stock” shall mean the Company’s preferred stock, $100 par value per share, which is issued and outstanding.

 

1.37.        “Prime Rate” shall mean the rate of interest publicly announced by The Philadelphia National Bank as its prime rate, as in effect from time to time.

 

1.38.        “Prohibited Action” shall mean any action referred to in Section 8.3.1 of this Agreement.

 

1.39.        “Purchaser” shall mean the Company or the Remaining Stockholders, or both the Company and the Remaining Stockholders, as applicable, to the extent such entity or person (s) is a purchaser of shares of stock pursuant to this Agreement.

 

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1.40.        “Put Notice” shall mean a written notice from a Stockholder to the Company that the Stockholder is exercising his rights under any of the provisions of Section 3.4 of this Agreement (relating to certain put rights).

 

1.41.        “Put Shares” shall mean shares of Common Stock which are the subject of a Put Notice.

 

1.42.        “Qualified Transferee” shall mean any Permitted Transferee who (or whose spouse) satisfies the Employment Qualification, or a trust created for the benefit of such a Permitted Transferee.

 

1.43.        “Recognized Transferees” shall mean transferees of Voting Stock, whether individuals or trusts, the transfer to whom, or to which, was recognized by the Company under the terms of this Agreement.

 

1.44.        “Remaining Stockholders” shall mean the holders of shares of the Company’s issued and outstanding capital stock, whether Common Stock, Preferred Stock or other class of the Company’s capital stock which may hereafter be authorized, other than the Stockholder making or deemed to make an Offer.

 

1.45.        “Remaining Voting Stockholder” shall mean a Remaining Stockholder who owns shares of Voting Stock.

 

1.46.        “Remaining Non-Voting Stockholder” shall mean a Remaining Stockholder who owns shares of Non-Voting Stock.

 

1.47.        “Replacement” shall mean the replacement for a Nominee who has resigned, been removed, or otherwise become unable to serve as a director.

 

1.48.        “Retirement” shall mean a Stockholder’s voluntary termination of employment with the Company for a reason other than Permanent Disability or other employment, at age 65 or other age established under Company policies as the retirement age for executives of the Company.

 

1.49.        “Stockholder” shall mean either Donald L. Detwiler or Paul I. Detwiler, Jr., and “Stockholders” shall mean both such individuals.

 

1.50.        “Trade Secret” shall mean any proprietary right of Company in any product, method or procedure whether or not such product, method or procedure is patented, trademarked or copyrighted.

 

1.51.        “Trust Agreement” shall mean a Voting Trust Agreement in the form of Exhibit A to this Agreement.

 

1.52.        “Voting Stock” shall mean all shares of voting Common Stock, whether now owned or hereafter acquired.

 

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1.53.                        “Voting Trust” shall mean a voting trust established under a Trust Agreement which trust shall (i) be created under Pennsylvania law; (ii) have a term of not less than ten (10) years; (iii) provide for the issuance of one or more trust certificates to the Permitted Transferee(s) on whose behalf the trust is created, which certificates shall represent the Permitted Transferee’s economic participation in the Company represented by the shares of Voting Stock deposited in the trust; and (iv) have as trustee either (x) a non-disabled Stockholder or (y) any Qualified Transferee of a disabled or deceased Stockholder to whom such Stockholder could have transferred such Voting Stock pursuant to Section 4 of this Agreement (taking into account, for purposes of this clause (y), the Employment Qualification).

 

2.                                      RESTRICTIONS ON TRANSFER

 

2.1.                              Restriction on Voluntary Transfer.

 

Except as otherwise provided in this Agreement, no Stockholder may transfer (whether by sale, gift or otherwise), pledge or encumber any of his shares of Common Stock unless such Stockholder has first made an offer, in the order and manner set forth in this Agreement, to sell either (A) all of his shares of Common Stock or (B) an Allowed Portion of Stock (but in no event less than the shares of Common Stock proposed to be so transferred, pledged or encumbered by the Stockholder), to the Company and to the Remaining Stockholders of the Company, and the Offer has not been accepted in the manner set forth in this Agreement.

 

2.2.                              Offer by the Stockholder.

 

An Offer Notice will be communicated to the Company and to the Remaining Stockholders concurrently and will consist of (a) an offer by a Stockholder to sell, in accordance with the provisions of this Agreement, either all of his shares of Common Stock or an Allowed Portion of Stock, but in no event less than the number of shares identified pursuant to clause (c) of this Section 2.2; (b) a statement of the Stockholder’s bona fide intention to transfer, pledge or encumber, as the case may be, any or all of his shares of Common Stock and the identity and address of the prospective record and beneficial transferees, pledgees or lienors; (c) the number of the shares of Common Stock involved in the proposed transfer, pledge or encumbrance and whether such shares are Voting Stock or Non-Voting Stock; and (d) the terms of the proposed transfer, pledge or encumbrance, including, without limitation, any financing arrangements then known to the Stockholder.

 

2.3.                              Stock to Which Offer Relates.

 

If a Stockholder proposes to transfer, pledge or encumber an Allowed Portion of Stock, the Offer made by such Stockholder pursuant to Section 2 of this Agreement shall relate only to those shares of Voting Stock or Non-Voting Stock, or both, as applicable, proposed to be transferred, pledged or encumbered at such time.  If a Stockholder proposes to transfer, pledge or encumber either (a) an amount of his Voting Stock which exceeds an Allowed Portion of Voting Stock, or (b) an amount of his Non-Voting Stock which exceeds an Allowed Portion of Non-Voting Stock, the Offer shall relate to all shares of Common Stock then held by such Stockholder.

 

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3.                                      OTHER EVENTS TRIGGERING TRANSFERS

 

3.1.                              Transfer by Operation of Law.

 

If any Stockholder makes a general assignment for the benefit of creditors, is adjudged a bankrupt, becomes insolvent or in any manner transfers by operation of law (other than as a result of death or any merger or consolidation to which the Company is a party) shares of Common Stock, or any part thereof, such Stockholder will be deemed thereby to have made the Offer to sell all of his shares of Common Stock in accordance with the provisions of Section 2 of this Agreement and the Offering Date will be deemed to be the date of receipt by the Company of written notice of any such assignment, adjudgment, insolvency or transfer.  If the Company, pursuant to Section 6.1.1 of this Agreement, elects not to purchase any or all of such Stockholder’s shares of Common Stock, and the Remaining Stockholders do not purchase all of such unpurchased shares of Common Stock pursuant to the Offer, each within the time periods set forth in Section 6.1 of this Agreement, then the Offer will be deemed a continuing offer thereafter and the Company may accept the Offer at such time as it believes to be appropriate, subject to applicable legal restraints.  Upon subsequent acceptance of the Offer by the Company, the Offering Date will be deemed to be the date of such acceptance; provided, however, that if the Offer is subsequently accepted by the Company within six (6) months of the time it was originally made, the valuation of the shares of Common Stock will be made as if the Offer had been accepted on the Offering Date.

 

3.2.                              Cessation of Employment in Certain Cases. i

 

If a Stockholder is Discharged For Cause or voluntarily terminates his employment with the Company (or otherwise ceases, to be a full-time employee of the Company for a reason other than Retirement, Permanent Disability, death or Discharge Without Cause), the Stockholder will be deemed thereby to have made an Offer to sell all of his Common Stock in accordance with Section 2 of this Agreement and the Offering Date will be deemed to be the date of receipt by the Company of notice of such cessation of employment.  If the Company, pursuant to Section 6.1.1 of this Agreement, elects not to purchase any or all of such Stockholder’s shares of Common Stock, and the Remaining Stockholders do not purchase all of such shares of Common Stock pursuant to the Offer, each within the time periods set forth in Section 6.1 of this Agreement, then the Offer will be deemed a continuing offer thereafter and the Company may accept the Offer at such time as it believes to be appropriate.  Upon subsequent acceptance of the Offer by the Company, the Offering Date will be deemed to be the date of such acceptance; provided, however, that if the Offer is subsequently accepted by the Company within six (6) months of the time it was originally made, the valuation of the shares of Common Stock will be made as if the Offer had been accepted on the Offering Date.

 

3.3.                              Permanent Disability or Death of Stockholder.

 

3.3.1.       Upon the Permanent Disability or death of a Stockholder, except as specifically provided in Section 3.3.3 hereof, such Stockholder or the personal representative of such Stockholder, whether or not properly qualified, shall sell all of his shares of Common Stock to the Company, and the Company shall purchase all of his shares of Common Stock, all in accordance with the terms of this Agreement as if an Offer were made.  Upon the death of such

 

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Stockholder, should any or all of his shares of Common Stock be transferred by operation of law to any of the heirs of such Stockholder, the personal representative of such Stockholder, whether or not properly qualified, shall be deemed to have made the Offer in accordance with the terms of this Agreement on behalf of such heirs.  In the event of such death or Permanent Disability, the Offering Date will be deemed to be the date of receipt of written notice of the occurrence of such event by the Company.

 

3.3.2.       In the event an Offer is deemed made pursuant to Section 3.3.1 of this Agreement and the Company is unable to purchase the shares of Offered Stock because of a legal or contractual impediment as provided in Section 6.1.1 hereof, then after the Free Transfer Period, the Company’s obligation to purchase such shares shall be continuing and the Company shall notify the Stockholder or personal representative, and shall purchase such shares, as soon as practicable after it is relieved of the legal or contractual impediment which prevented it from purchasing such shares.  Upon any such subsequent purchase, the Offering Date will be deemed to be the date the Company notifies the Stockholder or personal representative of its ability to purchase due to relief from the legal or contractual impediment.

 

3.3.3.       Notwithstanding Section 3.3.1 and any other provisions of this Agreement to the contrary, upon the Permanent Disability or death of any Stockholder, such Stockholder or his properly qualified personal representative may transfer (A) any Non-Voting Stock to any Permitted Transferee, or a trust created for the benefit of a Permitted Transferee; and (B) any Voting Stock to any Permitted Transferee or any trust for the benefit of a Permitted Transferee, provided that, if such Permitted Transferee of Voting Stock, who receives such shares or who is the beneficiary of any such trust, is not also a Qualified Transferee at the time of the transfer, such shares of Voting Stock shall be subject to a Voting Trust for the benefit of the Permitted Transferee.  The transfer to any such Permitted Transferee or trust (whether holding shares of Common Stock or voting trust certificates) shall not be recognized unless, prior thereto,, the Permitted Transferee (or trustee of a trust for the benefit of the Permitted Transferee) has executed and delivered to the Company a Transferee Stock Restriction Agreement substantially in the form of Exhibit B to this Agreement.

 

3.3.4.       In the event that shares of Voting Stock are subject to a Voting Trust for the benefit of a Permitted Transferee as provided in Section 3.3.3, and such shares were not otherwise transferred to a trust for the benefit of a Permitted Transferee, then the shares of Voting Stock so transferred to the trust will be considered as owned by the Permitted Transferee in computing the portion of the Company’s capital stock owned by such Permitted Transferee for purposes of determining the rights and obligations of such Permitted Transferee under this Agreement and other stock restriction agreements entered into between the Company and its stockholders from time to time, if any, but in no event will the obligations of the Company or a Remaining Stockholder be duplicated as a consequence of this provision.

 

3.4.                              Put Options.

 

3.4.1.       Put Option By Stockholder in the Event of Discharge Without Cause.  If a Stockholder is Discharged Without Cause, the discharged Stockholder may, at any time thereafter, require the Company (and if so required by the Stockholder, the Company hereby agrees, subject to Section 6.1.1 of this Agreement) to purchase all or any portion of (as required

 

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by such Stockholder) his shares of Common Stock by delivery of a Put Notice to the Company within thirty (30) days after any such discharge, in which event, any such purchase and sale shall take place in accordance with Sections 5.1 or 5.2 (as applicable), and Sections 5.3, 6.1 and 6.5 of this Agreement.

 

3.4.2.       Tenth Anniversary Put.  At any time after the tenth anniversary of the date of this Agreement, any Stockholder may require the Company (and if so required, the Company hereby agrees, subject to Section 6.1.1 of this Agreement) to purchase all or any portion of (as required by such Stockholder) his shares of Common Stock by delivery of a Put Notice to the Company.  In such event, any purchase and sale shall take place in accordance with Sections 5.1 or 5.2 (as applicable) and Sections 5.3, 6.1 and 6.5 of this Agreement.

 

3.4.3.       Put of Allowed Portion of Voting Stock.  At any time after the date of this Agreement, a Stockholder may require the Company (and if so required, the Company hereby agrees, subject to Section 6.1.1 of this Agreement) to purchase an amount of his Voting Stock up to the Allowed Portion of Voting Stock by delivery of a Put Notice to the Company; provided, however, that a Stockholder may not exercise his right to require the Company to so purchase his shares of Voting Stock pursuant to this Section 3.4.3 more than once each fiscal year.  Any such purchase and sale shall take place in accordance with Sections 5.1, 5.3, 6.1 and 6.5 of this Agreement.

 

3.4.4.       Rights Of Remaining Stockholders.  If Company is unable to fulfill its obligations under this Section 3.4 by reason of a legal or contractual impediment as provided in Section 6.1.1 (which cannot be removed as provided in said Section 6.1.1), then the Remaining Stockholders shall have an option to acquire the Put Shares, as if such shares were shares of Offered Stock and Section 6.1.2 applied.  Any Put Shares not purchased by the Remaining Stockholders shall again become subject to this Agreement, provided that, if not all such Put Shares are so purchased, the exercising Stockholder shall have the ability to rescind any elections by the Remaining Stockholders to purchase such Put Shares, whereupon all such Put Shares shall again be subject to the terms and conditions of this Agreement.

 

3.4.5.       Election to Apply Section 5.1 or 5.2.  If the number of Put Shares exceeds an Allowed Portion of Stock but is less than all shares then owned by the Stockholder providing the Put Notice, the Company may elect to calculate the purchase price therefore in accordance with either Section 5.1 or 5.2 of this Agreement.

 

4.                                      PERMITTED TRANSFERS

 

4.1.                              Transfer to Spouse, Lineal Descendants or Trusts.

 

Notwithstanding any provision in this Agreement to the contrary, the Stockholders may transfer, at any time all or any portion of their respective shares of Common Stock to a Permitted Transferee, or a trust created for the benefit of a Permitted Transferee.  A transfer will not be permitted under this Section 4.1 unless (a) prior to any such transfer there has been delivered to the Company by the Permitted Transferee, and by the trustee of any trust created for the benefit of a Permitted Transferee, a Transferee Stock Restriction Agreement substantially in the form of Exhibit B to this Agreement; and (b) if the shares of Common Stock

 

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to be transferred under this Section 4.1 are shares of Voting Stock, the Permitted Transferee who receives such shares or is the beneficiary of any such trust, is also a Qualified Transferee.

 

4.2.                              Transferor to Trust Treated as Owner.

 

In the event that the Stockholder makes any such transfer to a trust for the benefit of a Permitted Transferee the shares of the Company’s capital stock so transferred, nevertheless, will be considered as owned by the transferor in computing the portion of Company’s capital stock owned by such transferor for purposes of determining the rights and obligations of such transferor under this Agreement and similar agreements, if any, with other stockholders of the Company, but in no event will the obligations of the Company or a Remaining Stockholder be duplicated as a consequence of this provision.

 

5.                                      PRICE AND TERMS

 

5.1.                              Terms and Conditions for Sale of An Allowed Portion of Stock.

 

If an Offer relates to the sale of an Allowed Portion of Stock, and not to all Common Stock held by a Stockholder, the following terms and conditions shall apply to the sale:

 

5.1.1.                     Price.  The price for the purchase of any Allowed Portion of Stock will be the higher of (x) the Net Worth of Company multiplied by a fraction, the numerator of which is the number of shares of Common Stock to be purchased and the denominator of which is the total number of issued and outstanding shares of Common Stock as of the Offering Date, including the shares of Common Stock which are shares of Offered Stock or (y) the Earnings Per Share of Common Stock multiplied by twelve (12) times the aggregate number of shares of Common Stock to be purchased.

 

5.1.2.                     Net Worth.  For purposes of this Agreement, the Net Worth of Company will mean:

 

(a)           Offer in First Half of Year.  If the Offering Date occurs prior to the first (1st) day of the seventh (7th) month in any fiscal year of the Company, the net worth of the Company on the last day of the fiscal year of the Company immediately preceding the fiscal year in which the Offering Date occurs; or

 

(b)           Offer in Second Half of Year.  If the Offering Date occurs on or after the first (1st) day of the seventh (7th) month in any fiscal year, the net worth of the Company on the last day of the fiscal year of the Company in which the Offering Date occurs, in either case, as reflected on the Company’s Certified Statements for such year; provided, however, that the Net Worth (a) will include only capital paid in (including par value and surplus) for, and retained earnings attributable to, the Company’s issued and outstanding shares of Common Stock/ and (b) will not include any proceeds of insurance paid upon the death of a stockholder which would otherwise be included in Net Worth, but shall include the net cash surrender value (cash surrender value minus any loans) of such policies immediately prior to the death of a Stockholder, which would otherwise be excluded from Net Worth.

