UNITED STATES LIME & MINERALS INC
NOTE AND WARRANT PURCHASE AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>d08213exv10w1.txt
<DESCRIPTION>NOTE AND WARRANT PURCHASE AGREEMENT
<TEXT>
<PAGE>

                                                                    Exhibit 10.1

                       NOTE AND WARRANT PURCHASE AGREEMENT

         THIS NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of August 5, 2003, by and among United States Lime & Minerals,
Inc., a Texas corporation (the "Company"), and each of those persons and
entities, severally and not jointly, whose names are set forth on the Schedule
of Purchasers attached hereto as Schedule A (which persons and entities are
hereinafter collectively referred to as the "Purchasers" and each individually
as a "Purchaser").

                                    RECITALS:

         WHEREAS, the Company desires to issue and sell to the Purchasers 14%
Subordinated PIK Notes Due 2008, in the form attached hereto as Exhibit A (the
"Notes"), and warrants to purchase shares of common stock (the "Warrant
Shares"), par value $0.10 per share, of the Company (the "Common Stock"), in the
form attached hereto as Exhibit B (the "Warrants" and, together with the Notes
and the Warrant Shares, the "Securities"), in the respective amounts set forth
opposite each such Purchaser's name on Schedule A;

         WHEREAS, the Purchasers desire to purchase the Securities on the terms
and conditions set forth herein; and

         WHEREAS, to induce the Purchasers to purchase the Securities, the
Company is willing to enter into that certain Registration Rights Agreement,
dated as of the Closing Date (as defined below), by and among the Company and
the Purchasers (the "Registration Rights Agreement" and, together with this
Agreement, the Notes and the Warrants, the "Purchase Documents").

         NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties, and covenants hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

1.       Sale and Purchase of the Securities.

         1.1      Sale and Purchase. Subject to the terms and conditions hereof,
the Company hereby agrees to issue and sell to each Purchaser, severally and not
jointly, and each Purchaser agrees to purchase from the Company, severally and
not jointly, the Note and the Warrant in the respective amounts set forth
opposite such Purchaser's name on Schedule A. The purchase price of each Note
and Warrant shall be the principal amount of the Note set forth opposite each
Purchaser's name on Schedule A.

         1.2      Closing. The closing of the sale and purchase of the Notes and
Warrants under this Agreement shall be held at 10:00 a.m. on August 5, 2003, at
the principal executive offices of the Company (the "Closing"), or at such other
time, date or place as the Company and the Purchasers subscribing to purchase at
least a majority of the

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aggregate Original Principal Amount (as defined in the Notes) of all Notes may
mutually agree (the date of the Closing is hereinafter referred to as the
"Closing Date"). At the Closing, subject to the terms and conditions hereof, the
Company will deliver to the Purchasers the Notes and Warrants against payment of
the purchase price therefor in lawful money of the United States of America by
certified or official bank check made payable to the order of the Company or
wire transfer of immediately available funds to an account designated by the
Company. The parties agree that the delivery of the Purchase Documents and any
other documents at the Closing may be effected by means of an exchange of
facsimile signatures with original copies to follow by mail or courier service.

2.       Representations, Warranties and Covenants of the Purchasers. Each
Purchaser, severally and not jointly, hereby represents and warrants to, and
agrees with, the Company as follows:

         2.1     Requisite Power and Authority. The Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver the Purchase Documents and to carry out their provisions. All action on
the Purchaser's part required for the lawful execution and delivery of the
Purchase Documents has been taken. Upon their execution and delivery, the
Purchase Documents will be valid and binding obligations of the Purchaser,
enforceable in accordance with their terms, except as limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, and (ii) general
principles of equity that restrict the availability of equitable remedies.

         2.2      Investment Representations. The Purchaser understands that the
Securities have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or any state securities laws. The Purchaser also
understands that the Securities are being offered and sold pursuant to an
exemption from registration contained in the Securities Act and applicable state
securities laws (collectively, the "Acts") based in part upon the Purchaser's
representations contained in this Agreement. The Purchaser hereby represents and
warrants as follows:

                  (a)      Experience; Risk. The Purchaser has such knowledge
and experience in financial and business matters that the Purchaser is capable
of evaluating the merits and risks of the purchase of the Securities and of
protecting the Purchaser's interests in connection therewith. The Purchaser is
able to fend for itself in the transactions contemplated by the Purchase
Documents and has the ability to bear the economic risk of the investment,
including complete loss of the investment.

                  (b)      Investment. The Purchaser is acquiring the Securities
for investment for its own account, not as a nominee or agent, and not with a
view to, or for resale in connection with, any distribution thereof, and the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. The Purchaser understands that the Securities
have not been registered under the Acts by reason of a specific exemption from
the registration provisions of the Acts which depends upon, among other things,
the bona fide nature of the investment intent and the accuracy of the
Purchaser's representations as expressed herein.

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                  (c)      Information. The Purchaser has been furnished with
all information which the Purchaser deems necessary to evaluate the merits and
risks of purchasing the Securities and has had the opportunity to ask questions
concerning the Securities and the Company, and all questions posed have been
answered to the Purchaser's satisfaction. The Purchaser has been given the
opportunity to obtain any additional information the Purchaser deems necessary
to verify the accuracy of any information obtained concerning the Securities and
the Company. The Purchaser understands that an investment in the Securities
involves significant risks.

