10-K
1
FORM 10-K FOR LAFARGE CORPORATION
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ............... TO ...............
COMMISSION FILE NUMBER 0-11936
LAFARGE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 58-1290226
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
11130 SUNRISE VALLEY DRIVE 22091
SUITE 300 (Zip Code)
RESTON, VIRGINIA
(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 264-3600
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- -----------------------------
COMMON STOCK, PAR VALUE $1.00 PER SHARE NEW YORK STOCK EXCHANGE, INC.
THE TORONTO STOCK EXCHANGE
MONTREAL EXCHANGE
7% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2013 NEW YORK STOCK EXCHANGE, INC.
Securities registered pursuant to Section 12(g) of the Act:
Titles of Class
---------------
NONE
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulations S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
State the aggregate market value of the voting stock held by nonaffiliates of
the Registrant at March 8, 1995: $544,149,782
Indicate the number of shares of each of the Registrant's classes of common
stock, as of the latest practicable date.
CLASS OUTSTANDING AT MARCH 8, 1995
----- ----------------------------
COMMON STOCK, PAR VALUE $1.00 PER SHARE 68,374,670 SHARES (INCLUDING 8,502,062
EXCHANGEABLE PREFERENCE SHARES OF
LAFARGE CANADA INC.)
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K INTO WHICH THE
DOCUMENT DOCUMENT IS INCORPORATED
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Proxy Statement dated Part III
March 24, 1995
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Item 1. BUSINESS
Lafarge Corporation (the "Registrant"), a Maryland corporation, is engaged in
the production and sale of cement and ready-mixed concrete, aggregates,
asphalt, concrete blocks and pipes, and precast and prestressed concrete
components in the United States and Canada. The Registrant believes that it is
one of the largest producers of cement and construction materials in North
America. The Registrant is also engaged in road building and other
construction using many of its own products. Its wholly-owned subsidiary,
Systech Environmental Corporation ("Systech"), provides waste-derived fuels and
alternative raw materials to cement plants for use in cement kilns. The
Registrant's Canadian operations are carried out by Lafarge Canada Inc.
("LCI"), a major operating subsidiary of the Registrant. Lafarge Coppee S.A.
("Lafarge Coppee"), a French corporation, and certain of its affiliates own a
majority of the Registrant's outstanding voting securities. The terms
"Registrant", "LCI" and "Systech", as used in this Annual Report, include not
only Lafarge Corporation, Lafarge Canada Inc. and Systech Environmental
Corporation, respectively, but also their respective subsidiaries and
predecessors, unless the context indicates otherwise.
The Registrant manufactures and sells various types of portland cement, which
is widely used in most types of residential, institutional, commercial and
industrial construction. The Registrant also manufactures and sells a variety
of special purpose cements. At December 31, 1994 the Registrant operated 14
full-production cement manufacturing plants with a combined rated annual
clinker production capacity of approximately 11.5 million tons and one cement
grinding facility. The Registrant sells cement primarily to manufacturers of
ready-mixed concrete and other concrete products and to contractors throughout
Canada and in many areas of the United States. During 1994 the Registrant's
cement operations accounted for 50 percent of consolidated net sales, after the
elimination of intracompany sales, and 81 percent of consolidated income from
operations.
Management believes that LCI is the largest producer of concrete-related
building materials in Canada, where approximately 80 percent of the
Registrant's construction materials facilities were located at December 31,
1994. The U.S. construction materials operations are located primarily in
Illinois, Kansas, Louisiana, Missouri, Ohio, Pennsylvania, Texas and
Washington. The Registrant's significant construction materials activities
include the manufacture and sale of ready-mixed concrete, construction
aggregates, other concrete products and asphalt and road construction. The
Registrant has operations at approximately 400 locations including ready-mixed
concrete plants, crushed stone and sand and gravel sites, and concrete product
and asphalt plants. During 1994 the Registrant's construction materials
operations accounted for 50 percent of consolidated net sales, after the
elimination of intracompany sales, and 19 percent of consolidated income from
operations.
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At December 31, 1994 Systech operated five facilities at cement plants in the
U.S., including three plants that are owned by the Registrant. Systech
processed approximately 50 million gallons of supplemental fuel in 1994.
Systech's results of operations are included in the results of the Registrant's
construction materials operations.
The executive offices of the Registrant are located at 11130 Sunrise Valley
Drive, Suite 300, Reston, Virginia 22091, and its telephone number is (703)
264-3600.
(a) GENERAL DEVELOPMENT OF BUSINESS
In 1970, Lafarge Coppee acquired control of Canada Cement Lafarge Ltd. (now
LCI) which was Canada's largest cement producer. In 1974, LCI extended its
cement manufacturing operations into the United States through a joint venture
which operated three cement plants in the United States. Following the
termination of the joint venture in 1977, the Registrant (which was
incorporated in Maryland in 1977 under the name Citadel Cement Corporation of
Maryland) operated two of these U.S. cement plants. In 1981, a subsidiary of
the Registrant acquired the common stock of General Portland Inc. ("General
Portland"), the second largest cement producer in the U.S. In 1983, a
corporate reorganization was effected which established the Registrant as the
parent company of LCI and General Portland (General Portland was merged into
the Registrant in 1988), and the Registrant's name was changed to Lafarge
Corporation. In 1986, the Registrant purchased substantially all the assets of
National Gypsum Company's Huron Cement Division, consisting of one cement
plant, 13 cement terminals and related distribution facilities around the Great
Lakes. Also in 1986, the Registrant acquired Systech. During 1989, 1990 and
1991, the Registrant significantly expanded its U.S. construction materials
operations through acquisitions, the largest of which included 32 plant
facilities in five states and substantial mineral reserves acquired from
Standard Slag Holding Company headquartered in Ohio. The Registrant acquired
Missouri Portland Cement Company, Davenport Cement Company and certain related
companies and assets in 1991. This acquisition included three cement plants
and 15 cement distribution terminals located in the Mississippi River Basin,
more than 30 ready-mixed concrete and aggregate operations and the assets of a
chemical admixtures business.
Restructuring
In December 1993, the Registrant announced the restructuring of its North
American business units to be more efficient and cost competitive. The
restructuring plan entailed the consolidation of 11 regional operating units
into six in the Registrant's two main product lines. This consolidation, which
began in 1994 and will be substantially completed in 1995, will reduce
management layers, eliminate duplicative administrative functions and
standardize procedures and information
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systems. Manufacturing and distribution facilities are not materially affected
by the restructuring.
As of January 1, 1994, the Registrant's new North American organization
included three regions for construction materials: Western, based in Calgary,
Alberta; Eastern, based in Toronto, Ontario; and U.S., based in Canfield, Ohio.
Similarly, the cement group was divided into Western, Eastern and U.S. regions,
with office locations in Calgary; Montreal, Quebec; and Southfield, Michigan,
respectively. A technical services group was maintained at the Registrant's
research center in Montreal and Corporate headquarters remained in Reston,
Virginia.
See pages II-7 and II-8 of Item 7 and pages II-38 and II-39 of Item 8 of this
Annual Report for further discussion regarding the restructuring.
Recent Significant Divestments
On January 26, 1995, the Registrant sold its 65 percent interest in a Texas
aggregate operation for approximately $12.7 million in cash.
In December 1994, the Registrant sold 29 Texas ready-mixed concrete plants and
five related sand and gravel plants. The purchase price was approximately
$32.6 million cash.
Effective September 9, 1994 the Registrant sold its Balcones cement plant in
Texas, three cement terminals and an equity interest in an aggregate and
asphalt company in Houston, Texas for approximately $95.8 million cash,
excluding working capital, and the repayment of $7.4 million of debt to the
Registrant.
Effective February 1, 1993 the Registrant sold its cement plant in Demopolis,
Alabama. The sale included the Registrant's 810,000 ton single-kiln plant and
related assets, seven cement distribution terminals and two terminal leases in
the southeastern United States, a cement grinding plant and several barges.
The purchase price was approximately $50 million in cash. The Registrant used
the proceeds from the sale to repay debt. The gain from the sale was
immaterial. Systech continues to supply the Demopolis plant with waste-derived
fuels.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Registrant's operations are closely integrated. For reporting purposes,
the Registrant currently has only one industry segment, which includes the
manufacture and sale of cement, ready-mixed concrete, precast and prestressed
concrete components, concrete blocks and pipes, aggregates, asphalt and
reinforcing steel. In addition, the Registrant is engaged in road building and
other construction utilizing many of its
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own products. Its subsidiary, Systech, provides waste-derived fuels and
alternative raw materials for use in cement kilns. Financial information with
respect to the Registrant's product lines and geographic segments is set forth
under Item 7 Management's Discussion of Income on pages II-3 through II-20,
Management's Discussion of Cash Flows on pages II-21 and II-22 and Item 8 -
Consolidated Financial Statements and Supplementary Data on page II-48 of this
Annual Report.
The Registrant's business is affected significantly by seasonal variations in
weather conditions, primarily in Canada and the northern United States.
Information with respect to quarterly financial results is set forth in Item 8
page II-57 of this Annual Report.
(c) NARRATIVE DESCRIPTION OF BUSINESS
Cement Product Line
The Registrant manufactures and sells in Canada (through its subsidiary LCI)
and in the United States various types of portland cement, a basic construction
material manufactured principally from limestone and clay or shale. Portland
cement is the essential binding ingredient in concrete, which is widely used in
most types of residential, institutional, commercial and industrial
construction. In addition to normal portland cement, the Registrant
manufactures and sells a variety of special purpose cements, such as high early
strength, low and moderate heat of hydration, sulphate resistant, silica fume,
masonry and oilwell cement.
At December 31, 1994 the rated annual clinker production capacity of the
Registrant's operating cement manufacturing plants was approximately 11.5
million tons with about 5.2 million tons in Canada and approximately 6.3
million tons in the United States. The Canadian Portland Cement Association's
"Plant Information Summary Report" dated December 31, 1993 shows that the
Canadian capacity is the largest of the cement companies in Canada and
represented approximately 31 percent of the total active industry clinker
production capacity in that country. This same report for the U.S. at December
31, 1993 shows that the Registrant's operating cement manufacturing plants in
the United States accounted for an estimated 9 percent of total U.S. active
industry clinker production capacity.
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Cement Plants
The following table indicates the location, types of process and rated annual
clinker production capacity (based on management's estimates) of each of the
Registrant's operating cement manufacturing plants at December 31, 1994. The
total clinker production of a cement plant might be less than its rated
capacity due principally to product demand and seasonal factors. Generally, a
plant's cement production capacity is greater than its clinker production
capacity.
Rated Annual Clinker Production Capacity of
Cement Manufacturing Plants
(In short tons) *
United States Plants Canadian Plants
------------------------------------------ ----------------------------------------------
Clinker Clinker
Location Process Capacity Location Process Capacity
-------- ------- -------- -------- ------- --------
Paulding, OH Wet 470,000 Brookfield, N.S. Dry 599,000
Fredonia, KS Wet 385,000 St. Constant, QUE Dry 1,091,000
Whitehall, PA Dry *** 873,000 Bath, ONT Dry *** 1,047,000
Alpena, MI Dry 2,030,000 Woodstock, ONT Wet 628,000
Davenport, IA Dry ** 893,000 Exshaw, ALTA Dry ** 1,135,000
Sugar Creek, MO Dry 480,000 Kamloops, B.C. Dry 214,000
Joppa, IL Dry *** 1,150,000 Richmond, B.C. Wet 522,000
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Total capacity 6,281,000 Total capacity 5,236,000
========= =========
Total 1994 clinker production 5,923,000 Total 1994 clinker production 3,929,000
========= =========
1994 production as a percentage 1994 production as a percentage
of total capacity 94% of total capacity 75%
========= =========
* One short ton equals 2,000 pounds.
** Preheater, pre-calciner plants. The capacity of Exshaw's preheater,
pre-calciner kiln is 53 percent of the plant's clinker production
capacity.
*** Preheater plants.
All of the Registrant's cement plants are fully equipped with raw grinding
mills, kilns, finish grinding mills, environmental protective dust collection
systems and storage facilities. Each plant has facilities for shipping by rail
and by truck. The Richmond, Alpena, Bath, Davenport, Sugar Creek and Joppa
plants have facilities for transportation by water. The Exshaw plant and the
Kamloops limestone and cinerite quarries are located on sites leased on a
long-term basis. The Registrant owns all other plant sites. The Registrant
believes that each of its producing plants is in satisfactory operating
condition.
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At December 31, 1994, the Registrant owned cement grinding plants for the
processing of clinker into cement at Fort Whyte, Manitoba; Edmonton, Alberta;
Saskatoon, Saskatchewan; Montreal East, Quebec and Superior, Wisconsin. The
Fort Whyte grinding plant was shut down in 1994; furthermore, the Edmonton,
Montreal East, Saskatoon and Superior grinding plants have been shutdown for
several years as cement grinding has not been cost effective at these
locations. These plants were used during 1994 for the storage of cement. The
Registrant also owns a cement regrind plant and terminal facilities at Tampa,
Florida which include facilities for receiving cement by water. The Registrant
owns clinker producing plants which have been shut down in Havelock, New
Brunswick; Ft. Whyte, Manitoba and Metaline Falls, Washington.
With respect to the Registrant's Alpena plant, the second phase of the
modernization program totalling approximately $26 million was completed in
early 1995 and involved additional improvements to the plant's raw materials
handling and storage facilities. The facility upgrade and modernization
program is expected to reduce operating costs and increase the plant's rated
annual cement production capacity to 2.5 million tons.
The Manufacturing Process
The Registrant manufactures cement by a closely controlled chemical process
which begins with the crushing and mixing of calcium carbonates, argillaceous
material (clay, shale or kaolin) and silicates (sand). Once mixed, the crushed
raw materials undergo a grinding process, which mixes the various materials
more thoroughly and increases fineness in preparation for the kiln. This
mixing and grinding process may be done by either the wet or the dry method.
In the wet process, the materials are mixed with water to form "slurry", which
is heated in kilns, forming a hard substance called "clinker". In the more
fuel-efficient dry process, the addition of water and the formation of slurry
are eliminated, and clinker is formed by heating the dry raw materials. In the
preheater process, which provides further fuel efficiencies, the dry raw
materials are preheated by air exiting the kiln, and part of the chemical
reaction takes place prior to entry of the materials into the kiln. In the
pre-calciner process, an extension of the preheater process, heat is applied to
the raw materials, increasing the proportion of the chemical reaction taking
place prior to the kiln and, as a result, increasing clinker production
capacity. After the addition of gypsum, the clinker is ground into an
extremely fine powder called cement. In this form, cement is the binding agent
which, when mixed with sand, stone or other aggregates and water, produces
either concrete or mortar.
The raw materials required to manufacture cement are obtained principally from
operations which are owned by the Registrant or in which it has long-term
quarrying rights. These sources are located close to the manufacturing plants
except for the Joppa and Richmond quarries which are located approximately 70
and 80 miles, respectively, from the plant site. Each cement manufacturing
plant is equipped with
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rock crushing equipment. At Richmond, the Registrant owns the reserves, but
does not currently quarry them. The Registrant purchases limestone for
Richmond from a local source. At Whitehall, Joppa and Kamloops the Registrant
sub-contracts the quarry operations.
Fuel represents a significant portion of the cost of manufacturing cement. The
Registrant has placed special emphasis on becoming, and has become, more
efficient in its sourcing and use of fuel. Dry process plants generally
consume significantly less fuel per ton of output than do wet process plants.
At year-end approximately 78 percent and 86 percent of the Registrant's clinker
production capacity in Canada and the United States, respectively, used the dry
process.
As an additional means of reducing energy costs, most plants are now equipped
to convert from one form of fuel to another with very little interruption in
production, thus avoiding dependence on a single fuel and permitting the
Registrant to take advantage of price variations between fuels.
The use of waste-derived fuels supplied by Systech has also resulted in
substantial fuel cost savings to the Registrant. At December 31, 1994, the
Registrant used industrial waste materials obtained and processed by Systech as
fuel at three of the Registrant's United States cement plants.
Waste-derived fuels supplied by Systech constituted approximately 9 percent of
the fuel used by the Registrant in all of its cement operations during 1994.
In August 1991, the Registrant's U.S. cement plants which utilize hazardous
waste-derived fuels became subject to a substantial new federal permit program
known as the Resource Conservation and Recovery Act ("RCRA") boiler and
industrial furnaces (BIF) regulations. In August 1992, these plants submitted
certifications of compliance for the emission limits established under these
regulations. See pages II-15 through II-20 of Item 7 of this Annual Report for
further discussion regarding the RCRA and BIF regulations.
The following table shows the possible alternative fuel sources of the
Registrant's cement manufacturing plants in the United States and Canada at
December 31, 1994.
Plant Location Fuels
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United States:
Paulding, Ohio. . . . . . . Coal, Coke, Industrial Waste Materials
Fredonia, Kansas. . . . . . Coal, Industrial Waste Materials,
Natural Gas
Whitehall, Pennsylvania . . Coal, Oil, Coke, Tire Derived Fuel
Alpena, Michigan. . . . . . Coal, Coke, Industrial Waste Materials
Davenport, Iowa . . . . . . Coal
Sugar Creek, Missouri . . . Coal, Coke, Natural Gas
Joppa, Illinois . . . . . . Coal
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Plant Location Fuels
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Canada:
Brookfield, Nova Scotia . . Coal, Oil, Industrial Waste Materials
St. Constant, Quebec. . . . Natural Gas, Oil, Coke, Pitch Fuel,
Tire Derived Fuel, Waste Oil
Bath, Ontario . . . . . . . Natural Gas, Coke, Coal
Woodstock, Ontario. . . . . Natural Gas, Coal, Coke
Exshaw, Alberta . . . . . . Natural Gas
Kamloops, British Columbia. Natural Gas, Coal, Coke
Richmond, British Columbia. Natural Gas, Coke, Coal Tailings,
Tire Derived Fuel
Marketing
Cement is sold by the Registrant primarily to manufacturers of ready-mixed
concrete and other concrete products and to contractors throughout Canada and
in many areas of the United States. The states in which the Registrant had the
most significant U.S. sales in 1994 were Texas and Michigan. Other states in
which the Registrant had significant sales include Florida, Illinois, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, Missouri,
Nebraska, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Tennessee,
Wisconsin and Washington.
The provinces in Canada in which the Registrant had the most significant sales
of cement products were Ontario and Quebec, which together accounted for
approximately 44 percent of the Registrant's total Canadian cement shipments in
1994. Approximately 35 percent of the Registrant's cement shipments in Canada
were made to affiliates.
The Registrant sells cement to several thousand unaffiliated customers. No
single unaffiliated customer accounted for more than 10 percent of the
Registrant's cement sales during 1994, 1993 or 1992. Sales are made on the
basis of competitive prices in each market area, generally pursuant to
telephone orders from customers who purchase quantities sufficient for their
immediate requirements. The amount of backlog orders, as measured by written
contracts, is normally not significant.
At December 31, 1994 sales offices in the United States were located in or near
New Orleans, Louisiana; Buffalo, New York; Tampa, Florida; Fort Wayne, Indiana;
Whitehall and Hamburg, Pennsylvania; Chicago, Illinois; Cleveland, Ohio;
Lansing, Michigan; Milwaukee, Wisconsin; Seattle and Spokane, Washington;
Kansas City, Missouri; Davenport, Iowa; Valley City, Bismarck and Grand Forks,
North Dakota and Nashville, Tennessee.
At December 31, 1994 sales offices in Canada were located in Dartmouth, Nova
Scotia; Moncton, New Brunswick; Quebec City and Montreal, Quebec; Toronto,
Ontario; Winnipeg, Manitoba; Regina and Saskatoon, Saskatchewan; Edmonton,
Alberta; and Kamloops and Vancouver, British Columbia.
Distribution and storage facilities are maintained at all cement manufacturing
and finishing plants and at approximately 90 other
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locations including five deep water ocean terminals. These facilities are
strategically located to extend the marketing areas of each plant. Because of
freight costs, most cement is sold within a radius of 250 miles from the
producing plant, except for waterborne shipments which can be shipped
economically considerably greater distances. Cement is distributed primarily
in bulk but also in paper bags.
The Registrant utilizes trucks, rail cars and waterborne vessels to transport
cement from its plants to distribution points or directly to customers.
Transportation equipment is owned, leased or contracted for as required. In
addition, some customers in the United States make their own transportation
arrangements and take delivery of cement at the manufacturing plant or
distribution point.
Construction Materials Product Line
The Registrant is engaged in the production and sale of ready-mixed concrete,
aggregates, asphalt, precast and prestressed concrete, concrete block, concrete
pipe and other related products. The Registrant is also engaged in highway and
municipal paving and road building work. During 1994, 1993 and 1992 no single
customer accounted for more than 10 percent of the Registrant's construction
materials sales.
LCI is the only producer of ready-mixed concrete and construction aggregates in
Canada that has operations extending from coast to coast. Ready-mixed concrete
plants mix controlled portions of cement, water and aggregates to form concrete
which is sold primarily to building contractors and delivered to construction
sites by mixer trucks. In addition, management believes that LCI is one of the
largest manufacturers of precast concrete products and concrete pipe in Canada.
These products are sold primarily to contractors engaged in all phases of
construction activity. The Registrant owns substantially all of its
ready-mixed concrete, concrete products and aggregates plants and believes that
all such plants are in satisfactory operating condition.