 

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5.1.3.                     Earnings Per Share.  The Earnings Per Share of Common Stock shall mean the amount determined as follows:

 

(a)           Offer in First Half of Year.  If the Offering Date occurs prior to the first (1st) day of the seventh (7th) month in any fiscal year of the Company, the Earnings Per Share shall be the average of the earnings per share of Common Stock in each of the three (3) fiscal years immediately preceding the fiscal year in which the Offering Date occurs.

 

(b)           Offer in Second Half of Year.  If the Offering Date occurs on or after the first (1st) day of the seventh (7th) month in any fiscal year of the Company, the Earnings Per Share shall be the average of the earnings per share of Common Stock in each of the fiscal year in which the Offering Date occurs and the two (2) fiscal years immediately preceding the fiscal year in which the Offering Date occurs.

 

Earnings per share for each such year will be obtained by dividing (x) the net income (after provision has been made for federal, state and local taxes) of the Company, for each such year as derived from the Certified Statements by (y) the average number of shares of Common Stock issued and outstanding in each such year, as calculated by the Independent Accountants in accordance with generally accepted accounting principles consistently applied.

 

5.2.                              Terms and Conditions For Sale of All Common Stock.

 

In the case of an Offer relating to all shares of Common Stock then held by a Stockholder, the purchase price will be determined by an Appraisal conducted by an Appraiser at the time the Offer is made.  Company shall arrange, as necessary, for an Appraiser to value its Common Stock promptly after an Offer Notice or Put Notice is communicated pursuant to this Agreement.

 

5.3.                              Payment.

 

The purchase price for any shares of Offered Stock will be paid in thirty-two (32) equal consecutive quarterly installments, the first of which will be paid on the Closing Date, and the remainder of which will be paid on the next succeeding thirty-one (31) quarterly anniversary dates of Closing (or next business day, if such anniversary is on a Saturday, Sunday or holiday), together with accrued interest from the Closing Date on the unpaid portion of the purchase price at the rate of one percent (1%) per annum below the Prime Rate, but in no event less than the Applicable Federal Rate; provided that, in the event shares of Offered Stock are to be purchased due to the death of a Stockholder and the Company shall then have available to it the proceeds of any insurance to be obtained on the life of such Stockholder pursuant to Section 5.4 of this Agreement (relating to insurance), then the first payment due hereunder shall be in an amount equal to the proceeds of such life insurance actually received by the Company and the remainder shall be paid in thirty-one (31) equal installments as provided above in this Section 5.3.

 

5.4.                              Insurance.

 

The Company hereby agrees to purchase, and shall be the owner of, key-man life insurance on the life of each Stockholder providing for a death benefit in such amount as the Company deems appropriate, which insurance proceeds received by the Company shall be used

 

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to fund the initial payment obligation of the Company in the event the Company is required to repurchase from a Stockholder his shares of Common Stock due to the death of such Stockholder.  The Company shall not pledge, encumber or grant any security interest in the cash surrender value or proceeds of any such insurance policy.

 

6.                                      PROCEDURES

 

6.1.                              Acceptance of Offer.

 

6.1.1.                     The Company.

 

(a)           Obligation of the Company.  Within ninety (90) days after receipt by the Company of (a) the Offer made or deemed to have been made pursuant to Section 3.3 (relating to permanent disability or death) of this Agreement, or (b) a Put Notice, the Company shall purchase all, but not less than all, of the shares of Offered Stock unless the Company receives from its independent legal counsel within such period a written opinion based on information available at the time (including without limitation comparative analyses of unaudited financial statements and good faith projections of year-end results) to the effect that payment of the purchase price contemplated by such Offer is prohibited by applicable law, rule or regulation, or by a contract or agreement which affects the Company.

 

(b)           Election of the Company.  Within ninety (90) days after receipt of an Offer other than an Offer referred to in Section 6.1.1 (a), the Company may elect, but shall not be required, to purchase all, but not less than all, of the shares of Offered Stock.  After such ninety (90) day period and after the periods provided in Section 6.1.2 for purchase by the Remaining Stockholders, the Company shall again have the right to purchase any shares of Offered Stock to the extent such shares are the subject of an Offer made under Section 3.1 (relating to transfers by operation of law) or Section 3.2 (relating to cessation of employment) of this Agreement, insofar as such Offers shall be continuing as provided in Sections 3.1 and 3.2 of this Agreement.

 

(c)           Contractual Impediment.  If the opinion of the independent legal counsel referred to in Section 6.1.1(a) of this Agreement is to the effect that payment of such purchase price is not prohibited by any applicable law, rule or regulation, but is prohibited by a contract or agreement which affects the Company, then the Company will promptly use its best efforts to obtain such consents or waivers as may be necessary to remove such impediment to the purchase.  Within ten (10) days after receipt of all such consents or waivers, the Company promptly will purchase all shares of Offered Stock.  If, after using its best efforts, the Company is unable to obtain such consents or waivers, the Company will give written notice to the Stockholder and to the Remaining Stockholders of such inability and rejection of the Offer.

 

(d)           Legal Impediment.  If the legal opinion referred to in Section 6.1.1 (a) is to the effect that payment of such purchase price is prohibited by applicable law, rule or regulation, and if the legal prohibition can be eliminated by recapitalization in accordance with generally accepted accounting principles (including adjustment of the value of its assets or adjustment of the par value of the Company’s issued and outstanding capital stock or other reasonable action by the Company), then the Company will take such action.  If such prohibition

 

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cannot be eliminated by any such action, the Company will give written notice to the Stockholder and to the Remaining Stockholders of the Company’s inability to purchase and the rejection of the Offer.

 

6.1.2.                     Remaining Stockholders.

 

(a)           Voting Stock.  If the Offer is rejected by the Company pursuant to Section 6.1.1 of this Agreement, each Remaining Voting Stockholder, within thirty (30) days after the receipt by such Remaining Voting Stockholder of the notice from the Company rejecting the Offer pursuant to such Section 6.1.1, may elect, but shall not be required, to purchase up to that proportion of the shares of Offered Voting Stock as the number of shares of Voting Stock which such Remaining Voting Stockholder - owns as of the Offering Date bears to the aggregate number of then issued and outstanding shares of Voting Stock other than shares of Offered Voting Stock and any other shares of Voting Stock owned by the offering Stockholder.  Any shares purchased by a Permitted Transferee who is considered as the owner of Voting Stock pursuant to Section 3.3.4 of this Agreement, shall be subject to the same Voting Trust as is referred to in Section 3.3.4.

 

(b)           Non-Voting Stock.  If the Offer is rejected by the Company pursuant to Section 6.1.1 of this Agreement, each Remaining Stockholder, within the same thirty (30) day period allowed for the election to purchase shares of Offered Voting Stock pursuant to Section 6.1.2 (a), may elect, but shall not be required, to purchase up to that proportion of the shares of Offered Non-Voting Stock as the number of shares of Preferred Stock and Non-Voting Stock which such Remaining Stockholder owns as of the Offering Date bears to the aggregate number of then issued and outstanding shares of Preferred Stock and Non-Voting Stock, other than the shares of Offered Non-Voting Stock, and any other shares of Non-Voting Stock or Preferred Stock, owned by the offering Stockholder.

 

(c)           Subsequent Opportunity to Purchase.  If any Remaining Stockholder does not elect to purchase all of the portion of the shares of Offered Voting Stock or Offered Non-Voting Stock available to him pursuant Sections 6.1.2 (a) and 6.1.2(b), each Fully Electing Remaining Stockholder may elect, for a period of fifteen (15) days, to purchase that portion of the shares of Offered Stock not elected to be purchased by any Remaining Stockholder pursuant to Section 6.1.2 (a) and 6.1.2 (b), as the number of shares of Voting Stock, Preferred Stock and Non-Voting Stock which he owns as of the Offering Date bears to the aggregate number of issued and outstanding shares of Voting Stock, Preferred Stock and Non-Voting Stock owned as of the Offering Date by all Fully Electing Remaining Stockholders.  The fifteen (15) day period for the purchase of shares pursuant to this Section 6.1.2(c) shall not commence until the conclusion of the thirty (30) day period under Sections 6.1.2(a) and 6.1.2(b).

 

If all of the shares of Offered Stock are not so purchased, then the procedure set forth in the preceding paragraph will be repeated until all of the shares of Offered Stock have been so purchased or no Fully Electing Remaining Stockholders elect to buy all of the unpurchased shares of Offered Stock.

 

6.1.1.                     Exercise.  Within the appropriate ninety (90) day period referred to in Section 6.1.1 of this Agreement, the Company will give notice of its agreement to purchase all of

 

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the shares of Offered Stock, or of its rejection of the Offer pursuant to Section 6.1.1 of this Agreement, to the Stockholder and to each Remaining Stockholder.  Failure to give any such notice will constitute notice of rejection of the Offer pursuant to Section 6.1.1 on the ninetieth (90th) day.  Each Remaining Stockholder will exercise his election, if any, to purchase by giving notice thereof to the Stockholder, to the other Remaining Stockholders and to the Company.  In the event of agreement by the Company to purchase, its notice will specify a date for Closing which will be not more than sixty (60) days after the date of the giving of such notice/ provided, however, that if the purchase price is determined pursuant to Section 5.1.2 (b) or 5.1.3 (b) of this Agreement, the Closing shall take place not more than thirty (30) days after the Certified Statements are available for the fiscal year which includes the Offering Date.  In the event the Remaining Stockholders, or one or more of them, elect to purchase all or a portion of the shares of Offered Stock, Closing with respect to such shares will be held at such time as may be mutually agreed upon by the Stockholder and those Remaining Stockholders who have agreed to purchase and, in the absence of such agreement, will be held on the sixtieth (60th) day following receipt by the Stockholder of the last notice of election to purchase from a Remaining Stockholder.

 

6.2.                              Release from Restriction.

 

6.2.1.                     Free Transfer Period.  If the Offer is not accepted by the Company or by the Remaining Stockholders as to any or all of the Offered Stock, the Stockholder may, subject to Section 6.6 hereof, make a bona fide transfer, pledge or encumbrance of the shares of Offered Stock with respect to which the Stockholder’s Offer has not been accepted by the Company or by the Remaining Stockholders at any time within sixty (60) days following the expiration of the time provided in Section 6.1.2 of this Agreement for election to purchase by the Remaining Stockholders, provided that the Stockholder first complies with the provisions of Section 6.3 of this Agreement (relating to conditions of release from restriction).

 

(a)           Certain Offers Continuing.  Notwithstanding the foregoing paragraph, if the Offer is made pursuant to Sections 3.1 (relating to transfers by operation of law) or 3.2 (relating to cessation of employment), the Offer shall be a continuing Offer as provided in said Sections, and the Stockholder may not transfer the Offered Stock under this Section 6.2.

 

(b)           Rescission Rights.  If the Offer (regardless of under which Section of this Agreement the Offer is deemed to be made) is not accepted by the Company but is accepted by the Remaining Stockholders as to some, but not all of the shares of Offered Stock, the Stockholder may, but will not be obligated to, rescind the agreements of sale created by such elections of the Remaining Stockholders to purchase which the Stockholder has received, in which event the Offered Stock again will become subject to all of the restrictions of this Agreement and may not be transferred subsequently without compliance with the terms of this Agreement.

 

(c)           Free Transfer Only If Rescission Rights Not Exercised.  If the Offer is not accepted by the Company, but is accepted by the Remaining Stockholders as to some, but not all of the Offered Stock, and the Stockholder does not rescind the agreements of sale created by such elections of the Remaining Stockholders pursuant to Section 6.1.2, the Stockholder may make a bona fide transfer, pledge or encumbrance of those shares of Offered

 

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Stock with respect to which agreements of sale created by such elections of the Remaining Stockholders do not exist at any time within the Free Transfer Period, provided that the Stockholder first complies, as may be required, with the provisions of Section 6.3 of this Agreement.

 

6.2.1.       Public Offering.  Immediately upon the closing of the purchase of shares of Common Stock by an underwriter, or group of underwriters, pursuant to a public offering by the Company of its Common Stock, the rights and obligations affecting the disposition of the Common Stock as set forth in this Agreement will be of no force or effect.  In such event, the Stockholder will be free to dispose of Common Stock in any manner he deems appropriate consistent with relevant law, and neither the Company nor any Remaining Stockholder will have any obligation to purchase the shares of Common Stock.

 

6.3.                              Conditions of Release from Restriction.

 

6.3.1.       More Favorable Transfer Requires Re-Offer.  If any of the terms of a proposed bona fide transfer to a transferee other than the Company or the Remaining Stockholders under the terms of this Agreement are more favorable to the transferee than the corresponding terms in accordance with which the Company or the Remaining Stockholders could have purchased the shares of Offered Stock under this Agreement, the Stockholder may not transfer the shares of Offered Stock proposed to be transferred to such transferee without first having made a second Offer to transfer the shares of Offered Stock to the Company and the Remaining Stockholders on the same terms as the contemplated transfer to such transferee.  Thereupon, the Stockholder may make such bona fide transfer as to those shares of Offered Stock with respect to which the second Offer has not been accepted by either the Company or the Remaining Stockholders within thirty (30) days after their receipt of such second Offer.  The allocation of the shares of Offered Stock among the Remaining Stockholders, including allocation upon rejection of the second Offer, by any Remaining Stockholder with respect to such second Offer will be the same as provided in Section 6.1.2 of this Agreement.  If a second Offer to sell the shares of Offered Stock is made to the Company and the Remaining Stockholders in accordance with this Section 6.3.1, the Free Transfer Period will commence on the earlier of (x) the date of receipt by the Stockholder of the last rejection of the second Offer from the Company and all Remaining Stockholders or (y) the thirtieth (30th) day after the date of the second Offer.  Any shares of Offered Stock which are not transferred, pledged or encumbered during the Free Transfer Period will again become subject to all of the restrictions of this Agreement and may not be subsequently transferred without compliance with the terms of this Agreement.

 

6.3.2.       Pledge or Encumbrance.  If any Stockholder proposes to pledge or encumber shares of Common Stock, such Stockholder may not, after the Offer with respect to those shares of Common Stock has been rejected by the Company and the Remaining Stockholders, pledge or encumber shares of Common Stock without first having requested in writing to borrow from the Company and the Remaining Stockholders on the same terms and conditions of any proposed borrowing contemplating such proposed pledge or encumbrance.  Thereupon, such Stockholder may make such pledge or encumbrance as to those shares of Common Stock with respect to which such request has not been granted by either the Company or the Remaining Stockholders within thirty (30) days after their receipt of such request.  The

 

15

 

Remaining Stockholders’ participation in any advance to such Stockholder will be calculated in the same manner as provided in Section 6.1.2 of this Agreement.  If such offer to pledge or encumber shares of Common Stock is made to the Company and the Remaining Stockholders in accordance with this Section 6.3.2, the Free Transfer Period will commence on the earlier of (x) the date of receipt by the Stockholder of the last rejection of such request from Company and all of the Remaining Stockholders or (y) the thirtieth (30th) day after the date of such request.  Any shares of Common Stock which are not pledged or encumbered during the Free Transfer Period will again become subject to all of the restrictions of this Agreement and may not be subsequently transferred without compliance with the terms of this Agreement.

 

6.4.                              Nonrecognition of Certain Transfers; Additional Capital Stock.

 

6.4.1.                     Agreement to be Bound.  The Company will not, nor be compelled to, recognize any transfer, or issue any certificate representing any shares of Common Stock to any person who does not qualify as a proper transferee under the terms and conditions of this Agreement, or who has not delivered to the Company a Transferee Stock Restriction Agreement substantially in the form of Exhibit B to this Agreement.

 

6.4.1.                     Transfer Not in Accord with this Agreement.  The Company will not, nor be compelled to, recognize any transfer made other than in accordance with the terms of this Agreement and the similar agreements, if any, made with other stockholders of the Company as of the date hereof/ and the Company will not, nor be compelled to, issue any certificate representing shares of Common Stock to any person who has received such shares of Common Stock in a transfer made other than in accordance with the terms of this Agreement or one of such similar agreements.

 

6.4.1.                     Additional Capital Stock of the Company.  The Company will not issue any shares of capital stock of the Company to any party in addition to the capital stock outstanding as of the date hereof, except:

 

(a)           shares of preferred stock for which the Company received consideration in money or money’s worth at least equal to the stated value or par value of such stock;

 

(b)           shares of common stock for which the Company received consideration in money or money’s worth at least equal to the per share net book value of the Common Stock issued and outstanding immediately prior to such issue and as to which the amount of such consideration credited to capital stock on the books of the Company with respect to each share does not exceed the stated value or par value so credited with respect to each share of Common Stock outstanding immediately prior to such issue; or

 

(c)           any class or series of capital stock issued by the Company to its directors, officers or employees pursuant to a plan adopted by the Company regardless of whether such plan is designed to meet requirements of the Internal Revenue Code of 1986, as amended.

