EXHIBIT 4.1
THIS DOCUMENT CONSTITUTES PART OF A
PROSPECTUS COVERING SECURITIES THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
KEY ENERGY SERVICES, INC.
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Key Energy Services 401(k) Savings & Retirement Plan
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INFORMATION MEMORANDUM
INTRODUCTION
This Information Memorandum is provided by Key Energy Services, Inc., a
Maryland corporation (the "Company"), to all persons who participate in the Key
Energy Services 401(k) Savings and Retirement Plan (the "Plan"). The following
is a summary of the Plan. Reference is made to the complete text of the Plan,
and the following summary is qualified in its entirety by such reference.
PLAN DESCRIPTION
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The date of this Information Memorandum is March 14, 2001
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GENERAL
The Company is offering eligible employees the opportunity to
contribute and invest, through payroll deductions, a portion of their pre-tax
earnings in various investment options maintained by the Plan. One of the
investment options in the Plan will be the Company's common stock, par value
$0.10 per share (the "Common Stock"). Up to 400,000 shares of Common Stock may
be offered pursuant to the Plan. The Company's principal offices are located at
Two Tower Center, Twentieth Floor, East Brunswick, New Jersey 08816, telephone
(732) 247-4822. If you require additional information about the Plan and its
administrator or would like to request a copy of the Plan, you may contact the
Company at 6 Desta Drive, Suite 5900, Midland, Texas 79705, phone number (915)
498-0300. The principal terms of the Plan are described below.
The Plan is intended to help employees create a financial plan and save
for retirement by providing a vehicle where participants can save and invest on
a regular basis for themselves and their beneficiaries. The Plan is established
and maintained for the exclusive benefit of eligible employees of the Company
and their beneficiaries.
Any related business organization which is a member of the same
controlled group of corporations or other entities (as defined in Section 414(b)
and (c) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code" or the "Code")) or which is part of an affiliated service group (within
the meaning of Section 414(m) of the Code) with the Company may adopt the Plan
with the approval of the Board of Directors of Company. To date, the Plan has
been adopted by the following wholly-owned subsidiaries of the Company:
Yale E. Key, Inc. Odessa Exploration, Inc.
Key Energy Services-California, Inc. Key Energy Services-South Texas, Inc.
Key Four Corners, Inc. Key Rocky Mountain, Inc.
Key Energy Drilling, Inc. WellTech Eastern, Inc.
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Well-Co Oil Service, Inc. Updike Brothers, Inc.
Rowland Trucking Company J.W. Gibson Well Service Company
Dunbar Well Service, Inc. Watson Oilfield Service & Supply, Inc.
Frontier Well Service, Inc. Brooks Well Servicing, Inc.
WellTech Mid-Continent, Inc. Jeter Well Service, Inc.
Jeter Service Co. Landmark Fishing & Rental, Inc.
Industrial Oilfield Supply, Inc. Patrick Well Service, Inc.
Ram Oil Well Service, Inc.
The Company and each subsidiary which participates in the Plan are hereinafter
sometimes collectively referred to as the "Employers" and individually referred
to as an "Employer". In the future additional subsidiaries of the Company may
adopt the Plan.
The Plan will continue in existence until terminated by the Board of
Directors of the Company. See "Amendment or Termination and Withdrawal".
The Employee Retirement Income Security Act of 1974, as amended
("ERISA") covers most employee pension benefit plans and provides certain
minimum standards relating to, among other things, participation, vesting of
benefits, funding, fiduciary responsibility and reporting to the participants
and beneficiaries under the Plan. The Plan is subject to Titles I, II and III of
ERISA which contain the rules with respect to the above-mentioned areas.
Amendments to the Plan may be made in the future to achieve and maintain
compliance with ERISA law and regulations. The Plan is not subject to the
provisions of Title IV of ERISA, which concerns plan termination insurance, and
the protective provisions of Title IV thus do not extend to Participants and
Beneficiaries under the Plan.
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The Company will seek a determination letter from the Internal Revenue
Service evidencing its determination that the Plan, as amended and restated,
continues to be a qualified plan under Sections 401(a) and 401(k) of the Code,
and its related trust is exempt from taxes under Section 501(a) of the Code. The
Company anticipates taking such actions that it deems reasonably necessary
(including amendment of the Plan, if required) to ensure issuance of a favorable
determination by the Internal Revenue Service to the effect that the Plan and
its trust are qualified and exempt under the above sections of the Code.