The Registrant owned or had a majority interest in 318 construction materials
facilities in Canada at December 31, 1994. Of these, 119 are ready-mixed
concrete plants concentrated in the Provinces of Ontario (where approximately
one-half of the plants are located), Alberta, Quebec and British Columbia. The
Registrant also owns ready-mixed concrete plants in New Brunswick, Nova Scotia,
Saskatchewan and Manitoba. The Registrant owns 124 construction aggregates
facilities in Canada, approximately half of which are located in Ontario. The
other aggregates facilities are located in Alberta, Saskatchewan, British
Columbia, Quebec, Manitoba, New Brunswick and Nova Scotia. The Registrant's 29
Canadian asphalt facilities are also concentrated primarily in Ontario with the
remaining plants in Alberta, Nova Scotia, New Brunswick and Quebec. The
Registrant owns a total of 46 precast and prestressed concrete, concrete block
and concrete pipe plants and miscellaneous other construction materials
operations in Ontario (where
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approximately one-half of the plants are located), Alberta, British Columbia,
Manitoba, Quebec, New Brunswick and Nova Scotia.
In the U.S., the Registrant owned or had a majority interest in 76 construction
materials facilities at year end. Of these, 33 are ready-mixed concrete plants
concentrated in Missouri, and to a lesser extent, Louisiana, Ohio and Kansas.
Of the Registrant's 33 U.S. construction aggregates facilities, 17 were in
Ohio, 9 in Pennsylvania, with the remainder located in West Virginia, Illinois,
Missouri, Texas and Washington. The Registrant owned a total of 10 concrete
paving, road paving, concrete paving stone and miscellaneous other construction
materials operations located in Ohio, Michigan, Pennsylvania and Missouri.
In addition, the Registrant has minority interests in a number of smaller
companies primarily engaged in the manufacture and sale of ready-mixed
concrete, other concrete products and aggregates in Canada and the U.S.
Systech Environmental Corporation provides waste-derived fuels and alternative
raw materials for use in cement kilns. Using a technology called
co-processing, Systech provides high BTU value waste as a fuel substitute for
coal, natural gas and petroleum coke in heating the cement kiln. Co-processing
preserves natural resources and serves as a safe and efficient method to manage
selected waste. In addition, co-processing makes the product more competitive
by reducing fuel cost, which represents about 15 percent of the expense of
cement manufacturing.
Research, Development and Engineering
The Registrant is involved in research and development work through its own
technical services and laboratories and through its participation in the
Portland Cement Association. In addition, Lafarge Coppee, LCI and the
Registrant are parties to agreements relating to the exchange of technical and
management expertise under which the Registrant has access to the research and
development resources of Lafarge Coppee. Research is directed toward
improvement of existing technology in the manufacturing of cement, concrete and
related products as well as the development of new manufacturing techniques and
products. Systech is also engaged in research and development in an effort to
further develop the technology to handle additional waste materials. Research
and development costs, which are charged to expense as incurred, were $5.5
million, $6.2 million and $6.3 million for 1994, 1993 and 1992, respectively.
This includes amounts accrued for technical services rendered by Lafarge Coppee
to the Registrant, under the terms of the agreements discussed above, of $4.3
million during 1994, $4.8 million during 1993 and $5.3 million during 1992.
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Capital Expenditures and Asset Dispositions
The Registrant's business is relatively capital-intensive. During the
three-year period ended December 31, 1994 the Registrant invested approximately
$209 million in capital expenditures, principally for the modernization or
replacement of existing equipment. Of this amount, approximately 57 percent
related to cement operations and 43 percent to construction materials
operations. During the same period, the Registrant also invested approximately
$24 million in various acquisitions that expanded its market and product lines
which primarily related to the Registrant's construction materials operations.
Effective September 9, 1994, the Registrant acquired the Red Rock cement
terminal in St. Paul, Minnesota for approximately $6.4 million and obtained the
right to acquire the Gray Stone cement terminal in Wilder, Kentucky at a later
date for approximately $4.6 million.
"See General Development of Business - Recent Significant Divestments" for a
discussion on the sale of certain significant non- strategic assets.
Cement terminal facilities in St. Louis, Missouri and Houston, Texas were shut
down in February 1993. During 1994, the Registrant sold the land relative to
the St. Louis terminal and intends to sell the land on which the Houston
terminal and related assets are located.
In September 1992, the Registrant sold the assets of Conchem, a chemical
admixtures business located in the United States and Canada. The divestiture
included seven facilities engaged in the production and sale of admixture and
specialty products for the concrete and construction industry throughout North
America. The U.S. assets had been acquired as part of the Missouri
Portland/Davenport acquisition in January 1991 (see "General Development of
Business"). During 1994, 1993 and 1992 the Registrant disposed of various
surplus properties, none of which were material.
In December 1993, the Registrant purchased a plant from Koch Industries, Inc.
for grinding iron blast furnace slag into slag cement at Spragge, Ontario. In
April 1993 the Registrant entered into a joint venture, Richvale-York Block
Inc., with another block producer to carry on its concrete block business in
the Greater Metropolitan Toronto area. The Registrant is the majority
shareholder in this joint venture which owns two modern block plants that are
strategically located in this market.
Environmental Matters
The Registrant's operations, like those of other companies engaged in similar
businesses, involve the use, release/discharge, disposal and clean-up of
substances regulated under increasingly stringent federal, state, provincial
and/or local environmental protection laws. The major environmental statutes
and regulations affecting the Registrant's
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business and the status of certain environmental enforcement matters involving
the Registrant are discussed in Item 7 of this Annual Report in the
"Environmental Matters" section of Management's Discussion and Analysis
beginning on page II-15. Additionally, certain enforcement matters are
described in Item 3 (Legal Proceedings) of this Annual Report.
Employees
As of December 31, 1994, the Registrant and its subsidiaries employed
approximately 6,470 individuals of which 3,950 were hourly employees.
Approximately 1,280 of these hourly employees were engaged in the production of
portland cement products and approximately 2,670 were employed in the
Registrant's construction materials operations. Salaried employees totalled
approximately 2,520. These employees generally perform work in administrative,
managerial, marketing, professional and technical endeavors. Overall, the
Registrant considers its relations with employees to be satisfactory.
- - U.S. CEMENT OPERATIONS
The majority of the Registrant's approximately 790 U.S. hourly employees are
represented by labor unions. In September 1994, the Registrant completed the
sale of its Balcones cement plant, in Texas, and three related terminals.
During 1994, labor agreements were renegotiated at the Whitehall, Pennsylvania
and Sugar Creek, Missouri cement plants and the Tampa grinding facility. In
January 1995, a new agreement was negotiated for the cement plant at Paulding,
Ohio. An agreement at the Owensboro, Kentucky distribution terminal expired in
1994 and has not yet been renegotiated. During 1995, agreements will expire at
the Davenport, Iowa cement plant and distribution terminals at Buffalo, New
York; Detroit, Michigan; Forestview, Illinois; Oswego, New York and Saginaw,
Michigan.
- - U.S. CONSTRUCTION MATERIALS OPERATIONS
The Registrant's approximately 1,180 U.S. construction materials employees
consist of approximately 840 hourly employees and 340 salaried employees. In
1994, the Registrant sold an asphalt paving unit in New York, 29 concrete
plants in central and east Texas, five sand and gravel plants in Texas and
Louisiana, and its 52 percent interest in Parker Lafarge Inc., which operated
several asphalt and aggregate plants in Texas.
During 1994, the Registrant successfully negotiated labor and benefit
agreements for the Marblehead Limestone Quarry in the Northern U.S. Aggregates
Group plus three other aggregate facilities in Pennsylvania and West Virginia.
The strike that was in progress at the Kurtz Lafarge division in St. Louis was
successfully resolved in 1994 with new three year labor and benefit agreements.
New labor contracts were also negotiated in 1994 for the Waynesville and Kansas
City, Missouri
I-12
14
locations. In January 1995, the Registrant entered into negotiations for a new
labor and benefits agreement for ready-mixed concrete truck drivers at its
Metairie, Louisiana facility. It is expected that negotiations will be
successfully concluded for this location.
- - CANADIAN CEMENT OPERATIONS
Substantially all of the approximately 490 Canadian cement hourly employees are
covered by labor agreements. In 1994, agreements were reached at the Richmond
and St-Constant cement plants and distribution terminals at Toronto, Ontario;
Edmonton, Alberta and Saskatoon, Saskatchewan. In addition, following a
lock-out initiated by the Registrant in January 1994, a new four-year agreement
was reached at the Exshaw, Alberta plant in July 1994, retroactive from January
1, 1994. Also in July 1994, the Woodstock, Ontario plant ratified a new
three-year labor agreement after a five day strike. In 1995, agreements will
expire at the Bath, Brookfield and Kamloops cement plants and at the Montreal -
East and Winnipeg terminals.
- - CANADIAN CONSTRUCTION MATERIALS OPERATIONS
Employees working in the Canadian construction materials operations totalled
approximately 2,650 at the end of 1994 with approximately 1,830 hourly
employees and 820 salaried employees. In eastern Canada, hourly employees are
covered by 66 collective bargaining agreements with several unions and 55
non-union business units with negotiations held directly with employees.
During 1994, 30 collective bargaining agreements were successfully renegotiated
with union bargaining agents without a work stoppage. In western Canada,
hourly employees are covered by 30 collective bargaining agreements with
several unions and twelve non-union business units with negotiations held
directly with employees. During 1994, 13 collective bargaining agreements were
successfully renegotiated with union bargaining agents without a work stoppage.
One work stoppage did occur in British Columbia, which was successfully
resolved. In 1995, six labor agreements will expire. In addition, the
Laborer's International Union of North America has gained bargaining rights for
the ready-mixed concrete operations in Kenora, Ontario. It is expected that a
collective bargaining agreement will be negotiated in early 1995.
Competition
The competitive marketing radius of a typical cement plant for common types of
cement is approximately 250 miles except for waterborne shipments which can be
economically transported considerably greater distances. Cement, concrete
products and aggregates and construction services are sold in competitive
markets. These products and services are obtainable from alternate suppliers.
Vigorous price, service and quality competition is encountered in each of the
Registrant's primary marketing areas.
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15
The Registrant's operating cement plants located in Canada represented an
estimated 31 percent of the rated annual active clinker production capacity of
all Canadian cement plants at December 31, 1993. The Registrant is the only
cement producer serving all regions of Canada. The Registrant's largest
competitor in Canada accounted for approximately 23 percent of rated annual
active clinker production capacity. The Registrant's operating cement plants
located in the United States at December 31, 1993 represented an estimated 9
percent of the rated annual active clinker production capacity of all U.S.
cement plants. The Registrant's three largest competitors in the United States
accounted for 14, 7 and 6 percent, respectively, of the rated annual active
clinker production capacity. The preceding statements regarding the
Registrant's ranking and competitive position in the cement industry are based
on the U.S. and Canadian Portland Cement Industry: "Plant Information Summary
Report" dated December 31, 1993.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
The information with respect to foreign and domestic operations and export
sales is set forth on page II-48 of Item 8 - Financial Statements and
Supplementary Data of this Annual Report and is incorporated herein by
reference.
I-14
16
EXECUTIVE OFFICERS OF THE REGISTRANT
The following tabulation sets forth as of March 29, 1995 the name and age of
each of the executive officers of the Registrant and indicates all positions
and offices with the Registrant held by them at said date.
Name Position Age
------------------ ----------------------------- ---
Bertrand P. Collomb Chairman of the Board 52
Michel Rose President and Chief Executive Officer 52
Edward T. Balfe Executive Vice President and 53
President Construction Materials Group
Jean-Pierre Cloiseau Executive Vice President and 50
Chief Financial Officer
Duncan Gage Senior Vice President and 45
President U.S. Cement Region
Peter H. Cooke Senior Vice President and 46
President - Eastern Cement Region
H. L. Youngblood Senior Vice President and 59
President - Western Cement Region
Patrick Demars Senior Vice President - 46
Corporate Technical Services
Thomas W. Tatum Senior Vice President - 57
Human Resources
John C. Porter Vice President and Controller 56
David C. Jones Vice President - Legal Affairs and 53
Secretary
David W. Carroll Vice President - Environment and 48
Government Affairs
Philip A. Millington Treasurer 41
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Bertrand P. Collomb was appointed to his current position in January 1989. He
has also served as Chairman of the Board and Chief Executive Officer of Lafarge
Coppee since August 1, 1989. From January 1, 1989 to August 1, 1989 he was
Vice Chairman of the Board and Chief Operating Officer of Lafarge Coppee, and
from 1987 until January 1, 1989 he was Senior Executive Vice President of
Lafarge Coppee. He served as Vice Chairman of the Board and Chief Executive
Officer of the Registrant from February 1987 to January 1989.
Michel Rose was appointed to his current position in September 1992. He
previously served as President and Chief Executive Officer of Orsan, a Lafarge
Coppee subsidiary, from 1987 until September 1992. Since 1989 he has served as
Senior Executive Vice President of the Lafarge Coppee Group.
Edward T. Balfe was appointed to his current position in July 1994. Prior to
that he served as Senior Vice President of the Construction Materials Group.
He served as President of the Registrant's Construction Materials Eastern
Region and President and General Manager of Permanent Lafarge, a construction
materials affiliate of the Registrant, from 1990 to 1993. He had served as
President and General Manager of Permanent Lafarge from 1986 - 1990.
Jean-Pierre Cloiseau was appointed to his current position in January 1994. He
previously served as Senior Vice President and Chief Financial Officer of the
Registrant from September 1990 to December 1993. Prior to that, he served as
Vice President and Controller of the Registrant from January 1989 to September
1990. He had served as Vice President and Treasurer of the Registrant from May
1985 to January 1989.
Duncan Gage was appointed to his current position in October 1994. He
previously served as Senior Vice President - Planning and Development from
January 1994 to September 1994. He served as Senior Vice President and
President of the Registrant's Southern Region from May 1992 to December 1993.
He also served as President of Parker Lafarge, a construction materials
affiliate of the Registrant, from 1990 to 1992 and President of Francon
Lafarge, another construction materials affiliate of the Registrant, from 1987
to 1990.
Peter H. Cooke was appointed to his current position in July 1990. Prior to
that, he served as Vice President of Operations of the Registrant's Great Lakes
Region from April 1987 to June 1990.
H. L. Youngblood was appointed to his current position in January 1989. He
served as Vice President - Distribution of the Registrant's Great Lakes Region
from May 1987 to January 1989.
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Patrick Demars was appointed to his current position effective February 1991.
He previously served as Vice President - Products and Process of the
Registrant's Corporate Technical Services operations from July 1990 to January
1991. He was a Regional Vice President at CNCP, a Brazilian subsidiary of
Lafarge Coppee, from July 1986 to June 1990.
Thomas W. Tatum was appointed to his current position in April 1987.
John C. Porter was appointed to his current position in September 1990. He
served as Vice President and Controller of the Registrant's Great Lakes Region
from April 1989 until September 1990 and was Assistant Controller of that
Region from August 1987 until March 1989.
David C. Jones was appointed to his current position in February 1990. He
served as Corporate Secretary of the Registrant from November 1987 to February
1990.
David W. Carroll was appointed to his current position in February 1992. He
served as Director Environmental Affairs of the Registrant from February 1990
to February 1992. Prior to that he was Director Environmental Programs for the
Chemical Manufacturers Association from 1978 to 1990.
Philip A. Millington was appointed to his current position in January 1989. He
served as Assistant Treasurer of the Registrant from October 1987 to January
1989.
There is no family relationship between any of the executive officers of the
Registrant or its subsidiaries. None was selected as an officer pursuant to
any arrangement or understanding between him and any other person. The term of
office for each executive officer of the Registrant expires on the date of the
next annual meeting of the Board of Directors, scheduled to be held on May 2,
1995.
I-17
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Item 2. PROPERTIES
Information set forth in Item 1 of this Annual Report, insofar as it relates to
the location and general character of the principal plants, mineral reserves
and other significant physical properties owned in fee or leased by the
Registrant, is incorporated herein by reference in answer to this Item 2.
All of the Registrant's cement plant sites (active and closed) and quarries
(active and closed), as well as terminals, grinding plants and miscellaneous
properties, are owned by the Registrant free of major encumbrances, except the
Exshaw plant and the Kamloops limestone and cinerite quarries.
The Exshaw plant is built on land leased from the Province of Alberta. The
original lease has been renewed for a 42-year term commencing in 1992. Annual
payments under the lease are presently based on a fixed fee per acre.
The Kamloops plant, as well as the gypsum quarry which serves this plant, is on
land owned by the Registrant. The limestone and cinerite quarries are on land
leased from the province of British Columbia until March 2022.
Limestone quarry sites for the cement manufacturing plants in the United States
are owned and are conveniently located near each plant except for the Joppa
plant quarry which is located approximately 70 miles from the plant site. At
December 31, 1994, the Registrant also owned substantial reserves which
previously supplied raw materials to former cement production facilities which
are located at Miami, Tampa, and Fort Worth. The Tampa plant is now operated
as a cement grinding and distribution facility.
LCI's quarrying rights for limestone in the Canadian provinces of Manitoba, New
Brunswick, Quebec, Nova Scotia, Ontario, Alberta and British Columbia, are held
under quarry leases, some of which require annual royalty payments to the
provincial authorities. Management of the Registrant estimates that its
limestone reserves for the cement plants currently producing clinker will be
adequate to permit production at present capacities for at least 20 years.
Other raw materials, such as clay, shale, sandstone and gypsum, are either
obtained from reserves owned by the Registrant or are purchased from suppliers
and are readily available.
Deposits of raw materials for the Registrant's aggregate producing plants are
located on or near the plant sites. These deposits, due to their varying
nature, are either owned by the Registrant or leased upon terms which permit
orderly mining of reserves.
I-18
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Item 3. LEGAL PROCEEDINGS
During 1989 and 1990, CSX Transportation, Inc., Metro-North Commuter Railroad
Company, National Railroad Passenger Corp., Peerless Insurance Company and
Massachusetts Bay Transit Authority (the "Railroads") filed actions against
Lone Star Industries Inc. and affiliates ("Lone Star") for damages resulting
from its fabrication and sale of allegedly defective concrete railroad ties to
the Railroads. The Registrant and LCI have been named in third party actions in
which Lone Star is claiming indemnity for liability to the Railroads, for
damages to its business and for costs and losses suffered as a result of the
Registrant and LCI supplying allegedly defective cement used by Lone Star in
the fabrication of the railroad ties. The damages claimed totalled
approximately $226.5 million. The Registrant denied the allegations and
vigorously defended against the lawsuits (the "Lone Star Case"). During
September and October 1992, Lone Star entered into agreements with all five
plaintiff Railroads settling their claims regarding the Lone Star Case for an
amount totalling approximately $66.7 million. These settlements have been
submitted to and approved by the United States Bankruptcy Court for the
Southern District of New York, which is handling the Lone Star bankruptcy. Lone
Star commenced trial in November 1992 in its third party complaint against the
Registrant and LCI seeking indemnity for the Railroads' claims in addition to
its own claim for business destruction. A jury verdict in this case reached in
December 1992 awarded Lone Star $1.2 million as damages. Both Lone Star and the
Registrant and LCI have appealed the trial court verdict to the United States
Court of Appeals for Fourth Circuit which in April 1994 reversed the verdict,
remanded the case to the district court for retrial on damages and liability
and reinstated Lone Star's claim under Massachusetts Chapter 93A that prohibits
unfair and deceptive trade practice and provides for recovery of double or
treble damages and attorneys' fees. The re-trial of this suit began on October
24, 1994 with Lone Star claiming approximately $88.8 million in damages. On
November 30, 1994 the jury returned a verdict in favor of the Registrant on the
claims of implied warranty, negligence, fraud and indemnification but found in
favor of Lone Star on the claim of breach of express warranty in the amount of
$8.4 million. On December 20, 1994 the Court entered partial summary judgment
in the amount of the verdict plus prejudgment interest of $0.9 million. Lone
Star and the Registrant have filed post trial motions contesting the entry of
judgment and are awaiting advisement by the Court. In addition, the Court has
reserved ruling on Lone Star's Massachusetts Chapter 93A claims. In August 1994
Lone Star commenced a new suit against the Registrant and its affiliate for
damages as a result of conduct which parallels that alleged in the Lone Star
Case involving approximately 8,000 railroad ties sold to three railroads, a
construction company and the U.S. Navy and claiming an amount not less than
$11.2 million plus double or treble damages under Massachusetts Chapter 93A and
attorneys' fees. Because the case was not filed until August 1994, it was not
included in the disposition of the Lone Star Case. The Registrant has answered
the complaint and is vigorously defending the case.
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In late 1990 Nationwide Mutual Insurance Company ("Nationwide"), one of the
Registrant's primary insurers during the period when allegedly defective cement
was supplied to Lone Star by the Registrant, filed a complaint for declaratory
judgement against the Registrant, several of its affiliates and 11 other
liability insurers of the Registrant (the "Coverage Suit"). The complaint
seeks a determination of all insurance coverage issues impacting the Registrant
in the Lone Star Case. The Registrant has answered the complaint,
counter-claimed against Nationwide, cross-claimed against the co-defendant
insurers and filed a third party complaint against 36 additional insurers. In
December 1991, the Registrant and Nationwide entered into a settlement
agreement pursuant to which Nationwide settled its claim in the Coverage Suit
and, among other things, paid the Registrant a portion of past due defense
expenses in the Lone Star Case, promised to pay its proportion of continuing
defense expenses therein and to post the entire remaining aggregate limits of
its policies as reserves to be used in the Lone Star Case, if necessary.