 

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6.1.                              Necessary Documents.

 

If, under the terms of this Agreement, shares of Common Stock are purchased, the Stockholder or the Stockholder’s personal representative, whether or not properly qualified, will execute and deliver at the Closing all necessary documents that reasonably may be required to accomplish a complete transfer of such shares of Common Stock, and the Purchaser will execute and deliver to the Stockholder or the Stockholder’s personal representative a non-negotiable promissory note for any deferred portion of the purchase price (and interest thereon), and will agree to pledge the shares of Common Stock pursuant to a Stock Pledge and Escrow Agreement and, in connection therewith, will deliver to the Company’s legal counsel (or to such other person mutually agreed upon by the parties) certificates representing all of the shares of Common Stock actually purchased, with executed blank transfer powers attached, which certificates will be delivered to Purchaser upon final payment of the unpaid balance of the purchase price and all interest thereon.

 

6.2.                              No Sale to Competitor.

 

Notwithstanding any provision of this Agreement relating to sales of shares of Common Stock during a Free Transfer Period, in no event may any such sales be made during a Free Transfer Period to any Competitor.

 

7.                                      MANAGEMENT MATTERS

 

7.1.                              Management Policies and Resolution of Management Disputes.

 

7.1.1.                     Selection of Voting Directors.

 

(a)           Nominations by Stockholders.  For so long as each Stockholder is living and not subject to a Mental Disability, each Stockholder shall be entitled to nominate one-half of the Voting Directors (as defined in the Company’s Bylaws) in accordance with the provisions of the next sentence.  At least thirty (30) days prior to the date on which the nominees for positions on the Company’s Board of Directors are required to be finally determined, each Stockholder will submit to the other Stockholder a list of persons whom he is intending to nominate for one-half of the total number of positions as Voting Directors i of the Company.  At any time prior to the time when the Company’s Bylaws permit persons to be nominated for a position on the Company’s Board of Directors, any Stockholder may change any of his Nominees.  Each Stockholder hereby agrees to vote his shares of Voting Stock at any meeting (special or annual) called for the election of directors for his own Nominees and for those Nominees of the other Stockholder.  In the event any Nominee of a Stockholder shall be elected to a position on the Company’s Board of Directors, and such Nominee shall thereafter resign, be removed or be otherwise unable to serve as a director of the Company, then the Stockholder who originally nominated such Nominee shall have the right, as between the Stockholders, to nominate the Replacement and each Stockholder hereby agrees to vote his shares of Voting Stock in such a manner as to cause the Replacement to be elected to the Company’s Board of Directors.

 

(b)           Nominations by Recognized Transferees.  In the event of the death or Mental Disability of a Stockholder, the Recognized Transferee(s) of such Stockholder shall 

 

17

 

make the nomination(s) which would otherwise have been made by such Stockholder.  If such Recognized Transferees cannot agree on the person(s) to be nominated, then the nominee(s) shall be the person(s) elected by the majority vote of the Recognized Transferees at a meeting convened upon ten (10) days written notice by any Recognized Transferee.  All Recognized Transferees shall vote for the person(s) so nominated.  In any such election by Recognized Transferees for purposes of nominating person (s) to be director, each Recognized Transferee shall have one vote in respect of each of his shares of Voting Stock and shall be entitled to cast his votes for or against each candidate in such election to determine nominees.

 

The persons so nominated by the Recognized Transferees shall be treated as the Nominee(s) of the deceased or disabled Stockholder for purposes of this Section 19.1.1.

 

7.1.1.       Selection of Emeritus Directors.  In the absence of an agreement as to whom the Stockholders shall elect to be Emeritus Directors (as defined in the Company’s Bylaws), and for so long as each Stockholder is living and not subject to a Mental Disability, each Stockholder shall be entitled to nominate the same number of Emeritus Directors and shall vote his shares of Voting Stock for the person(s) so nominated by him.  Each Stockholder also agrees to vote his shares of Voting Stock for the nominee(s) for Emeritus Director of the other Stockholder.  Only the Stockholders shall be entitled to nominate a person for Emeritus Director, even though shares of Voting Stock may have been transferred pursuant to this Agreement.

 

In the event that an Emeritus Director shall resign, be removed or be otherwise unable to serve as a director of the Company, then the vacancy created by such resignation removal or otherwise shall only be filled if the Stockholders agree to fill it.

 

7.1.1.       Designated Directors.  For purposes of preserving the ability of a Permitted Transferee to satisfy the Employment Qualification after the death of a Stockholder, the Stockholders agree that in the event of the death of a Stockholder, the deceased Stockholder’s Designated Directors shall determine whether a Permitted Transferee of the deceased Stockholder shall be hired by the Company in a managerial capacity (if application for employment is made by the Permitted Transferee), or shall not be Discharged Without Cause by the Company.  The position of such Permitted Transferee shall be determined by such Designated Directors in conjunction with management.  The compensation and promotion of such Permitted Transferee shall be determined by the Compensation Committee of the Company’s Board of Directors in conjunction with the deceased Stockholder’s Designated Directors.

 

7.2.                              Co-involvement and Management Disputes.

 

The Stockholders acknowledge that presently, as officers and employees of the Company, each manages the operations of one of the two most significant divisions of the Company and that each must be informed of the operations and needs of, as well as the decisions affecting, each such division of the Company.  Each Stockholder agrees to keep the other Stockholder so informed.  If a dispute arises between the Stockholders in their capacities as managers of the Company’s businesses, and such dispute involves the operation and management of the Company’s businesses and is therefore not within the provision of Section 8.1 of this Agreement, the Stockholders shall refer such dispute to the Independent Committee 

 

18

 

for recommendation as to its resolution.  The Independent Committee will discuss the facts and circumstances of the disputed matter with the Stockholders and any other persons it deems appropriate and will develop a recommendation as to courses of action which are possible.  The recommendation made by the Independent Committee shall then be submitted to the full Board of Directors of the Company for final approval.  The Stockholders agree to abide by the majority decision of the Board.

 

7.3.                              Cash Flow Controls and Maximizing ROI.

 

Each Stockholder agrees that, as officers and employees of the Company, their respective areas of management shall be conducted so as to maximize the return on investment to the stockholders of the Company, and to ensure the highest and best use of the funds available to the Company.  To achieve such goal, the Stockholders agree to abide by the terms of the cash management plan established by the Company’s chief financial officer and adopted by the Board of Directors.  Also, to further this goal, the Stockholders, as officers and employees of the Company, shall adopt and adhere to appropriate budget systems and constraints and shall inform each other of the results thereof as applied to the ongoing operations of their respective divisions.  The capital budgets shall be adjusted periodically (not less frequently than annually) to reflect excesses or deficits from prior periods.  The Stockholders agree as managers of the prominent divisions of the Company’s business not to exceed the capital limitation set forth in the Company’s proposal to The Philadelphia National Bank, in reliance on which The Philadelphia National Bank has loaned funds to the Company on or prior to the date hereof.  In addition, as managers, the Stockholders agree to use their best efforts to maintain at all times not less than One Million Five Hundred Thousand Dollars ($1,500,000) for capital improvement contingencies.

 

7.4.                              Establishing Specific Corporate Policies.

 

7.4.1.       Management Evaluations.  The Stockholders (as managers) shall establish job descriptions with designated responsibilities for each managerial position within the Company and shall undertake a performance evaluation of each of the Company’s managers at least once each year, using the job descriptions as the bases for such evaluation.

 

7.4.2.       Other Policies.  The Stockholders (as managers) will establish, and propose to the Board of Directors for approval, specific corporate policies regarding expense accounts, travel allowance (type and number of trips and reimbursement), automobile benefits (use and/or insurance) and reports and controls for sub-management levels.

 

7.5.                              The Board of Directors.

 

The Stockholders shall conduct themselves so as to maintain the independence of the Board of Directors, especially in relation to its function of reviewing the decisions affecting the Stockholders’ respective divisions of the Company.  The Stockholders will use their best efforts to cause the Board of Directors to adopt the policies and guidelines set forth in this Section 7.  In addition to the Board of Directors’ functions as outlined in the Company’s Bylaws, the Stockholders shall use their best efforts to cause the Board to perform the following functions:

 

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7.5.1.       to review, and approve or reject, all capital expenditures above an amount to be determined by the Board prior to any commitment with respect thereto (such review to be made based on return on investment and cash flow considerations), and also to be subject to an overall policy favoring the most positive cash flows while supplementing or complementing the existing operations of the Company/

 

7.5.2.       to review, and adopt or reject, corporate policies, including those submitted by the Stockholders pursuant to Section 7.4 of this Agreement, and including policies or procedures for evaluating key personnel;

 

7.5.3.       to review and establish the Company’s long term goals and corporate objectives;

 

7.5.4.       to establish the budgets for each division and plant within the Company;

 

7.5.5.       to review, and approve or reject, proposed bank borrowings, product development and research;

 

7.5.6.       to monitor compliance with, and revise in accordance with actual facts and circumstances, projections of the Company’s future results of operations;

 

7.5.7.       to review, and approve or reject, all proposals for expansions or contractions of the Company’s business, including acquisitions or dispositions, subject to stockholder approval where appropriate;

 

7.5.8.       to appoint and monitor, as appropriate, committees of the Board, including an Executive Committee (which shall be empowered to act on the Board’s behalf between regular quarterly Board meetings), Audit Committee, Compensation Committee, and the Independent Committee;

 

7.5.9.       to meet regularly on a quarterly basis; and

 

7.5.10.     to establish a code of ethics by which all officers and employees of the Company shall conduct themselves.

 

8.                                      MISCELLANEOUS MATTERS

 

8.1.                              Arbitration.

 

Any Irreconcilable Dispute shall be decided by arbitration in Harrisburg, Pennsylvania, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then obtaining, unless the Stockholders otherwise mutually agree in writing.  The dispute shall be decided by a panel of three arbitrators with each Stockholder choosing one arbitrator and those two arbitrators selecting the third arbitrator.  The decision and the award of damages or specific performance rendered by a majority of the arbitrators shall be final and binding and judgment may be entered upon it in any court having jurisdiction thereof.  The arbitration shall be held as promptly as practicable after actual receipt of notice that a Stockholder has filed a notice for arbitration with the American Arbitration Association on such 

 

20

 

a date, and at such a place and time in Harrisburg, Pennsylvania, convenient to the Stockholders and to the arbitrators, except that if the Stockholders cannot agree, the arbitrators shall decide such date, place and time.  Notwithstanding the foregoing, in no event shall the date of the arbitration exceed sixty (60) days from the date the other Stockholder receives the notice for arbitration, unless the Stockholders mutually agree otherwise.  The arbitrators shall make their decision promptly and any award of damages or specific performance shall be made, unless otherwise mutually agreed by the Stockholders in writing, not later than fifteen (15) days from the date of closing of the hearings or if oral hearings have been waived, from the date of transmitting the final statements and proofs to the arbitrators.

 

8.2.                              Endorsement on Stock Certificates.

 

Each certificate representing any shares of Common Stock now held by any Stockholder or any shares of Common Stock hereafter held by any Stockholder will bear a legend in substantially the following form:

 

“THE TRANSFER OF THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY THE TERMS OF A STOCK RESTRICTION AND MANAGEMENT AGREEMENT DATED FEBRUARY 28, 1990, A COPY OF WHICH IS ON FILE AND MAY BE INSPECTED AT THE OFFICE OF THE COMPANY.”

 

8.3.                              Covenant Not to Compete.

 

8.3.1.       During Employment.  During the period in which the Stockholder is employed by Company, the Stockholder will not directly or indirectly own, manage, operate, join, control or participate in the ownership, management, operation or control of or be employed or otherwise be connected in any manner with any Competitor.

 

8.3.2.       After Termination of Employment or Sale of Stock.  For a period of five (5) years following either (a) termination of the Stockholder’s employment by Company (unless the Stockholder has been Discharged Without Cause, or (b) an Offer by the Stockholder to sell all of his shares of Common Stock pursuant to this Agreement, the Stockholder will not undertake any Prohibited Action, and will not solicit or aid in the solicitation of any business from any Customer of Company, and will not disclose, or utilize on behalf of himself or any other person or business entity, any Trade Secret of Company.

 

8.3.3.       Modification for Enforceability.  Should the foregoing covenants of this Section 8.3 be adjudged to any extent invalid by any competent tribunal, such covenant will be deemed modified to the extent necessary to make it enforceable.

 

8.4.                              Specific Performance.

 

In the event of a breach or threatened breach of any of the provisions of this Agreement, the remedy at law would be inadequate and a party to this Agreement will be entitled to appropriate injunctive and other equitable relief, including without limitation, specific performance and such party will be entitled to recover the loss, costs and expenses (including 

 

21

 

reasonable attorneys’ fees and disbursements) which such party incurs in securing any relief at law or in equity.

 

8.5.                              Liquidation of Corporation.

 

Notwithstanding any other provision of this Agreement, if, at any time, the Board of Directors of the Company adopts a resolution recommending the sale or exchange of all, or substantially all, of the Company’s assets to be followed by liquidation of the Company, or recommends that the Company be dissolved voluntarily, or if all of the stockholders of the Company have signed a written agreement consenting to such sale or dissolution, or if, at any time, an agreement is made for the sale of ninety percent (90%) or more of the Company’s issued and outstanding capital stock, then with respect to any event thereafter occurring, all obligations to purchase any shares of Common Stock and all obligations of any Stockholder to sell any shares of Common Stock arising under the terms of this Agreement will be abated.  If such recommended sale is consummated or such dissolution occurs, such obligations will terminate absolutely and such selling Stockholder will receive his pro rata share of the proceeds of such sale or dissolution.  If such sale or dissolution is thereafter abandoned, all of the obligations of purchase and sale herein contained will be in full force and effect again.  If, during the period of abatement, an event occurs which, but for the abatement, would have required or permitted an Offer or sale by a Stockholder pursuant to the provisions of this Agreement, all time periods with respect to such Offer and sale, and the responses required or permitted hereunder, shall be computed as if such event had occurred on the day after the proposed sale or dissolution was abandoned, but all determinations of price shall be made as if the Offer or sale had been made at the time it would have been made had there been no abatement.

 

8.6.                              Stockholder Wills.

 

Each Stockholder agrees to include in his will a direction and authorization to his executor to comply with the provisions of this Agreement and to sell all of his shares of Common Stock in accordance with this Agreement; provided, however, that the failure of any Stockholder so to direct his executor shall not affect the validity or enforceability of this Agreement.

 

8.7.                              Notices.

 

Any and all notices, designations, consents, offers, acceptances or any other communications provided for herein will be given in writing by registered or certified mail, return receipt requested, which will be addressed, in the case of the Company, to its principal office and in the case of the Stockholders to their respective addresses appearing on the records of the Company, or to such other address as may be designated by any Stockholder in writing to the Company and the other stockholders.

 

8.8.                              Time Periods.

 

In computing the number of days for any purpose of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays, except that if the last day of any period occurs on a Saturday, Sunday or holiday, the period will be deemed extended to the end of the next succeeding day which is not a Saturday, Sunday or holiday.  A holiday for purposes 

 

22

 

of this Agreement shall mean those days on which banks in the Commonwealth of Pennsylvania may, or are obligated to, remain closed.

 

8.9.                              Successors and Assigns.

 

This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, all future stockholders of the Company, whether they become such by transfer pursuant to or contrary to the terms of this Agreement or similar agreements, if any, with other stockholders of the Company, and all of their respective heirs, legatees, personal representatives, successors and assigns.

 

8.10.                        Titles Not to Affect Interpretation.

 

The headings of sections and paragraphs in this Agreement are inserted for convenience of reference only and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.

 

8.11.                        Invalid Provision.

 

The invalidity or unenforceability of any provision of this Agreement will not affect the other provisions hereof, and this Agreement will be construed as if such invalid or unenforceable provisions were omitted.

 

8.12.                        Governing Law.

 

This Agreement will be governed by the laws of the Commonwealth of Pennsylvania.

 

8.13.                        Subordination.

 

Each Stockholder agrees that the obligation of the Company hereunder is and shall be subordinate to any long term financial arrangement to which the Company is now, or in the future may be, a party, and each Stockholder agrees to take such action as the Company shall reasonable request to implement this subordination agreement.

 

8.14.                        Modification.

 

This Agreement contains the entire agreement between the parties relating to the restrictions on the transfer of any shares of Common Stock and may be modified only by a writing signed by the Company and each Stockholder, and by all Remaining Stockholders if those provisions of this Agreement which confer rights or obligations on the Remaining Stockholders are modified by such amendment.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by a duly authorized officer and its corporate seal affixed hereto, and each Stockholder has signed this Agreement as of the date first above written.