ELIGIBILITY AND PARTICIPATION
Eligible employees of all Employers are entitled to participate in the
Plan. Eligible employees generally include all employees of an Employer except
the following:
- nonresident aliens; and
- employees whose employment is subject to the terms of a
collective bargaining agreement unless the collective
bargaining agreement specifically provides for participation
in the Plan. Leased employees, as defined in Section 414(n) of
the Code, are generally ineligible to participate in the Plan.
With certain exceptions, an eligible employee of an Employer is
entitled to participate in the Plan (to become a "Participant") commencing on
the first day of each quarter in a Plan Year if the employee is at least 18
years of age and has completed 90 days of Eligibility Service (as defined in the
Plan). If a person is transferred directly from employment with an Employer, or
with a Related Company in a capacity other than as an eligible employee, to
employment as an eligible employee, he or she shall become a Participant as of
the transfer date if on or prior to the most recent Enrollment Date (as defined
in the Plan) such employee has met the eligibility requirements of the Plan.
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ADMINISTRATION OF THE PLAN
PLAN ADMINISTRATOR
The Company is the plan administrator and is responsible for the
day-to-day administration and operation of the Plan. The Company has the
authority to allocate any of the powers, authority or responsibilities for the
operation and administration of the Plan among "named fiduciaries" (as defined
in ERISA), such as a plan committee, provided that such named fiduciaries accept
such powers, authority or responsibilities in writing. The Company, as the plan
administrator, has broad powers regarding the supervision and administration of
the Plan in accordance with its terms and provisions. These powers generally
include the power to:
- establish rules for the administration of the Plan;
- interpret the Plan;
- employ advisors;
- direct and instruct, or appoint investment managers who may
direct and instruct, the trustee with respect to certain
investments;
- determine all questions relating to eligibility and the right
of any person to benefits under the Plan, and
- determine the amount, manner and time of payment of benefits.
The Company reserves the right to delegate such authority and
responsibilities among named fiduciaries or to any person or persons other than
a named fiduciary.
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CLAIMS FOR BENEFITS
The Company, as the plan administrator, has established claims
procedures consistent with the regulations of the Department of Labor for the
presentment of claims by participants and beneficiaries. Information regarding
the rights to claim benefits under the claim procedures established by the plan
administrator, and the name of the person or persons with whom such claims
should be filed, are available from the Company. Whenever a claim for benefits
is denied, in whole or in part, the plan administrator will transmit a written
notice of such decision to the claimant within 90 days of the date the claim was
filed, or if special circumstances require an extension, within 180 days of such
date.
CLAIMS REVIEW PROCEDURE
If a claim for benefits is denied, in whole or in part, the claimant
has the right within 60 days after receipt of the notice of the claim denial to
request that the plan administrator review his entitlement to the benefit that
was requested. The plan administrator will consider the claim for the benefit
within 60 days after receipt of a request for review, unless special
circumstances require a longer period of time, in which case a written decision
will be rendered as soon as possible and not later than 120 days after receipt
of the request for review. The decision on review will be written in a manner
calculated to be understood by the claimant and will specify the reasons and
Plan provisions upon which the denial was based.
TRUSTEE
CG Trust Company serves as trustee (the "Trustee") of the Plan pursuant
to a Trust Agreement (the "Trust Agreement") executed by the Trustee and the
Company. The Trustee may resign, or be replaced by the Company, upon at least 30
days advance notice. The Common Stock purchased or acquired by the Plan will be
an asset of the trust which will be held by National
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Financial Services Corporation, a Fidelity Investment Company (the "Custodian"),
pursuant to the terms and conditions of a Master Custody Agreement between the
Trustee and the Custodian.
TRUST
The Trustee has no responsibility or authority with regard to the
management or disposition of Plan assets. Such responsibility and authority
rests entirely with the Participants or the Plan Administrator to the extent
each directs investments of Plan assets. Except as otherwise provided by ERISA,
each Participant assumes all investment risks associated with the investments
held for his account by the Trustee.
CONTRIBUTIONS
TAX-DEFERRED CONTRIBUTIONS. Each Participant may elect to reduce his or
her compensation each pay period by an amount which is between 1% and 15% of the
employee's gross compensation and to have the Employer contribute that amount to
the Plan for such Participant as a "Tax-Deferred Contribution." A Participant
may change the amount of his or her Tax-Deferred Contributions by filing a new
election in such manner and within the time frame prescribed by the Plan
Administrator. A Participant may withdraw authorization for the Employer to
withhold amounts from his or her future compensation, and suspend Tax-Deferred
Contributions at any time, by giving such advance notice as prescribed by the
plan administrator. The suspension will take effect for compensation paid to the
Participant after the expiration of the required notice period. Tax-Deferred
Contributions will be allocated to the Participant's Tax-Deferred Contribution
Sub-Account and will be 100% vested at all times.