                  (d)      Restricted Securities; Need for the Company's Consent
To Transfer. The Purchaser understands that the Securities will be "restricted
securities" under the Acts inasmuch as they are being acquired from the Company
in a transaction not involving a public offering, and that under such laws and
applicable regulations the Securities may be resold without registration under
the Acts only in certain limited circumstances. The Purchaser acknowledges that
the Securities must be held indefinitely unless subsequently registered under
the Acts or an exemption from such registration is available. In addition to
restrictions under the Acts, the Purchaser may not sell, assign, pledge, dispose
of or otherwise transfer the Notes or Warrants, or any interest therein, without
the prior written consent of the Company.

                  (e)      Accredited Investor Status; Tax Implications. The
Purchaser is an "accredited investor" within the meaning of Rule 501 promulgated
under the Securities Act. The Purchaser has considered the Federal and state
income tax implications of an investment in the Securities and has consulted
with the Purchaser's own advisors with respect thereto.

                  (f)      Residence. If the Purchaser is an individual, then
the Purchaser resides in the state identified in the address of the Purchaser
set forth on Schedule A; if the Purchaser is a partnership, corporation, limited
liability company or other entity, then the office or offices of the Purchaser
in which its investment decision was made are located at the address or
addresses of the Purchaser set forth on Schedule A.

                  (g)      Further Limitations on Disposition. Without in any
way limiting the representations set forth above, the Purchaser further agrees
not to make any permitted disposition of all or any portion of the Securities
unless and until:

                           (i)      there is then in effect a registration
statement under the Acts covering such proposed disposition and such disposition
is made in accordance with such registration statement; or

                           (ii)     the Purchaser shall have notified the
Company of the proposed disposition, and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition and, at the
expense of the Purchaser or its transferee, with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such securities under any of the Acts.

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                  (h)      Legends. The Purchaser understands and agrees that
the Securities will bear a legend substantially similar to the legend set forth
below:

         THIS SECURITY [AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF] HAS
         [HAVE] NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
         AMENDED, OR ANY STATE SECURITIES LAWS. [NEITHER] THIS SECURITY [NOR THE
         SECURITIES ISSUABLE UPON EXERCISE HEREOF] MAY [NOT] BE TRANSFERRED
         EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES
         ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B)
         IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES
         ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS. THIS
         SECURITY IS SUBJECT TO THAT CERTAIN NOTE AND WARRANT PURCHASE
         AGREEMENT, DATED AS OF AUGUST 4, 2003, BY AND AMONG THE COMPANY AND THE
         PURCHASERS NAMED THEREIN.

In addition to the foregoing, the Securities will bear any other legend that may
be required by applicable law, by the Company's Articles of Incorporation or
Bylaws, or by any agreement between the Company and the Purchaser.

                  (i)      Subordination. The Purchaser understands that certain
provisions of this Agreement, the Notes and Warrants, including without
limitation certain provisions with respect to rights relating to payments,
remedies and other benefits provided to the Purchaser, are subordinate to
certain other debt of the Company pursuant to the terms and conditions of
Section 4 of the Notes.

                  (j)      Broker's Fees. No agent, broker, investment banker,
person or firm acting on behalf of or under the authority of the Purchaser is or
will be entitled to any broker's or finder's fee or any other commission
directly or indirectly in connection with the transactions contemplated by this
Agreement. The Purchaser agrees to indemnify the Company for any claims, losses
or expenses incurred by the Company in connection with any claim for any such
fees or commissions.

3.       Representations and Warranties of the Company. The Company hereby
represents and warrants to each Purchaser as of the date of this Agreement as
follows:

         3.1      Organization, Good Standing and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
the Purchase Documents and to carry out the provisions of the Purchase
Documents. The Company is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and

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leased) makes such qualification necessary, except for those jurisdictions in
which failure to do so would not have a material adverse effect on the Company
or its business.

         3.2      Authorization; Binding Obligation. All corporate action on the
part of the Company necessary for the authorization of the Purchase Documents
and the performance of all obligations of the Company thereunder at the Closing
has been taken or will be taken prior to the Closing. This Agreement has been,
and the Registration Rights Agreement, the Notes and the Warrants will be, when
executed and delivered at the Closing, duly executed and delivered by the
Company. This Agreement constitutes, and the Registration Rights Agreement, the
Notes and the Warrants when executed and delivered at the Closing will
constitute, valid and binding obligations of the Company enforceable in
accordance with their terms, except as limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, and (ii) general principles of
equity that restrict the availability of equitable remedies.

         3.3      Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 15,000,000 shares of Common Stock,
5,799,845 shares of which are issued and outstanding and (ii) 500,000 shares of
Preferred Stock, par value $5.00 per share, none of which is issued. All
outstanding shares have been duly authorized, validly issued and are fully paid
and nonassessable.