 

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Attest:
    	
 
    	
NEW   ENTERPRISE STONE & LIME CO., INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/
    	
 
    	
By:
    	
/s/   Donald L. Detwiler
    
	
Secretary
    	
 
    	
 
    	
Title:
    
	
[Corporate   Seal]
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Witness:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/
    	
 
    	
/s/   Donald L. Detwiler
    
	
 
    	
 
    	
Donald   L. Detwiler
    
	
 
    	
 
    	
 
    
	
Witness:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/
    	
 
    	
/s/   Paul I. Detwiler, Jr.
    
	
 
    	
 
    	
Paul   I. Detwiler, Jr.
    

 

 

The undersigned stockholders of Company other than the Stockholders have executed this Agreement to acknowledge that they have the rights and obligations specifically conferred by this Agreement.

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

24

 

EXHIBIT A

 

FORM OF

 

BENEFICIARY STOCKHOLDERS’ VOTING TRUST AGREEMENT

 

THIS BENEFICIARY STOCKHOLDERS’ VOTING TRUST AGREEMENT (“Trust Agreement”), dated                                           ,           , is made among [Don and Paul or Personal Representative of either], a resident of the Commonwealth of Pennsylvania [in his capacity as personal representative of [Don or Paul]] (the “Principal”), [Name of Trustee] , as trustee, the person (s) named on Appendix A hereto (each a “Beneficiary Stockholder and collectively, the “Beneficiary Stockholders”), and New Enterprise Stone & Lime Co., Inc., a Delaware corporation (the “Company”).

 

BACKGROUND

 

The Company currently has authorized two classes of capital stock:  (a) Common Stock $1.00 par value (the “Common Stock”), which is divided into two different series, one of which is voting Common Stock (“Voting Stock”) and the other of which is non-voting Common Stock (“Non-Voting Stock”); and (b) Preferred Stock, $100 par value (the “Preferred Stock”).

 

The Principal [in his capacity as personal representative for [Don or Paul] [who is deceased or permanently disabled] is the owner of              shares of Voting Stock the transfer of which is restricted by the terms of the Stock Restriction and Management Agreement dated                           , 1990 among Paul I. Detwiler, Jr., Donald L. Detwiler (referred to herein collectively as “Stockholders” and individually as a “Stockholder”) and the Company (the “Stock Agreement”).

 

NOW THEREFORE, intending to be legally bound, the parties to this Trust Agreement hereby agree as follows:

 

A-1

 

1.             Creation of Trust.  The Principal [in his capacity as personal representative of [Don or Paul]], hereby creates a Beneficiary Stockholders’ Voting Trust (the “Trust”) in accordance with, and which shall be governed by, the terms of this Trust Agreement (the “Trust Agreement”).

 

2.             Appointment of Trustee.  The Trustee shall be the sole trustee of the Trust and shall act and administer the Trust in accordance with all of the terms and conditions of this Trust Agreement.  It is hereby acknowledged by all parties hereto that the Trustee meets at least one of the following qualifications:  (1) the Trustee is the survivor of the Stockholders; or (2) the Trustee is the Stockholder who retains the physical and mental capacity to perform his duties as a full-time executive employee of the Company; or (3) the Trustee is a person permitted under Section 15 (taking into account the requirements of clause (b) of said Section 15) of the Stock Agreement to be a transferee of voting Common Stock from the Principal.  The term “Trustee” as used herein shall mean such Trustee and any successor Trustee or Trustees appointed under this Trust Agreement.  The Trustee hereby acknowledges receipt of a copy of the Stock Agreement.

 

3.             Term of Trust.  The Trust shall continue for a period of ten years, unless it is sooner terminated by the withdrawal of all shares of Voting Stock as hereinafter provided.

 

4.             Deposit of Shares.  The Principal hereby deposits, and may hereinafter deposit, with the Trustee, stock certificates representing such shares of the Company’s Voting Stock (the “Deposited Shares”) of which the beneficial ownership is transferred to the Beneficiary Stockholders in the amounts set forth on Appendix A.  All stock certificates evidencing Deposited Shares delivered to the Trustee as herein provided shall be registered in the name of the Trustee or shall be endorsed or accompanied by duly executed stock powers and

 

A-2

 

such other assignments, certificates of authority, consents to transfer or other instruments as may be reasonably requested by counsel to the Trustee in order to transfer record ownership of the Deposited Shares to the Trustee.  Such Deposited Shares shall be registered on the books and records of the Company in the name of the Trustee, as trustee for the Beneficiary Stockholders, or any one or more of them, and all stock certificates representing the Deposited Shares shall contain a legend that such certificates are held subject to the provisions of this Trust Agreement.

 

5.             Issuance of Trust Certificates.  In exchange for the stock certificates evidencing the Deposited Shares, the Trustee shall issue and deliver to each Beneficiary Stockholder having a beneficial interest therein, one or more Trust Certificates (each a “Trust Certificate”) substantially in the form attached hereto as Appendix B, representing, in the aggregate, the number of Deposited Shares beneficially owned by that Beneficiary Stockholder.  Trust Certificates shall evidence the Beneficiary Stockholder’s beneficial interest in the Trust and the Deposited Shares.  The holder of a Trust Certificate shall have all rights of a holder of the Deposited Shares represented by the Trust Certificate except as otherwise provided herein.

 

6.             Powers and Duties of the Trustees.

 

While this Trust Agreement is in effect and until the Deposited Shares are withdrawn from the Trust as hereinafter provided, the Trustee, in person, by proxy or by written consent, shall have the sole and unqualified right and power to vote the Deposited Shares for the election of any person or persons as directors of the Company, and to act in connection with the voting of the Deposited Shares in the same manner and to the same extent, and subject to all applicable restrictions in respect of voting as expressed in the Company’s Bylaws and in the Stock Agreement, as if he were the absolute owner thereof in his own right.  On all proposals or matters which are required to be or which shall be submitted for a vote of the Company’s voting

 

A-3

 

Common Stock other than the election of directors, the Trustee shall be entitled to vote the Deposited Shares, for or against such proposal or matter, or to refrain from voting, as he in his sole discretion shall determine.

 

7.                                       Appointment of Successor Trustees.  The Trustee shall serve for life or until he is legally incompetent to serve or he resigns in accordance with the provisions of Section 8 of this Trust Agreement.  Upon the death, legal incompetence or resignation of the Trustee, the Company shall appoint one person to serve as successor Trustee (the “Successor Trustee”) in accordance with the following provisions:

 

(a)           the Company, by action of its board of directors, shall appoint as Successor Trustee either (1) the person nominated as Successor Trustee by the Principal (by Will or otherwise); or (2) if no person can be appointed in accordance with clause (1) for any reason, a person who the Company believes will serve best the interests of each Beneficiary Stockholder/ and

 

(b)           the person so appointed shall be a person who meets at least one of the qualifications set forth in clauses (1) , (2) , or (3) of Section 2 of this Trust Agreement, and who is 30 years of age or older.

 

8.                                       Vacancies.  Any Trustee may resign by delivering a written resignation to the Company and the Beneficiary Stockholder(s) and thereupon a Successor Trustee shall be appointed in accordance with the provisions of Section 7 of this Trust Agreement.  In order to avoid vacancies, the Trustee shall continue to serve until the Successor Trustee is so appointed.  Upon a vacancy created by the death or legal incompetence of a Trustee, such vacancy shall be filled in accordance with the provisions of Section 7 of this Trust Agreement.

 

A-4

 

9.                                       Withdrawal.

 

(a)                                  Upon the fulfillment of the following conditions, any Beneficiary Stockholder may withdraw from the Trust all (and not less than all) of the Deposited Shares transferred to the Trustee hereunder for his benefit by giving prior written notice (a “Withdrawal Notice”) to the Trustee of his intent to withdraw his Deposited Shares, which notice shall also contain:

 

(i)            a statement that the Beneficiary Stockholder has attained the age of 21 years; and

 

(ii)           a certificate of the Company in the form attached hereto as Appendix C stating that the Beneficiary Stockholder, or the spouse of the Beneficiary Stockholder, is at the date thereof, and has been for the immediately preceding two (2) year period, active in the management of the Company.

 

Deposited Shares as to which the Trustee has received a Withdrawal Notice are herein referred to as “Withdrawn Shares.”

 

(b)                                 Prior to the delivery or transfer of the Withdrawn Shares to the withdrawing Beneficiary Stockholder, the withdrawing Beneficiary Stockholder shall deliver to the Trustee the Trust Certificates duly endorsed to the Trustee covering such Withdrawn Shares and, except as provided in Section 9 (c), any Withdrawn Shares shall no longer be subject to the provisions of the Trust or this Trust Agreement.  Thereafter, the Trustee shall promptly cause such Withdrawn Shares to be registered in the name of the withdrawing Beneficiary Stockholder and delivered to the withdrawing Beneficiary Stockholder in accordance with his or her instructions.

 

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(c)           After a Withdrawal Notice is received by the Trustee, the Withdrawn Shares shall continue to be subject to this Trust Agreement until the Trustee has received the Trust Certificates representing such Withdrawn Shares as set out above.  Until the date of such receipt, or thereafter, if the Beneficiary Stockholder owning the Withdrawn Shares is unable to vote them because the record date for such vote has passed, the Trustee will vote such Withdrawn Shares in accordance with the written instructions of such Beneficiary Stockholder, provided such instructions are received at least five (5) business days prior to the date of any annual or special meeting of stockholders of the Company.  In the absence of such written instructions, the Trustee shall have authority to vote the Withdrawn Shares as he may determine in accordance with the provisions of this Trust Agreement.

 

10.                                 Dividends and Distributions.

 

(a)           Cash Dividends.  The Trustee shall give the Company or its dividend disbursing agent a list of the names and addresses of the then registered holders of Trust Certificates, which list shall set forth the number of Deposited Shares represented by the Trust Certificates registered in the name of each Beneficiary Stockholder on the record date for any cash dividends, and the Trustee shall request the Company to make distribution of cash dividends, on behalf of the Trustee, directly to each such registered Beneficiary Stockholder or to a bank designated by such holder of Trust Certificates.  In the event that any cash dividends are paid directly to the Trustee, the Trustee shall promptly pay over such dividends to the then registered holders of Trust Certificates according to their respective interests at the record date.

 

(b)           Stock Dividends.  If any dividend or distribution in respect of the Deposited Shares is paid, in whole or in part, in shares of voting capital stock of the Company, the Trustee shall hold the stock certificates for such voting shares which are received on account

 

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of such dividend and such voting shares shall thereafter for all purposes be treated as part of the Deposited Shares.  The holder of each Trust Certificate issued under this Trust Agreement on the date for the determination of those stockholders of the Company entitled to receive such dividend shall be entitled to receive a Trust Certificate evidencing such holder’s pro rata share of the number of voting shares received as such dividend.  If any dividend or distribution in respect of Deposited Shares is paid, in whole or in part, in shares of non-voting capital stock of the Company, the Trustee shall promptly distribute the stock certificates representing such non-voting shares to the Beneficiary Stockholders in proportion to their beneficial ownership in the Deposited Shares upon which the dividend or distribution is made.

 

(c)           Dividends in Other Assets.  If any dividend or distribution in respect of the Deposited Shares held by the Trustee is paid, in whole or in part, in assets of the Company, the Trustee shall give the Company a list of the names and addresses of the then registered holders of Trust Certificates, which list shall set forth the number of Deposited Shares represented by the Trust Certificates registered in the name of each holder on the record date, and the Trustee shall request the Company to make such distribution, on behalf of the Trustee, directly to each registered holder of the Trust Certificates.  In the event the distributions are paid directly to the Trustee, the Trustee shall promptly pay over such distributions to the then registered holders of Trust Certificates according to their respective interests at the record date.

 

(d)           Mergers, etc.  If, during the term hereof, the Company shall merge or consolidate into or with another corporation or corporations or other business entity, or if there shall be a reorganization or recapitalization of the Company, voting securities representing any such corporation or other business entity received by the Trustee in exchange for or with respect to the Deposited Shares as a result of such merger, consolidation, recapitalization or

 

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reorganization, shall be held by the Trustee in accordance with the terms hereof and shall thereafter for all purposes be treated as part of the Deposited Shares.  The Trustee shall issue and deliver Trust Certificates representing such voting securities to the then registered holders of Trust Certificates as their interests shall appear, against surrender by such holders of any Trust Certificates registered in their name which represented Deposited Shares which were surrendered by the Trustee pursuant to the terms of such merger, consolidation, recapitalization or reorganization.  Any other consideration received by the Trustee in such a transaction shall be paid by the Trustee to the then registered holders of Trust Certificates in accordance with their respective beneficial interests at the applicable record date.

 

(e)           Dissolution.  If, during the term hereof, the Company shall be dissolved or liquidated in such a manner as to entitle the holders of Common Stock to liquidating dividends, the Trustee shall request all such dividends to be distributed directly by the Company to the holders of Trust Certificates in proportion to their respective beneficial ownership in the Deposited Shares upon which dividends are paid.  In the event that such dividends are paid directly to the Trustee, the Trustee shall promptly pay over such dividends to the then registered holders of Trust Certificates according to their respective beneficial interests at the record date.

 

(f)            Rights Offerings.  If any capital stock or other securities of the Company are offered for subscription or otherwise to the holders of Common Stock of the Company, the Trustee, promptly upon receipt of notice of such offer, shall mail a copy thereof to each of the holders of the Trust Certificates.  Upon receipt by the Trustee, at least five (5) business days prior to the last day fixed by the Company for subscription and payment, of a request from any such registered holder of Trust Certificates to subscribe on behalf of such holder, accompanied by the sum of money required to pay for such stock or securities, the

 

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Trustee shall make such subscription and payment, and upon receiving from the Company the certificates for shares or securities so subscribed for, shall issue to such holder a Trust Certificate in respect thereof if the same be shares of Voting Stock, but if the same be securities other than Common Stock, the Trustee shall deliver such securities to the holder of the Trust Certificate on whose behalf the subscription was made, or may request the Company to make delivery directly to the holder of the Trust Certificate entitled thereto.

 

11.                                 Transfer and Replacement of Voting Trust Certificates.

 

(a)                                  Trust Certificates may not be transferred (whether by sale, gift or otherwise) pledged or encumbered, except in accordance with the following provisions:

 

(i)            Any Beneficiary Stockholder may transfer, pledge or encumber Trust Certificates subject to the restrictions contained in the Transferee Stock Restriction Agreement (“Beneficiary Stock Agreement”) which such Beneficiary Stockholder, as a transferee of shares of Common Stock, was required to execute pursuant to Sections 4.1 or 6.4.1 of the Stock Agreement, a copy of which Beneficiary Stock Agreement has been delivered to the Trustee.  For purposes of applying the foregoing sentence, Trust Certificates shall be treated as if they were shares of Voting Stock, except that the Beneficiary Stockholder shall not be entitled, until such time as the trust is terminated or the Deposited Shares are withdrawn, to exercise rights comparable to those under Section 3.4.3 of the Stock Agreement.

 

(ii)           By execution of this Trust Agreement, each Beneficiary Stockholder agrees to be bound, with respect to the Trust Certificates, by all the terms and conditions of his Beneficiary Stock Agreement, as if such Trust Certificates were shares of Voting Stock.

 

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(iii)          The Company and the Trustee will not, nor be compelled to, recognize any transfer of Trust Certificates, or issue any Trust Certificate or stock certificate representing any Trust Certificate or Deposited Shares purportedly transferred, to any person who (A) does not qualify as a proper transferee under the terms and conditions of the Beneficiary Stock Agreement and this Trust Agreement, and who has not delivered to the Company and the Trustee an agreement in substantially the same form as the Beneficiary Stock Agreement and a written undertaking to be bound by the terms of this Trust Agreement; or (B) has received such Trust Certificates or stock certificates in a transfer made other than in accordance with the terms of the Beneficiary Stock Agreement and this Trust Agreement, or similar agreements, if any, made with other stockholders of the Company.

 

(b)                                 The Trustee shall keep a record of all Trust Certificates issued by the Trust upon the original issuance thereof in exchange for the Deposited Shares, or upon the transfer of Trust Certificates in accordance with the provisions of this Section 11, or as a result of the release of Withdrawn Shares to the Beneficiary Stockholders in accordance with the provisions of Section 9.  The record of Trust Certificates shall be kept, and Trust Certificates may be transferred, subject to the provisions of this Section 11 and applicable legal requirements including those under the Securities Act of 1933, at the office of the Trustee.  The records so kept by the Trustee shall conform, as nearly as may be practicable, to the form of stock ledger or statutory stock books which would be used by a corporation or a transfer agent under similar circumstances, and shall indicate, among other things, the names and addresses of all persons who are holders of Trust Certificates, the number of Deposited Shares represented by the Trust Certificates held by each of them and the dates when each of them became the owners thereof.