MATCHING COMPANY CONTRIBUTIONS. The Company may make a matching
contribution to the Plan in an amount equal to a percentage, as determined by
the Company in its discretion, of the eligible Tax-Deferred Contributions made
on behalf of Participants who are eligible to participate in the allocation of
matching contributions for each contribution period. Eligible Tax-Deferred
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Contributions means Tax-Deferred Contributions which do not exceed 3% of a
Participant's compensation. Matching contributions will be allocated to the
Participant's Matching Contribution Sub-Account and will be subject to the
vesting schedule set forth in the "Termination of Employment" section below.
QUALIFIED MATCHING CONTRIBUTIONS. An Employer may designate all or any
portion of its matching contribution as a Qualified Matching Contribution.
Amounts that are designated as Qualified Matching Contributions will be
allocable to a Participant's Employer Contribution Account, but shall be
accounted for separately and may be withdrawn only as permitted under the Plan.
A Participant's vested interest in his or her Employer Contributions Account
which is the result of Qualified Matching Contributions shall at all times be
100%. Qualified Matching Contributions may be applied to satisfy either the
average deferral percentage or the average contribution percentage tests.
QUALIFIED NON-ELECTIVE CONTRIBUTIONS. The Employer may contribute to
the Trust a "Qualified Non-Elective Contribution" ("QNEC") in such amount as is
determined in its discretion. A QNEC will only be made on behalf of Participants
who are not "highly compensated employees," as defined in the Plan and Section
414(q) of the Code. QNECs will be allocated to the Participant's Employer
Contributions Account and will be accounted for separately. The portion of a
Participant's Employer Contributions Account which is the result of QNEC shall
at all times be 100% vested and may be withdrawn only as provided in the Plan.
PROFIT SHARING CONTRIBUTIONS. The Company, in its discretion, may make
a Profit Sharing Contribution to the Plan on behalf of eligible Participants who
complete 1,000 Hours of Service during the plan year and who are employed on the
last day of the plan year. A Participant who terminates employment during the
plan year is also eligible to receive an allocation of any Profit Sharing
Contribution if his or her termination was due to retirement at normal
retirement age (age 65). The Participant shall also receive an allocation if his
or her termination during the plan year is due to death or physical or mental
disability such that he or she can no longer continue in the service
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of the Employer. Profit Sharing Contributions will be allocated to each
Participant's Employer Contributions Account and will be subject to the vesting
schedule set forth in the "Termination of Employment" section below.
LIMITATIONS ON CONTRIBUTIONS. With respect to any taxable year of any
Participant, a Participant's Tax-Deferred Contributions under the Plan, together
with any deferrals pursuant to any salary reduction agreement under any other
qualified retirement plan, simplified pension plan or tax sheltered annuity
which facilitates deferral of otherwise taxable income for federal income tax
purposes, may not exceed the Code Section 402(g) limit, as adjusted by the
Secretary of the Treasury ($10,500 for plan years beginning on or after January
1, 2000). Participants who make Tax-Deferred Contributions in excess of such
amount must notify the plan administrator of such excess deferral by March 1 of
the year following the year in which the excess deferral was made.
No contributions may be made by the Employer to the Plan in violation
of the nondiscrimination rules under the Plan and Sections 401(k) and 401(m) of
the Code, which limit the amount the Employer may contribute to the Plan on
behalf of "highly compensated employees". In the event any such excess
contributions are made, they must be refunded unless the Employer elects to make
a QNEC or a Qualified Matching Contribution in an amount sufficient to satisfy
the nondiscrimination tests.
The total amount of contributions allocated to a Participant's account
during any plan year cannot exceed the lesser of (i) 25% of his compensation (as
defined in the Plan and Section 415 of the Code) for such year or (ii) $30,000.
This limitation applies with respect to the total contributions allocated under
this Plan and any other qualified defined contribution plan maintained by the
Employer.
It is contemplated that all contributions (except rollover
contributions) to the Plan will be deductible by the Employer under applicable
provisions of the Code. Accordingly, no contribution to the Plan by the
Employer shall exceed a sum equal to 15% of the total compensation
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paid or accrued to all Participants during a taxable year of the Employer
ending with or within a plan year.