Virtually all of LCI's Canadian insurers involved in the Coverage Suit filed
motions for summary judgment. In January 1993, the court denied all of the
insurers' summary judgment motions. In January 1994 the Registrant filed
motions for partial summary judgment regarding the insurers' defense
obligations and regarding the reasonableness of fees and expenses incurred in
the defense of the Lone Star Case. In addition the Registrant filed a motion
to strike the designation of several expert witnesses of the insurers. In July
1994 the Court granted the Registrant's first motions, holding that all but one
of the Registrant's and its affiliates' primary insurers, including one insurer
whose policies are reinsured by a subsidiary of the Registrant, were liable for
defense expenses. The Court denied the Registrant's motions with respect to the
reasonableness of defense expenses, leaving this for renewal or trial of this
issue, and its motion regarding plaintiffs' experts. The Registrant believes
that it has substantial insurance coverage that will respond to a large portion
of defense expenses and liability, if any, in the Lone Star Case.
Since 1992, a number of owners of buildings located in eastern Ontario, Canada
most of whom are residential homeowners, filed actions in the Ontario Court
(General Division) against Bertrand & Frere Construction Company Limited
("Bertrand") and a number of other defendants seeking damages as a result of
allegedly defective footings, foundations and floors made with ready-mixed
concrete supplied by Bertrand. The largest of these cases involves claims by
approximately 118 plaintiffs complaining about 80 basement foundations
including a 20-unit condominium. Together, these plaintiffs are claiming
approximately Cdn. $51.7 million against Bertrand, each plaintiff seeking Cdn.
$200,000 for costs of repairs and loss of capital value of their respective
home or building, Cdn. $200,000 for punitive and exemplary damages and Cdn.
$20,000 for hardship, inconvenience and mental distress, together with interest
and costs. Other owners, owning a total of 23 buildings (of which 21 are
residential homes), have instituted similar suits against Bertrand and, based
on the information available at this time, these claims total approximately
Cdn. $10.3 million. As of the end of January 1995, LCI has been served with
third- or fourth-party claims by Bertrand
I-20
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in most of the referenced lawsuits. Bertrand is seeking indemnity for its
liability to the owners as a result of the supply by LCI of allegedly defective
fly ash. Bertrand has recently amended some and intends to amend all of its
other claims to allege that the cement supplied by LCI is also defective. LCI
has delivered its statements of defense. Discovery has begun but is not yet
completed. LCI has denied liability and is defending the lawsuits vigorously.
The Registrant believes it has substantial insurance coverage that will respond
to defense expenses and liability, if any, in the lawsuits.
The Registrant has received a notice of violation and/or a complaint with
respect to each of its three cement plants that use hazardous waste derived
fuel alleging violations of the Boiler and Industrial Furnaces ("BIF")
regulations of the federal Resources Conservation and Recovery Act ("RCRA").
These notices of violation and complaints were issued by the U.S. Environmental
Protection Agency ("EPA") with respect to the plants, located in Fredonia,
Kansas and Paulding, Ohio and by the State of Michigan, which has been
delegated BIF enforcement authority by the EPA, with respect to the plant
located in Alpena, Michigan. Although the details of each notice of violation
or complaint are specific to the particular plant, the major recurring issue
has been the existence or adequacy of the plant's waste analysis plan to ensure
compliance with the established allowable emission limits and feed rates. The
Registrant settled the matter with respect to the Alpena, Michigan plant by
entering into a consent decree with the State of Michigan that included a
$400,000 penalty. The Registrant settled the matter with respect to the
Fredonia, Kansas plant by entering into a consent decree with the U.S. EPA that
included a $250,000 penalty and a supplemental environmental project. The
Registrant has formally responded to the remaining notice of violation and
complaint involving its Paulding, Ohio plant, setting forth certain defenses
and factual information. The Registrant's representatives have met on numerous
occasions with the EPA to discuss the alleged violations and the possibilities
of settlements. At this time, the Registrant is awaiting a response from the
government on whether this matter will have to go to an adjudicatory
proceeding.
In 1993, the State of Michigan alleged that the Registrant's Alpena plant was
managing CKD in violation of applicable state solid waste management
requirements. The Registrant has settled this matter by entering into a
consent judgment with the State of Michigan. The agreement finalizes a testing
protocol for CKD, how the CKD will be managed, a closure plan for historic CKD
areas, and payment of a penalty of $350,000 that essentially covers the costs
expended by state agency personnel to resolve this matter.
In another matter relating to the Alpena plant and CKD, the State of Michigan
has contacted the Registrant and the former owner of the plant seeking
remediation of an old CKD pile from which it alleges there is runoff of
hazardous substances into Lake Huron. The Registrant has advised the state
that it is not responsible for remediating this property because the property
was expressly excluded in the purchase agreement pursuant to which the
Registrant acquired the plant. The
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Registrant has advised the former plant owner of the Registrant's position on
this matter and has filed a legal action in federal district court seeking to
have the deed reformed to be consistent with the asset purchase agreement. It
is unclear, at this time, whether this matter can be settled or whether it will
proceed to a court's resolution of the matter.
In December 1994, the Registrant received correspondence from the Illinois EPA
regarding the Registrant's Joppa, Illinois plant indicating that excess opacity
emissions from kiln #2 had been referred to the Office of the Attorney General
for preparation of a formal enforcement complaint. The alleged exceedances
occurred during a period of time prior to a new baghouse being installed (June
1994). The Registrant has had meetings with the Illinois Attorney General's
office and U.S. EPA to discuss the factual information and alleged violations,
and the possibilities of settlement. At this time, it is unclear whether the
matter can be settled, what a penalty amount would be, or whether the matter
will have to proceed to litigation.
In June 1994, the Registrant was sued by approximately 24 plaintiffs for injury
to and death of passengers and observers of a collision between a ready-mixed
concrete truck owned by the Registrant and a church van which occurred in 1992.
The plaintiffs contend that the negligent acts and omissions of the driver and
the Registrant constitute the proximate cause of the accident and all of the
plaintiffs' injuries and damages arising therefrom. The claim for damages is
approximately $106 million. The Registrant has tendered its policy limits
under its primary insurance policy and has transferred control of the defense
of this litigation to the excess insurance carrier.
In March 1994, the Registrant was served with a Civil Investigative Demand by
the U.S. Department of Justice, Antitrust Division, requesting the production
of documents and responses to interrogatories in connection with an
investigation of potential price fixing and market allocation by cement
producers. The Registrant has prepared and submitted all of the agreed upon
information. The Registrant believes that it has no liability with respect to
any of the suspected antitrust violations referenced in the Justice
Department's demand.
The Registrant is involved in certain other legal actions and claims. It is
the opinion of management that all such legal matters will be resolved without
material effect on the Registrant's Consolidated Financial Statements.
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None during the fourth quarter ended December 31, 1994.
I-23
25
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information required in response to Item 5 is reported in Item 7, pages II-25
and II-26 of this Annual Report and is incorporated herein by reference.
On March 8, 1995, 59,872,608 Common Shares were outstanding and held by
approximately 3,006 record holders. In addition, on March 8, 1995, 8,502,062
exchangeable preference shares of LCI, which are exchangeable at the option of
the holder into Common Shares on a one-for-one basis and have rights and
privileges that parallel those of the Common Shares, were outstanding and held
by 6,980 record holders.
The Registrant may obtain funds required for dividend payments, expenses and
interest payments on its debt from its operations in the U.S., dividends from
its subsidiaries or from external sources, including bank or other borrowings.
II - 1
26
Item 6. SELECTED FINANCIAL DATA
The table below summarizes selected financial information for the Registrant.
For further information, refer to the Registrant's consolidated financial
statements and notes thereto presented under Item 8 of this Annual Report.
SELECTED CONSOLIDATED FINANCIAL DATA
(in millions except as indicated by an *)
Years Ended December 31
--------------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------
OPERATING RESULTS
Net Sales $1,563.3 $1,494.5 $1,511.2 $1,568.8 $1,769.6
====================================================================
INCOME BEFORE THE FOLLOWING ITEMS: $ 141.9 $ 70.2 $ 28.0 $ 17.7 $ 145.1
Interest expense, net (28.8) (42.7) (49.4) (52.0) (46.8)
Income taxes (32.5) (21.6) (15.7) (16.1) (55.4)
--------------------------------------------------------------------
NET INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLES 80.6 5.9 (37.1) (50.4) 42.9
Cumulative effect of change in
accounting principles - - (63.5) - -
--------------------------------------------------------------------
NET INCOME (LOSS) 80.6 5.9 (100.6) (50.4) 42.9
Depreciation and depletion 97.5 108.5 117.6 112.1 100.5
Cumulative effect of change in
accounting principles - - 63.5 - -
Restructuring (13.6) 21.6 - - -
Other items not affecting cash (16.5) 18.9 (3.8) 10.9 (44.3)
--------------------------------------------------------------------
NET CASH PROVIDED BY OPERATIONS $ 148.0 $ 154.9 $ 76.7 $ 72.6 $ 99.1
====================================================================
FINANCIAL CONDITION AT YEAR END
Working capital $ 402.3 $ 315.4 $ 253.0 $ 253.5 $ 318.8
Property, plant and equipment, net 751.9 880.7 982.3 1,056.3 1,066.4
Other assets 192.4 221.8 205.0 209.0 223.6
--------------------------------------------------------------------
TOTAL NET ASSETS $1,346.6 $1,417.9 $1,440.3 $1,518.8 $1,608.8
====================================================================
Long-term debt $ 290.7 $ 373.2 $ 515.2 $ 564.6 $ 594.9
Other long-term liabilities 214.5 253.0 225.2 112.2 121.5
Shareholders' equity 841.4 791.7 699.9 842.0 892.4
--------------------------------------------------------------------
TOTAL CAPITALIZATION $1,346.6 $1,417.9 $1,440.3 $1,518.8 $1,608.8
====================================================================
COMMON EQUITY SHARE INFORMATION
Net income (loss)* $ 1.18 $ 0.10 $ (0.63)(a) $ (0.90) $ 0.77
Dividends* $ 0.30 $ 0.30 $ 0.30 $ 0.35 $ 0.40
Book value at year end* $ 12.34 $ 11.84 $ 11.79 $ 14.85 $ 16.14
Average shares and equivalents
outstanding 68.3 61.6 58.7 55.9 55.8
Shares outstanding at year end 68.2 66.9 59.4 56.7 55.3
====================================================================
STATISTICAL DATA
Capital expenditures $ 95.4 $ 58.4 $ 54.9 $ 95.8 $ 173.0
Acquisitions $ 4.7 $ 15.2 $ 4.3 $ 11.1 $ 42.9
Net income (loss) as a percentage
of net sales* 5.2% 0.4% (2.5)%(a) (3.2)% 2.4%
Return on average shareholders'
equity* 9.9% 0.8% (4.8)%(a) (5.8)% 4.9%
Long-term debt as a percentage
of total capitalization* 21.6% 26.3% 35.8% 37.2% 37.0%
Number of employees at year end* 6,500 7,400 7,700 7,900 8,800
Exchange rate at year end
(Cdn. to U.S.)* 0.713 0.755 0.787 0.865 0.862
Average exchange rate for year
(Cdn. to U.S.)* 0.732 0.775 0.828 0.873 0.851
====================================================================
(a) Before cumulative effect of change in accounting principles.
II - 2
27
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto:
MANAGEMENT'S DISCUSSION OF INCOME
The Consolidated Statements of Income (Item 8, page II-32) summarize the
Registrant's operating performance for the past three years. To facilitate
analysis, sales and operating profit will be discussed by product line and are
summarized in the table on page II-4 (in millions). The Registrant's two
product lines are:
1. Cement-the production and distribution of portland and specialty
cements and cementitious materials.
2. Construction Materials-the production and distribution of ready-mixed
concrete, construction aggregates, other concrete products, asphalt,
road construction and the conversion of industrial waste into fuels
and raw materials for use in cement kilns.
II - 3
28
Years Ended December 31
-------------------------------------------------------
1994 1993 1992
-------------------------------------------------------
NET SALES
Cement $ 876.6 $ 801.4 $ 794.3
Construction Materials 799.7 802.2 830.6
Eliminations (113.0) (109.1) (113.7)
-------------------------------------------------------
TOTAL NET SALES $1,563.3 $1,494.5 $1,511.2
=======================================================
GROSS PROFIT
Cement $ 207.8 $ 161.0 $ 138.5
Construction Materials 100.8 91.2 83.3
-------------------------------------------------------
TOTAL 308.6 252.2 221.8
-------------------------------------------------------
OPERATIONAL OVERHEAD AND
OTHER EXPENSES
Cement (69.5) (71.7) (71.9)
Construction Materials (69.3) (63.2) (73.6)
-------------------------------------------------------
TOTAL (138.8) (134.9) (145.5)
-------------------------------------------------------
INCOME FROM OPERATIONS
Cement 138.3 89.3 66.6
Construction Materials 31.5 28.0 9.7
-------------------------------------------------------
TOTAL OPERATING PROFIT 169.8 117.3 76.3
Corporate and Unallocated
Expenses (27.9) (47.1) (48.3)
-------------------------------------------------------
TOTAL INCOME FROM OPERATIONS $ 141.9 $ 70.2 $ 28.0
=======================================================
IDENTIFIABLE ASSETS
Cement $ 692.3 $ 759.2 $ 863.7
Construction Materials 605.0 697.3 711.3
Corporate and Unallocated
Assets 354.1 231.2 192.4
-------------------------------------------------------
TOTAL ASSETS $1,651.4 $1,687.7 $1,767.4
=======================================================
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YEAR ENDED DECEMBER 31, 1994
NET SALES
The Registrant's net sales increased 5 percent in 1994 to $1,563.3 million from
$1,494.5 million in 1993. Excluding sales from the Registrant's operations
divested in 1994 and 1993, net sales were 9 percent higher than 1993. These
divested operations include the Registrant's Balcones cement plant in Texas,
three cement terminals and an equity interest in an aggregates and asphalt
company in Houston, Texas which were sold in September 1994 and the aggregate
operations located in Southern Ohio and Illinois which were sold in late 1993.
The improvement in net sales was primarily due to 5 percent and 10 percent
increases in cement and ready-mixed concrete shipments, respectively, and 6
percent higher cement prices. Partially offsetting these increases was the
exchange rate impact resulting from a drop in the value of the Canadian dollar
relative to the U.S. dollar. Canadian net sales were $666.8 million, an
increase of 4 percent from 1993. U.S. net sales rose 5 percent to $896.5
million.
The Registrant's net sales from cement operations were $876.6 million, an
increase of 9 percent. After adjusting for sales lost from the Registrant's
operations divested in 1994 and 1993, net sales from continuing operations were
14 percent higher than 1993. Cement shipments rose in 1994 to 12.8 million
tons from 12.3 million tons in 1993. Excluding shipments from the divested
Texas cement plant, shipments from continuing operations increased 8 percent.
All three cement regions had higher sales volumes than the previous year.
Cement average net sales prices increased 6 percent over 1993. U.S. prices
increased 7 percent and Canadian prices increased 4 percent, before exchange
rate fluctuations, led by a 7 percent increase in eastern Canada. Canadian net
sales and shipments increased 5 percent and 7 percent, respectively. Net sales
were reduced by a drop in the value of the Canadian dollar relative to the U.S.
dollar. Sales volumes in eastern Canada increased 8 percent due to strong
domestic volumes resulting from Canada's $6 billion federal infrastructure
renewal program. In the U.S., net sales were 11 percent higher while cement
shipments increased 4 percent. Excluding operations divested, revenues and
shipments from continuing operations increased 16 percent and 8 percent,
respectively, over 1993. The improvement was due to the strong construction
activity throughout the year, which resulted in U.S. cement consumption far
exceeding domestic capacity.
Net sales from the Registrant's construction materials and waste management
operations were $799.7 million, down slightly from $802.2 million in 1993. Net
sales from continuing operations were 5 percent higher than 1993. Sales
volumes from continuing operations in 1994 were higher in both of the group's
primary product lines, ready-mixed concrete and construction aggregates.
Ready-mixed concrete volumes climbed 10 percent to 6.7 million cubic yards from
6.1 million cubic yards in 1993, with the largest gains coming from midwestern
and
II - 5
30
southern markets of the U.S. and the Atlantic and Ontario markets of Canada.
As a result of divestments, aggregate volumes fell 3 percent in 1994 to 46.5
million tons from 48.1 million tons in 1993. Aggregate volumes from continuing
operations rose 8 percent, reflecting growth in the eastern half of Canada and
all U.S. markets. In Canada, net sales were up 4 percent despite the negative
impact from the declining value of the Canadian dollar relative to U.S.
currency. Compared to 1993, ready-mixed concrete and aggregate volumes in
Canada increased approximately 6 percent due to 13 percent increases in each
product line in eastern Canada. The improvement from the previous year was due
to the continued growth in construction activity in Ontario and shipments to
the fixed-link bridge project in the Canadian Maritimes. Net sales in the U.S.
were 7 percent lower than 1993 mainly due to divested operations. Ready-mixed
concrete volumes were 21 percent higher than a year ago while aggregate sales
volumes from continuing operations rose 9 percent. The U.S. construction
materials operations benefitted from a rebound in construction that took place
in the midwest markets following the summer floods of 1993, the end of a
drivers strike in St. Louis and strong activity in the southern markets and in
the northern aggregate markets.
GROSS PROFIT AND COST OF GOODS SOLD
The Registrant's gross profit as a percentage of net sales improved from 17
percent in 1993 to 20 percent in 1994. Cement gross profit margin was 24
percent compared to 20 percent in 1993. The increase was a result of improved
volumes and prices. Construction materials gross profit margin was 13 percent
in 1994, up from 11 percent in 1993.
The Registrant's cement cost per ton is heavily influenced by plant capacity
utilization. The following table summarizes the Registrant's cement production
(in millions of tons) and the utilization rate of clinker production capacity.
Years Ended December 31
--------------------------
1994 1993
--------------------------
Cement production 10.94 10.37
Clinker capacity utilization 86% 81%
==========================
Cement production from continuing operations increased 6 percent from 1993
mainly due to the strong product demand in the U.S. Total U.S. cement
production totalled 6.6 million tons, an increase of 5 percent from last year.
In Canada, cement production was 4.3 million tons, up slightly from 4.1 million
tons in 1993. Clinker capacity utilization at U.S. plants was 94 percent in
1994 compared to 90 percent in 1993 while Canadian capacity utilization
increased to 75 percent from 72 percent in 1993. Capacity utilization in the
Registrant's Canadian plants increased from higher cement shipments in Canada
and from higher exports to the U.S.
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31
Total U.S. cement consumption exceeded domestic production capacity. To meet
the cement needs of U.S. customers, the company purchased more cement from its
Canadian plants which had underutilized cement capacity, and imported cement
from South American and European sources. Spot cement shortages occurred in
some U.S. markets.
SELLING AND ADMINISTRATIVE
Selling and administrative expenses were $163.4 million in 1994 compared to
$161.4 million in 1993. Although some expense reductions were achieved from
office consolidation and termination of some employees in the first phase of a
restructuring program (see "Restructuring" below), these reductions were mostly
offset by nonrecurring charges for development of a new financial system for
construction materials and for secondary employee relocations that were
triggered by the restructuring. Selling and administrative expenses as a
percentage of net sales declined to 10.4 percent in 1994 from 10.8 percent in
1993.
OTHER (INCOME) EXPENSE, NET
Other income and expense consists of items such as net retirement costs, equity
income, amortization of intangibles and nonrecurring gains and losses from
divestitures. Other expense, net was $3.4 million in 1994 compared to income
of $1.0 million in 1993. The change was the result of write-downs of surplus
properties, higher retirement costs, a provision for settlement of a lawsuit
and interest rate swap expenses. These charges were partially offset by higher
divestment gains from the sale of non strategic assets.
RESTRUCTURING
In the fourth quarter of 1993, the Registrant recorded a one-time pre-tax
restructuring charge of $21.6 million ($16.4 million net of tax benefits) to
cover the direct expenses of restructuring the Registrant's North American
business units to increase organizational efficiency. The primary components
of the restructuring charge were separation benefits for approximately 350
employees, employee relocation and retirement benefits for eligible employees
electing early retirement. The charge also included office relocation and
lease termination expenses.
The restructuring plan entailed the consolidation of 11 regional operating
units into six units in the Registrant's two main product lines. This
consolidation, which began in 1994 and will be substantially completed in 1995,
will reduce management layers, eliminate duplicative administrative functions
and standardize procedures and information systems. Manufacturing and
distribution facilities are not materially affected by the restructuring.
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32
During 1994, the Registrant spent $14.7 million (includes $1.1 million of
exchange rate impact) on the restructuring and anticipates that the remaining
accrual of $6.9 million will be substantially spent in 1995 as the Construction
Materials Group completes most of its restructuring.
In 1994, the annual expense reductions (mostly from the termination of 238
employees) that resulted from the restructuring totalled approximately $10
million pre-tax, consistent with expectations. These expense reductions were
mostly offset by nonrecurring charges for development of the new financial
system for construction materials and for secondary employee relocations that
were triggered by the restructuring. The estimated annual savings upon full
implementation of the restructuring plan are unchanged at $24 million pre-tax.
PERFORMANCE BY LINE OF BUSINESS
The Registrant's operating profit from cement operations (before corporate and
unallocated expenses) was $138.3 million, $49.0 million better than 1993.
Cement results were better due to higher sales volumes and prices somewhat
offset by higher maintenance costs and fuel costs per unit in certain Canadian
plants and higher purchased clinker costs in the U.S. In Canada, operating
profit totalled $42.7 million, $3.7 million higher than 1993. Higher sales
volumes throughout Canada and higher prices in central and eastern Canada were
partially offset by higher plant costs in certain cement plants. The
Registrant's U.S. operations reported an operating profit of $95.6 million.
This was $45.3 million better than 1993. Strong product demand coupled with a
7 percent increase in the average net sales price led to the improvement.