 

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(c)           Any transfer of Trust Certificates permitted hereunder and under the Stock Agreement shall be accomplished by delivery, of the Trust Certificates to the Trustee, duly endorsed or accompanied by duly executed powers and by such other assignments, certificates of authority and consent to transfer instruments as may be reasonably requested by counsel to the Trustee in order to effect a transfer of the Trust Certificates.  Upon effecting any such transfer, all Trust Certificates so surrendered to the Trustee shall be cancelled forthwith.  The Trustee may, in his sole discretion, treat the registered holder of any Trust Certificates as the owner thereof for all purposes whatsoever, and shall not be affected by any notice to the contrary.  Upon the expiration or termination of the Trust Agreement, the Deposited Shares will not be delivered to the Beneficiary Stockholders without the surrender of the Trust Certificates representing such Deposited Shares, properly endorsed for surrender.

 

(d)           If any Trust Certificate shall become mutilated, lost, stolen or destroyed, the Trustee may provide for the issuance of a new Trust Certificate in lieu of such lost, stolen or destroyed Trust Certificate or in exchange for such mutilated Trust Certificate, under such conditions with respect to indemnity and otherwise as he, in his sole discretion, may prescribe.

 

12.                                 Pledge of Trust Certificates.  Provided a Beneficiary Stockholder has first complied with the requirements of the Beneficiary Stock Agreement, a Beneficiary Stockholder may assign a security interest in Deposited Shares represented by Trust Certificates to a bank or other lender (a “Lender”) and may deliver physical possession of such Trust Certificates in pledge to such Lender.  A Lender that has taken physical possession of a pledged Trust Certificate and the Deposited Shares represented thereby shall give written notice to the Trustee of such possession and pledge, confirmed in writing by the pledgor, and thereafter until

 

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otherwise notified in writing by the Lender, the Trustee shall recognize the Lender’s security interest in such Trust Certificate and Deposited Shares.  Unless otherwise notified in writing by the Lender, and subject to the provisions of Sections 10(a), 10(b) and 10(c) of this Trust Agreement, the Trustee may direct that dividends relating to pledged Trust Certificates be paid to the pledgor and the Trustee may follow the instructions of the pledgor as to matters affecting the Trust, except as otherwise provided in this Trust Agreement.  Until the Deposited Shares underlying a pledged Trust Certificate are released from the Trust, the Trustee shall have power to continue to vote such Deposited Shares in accordance with the terms of this Trust Agreement.  After default of the pledging Beneficiary Stockholder, and upon written notice to the Trustee from a Lender that it is therefore entitled to obtain possession of the Deposited Shares underlying such Trust Certificates pledged with it in order to realize upon its security interest therein, the Trustee shall forthwith cause such Deposited Shares to be delivered to the Lender, which shall surrender such Trust Certificates to the Trustee, and such Shares shall be free from the Trust and shall no longer be subject to the provisions of this Trust Agreement.  The Trustee shall have authority to enter into written agreements with a Lender confirming such obligation hereunder to the Lender.

 

13.           Expenses.  The Trustee shall receive no compensation or commissions for acting as Trustee.  The Trustee shall have authority to pay necessary expenses in connection with the business of the Trust and may retain counsel and other professionals.  The Trustee shall be entitled to reimbursement for any reasonable out-of-pocket expenses incurred by him in connection with the conduct of the business of the Trust.  The Trustee shall from time to time assess the Beneficiary Stockholders for funds to pay these expenses, in proportion to their beneficial ownership of Deposited Shares.

 

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14.           Liability.

 

(a)           The Trustee shall not be liable for the consequence of any vote cast or consent given and shall not incur any liability to any Beneficiary Stockholder, except for willful misconduct evidencing bad faith or gross negligence.  The Beneficiary Stockholders shall indemnify the Trustee and hold him harmless from any and all liabilities which he may incur as a result of carrying on the business of the Trust, except for those arising out of the willful misconduct evidencing bad faith or gross negligence of the Trustee.

 

(b)           No contract or other transaction between the Company and the Trustee, or any person, firm or corporation in which the Trustee may be interested or with which he may be affiliated or in any way related, shall be rendered invalid by the fact of his being a party thereto, or being interested in or affiliated with or related to such person, firm or corporation, and the Trustee and any such person, firm or corporation are hereby relieved from any liability by reason of the making of any contract or participating in any transaction wherein the Trustee or any such person, firm or corporation, may be interested.

 

15.           Notice to Company.  An executed counterpart of this Trust Agreement shall be filed with the registered office of the Company.

 

16.           Termination.  Upon termination of the Trust hereunder, either because of the expiration of the term of the Trust or the withdrawal of all Deposited Shares by the Beneficiary Stockholders in accordance with Section 9 hereof, the Trustee shall take all such action as may be required to cause such Deposited Shares to be registered in the names of the Beneficiary Stockholders in accordance with their beneficial holdings as evidenced by the Trust Certificates, or transferred in accordance with their written instructions.

 

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17.           Miscellaneous Provisions.

 

(a)           Any notice given hereunder shall be in writing and shall be addressed to any party at the address listed on the records of the Trustee or such other address as a party may have notified the other parties hereto (including the Trustee) in writing, or delivered to such person personally.  Notices by the Beneficiary Stockholders to the Trustee shall be sent to him at                                            .  All notices hereunder may be sent by certified or registered mail return receipt requested or delivered by telex, telecopy, telegram or similar method of communication.  Such notice shall be effective upon receipt.

 

(b)           This Trust Agreement shall be binding upon the successors, assigns, executors and administrators of the undersigned.  It may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute a single instrument.  It shall not be effective as to any party until it has been executed by all parties either individually or pursuant to a power of attorney.

 

(c)           Governing Law.  This Trust shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.

 

 

	
 
    	
TRUSTEE:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BENEFICIARY   STOCKHOLDERS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    

 

[EXECUTIONS CONTINUED]

 

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[Name]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PRINCIPAL:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NEW   ENTERPRISE STONE & LIME CO., INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Title:
    

 

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APPENDIX A

 

BENEFICIARY STOCKHOLDERS

 

 

	
Name
    	
 
    	
Address
    	
 
    	
Number of
   Shares
    	
 
    	
Relationship
   to Transferor
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

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APPENDIX B

 

FORM OF TRUST CERTIFICATE

 

	
No.
    	
Shares
    

 

New Enterprise Stone & Lime Co., Inc.

 

Trust Certificate

 

This certifies that                                                                                                                                                                                                                                                                                                                                        is the beneficial owner of                            shares of voting common stock ($       par value) of New Enterprise Stone & Lime Co., Inc., a Delaware corporation (the “Company”), which shares have been deposited with the Trustee of the Beneficiary Stockholders’ Voting Trust (the “Trust”) established pursuant to the Beneficiary Stockholders’ Voting Trust Agreement dated                                        ,              (the “Trust Agreement”).  Upon the surrender of this certificate, when permitted by and in accordance with the terms of the Trust Agreement, the registered holder hereof will be entitled to receive a certificate representing the same number of shares of the Company’s voting common stock.

 

This certificate is issued subject to, and the holder by accepting the same consents to, all the terms of the Trust Agreement, a copy of which will be made available to the holder hereof upon application to the Trustee.

 

This certificate is not transferable otherwise than in accordance with the provisions of the Trust Agreement.  Any transfer permitted under the provisions of the Trust Agreement shall be made upon the books of the Trust at the office of the Trustee by the holder of record hereof, either in person or by attorney thereto duly authorized in accordance with rules established for that purpose by the Trustee.

 

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Trust interests represented by this certificate have not been registered under the Securities Act of 1933 (the “Act”) or any state securities law, and may not be assigned, sold or transferred in violation of the Act or any such law.

 

Dated:                                            ,             .

 

	
 
    	
 
    
	
 
    	
Trustee
    
	
 
    	
 
    
	
 
    	
 
    

 

[Reverse of Certificate]

 

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For value received                                                                                                                        hereby sell, assign, and transfer unto                                                                                                                                                                      the within certificate and all rights represented thereby and do hereby irrevocably constitute and appoint                                                                   attorney to transfer such certificates on the books of the Trustee mentioned therein with full power of substitution in the premises.

 

 

	
 
    	
 
    	
 
    	
  (LS)
    
	
 
    	
 
    	
 
    
	
In presence of
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

 

Notice:  The signature to this assignment must correspond with the name as written upon the face of this certificate in every particular, without alteration or any change whatever.

 

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APPENDIX C

 

CERTIFICATE

 

The undersigned, New Enterprise Stone & Lime Co., Inc. (the “Company”) hereby certifies that                                     , a                                            resident, is, and has been for the immediately preceding two (2) year period, active in the management of the Company.

 

	
 
    	
NEW   ENTERPRISE STONE & LIME CO., INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
Dated:
    	
 
    

 

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EXHIBIT B

 

FORM OF TRANSFEREE STOCK RESTRICTION AGREEMENT

 

This STOCK RESTRICTION AND MANAGEMENT AGREEMENT dated as of                                       ,              is among                                                       , a resident of                                                 , and NEW ENTERPRISE STONE & LIME CO., INC., a Delaware corporation.

 

BACKGROUND

 

The Company currently has authorized two classes of capital stock: (a) Common Stock, $         par value, which is divided into two different series, one of which is voting Common Stock and the other of which is non-voting Common Stock; and (b) Preferred Stock, $100 par value.

 

.The Transferee Stockholder currently is the record owner of          shares of the Company’s voting Common Stock and          shares of the Company’s non-voting Common Stock.  This Agreement does not govern any shares of Preferred Stock which may be owned by Holder.

 

The Transferee Stockholder acquired such shares from [name of transferor]                                                        in accordance with the terms and conditions of a [Stock Restriction and Management Agreement dated                         , 1990] [Transferee Stock Restriction Agreement dated                           ,         ] between Company and                                             .  The Transferee Stockholder and the Company have agreed that it would be in their respective best interests to set forth in writing the restrictions on the transfer of the shares of Common Stock and the obligations relating to the disposition of the shares of Common Stock which each will have to the other.

 

NOW, THEREFORE, intending to be legally bound hereby, the Transferee Stockholder and the Company agree as follows:

 

1.                                      DEFINITIONS.

 

The following terms shall have the meanings ascribed to them when used in this Agreement:

 

1.1.                              “Allowed Portion of Non-Voting Stock” shall mean an amount of the Transferee Stockholder’s Non-Voting Stock which, when added to all other transfers of Non-Voting Stock by such Transferee Stockholder pursuant to this Agreement (including pursuant to Section 3.4 hereof (relating to certain put rights) and all other transfers of Non-Voting Stock by Traced Transferees of the Original Transferor of the Transferee Stockholder,, is not more than twenty percent (20%) of the amount of Non-Voting Stock held by the Original Transferor of the Transferee Stockholder on the date of the Original Agreement.  For purposes of applying the twenty percent (20%) limit, transfers to transferees permitted under Section 4 of this Agreement

 

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or comparable provisions of Transferee Agreements (relating to transfers to spouses, lineal descendants or trusts) shall not be taken into account.

 

1.2.          “Allowed Portion of Stock” shall mean either an Allowed Portion of Voting Stock or an Allowed Portion of Non-Voting Stock.

 

1.3.          “Allowed Portion of Voting Stock” shall mean an amount of a Transferee Stockholder’s Voting Stock which, when added to all other transfers of Voting Stock by such Transferee Stockholder pursuant to this Agreement (including pursuant to Section 3.4 hereof (relating to certain put rights)) and all other transfers of Voting Stock by Traced Transferees of the Original Transferor of the Transferee Stockholder, is not more than twenty percent (20%) of the amount of Voting Stock held by the Original Stockholder on the date of the Original Agreement.  For purposes of applying the twenty percent (20%) limit, transfers to transferees permitted under Section 4 of this Agreement (relating to transfers to spouses, lineal descendants or trusts) shall not be taken into account.

 

1.4.          “Appraisal” shall mean the valuation of the Common Stock conducted by an appraiser as required by Section 5.2 of this Agreement.

 

1.5.          “Appraiser” shall mean the appraiser performing the Appraisal, which appraiser shall be selected by agreement of the Original Stockholders; provided that if both Original Stockholders are no longer living or if the Original Stockholders are unable to agree, the appraiser shall be selected by members of the Board of Directors of the Company.

 

1.6.          “Certified Statements” shall mean the certified financial statements of the Company prepared by the Independent Accountants.

 

1.7.          “Closing” shall mean the actual transfer of shares of Common Stock by the Transferee Stockholder to the Company or the Remaining Transferee Stockholders, as the case may be.

 

1.8.          “Closing Date” shall mean the date of Closing.

 

1.9.          “Common Stock” shall mean the Company’s common stock, $ par value per share, which is issued and outstanding.

 

1.10.        “Company” shall mean New Enterprise Stone & Lime Co., Inc., a Delaware corporation.

 

1.11.        “Competitor” shall mean any person or entity conducting a commercial enterprise engaged in business operations which compete directly or indirectly with the Company.

 

1.12.        “Customer” shall mean any person, division or unit of a business enterprise, or unit of a government agency, with whom or which, at the time of termination of a Transferee Stockholder’s or his spouse’s employment by Company, as applicable, the Company has a contract, or is negotiating for a contract, or has submitted a bid which has not yet been accepted or rejected, or is preparing a bid to be submitted.

 

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1.13.        “Discharge For Cause” shall mean termination of employment by the Company due to conviction of a crime or participating in, benefitting from, or not acting to prevent, a known fraud against the Company or if, in the Board of Directors’ opinion, the terminated person’s conduct as an employee has evidenced a repeated willful failure or refusal to perform those functions necessary or desirable for the efficient operation of the Company’s business activities or to develop and promote the business opportunities of the Company.

 

1.14.        “Discharge Without Cause” shall mean a termination of employment by the Company other than for Permanent Disability, Retirement or death, and other than for Discharge for Cause.

 

1.15.        “Earnings Per Share” shall have the meaning set forth in Section 5.1.3 of this Agreement.

 

1.16.        “Employment Qualification” shall mean, with respect to any transferee of shares of Common Stock pursuant to this Agreement, a requirement that the transferee, or the spouse of the transferee (or, if applicable, the beneficiary of a trust which is a transferee hereunder, or the spouse of any such beneficiary), be, and have been for the immediately preceding two (2) years, active in the management of the Company as of the time of the transfer.

 

1.17.        “Family Members” shall mean the person having lineal consanguinity (ascending or descending) with the Transferee Stockholder, and the spouses of any such persons.

 

1.18.        “Family Member List” shall mean a written list which the Transferee Stockholder shall supply to the Company from time to time setting forth the names, addresses and relationships of all of the Transferee Stockholder’s Family Members.

 

1.19.        “Free Transfer Period” shall mean the sixty (60) day period following the expiration of the time provided in Section 6.2.1 of this Agreement for election to purchase by Remaining Transferee Stockholders, except as otherwise expressly provided in this Agreement.

 

1.20.        “Fully Electing Remaining Stockholder” shall mean a Remaining Stockholder who has elected to purchase the full portion of shares of Offered Voting Stock and Offered Non-Voting Stock available to him pursuant to Section 6.1.3 of this Agreement.

 

1.21.        “Independent Accountants” shall mean the independent accountants engaged by the Company to audit the Company’s books and records.

 

1.22.        “Net Worth” shall have the meaning set forth in Section 4.2 of this Agreement.

 

1.23.        “Non-Voting Stock” shall mean all shares of non-voting Common Stock, whether now owned or hereafter acquired.

 

1.24.        “Offer” shall mean the offer made pursuant to Section 2 of this Agreement.

 

1.25.        “Offer Notice” shall mean the notice of an Offer required to be made by Section 2.2 of this Agreement.

 

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1.26.        “Offered Stock” shall mean the shares of Common Stock which are the subject of an Offer, and shall include, for purposes of Section 6.1 of this Agreement (relating to acceptance of the Offer) shares of Common Stock which are the subject of a Put Notice.

 

1.27.        “Offered Voting Stock” shall mean shares of Offered Stock which are shares of Voting Stock.

 

1.28.        “Offered Non-Voting Stock” shall mean shares of Offered Stock which are shares of Non-Voting Stock.

 

1.29.        “Offering Date” shall mean, unless otherwise specified in this Agreement, the date on which communication of an Offer, in the form of an Offer Notice or otherwise, is received by the Company.

 

1.30.        “Original Agreement” shall mean the Stock Restriction and Management Agreement dated                                       , 1990 among the Company and the Original Stockholders.

 

1.31.        “Original Stockholder” shall mean either of Donald L. Detwiler or Paul I. Detwiler, Jr. and “Original Stockholders” shall mean both such individuals.

 

1.32.        “Original Transferor” shall mean, as to a particular share or shares of Common Stock, the Original Stockholder who owned such share(s) on the date of the Original Agreement which share(s) are owned by the Transferee Stockholder on the date of this Agreement.

 

1.33.        “Permanent Disability” shall mean a physical or mental incapacity, certified by a licensed physician of the Company’s choice, which prevents a person from carrying out his or her full-time employment with the Company for a period of                      (          ) consecutive days or a total of                                (          ) days within any three hundred sixty-five (365) day period.