ROLLOVER CONTRIBUTIONS. Rollover contributions to the Plan of amounts
distributed from another qualified retirement plan are permitted. A Rollover
Contribution Account will share in the income or losses and/or depreciation of
the trust fund, but will have no effect on any limitation under the Plan based
on contributions. A Participant may have to furnish proof satisfactory to the
plan administrator that the funds are eligible to be rolled over into the Plan.
Once accepted, the rollover contribution will become subject to all the
terms and conditions of the Plan and will be distributable to the Participant
under the terms of the Plan. The Participant is always 100% vested in the value
of the rollover contributions (including any investment gains or losses)
credited to his or her account and may withdraw such amounts at any time.
TOP-HEAVY PLAN PROVISIONS
If the Plan becomes "top-heavy" for any plan year, certain provisions
of the Plan supersede and override any conflicting provisions of the Plan.
Generally, the Plan is top-heavy if more than 60% of the sum of account balances
of all Employees is credited to the accounts of Participants who are considered
to be "key employees" under the Code. The top-heavy provisions include
accelerated vesting, minimum Employer contributions and other conditions for the
benefit of non-key employees.
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THE TRUST FUND
The Company has entered into a trust agreement (the "Trust
Agreement"), and established a trust fund (the "Trust Fund") with the Trustee.
The Trustee is entitled to receive such compensation as may be agreed upon from
time to time by the Trustee and the Company.
The Trust Fund will be invested for the benefit of the Participants,
subject to the provisions of the Plan and the Trust Agreement. Each Participant
will be entitled to direct the investment of his or her account in certain
commingled mutual funds and in Common Stock. The Plan is intended to qualify as
a self-directed, individual account plan under Section 404(c) of ERISA. Except
to the extent expressly provided by ERISA, each person who claims the right to
any payment under the Plan will be entitled to look only to the Trust Fund for
such payment.
VALUATION OF FUNDS; REPORTS
The Trustee shall determine the fair market value, and the
appreciation or depreciation and net income or loss, of each investment fund in
which the Participant's account balance is invested. The income or loss and
appreciation or depreciation of each such investment fund shall be allocated to
the Participant's account. Each Participant will be furnished a quarterly
statement of his or her account.
INVESTMENTS OF THE TRUST FUND
In accordance with rules prescribed by the plan administrator, each
Participant will be entitled to direct the investment of amounts allocated to
his or her account in Common Stock or in certain commingled mutual funds as
made available for investments under the Plan from time to time. Participants
will receive information regarding investment alternatives, as well as the
manner in which investment elections are to be made or changed. Except as
provided below, a Participant may change his or her investment elections daily
provided that all prior investment
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election changes have settled. Each investment option has a different
investment objective; consequently, the risk of loss and potential for gain is
greater in some funds than in others. The Trustee has advised the Company that
the following is representative of investment fund performance through November
30, 2000 for each investment option available under the Plan.
AVERAGE ANNUALIZED RETURNS
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1 YR. 3 YR. 5 YR.
----------- ----------- -----------
GUARANTEED INCOME FUNDS
CIGNA Charter Guaranteed Income Fund 5.40% N/A N/A
FIXED INCOME FUNDS
STATE STREET Intermediate Bond Account 7.60% 5.57% N/A
BALANCED FUNDS
CIGNA Charter Balanced Fund - Invesco (5.26)% N/A N/A
DREYFUS Founders Balanced Account (10.63)% .17% 7.16%
EQUITY FUNDS
CIGNA Charter Large Company Stock Index Fund (4.50)% 12.41% 18.31%
CIGNA Charter Large Company Stock Growth Fund (9.93)% N/A N/A
- Putnam
CIGNA Charter Large Company Stock Growth II Fund (2.12)% N/A N/A
- Morgan
CIGNA Charter Large Company Stock Value I Fund 12.46% N/A N/A
- Levin
FIDELITY Growth Opportunities Account (17.01)% 2.35% 10.15%
JANUS Advisor Growth Account (4.17)% 19.35% N/A
NEUBERGER & BERMAN Partners Fund (1.78)% 2.84% 12.55%
AIM Constellation Fund 1.56% 13.77% 13.69%
INVESCO Dynamics Account .39% 23.65% 21.85%
WARBURG-PINCUS Emerging Growth Fund (4.62)% 7.44% 10.90%
CIGNA Charter Small Company Stock Growth Fund - 17.53% N/A N/A
Times Square
CIGNA Charter Small Company Stock Value I Fund - 21.47% N/A N/A
Berger
FIDELITY Advisor Value Strategies Fund 10.99% 7.62% 10.64%
INVESCO Small Company Growth Account (1.26)% 19.51% 18.75%
KEY ENERGY Stock Fund 45.00% (33.91)% 5.68%
LAZARD Small Cap Portfolio Fund 9.92% (1.35)% N/A
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AVERAGE ANNUALIZED RETURNS
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1 YR. 3 YR. 5 YR.