         3.4      SEC Reports. The Company has filed all forms, reports and
documents required to be filed by the Company with the Securities and Exchange
Commission (collectively, the "Company SEC Reports"). The Company SEC Reports
(i) at the time they were filed complied as to form in all material respects
with the applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, and (ii) did not
at the time they were filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

         3.5      Warrant Shares. Upon issuance in accordance with the terms of
the Warrants, the Warrant Shares will be duly authorized, validly issued, fully
paid and nonassessable. The Company has reserved from its authorized shares of
Common Stock such number of Warrant Shares as are issuable upon exercise of the
Warrants.

         3.6      Debt Obligations. Schedule B is a complete and correct listing
of all of the Company's liabilities, obligations and indebtedness for borrowed
money in excess of $1,000,000 as of the date hereof (collectively, "Debt"). The
Company has performed and is in compliance in all material respects with all of
the terms of such Debt and all instruments and agreements relating thereto.

         3.7      Solvency. As of the Closing, the Company (i) has capital
sufficient to carry on its business and transactions and (ii) does not intend to
incur or believe (or have

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reason to believe) that it will incur debts or liabilities beyond its ability to
pay such debts or liabilities as they mature.

         3.8      Compliance with Applicable Law. Except to the extent that the
failure of such to be the case would not result in a material adverse effect on
the Company or its business, the Company is in compliance with each governmental
approval applicable to it and in compliance with all other applicable laws
relating to it or any of its properties.

         3.9      Governmental and Third Party Approvals. The Company has
obtained all necessary approvals, authorizations and consents of any person and
of all governmental authorities and courts having jurisdiction with respect to
the transactions contemplated by this Agreement and the other Purchase
Documents.

         3.10     No Material Adverse Change. Since December 31, 2002, there has
been no material adverse change in the properties, business, operations,
prospects, or condition (financial or otherwise) of the Company and no event has
occurred or condition arisen that would reasonably be expected to have a
material adverse effect on the Company or its business.

         3.11     Broker's Fees. Other than Frost Securities, Inc., no agent,
broker, investment banker, person or firm acting on behalf of or under the
authority of the Company is or will be entitled to any broker's or finder's fee
or any other commission directly or indirectly in connection with the
transactions contemplated by the Purchase Documents. The Company agrees to
indemnify each Purchaser against any fee or commission payable by such Purchaser
for which the Company is responsible.

4.       Covenants of the Company. Except as otherwise waived by the holders of
at least a majority of the aggregate Original Principal Amount of all Notes then
outstanding (the "Majority Purchasers"), until all of the indebtedness
represented by the Notes has been paid and satisfied in full, the Company will:

         4.1      Preservation of Corporate Existence and Related Matters.
Except as permitted by Section 4.13, preserve and maintain its corporate
existence and all rights, franchises, licenses and privileges necessary to the
conduct of its business, including without limitation all permits when and as
necessary for the conduct of the Company's business as then contemplated, and
qualify and remain qualified as a foreign corporation and authorized to do
business in each jurisdiction where the nature and scope of its activities
require it to so qualify under applicable law.

         4.2      Maintenance of Property. Except as permitted by Section 4.14,
protect and preserve all properties useful in and material to its business, the
lack of which could result in a material adverse effect on the Company or its
business, including copyrights, patents, trade names and trademarks; maintain in
good working order and condition all buildings, equipment and other tangible
real and personal property the lack of which could result in a material adverse
effect on the Company or its business; and, from time to time, make or cause to
be made all renewals, replacements and additions to such

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property necessary for the conduct of its business, so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times.

         4.3      Insurance. Carry adequate insurance issued by an insurer
acceptable to the Majority Purchasers, in amounts reasonably acceptable to the
Majority Purchasers against all such liability and hazards as are usually
carried by entities engaged in the same or a similar business similarly
situated. Business interruption insurance shall be carried by the Company in an
amount usually carried by entities engaged in the same or similar business
similarly situated.

         4.4      Accounting Methods and Financial Records. Maintain a system of
accounting, and keep such books, records and accounts (which shall be true and
complete in all material respects) as may be required or as may be necessary to
permit the preparation of financial statements in accordance with generally
accepted accounting principles as recognized by the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board,
consistently applied and maintained on a consistent basis ("GAAP") and in
compliance with the regulations of any governmental authority having
jurisdiction over the Company or any of its properties.

         4.5      Payment and Performance of Obligations. Pay and perform all
obligations under the Purchase Documents, and to the extent that the failure to
do so could result in a material adverse effect on the Company or its business,
pay or perform (i) all taxes, assessments and other governmental charges that
may be levied or assessed upon it or any of its property, and (ii) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; provided, however, that the Company may contest any item described in
clauses (i) or (ii) of this Section 4.5 in good faith so long as adequate
reserves are maintained with respect thereto in accordance with GAAP.

         4.6      Compliance with Laws and Approvals. Observe and remain in
compliance with all applicable laws and maintain in full force and effect all
governmental approvals, in each case applicable to the conduct of the Company's
business to the extent that the failure to do so could result in a material
adverse effect on the Company or its business.