 

1.34.        “Permitted Transferee” shall mean any of the spouse or lineal descendants of the Transferee Stockholder.

 

1.35.        “Preferred Stock” shall mean the Company’s preferred stock, $100 par value per share, which is issued and outstanding.

 

1.36.        “Prohibited Action” shall mean any action referred to in Section 8.3.1 of this Agreement.

 

1.37.        “Purchaser” shall mean the Company or the Remaining Stockholders, or both the Company and the Remaining Stockholders, as applicable, to the extent such entity or person(s) is a purchaser of shares of stock pursuant to this Agreement.

 

1.38.        “Put Notice” shall mean a written notice from the Transferee Stockholder to the Company that he is exercising his rights under any of the provisions of Section 3.4 of this Agreement (relating to certain put rights).

 

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1.39.        “Put Shares” shall mean shares of Common Stock which are the subject of a Put Notice.

 

1.40.        “Qualified Shares” shall mean shares of Voting Stock acquired by the Transferee Stockholder which were permitted to be transferred to the Transferee Stockholder because the Transferee Stockholder was a Spouse-Qualified Transferee Stockholder.

 

1.41.        “Qualifying Spouse” is defined in Section 1.47 hereof.

 

1.42.        “Qualified Transferee” shall mean any Permitted Transferee who (or whose spouse) satisfies the Employment Qualification, or a trust created for the benefit of such a Permitted Transferee.

 

1.43.        “Remaining Stockholders” shall mean the holders of shares of the Company’s issued and outstanding capital stock, whether Common Stock, Preferred Stock or other class of the Company’s capital stock which may hereafter be authorized, other than the Transferee Stockholder.

 

1.44.        “Remaining Voting Stockholder” shall mean a Remaining Stockholder who owns shares of Voting Stock.

 

1.45.        “Remaining Non-Voting Stockholder” shall mean a Remaining Stockholder who owns shares of Non-Voting Stock.

 

1.46.        “Retirement” shall mean a voluntary termination of employment with the Company for a reason other than Permanent Disability or other employment, at age 65 or other age established under Company policies as the retirement age for executives of the Company.  To “Retire” shall mean to so terminate employment.

 

1.47.        “Spouse-Qualified Transferee Stockholder” shall mean the Transferee Stockholder if the Transferee Stockholder was Qualified Transferee under Section 4 of the Original Agreement (or comparable provision of a Transferee Agreement) by reason of his or her spouse’s satisfying the Employment Qualification at the time the Transferee Stockholder acquired shares of Voting Stock, and the Transferee Stockholder was thereby permitted under the terms of the Original Agreement (or comparable provisions of a Transferee Agreement) to be a transferee of shares of Voting Stock not subject to a Voting Trust.  A spouse that enables a Transferee Stockholder to be such a Qualified Transferee is referred to in this Agreement as the “Qualifying Spouse.”

 

1.48.        “Traced Transferees” shall mean all transferees of the Original Stockholder (and transferees of such transferees) who is the Original Transferor of the Transferee Stockholder.

 

1.49.        “Trade Secret” shall mean any proprietary right of Company in any product, method or procedure whether or not such product, method or procedure is patented, trademarked or copyrighted.

 

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1.50.                        “Transferee Agreements” shall mean agreements in substantially the same form as this Agreement between the Company and other transferees of Common Stock from the Transferee Stockholder’s Original Transferor (or transferees of such transferees).

 

1.51.                        “Transferee Stockholder” shall mean

 

1.52.                        “Trust Agreement” shall mean a Voting Trust Agreement substantially in the form of Exhibit A to the Original Agreement.

 

1.53.                        “Voting Stock” shall mean all shares of voting Common Stock, whether now owned or hereafter acquired.

 

1.54.                        “Voting Trust” shall mean a voting trust established under a Trust Agreement which trust shall (i) be created under Pennsylvania law; (ii) have a term of not less than ten (10) years; (iii) provide for the issuance of one or more trust certificates to the Permitted Transferee(s) on whose behalf the trust is created, which certificates shall represent the Permitted Transferee’s economic participation in the Company represented by the shares of Voting Stock deposited in the trust; and (iv) have as trustee either (x) a non-disabled Original Stockholder or (y) any Qualified Transferee of a disabled or deceased Original Stockholder to whom such Original Stockholder could have transferred such Voting Stock pursuant to Section 4 of the Original Agreement (taking into account, for purposes of this clause (y), the Employment Qualification).

 

2.                                      RESTRICTIONS ON TRANSFER

 

2.1.                              Restriction on Voluntary Transfer.

 

Except as otherwise provided in this Agreement, the Transferee Stockholder may not transfer (whether by sale, gift or otherwise), pledge or encumber any of his shares of Common Stock unless such Transferee Stockholder has first made an offer, in the order and manner set forth in this Agreement, to sell either (A) all of his shares of Common Stock or (B) an Allowed Portion of Stock (but in no event less than the shares of Common Stock proposed to be so transferred, pledged or encumbered by the Transferee Stockholder), to the Company and to the Transferee Stockholder’s Family Members, if applicable, and to the Remaining Stockholders of the Company, and the Offer has not been accepted in the manner set forth in this Agreement.

 

2.2.                              Offer by the Transferee Stockholder.

 

An Offer Notice will be communicated to the Company and to the Remaining Stockholders concurrently and will consist of (a) an offer by a Transferee Stockholder to sell, in accordance with the provisions of this Agreement, either all of his shares of Common Stock or an Allowed Portion of Stock, but in no event less than the number of shares identified pursuant to clause (c) of this Section 2.2; (b) a statement of the Transferee Stockholder’s bona fide intention to transfer, pledge or encumber, as the case may be, any or all of his shares of Common Stock and the identity and address of the prospective record and beneficial transferees, pledgees or lienors; (c) the number of the shares of Common Stock involved in the proposed transfer, pledge or encumbrance and whether such shares are Voting Stock or Non-Voting Stock; and (d)

 

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the terms of the proposed transfer, pledge or encumbrance, including, without limitation, any financing arrangements then known to the Transferee Stockholder.

 

2.3.                              Stock to Which Offer Relates.

 

If a Transferee Stockholder proposes to transfer, pledge or encumber an Allowed Portion of Stock, the Offer made by such Transferee Stockholder pursuant to Section 2 of this Agreement shall relate only to those shares of Voting Stock or Non-Voting Stock, or both, as applicable, proposed to be transferred, pledged or encumbered at such time.  If a Transferee Stockholder proposes to transfer, pledge or encumber either (a) an amount of his Voting Stock which exceeds an Allowed Portion of Voting Stock, or (b) an amount of his Non-Voting Stock which exceeds an Allowed Portion of Non-Voting Stock, the Offer shall relate to all shares of Common Stock then held by such Transferee Stockholder.

 

3.                                      OTHER EVENTS TRIGGERING TRANSFERS

 

3.1.                              Transfer by Operation of Law.

 

If any Transferee Stockholder makes a general assignment for the benefit of creditors, is adjudged a bankrupt, becomes insolvent or in any manner transfers by operation of law (other than as a result of death or any merger or consolidation to which the Company is a party) shares of Common Stock, or any part thereof, such Transferee Stockholder will be deemed thereby to have made the Offer to sell all of his shares of Common Stock in accordance with the provisions of Section 2 of this Agreement and the Offering Date will be deemed to be the date of receipt by the Company of written notice of any such assignment, adjudgment, insolvency or transfer.  If the Company, pursuant to Section 6.1.1 of this Agreement, elects not to purchase any or all of such Transferee Stockholder’s shares of Common Stock, and the Family Members and Remaining Stockholders do not purchase all of such unpurchased shares of Common Stock pursuant to the Offer, each within the time periods set forth in Section 6.1 of this Agreement, then the Offer will be deemed a continuing offer thereafter and the Company may accept the Offer at such time as it believes to be appropriate, subject to applicable legal restraints.  Upon subsequent acceptance of the Offer by the Company, the Offering Date will be deemed to be the date of such acceptance; provided, however, that if the Offer is subsequently accepted by the Company within six (6) months of the time it was originally made, the valuation of the shares of Common Stock will be made as if the Offer had been accepted on the Offering Date.

 

3.1.1.       If the Transferee Stockholder is a Spouse-Qualified Transferee Stockholder, then, if the Qualifying Spouse makes a general assignment for the benefit of creditors, is adjudged a bankrupt or becomes insolvent, the Transferee Stockholder will be deemed thereby to have made an Offer to sell all of his Qualified Shares as if the Transferee Stockholder had been the one to make such assignment or be so adjudged; provided, however, that such event shall not, by itself, require the Transferee Stockholder to sell any shares of Non-Voting Stock which be may then own; and provided further that an Offer will not be deemed thereby to have been made if the Transferee Stockholder deposits his Qualified Shares in a Voting Trust for the benefit of the Transferee Stockholder or a Permitted Transferee of the Transferee Stockholder, or transfers same to a Qualified Transferee of the Transferee Stockholder.

 

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3.2.                              Retirement; Cessation of Employment in Certain Cases.

 

If a Transferee Stockholder Retires, is Discharged For Cause or voluntarily terminates his employment with the Company (or otherwise ceases to be a full-time employee of the Company for a reason other than Permanent Disability, death or Discharge Without Cause), the Transferee Stockholder will be deemed thereby to have made an Offer to sell all of his Common Stock in accordance with Section 2 of this Agreement and the Offering Date will be deemed to be the date of receipt by the Company of notice of such cessation of employment.  If the Company, pursuant to Section 6.1.1 of this Agreement, elects not to purchase any or all of such Transferee Stockholder’s shares of Common Stock, and the Transferee Stockholder’s Family Members and the Remaining Stockholders do not purchase all of such shares of Common Stock pursuant to the Offer, each within the time periods set forth in Section 6.1 of this Agreement, then the Offer will be deemed a continuing offer thereafter and the Company may accept the Offer at such time as it believes to be appropriate.  Upon subsequent acceptance of the Offer by the Company, the Offering Date will be deemed to be the date of such acceptance; provided, however, that if the Offer is subsequently accepted by the Company within six (6) months of the time it was originally made, the valuation of the shares of Common Stock will be made as if the Offer had been accepted on the Offering Date.

 

3.2.1.       If the Transferee Stockholder is a Spouse-Qualified Transferee Stockholder then, if the Qualifying Spouse Retires, is Discharged For Cause or voluntarily terminates his employment with the Company (or otherwise ceases to be a full-time employee of the Company for a reason other than Permanent Disability, death, or Discharge Without Cause), the Transferee Stockholder will be deemed thereby to have made an Offer to sell all of his Qualified Shares as if the Transferee Stockholder had been the one to Retire, be Discharged For Cause or voluntarily terminate his employment with the Company; provided, however, that such event shall not require the Transferee Stockholder to sell any shares of Non-Voting Stock which he may then own; and provided further that an Offer will not be deemed thereby to have been made if the Transferee Stockholder deposits his Qualified Shares in a Voting Trust for the benefit of the Transferee Stockholder or a Permitted Transferee of the Transferee Stockholder, or transfers same to a Qualified Transferee of the Transferee Stockholder.

 

3.3.                              Permanent Disability or Death of Transferee Stockholder.

 

3.3.1.       Upon the Permanent Disability or death of a Transferee Stockholder, except as specifically provided in Section 3.3.3 hereof, such Transferee Stockholder or the personal representative of such Transferee Stockholder, whether or not properly qualified, shall sell all of his shares of Common Stock to the Company, and the Company shall purchase all of his shares of Common Stock, all in accordance with the terms of this Agreement as if an Offer were made.  Upon the death of such Transferee Stockholder, should any or all of his shares of Common Stock be transferred by operation of law to any of the heirs of such Transferee Stockholder, the personal representative of such Transferee Stockholder, whether or not properly qualified, shall be deemed to have made the Offer in accordance with the terms of this Agreement on behalf of such heirs.  In the event of such death or Permanent Disability, the Offering Date will be deemed to be the date of receipt of written notice of the occurrence of such event by the Company.

 

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3.3.2.       In the event an Offer is deemed made pursuant to Section 3.3.1 of this Agreement and the Company is unable to purchase the shares of Offered Stock because of a legal or contractual impediment as provided in Section 6.1.1 hereof, then, after the Free Transfer Period, the Company’s obligation to purchase such shares shall be continuing and the Company shall notify the Transferee Stockholder or personal representative, and shall purchase such shares, as soon as practicable after it is relieved of the legal or contractual impediment which prevented it from purchasing such shares.  Upon any such subsequent purchase, the Offering Date will be deemed to be the date the Company notifies the Transferee Stockholder or personal representative of its ability to purchase due to relief from the legal or contractual impediment.

 

3.3.3.       Notwithstanding Section 3.3.1 and any other provisions of this Agreement to the contrary, upon the Permanent Disability or death of any Transferee Stockholder, such Transferee Stockholder or his properly qualified personal representative may transfer (A) any Non-Voting Stock to any Permitted Transferee, or a trust created for the benefit of a Permitted Transferee/ and (B) any Voting Stock to any Permitted Transferee or any trust for the benefit of a Permitted Transferee, provided that, if such Permitted Transferee of Voting Stock who receives such shares, or who is the beneficiary of any such trust, is not also a Qualified Transferee at the time of the transfer, such shares of Voting Stock shall be subject to a Voting Trust for the benefit of the Permitted Transferee.  The transfer to any such Permitted Transferee or trust (whether holding shares of Common Stock or voting trust certificates) shall not be recognized unless, prior thereto, the Permitted Transferee (or trustee of a trust for the benefit of the Permitted Transferee) has executed and delivered to the Company a Transferee Stock Restriction Agreement substantially in the form of Exhibit B to this Agreement.

 

In the event that the Transferee Stockholder makes a transfer to a Voting Trust for the benefit of a Permitted Transferee as provided in this Section 3.3.3, the shares of Voting Stock so transferred will be considered as owned by the beneficiary Permitted Transferee in computing the portion of Company’s capital stock owned by such Permitted Transferee for purposes of determining the rights and obligations of such Permitted Transferee under this Agreement and other Transferee Agreements, if any, but in no event will the obligation of the Company or a Remaining Stockholder be duplicated as a consequence of this provision.

 

3.3.4.       if the Transferee Stockholder is a Spouse-Qualified Transferee Stockholder, then, if the Qualifying Spouse suffers a Permanent Disability or dies, then the Transferee Stockholder shall sell all of his Qualified Shares to the Company as if such event had happened to the Transferee Stockholder; provided, however, that such event shall not, by itself, require the Transferee Stockholder to sell any shares of Non-Voting Stock which he may then own; and provided further that the Transferee Stockholder shall not be required to sell his Qualified Shares pursuant to this Section 3.3.4 if the Transferee Stockholder deposits the Qualified Shares in a Voting Trust for the benefit of the Transferee Stockholder or a Permitted Transferee of the Transferee Stockholder, or transfers same to a Qualified Transferee of the Transferee Stockholder.

 

3.4.                              Put Options.

 

3.4.1.       Put Option By Transferee Stockholder in the Event of Discharge Without Cause.  If a Transferee Stockholder is Discharged Without Cause, the discharged Transferee

 

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Stockholder may, at any time thereafter, require the Company (and if so required by the Transferee Stockholder, the Company hereby agrees, subject to Section 6.1.1 of this Agreement) to purchase all or any portion of (as required by such Transferee Stockholder) his shares of Common Stock by delivery of a Put Notice to the Company within thirty (30) days after any such discharge, in which event, any such purchase and sale shall take place in accordance with Sections 5.1 or 5.2 (as applicable), and Sections 5.3, 6.1 and 6.5 of this Agreement.  If the Transferee Stockholder is a Spouse-Qualified Transferee Stockholder and the Qualifying Spouse is Discharged Without Cause, then the Transferee Stockholder may, upon such Discharge Without Cause of the Qualifying Spouse, require the Company to purchase, in accordance with the foregoing sentence, all, but not less than all, of his Qualified Shares.  If the Transferee Stockholder does not exercise his right to require the Company to purchase such Qualified Shares upon the Discharge Without Cause of the Qualifying Spouse, then the Transferee Stockholder shall be deemed to have made an Offer to sell all of his Qualified Shares; provided, however, that such event shall not, by itself, require the Transferee Stockholder to sell any shares of Non-Voting Stock which he may then own; and provided further that such Offer will not be deemed to be made if the Transferee Stockholder deposits such Qualified Shares in a Voting Trust for the benefit of the Transferee Stockholder or a Permitted Transferee of the Transferee Stockholder, or transfers same to a Qualified Transferee of the Transferee Stockholder.

 

3.4.2.       Tenth Anniversary Put.  At any time after the tenth anniversary of the date of this Agreement, any Transferee Stockholder may require the Company (and if so required, the Company hereby agrees, subject to Section 6.1.1 of this Agreement) to purchase all or any portion of (as required by such Transferee Stockholder) his shares of Common Stock by delivery of a Put Notice to the Company.  In such event, any purchase and sale shall take place in accordance with Sections 5.1 or 5.2 (as applicable) and Sections 5.3, 6.1 and 6.5 of this Agreement.