----------- ----------- -----------
INTERNATIONAL EQUITY FUNDS
JANUS Worldwide Fund (3.34)% 20.69% 22.50%
TEMPLETON Foreign Fund (1.27)% 6.43% 9.02%
Matching contributions made to the Plan beginning on or after April 1,
2000 will be invested in Common Stock. Effective April 1, 2000, a Participant
who is 100% vested in his Employer Contributions Account may elect to transfer
the matching contributions which are automatically invested in Common Stock to
another investment fund at any time after the matching contribution has been
allocated to his Matching Contributions Sub-Account.
Purchases and sales of Common Stock by the Trustee on behalf of the
Plan will be made on the open market through a licensed stock broker. It is
intended that purchases of Common Stock will be made on the business day
immediately following the date on which the Trustee receives from the Plan
Administrator all information and wire transfer of funds (if applicable) and
documentation necessary to accurately effect such transactions at prevailing
market prices. After shares of Common Stock are purchased by the Trustee, such
Common Stock will be allocated pro rata among the plan accounts of affected
Participants in the same ratio that the dollar amount of contributions to be
invested in Common Stock for each affected Participant bears to the dollar
amount of contributions to be invested in Common Stock for all affected
Participants. It is intended that sales of Common Stock will be made through a
licensed stock broker on the business day immediately following the date that
the Trustee receives instructions from the Participant to transfer such
Participant's account to another investment option or to distribute the
Participant's account.
VOTING OF SECURITIES
The Trustee will exercise the voting rights, in its sole discretion,
of all stock held in all funds other than Common Stock. The plan administrator
may give the Trustee written instructions
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with respect to voting the Common Stock held by the Plan. Absent instruction
with respect to voting the Common Stock, the Trustee will not vote such shares.
The expenses of administration of the Plan shall be paid from the
Trust to the extent permissible under ERISA, unless the Company elects to make
any such payment directly.
DISTRIBUTIONS AND WITHDRAWALS
Participants can only receive distributions or withdrawals from vested
account balances. Distributions or withdrawals of vested account balances will
be made to Participants (or their beneficiaries, as applicable) only upon
retirement, death, total and permanent disability, or other severance of
employment with the Employer, or in the event of the financial hardship of the
Participant or the termination of the Plan.
DEATH. On the death of a Participant, the death benefit will be 100%
of the amount credited to the Participant's account. If a Participant dies
prior to the date that distribution of his or her account balance begins, the
Participant's beneficiary will receive distribution of the Participant's vested
interest in his or her account in the form provided under the terms of the
Plan. This distribution will begin as soon as reasonably practicable following
the date the beneficiary's application for distribution is filed with the plan
administrator. The Participant's death benefit will be paid to such
Participant's surviving spouse, or, if there is no surviving spouse or the
surviving spouse consents in writing, to such Participant's designated
beneficiary (other than such spouse). At any time each Participant will have
the right to designate any primary beneficiary to receive the death benefit and
the right to revoke any such designation; provided, however, that any primary
beneficiary designation (other than the Participant's spouse) by a Participant
who is lawfully married will require a new spousal consent. If no such
beneficiary designation is on file with the plan administrator at the time of
the Participant's death, or if the plan administrator at such time
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determines that such designation is ineffective, such Participant's spouse, if
then living, or if not, then the executor or other personal representative of
the Participant's estate, will be deemed the designated beneficiary.
Whenever the Trustee is authorized to pay funds to a minor or an
incompetent, the Trustee is authorized to pay such funds to a parent or
guardian of such minor or incompetent, or to apply such funds for the benefit
of such minor or incompetent in such manner as the Plan Administrator may
direct.
RETIREMENT. Upon the retirement of a Participant at or after age 65,
the Participant's retirement benefit will be 100% of the amount credited to his
or her account.
TERMINATION OF EMPLOYMENT. Upon a Participant's termination from
employment with an Employer for any reason other than death, retirement or
total and permanent disability, the distributable benefit will be an amount
equal to the vested interest in his or her account.