         4.7      Environmental Laws. In addition to and without limiting the
generality of Section 4.6, to the extent that the failure to do so could result
in a material adverse effect on the Company or its business, (i) comply with,
and ensure such compliance by all tenants and subtenants with all applicable
Environmental Laws (as defined below) and obtain and comply with and maintain,
and ensure that all tenants and subtenants obtain and comply with and maintain,
any and all licenses, approvals, notifications, registrations or permits
required by applicable Environmental Laws, (ii) conduct and complete all
investigations, studies, sampling and testing, and all remedial, removal and
other actions required under Environmental Laws, and promptly comply with all
lawful orders and directives of any governmental authority regarding
Environmental Laws, and (iii) defend, indemnify and hold harmless the
Purchasers, and their respective affiliates, employees, agents, officers and
directors, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or

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unknown, contingent or otherwise, arising out of, or in any way relating to the
presence of Hazardous Materials (as defined below), or the violation of,
noncompliance with or liability under any Environmental Laws applicable to the
operations of the Company, or any orders, requirements or demands of
governmental authorities related thereto, including without limitation
reasonable attorney's and consultant's fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing directly result from the gross negligence or willful
misconduct of the party seeking indemnification therefor. For purposes of this
Agreement: (i) "Environmental Laws" means any and all Federal, state and local
laws, statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or governmental authorities, relating to
the protection of human health or the environment, including without limitation
requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials, and (ii)
"Hazardous Materials" means any substances or materials (a) which are or become
defined as hazardous wastes, hazardous substances, pollutants, contaminants,
chemical substances or mixtures or toxic substances under any applicable law,
(b) which are toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise harmful to human health or the environment
and are or become regulated by any governmental authority, (c) the presence of
which require investigation or remediation under any applicable law, (d) the
discharge or emission or release of which require a permit or license under any
applicable law or other governmental approval, (e) which are deemed to
constitute a nuisance, a trespass or pose a health or safety hazard to persons
or neighboring properties, or (f) which consist of underground or aboveground
storage tanks, whether empty, filled or partially filled with any substance, or
which contain asbestos, polychlorinated biphenyls, urea formaldehyde foam
insulation, petroleum hydrocarbons, petroleum derived substances (in unsafe
form) or waste, crude oil, nuclear fuel, natural gas or synthetic gas.

         4.8      Compliance with ERISA. In addition to and without limiting the
generality of Section 4.6, to the extent that the failure to do so could result
in a material adverse effect on the Company or its business (i) comply with all
applicable provisions of the Employee Retirement Income Security Act of 1974,
and the rules and regulations thereunder, each as amended, supplemented or
otherwise modified ("ERISA"), with respect to all Employee Benefit Plans (as
defined below), (ii) not take any action or fail to take action the result of
which could be a liability to the PBGC (as defined below) or to a Multiemployer
Plan (as defined below), (iii) not participate in any prohibited transaction
that could result in any civil penalty under ERISA or tax under the Code (as
defined below), (iv) operate each Employee Benefit Plan in such a manner that
will not incur any tax liability under Section 4980B of the Code or any
liability to any qualified beneficiary as defined in Section 4980B of the Code,
and (e) furnish to the Purchasers upon the request of the Majority Purchasers
such additional information about any Employee Benefit Plan as may be reasonably
requested by the Majority Purchasers. For purposes of this Agreement: (i) an
"Employee Benefit Plan" means any employee benefit plan within the meaning of
Section 3(3) of ERISA which (a) is maintained for employees of the Company, or
any ERISA Affiliate (as defined below) or (b) has at any time within the
preceding six years been maintained for the employees of the Company, or any
current or

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former ERISA Affiliate, (ii) "ERISA Affiliate" means any person who
together with the Company is treated as a single employer within the meaning of
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA, (iii)
"Code" means the Internal Revenue Code of 1986, and the rules and regulations
thereunder, each as amended, supplemented or otherwise modified, (iv)
Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate is making, or is
accruing an obligation to make, or within the six years immediately preceding,
has made, contributions, and (v) "PBGC" means the Pension Benefit Guaranty
Corporation or any successor agency.

         4.9      Compliance with Agreements. Comply in all material respects
with each term, condition and provision of all leases, agreements and other
instruments entered into in the conduct of the Company's business (except to the
extent that any term, condition and provision has been waived by the other
parties to such leases, agreements and other instruments), including without
limitation (i) the Credit Agreement, dated as of April 22, 1999, as amended by
the First Amendment to Credit Agreement, dated as of December 27, 2000, a letter
agreement dated March 4, 2003, and the Third Amendment to Credit Agreement,
dated as of August 4, 2003, each as amended, restated or otherwise modified and
in effect from time to time, by and among by and among the Company, Texas Lime
Company, a Texas corporation ("TLC"), Arkansas Lime Company, an Arkansas
corporation ("ALC"), the lenders referred to therein and National City Bank
(successor to Wachovia Bank, National Association) and (ii) the Loan and
Security Agreement, dated March 3, 2003, as amended by the First Amendment to
Loan and Security Agreement, dated as of August 4, 2003, as amended, restated or
otherwise modified and in effect from time to time, by and among the Company,
TLC, ALC and National City Bank, the noncompliance with which could cause a
material adverse effect on the Company or its business.