The Registrant's operating profit from its construction materials and waste
management operations (before corporate and unallocated expenses) was $31.5
million, or $3.5 million better than 1993. Results were better due to
significant improvement in the United States and moderate improvement in
eastern Canada. Operating profit was reduced by development expenses for a new
financial system and nonrecurring charges totalling approximately $7 million at
the Registrant's waste management operations. The Registrant's Canadian
operations contributed $16.4 million. This was $1.5 million worse than the
prior year. Earnings were higher in eastern Canada due to increased
ready-mixed concrete and aggregate volumes reflecting the continued improvement
in economic conditions and shipments to the fixed-link bridge project. These
earnings were more than offset by nonrecurring charges at the waste management
operations and development expenses for the new financial system. The U.S.
operations earned $15.1 million compared to $10.1 million in 1993. The
improvement was the result of higher ready-mixed concrete and aggregate volumes
due to increased construction activity following the 1993 floods in the midwest
coupled with strong performance in Texas and the northern aggregate markets.
Partially offsetting these improvements were nonrecurring charges at the waste
management operations and development expenses for the new financial system.
II - 8
33
TOTAL INCOME FROM OPERATIONS
In 1994, total income from operations was $141.9 million, $71.7 million better
than 1993. The increase was mostly due to higher earnings in the Registrant's
U.S. cement and construction materials operations, which accounted for 82
percent of the increase. Income from operations was also improved by higher
divestment gains from the sale of non strategic assets and the absence of the
one-time restructuring charge of $21.6 million in 1993. Offsetting these
improvements were nonrecurring charges at the Registrant's waste management
operations, a provision for settlement of a lawsuit, write-downs of surplus
properties, expenses for development of a new financial system and interest
rate swap expenses. Operating profit from Canadian operations was $49.9
million, $13.2 million better than 1993. The Registrant's operating profit
from U.S. operations was $92.0 million, $58.5 million better than 1993.
INTEREST EXPENSE, NET
Net interest expense decreased by $14.0 million in 1994 due to lower average
net indebtedness, higher interest rates on investments and currency exchange
gains on U.S. dollar denominated investments in Canada.
INCOME TAXES
Income tax expense increased from $21.6 million in 1993 to $32.5 million in
1994. In the U.S., taxes climbed only $2.0 million. The higher operating
income coupled with the additional taxable income from divestments resulted in
a current tax benefit from the utilization of most of the Registrant's net
operating loss carryforwards in the U.S. Canadian income tax expense increased
$8.9 million due to higher earnings. The Canadian effective income tax rates
were 46.9 percent in 1994 and 46.1 percent in 1993.
NET INCOME
The Registrant reported net income of $80.6 million in 1994. This compares
with net income of $5.9 million in 1993. The 1993 results included an
after-tax charge of $16.4 million recorded in the fourth quarter related to the
Registrant's restructuring plan. The Registrant's Canadian operations reported
net income of $29.9 million, $9.4 million better than 1993. Earnings increased
in eastern Canada due to the continued improvement in economic conditions.
Canadian earnings also benefitted from an adjustment of overhead charges
between the U.S. and Canada, the absence of the restructuring charge and higher
interest income. Partially offsetting these gains were higher maintenance
costs and fuel costs per unit in certain plants, nonrecurring charges related
to waste management operations and expenses for the development of a new
financial system for construction materials. In the U.S., net income
II - 9
34
was $50.7 million, $65.3 million better than 1993. The U.S. improvement
resulted from an increase in cement shipments and prices, a 21 percent increase
in ready-mixed concrete shipments, higher divestment gains and the absence of
the restructuring charge. In addition, interest expense in the U.S. was $8.8
million lower than 1993. These increases were partially offset by higher
purchased clinker costs at certain U.S. plants, nonrecurring charges related to
waste management operations, a provision for settlement of a lawsuit and
interest rate swap expenses.
GENERAL OUTLOOK
The Registrant's general outlook for 1995 in the Cement Group is favorable in
both the U.S. and Canada. Price increases have been announced in all markets.
The Portland Cement Association projects that cement consumption in the U.S.
will increase another 4 percent in 1995. The Registrant will have an
additional 400,000 tons of capacity available because of optimization projects
at two U.S. plants. All U.S. plants are expected to sell out again in 1995.
For 1995 the Canadian Portland Cement Association is forecasting a 7 percent
growth rate in cement consumption for Ontario and Quebec and a modest 2 percent
growth rate in western Canada, averaging 5 percent growth rate for Canada as a
whole. Demand is expected to be flat in Atlantic Canada except for the
fixed-link bridge project, which will use more than 170,000 metric tons of the
Registrant's specialty cements over a three-year period. In western Canada,
the combination of strong U.S. demand and an improving Canadian economy should
help the Registrant operate its three western plants at close to full capacity
in 1995.
In the Registrant's Construction Materials Group, the outlook for 1995 is also
favorable. The substantial completion of the restructuring plan for the
Registrant's construction materials operations should have a favorable impact.
In the U.S., sales volumes should improve in key markets such as Kansas City
and St. Louis. Other markets such as New Orleans and Pittsburgh are expected
to stay fairly stable. In central and eastern Canada, 1995 is shaping up to be
a better year because of expected volume growth in Ontario and an increase in
shipments for the fixed-link bridge project. Western Canada should see
moderate volume growth in 1995.
Higher interest rates are expected to have a dampening effect on residential
construction in 1995. However, construction spending for commercial,
industrial and infrastructure projects, which are less sensitive to interest
rate fluctuations, is expected to increase.
II - 10
35
YEAR ENDED DECEMBER 31, 1993
NET SALES
The Registrant's net sales were $1,494.5 million, down slightly from $1,511.2
million in 1992. The decrease was due to a drop in the value of the Canadian
dollar relative to the U.S. dollar and sales lost from divested operations
including the Registrant's cement plant in Demopolis, Alabama. Partially
offsetting these declines were a 4 percent increase in average cement net sales
prices and higher sales volumes from both cement and construction materials
operations. Canadian net sales were $640.5 million, a decline of 4 percent
from last year while U.S. net sales increased 1.5 percent to $854.0 million.
The Registrant's net sales from cement operations increased 1 percent in 1993.
Cement average net sales prices improved 4 percent over 1992 due to a 6 percent
increase in the U.S. Canadian net sales decreased 4 percent due to the impact
of exchange rates. In the U.S., net sales increased 3 percent. Prices
increased an average of 6 percent in the Great Lakes U.S. market and 7 percent
in the southern U.S. The Canadian average net sales price remained stable with
lower prices in Ontario offset by higher prices in the west.
Cement shipments (after adjusting for sales from the Demopolis, Alabama plant,
which was divested in February 1993) increased 4 percent in 1993 to 12.3
million tons from 11.8 million tons in 1992. Demand was strongest in U.S.
markets and in western Canada. U.S. and Canadian shipments increased 4 percent
and 2 percent, respectively. Spot shortages occurred during 1993 in the
southern Great Lakes and Mississippi River markets as the continued improvement
in the U.S. construction market increased the demand for cement. Additionally,
construction activity in the Midwest increased after the flood waters receded.
Shipments in the Pennsylvania and New England markets increased over 1992 and
prices improved 3 percent from 1992's depressed levels. The Florida market
performed well in 1993, with sales volumes up 14 percent from the previous
year. Oilwell cement sales in the western provinces of Canada nearly doubled
in 1993 as an increase in natural gas prices and changes to the royalty system
resulted in an increase in drilling activity. Additionally, cement shipments
in British Columbia increased 9 percent over 1992. In 1993, market conditions
in eastern Canada were adversely impacted by excess cement capacity. However,
the Registrant used surplus capacity in Ontario to supplement U.S. facilities
that were facing inventory shortages. The Registrant's two cement plants in
Ontario increased production and lowered unit costs although cement demand
dropped 2 percent in the province. Shipments in the Quebec and Atlantic
provinces of Canada were flat in 1993.
Net sales from the Registrant's construction materials and waste management
operations were $802.2 million, down 3 percent from 1992. The drop in the
value of the Canadian dollar, sales lost from divested operations in 1992, the
sluggish economy in Canada and flooding in the
II - 11
36
midwest U.S. were the major causes of this decline. In Canada, net sales
dropped 5 percent primarily due to the decline in the value of the Canadian
dollar and the divestment of the Registrant's chemical admixtures operations in
1992. Net sales in the U.S. declined slightly as a result of the weak
performance in the Registrant's northern markets, flooding in the midwest and
the divestment of several construction materials businesses. These declines
were nearly offset by strong performance in the Registrant's southern U.S.
markets. Registrant-wide, ready-mixed concrete shipments of 6.1 million cubic
yards were 1 percent higher than a year ago. Aggregate sales of 48.1 million
tons were 4 percent higher than the previous year. In Canada, ready-mixed
concrete shipments increased 2 percent due to an increase in construction
activity in British Columbia and Quebec while infrastructure work in eastern
Canada boosted aggregate volumes by 8 percent. In the U.S., ready-mixed
concrete and aggregate volumes declined slightly due to the floods and a
drivers strike in St. Louis coupled with the 1992 sale of several construction
materials businesses.
GROSS PROFIT AND COST OF GOODS SOLD
The Registrant's gross profit as a percentage of net sales improved from 14
percent in 1992 to 17 percent in 1993. Cement gross profit was 20 percent
compared to 17 percent in 1992 as a result of improved prices. Over the two
year period, construction materials gross profit remained constant at
approximately 11 percent.
The Registrant's cement cost per ton is heavily influenced by plant capacity
utilization. The following table summarizes the Registrant's cement production
(in millions of tons) and the utilization rate of clinker production capacity.
The 1993 figures exclude the Demopolis, Alabama plant which was divested in
February 1993.
Years Ended December 31
--------------------------
1993 1992
--------------------------
Cement production 11.25 11.79
Clinker capacity utilization 82% 83%
==========================
Cement production and clinker capacity utilization in 1993 were down somewhat
from a year ago. In the U.S., cement production totalled 7.2 million tons, an
11 percent decrease from 1992. Capacity utilization at U.S. plants was 90
percent in 1993 compared to 95 percent in 1992. The decrease in production and
utilization was due to operating problems at three of the Registrant's cement
plants. Canadian cement production was 4.1 million tons in 1993, an increase
of 11 percent from 3.7 million tons in 1992. Capacity utilization was 72
percent and 66 percent in 1993 and 1992. The increase in production and
utilization was primarily
II - 12
37
due to higher sales volumes and the use of surplus capacity in the Registrant's
Ontario plants to supplement U.S. markets that were experiencing cement
shortages.
SELLING AND ADMINISTRATIVE
Selling and administrative expenses were $161.4 million in 1993, $23.3 million
(13 percent) lower than 1992. This reduction resulted primarily from
divestments and actions taken to streamline operations and reduce costs in the
Registrant's cement and construction materials operations over the last two
years. Selling and administrative expenses as a percentage of net sales
declined to 10.8 percent in 1993 from 12.2 percent in 1992.
OTHER (INCOME) EXPENSE, NET
Other income and expense consists of items such as net retirement costs, equity
income, amortization of intangibles and nonrecurring gains and losses from
divestitures. Other income, net was $1.0 million in 1993 compared to expense
of $9.1 million in 1992. The change was the result of higher divestment gains
from the sale of non-strategic assets and lower amortization coupled with the
absence of strike related costs at the Richmond plant.
PERFORMANCE BY LINE OF BUSINESS
In 1993, the Registrant's operating profit from cement operations (before
corporate and unallocated expenses) was $96.4 million, $29.8 million better
than 1992. All regions reported better results than the prior year. Cement
results were much better due to higher prices and stronger shipments,
particularly in the second half of 1993. The most notable progress was in the
U.S. markets. Prices were up 6 percent in the U.S. but unchanged in Canada.
The Registrant's Canadian operations reported an operating profit of $46.2
million, $5.5 million better than last year. Earnings increased in western
Canada due to higher shipments and the absence of costs related to the strike
at the Richmond plant that was settled in March 1992. Earnings declined in
central Canada due to the continued sluggish market but improved in eastern
Canada primarily due to higher intraregional sales to the U.S. New England
markets. Earnings from U.S. cement operations were $50.2 million, or $24.3
million better than 1992. Results improved in all U.S. regions, mainly due to
the 6 percent increase in average net selling prices combined with a 4 percent
increase in shipments.
The operating profit from the Registrant's construction materials and waste
management operations in 1993 (before corporate and unallocated expenses) was
$30.6 million, $20.9 million better than 1992. Earnings were boosted by cost
reductions and higher ready- mixed concrete and block prices in central Canada,
and improved ready-mixed concrete and
II - 13
38
aggregate volumes in eastern Canada, partially offset by lower ready-mixed
concrete prices in the western provinces due to competitive pressures in a
number of markets. The Canadian operations contributed $20.3 million, $14.7
million higher than prior year. Most of the increase was attributable to the
Registrant's Ontario-based concrete products operations. The U.S. operating
profit totalled $10.3 million, $6.2 million better than 1992. This improvement
was primarily attributable to the Registrant's construction materials
operations in the southern U.S. resulting from higher ready-mixed concrete
volumes, lower stone costs and a $3.1 million write-down of a quarry in 1992.
Partially offsetting these gains were an earnings decline in the Registrant's
northern U.S. markets due to the continued poor economic climate and high
operating costs in the midwest markets as a result of the summer floods and a
drivers strike.
TOTAL INCOME FROM OPERATIONS
Total income from operations was $70.2 million in 1993, an increase of $42.2
million from 1992. The improved performance was due largely to a 6 percent
increase in the U.S. average cement net sales price. Also contributing to the
results were an $18.2 million turnaround in profitability of the Registrant's
construction materials operations in central and eastern Canada, higher
shipments in the western cement region, higher divestment gains from the sale
of nonstrategic assets and a 13 percent reduction in selling and administrative
expenses. These improvements were partially offset by a one-time restructuring
charge of $21.6 million. The Registrant's operating profit from its Canadian
operations was $36.7 million, $3.2 million better than 1992. Operating profit
from U.S. operations was $33.5 million, $39.0 million better than 1992.
INTEREST EXPENSE, NET
Net interest expense decreased by $6.7 million in 1993 due to lower average
debt levels.
INCOME TAXES
Income tax expense increased $5.9 million in 1993. U.S. taxes increased $3.0
million primarily due to a $2.6 million increase in deferred income taxes. The
Canadian income taxes increased $2.9 million due to higher earnings in Canada.
The Canadian effective income tax rates were 46.1 percent in 1993 and 42.7
percent in 1992. Certain elements of the Canadian income tax provision are
fixed in amount. The increase in the Canadian effective tax rate in 1993 was
caused by the relatively higher percentage of these fixed amounts to the higher
earnings experienced in 1993, partially offset by a tax rate reduction enacted
during 1993.
II - 14
39
NET INCOME
In 1993, the Registrant reported net income of $5.9 million. This was $106.5
million better than 1992's net loss of $100.6 million. The 1992 loss included
$12.1 million after-tax of employee severance and other nonrecurring charges,
while 1993 results included an after-tax charge of $16.4 million related to
corporate restructuring recorded in the fourth quarter. The 1992 loss also
included $63.5 million in after-tax charges related to the adoption of new
accounting rules for postretirement benefits and income taxes. Excluding this
one-time charge, net income in 1993 was $43.0 million better than 1992.
Excluding one-time charges resulting from the adoption of these new accounting
rules, the Registrant's Canadian operations reported net income of $20.5
million, $0.8 million higher than 1992. The increase was due to better results
in the Registrant's ready-mixed concrete and aggregate operations in central
and eastern Canada, higher shipments in the Western Cement Region and the
absence of strike related costs at the Richmond plant. These increases were
offset by a 4 percent decline in net sales and lower divestment gains.
After excluding one-time charges resulting from the adoption of new accounting
rules, the Registrant's U.S. operations incurred a net loss of $14.6 million.
This was $42.2 million better than 1992. The improved U.S. performance was the
result of a $4.9 million gain realized from the expropriation of property at
one of the Registrant's construction materials operations and an increase in
cement volumes and prices. In addition, interest expense in the U.S. was $6.2
million lower than the previous year. U.S. results were negatively impacted by
infrequently occurring maintenance projects (those required every three years
or more) and an earnings decline in the Registrant's northern and midwestern
construction materials markets.
ENVIRONMENTAL MATTERS
The Registrant's operations, like those of other companies engaged in similar
businesses, involve the use, release/discharge, disposal and clean-up of
substances regulated under increasingly stringent federal, state, provincial
and/or local environmental protection laws. Many of the regulations are
technically and legally complex, posing significant compliance challenges. The
Registrant's environmental compliance program includes an environmental policy
and an environmental ethics policy that are designed to provide corporate
direction for all operations and employees, an environmental assessment and
follow-up program, routine compliance oversight of the Registrant's facilities,
environmental guidance on key issues confronting the Registrant, routine
training and exchange of information by its environmental professionals, and
routine and emergency reporting systems.
The Registrant has been in, or is presently involved in, certain environmental
enforcement matters in both the U.S. and Canada.
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40
Management's philosophy is to attempt to actively resolve such matters with the
appropriate government authorities. In certain circumstances, notwithstanding
management's belief that a particular alleged violation poses no significant
threat to the environment, the Registrant may decide to resolve such matters by
entering into a consent agreement and/or paying a penalty.
In 1992, the Registrant's four cement plants using hazardous waste- derived
fuels submitted certifications of compliance for the emission limits
established under the federal Resource Conservation and Recovery Act ("RCRA"),
Boiler and Industrial Furnaces ("BIF") regulations. The BIF regulations also
require extensive record keeping of operational parameters, and of fuels and
raw materials used. The BIF regulations are extremely complex, and certain
provisions have been subject to different interpretations. The Registrant has
received a notice of violation and/or a complaint alleging violations of the
BIF regulations at each of the four cement plants. These notices of violation
and complaints were issued by the U.S. Environmental Protection Agency ("EPA")
with respect to three plants, and by the State of Michigan, which has been
delegated BIF enforcement authority by the EPA, with respect to a fourth plant.
Although the details of each notice of violation or complaint are specific to
the particular plant, a recurring issue has been the existence or adequacy of
the plant's waste analysis plan to ensure compliance with the established
allowable emissions limits and feed rates. All of the Registrant's plants
which are subject to the BIF regulations have revised their waste analysis
plans and submitted them for approval. Furthermore, to reduce the potential
recurrence of BIF violations, the Registrant has designated an employee who is
responsible for managing the Registrant's BIF compliance, including routine
auditing of plant operations and plant records which are required to document
compliance with the BIF regulations.
The current status of these BIF-related matters is as follows: With respect to
the Demopolis, Alabama plant (which was sold by the Registrant in early 1993),
the Registrant settled the matter by paying a penalty of $594,000. The
Registrant settled the matter with respect to the Alpena, Michigan plant by
entering into a consent decree with the State of Michigan that included a
$400,000 penalty. The Registrant settled the matter with respect to the
Fredonia, Kansas plant by entering into a consent decree with the U.S. EPA that
included a $250,000 penalty and a supplemental environmental project. The
Registrant has formally responded to the remaining notice of violation and
complaint involving its Paulding, Ohio plant, setting forth certain defenses
and factual information. The Registrant's representatives have met on numerous
occasions with the EPA to discuss the alleged violations and the possibilities
of settlement. At this time, the Registrant is awaiting a response from the
government on whether this matter will have to go to an adjudicatory
proceeding.
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41
In late February 1994, a decision was issued in a lawsuit challenging certain
aspects of the BIF regulations. The court's decision, among other things,
vacated the Tier III standard for hydrocarbon emission levels and instructed
the EPA to reconsider the Tier III standard. Two of the Registrant's plants
had been complying with the Tier III standard and were not able to meet either
the Tier I standard or the Tier II standard, which are the two remaining
standards. The two plants have completed raw materials replacements that have
allowed the plants to demonstrate compliance with the Tier II hydrocarbon
standards. As a result, the Registrant has been able to continue the use of
supplemental fuels at the two plants.
A by-product of many of the Registrant's cement manufacturing plants is cement
kiln dust ("CKD"). CKD has been excluded from regulation as hazardous waste
under the so-called "Bevill Amendment" to RCRA until the EPA completes a study
of CKD, determines if it should be regulated as hazardous waste and issues
appropriate implementing rules. On December 30, 1993, the EPA issued its
Report to Congress and proposed five regulatory options for CKD. On January
31, 1995, the EPA issued a regulatory determination in which it found that
certain CKD management practices create unacceptable risks that require
additional regulation. The EPA specifically identified the potential for
groundwater contamination from the management of CKD in karst terrain, fugitive
emissions from handling and management of CKD, and surface water/stormwater
runoff from CKD management areas. The EPA found that there is no difference
between dust generated from kilns that use traditional fuels and those that use
supplemental fuels. The EPA also indicated there are no concerns with cement
and clinker, and that most beneficial uses of CKD were not of concern with the
exception of its use as a "soil amendment" (the EPA indicated it would further
study such application during a future rulemaking).
The EPA outlined a tentative regulatory approach for further regulation of CKD
to be carried out over the next two-plus years. During this interim period,
the Bevill exclusion would be retained. The EPA indicates that existing legal
authority under the Clean Air and Water Acts will be used to address the
fugitive emissions and stormwater/surface water runoff issues. For those
instances where groundwater concerns exist, the EPA indicates it will use
Subtitle C of RCRA as its jurisdiction for establishing highly tailored CKD
management standards. In this regard, the EPA indicated that
industry-developed CKD management standards would likely be the starting point
for the rulemaking. During an industry briefing, EPA representatives indicated
that the above approach was tentative and could be influenced and/or found to
be unnecessary should states adequately regulate CKD, new information shows
clear evidence of no need for regulation and/or the cement manufacturing
industry implements its own CKD management practices. The Registrant is
participating with other cement manufacturers in evaluating options in response
to the EPA's regulatory determination, including legal, legislative and further
regulatory actions.