The vested percentage is based upon the vesting table set forth below:
NUMBER OF YEARS VESTING
OF ACTIVE SERVICE AS OF THE DATE OF TERMINATION PERCENTAGE
----------------------------------------------- ----------
Less than one year............................. 0%
One year, but less than two years.............. 25%
Two years, but less than three years........... 50%
Three years, but less than four years.......... 75%
Four years or more............................. 100%
The amount credited to a Participant's account which is not vested upon
termination of employment will be forfeited on the earlier to occur of:
- distribution of the vested portion of the Participant's
account; or
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- the date the Participant incurs five consecutive
Breaks-in-Service (as defined by the Plan).
If a Participant forfeits a portion of his or her account, the forfeited amount
will be used first to pay plan expenses for the plan year and then to reduce the
amount of Employer contributions for the plan Year in which the forfeiture
occurs or in the subsequent plan year. If a former Participant returns to the
employment of an Employer after forfeiting the non-vested portion of his or her
account, the amount forfeited will be recredited to such Participant's account
if:
- he or she is reemployed by any Employer before the date on
which he or she incurs five consecutive Breaks-in-Service
beginning after the later of (a) the date his or her
employment terminated or (b) the date the vested portion of
such Participant's account was distributed; and
- the Participant repays the amount previously distributed, if
any, before the earlier of (a) the five year period ending on
the date of reemployment or (b) the date he or she incurs five
consecutive Breaks-in-Service after the date of distribution.
All Participants are always 100% vested in their Tax-Deferred
Contributions Sub-Account, Qualified Matching Contributions
Sub-Account and Qualified Nonelective Contribution
Sub-Account.
FULL VESTING UPON TOTAL OR PARTIAL TERMINATION OF PLAN. In the event
there is a total or partial termination of the Plan, or complete discontinuance
of the Employer's contributions thereto, the vesting schedule will become
inapplicable and each affected Participant will become 100% vested in his or
her account.
FORM, METHOD AND TIMING OF DISTRIBUTIONS. Unless the Participant, or
beneficiary if the Participant has died, elects an optional form of payment,
distribution will be made in the form of a single premium, nontransferable
annuity contract for such term and in such form as the Participant,
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or if applicable the beneficiary, may select. The normal form of annuity for a
married Participant is a 50% joint and survivor annuity and the normal form of
annuity for an unmarried Participant is a single life annuity. If the
Participant waives the normal form of benefit, the Participant may elect to
receive distribution of his of her account in the form of (i) a single, lump
sum payment or (ii) installment payments over a period not exceeding the life
expectancy of the Participant or the joint and last survivor life expectancy of
the Participant and a designated beneficiary. The election to waive the normal
form of annuity payment may require spousal consent. A Participant must consent
to a distribution if his distributable account balance exceeds $5,000. If the
distributable balance in the Participant's account does not exceed $5,000, the
plan administrator may direct the Trustee to distribute the Participant's
account in the form of a lump sum payment without the consent of the
Participant, or if applicable, the consent of the Participant's spouse.
In the event that a Participant dies prior to distribution of his or
her account balance, such Participant's entire vested interest shall be
distributed to his or her surviving spouse or other designated beneficiary.
Unless distribution is to be made over the life or over a period certain not
greater than the life expectancy of the Beneficiary, distribution of the
Participant's entire vested interest will be made to the Beneficiary no later
than the end of the fifth calender year beginning after the Participant's
death. If distribution is made over the life or over a period certain,
distribution will begin no later than the end of the first calender year
beginning after the Participant's death if the Beneficiary is not the
Participant's surviving spouse. If distribution is to be made to the
Participant's surviving spouse, the surviving spouse may elect to postpone
receipt of the distribution until the later of (i) the end of the calendar year
beginning after the Participant's death or (ii) the end of the calendar year in
which the Participant would have attained age 70-1/2.
IMMEDIATE AND HEAVY FINANCIAL HARDSHIP. Upon proof satisfactory to the
plan administrator (i) that a Participant is suffering an immediate and heavy
financial hardship (as defined in the Plan), and (ii) the amount required to be
withdrawn in order to alleviate the hardship, and (iii) that such amount is not
reasonably available from other sources, the Participant will be entitled to
withdraw from his or her Tax-Deferred Contributions Sub-Account an amount equal
to the lesser
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of (a) the amount needed to alleviate the hardship or (b) the portion of such
account that is attributable to Tax-Deferred Contributions (net of earnings
thereon). Prior to receipt of a hardship distribution, the Participant must
have obtained all distributions, other than hardship distributions, and all
non-taxable loans currently available under all plans maintained by the
Employer or any Related Company (as defined by the plan). The Participant's
Tax-Deferred Contributions to this Plan and the Participant's elective
tax-deferred contributions under all other tax-qualified plans will be
suspended for a period of twelve months after receipt of a hardship
distribution. In addition, after the end of the twelve-month suspension period,
the maximum amount which may be contributed as a Tax-Deferred Contribution to
the Plan by a Participant who has received a hardship distribution may be
limited as provided in the Code.