         4.10     Conduct of Business. Engage only in businesses in
substantially the same fields as the businesses conducted on the Closing Date
and in lines of business reasonably related thereto.

         4.11     Visits and Inspections. Permit each Purchaser, from time to
time, at reasonable times and upon reasonable advance notice, to visit and
inspect the Company's properties; inspect, audit and make extracts from its
books, records and files, including without limitation management letters
prepared by independent accountants; and discuss with its principal officers,
and its independent accountants, its business, assets, liabilities, financial
condition, results of operations and business prospects.

         4.12     Further Assurances. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as the Majority
Purchasers may reasonably require to document and consummate the transactions
contemplated hereby and to vest completely in and assure each Purchaser its
rights under the Purchase Documents.

         4.13     Limitations on Mergers and Liquidation. Not merge, consolidate
or enter into any similar combination with any other person or liquidate,
wind-up or dissolve itself

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(or suffer any liquidation or dissolution) except, provided that no Event of
Default (as defined in Section 6) then exists or would occur as a result
thereof:

                  (a)      any wholly-owned subsidiary of the Company may merge
with the Company or with any other wholly-owned subsidiary of the Company;

                  (b)      any wholly-owned subsidiary of the Company may
wind-up into the Company; and

                  (c)      the Company may merge, consolidate or enter into any
similar combination with, or wind-up or dissolve itself into, any person which
(i) expressly assumes joint and several liability for the indebtedness
represented by the Notes and becomes a party to this Agreement pursuant to
Section 7.2, (ii) is incorporated under the laws of the United States or any
state thereof, and (iii) is solvent after giving affect thereto.

         4.14     Limitations on Sale of Assets. Not convey, sell, lease,
assign, transfer or otherwise dispose of 10% or more of the Company's property,
business or assets, on a consolidated basis, including without limitation the
sale of any receivables and leasehold interests and any sale-leaseback or
similar transaction, whether now owned or hereafter acquired except, provided
that no Event of Default then exists or would occur as a result thereof:

                  (a)      the sale of inventory in the ordinary course of
business;

                  (b)      the sale of obsolete assets no longer used or usable
in the business of the Company or any of its subsidiaries;

                  (c)      the transfer of assets to an entity pursuant to
Section 4.13(c);

                  (d)      the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection with the
compromise or collection thereof; and

                  (e)      the sale of all or substantially all of the Company's
assets to a person with which the Company could have merged pursuant to Section
4.13(c) hereof.

         4.15     Use of Proceeds. Use all proceeds from the sale of the Notes
to fund Phase II of Arkansas Lime Company as outlined in the Company's
confidential business plan dated May 2003 and previously delivered to the
Purchasers.

         4.16     Financial Statements and Projections. Provide each Purchaser
with the following financial statements and reports in the event the Company is
no longer subject to any of the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended:

                  (a)      as soon as practicable and in any event within 50
days after the end of each of the first three fiscal quarters of each fiscal
year, an unaudited consolidated and

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consolidating balance sheet of the Company and its subsidiaries as of the close
of such fiscal quarter and unaudited consolidated and consolidating statements
of income, retained earnings and cash flows for the fiscal quarter then ended
and that portion of the fiscal year then ended, including the notes thereto, all
in reasonable detail setting forth in comparative form the corresponding figures
for the preceding fiscal year and prepared by the Company in accordance with
GAAP (except for the absence of footnotes) and, if applicable, containing
disclosure of the effect on the financial position or results of operations of
any change in the application of accounting principles and practices during the
period, and certified by the principal financial and accounting officer of the
Company to present fairly in all material respects the financial condition of
Company and its subsidiaries as of their respective dates and the results of
operations of the Company and its Subsidiaries for the respective periods then
ended, subject to normal year end adjustments.

                  (b)      as soon as practicable and in any event within 125
days after the end of each fiscal year, an audited consolidated balance sheet of
the Company and its subsidiaries as of the close of such fiscal year and audited
consolidated statements of income, retained earnings and cash flows for the
fiscal year then ended, including the notes thereto, all in reasonable detail
setting forth in comparative form the corresponding figures for the preceding
fiscal year and prepared by an independent certified public accounting firm
acceptable to the Majority Purchasers in accordance with GAAP and, if
applicable, containing disclosure of the effect on the financial position or
results of operation of any change in the application of accounting principles
and practices during the year, and accompanied by a report thereon by such
certified public accountants that is not qualified with respect to scope
limitations imposed by the Company or any of its subsidiaries or with respect to
accounting principles followed by the Company or any of its subsidiaries not in
accordance with GAAP.

                  (c)      At the time of delivery of any reports to the Senior
Creditors (as defined in the Notes) which reports are required to be delivered
to the Senior Creditors pursuant to any Senior Debt Documents (as defined in the
Notes) ("Senior Reports"), such Senior Reports.

5.       Conditions to Closing.

         5.1      Conditions to the Purchasers' Obligations at the Closing. The
Purchasers' obligations under Section 1 of this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:

                  (a)      Representations and Warranties True. The
representations and warranties made by the Company in Section 3 shall be true
and correct as of the Closing with the same force and effect as if they had been
made on and as of the Closing Date.