II - 17
42
The Registrant's management does not believe that the existing data/information
support the tentative regulatory approach set forth by the EPA. Should the EPA
ultimately proceed to promulgate new CKD management standards, the Registrant
is likely to incur additional capital costs and operational expenses to meet
the new standards. The Registrant has undertaken a program to assess its
management practices for CKD in the U.S. and Canada, and is voluntarily taking
remedial steps and instituting management practices consistent with the
industry CKD management practices, as well as assessing and modifying process
operations, evaluating and using alternative raw materials, and implementing
new technologies for reducing the generation of CKD.
In 1993, the State of Michigan alleged that the Registrant's Alpena plant was
managing CKD in violation of applicable state solid waste management
requirements. The Registrant has settled this matter by entering into a
consent judgment with the State of Michigan. The agreement finalizes a testing
protocol for CKD, how the CKD will be managed, a closure plan for historic CKD
areas, and payment of a penalty of $350,000 that essentially covers the costs
expended by state agency personnel to resolve this matter.
In another matter relating to the Alpena plant and CKD, the State of Michigan
has contacted the Registrant and the former owner of the plant seeking
remediation of an old CKD pile from which it alleges there is runoff of
hazardous substances into Lake Huron. The Registrant has advised the state
that it is not responsible for remediating this property because the property
was expressly excluded in the purchase agreement pursuant to which the
Registrant acquired the plant. The Registrant has advised the former plant
owner of the Registrant's position on this matter and has filed a legal action
in federal district court seeking to have the deed reformed to be consistent
with the asset purchase agreement. It is unclear, at this time, whether this
matter can be settled or whether it will proceed to a court's resolution of the
matter.
As with most industrial companies in the U.S., the Registrant is involved in
certain remedial actions to clean up historical problem waste disposal sites,
as required by federal and state laws, which provide that responsible parties
must fund remedial actions regardless of fault or legality at the time of the
original disposal. In this regard, the Registrant is presently involved in
approximately 18 federal, state, and provincial administrative investigations,
studies and/or proceedings. At all but seven of these sites, the Registrant is
either a de minimis party or the Registrant has information to support its
position that it did not contribute/dispose or is not legally responsible for
the disposal of materials at the site. At five of the seven sites, the
Registrant is already in the process of remediating the site or has agreed to
undertake remediation of the site, and with respect to four of these five
sites, the Registrant has recorded provisions for exposure but is seeking
contribution from one or more other parties and/or pursuing recovery from its
insurers. At the sixth site, the Registrant and a potential buyer of the
property are
II - 18
43
attempting to obtain governmental approval of a plan to "seal" the site. The
seventh site is the old CKD pile at the Alpena plant discussed above.
The 1990 Clean Air Act Amendments have the potential to result in significant
capital expenditures and operational expenses for the Registrant. The Clean
Air Act Amendments established a new federal operating permit and fee program
for many manufacturing operations. By November 1995, the Registrant's U.S.
operations that are deemed to be "major sources" of air pollution will have to
submit detailed permit applications and pay recurring permit fees. To ensure
the timely submittal and completeness of permit applications for the
Registrant's "major sources", the Registrant has designated employees in its
various operating regions to manage the overall permit application development
program. By the end of 1994, the Registrant had conducted emissions
inventories, determined compliance status with applicable regulations and
commenced definition of alternate operating scenarios. As part of this
process, plant personnel have been discussing their actions with the respective
state air agencies that have ultimate responsibility for review and issuance of
the federal operating permits. Major emphasis has been placed on defining
likely future operational needs so that the plants obtain permit operating
conditions that allow them to be competitive in the marketplace.
The Clean Air Act Amendments of 1990 also require the EPA to develop air toxics
regulations for a broad spectrum of industrial sectors, including portland
cement manufacturing. The EPA has indicated that the new maximum achievable
control technology ("MACT") standards will force a significant reduction of air
pollutants below existing levels. The Registrant is actively participating
with other cement manufacturers in working with the EPA to define test
protocols, better define the scope of MACT standards, the existence/feasibility
of various technologies and develop realistic emission limitations for the
cement industry. The EPA is also developing revised boiler and industrial
furnaces ("BIF") standards for facilities that use hazardous waste as a
supplemental fuel. The EPA has indicated that it plans to use a "MACT-like"
approach for developing technology-based standards rather than relying on its
RCRA risk-based standards authority. The Registrant is actively participating
with other BIF/cement manufacturers to encourage the EPA to revise the BIF
standards, using the MACT-like approach that comports with all of the Clean Air
Act requirements, rather than basing these standards on operationally
dissimilar facilities that also thermally treat hazardous wastes. There is a
close link between these activities because most of the existing air toxics
data is based upon BIF certifications of compliance. These tests are not
necessarily representative of normal operating conditions. The Registrant's
management anticipates that several of its plants are likely to be required to
upgrade and/or replace existing air pollution control equipment as a result of
these regulations. The EPA has acknowledged that the capital costs and
operating expenses associated with meeting these requirements are likely to be
significant i.e., as much as 7.5 percent of annual sales for some companies.
Until the EPA better
II - 19
44
defines the actual air toxics to be controlled, proposes emission standards
based upon certain technologies, and proposes continuous emission monitoring
techniques to measure compliance, management cannot determine the additional
controls that may be required at its facilities or the associated costs for
such controls.
Because of differences between requirements in the U.S. and Canada, and the
complexity and uncertainty of existing and future environmental requirements,
permit conditions, costs of new and existing technology, potential remedial
costs and insurance coverage, and/or enforcement related activities and costs,
it is difficult for management to estimate the ultimate level of the
Registrant's expenditures related to environmental matters. The Registrant's
capital expenditures and operational expenses for environmental matters have
increased and are likely to increase in the future. However, the Registrant
cannot determine at this time if capital expenditures and other remedial
actions that the Registrant has taken, or may in the future be required to
undertake in order to comply with the laws governing environmental protection
will have material effect upon its capital expenditures or earnings.
II - 20
45
MANAGEMENT'S DISCUSSION OF CASH FLOWS
The Consolidated Statements of Cash Flows summarize the Registrant's main
sources and uses of cash. These statements show the relationship between
operations that are presented in the Consolidated Statements of Income and
liquidity and financial resources which are depicted in the Consolidated
Balance Sheets.
The Registrant's liquidity requirements arise primarily from the funding of its
capital expenditures, working capital needs, debt service obligations and
dividends. The Registrant has met its operating liquidity needs primarily
through internal generation of cash and expects to continue to do so in the
future. However, because of the seasonality of the Registrant's business, cash
balances decline in the first two quarters. Short-term borrowings might be
required in the future to fund seasonal operating requirements.
The net cash provided by operations for each of the three years presented
reflects the Registrant's net income (loss) adjusted for noncash items.
Depreciation and depletion have declined over the periods presented due to
divestments and the 1994 extension of the estimated useful lives at six of the
Registrant's cement plants. Deferred income taxes affected the operating cash
flow primarily because of the reversal of depreciation differences in Canada
and the payment of alternative minimum tax in the U.S. The changes in working
capital are discussed in Management's Discussion of Financial Position.
Cash flows from investing consist primarily of capital expenditures and
acquisitions offset by proceeds of property, plant and equipment dispositions.
Capital investments by product line, including acquisitions, were as follows
(in millions):
Years Ended December 31
----------------------------------------------------
1994 1993 1992
----------------------------------------------------
Cement $ 63.7 $ 27.2 $ 28.0
Construction materials 32.8 45.8 30.8
Other 3.7 0.6 0.5
----------------------------------------------------
Total capital investments $100.2 $ 73.6 $ 59.3
====================================================
Capital investments are not expected to exceed $200 million in 1995. The
Registrant intends to invest in internal capital improvement projects and
acquisition opportunities to enhance or expand the Registrant's competitive
position in the U.S. and Canada. Capital spending and dividend requirements are
anticipated to be funded by existing cash and by cash flows from operations.
In September 1994, the Registrant sold its New Braunfels, Texas cement plant,
three cement terminals and an equity interest in an aggregate operation. In
late December, the Registrant sold its Texas ready-mixed concrete plants and
related
II - 21
46
assets. In February 1993, the Registrant sold its Demopolis, Alabama cement
facility and other related assets. During 1994 and 1993 the Registrant's
proceeds from the sale of non strategic assets, surplus land and other
miscellaneous items totalled $157.9 million and $68.9 million, respectively.
The financial position of the Registrant has substantially improved with a net
debt reduction of $450.6 million during the three years ended December 31,
1994. This reduction was the result of improved earnings from operations,
proceeds from divestments of non strategic assets, proceeds from the sale of
Common Shares in 1993 and moderate levels of capital spending. In October 1993
the Registrant completed an offering of 6.75 million Common Shares priced at
$18.25 per share. The net proceeds from the offering totalled $117.6 million.
In early 1992, the Registrant sold 1.7 million Exchangeable Shares of Lafarge
Canada Inc., a wholly owned subsidiary, that it had accumulated through
exchange transactions for net proceeds of $25.8 million.
The Registrant has access to a wide variety of short-term and long-term
financing alternatives in both the U.S. and Canada. Effective September 1,
1994, the Registrant cancelled its existing revolving credit facility and
established similar, bilateral revolving credit facilities with nine
institutions for total commitments of $150 million at favorable terms compared
with the previous facility. At December 31, 1994, no amounts were outstanding
under the revolving credit facilities.
II - 22
47
MANAGEMENT'S DISCUSSION OF FINANCIAL POSITION
The Consolidated Balance Sheets summarize the Registrant's financial position
at December 31, 1994 and 1993.
The value reported for Canadian dollar denominated net assets decreased from
December 31, 1993 as a result of a decline in the value of the Canadian dollar
relative to the U.S. dollar. At December 31, 1994 the U.S. dollar equivalent
of a Canadian dollar was $ .71 versus $ .76 at December 31, 1993.
Working capital, excluding cash, short-term investments and current portion of
long-term debt, decreased $8.0 million during 1994 as a result of the drop in
the value of the Canadian dollar relative to the U.S. dollar. The impact of
these exchange rate changes was to reduce accounts receivable by $8.3 million,
inventories by $5.0 million, and accounts payable and accrued liabilities by
$4.8 million.
Working capital, excluding cash, short-term investments, current portion of
long-term debt and the impact of exchange rate changes, decreased $36.0 million
from December 31, 1993 to December 31, 1994. Accounts receivable increased
$12.2 million during the year mainly due to a 2 percent and 6 percent increase
in net sales and average cement net sales prices in the fourth quarter of 1994
compared to 1993. (Net sales are detailed in Management's Discussion of
Income). Inventories decreased $5.7 million due to strong shipments in the
fourth quarter and the impact of divestments. Accounts payable and accrued
liabilities increased $25.8 million due to a provision for settlement of a
lawsuit, higher credit balances in bank accounts reclassified to accounts
payable and the timing of purchases and payments. These increases were
partially offset by a reduction in the restructuring accrual. Income taxes
payable increased by $12.2 million due to alternative minimum tax payable in
the U.S.
Net property, plant and equipment decreased $128.8 million during 1994. The
impact of exchange rate changes was $20.3 million. Depreciation and
divestments were $97.5 million and $140.1 million. Capital expenditures and
acquisitions of fixed assets totalled $98.9 million. The excess of cost over
net assets of businesses acquired relates primarily to a 1981 U.S. acquisition.
The decrease in this balance during 1994 resulted from amortization and
divestments. The decrease in other assets was mainly due to payments on
long-term notes receivable and write-downs of surplus properties. Other
long-term liabilities decreased $38.5 million during 1994. The decline was
mainly attributable to a $33.1 million decrease in deferred income taxes
resulting from asset sales in the U.S. and book depreciation in excess of tax
depreciation in Canada. The adoption of SFAS No. 106, "Employers Accounting
for Postretirement Benefits Other than Pensions", was recorded effective
January 1, 1992 and resulted in the establishment of a $111.0 million
liability. The related 1994 and 1993 accruals, net of actual payments, were
$3.4 million and $4.5 million, respectively.
II - 23
48
The Registrant's capitalization is summarized in the following table:
December 31
-----------------------------
1994 1993
-----------------------------
Long-term debt 21.6% 26.3%
Other long-term liabilities 15.9% 17.9%
Shareholders' equity 62.5% 55.8%
-----------------------------
Total capitalization 100.0% 100.0%
=============================
The increase in shareholders' equity is discussed in Management's Discussion of
Shareholders' Equity. The decline in long-term debt is discussed in
Management's Discussion of Cash Flows.
II - 24
49
MANAGEMENT'S DISCUSSION OF SHAREHOLDERS' EQUITY
The Consolidated Statements of Shareholders' Equity summarize the activity in
each of the components of shareholders' equity for the three years presented.
In 1994 Shareholders' equity increased by $49.8 million from net income of
$80.6 million and proceeds from the exercise of stock options of $12.0 million,
partially offset by dividend payments, net of reinvestments, of $10.1 million
and a decrease in foreign currency translation adjustments of $34.6 million
resulting from a decline in the value of the Canadian dollar relative to the
U.S. dollar.
Shareholders' equity increased $91.7 million in 1993. The increase was due
mainly to the October 1993 sale of 6.75 million Common Shares for net proceeds
of $117.6 million as well as net income of $5.9 million. Partially offsetting
these increases were dividend payments, net of reinvestments, of $14.3 million
and a decrease in foreign currency translation adjustments of $24.6 million.
Common equity interests include Common Shares and the Lafarge Canada Inc.
Exchangeable Shares, which have comparable voting, dividend and liquidation
rights. Common Shares are traded on the New York Stock Exchange under the
ticker symbol "LAF" and on The Toronto Stock Exchange and the Montreal
Exchange. The Exchangeable Shares are traded on the Montreal Exchange and The
Toronto Stock Exchange.
The following table reflects the range of high and low closing prices of Common
Shares by quarter for 1994 and 1993 as quoted on the New York Stock Exchange:
Quarters Ended
-----------------------------------------------
March June Sept. Dec.
31 30 30 31
------------------------------------------------
1994 STOCK PRICES
HIGH $26 7/8 $23 5/8 $22 $20 1/4
LOW 21 1/2 18 7/8 18 1/4 16 1/4
1993 STOCK PRICES
HIGH $17 3/4 $17 3/4 $19 3/4 $22 7/8
LOW 14 3/4 15 15 1/8 18 1/4
II - 25
50
Dividends are summarized in the following table (in thousands, except per share
amounts):
Years Ended December 31
------------------------------------------------
1994 1993 1992
------------------------------------------------
Common equity dividends $ 20,430 $ 18,390 $ 17,606
Less dividend reinvestments (10,338) (4,073) (9,918)
------------------------------------------------
Net cash dividend payments $ 10,092 $ 14,317 $ 7,688
================================================
Common equity dividends
per share $ .30 $ .30 $ .30
================================================
II - 26
51
MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA
The Selected Consolidated Financial Data provides both a reference for some
data frequently requested about the Registrant and a useful record in reviewing
trends.
The Selected Consolidated Financial Data for 1990 has been restated to reflect
the Missouri Portland/Davenport acquisition in 1991.
The Registrant's net sales decreased 11 percent from 1990 to 1991 reflecting
the lower sales volumes during the recession. The 4 percent decline from 1991
to 1992 was caused by sluggish construction activity in central and eastern
Canada coupled with a decline in the average value of the Canadian dollar. The
1 percent decline from 1992 to 1993 was due to the drop in the value of the
Canadian dollar and sales lost from operations divested, partially offset by a
4 percent increase in average cement net sales prices and higher cement and
construction materials sales volumes. Net sales increased 5 percent from 1993
to 1994 due to increases in cement and ready-mixed concrete shipments and
higher cement prices. Net sales were reduced by the declining value of the
Canadian dollar relative to U.S. currency and sales lost from operations
divested as discussed in Management's Discussion of Income.
Inflation has not been a significant factor in the Registrant's sales or
earnings growth due to lower inflation rates in recent years, and because the
Registrant continually attempts to offset the effect of inflation by improving
operating efficiencies, especially in the areas of selling and administrative
expenses, productivity and energy costs. The ability to recover increasing
costs by obtaining higher prices for the Registrant's products varies with the
level of activity in the construction industry and the availability of products
to supply a local market.
In 1990, the Registrant's cement selling price increases in the U.S. and in
Canada were generally less than the rate of inflation. In 1991, that pattern
continued in the U.S.; however, Canadian selling prices were relatively stable
in 1991. In 1992, selling prices in the U.S. decreased 1.4 percent while
Canadian selling prices increased 1 percent. In 1993 selling prices in the
U.S. increased 6 percent while average Canadian prices were unchanged despite
lower volumes and competitive pressures in Ontario. Cement average net sales
prices increased 6 percent in 1994 over 1993 mostly due to a 7 percent increase
in the U.S. Canadian prices increased 4 percent which included a 7 percent
escalation in eastern Canada.
Net cash provided by operations consists primarily of net income (loss),
adjusted primarily for depreciation, restructuring adjustments in 1994 and 1993
and, in 1992, the cumulative effect of changes in accounting principles. The
Registrant is in a capital-intensive industry and as a result recognizes large
amounts of depreciation. The Registrant has used the cash provided by
operations primarily to expand its markets and to improve the performance of
its plants and other operating equipment.
II - 27
52
Capital expenditures and acquisitions totalled $555.7 million over the five
years. Significant investments during the period included a variety of cement
plant projects to increase production capacity and reduce costs, the
installation of supplemental-fuel receiving and handling facilities, the
building and purchasing of additional distribution terminals to extend markets
and improve existing supply networks, acquisitions of ready-mixed concrete
plants and aggregate operations, and modernization of the construction
materials mobile equipment fleet.
II - 28
53
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial information is included on the pages indicated:
Page
----
Report of Independent Public Accountants II-30
Consolidated Balance Sheets II-31
Consolidated Statements of Income II-32
Consolidated Statements of Shareholders' Equity II-33
Consolidated Statements of Cash Flows II-34
Notes to Consolidated Financial Statements II-35 through II-57
II - 29
54
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Lafarge Corporation:
We have audited the accompanying consolidated balance sheets of Lafarge
Corporation (a Maryland corporation) and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income, cash flows, and
shareholders' equity for each of the three years in the period ended December
31, 1994. These financial statements and the schedule referred to below are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above (appearing on pages
II-31 through II-56) present fairly, in all material respects, the financial
position of Lafarge Corporation and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in the notes to the consolidated financial statements, effective
January 1, 1992, the Company changed its method of accounting for
postretirement benefits other than pensions and for income taxes.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The consolidated schedule II (appearing
on page IV-8) is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Washington, D.C.