OTHER IN-SERVICE WITHDRAWALS. A Participant may elect to withdraw the
total amounts credited to his or her After-Tax Contributions Sub-Account (if
any was transferred from a predecessor plan) or his Rollover Account, subject
to the overall conditions and limitations on withdrawals as set forth in the
Plan. In addition, upon the attainment of age 59-1/2, a Participant may elect
to withdraw the total vested amounts credited to his or her account. Any
withdrawal pursuant to this paragraph may require spousal consent.
LOANS TO PARTICIPANTS
A Participant may apply for a loan from the vested portion of his or
her account while still employed by an Employer. The Plan Administrator will
provide the Participant with a copy of the rules governing loans. Any loan made
to a Participant will be treated as a separate investment of the assets held in
his or her account.
Specific Code rules govern loans from tax-qualified plans such as the
Plan. Any loan must meet the minimum requirements set forth in the Code and
applicable regulations. In addition, any loan must meet the requirements set
forth in the loan guidelines provided by the plan administrator.
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The interest rate charged on a loan must be a reasonable rate similar
to the rate charged for a loan made under similar circumstances by persons in
the business of lending money. The amount of any loan, when added to the
outstanding balance of all other loans made to the Participant from any other
plan maintained by the Employer, may not exceed specified limits. The term of
any loan may not exceed five years, unless it is used to purchase the
Participant's principal residence in which case the repayment period may be up
to 10 years. Any loan must be repaid in substantially equal installments
through payroll deductions over the term of the loan.
A loan will be treated as a directed investment of the Participant's
account and will be secured by his or her vested account balance. If a loan is
still outstanding at the time of distribution of the Participant's account, the
amount distributed to the Participant will be reduced by the amount of the
vested Participant account that is held as collateral for the loan, but only to
the extent necessary to fully repay the loan including accrued interest.
No Participant will receive a loan unless the Participant agrees that
his or her Account may be charged for unpaid principal and interest in the
event of a default on the loan. A loan may be declared by the Plan
Administrator to be in default if (i) the Participant fails to make required
payments on the loan by the end of the calendar quarter beginning after the due
date or there is an outstanding balance on the last scheduled repayment date,
(ii) an event occurs which requires distribution of the Participant's account
and the Participant's distributable balance in his or her account is less than
$5,000 or, if the distributable balance in the Participant's account is greater
than $5,000, the Participant requests a distribution of all or a portion of his
account, or (iii) the Plan Administrator believes, in good faith, that the
prospect of repayment of the loan is impaired. If a loan is declared to be in
default, the entire unpaid balance of the loan, together with accrued interest,
is immediately due and payable. If the loan balance with accrued interest is
not then paid within five (5) days, the loan balance will be deemed to be a
distribution for income tax purposes and the Participant's account will be
charged with such amount at the earliest date that distribution may be made to
the Participant without affecting the tax qualification of the Plan. A
Participant may not
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have more than one loan outstanding under the Plan. A Participant may not apply
for a second loan until any existing loan is repaid in full.
EXPENSES
Generally, the expenses of administering the Plan are paid from Plan
assets, unless the Employer elects to make the payment directly. In addition, a
Participant's account may be charged for the cost of an administrative expense
that is attributable directly to such account, unless the Employer elects to
make the payment.
ASSIGNMENT OF INTERESTS
As a general rule, the balance credited to a Participant's account may
not be alienated, sold, assigned, pledged, encumbered or otherwise transferred.
In addition, a Participant's creditors may not attach, garnish, or otherwise
interfere with his or her account balance or with any payment from the Plan
until it is received.
There is a statutory exception to the general rule described in the
previous paragraph. The Plan is required by law to recognize certain
obligations that a Participant incurs as the result of court ordered child
support or alimony payments. In particular, the Plan is required to honor a
"qualified domestic relations order" ("QDRO"). A QDRO is a decree or order
issued by a court that obligates the Participant to pay child support or
alimony, or otherwise allocates a portion of his or her account balance to an
alternate payee such as his or her former spouse, child or other dependent. If
the Plan receives a QDRO, all or a portion of the Participant's account may be
used to satisfy the resulting obligation to each alternate payee. The Plan
Administrator will determine whether any domestic relations order received by
the Plan is a QDRO.