                  (b)      Legal Investment. On the Closing Date, the offer,
sale and issuance of the Securities shall be legally permitted by all laws and
regulations to which the Purchasers and the Company are subject.

                                       11

<PAGE>

                  (c)      Consents, Permits, and Waivers. The Company shall
have obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by this Agreement (except for
such as may be properly obtained subsequent to the Closing).

                  (d)      No Default. No condition or event shall exist or have
occurred which would constitute an Event of Default or, with the giving of
notice, passage of time or both, would constitute an Event of Default.

                  (e)      Registration Rights Agreement. The Registration
Rights Agreement shall have been executed and delivered by the Company.

         5.2      Conditions to Obligations of the Company. The Company's
obligations to offer, sell and issue the Securities are subject to the
satisfaction, at or prior to the Closing, of the following conditions:

                  (a)      Representations and Warranties True. The
representations and warranties made by each of the Purchasers in Section 2 shall
be true and correct as of the Closing with the same force and effect as if they
had been made on and as of the Closing Date.

                  (b)      Legal Investment. On the Closing Date, the offer,
sale and issuance of the Securities shall be legally permitted by all laws and
regulations to which the Purchasers and the Company are subject.

                  (c)      Consents, Permits, and Waivers. The Company shall
have obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by this Agreement (except for
such as may be properly obtained subsequent to the Closing).

6.       Events of Default. Except as otherwise consented to by the Majority
Purchasers, each of the following shall constitute an "Event of Default,"
whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental
authority or otherwise:

         6.1      Default in Payment of Principal. The Company shall default in
any payment when and as due (whether at maturity, by reason of acceleration or
otherwise) of principal on the Notes.

         6.2      Other Payment Default. The Company shall default in the
payment when and as due (whether at maturity, by reason of acceleration or
otherwise) of interest accrued but unpaid on the Notes, and such default shall
continue unremedied for five business days.

         6.3      Misrepresentation. Any representation or warranty made or
deemed to be made by the Company under the Purchase Documents or any amendment
thereto shall at

                                       12

<PAGE>

any time prove to have been incorrect or misleading in any material respect when
made or deemed made.

         6.4      Default in Performance of Certain Covenants. The Company shall
default in the performance or observance of any covenant or agreement contained
in Section 4.13 or 4.14.

         6.5      Default in Performance of Other Covenants and Conditions. The
Company shall default in the performance or observance of any term, covenant,
condition or agreement contained in this Agreement (other than as specifically
provided for otherwise in Section 6.4) or any other Purchase Documents and such
default shall continue for a period of 30 days after written notice thereof has
been given to the Company by the Majority Purchasers in the manner provided
herein.

         6.6      Debt Cross-Default. The Company shall (i) be in default in the
payment of any Indebtedness (as defined below) due to any party other than the
Purchasers, the aggregate outstanding amount of which Indebtedness is in excess
of $1,000,000, beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created, or (ii) default in the
observance or performance of any other agreement or condition relating to any
Indebtedness (other than the Indebtedness referred to in clause (i) above), the
aggregate outstanding amount of which other Indebtedness is in excess of
$1,000,000 or contained in any instrument or agreement evidencing, securing or
relating thereto or any other default or event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such other Indebtedness (or a trustee or agent
on behalf of such holder or holders) to cause, with the giving of notice if
required, any such other Indebtedness to become due prior to its stated maturity
(any applicable grace period having expired). "Indebtedness," as applied to the
Company, means without duplication: (a) all items (except items of capital
stock, surplus or undivided profits) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of the Company as at the date as of which Indebtedness is to be
determined; (b) to the extent not included in the foregoing, all indebtedness,
obligations, and liabilities secured by any mortgage, pledge, lien, conditional
sale or other title retention agreement or other security interest to which any
property or asset owned or held by the Company is subject, whether or not the
indebtedness, obligations or liabilities secured thereby shall have been assumed
by the Company; and (c) to the extent not included in the foregoing, all
indebtedness, obligations and liabilities of others which the Company has
directly or indirectly guaranteed, endorsed (other than for collection or
deposit in the ordinary course of business), sold with recourse, or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire or in
respect of which the Company has agreed to supply or advance funds (whether by
way of loan, stock purchase, capital contribution or otherwise) or otherwise to
become directly or indirectly liable.

         6.7      Other Cross-Defaults. The Company shall default in the payment
when due, or in the performance or observance, of any obligation or condition of
any Material Contract (as defined below) unless, but only as long as, the
existence of any such default is being contested by the Company in good faith by
appropriate proceedings and

                                       13

<PAGE>


adequate reserves in respect thereof have been established on the books of the
Company to the extent required by GAAP. "Material Contract" means any contract
or agreement, written or oral, of the Company, the failure to comply with which
could reasonably be expected to have a material adverse effect on the Company or
its business.

         6.8      Change in Control. Any person or group of persons (within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
other than Inberdon Enterprises, Ltd. and its affiliates, shall obtain ownership
or control in one or more series of transactions of more than 25% of the Common
Stock or 25% of the voting power of the Company entitled to vote in the election
of members of the board of directors of the Company, or there shall have
occurred under any indenture or other instrument evidencing any Indebtedness in
excess of $1,000,000 any "change in control" (as defined in such indenture or
other evidence of Indebtedness) obligating the Company to repurchase, redeem or
repay all or any part of the Indebtedness or capital stock provided for therein
(any such event, a "Change in Control").