January 26, 1995
II - 30
55
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31
------------------------------
1994 1993
------------------------------
ASSETS
Cash and cash equivalents $ 193,057 $ 109,294
Short-term investments 50,500 -
Receivables, net 257,093 253,207
Inventories 175,433 186,082
Other current assets 31,052 36,661
------------------------------
Total current assets 707,135 585,244
Property, plant and equipment, net 751,880 880,724
Excess of cost over net assets of
businesses acquired, net 21,926 39,636
Other assets 170,490 182,123
------------------------------
TOTAL ASSETS $1,651,431 $1,687,727
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities $247,378 $ 226,585
Income taxes payable 39,614 28,846
Current portion of long-term debt 17,813 14,373
------------------------------
Total current liabilities 304,805 269,804
Long-term debt 290,668 373,230
Other long-term liabilities 214,504 253,028
------------------------------
Total liabilities 809,977 896,062
------------------------------
Common equity interests
Common shares ($1.00 par value;
authorized 110.1 million shares; issued
59.7 and 55.3 million shares, respectively) 59,694 55,290
Exchangeable shares (no par or stated
value; authorized 24.3 million shares;
issued 8.5 and 11.6 million shares, respectively) 57,805 78,443
Additional paid-in capital 576,054 535,685
Retained earnings 224,908 164,702
Foreign currency translation adjustments (77,007) (42,455)
------------------------------
Total shareholders' equity 841,454 791,665
------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,651,431 $1,687,727
==============================
See Notes to Consolidated Financial Statements
II - 31
56
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Years Ended December 31
-------------------------------------------------
1994 1993 1992
-------------------------------------------------
NET SALES $1,563,250 $1,494,491 $1,511,231
------------------------------------------------
Costs and expenses
Cost of goods sold 1,254,646 1,242,246 1,289,394
Selling and administrative 163,371 161,449 184,792
Interest expense, net 28,780 42,732 49,398
Other (income) expense, net 3,366 (1,007) 9,060
Restructuring - 21,600 -
------------------------------------------------
Total costs and expenses 1,450,163 1,467,020 1,532,644
------------------------------------------------
Pre-tax income (loss) 113,087 27,471 (21,413)
Income taxes 32,451 21,574 15,700
------------------------------------------------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLES 80,636 5,897 (37,113)
Cumulative effect of change in
accounting principles - - (63,531)
------------------------------------------------
NET INCOME (LOSS) $ 80,636 $ 5,897 $ (100,644)
================================================
NET INCOME (LOSS) PER COMMON
EQUITY SHARE BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLES - PRIMARY AND
ASSUMING FULL DILUTION $ 1.18 $ 0.10 $ (0.63)
Cumulative effect of change in
accounting principles - - (1.09)
------------------------------------------------
NET INCOME (LOSS) PER COMMON
EQUITY SHARE - PRIMARY AND
ASSUMING FULL DILUTION $ 1.18 $ 0.10 $ (1.72)
================================================
DIVIDENDS PER COMMON EQUITY SHARE $ 0.30 $ 0.30 $ 0.30
================================================
See Notes to Consolidated Financial Statements
II - 32
57
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Years Ended December 31
---------------------------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------------------------
Amount Shares Amount Shares Amount Shares
COMMON EQUITY INTERESTS
COMMON SHARES
Balance at January 1 $ 55,290 55,290 $ 46,605 46,605 $ 45,683 45,683
Issuance of Common Shares for:
Dividend reinvestment plans 514 514 168 168 664 664
Sale of Common Shares - - 6,750 6,750 - -
Employee stock purchase plan 44 44 45 45 51 51
Exchange of Exchangeable Shares 3,163 3,163 1,286 1,286 26 26
Exercise of stock options 683 683 436 436 181 181
---------------------------------------------------------------------------------
Balance at December 31 $ 59,694 59,694 $ 55,290 55,290 $ 46,605 46,605
=================================================================================
EXCHANGEABLE SHARES
Balance at January 1 $ 78,443 11,596 $ 85,689 12,767 $ 72,384 10,976
Issuance of Exchangeable
Shares for:
Dividend reinvestment plans 511 26 1,027 64 975 66
Employee stock purchase plan 234 35 257 38 419 51
Sale of Exchangeable Shares - - - - 12,086 1,700
Exchange of Exchangeable Shares (21,383) (3,163) (8,667) (1,286) (175) (26)
Exercise of stock options - - 137 13 - -
---------------------------------------------------------------------------------
Balance at December 31 $ 57,805 8,494 $ 78,443 11,596 $ 85,689 12,767
=================================================================================
ADDITIONAL PAID-IN CAPITAL
Balance at January 1 $535,685 $408,338 $383,559
Issuance of Common and/or
Exchangeable Shares for:
Dividend reinvestment plans 9,313 2,877 8,279
Sale of Common Shares - 110,869 -
Employee stock purchase plan 1,475 1,073 1,187
Sale of Exchangeable Shares - - 13,648
Exchange of Exchangeable Shares 18,220 7,381 148
Exercise of stock options 11,361 5,147 1,517
---------------------------------------------------------------------------------
Balance at December 31 $576,054 $535,685 $408,338
=================================================================================
RETAINED EARNINGS
Balance at January 1 $164,702 $177,195 $295,445
Net income (loss) 80,636 5,897 (100,644)
Dividends-common equity interests (20,430) (18,390) (17,606)
---------------------------------------------------------------------------------
Balance at December 31 $224,908 $164,702 $177,195
=================================================================================
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Balance at January 1 $(42,455) $(17,897) $ 44,873
Translation adjustments (34,552) (24,558) (62,770)
---------------------------------------------------------------------------------
Balance at December 31 $(77,007) $(42,455) $(17,897)
=================================================================================
TOTAL SHAREHOLDERS' EQUITY $841,454 $791,665 $699,930
=================================================================================
See Notes to Consolidated Financial Statements
II - 33
58
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31
--------------------------------------------------
1994 1993 1992
--------------------------------------------------
CASH FLOWS FROM OPERATIONS
Net income (loss) $ 80,636 $ 5,897 $(100,644)
Adjustments to reconcile net
income (loss) to net cash
provided by operations:
Depreciation, depletion,
and amortization 103,586 114,970 125,198
Provision for bad debts 5,941 5,735 6,371
Deferred income taxes (21,967) (5,676) (8,729)
Gain on sale of assets (17,797) (16,995) (10,934)
Cumulative effect of change
in accounting principles - - 63,531
Restructuring (13,596) 21,600 -
Other noncash charges and credits, net (1,943) 757 3,456
Net change in operating working
capital (see below)* 13,113 28,584 (1,580)
-------------------------------------------------
NET CASH PROVIDED BY OPERATIONS 147,973 154,872 76,669
-------------------------------------------------
CASH FLOWS FROM INVESTING
Capital expenditures (95,415) (58,427) (54,939)
Acquisitions (4,739) (15,203) (4,338)
Short-term investments (50,500) - -
Proceeds from property, plant
and equipment dispositions 157,945 68,940 25,140
Other 11,400 3,933 (3,417)
-------------------------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTING 18,691 (757) (37,554)
-------------------------------------------------
CASH FLOWS FROM FINANCING
Additional long-term borrowings - 23,000 77,519
Repayment of long-term debt (78,983) (257,834) (113,781)
Issuance of equity securities, net 13,797 124,713 29,088
Dividends, net of reinvestments (10,092) (14,317) (7,688)
-------------------------------------------------
NET CASH CONSUMED BY FINANCING (75,278) (124,438) (14,862)
-------------------------------------------------
Effect of exchange rate changes (7,623) (5,041) (12,350)
-------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 83,763 24,636 11,903
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE YEAR 109,294 84,658 72,755
-------------------------------------------------
CASH AND CASH EQUIVALENTS AT THE END
OF THE YEAR $ 193,057 $ 109,294 $ 84,658
=================================================
*ANALYSIS OF CHANGES IN WORKING
CAPITAL ITEMS
Receivables, net $ (30,540) $ (20,166) $ (16,548)
Inventories (4,021) 32,841 10,186
Other current assets (5,294) (1,912) (4,081)
Accounts payable and accrued liabilities 40,753 16,798 (10,425)
Income taxes payable 12,215 1,023 19,288
-------------------------------------------------
NET CHANGE IN OPERATING WORKING CAPITAL $ 13,113 $ 28,584 $ (1,580)
=================================================
See Notes to Consolidated Financial Statements
II - 34
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Together with its subsidiaries, Lafarge Corporation ("the Registrant"), a
Maryland corporation, is engaged in the production and sale of cement,
ready-mixed concrete, aggregates and other concrete products. The Registrant
operates in the U.S. and its major operating subsidiary, Lafarge Canada Inc.
("LCI"), operates in Canada. The Registrant's wholly-owned subsidiary, Systech
Environmental Corporation is involved in the conversion of waste into fuels for
use in cement kilns. Lafarge Coppee S.A., a French corporation, and certain of
its affiliates ("Lafarge Coppee") own a majority of the voting securities of
the Registrant.
ACCOUNTING AND FINANCIAL REPORTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Registrant
and all of its majority-owned subsidiaries (the "Registrant"), after the
elimination of intercompany transactions and balances. Investments in
affiliates in which the Registrant has less than a majority ownership are
accounted for by the equity method. Certain reclassifications have been made
to the prior-year financial statements to conform to the 1994 presentation.
Foreign Currency Translation
Assets and liabilities of LCI are translated at the exchange rate prevailing at
the balance sheet date. Revenue and expense accounts for this subsidiary are
translated using the average exchange rate during the period. Foreign currency
translation adjustments are disclosed as a separate item in shareholders'
equity.
Revenue Recognition
Revenue from the sale of cement, concrete products and aggregates is recorded
at the time the products are shipped. Revenue from waste recovery and disposal
is recorded at the time the material is received, tested and accepted. Revenue
from road construction contracts is recognized on the basis of units of work
completed, while revenue from other indivisible lump sum contracts is
recognized using the percentage-of-completion method.
Derivative Financial Instruments
The Registrant utilizes derivative financial instruments ("Derivatives") in
order to hedge the impact of adverse changes in interest rates. These
Derivatives are not held or issued for trading purposes.
The Registrant is a party to several interest rate swap contracts ("Interest
Swaps") requiring the Registrant to make a fixed interest rate payment and to
receive a floating interest rate payment from a commercial bank. These
Interest Swaps were transacted in order to hedge a portion of the Registrant's
floating interest rate borrowings from significant increases
II - 35
60
in interest rates. The net difference in interest payments is accrued as
interest rates change and is recognized over the life of the Interest Swap as a
component in the "Interest expense, net" caption in the Consolidated Statements
of Income. To the extent that the notional amount of Interest Swaps exceeds
the current or projected floating interest rate debt levels, the Registrant
records these excess Interest Swaps at market value with the impact included in
the "Other (income) expense, net" caption in the Consolidated Statements of
Income. Any realized loss resulting from the termination of Interest Swaps,
which would have continued to hedge current and projected debt levels, is
amortized over the original Interest Swap term. See the "Long-Term Debt"
footnote for more information on Interest Swaps.
Change in Accounting Principles
Effective January 1, 1992 the Registrant adopted Statements of Financial
Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions," and No. 109, "Accounting for
Income Taxes." The cumulative effect of these changes in accounting principles
of $63.5 million (after-tax) was recorded as a charge to expense in 1992.
Other Postretirement Benefits
SFAS No. 106 requires that the expected cost of retiree health care and life
insurance benefits be charged to expense during the years that the employees
render service rather than the Registrant's practice, prior to 1992, of
recognizing these costs on a cash basis. The January 1, 1992 noncash
cumulative charge for the adoption of this standard was $86.1 million, or $1.47
per share, after income taxes of $24.9 million. This charge represents the
discounted present value of expected future benefits attributed to employees'
service rendered prior to January 1, 1992. The adoption of this accounting
principle also reduced 1992 pre-tax income by approximately $6.0 million. The
amount of claims paid for these benefits was approximately $6.3 million, $7.2
million, and $5.5 million during 1994, 1993, and 1992, respectively.
Income Taxes
SFAS No. 109 utilizes the liability method of accounting for income taxes.
Under the liability method, deferred income taxes reflect the tax consequences
of "temporary differences" between the amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by tax law. Under
this standard, the effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. The
January 1, 1992 noncash cumulative credit recognized as income for the adoption
of this standard was $22.6 million, or $.39 per share. The adoption of SFAS
No. 109 reduced 1992 pre-tax income from continuing operations by $3.4 million.
II - 36
61
Other Postemployment Benefits
Effective January 1, 1994 the Registrant adopted SFAS No. 112, "Accounting for
Other Postemployment Benefits." SFAS No. 112 requires the accrual of the
estimated cost of benefits provided to former or inactive employees after
employment but before retirement. These benefits include long-term disability,
temporary disability income, medical coverage continuation and COBRA medical
coverage continuation. The noncash cumulative charge for the adoption of this
standard was charged to other expense and was not material to the Registrant's
financial position and operating results.
Cash Equivalents
The Registrant considers liquid investments purchased with an original maturity
at date of purchase of three months or less to be cash equivalents. Because of
the short maturity of these investments, their carrying amount approximates
fair value.
Short-Term Investments
Short-term investments consist primarily of commercial paper with original
maturities at date of purchase beyond three months and less than twelve months.
Such short-term investments are carried at cost, which approximates fair value,
due to the short period of time to maturity.
Inventories
Inventories are valued at lower of cost or market. The majority of the
Registrant's U.S. inventories, other than maintenance and operating supplies,
are stated at last-in, first-out ("LIFO") cost and all other inventories are
valued at average cost.
Property, Plant and Equipment
Depreciation of property, plant and equipment is computed for financial
reporting purposes using the straight-line method over the estimated useful
lives of the assets. These lives range from three years on light mobile
equipment to forty years on certain buildings. Land and mineral deposits
include depletable raw material reserves on which depletion is recorded using
the units-of- production method.
During 1994, the Registrant completed a review of the estimated useful lives of
its cement plants. As a result, the Registrant extended the estimated useful
lives of certain plants effective July 1, 1994. The effect of this change in
estimate reduced depreciation expense and increased pre-tax income for the year
ended December 31, 1994 by approximately $2.6 million.
Excess of Cost Over Net Assets of Businesses Acquired
The excess of cost over fair value of net assets of businesses acquired is
amortized using the straight-line method over periods not exceeding 40
II - 37
62
years. The amortization recorded for 1994, 1993 and 1992 was $4.0 million, $4.3
million and $5.4 million, respectively. Accumulated amortization at December
31, 1994 and 1993 was $35.2 million and $38.2 million, respectively.
Research and Development
The Registrant is committed to improving its manufacturing process, maintaining
product quality and meeting existing and future customer needs. These
objectives are pursued through various programs. Research and development
costs, which are charged to expense as incurred, were $5.5 million, $6.2
million, and $6.3 million for 1994, 1993, and 1992, respectively.
Interest
Interest of $.7 million was capitalized during 1994. No interest was
capitalized during 1993 or 1992. Interest income of $9.4 million, $5.3
million, and $4.5 million, has been applied against interest expense for 1994,
1993, and 1992, respectively.
Net Income Per Common Equity Share
The calculation of net income per common equity share is based on the weighted
average number of the Registrant's Common Shares and the Exchangeable
Preference Shares of LCI ("Exchangeable Shares") outstanding in each period and
the assumed exercise of stock options. The weighted average number of shares
and share equivalents outstanding was (in thousands) 68,254, 61,636, and 58,652
in 1994, 1993 and 1992, respectively. The computation of fully diluted
earnings per share was antidilutive in 1994, 1993 and 1992.
RESTRUCTURING
In the fourth quarter of 1993, the Registrant recorded a one-time pre-tax
restructuring charge of $21.6 million ($16.4 million net of tax benefits, or
$.27 per share) to cover the direct costs of restructuring the Registrant's
North American business units to increase organizational efficiency. The
primary components of the restructuring charge were separation benefits for
approximately 350 employees (238 employees separated in 1994), employee
relocation costs and early retirement benefits for eligible employees electing
early retirement. The charge also included office relocation and lease
termination.
During 1994, the Registrant spent $14.7 million (includes $1.1 million of
exchange rate impact) on the restructuring and anticipates that the remaining
accrual of $6.9 million will substantially be spent in 1995 as the Construction
Materials Group completes most of its restructuring.
The restructuring plan entailed the consolidation of 11 regional operating
units into six units in the Registrant's two main business lines. This
II - 38
63
consolidation reduced management layers, eliminated duplicative administrative
functions and standardized procedures and information systems. Manufacturing
and distribution facilities were not materially affected by the restructuring.
RECEIVABLES
Receivables consist of the following (in thousands):
December 31
-------------------------------
1994 1993
-------------------------------
Trade and note receivables $ 276,310 $ 269,600
Retainage on long-term contracts 9,130 7,679
Allowances (28,347) (24,072)
-------------------------------
Total receivables, net $ 257,093 $ 253,207
===============================
INVENTORIES
Inventories consist of the following (in thousands):
December 31
---------------------------------
1994 1993
---------------------------------
Finished products $ 82,324 $ 89,700
Work in process 8,427 10,681
Raw materials and fuel 45,291 39,668
Maintenance and operating supplies 39,391 46,033
--------------------------------
Total inventories $ 175,433 $ 186,082
================================
Included in the finished products, work in process and raw materials and fuel
categories are inventories valued using the LIFO method of $56.4 million and
$54.8 million at December 31, 1994 and 1993, respectively. If these inventories
were valued using the average cost method, such inventories would have
decreased by $9.1 million and $7.5 million, respectively.
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64
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
December 31
--------------------------------
1994 1993
--------------------------------
Land and mineral deposits $ 168,552 $ 194,265
Buildings, machinery and equipment 1,434,320 1,650,884
Construction in progress 54,627 21,434
--------------------------------
Property, plant and equipment,
at cost 1,657,499 1,866,583
Less accumulated depreciation and
depletion (905,619) (985,859)
--------------------------------
Total property, plant and equipment, net $ 751,880 $ 880,724
================================
OTHER ASSETS
Other assets consist of the following (in thousands):
December 31
----------------------------------
1994 1993
----------------------------------
Long-term receivables $ 18,334 $ 23,896
Investments in unconsolidated
companies 36,807 37,688
Prepaid pension asset 75,294 70,502
Property held for sale 22,409 26,235
Other 17,646 23,802
---------------------------------
Total other assets $ 170,490 $ 182,123
=================================
Property held for sale represents certain permanently closed cement plants and
land that are carried at the lower of cost or estimated net realizable value.
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65
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (in
thousands):
December 31
--------------------------------
1994 1993
--------------------------------
Trade accounts payable $ 67,166 $ 73,164
Accrued payroll expense 36,567 36,558
Accrued interest expense 4,996 5,375
Restructuring 6,902 21,600
Bank overdrafts 25,532 7,946
Other accrued expenses 106,215 81,942
--------------------------------
Total accounts payable and
accrued liabilities $ 247,378 $ 226,585
================================
LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
December 31
-----------------------------
1994 1993
-----------------------------
Medium-term notes maturing in various amounts
between 1995 and 2006, bearing interest at
fixed rates which range from 9.1 percent to
9.8 percent $ 176,000 $ 215,000
7% Convertible Debentures maturing in 2013,
convertible into Common Shares at a conversion
price of $22.125 per share, with sinking fund
requirements beginning in 1999 100,000 100,000
Long-term bank loan retired in 1994 - 20,000
Tax-exempt bonds maturing in various amounts
between 1995 and 2011, bearing interest at
floating rates which range from 5.1 percent
to 6.8 percent 30,517 37,400
Other 1,964 15,203
-----------------------------
Subtotal 308,481 387,603
Less current portion (17,813) (14,373)
-----------------------------
Total long-term debt $ 290,668 $ 373,230
=============================
II - 41
66
The fair value of current and long-term debt at December 31, 1994 was
approximately $315.4 million compared with $308.5 million included in the
Consolidated Balance Sheet. This fair value was estimated based upon quoted
market prices or current interest rates offered to the Registrant for debt of
the same maturity. The Registrant does not generally refinance its debt
obligations prior to maturity.
Annual principal payment requirements on long-term debt for each of the five
years in the period ending December 31, 1999 are as follows (in millions):
1995 1996 1997 1998 1999 Thereafter
--------------------------------------------------
Repayments $17.8 $20.7 $16.7 $29.7 $28.6 $195.0
--------------------------------------------------
Effective September 1, 1994, the Registrant cancelled its existing revolving
credit facility and established similar, bilateral revolving credit facilities
with nine institutions for total commitments of $150 million, extending through
August 31, 1999 at favorable terms compared with the previous facility. At the
end of 1994, no amounts were outstanding under the revolving credit facilities.
The Registrant is required to pay annual commitment fees of 0.15 percent of the
total amount of the facilities. The revolving credit facilities are at market
conditions.
The Registrant's debt agreements require the maintenance of certain financial
ratios relating to fixed charge coverage and leverage. At December 31, 1994,
the Registrant was in compliance with these requirements.
As described in the "Accounting and Financial Reporting Policies" footnote, the
Registrant is a party to $75 million (notional amount) of Interest Swaps, which
require the Registrant to pay an average fixed rate of 8.5 percent in exchange
for floating rate receipts for which the average interest rate was 6.2 percent
at December 31, 1994. These Interest Swaps are currently active except for a
$20 million Interest Swap that is inactive until the period from March 1996 to
September 2000. The Registrant's Interest Swaps mature from 1998 to 2000 by
$20 million, $25 million and $30 million, respectively.
The differences in swapped interest rates are paid every three to six months
pursuant to the Interest Swap contracts. The Registrant is exposed to credit
loss in the event of nonperformance by the other parties to the interest rate
swap agreements but does not anticipate nonperformance by such parties. The
net payments under the Interest Swaps are dependent on the level of floating
interest rates (LIBOR and commercial paper).
Because the Registrant repaid its liquid, floating interest rate borrowings
with the significant cash inflows generated during 1994, a portion of the
notional amount of the Registrant's Interest Swaps exceeds the current and
projected floating interest rate debt levels. Consequently, several Interest
Swaps were terminated at a cost of $1.8 million and a mark-to-market provision
of $0.5 million has been provided at December 31, 1994 for several of the
active Interest Swaps relative to periods when interest rate
II - 42
67
swap positions exceed associated borrowings. The mark-to-market provision and
the recorded Interest Swap termination costs are included in the "Other
(income) expense, net" caption of the Consolidated Statements of Income. Based
on interest rates at December 31, 1994, the net termination cost for the
Registrant to unwind all of its remaining interest-related Derivatives was
approximately $2.1 million which included approximately $0.5 million of
previously accrued amounts.
OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following (in thousands):
December 31
-----------------------------
1994 1993
-----------------------------
Deferred income taxes $ 68,326 $ 101,395
Minority interests 10,206 13,906
Accrued postretirement benefit cost 120,591 120,676
Accrued pension liability 13,037 14,009
Other 2,344 3,042
----------------------------
Total other long-term liabilities $ 214,504 $ 253,028
============================
COMMON EQUITY INTERESTS
Holders of Exchangeable Shares have voting, dividend and liquidation rights
that parallel those of holders of the Registrant's Common Shares. The
Exchangeable Shares are exchangeable into the Registrant's Common Shares on a
one-for-one basis. Dividends on the Exchangeable Shares are cumulative and
payable at the same time as any dividends declared on the Registrant's Common
Shares. The Registrant has agreed not to pay dividends on its Common Shares
without causing LCI to declare an equivalent dividend in Canadian dollars on
the Exchangeable Shares. Dividend payments and the exchange rate on the
Exchangeable Shares are subject to adjustment from time to time to take into
account certain dilutive events.
At December 31, 1994 the Registrant had reserved for issuance approximately
10.2 million Common Shares to allow for the exchange of outstanding
Exchangeable Shares. Additional common equity shares are reserved to cover
grants under the Registrant's stock option program (2.5 million), employee
stock purchase plan (.7 million), conversion of the Convertible Debentures (4.5
million) and issuances pursuant to the Registrant's optional stock dividend
plan (.1 million).
In February 1992, the Registrant sold 1.7 million Exchangeable Shares that it
had accumulated through exchange transactions for net proceeds of $25.8
million.
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68
On October 13, 1993, the Registrant sold 6.75 million Common Shares for $18.25
per share with net proceeds of $117.6 million. Lafarge Coppee, the
Registrant's majority shareholder, purchased 1.0 million of these shares.