 

3.4.3.       Put of Allowed Portion of Voting Stock.  At any time after the date of this Agreement, a Transferee Stockholder may require the Company (and if so required, the Company hereby agrees, subject to Section 6.1.1 of this Agreement) to purchase an amount of his Voting Stock up to the Allowed Portion of Voting Stock by delivery of a Put Notice to the Company; provided, however, that a Transferee Stockholder may not exercise his right to require the Company to so purchase his shares of Voting Stock pursuant to this Section 3.4.3 more than once each fiscal year.  Any such purchase and sale shall take place in accordance with Sections 5.1, 5.3, 6.1 and 6.5 of this Agreement.

 

3.4.4.       Rights Of Remaining Stockholders.  If the Company is unable to fulfill its obligations under this Section 3.4 by reason of a legal or contractual impediment as provided in Section 6.1.1 (which cannot be removed as provided in said Section 6.1.1), then the Remaining Stockholders shall have an option to acquire the Put Shares, as if such shares were shares of Offered Stock and Section 6.1.2 applied.  Any Put Shares not purchased by the Remaining Stockholders shall again become subject to this Agreement, provided that, if not all such Put Shares are so purchased, the exercising Transferee Stockholder shall have the ability to rescind any elections by the Remaining Transferee Stockholders to purchase such Put Shares, whereupon all such Put Shares shall again be subject to the terms and conditions of this Agreement.

 

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3.4.5.       Election to Apply Section 5.1 or 5.2.  If the number of Put Shares exceeds an Allowed Portion of Stock but is less than all shares then owned by the Transferee Stockholder providing the Put Notice, the Company may elect to calculate the purchase price therefore in accordance with either Section 5.1 or 5.2 of this Agrement.

 

4.                                      PERMITTED TRANSFERS

 

4.1.                              Transfer to Spouse, Lineal Descendants or Trusts.

 

Notwithstanding any provision in this Agreement to the contrary, the Transferee Stockholder may transfer, at any time all or any portion of his shares of Common Stock to a Permitted Transferee, or a trust created for the benefit of a Permitted Transferee.  A transfer will not be permitted under this Section 4.1 unless (a) prior to any such transfer there has been delivered to the Company by the Permitted Transferee, and by the trustee of any trust created for the benefit of a Permitted Transferee, a Transferee Stock Restriction Agreement substantially in the form of this Agreement; and (b) if the shares of Common Stock to be transferred under this Section 4.1 are shares of Voting Stock, the Permitted Transferee who receives such shares or is the beneficiary of any such trust, is also a Qualified Transferee.

 

4.2.                              Transferor to Trust Treated as Owner.

 

In the event that the Transferee Stockholder makes a transfer to a trust referred to in Section 4.1 for the benefit of a Permitted Transferee the shares of the Company’s capital stock so transferred, nevertheless, will be considered as owned by the transferor in computing the portion of Company’s capital stock owned by such transferor for purposes of determining the rights and obligations of such transferor under this Agreement and similar agreements, if any, with other stockholders of the Company, but in no event will the obligations of the Company or a Remaining Stockholder be duplicated as a consequence of this provision.

 

5.                                      PRICE AND TERMS

 

5.1.                              Terms and Conditions for Sale of An Allowed Portion of Stock.

 

If an Offer relates to either the sale of an Allowed Portion of Stock, or the sale of an amount of Common Stock which is less than the amount of Common Stock owned by the Transferee Stockholder’s Original Transferor on the date of the Original Agreement, then the following terms and conditions shall apply to the sale:

 

5.1.1.       Price.  The price for the purchase of any Allowed Portion of Stock will be the higher of (x) the Net Worth of Company multiplied by a fraction, the numerator of which is the number of shares of Common Stock to be purchased and the denominator of which is the total number of issued and outstanding shares of Common Stock as of the Offering Date, including the shares of Common Stock which are shares of Offered Stock or (y) the Earnings Per Share of Common Stock multiplied by twelve (12) times the aggregate number of shares of Common Stock to be purchased.

 

5.1.2.       Net Worth.  For purposes of this Agreement, ! the Net Worth of Company will mean:

 

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(a)           Offer in First Half of Year.  If the Offering Date occurs prior to the first (1st) day of the seventh (7th) month in any fiscal year of the Company, the net worth of the Company on the last day of the fiscal year of the Company immediately preceding the fiscal year in which the Offering Date occurs; or

 

(b)           Offer in Second Half of Year.  If the Offering Date occurs on or after the first (1st) day of the seventh (7th) month in any fiscal year, the net worth of the Company on the last day of the fiscal year of the Company in which the Offering Date occurs,

 

in either case, as reflected on the Company’s Certified Statements for such year; provided, however, that the Net Worth (a) will include only capital paid in (including par value and surplus) for, and retained earnings attributable to, the Company’s issued and outstanding shares of Common Stock; and (b) will not include any proceeds of insurance paid upon the death of a Transferee Stockholder which would otherwise be included in Net Worth, but shall include the net cash surrender value (cash surrender value minus any loans) of such policies immediately prior to the death of a Transferee Stockholder, which would otherwise be excluded from Net Worth.

 

5.1.3.       Earnings Per Share.  The Earnings Per Share of Common Stock shall mean the amount determined as follows:

 

(a)           Offer in First Half of Year.  If the Offering Date occurs prior to the first (1st) day of the seventh (7th) month in any fiscal year of the Company, the Earnings Per Share shall be the average of the earnings per share of Common Stock in each of the three (3) fiscal years immediately preceding the fiscal year in which the Offering Date occurs.

 

(b)           Offer in Second Half of Year.  If the Offering Date occurs on or after the first (1st) day of the seventh (7th) month in any fiscal year of the Company, the Earnings Per Share shall be the average of the earnings per share of Common Stock in each of the fiscal year in which the Offering Date occurs and the two (2) fiscal years immediately preceding the fiscal year in which the Offering Date occurs.

 

Earnings per share for each such year will be obtained by dividing (x) the net income (after provision has been made for federal, state and local taxes) of the Company, for each such year as derived from the Certified Statements by (y) the average number of shares of Common Stock issued and outstanding in each such year, as calculated by the Independent Accountants in accordance with generally accepted accounting principles consistently applied.

 

5.2.          Terms and Conditions For Sale of All Common Stock.

 

In the case of an Offer relating to an amount of Common Stock which is equal to or more than the amount of Common Stock owned by the Transferee Stockholder’s Original Transferor on the date of the Original Agreement, then the purchase price will be determined by an Appraisal conducted by an Appraiser at the time the Offer is made.  Company shall arrange, as necessary, for an Appraiser to value its Common Stock promptly after an Offer Notice or Put Notice is communicated pursuant to this Agreement.

 

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5.3.          Payment.

 

The purchase price for any shares of Offered Stock will be paid in thirty-two (32) equal consecutive quarterly installments, the first of which will be paid on the Closing Date, and the remainder of which will be paid on the next succeeding thirty-one (31) quarterly anniversary dates of Closing (or next business day, if such anniversary is on a Saturday, Sunday or holiday), together with accrued interest from the Closing Date on the unpaid portion of the purchase price at the rate of          percent (    %) per annum.

 

6.             PROCEDURES

 

6.1.          Acceptance of Offer.

 

6.1.1.       The Company.

 

(a)           Obligation of the Company.  Within ninety (90) days after receipt by the Company of (a) the Offer made or deemed to have been made pursuant to Section 3.3 (relating to permanent disability or death) of this Agreement, or (b) a Put Notice, the Company shall purchase all, but not less than all, of the shares of Offered Stock unless the Company receives from its independent legal counsel within such period a written opinion based on information available at the time (including without limitation comparative analyses of unaudited financial statements and good faith projections of year-end results) to the effect that payment of the purchase price contemplated by such Offer is prohibited by applicable law, rule or regulation, or by a contract or agreement which affects the Company.

 

(b)           Election of the Company.  Within ninety (90) days after receipt of an Offer other than an Offer referred to in Section 6.1.1(a), the Company may elect, but shall not be required, to purchase all, but not less than all, of the shares of Offered Stock.  After such ninety (90) day period and after the periods provided in Section 6.1.2 for purchase by the Remaining Stockholders, the Company shall again have the right to purchase any shares of Offered Stock to the extent such shares are the subject of an Offer made under Section 3.1 (relating to transfers by operation of law) or Section 3.2 (relating to cessation of employment) of this Agreement, insofar as such Offers shall be continuing as provided in Sections 3.1 and 3.2 of this Agreement.

 

(c)           Contractual Impediment.  If the opinion of the independent legal counsel referred to in Section 6.1.1(a) of this Agreement is to the effect that payment of such purchase price is not prohibited by any applicable law, rule or regulation, but is prohibited by a contract or agreement which affects the Company, then the Company will promptly use its best efforts to obtain such consents or waivers as may be necessary to remove such impediment to the purchase.  Within ten (10) days after receipt of all such consents or waivers, the Company promptly will purchase all shares of Offered Stock.  If, after using its best efforts, the Company is unable to obtain such consents or waivers, the Company will give written notice to the Transferee Stockholder, the Transferee Stockholder’s Family Members as identified on his Family Member List, and to the Remaining Stockholders of such inability and rejection of the Offer.

 

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(d)           Legal Impediment.  If the legal opinion referred to in Section 6.1.1 (a) is to the effect that payment of such purchase price is prohibited by applicable law, rule or regulation, and if the legal prohibition can be eliminated by recapitalization in accordance with generally accepted accounting principles (including adjustment of the value of its assets or adjustment of the par value of the Company’s issued and outstanding capital stock or other reasonable action by the Company), then the Company will take such action.  If such prohibition cannot be eliminated by any such action, the Company will give written notice to the Transferee Stockholder, the Transferee Stockholder’s Family Members as identified on his Family Member List, and to the Remaining Stockholders of the Company’s inability to purchase and the rejection of the Offer.

 

6.1.2.       Family Members.  If the Offer is rejected by the Company pursuant to Section 6.1.1. of this Agreement, then the Transferee Stockholder shall next offer any shares of Offered Stock to the Transferee Stockholder’s Family Members who shall be entitled to purchase such shares on a first come/first serve basis.  If, within thirty (30) days after the Company’s notice is given to such Family Members pursuant to Section 6.1.1, any shares of Voting Stock have not been elected to be purchased by the Transferee Stockholder’s Family Members, then the Remaining Stockholders shall have the right to purchase any such unpurchased shares as provided in Section 6.1.3 hereof.

 

6.1.3.       Remaining Stockholders.

 

(a)           Voting Stock.  If the Offer is rejected by the Company pursuant to Section 6.1.1 of this Agreement and shares of Offered Stock are not purchased by the Transferee Stockholder’s Family Members pursuant to Section 6.1.2 hereof, each Remaining Voting Stockholder,  within sixty (60) days after the receipt by such Remaining Voting Stockholder of the notice from the Company rejecting the Offer pursuant to such Section 6.1.1 (but not sooner than thirty (30) days after such notice is received), may elect, but shall not be required, to purchase up to that proportion of the unpurchased shares of Offered Voting Stock as the number of shares of Voting Stock which such Remaining Voting Stockholder owns as of the Offering Date bears to the aggregate number of then issued and outstanding shares of Voting Stock other than shares of Offered Voting Stock and any other shares of Voting Stock owned by the offering Transferee Stockholder.

 

(b)           Non-Voting Stock.  If the Offer is rejected by the Company pursuant to Section 6.1.1 of this Agreement and shares of Offered Stock are not purchased by the Transferee  Stockholder’s Family Members pursuant to Section 6.1.2 hereof, each Remaining Stockholder, within the same thirty (30) day period allowed for the election to purchase shares of Offered Voting Stock pursuant to Section 6.1.3(a), may elect, but shall not be required, to purchase up to that proportion of the unpurchased shares of Offered Non-Voting Stock as the number of shares of Preferred Stock and Non-Voting Stock which such Remaining Stockholder owns as of the Offering Date bears to the aggregate number of then issued and outstanding shares of Preferred Stock and Non-Voting Stock, other than the shares of Offered Non-Voting Stock, and any other shares of Non-Voting Stock or Preferred Stock, owned by the offering Transferee Stockholder.

 

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(c)           Subsequent Opportunity to Purchase.  If any Remaining Stockholder does not elect to purchase all of the portion of the unpurchased shares of Offered Voting Stock or Offered Non-Voting Stock available to him pursuant Sections 6.1.3(a) and 6.1.3(b), each Fully Electing Remaining Stockholder may elect, for a period of fifteen (15) days, to purchase that portion of the shares of Offered Stock not elected to be purchased by any Remaining Stockholder pursuant to Section 6.1.3(a) and 6.1.3(b), as the number of shares of Voting Stock, Preferred Stock and Non-Voting Stock which he owns as of the Offering Date bears to the aggregate number of issued and outstanding shares of Voting Stock, Preferred Stock and Non-Voting Stock owned as of the Offering Date by all Fully Electing Remaining Stockholders.  The fifteen (15) day period for the purchase of shares pursuant to this Section 6.1.3 (c) shall not commence until the conclusion of the thirty (30) day period under Sections 6.1.3(a) and 6.1.3(b).

 

If all of the shares of Offered Stock are not so purchased, then the procedure set forth in the preceding paragraph will be repeated until all of the shares of Offered Stock have been so purchased or no Fully Electing Remaining Transferee Stockholders elect to buy all of the unpurchased shares of Offered Stock.

 

6.1.4.       Exercise.  Within the appropriate ninety (90) day period referred to in Section 6.1.1 of this Agreement, the Company will give notice of its agreement to purchase all of the shares of Offered Stock, or of its rejection of the Offer pursuant to Section 6.1.1 of this Agreement, to the Transferee Stockholder, his Family Members as identified on the Family Member List, and to each Remaining Stockholder.  Failure to give any such notice will constitute notice of rejection of the Offer pursuant to Section 6.1.1 on the ninetieth (90th) day.  Each Family Member or Remaining Stockholder will exercise his election, if any, to purchase by giving written notice thereof to the Transferee Stockholder, to the other Remaining Stockholders and to the Company.  In the event of agreement by the Company to purchase, its notice will specify a date for Closing which will be not more than sixty (60) days after the date of the giving of such notice; provided, however, that if the purchase price is determined pursuant to Section 5.1.2(b) or 5.1.3(b) of this Agreement, the Closing shall take place not more than thirty (30) days after the Certified Statements are available for the fiscal year which includes the Offering Date.  In the event the Family Members or Remaining Stockholders, or one or more of them, elect to purchase all or a portion of the shares of Offered Stock, Closing with respect to such shares will be held at such time as may be mutually agreed upon by the Transferee Stockholder and those Family Members or Remaining Stockholders who have agreed to purchase and, in the absence of such agreement, will be held on the sixtieth (60th) day following receipt by the Transferee Stockholder of a Family Member’s notice of election to purchase or of the last notice of election to purchase from a Remaining Stockholder, as applicable.

 

6.2.          Release from Restriction.

 

6.2.1.       Free Transfer Period.  If the Offer is not accepted by the Company, the Family Members or by the Remaining Stockholders as to any or all of the Offered Stock, the Transferee Stockholder may, subject to Section 6.6 hereof, make a bona fide transfer, pledge or encumbrance of the shares of Offered Stock with respect to which the Transferee Stockholder’s Offer has not been accepted by the Company, the Family Members or by the Remaining Stockholders at any time within sixty (60) days following the expiration of the time provided in

 

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Section 6.1.3 of this Agreement for election to purchase by the Remaining Stockholders, provided that the Transferee Stockholder first complies with the provisions of Section 6.3 of this Agreement (relating to conditions of release from restriction).

 

(a)           Certain Offers Continuing.  Notwithstanding the foregoing paragraph, if the Offer is made pursuant to Sections 3.1 (relating to transfers by operation of law) or 3.2 (relating to cessation of employment), the Offer shall be a continuing Offer as provided in said Sections, and the Transferee Stockholder may not transfer the Offered Stock under this Section 6.2.

 

(b)           Rescission Rights.  If the Offer (regardless of under which Section of this Agreement the Offer is deemed to be made) is not accepted by the Company or the Family Members as to all the shares of Offered Stock, but is accepted by the Remaining Stockholders as to some, but not all, of the shares of Offered Stock available to the Remaining Stockholders, the Transferee Stockholder may, but will not be obligated to, rescind the agreements of sale created by such elections of the Remaining Stockholders to purchase which the Stockholder has received, in which event the shares of Offered Stock which were available to the Remaining Stockholders again will become subject to all of I     the restrictions of this Agreement and may not be transferred subsequently without compliance with the terms of this Agreement.