         6.9      Voluntary Bankruptcy Proceeding. The Company shall (i)
commence a voluntary case under the Federal bankruptcy laws (as now or hereafter
in effect), (ii) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition for adjustment of debts, (iii) consent to or fail to contest
in a timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
or liquidator of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they become due,
(vi) make a general assignment for the benefit of creditors, or (vii) take any
corporate action for the purpose of authorizing any of the foregoing.

         6.10     Involuntary Bankruptcy Proceeding. A case or other proceeding
shall be commenced against the Company in any court of competent jurisdiction
seeking (i) relief under the Federal bankruptcy laws (as now or hereafter in
effect) or under any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding-up or adjustment of debts, or (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like for the
Company or for all or any substantial part of its assets, domestic or foreign,
and such case or proceeding shall continue without dismissal or stay for a
period of 60 consecutive days, or an order granting the relief requested in such
case or proceeding (including without limitation an order for relief under such
Federal bankruptcy laws) shall be entered.

         6.11     Failure of Agreements. Any provision of this Agreement or of
any other Purchase Document shall for any reason cease to be valid and binding
on the Company.

         6.12     Judgment. A judgment or order for the payment of money which
causes the aggregate amount of all such judgments to exceed $1,000,000 in any
fiscal year shall be entered against the Company by any court and such judgment
or order shall continue without discharge or stay for a period of 30 days.

                                       14

<PAGE>

7.       General Provisions.

         7.1      Governing Law; Jurisdiction. The Purchase Documents and all
acts and transactions pursuant thereto and the rights and obligations of the
parties thereto shall be governed, construed and interpreted in accordance with
the laws of the State of Texas, without giving effect to principles of conflicts
of law and choice of law that would cause the laws of any other jurisdiction to
apply. EACH PURCHASER CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION LOCATED WITHIN DALLAS, TEXAS, AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THE PURCHASE
DOCUMENTS MAY BE LITIGATED IN SUCH COURTS. EACH PURCHASER ACCEPTS FOR SUCH
PURCHASER AND IN CONNECTION WITH SUCH PURCHASER'S RESPECTIVE RIGHTS UNDER THE
PURCHASE DOCUMENTS, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THE
PURCHASE DOCUMENTS. EACH PURCHASER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN THE MANNER SPECIFIED IN
SECTION 7.6 OF THIS AGREEMENT. EACH PARTY HERETO IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE PURCHASE
DOCUMENTS OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF. EACH PURCHASER FURTHER WARRANTS AND
REPRESENTS THAT SUCH PURCHASER HAS REVIEWED THIS WAIVER WITH SUCH PURCHASER'S
LEGAL COUNSEL, AND THAT SUCH PURCHASER KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THE PURCHASE DOCUMENTS. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

         7.2      Successors and Assigns. This Agreement may not be assigned,
conveyed or transferred without the prior written consent of the Company. As a
condition of any such transfer, a Joinder to this Agreement in the form attached
hereto as Schedule C must be duly executed and delivered by the permitted
transferee to the Company. Subject to the foregoing, the rights and obligations
of the Company and each Purchaser under this Agreement shall be binding upon and
benefit their respective permitted successors and assigns.

         7.3      Entire Agreement. This Agreement, the other Purchase
Documents, the exhibits and schedules hereto and thereto and the Notes and
Warrants delivered pursuant to the terms hereof constitute the full and entire
understanding and agreement between

                                       15

<PAGE>

and among the parties with regard to the subjects hereof, and, except as
provided in Section 4 of the Notes, are for the sole benefit of the parties
hereto and their respective permitted successors and assigns and are not
intended to confer any third-party benefit on any other person, and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein. Any previous agreement among the parties relative to the specific
subject matter hereof is superseded by this Agreement.

         7.4      Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

         7.5      Amendment or Waiver. The Purchase Documents may be amended,
and any term or provision of the Purchase Documents may be waived (either
generally or in a particular instance and either retroactively or
prospectively), upon the written consent of the Company and the Majority
Purchasers. Any such amendment of the Purchase Documents, or waiver of any term
or provision of the Purchase Documents, made with such written consent of the
Company and the Majority Purchasers shall be binding upon each Purchaser under
this Agreement; provided, however, that, without the written consent of all of
the Purchasers and the Company, no such amendment or waiver will be made which
would (i) extend the time for payment of any principal or interest of any Note
(ii) reduce the principal amount of or interest due under any Note, (iii) except
as otherwise set forth in the Warrants, decrease the number of Warrant Shares
that may be purchased under any Warrant, (iv) modify the Warrant Exercise Term
(as defined in the Warrants), or (v) except as permitted by the terms of the
Warrants, adjust the Exercise Price (as defined in the Warrants) set forth in
the Warrants.