OPTIONAL STOCK DIVIDEND PLAN
The Registrant has an optional stock dividend plan that permits holders of
record of common equity shares to elect to receive new common equity shares
issued as stock dividends in lieu of cash dividends on such shares. The common
equity shares are issued under the plan at 95 percent of the average market
price, as defined in the plan.
STOCK OPTION AND PURCHASE PLANS
Options to purchase the Registrant's Common Shares have been granted to key
employees of the Registrant at option prices based on the market price of the
securities at the date of grant. One-fourth of the options granted are
exercisable at the end of each year following the date of grant. The options
expire ten years from the date of grant.
The following table summarizes activity for options related to the Registrant's
common equity interests:
Years Ended December 31
------------------------------------------------------------------------------------
1994 1993 1992
------------------------ --------------------------- ----------------------
Average Average Average
Option Option Option
Shares Price Shares Price Shares Price
------------------------ -------------------------- ----------------------
Balance outstanding
at beginning
of year 2,449,228 $14.79 2,566,828 $14.23 2,407,578 $13.82
Options granted 467,000 24.13 437,500 15.75 526,500 14.28
Options exercised (684,633) 13.88 (503,725) 12.71 (262,000) 9.99
Options cancelled (77,875) 15.77 (51,375) 15.43 (105,250) 15.73
----------------------- -------------------------- ----------------------
Balance outstanding
at end of year 2,153,720 $17.06 2,449,228 $14.79 2,566,828 $14.23
----------------------- -------------------------- ----------------------
Options excerci-
able at end
of year 1,081,720 1,356,853 1,459,428
======================= ========================== ======================
The Registrant has an Employee Stock Purchase Plan that permits substantially
all employees to purchase the Registrant's common equity interests through
payroll deductions at 90 percent of the lower of the beginning or end of plan
year market prices. In 1994, 79,319 shares were issued to employees under the
plan at a share price of $15.19 and in 1993, 83,517 shares were issued at a
share price of $15.08. At December 31, 1994
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69
and 1993, $.7 million and $.7 million were subscribed for future share
purchases, respectively.
INCOME TAXES
Pre-tax income (loss) is summarized by country in the following table (in
thousands):
Years Ended December 31
------------------------------------------------
1994 1993 1992
------------------------------------------------
United States $ 56,691 $(10,622) $(55,832)
Canada 56,396 38,093 34,419
------------------------------------------------
Pre-tax income (loss) $113,087 $ 27,471 $(21,413)
================================================
The provision for income taxes includes the following components (in
thousands):
Years Ended December 31
------------------------------------------------
1994 1993 1992
------------------------------------------------
Current
United States $ 21,600 $ 1,400 $ 1,000
Canada 32,818 25,850 23,429
-----------------------------------------------
Total current 54,418 27,250 24,429
-----------------------------------------------
Deferred
United States (15,600) 2,600 -
Canada (6,367) (8,276) (8,729)
-----------------------------------------------
Total deferred (21,967) (5,676) (8,729)
-----------------------------------------------
Total income taxes $ 32,451 $ 21,574 $ 15,700
===============================================
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70
A reconciliation of taxes at the U.S. federal income tax rate to the
Registrant's actual income taxes is as follows (in millions):
Years Ended December 31
------------------------------------------------
1994 1993 1992
------------------------------------------------
Taxes at the U.S. federal
income tax rate $ 39.6 $ 9.6 $ (7.3)
U.S./Canadian tax rate
differential 1.7 1.2 1.4
Canadian tax incentives (3.2) (1.9) (1.7)
State and Canadian
provincial income taxes,
net of federal benefit 5.9 3.3 2.7
Tax effect of certain operating
losses and other tax credits,
primarily U.S. (21.8) (1.9) 20.3
Other items 10.3 11.3 0.3
-----------------------------------------------
Provision for income taxes $ 32.5 $ 21.6 $ 15.7
===============================================
Effective January 1, 1992 the Registrant adopted SFAS No. 109 "Accounting for
Income Taxes." The cumulative effect of this accounting change is reported in
the Consolidated Statements of Income.
Deferred income taxes reflect the tax consequences of "temporary differences"
between the amounts of assets and liabilities for financial reporting purposes
and such amounts as measured by tax law. These temporary differences are
determined in accordance with SFAS No. 109.
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71
Temporary differences and carryforwards which give rise to deferred tax assets
and liabilities are as follows (in thousands):
December 31
-----------------------------
1994 1993
-----------------------------
Deferred Tax Assets:
Reserves and other liabilities $ 50,419 $ 53,293
Other postretirement benefits 47,322 46,596
Tax loss carryforwards 6,857 42,204
Other credit carryforwards 13,970 4,422
-----------------------------
Gross deferred tax assets 118,568 146,515
Valuation allowance (46,276) (68,121)
-----------------------------
Net deferred tax assets 72,292 78,394
-----------------------------
Deferred Tax Liabilities:
Property, plant and equipment 91,913 122,605
Prepaid pension asset 22,615 22,013
Other 8,578 9,267
-----------------------------
Gross deferred tax liabilities 123,106 153,885
-----------------------------
Net deferred tax liability 50,814 75,491
Net deferred tax asset-current 17,512 25,904
-----------------------------
Net deferred tax liability-noncurrent $ 68,326 $101,395
=============================
A valuation allowance is provided to reduce the deferred tax assets to a level
which, more likely than not under the rules in SFAS No. 109, will be realized.
During 1994 and 1993, the net decrease in the valuation allowance was $21.8
million and $1.9 million, respectively, with the 1994 change resulting
primarily from the realization of net operating loss carryforwards and
investment tax credits for which a valuation allowance had previously been
provided.
At December 31, 1994, the Registrant had net tax operating loss and other tax
credit carryforwards of $17.8 million and $14.0 million, respectively. The net
operating loss carryforwards are limited to use in varying annual amounts
through 2006. The tax credit carryforwards are primarily alternative minimum
tax credits that have no expiration date.
At December 31, 1994, cumulative undistributed earnings of LCI were $573.0
million. No provision for U.S. income taxes or Canadian withholding taxes has
been made since the Registrant considers the undistributed earnings to be
permanently invested in Canada. The Registrant's management has decided that
the determination of the amount of any unrecognized deferred tax liability for
the cumulative undistributed earnings of LCI is impracticable
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72
since it would depend upon a number of factors that cannot be known until such
time as a decision to repatriate the earnings might be made.
The Registrant's U.S. federal tax liability has not been finalized by the
Internal Revenue Service for any year subsequent to 1983 due to the existence
of tax net operating loss and credit carryforwards into 1994. The Registrant's
Canadian federal tax liability for all taxation years through 1989 has been
reviewed and finalized by Revenue Canada Taxation except for certain
transactions for the tax years 1984 through 1993 that are currently being
reviewed.
SEGMENT INFORMATION
The Registrant's single business segment includes the manufacture and sale of
cement and ready-mixed concrete, precast and prestressed concrete components,
concrete block and pipe, aggregates, asphalt and reinforcing steel. In
addition, the Registrant is engaged in road building and other construction
utilizing many of its own products, and in waste recovery and disposal
utilizing industrial waste as supplemental fuels and raw materials in cement
kilns.
Sales between the United States and Canada are accounted for at fair market
value. Income from operations equals net sales plus other income less cost of
goods sold, selling and administrative expenses and, in 1993, restructuring
charges. It excludes interest expense and income taxes. Financial information
by country is as follows (in millions):
Years Ended December 31
---------------------------------------------
1994 1993 1992
---------------------------------------------
Net Sales
Canada $ 666.8 $ 640.5 $ 670.0
United States 896.5 854.0 841.2
---------------------------------------------
Total net sales $1,563.3 $1,494.5 $1,511.2
=============================================
Income (Loss) from Operations
Canada $ 49.9 $ 36.7 $ 33.5
United States 92.0 33.5 (5.5)
---------------------------------------------
Total income from operations $ 141.9 $ 70.2 $ 28.0
=============================================
Identifiable Assets
Canada $ 791.3 $ 801.0 $ 799.3
United States 860.1 886.7 968.1
---------------------------------------------
Total identifiable assets $1,651.4 $1,687.7 $1,767.4
=============================================
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73
SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities included the issuance of 540,000,
232,000 and 730,000 common equity shares upon the reinvestment of dividends
totalling $10.3, $4.1, and $9.9 million in 1994, 1993 and 1992, respectively.
Cash paid during the year for interest and income taxes is as follows (in
thousands):
Years Ended December 31
-----------------------------------------------
1994 1993 1992
-----------------------------------------------
Interest $ 29,159 $ 44,553 $ 49,934
Income taxes (net of
refunds) $ 41,779 $ 27,177 $ 8,179
==============================================
PENSION PLANS
The Registrant has several defined benefit and defined contribution retirement
plans covering substantially all employees. Benefits paid under the defined
benefit plans are generally based either on years of service and the employee's
compensation over the last few years of employment or years of service
multiplied by a contractual amount. The Registrant's funding policy is to
contribute amounts that are deductible for income tax purposes.
The following table summarizes the consolidated funded status of the
Registrant's defined benefit retirement plans and provides a reconciliation to
the consolidated prepaid pension asset and accrued pension liability recorded
on the Registrant's Consolidated Balance Sheets at December 31, 1994 and 1993
(in millions). For 1994 and 1993, the assumed settlement interest rates were
8.5 and 7.5 percent, respectively, for the Registrant's U.S. plans and 9.0 and
8.0 percent, respectively, for the Canadian plans. For 1994 and 1993, the
assumed rates of increase in future compensation levels used in determining the
actuarial present values of the projected benefit obligations in both countries
were 5.0 and 4.5 percent, respectively. The expected long-term rate of
investment return on pension assets, which includes listed stocks, fixed income
securities and real estate, for each country was 9.0 percent for each year
presented.
II - 49
74
December 31, 1994 December 31, 1993
----------------------------------------------------------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
----------------------------------------------------------------------------------
Actuarial present
value of:
Vested benefit
obligations $253.3 $21.9 $ 273.4 $29.0
Accumulated benefit
obligations 256.6 25.1 278.2 32.3
==================================================================================
Projected benefit obli-
gation for service
rendered to date $285.5 $28.5 $312.8 $ 38.2
Market value of plan
assets 360.8 14.1 375.5 17.5
----------------------------------------------------------------------------------
Plan assets in excess
of (less than) pro-
jected benefit
obligations 75.3 (14.4) 62.7 (20.7)
Unrecognized net gain
(loss) due to past
experience different
from assumptions made
and amortized over
the average future
working lifetime
of those expected to
receive benefits 12.0 (0.4) 23.6 4.3
Unrecognized net assets
(obligations) at
transition to
SFAS No. 87 (12.0) 1.8 (15.8) 2.4
----------------------------------------------------------------------------------
Prepaid pension asset
(accrued pension
liability) $75.3 $(13.0) $ 70.5 $ (14.0)
==================================================================================
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75
Net retirement cost for the years indicated includes the following components
(in millions):
Years Ended December 31
-----------------------------------------------
1994 1993 1992
-----------------------------------------------
Service cost of benefits
earned during the period $11.2 $ 10.5 $ 10.4
Interest cost on projected
benefit obligation 26.1 26.2 26.6
Actual gain on plan assets (7.5) (31.7) (24.6)
Net amortization and deferral (26.8) (3.5) (11.9)
-----------------------------------------------
Total defined benefit plans cost 3.0 1.5 0.5
Defined contribution plans cost 4.2 4.4 4.7
-----------------------------------------------
Net retirement cost $7.2 $ 5.9 $ 5.2
===============================================
Certain employees are also covered under multi-employer pension plans
administered by unions. Amounts included in the preceding table as defined
benefit plans retirement cost and contributions to such plans were $3.4
million, $3.5 million and $3.5 million for 1994, 1993 and 1992, respectively.
The data available from administrators of the multi-employer plans are not
sufficient to determine the accumulated benefit obligation, nor the net assets
attributable to the multi-employer plans in which Registrant employees
participate.
The defined contribution plans costs in the preceding table relate to thrift
savings plans for all eligible U.S. and Canadian employees. Under the
provisions of the plans, the Registrant will match a portion of each
participant's contribution and, through June 30, 1994 for all eligible U.S.
employees, contributed an amount proportionate to each participant's salary.
OTHER POSTRETIREMENT BENEFITS
Effective January 1, 1992 the Registrant adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions." The cumulative
effect of this accounting change is reported in the Consolidated Statements of
Income.
The Registrant provides certain retiree health and life insurance benefits to
eligible employees who retire in the U.S. or Canada. Salaried participants
generally become eligible for retiree health care benefits when they retire
from active service at age 55 or later, although there are some variances by
plan or unit in Canada and the U.S. Benefits, eligibility and cost-sharing
provisions for hourly employees vary by location and/or bargaining unit.
Generally, the health plans pay a stated percentage of most medical/dental
expenses reduced for any deductible, co-payment and
II - 51
76
payments made by government programs and other group coverage. These plans are
unfunded. An eligible retiree's health care benefit coverage is coordinated in
Canada with Provincial Health and Insurance Plans and in the U.S., after
attaining age 65, with Medicare. Certain retired employees of businesses
acquired by the Registrant are covered under other care plans that differ from
current plans in coverage, deductibles and retiree contributions.
In the U.S., salaried retirees and dependents under age 65 have a $1,000,000
health care lifetime maximum benefit. At age 65 or over, the maximum is
$50,000. Lifetime maximums for hourly retirees are governed by the location
and/or bargaining agreement in effect at the time of retirement. In Canada,
some units have maximums, but in most cases there are no lifetime maximums. In
some units in Canada, spouses of retirees have lifetime medical coverage.
In Canada, both salaried and nonsalaried employees are generally eligible for
life insurance benefits. In the U.S., life insurance is provided for a number
of hourly retirees as stipulated in their hourly bargained agreements, but not
for salaried retirees except those of certain acquired companies.
The following table sets forth the plans' combined status reconciled with the
accrued postretirement benefit cost included in the Registrant's Consolidated
Balance Sheets (in thousands):
December 31
-------------------------------
1994 1993
-------------------------------
Accumulated Postretirement
Benefit Obligation
Retirees $ 69,212 $ 79,854
Fully eligible active
participants 13,601 19,657
Other active participants 17,148 26,675
------------------------------
Total accumulated post-
retirement benefit obligation 99,961 126,186
Unrecognized net gain (loss) 15,776 (5,510)
Unrecognized prior service cost 4,854 -
------------------------------
Accrued postretirement benefit cost $120,591 $120,676
==============================
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77
Net periodic postretirement benefit cost includes the following components (in
thousands):
Years Ended December 31
---------------------------------------------
1994 1993 1992
---------------------------------------------
Service cost of benefits
earned during the period $ 1,687 $ 2,517 $ 2,756
Interest cost on accumulated post-
retirement benefit obligation 8,040 9,296 8,740
Net amortization (492) - -
----------------------------------------------
Net periodic postretirement
benefit cost $ 9,235 $11,813 $11,496
==============================================
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation differs between U.S. and Canadian plans. For
plans in both the U.S. and Canada, the pre-65 assumed rate was 12.8 percent
decreasing to 5.5 percent over 13 years. For post-65 retirees in the U.S., the
assumed rate was 8.5 percent decreasing to 5.5 percent over 13 years with a
Medicare assumed rate for the same group of 7.7 percent decreasing to 5.5
percent over 13 years. For post-65 retirees in Canada, the assumed rate was
11.1 percent decreasing to 5.5 percent over 13 years. If the health care cost
trend rate assumptions were increased by 1 percent, the accumulated
postretirement benefit obligation as of December 31, 1994 would be increased by
7.7 percent. The effect of this change on the net periodic postretirement
benefit cost for 1994 would be an increase of 11.4 percent.
For 1994 and 1993, the weighted average discount rates used in determining the
accumulated postretirement benefit obligations were 8.5 and 7.5 percent,
respectively, for U.S. plans and 9.0 and 8.0 percent, respectively, for
Canadian plans.
COMMITMENTS AND CONTINGENCIES
The Registrant leases office space and certain equipment. Total rental expenses
for 1994, 1993, and 1992 were $11.8 million, $16.7 million, and $19.3 million,
respectively.
II - 53
78
Future minimum annual rental commitments for all non-cancelable leases are as
follows (in thousands):
1995 $ 8,508
1996 7,804
1997 5,866
1998 5,556
1999 5,548
Thereafter 19,781
--------
Total $ 53,063
========
During 1989 and 1990, CSX Transportation, Inc., Metro-North Commuter Railroad
Company, National Railroad Passenger Corp., Peerless Insurance Company and
Massachusetts Bay Transit Authority (the "Railroads") filed actions against
Lone Star Industries Inc. and affiliates ("Lone Star") for damages resulting
from its fabrication and sale of allegedly defective concrete railroad ties to
the Railroads. The Registrant and LCI have been named in third party actions in
which Lone Star is claiming indemnity for liability to the Railroads, for
damages to its business and for costs and losses suffered as a result of the
Registrant and LCI supplying allegedly defective cement used by Lone Star in
the fabrication of the railroad ties. The damages claimed totalled
approximately $226.5 million. The Registrant denied the allegations and
vigorously defended against the lawsuits (the "Lone Star Case"). During
September and October 1992, Lone Star entered into agreements with all five
plaintiff Railroads settling their claims regarding the Lone Star Case for an
amount totalling approximately $66.7 million. These settlements have been
submitted to and approved by the United States Bankruptcy Court for the
Southern District of New York, which is handling the Lone Star bankruptcy. Lone
Star commenced trial in November 1992 in its third party complaint against the
Registrant and LCI seeking indemnity for the Railroads' claims in addition to
its own claim for business destruction. A jury verdict in this case reached in
December 1992 awarded Lone Star $1.2 million as damages. Both Lone Star and the
Registrant and LCI have appealed the trial court verdict to the United States
Court of Appeals for Fourth Circuit which in April 1994 reversed the verdict,
remanded the case to the district court for retrial on damages and liability
and reinstated Lone Star's claim under Massachusetts Chapter 93A that prohibits
unfair and deceptive trade practice and provides for recovery of double or
treble damages and attorneys' fees. The re-trial of this suit began on October
24, 1994 with Lone Star claiming approximately $88.8 million in damages. On
November 30, 1994 the jury returned a verdict in favor of the Registrant on the
claims of implied warranty, negligence, fraud and indemnification but found in
favor of Lone Star on the claim of breach of express warranty in the amount of
$8.4 million. On December 20, 1994 the Court entered partial summary judgment
in the amount of the verdict plus prejudgment interest of $0.9 million. Lone
Star and the Registrant have filed post trial motions contesting the entry of
judgment and are awaiting advisement by the Court. In addition, the Court has
reserved ruling on Lone Star's Massachusetts Chapter 93A claims. In August 1994
Lone Star commenced a new suit against the Registrant and its affiliate for
damages as a result of conduct which
II - 54
79
parallels that alleged in the Lone Star Case involving approximately 8,000
railroad ties sold to three railroads, a construction company and the U.S. Navy
and claiming an amount not less than $11.2 million plus double or treble
damages under Massachusetts Chapter 93A and attorneys' fees. Because the case
was not filed until August 1994, it was not included in the disposition of the
Lone Star Case. The Registrant has answered the complaint and is vigorously
defending the case.
In late 1990 Nationwide Mutual Insurance Company ("Nationwide"), one of the
Registrant's primary insurers during the period when allegedly defective cement
was supplied to Lone Star by the Registrant, filed a complaint for declaratory
judgment against the Registrant, several of its affiliates and 11 other
liability insurers of the Registrant (the "Coverage Suit"). The complaint
seeks a determination of all insurance coverage issues impacting the Registrant
in the Lone Star Case. The Registrant has answered the complaint,
counter-claimed against Nationwide, cross-claimed against the co-defendant
insurers and filed a third party complaint against 36 additional insurers. In
December 1991, the Registrant and Nationwide entered into a settlement
agreement pursuant to which Nationwide settled its claim in the Coverage Suit
and, among other things, paid the Registrant a portion of past due defense
expenses in the Lone Star Case, promised to pay its proportion of continuing
defense expenses therein and to post the entire remaining aggregate limits of
its policies as reserves to be used in the Lone Star Case, if necessary.
Virtually all of LCI's Canadian insurers involved in the Coverage Suit filed
motions for summary judgment. In January 1993, the court denied all of the
insurers' summary judgment motions. In January 1994 the Registrant filed
motions for partial summary judgment regarding the insurers' defense
obligations and regarding the reasonableness of fees and expenses incurred in
the defense of the Lone Star Case. In addition the Registrant filed a motion
to strike the designation of several expert witnesses of the insurers. In July
1994 the Court granted the Registrant's first motions, holding that all but one
of the Registrant's and its affiliates' primary insurers, including one insurer
whose policies are reinsured by a subsidiary of the Registrant, were liable for
defense expenses. The Court denied the Registrant's motions with respect to the
reasonableness of defense expenses, leaving this for renewal or trial of this
issue, and its motion regarding plaintiffs' experts. The Registrant believes
that it has substantial insurance coverage that will respond to a large portion
of defense expenses and liability, if any, in the Lone Star Case.
Since 1992, a number of owners of buildings located in eastern Ontario, Canada
most of whom are residential homeowners, filed actions in the Ontario Court
(General Division) against Bertrand & Frere Construction Company Limited
("Bertrand") and a number of other defendants seeking damages as a result of
allegedly defective footings, foundations and floors made with ready-mixed
concrete supplied by Bertrand. The largest of these cases involves claims by
approximately 118 plaintiffs complaining about 80 basement foundations
including a 20-unit condominium. Together, these plaintiffs are claiming
approximately Cdn. $51.7 million against Bertrand, each plaintiff seeking Cdn.