 

(a)           Free Transfer Only If Rescission Rights Not Exercised.  If the Offer is not accepted by the Company or the Family Members as to all the shares of Offered Stock, but is accepted by the Remaining Stockholders as to some, but not all, of the shares of Offered Stock, and the Transferee Stockholder does not rescind the agreements of sale created by such elections of the Remaining Stockholders pursuant to Section 6.1.3, the Transferee Stockholder may, subject to Section 6.6 hereof, make a bona fide transfer, pledge or encumbrance of those shares of Offered Stock with respect to which agreements of sale created by such elections of the Remaining Stockholders do not exist at any time within the Free Transfer Period, provided that the Transferee Stockholder first complies, as may be required, with the provisions of Section 6.3 of this Agreement.

 

6.2.2.       Public Offering.  Immediately upon the closing of the purchase of shares of Common Stock by an underwriter, or group of underwriters, pursuant to a public offering by the Company of its Common Stock, the rights and obligations affecting the disposition of the Common Stock as set forth in this Agreement will be of no force or effect.  In such event, the Transferee Stockholder will be free to dispose of Common Stock in any manner he deems appropriate consistent with relevant law, and neither the Company nor any Remaining Stockholder will have any obligation to purchase the shares of Common Stock.

 

6.3.          Conditions of Release from Restriction.

 

6.3.1.       More Favorable Transfer Requires Re-Offer.  If any of the terms of a proposed bona fide transfer during the Free Transfer Period to a transferee other than the Company, the Family Members or the Remaining Stockholders under the terms of this Agreement are more favorable to the transferee than the corresponding terms in accordance with which the Company, the Family Members or the Remaining Stockholders could have purchased

 

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the shares of Offered Stock under this Agreement, then the Transferee Stockholder may not transfer the shares of Offered Stock proposed to be transferred to such transferee without first having made a second Offer to transfer the shares of Offered Stock to the Company, the Family Members and the Remaining Stockholders on the same terms as the contemplated transfer to such transferee.  Thereupon, subject to Section 6.6 hereof, the Transferee Stockholder may make such bona fide transfer as to those shares of Offered Stock with respect to which the second Offer has not been accepted by any of the Company, the Family Members or the Remaining Stockholders within thirty (30) days after their receipt of such second Offer.  The allocation of the shares of Offered Stock among the Remaining Stockholders, including allocation upon rejection of the second Offer, by any Remaining Stockholder with respect to such second Offer will be the same as provided in Section 6.1.3 of this Agreement.  If a second Offer to sell the shares of Offered Stock is made to the Company and the Remaining Stockholders in accordance with this Section 6.3.1, the Free Transfer Period with respect to the second offer will commence on the earlier of (x) the date of receipt by the Transferee Stockholder of the last rejection of the second Offer from the Remaining Stockholders or (y) the thirtieth (30th) day after the date of the second Offer.  Any shares of Offered Stock which are not transferred, pledged or encumbered during the Free Transfer Period will again become subject to all of the restrictions of this Agreement and may not be subsequently transferred without compliance with the terms of this Agreement.

 

6.3.2.       Pledge or Encumbrance.  If any Transferee Stockholder proposes to pledge or encumber shares of Common Stock, such Transferee Stockholder may not, after the Offer with respect to those shares of Common Stock has been rejected by the Company, the Family Members and the Remaining Stockholders, pledge or encumber shares of Common Stock without first having requested in writing to borrow from the Company and the Remaining Stockholders on the same terms and conditions of any proposed borrowing contemplating such proposed pledge or encumbrance.  Thereupon, such Transferee Stockholder may make such pledge or encumbrance as to those shares of Common Stock with respect to which such request has not been granted by either the Company or the Remaining Stockholders within thirty (30) days after their receipt of such request.  The Remaining Stockholders’’ participation in any advance to such Transferee Stockholder will be calculated in the same manner as provided in Section 6.1.3 of this Agreement.  If such offer to pledge or encumber shares of Common Stock is made to the Company and the Remaining Stockholders in accordance with this Section 6.3.2, the Free Transfer Period will commence on the earlier of (x) the date of receipt by the Transferee Stockholder of the last rejection of such request from Company and all of the Remaining Transferee Stockholders or (y) the thirtieth (30th) day after the date of  such request.  Any shares of Common Stock which are not pledged  or encumbered during the Free Transfer Period will again become  subject to all of the restrictions of this Agreement and may not  be subsequently transferred without compliance with the terms of  this Agreement.

 

6.4.          Nonrecognition of Certain Transfers; Additional Capital Stock.

 

6.4.1.       Agreement to be Bound.  The Company will not, nor be compelled to, recognize any transfer, or issue any certificate representing any shares of Common Stock to any person who does not qualify as a proper transferee under the terms and conditions of this Agreement, or who has not delivered to the Company a Transferee Stock Restriction Agreement substantially in the form of this Agreement.

 

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6.4.2.       Transfer Not in Accord with this Agreement. The Company will not, nor be compelled to, recognize any transfer made other than in accordance with the terms of this Agreement and the similar agreements, if any, made with other stockholders of the Company as of the date hereof; and the Company will not, nor be compelled to, issue any certificate representing shares of Common Stock to any person who has received such shares of Common Stock in a transfer made other than in accordance with the terms of this Agreement or one of such similar agreements.

 

6.4.3.       Additional Capital Stock of the Company. The Company will not issue any shares of capital stock of the Company to any party in addition to the capital stock outstanding as of the date hereof, except:

 

(a)           shares of preferred stock for which the Company received consideration in money or money’s worth at least equal to the stated value or par value of such stock;

 

(b)           shares of common stock for which the Company received consideration in money or money’s worth at least equal to the per share net book value of the Common Stock issued and outstanding immediately prior to such issue and as to which the amount of such consideration credited to capital stock on the books of the Company with respect to each share does not exceed the stated value or par value so credited with respect to each share of Common Stock outstanding immediately prior to such issue; or

 

(c)           any class or series of capital stock issued by the Company to its directors, officers or employees pursuant to a plan adopted by the Company regardless of whether such plan is designed to meet requirements of the Internal Revenue Code of 1986, as amended.

 

6.5.          Necessary Documents.

 

If, under the terms of this Agreement, shares of Common Stock are purchased, the Transferee Stockholder or the Transferee Stockholder’s personal representative, whether or not properly qualified, will execute and deliver at the Closing all necessary documents that reasonably may be required to accomplish a complete transfer of such shares of Common Stock, and the Purchaser will execute and deliver to the Transferee Stockholder or the Transferee Stockholder’s personal representative a non-negotiable promissory note for any deferred portion of the purchase price (and interest thereon), and will agree to pledge the shares of Common Stock pursuant to a Stock Pledge and Escrow Agreement and, in connection therewith, will deliver to the Company’s legal counsel (or to such other person mutually agreed upon by the parties) certificates representing all of the shares of Common Stock actually purchased, with executed blank transfer powers attached, which certificates will be delivered to Purchaser upon final payment of the unpaid balance of the purchase price and all interest thereon.

 

6.6.          No Sale to Competitor. Notwithstanding any provision of this Agreement relating to sales of shares of Common Stock during a Free Transfer Period, in no event may any such sales be made during a Free Transfer Period to any Competitor.

 

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7.                                      VOTING AND EMPLOYMENT MATTERS.

 

7.1.          Voting. The Transferee Stockholder agrees to vote his shares of Voting Stock acquired through one or more transfers from an Original Stockholder for (i) the persons nominated by such Original Stockholder for the position of director of the Company and (ii) the persons nominated for such position by the other Original Stockholder (or by the transferee(s) of such other Original Stockholder entitled to nominate persons for director pursuant to provisions comparable to Section 7.2 hereof contained in Transferee Agreements executed before, on or after the date hereof) .

 

7.2.          Nomination Rights. In the event of the death or permanent mental disability of an Original Stockholder, the holders of shares of Voting Stock which were owned by such Original Stockholder on the date of the Original Agreement shall make such nomination(s) for the position of director of the Company as would otherwise have been made by such Original Stockholder under the terms of the Original Agreement. If such holders cannot agree on the person(s) to be nominated, then the nominee(s) shall be the person(s) elected by the majority vote of such holders at a meeting convened upon ten (10) days written notice by any such holder. All such holders shall vote for the person(s) so nominated. In any such election by such holders for purposes of nominating person(s) to be director, each such holder shall have one vote in respect of each of his shares of Voting Stock and shall be entitled to cast his votes for or against each candidate in such election to determine nominees.

 

7.3.          Employment. The Transferee Stockholder acknowledges that, if the Transferee Stockholder is not, on the date hereof, an active employee in the management of the Company and desires to become one in order to meet the Employment Qualification at a later date, whether the Transferee Stockholder shall be hired, and in what position he shall be hired, will be determined by the Company’s management in conjunction with certain directors (not less than three (3)) designated for such purpose by the Transferee Stockholder’s Original Transferor pursuant to the terms of the Original Agreement. The compensation and promotion of the Transferee Stockholder, once hired, will be determined by the Compensation Committee of the Company’s Board of Directors in conjunction with such directors designated by the Transferee Stockholder’s Original Transferor pursuant to the terms of the Original Agreement.

 

8.                                      MISCELLANEOUS MATTERS

 

8.1.          Arbitration.

 

Any dispute between the Transferee Stockholder and the Company relating to matters addressed in this Agreement shall be decided by arbitration in Harrisburg, Pennsylvania, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then obtaining, unless the Transferee Stockholder and the Company otherwise mutually agree in writing. The dispute shall be decided by a panel of three arbitrators with each of the Transferee Stockholder and the Company choosing one arbitrator and those two arbitrators selecting the third arbitrator. The decision and the award of damages or specific performance rendered by a majority of the arbitrators shall be final and binding and judgment may be entered upon it in any court having jurisdiction thereof. The arbitration shall be held as promptly as practicable after actual receipt of notice that the Transferee Stockholder or the Company has filed a notice for

 

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arbitration with the American Arbitration Association on such a date, and at such a place and time in Harrisburg, Pennsylvania, convenient to the Transferee Stockholder, the Company and the ; arbitrators, except that if the Transferee Stockholder and the Company cannot agree, the arbitrators shall decide such date, place and time. Notwithstanding the foregoing, in no event shall the date of the arbitration exceed sixty (60) days from the date the other Transferee Stockholder or the Company receives the notice for arbitration, unless the Transferee Stockholder and the Company mutually agree otherwise. The arbitrators shall make their decision promptly and any award of damages or specific performance shall be made, unless otherwise mutually agreed by the Transferee Stockholder and the Company in writing, not later than fifteen (15) days from the date of closing of the hearings or if oral hearings have been waived, from the date of transmitting the final statements and proofs to the arbitrators.

 

8.2.          Endorsement on Stock Certificates.

 

Each certificate representing any shares of Common Stock now held by the Transferee Stockholder or any shares of Common Stock hereafter held by the Transferee Stockholder will bear a legend in substantially the following form:

 

“THE TRANSFER OF THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY THE TERMS OF A TRANSFEREE STOCK RESTRICTION AGREEMENT DATED                                         , 19    , A COPY OF WHICH IS ON FILE AND MAY BE INSPECTED AT THE OFFICE OF THE COMPANY.”

 

8.3.          Covenant Not to Compete.

 

8.3.1.       During Employment. During the period in which the Transferee Stockholder is employed by Company, if any, the Transferee Stockholder will not directly or indirectly own, manage, operate, join, control or participate in the ownership, management, operation or control of or be employed or otherwise be connected in any manner with any Competitor.

 

8.3.2.       After Termination of Employment or Sale of Stock. For a period of five (5) years following either (a) termination of the Transferee Stockholder’s employment by Company (unless the Transferee Stockholder has been Discharged Without Cause), or (b) an Offer by the Transferee Stockholder to sell all of his shares of Common Stock pursuant to this Agreement, the Transferee Stockholder will not undertake any Prohibited Action, and will not solicit or aid in the solicitation of any business from any Customer of Company, and will not disclose, or utilize on behalf of himself or any other person or business entity, any Trade Secret of Company.

 

8.3.3.       Modification for Enforceability. Should the foregoing covenants of this Section 8.3 be adjudged to any extent invalid by any competent tribunal, such covenant will be deemed modified to the extent necessary to make it enforceable.

 

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8.4.          Specific Performance.

 

In the event of a breach or threatened breach of any of the provisions of this Agreement, the remedy at law would be inadequate and a party to this Agreement will be entitled to appropriate injunctive and other equitable relief, including without limitation, specific performance and such party will be entitled to recover the loss, costs and expenses (including reasonable attorneys’ fees and disbursements) which such party incurs in securing any relief at law or in equity.

 

8.5.          Liquidation of Corporation.

 

Notwithstanding any other provision of this Agreement, if, at any time, the Board of Directors of the Company adopts a resolution recommending the sale or exchange of all, or substantially all, of the Company’s assets to be followed by liquidation of the Company, or recommends that the Company be dissolved voluntarily, or if all of the stockholders of the Company have signed a written agreement consenting to such sale or dissolution, or if, at any time, an agreement is made for^the sale of ninety percent (90%) or more of the Company’s issued and outstanding capital stock, then with respect to any event thereafter occurring, all obligations to purchase any shares of Common Stock and all obligations of any Transferee Stockholder to sell any shares of Common Stock arising under the terms of this Agreement will be abated. If such recommended sale is consummated or such dissolution occurs, such obligations will terminate absolutely and such selling Transferee Stockholder will receive his pro rata share of the proceeds of such sale or dissolution. If such sale or dissolution is thereafter abandoned, all of the obligations of purchase and sale herein contained will be in full force and effect again. If, during the period of abatement, an event occurs which, but for the abatement, would have required or permitted an Offer or sale by a Transferee Stockholder pursuant to the provisions of this Agreement, all time periods with respect to such Offer and sale, and the responses required or permitted hereunder, shall be computed as if such event had occurred on the day after the proposed sale or dissolution was abandoned, but all determinations of price shall be made as if the Offer or sale had been made at the time it would have been made had there been no abatement.

 

8.6.          Transferee Stockholder Wills.

 

Each Transferee Stockholder agrees to include in his will a direction and authorization to his executor to comply with the provisions of this Agreement and to sell all of his shares of Common Stock in accordance with this Agreement; provided, however, that the failure of any Transferee Stockholder so to direct his executor shall not affect the validity or enforceability of this Agreement.

 

8.7.          Notices.

 

Any and all notices, designations, consents, offers, acceptances or any other communications provided for herein will be given in writing by registered or certified mail, return receipt requested, which will be addressed, in the case of the Company, to its principal office and in the case of the Transferee Stockholder to his addresses appearing on the records of

 

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the Company, or to such other address as may be designated by the Transferee Stockholder in writing to the Company and the other stockholders.

 

8.8.          Time Periods.

 

In computing the number of days for any purpose of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays, except that if the last day of any period occurs on a Saturday, Sunday or holiday, the period will be deemed extended to the end of the next succeeding day which is not a Saturday, Sunday or holiday. A holiday for purposes of this Agreement shall mean those days on which banks in the Commonwealth of Pennsylvania may, or are obligated to, remain closed.

 

8.9.          Successors and Assigns.

 

This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, all future stockholders of the Company, whether they become such by transfer pursuant to or contrary to the terms of this Agreement or similar agreements, if any, with other stockholders of the Company, and all of their respective heirs, legatees, personal representatives, successors and assigns.

 

8.10.        Titles Not to Affect Interpretation.

 

The headings of sections and paragraphs in this Agreement are inserted for convenience of reference only and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.

 

8.11.        Gender, etc.

 

References to the masculine gender in this Agreement shall mean the masculine or feminine where applicable and singular references shall be deemed to include the plural where applicable.

 

8.12.        Invalid Provision.

 

The invalidity or unenforceability of any provision of this Agreement will not affect the other provisions hereof, and this Agreement will be construed as if such invalid or unenforceable provisions were omitted.

 

8.13.        Governing Law.

 

This Agreement will be governed by the laws of the Commonwealth of Pennsylvania.

 

8.14.        Subordination.

 

The Transferee Stockholder agrees that the obligation of the Company hereunder is and shall be subordinate to any long term financial arrangement to which the Company is now,

 

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or in the future may be, a party, and the Transferee Stockholder agrees to take such action as the Company shall reasonable request to implement this subordination agreement.

 

8.15.        Modification.

 

This Agreement contains the entire agreement between the parties relating to the restrictions on the transfer of any shares of Common Stock and may be modified only by a writing signed by the Company and each Transferee Stockholder, and by all Remaining Stockholders if those provisions of this Agreement which confer rights or obligations on the Remaining Transferee Stockholders are modified by such amendment.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by a duly authorized officer and its corporate seal affixed hereto, and the Transferee Stockholder has signed this Agreement as of the date first above written.

 

 

	
Attest:
    	
 
    	
NEW   ENTERPRISE STONE & LIME CO., INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
Secretary
    	
 
    	
 
    	
Title:
    
	
[Corporate   Seal]
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Witness:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Transferee   Stockholder:
    

 

The undersigned stockholders of Company other than the Transferee Stockholder has executed this Agreement to acknowledge that they have the rights and obligations specifically conferred by this Agreement.

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

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