         7.6      Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; (iv) in the case of a Purchaser
located within the continental United States, the next business day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt; or (v) in the case of a
Purchaser located outside of the continental United States, the third business
day after deposit with an internationally recognized courier, with written
verification of receipt. All communications shall be sent to the Company at the
address as set forth on the signature page hereof and to each Purchaser at the
address set forth on the signature page hereof, or at such other address as the
Company or a Purchaser may designate by 10 days' advance written notice to the
other parties hereto.

         7.7      Expenses. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement, except that the Company shall reimburse the Purchasers for their
reasonable legal fees and expenses (not to exceed $25,000 in the aggregate) in
connection with the negotiation and execution of this Agreement.

                                       16

<PAGE>

         7.8      Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.

         7.9      Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

         7.10     Notes Pari Passu. Except for matters related to prepayment as
may be specifically set forth in any Note, the Notes shall rank equally without
preference or priority of any kind over one another.

         7.11     No Shareholder Rights. Nothing contained in the Purchase
Documents (i) shall be construed as conferring upon any Purchaser the right to
vote or to consent or to receive notice as a shareholder in respect of meetings
of shareholders for the election of directors of the Company or any other
matters or any rights whatsoever as a shareholder of the Company, and (ii) no
dividends shall be payable or accrued in respect of the Warrants or the Warrant
Shares, in both cases of (i) and (ii) until, and only to the extent that, the
Warrants shall have been duly exercised for Warrant Shares properly registered
in the name of the Purchaser.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       17

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.

THE COMPANY:

UNITED STATES LIME & MINERALS, INC.

By:________________________________________
Name:  Timothy W. Byrne
Title: President and Chief Executive Officer

Address: 13800 Montfort Drive, Suite 330
         Dallas, Texas 75240

Telephone: (972) 991-8400
Facsimile: (972) 385-1805

THE PURCHASERS:

CREDIT TRUST S.A.L.                       ABB FINANCE, LIMITED


By:__________________________________     By:__________________________________
Name:  Elias Doumet                       Name:________________________________
Title: President                          Title:_______________________________

Address:  ___________________________     Address:
          ___________________________
          ___________________________
          ___________________________

Telephone:___________________________     Telephone:
Facsimile:___________________________     Facsimile: __________________________

R.S. BEALL CAPITAL PARTNERS, LP

By:    Trans Texas Financial Corp., its
       general partner


By:__________________________________
Name:  Robert S. Beall
Title: President

Address: 1903 Central Drive, Suite 102
         Bedford, Texas 76021

Telephone: (817) 399-1100
Facsimile: (817) 399-1919


<PAGE>

                                   SCHEDULE A

                             SCHEDULE OF PURCHASERS

<TABLE>
<CAPTION>
                                                                              Number of Warrant Shares
   Name and Address                         Principal Amount of Note              Underlying Warrant
   ----------------                         ------------------------              ------------------
<S>                                         <C>                               <C>
CREDIT TRUST S.A.L.                                $5,500,000                           63,643

_______________________________
_______________________________
_______________________________

ABB FINANCE, LIMITED                               $5,500,000                           63,643

R.S. BEALL CAPITAL PARTNERS, LP                    $3,000,000                           34,714
</TABLE>

<PAGE>

                                   SCHEDULE B

         1.       The Credit Agreement, dated as of April 22, 1999, as amended
by the First Amendment to Credit Agreement, dated as of December 27, 2000, a
letter agreement dated March 4, 2003, and the Third Amendment to Credit
Agreement, dated as of August 5, 2003, each as amended, restated or otherwise
modified and in effect from time to time, by and among the members of the
Company Group, the lenders referred to therein and National City Bank (successor
to Wachovia Bank, National Association) pursuant to which such lenders have
agreed to make loans to and otherwise provide credit to or for the benefit of
the members of the Company Group.

         2.       The Loan and Security Agreement, dated March 3, 2003, as
amended by the First Amendment to Loan and Security Agreement, dated as of
August 5, 2003, as amended, restated or otherwise modified and in effect from
time to time, by and among the members of the Company Group and National City
Bank.

<PAGE>

                                   SCHEDULE C

                                     JOINDER

                       Made as of _______________________

Reference is made to the Note and Warrant Purchase Agreement (the "Agreement")
entered into as of August 5, 2003, by and among United States Lime & Minerals,
Inc., a Texas corporation (the "Company"), and each of those persons and
entities (the "Purchasers"), severally and not jointly, whose names are set
forth on the Schedule of Purchasers attached thereto as Schedule A.

The undersigned, __________________________ (the "Joining Party"), represents
and warrants to the Company that it is a permitted transferee under the
Agreement.

The Joining Party has read the Agreement and hereby agrees to be bound by all
terms and conditions thereof to which the Purchasers are bound, such that the
term "Purchaser," "Purchasers," and "Majority Purchasers" as and when used in
the Agreement shall henceforth also include the Joining Party.



                                            ACKNOWLEDGED AND AGREED

                                            [__________________________________]

                                            By:_________________________________
                                            Name:_______________________________
                                            Title:______________________________

                                            Telephone:__________________________

                                            Facsimile:__________________________

<PAGE>

                                    EXHIBIT A

                                  FORM OF NOTE

<PAGE>

                                    EXHIBIT B

                                 FORM OF WARRANT

</TEXT>
</DOCUMENT>