RESALES OF COMMON STOCK
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The Plan does not impose any restriction on resales or distributions
of Common Stock acquired by a Participant through the Plan. However, resales
are subject to applicable securities laws, including those relating to sales of
securities by "affiliates" of the Company and the provisions of Section 16(b)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
regarding certain resales by officers, directors and 10% shareholders of the
Company.
AMENDMENT OR TERMINATION AND WITHDRAWAL
The Company currently intends to continue the Plan indefinitely, but
the Board of Directors of the Company may at any time terminate the Plan, amend
it in whole or in part, or discontinue Employer Contributions, for any reason.
FEDERAL INCOME TAXES
The following statements concerning certain tax implications resulting
from participation under the Plan are based on the assumption that at all times
the Plan meets the requirements for qualification under Sections 401(a) and
401(k) of the Code. These statements are only intended to summarize briefly
certain Federal income tax consequences and are not meant to provide or
supplement tax advice to Participants. The following general statements are
based upon present Federal income tax statutes, regulations and currently
available interpretations thereof, and are intended to apply to the Plan as
normally operated. Participants should consult their own tax advisers with
respect to any specific tax question that may arise in connection with the
Plan, including any state or foreign tax consequences and the effect, if any,
of gift, estate and inheritance taxes.
The Trust Fund will be exempt from tax on its earnings. Participants
will not be taxed on contributions and income or gains allocated to their
Accounts until such amounts are distributed. The Employer, subject to certain
statutory limitations, may deduct all of its contributions to the Plan.
Distributions to Participants will generally be taxable upon receipt as
ordinary income. In addition,
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taxable amounts distributed or withdrawn will generally be subject to a 10%
additional tax, unless the Participant is at least age 59-1/2 or meets one of
the other exceptions described in Section 72(t) of the Code. In certain
situations under the tax laws, however, Participants and beneficiaries may be
able to avail themselves of special rules for tax-free rollover of
distributions to individual retirement accounts ("IRAs") or to another
employer-sponsored, qualified retirement plan.
The Company will seek a determination letter from the Internal Revenue
Service evidencing its determination that the Plan continues to be a qualified
plan under Sections 401(a) and 401(k) of the Code and the Trust Fund is exempt
from federal income taxes under Section 501(a) of the Code. The Company intends
to take such actions as it deems reasonably necessary (including amendment of
the Plan, if required) to ensure issuance of a favorable determination by the
Internal Revenue Service to the effect that the Plan is a qualified plan under
Sections 401(a) and 401(k) of the Code and the Trust Fund is exempt from
federal income taxes under Section 501(a) of the Code.
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AVAILABILITY OF CERTAIN
DOCUMENTS INCORPORATED BY REFERENCE
A copy of the Plan and certain documents (excluding exhibits thereto
other than exhibits which are specifically incorporated by reference therein)
described below are available without charge upon written or oral request
directed to the Company at 6 Desta Drive, Suite 5900, Midland, Texas 79705,
(915) 498-0300. You may also read and copy the documents incorporated by
reference at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
405 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The Commission also maintains an Internet
world wide web site that contains reports, proxy statements and other
information about issuers who file electronically with the SEC. The address of
that site is http;//www.sec.gov.
This Information Memorandum and the Company's registration statement
on Form S-8 registering the Common Stock issuable under, and plan interests in,
the Plan (the "Registration Statement") incorporate by reference the following
documents that the Company has filed with the U.S. Securities and Exchange
Commission (the "SEC"):
(1) Annual Report on Form 10-K for the fiscal year ended June 30,
2000;
(2) Amendment to the Annual Report on Form 10-K/A for the fiscal
year ended June 30, 2000;
(3) Quarterly Report on Form 10-Q for the quarter ended September
30, 2000;
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(4) Quarterly Report on Form 10-Q for the quarter ended December
31, 2000; and
(5) the description of the Company's common stock, par value $0.10
per share, contained in the registration statement on Form 8-A
dated March 27, 1998, including any amendments or reports that
have been filed to update the description.
All documents the Company files with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Information Memorandum and prior to the filing of a post-effective amendment
to the Registration Statement which indicates that all securities offered
pursuant to the Registration Statement have been sold or which deregisters all
securities then remaining unsold, shall deemed to be incorporated by reference
in this Information Memorandum and to be part hereof from the date of the
filing of such documents. Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein (or in any other
subsequently filed document which is also incorporated by reference herein),
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed in its unmodified or unsuperseded form to constitute a part
hereof.
The Company's Annual Report to Stockholders, Proxy Statements and
other communications to stockholders generally, will be delivered without
charge, to persons participating in the Plan.
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