$200,000 for costs of repairs and loss of capital value of their respective
home or building, Cdn. $200,000 for
II - 55
80
punitive and exemplary damages and Cdn. $20,000 for hardship, inconvenience and
mental distress, together with interest and costs. Other owners, owning a
total of 23 buildings (of which 21 are residential homes), have instituted
similar suits against Bertrand and, based on the information available at this
time, these claims total approximately Cdn. $10.3 million. As of the end of
January 1995, LCI has been served with third- or fourth-party claims by
Bertrand in most of the referenced lawsuits. Bertrand is seeking indemnity for
its liability to the owners as a result of the supply by LCI of allegedly
defective fly ash. Bertrand has recently amended some and intends to amend all
of its other claims to allege that the cement supplied by LCI is also
defective. LCI has delivered its statements of defense. Discovery has begun but
is not yet completed. LCI has denied liability and is defending the lawsuits
vigorously. The Registrant believes it has substantial insurance coverage that
will respond to defense expenses and liability, if any, in the lawsuits.
The Registrant has been notified by the EPA that it is one of several
potentially responsible parties for clean-up costs at waste disposal sites. The
ultimate costs related to such matters and the Registrant's degree of
responsibility, in some of these matters, is not presently determinable. In
addition, the Registrant is involved in certain other legal actions and claims.
It is the opinion of management that all legal and environmental matters will
be resolved without material effect on the Registrant's consolidated financial
statements.
RELATED PARTY TRANSACTIONS
The Registrant is a participant in agreements with Lafarge Coppee for the
sharing of certain costs incurred for technical, research and managerial
assistance and for the use of certain trademarks. The net expenses accrued for
these services were $4.3 million, $4.8 million, and $5.3 million during 1994,
1993 and 1992, respectively. In addition, the Registrant purchases various
products from Lafarge Coppee. Such purchases totaled $11.7 million, $6.3
million, and $17.1 million in 1994, 1993, and 1992, respectively. All
transactions with Lafarge Coppee were conducted on an arm's length basis.
Lafarge Coppee reinvested a portion of dividends it was entitled to receive on
the Registrant's Common Shares during 1994, 1993, and 1992. These
reinvestments totaled $9.5 million, $3.0 million, and $8.9 million,
respectively.
At year-end, $15 million of the Registrant's 7% Convertible Debentures were
held by Lafarge Coppee.
In 1993, Lafarge Coppee purchased 1.0 million Common Shares as part of the
Registrant's equity offering of 6.75 million Common Shares. The price paid for
these shares was the price to the public. (See Common Equity Interests).
II - 56
81
QUARTERLY DATA (UNAUDITED)
The following table summarizes financial data by quarter for 1994 and 1993 (in
millions, except per share information):
First Second Third Fourth Total
-----------------------------------------------------------------
1994
Net Sales $208 $423 $528 $404 $1,563
Gross profit (loss) (23) 98 144 90 309
Net income (loss) (61) 38 72 32 81
Net income (loss) per
common equity share (a):
Primary (0.92) 0.56 1.06 0.47 1.18
Fully diluted (0.92) 0.55 1.01 0.47 1.18
==================================================================
First Second Third Fourth(b) Total
-----------------------------------------------------------------
1993
Net Sales $ 192 $ 394 $ 510 $ 398 $1,494
Gross profit (loss) (42) 81 129 84 252
Net income (loss) (72) 22 54 2 6
Net income (loss) per
common equity share (a):
Primary (1.23) 0.37 0.90 0.03 0.10
Fully diluted (1.23) 0.37 0.87 0.03 0.10
=================================================================
(a) The sum of these amounts does not equal the annual amount because of
changes in the average number of common equity shares outstanding during
the year.
(b) Net income for the fourth quarter of 1993 includes nonrecurring
restructuring charges of $16.4 million, after tax. Excluding these
charges, earnings per share for the fourth quarter and year were $0.28 and
$0.36, respectively. See Restructuring.
II - 57
82
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
II - 58
83
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The section entitled "Election of Directors" appearing on pages five through
eight of the Registrant's proxy statement for the annual meeting of
stockholders to be held on May 2, 1995 sets forth certain information with
respect to the directors and nominees for election as directors of the
Registrant and is incorporated herein by reference. Certain information with
respect to persons who are or may be deemed to be executive officers of the
Registrant is set forth under the caption "Executive Officers of the
Registrant" in Part I of this Annual Report. Information with respect to
directors' and officers' compliance with Section 16(a) of the Securities
Exchange Act of 1934 is set forth in the section entitled "Executive
Compensation - Compliance with Section 16(a) of the Exchange Act" on page 19 of
the Registrant's proxy statement referred to above.
III - 1
84
Item 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" appearing on pages eight through
19 of the Registrant's proxy statement for the annual meeting of stockholders
to be held on May 2, 1995 sets forth certain information with respect to the
compensation of management of the Registrant, and is incorporated herein by
reference.
III - 2
85
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The sections entitled "Voting Securities", "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" appearing on pages
one through five and "Election of Directors" appearing on pages five through
eight of the Registrant's proxy statement for the annual meeting of
stockholders to be held on May 2, 1995 set forth certain information with
respect to the ownership of the Registrant's voting securities, and are
incorporated herein by reference.
III - 3
86
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The sections entitled "Executive Compensation - Indebtedness of Management" and
"Executive Compensation - Transactions with Management and Others" appearing on
pages 18 and 19 of the Registrant's proxy statement for the annual meeting of
stockholders to be held on May 2, 1995 set forth certain information with
respect to relations of and transactions by management of the Registrant, and
are incorporated herein by reference.
III - 4
87
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements
Consolidated Financial Statements filed as part of
this Form 10-K are listed under Part II, Item 8 of
this Form 10-K.
2. Financial Statement Schedule
Page Number
-----------
Consolidated Supporting Schedule
II - Valuation and Qualifying Accounts IV-8
Schedules I, III, IV and V have been omitted because they are not
applicable.
IV - 1
88
3. Exhibits
3.1 Articles of Amendment and Restatement of the Registrant, filed May 29, 1992 [incorporated by reference
to Exhibit 3.1 to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended
December 31, 1992].
3.2 By-Laws of the Registrant, (as most recently amended on July 29, 1994).
4.1 Form of Indenture dated as of October 1, 1989 between the Registrant and Citibank, N.A., as Trustee,
relating to $250 million of debt securities of the Registrant [incorporated by reference to Exhibit 4.1
to the Registration Statement on Form S-3 (Registration No. 33-31333) of the Registrant, filed with the
Securities and Exchange Commission on October 3, 1989].
4.2 Form of Fixed Rate Medium-Term Note of the Registrant [incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form S-3 (Registration No. 33-31333) of the Registrant, filed with the
Securities and Exchange Commission on October 3, 1989].
4.3 Form of Floating Rate Medium-Term Note of the Registrant [incorporated by reference to Exhibit 4.3 to
the Registration Statement on Form S-3 (Registration No. 33-31333) of the Registrant, filed with the
Securities and Exchange Commission on October 3, 1989].
4.4 Instruments with respect to long-term debt which do not exceed 10 percent of the total assets of the
Registrant and its consolidated subsidiaries have not been filed. The Registrant agrees to furnish a
copy of such instruments to the Commission upon request.
9.1 Trust Agreement dated as of October 13, 1927 among Canada Cement Company Limited, Montreal Trust
Company, Henry L. Doble and Alban C. Bedford-Jones, as amended (composite copy) [incorporated by
reference to Exhibit 10.5 to the Registration Statement on Form S-1 (Registration No. 2-82548) of the
Registrant, filed with the Securities and Exchange Commission on March 21, 1983].
9.2 Amendment dated June 10, 1983 to Trust Agreement filed as Exhibit 9.1 [incorporated by reference to
Exhibit 9.2 to the Registration Statement of Form S-1 (Registration No. 2-86589) of the Registrant,
filed with the Securities and Exchange Commission on September 16, 1983].
IV - 2
89
10.1 Exchange Agency and Trust Agreement dated as of May 1, 1983 among the Registrant, Canada Cement
Lafarge, Lafarge Coppee and Montreal Trust Company, as trustee [incorporated by reference to Exhibit
10.1 to Amendment No. 1 to the Registration Statement on Form S-1 (Registration No. 2-82548) of the
Registrant, filed with the Securities and Exchange Commission on May 5, 1983]. Canada Cement Lafarge
changed its name on January 1, 1988 to Lafarge Canada Inc.
10.2 Guarantee Agreement dated as of May 1, 1983 between the Registrant and Canada Cement Lafarge
[incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Registration Statement of Form S-1
(Registration No. 2-82548) of the Registrant, filed with the Securities and Exchange Commission on May
5, 1983].
10.3 Special Surface Lease dated as of August 1, 1954 between the Province of Alberta and Canada Cement
Lafarge, as amended [incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-
1 (Registration No. 2-82548) of the Registrant, filed with the Securities and Exchange Commission on
March 21, 1983].
10.4 Director Fee Deferral Plan of the Registrant [incorporated by reference to Exhibit 10.21 to the
Registration Statement on Form S-1 (Registration No. 2-86589) of the Registrant, filed with the
Securities and Exchange Commission on September 16, 1983].
10.5 1993 Stock Option Plan of the Registrant [incorporated by reference to Exhibit 10.6 to the Annual
Report on Form 10-K filed by the Registrant for the fiscal year ended December 31, 1993].
10.6 1983 Stock Option Plan of the Registrant, as amended and restated May 2, 1989 [incorporated by
reference to Exhibit 28 to the Registrant's report on Form 10-Q for the quarter ended June 30, 1989].
10.7 Optional Stock Dividend Plan of the Registrant [incorporated by reference to Exhibit 10.22 to the
Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31, 1987].
10.8 Description of Bonus Plan of the Registrant [incorporated by reference to Exhibit 10.24 to Amendment
No. 1 to the Registration Statement on Form S-1 (Registration No. 2-86589) of the Registrant, filed
with the Securities and Exchange Commission on November 23, 1983].
IV - 3
90
10.9 Director Fee Deferral Plan of General Portland, assumed by the Registrant on January 29, 1988
[incorporated by reference to Exhibit 10(g) to the Annual Report on Form 10-K filed by General Portland
for the fiscal year ended December 31, 1980].
10.10 Option Agreement for Common Stock dated as of November 1, 1993 between the Registrant and Lafarge
Coppee [incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed by the
Registrant for the fiscal year ended December 31, 1993].
10.11 Deferred Compensation Program of Canada Cement Lafarge [incorporated by reference to Exhibit 10.57 to
Amendment No. 1 to the Registration Statement on Form S-1 (Registration No. 2-86589) of the Registrant,
filed with the Securities and Exchange Commission on November 23, 1983].
10.12 Agreement dated November 8, 1983 between Canada Cement Lafarge and Standard Industries Ltd.
[incorporated by reference to Exhibit 10.58 to Amendment No. 1 to the Registration Statement on Form S-
1 (Registration No. 2-86589) of the Registrant, filed with the Securities and Exchange Commission on
November 23, 1983].
10.13 Stock Purchase Agreement dated September 17, 1986 between the Registrant and Lafarge Coppee, S.A.
[incorporated by reference to Exhibit B to the Registrant's report on Form 10-Q for the quarter ended
September 30, 1986].
10.14 Promissory Note dated December 11, 1987 of Philip A. Millington [incorporated by reference to Exhibit
10.32 to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31,
1989].
10.15 Promissory Note dated July 17, 1987 of Bertrand P. Collomb [incorporated by reference to Exhibit 10.64
to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31, 1987].
10.16 Promissory Note dated July 31, 1987 of Thomas W. Tatum [incorporated by reference to Exhibit 10.65 to
the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31, 1987].
10.17 Promissory Note dated August 4, 1987 of Jean-Pierre Cloiseau [incorporated by reference to Exhibit
10.66 to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31,
1987].
IV - 4
91
10.18 Cost Sharing Agreement dated December 2, 1988 between Lafarge Coppee, LCI and the Registrant relating
to expenses for research and development, strategic planning and human resources and communication
techniques [incorporated by reference to Exhibit 10.42 to the Annual Report on Form 10-K filed by the
Registrant for the fiscal year ended December 31, 1988].
10.19 Royalty Agreement dated December 2, 1988 between Lafarge Coppee, LCI and the Registrant relating to
access to the reputation, logo and trademarks of Lafarge Coppee [incorporated by reference to Exhibit
10.43 to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31,
1988].
10.20 Amendment dated January 1, 1993 to Royalty Agreement filed as Exhibit 10.19 [incorporated by reference
to Exhibit 10.21 to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended
December 31, 1992].
10.21 Description of Nonemployee Director Retirement Plan of the Registrant, effective January 1, 1989
[incorporated by reference to Exhibit 10.40 to the Annual Report on Form 10-K filed by the Registrant
for the fiscal year ended December 31, 1989].
10.22 Promissory Note dated February 6, 1989 of John M. Piecuch [incorporated by reference to Exhibit 10.41
to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31, 1989].
10.23 Promissory Note dated February 27, 1989 of John M. Piecuch [incorporated by reference to Exhibit 10.42
to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31, 1989].
10.24 Promissory Note dated January 17, 1989 of H. L. Youngblood [incorporated by reference to Exhibit 10.44
to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31, 1989].
10.25 Promissory Note dated September 20, 1990 of John C. Porter [incorporated by reference to Exhibit 10.40
to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31, 1990].
10.26 Reimbursement Agreement dated January 1, 1990, between Lafarge Coppee and the Registrant relating to
expenses for Strategic Planning and Communication techniques [incorporated by reference to Exhibit
10.41 to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended December 31,
1990].
IV - 5
92
10.27 Form of Revolving Credit Facility Agreements, dated as of September 1, 1994, among the Registrant and
nine separate banking institutions.
10.28 Promissory Note dated June 15, 1994 of Edward T. Balfe.
10.29 Promissory Note dated September 1, 1994 of Duncan Gage.
10.30 Promissory Note dated July 9, 1990 of Peter H. Cooke.
10.31 Amendment dated September 13, 1991 to Cost Sharing Agreement filed as Exhibit 10.18.
10.32 Memorandum of Understanding dated September 1, 1992 between the Registrant and Lafarge Coppee relating
to the reimbursement to the Registrant of a portion of Michel Rose's compensation and expenses
[incorporated by reference to Exhibit 10.29 to the Annual Report on Form 10-K filed by the Registrant
for the fiscal year ended December 31, 1992].
11 Statement regarding computation of net income per common equity share.
22 Subsidiaries of the Registrant.
24 Consent of Arthur Andersen LLP, independent public accountants.
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed during the last quarter of the fiscal year covered by this Annual
Report.
IV - 6
93
CONSOLIDATED SUPPORTING SCHEDULE
IV - 7
94
LAFARGE CORPORATION AND SUBSIDIARIES SCHEDULE II
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1994, 1993 and 1992
(In Thousands)
Additions Deductions
--------- ----------------------------------
Balance at Charge to From Reserve for
Beginning Cost and Purposes for Which Balance at
Description of Year Expenses Reserve Was Created Other (1) End of Year
------------ ---------- --------- ------------------- --------- -----------
Reserve applicable to
current receivable
For doubtful accounts:
1994 $ 19,084 $ 5,941 $ (1,842) $ (485) $ 22,698
1993 $ 19,138 $ 5,735 $ (5,451) $ (338) $ 19,084
1992 $ 20,942 $ 6,371 $ (6,432) $ (1,743) $ 19,138
For cash and other
discounts:
1994 $ 4,988 $ 34,567 $ (33,155) $ (751) $ 5,649
1993 $ 5,115 $ 35,733 $ (35,213) $ (647) $ 4,988
1992 $ 3,699 $ 34,928 $ (31,444) $ (2,068) $ 5,115
--------------------------------
(1) Primarily foreign currency translation adjustments.
IV - 8
95
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LAFARGE CORPORATION
By:/s/ JEAN-PIERRE CLOISEAU
---------------------------------
Jean-Pierre Cloiseau, Executive
Vice President and Chief
Financial Officer
Date: March 29, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ MICHEL ROSE President and Chief March 29, 1995
----------------------------- Executive Officer
Michel Rose and Director
/s/ JEAN-PIERRE CLOISEAU Executive Vice March 29, 1995
----------------------------- President and
Jean-Pierre Cloiseau Chief Financial
Officer
/s/ JOHN C. PORTER Vice President March 29, 1995
----------------------------- and Controller
John C. Porter
/s/ BERTRAND P. COLLOMB Director March 29, 1995
-----------------------------
Bertrand P. Collomb
/s/ JOHN D. REDFERN Director March 29, 1995
-----------------------------
John D. Redfern
/s/ THOMAS A. BUELL Director March 29, 1995
-----------------------------
Thomas A. Buell
IV - 9
96
/s/ MARSHALL A. COHEN Director March 29, 1995
-----------------------------
Marshall A. Cohen
/s/ BERNARD L. KASRIEL Director March 29, 1995
-----------------------------
Bernard L. Kasriel
/s/ JACQUES LEFEVRE Director March 29, 1995
-----------------------------
Jacques Lefevre
/s/ PAUL W. MACAVOY Director March 29, 1995
-----------------------------
Paul W. MacAvoy
/s/ CLAUDINE B. MALONE Director March 29, 1995
-----------------------------
Claudine B. Malone
/s/ ALONZO L. MCDONALD Director March 29, 1995
-----------------------------
Alonzo L. McDonald
/s/ DAVID E. MITCHELL Director March 29, 1995
-----------------------------
David E. Mitchell
/s/ ROBERT W. MURDOCH Director March 29, 1995
-----------------------------
Robert W. Murdoch
/s/ BERTIN F. NADEAU Director March 29, 1995
-----------------------------
Bertin F. Nadeau
/s/ JOHN M. PIECUCH Director March 29, 1995
-----------------------------
John M. Piecuch
/s/ JOE M. RODGERS Director March 29, 1995
-----------------------------
Joe M. Rodgers
/s/ RONALD D. SOUTHERN Director March 29, 1995
-----------------------------
Ronald D. Southern
/s/ EDWARD H. TUCK Director March 29, 1995
-----------------------------
Edward H. Tuck
IV - 10
97
INDEX OF EXHIBITS
-----------------
Exhibit Sequentially
Number Numbered Pages
------ --------------------------------------------------------------------------------- --------------
3.1 Articles of Amendment and Restatement of the Registrant, filed May 29, 1992
[incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K filed
by the Registrant for the fiscal year ended December 31, 1992].
* 3.2 By-Laws of the Registrant, (as most recently amended on July 29, 1994).
4.1 Form of Indenture dated as of October 1, 1989 between the Registrant and Citibank,
N.A., as Trustee, relating to $250 million of debt securities of the Registrant
[incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3
(Registration No. 33-31333) of the Registrant, filed with the Securities and Exchange
Commission on October 3, 1989].
4.2 Form of Fixed Rate Medium-Term Note of the Registrant [incorporated by reference to
Exhibit 4.2 to the Registration Statement on Form S-3 (Registration No. 33-31333)
of the Registrant, filed with the Securities and Exchange Commission on October 3, 1989].
4.3 Form of Floating Rate Medium-Term Note of the Registrant [incorporated by reference to
Exhibit 4.3 to the Registration Statement on Form S-3 (Registration No. 33-31333) of
the Registrant, filed with the Securities and Exchange Commission on October 3, 1989].
4.4 Instruments with respect to long-term debt which do not exceed 10 percent of the total
assets of the Registrant and its consolidated subsidiaries have not been filed. The
Registrant agrees to furnish a copy of such instruments to the Commission upon request.
IV - 11
98
INDEX OF EXHIBITS
-----------------
Exhibit Sequentially
Number Numbered Pages
------ --------------------------------------------------------------------------------- --------------
9.1 Trust Agreement dated as of October 13, 1927 among Canada Cement Company Limited,
Montreal Trust Company, Henry L. Doble and Alban C. Bedford-Jones, as amended
(composite copy) [incorporated by reference to Exhibit 10.5 to the Registration
Statement on Form S-1 (Registration No. 2-82548) of the Registrant, filed with the
Securities and Exchange Commission on March 21, 1983].
9.2 Amendment dated June 10, 1983 to Trust Agreement filed as Exhibit 9.1 [incorporated
by reference to Exhibit 9.2 to the Registration Statement of Form S-1
(Registration No. 2-86589) of the Registrant, filed with the Securities and Exchange
Commission on September 16, 1983].
10.1 Exchange Agency and Trust Agreement dated as of May 1, 1983 among the Registrant,
Canada Cement Lafarge, Lafarge Coppee and Montreal Trust Company, as trustee
[incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Registration
Statement on Form S-1 (Registration No. 2-82548) of the Registrant, filed with the
Securities and Exchange Commission on May 5, 1983]. Canada Cement Lafarge changed
its name on January 1, 1988 to Lafarge Canada Inc.
10.2 Guarantee Agreement dated as of May 1, 1983 between the Registrant and Canada Cement
Lafarge [incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the
Registration Statement of Form S-1 (Registration No. 2-82548) of the Registrant,
filed with the Securities and Exchange Commission on May 5, 1983].
IV - 12
99
INDEX OF EXHIBITS
-----------------
Exhibit Sequentially
Number Numbered Pages
------ ------------------------------------------------------------------------------------- --------------
10.3 Special Surface Lease dated as of August 1, 1954 between the Province of Alberta and
Canada Cement Lafarge, as amended [incorporated by reference to Exhibit 10.7 to the
Registration Statement on Form S-1 (Registration No. 2- 82548) of the Registrant,
filed with the Securities and Exchange Commission on March 21, 1983].
10.4 Director Fee Deferral Plan of the Registrant [incorporated by reference to Exhibit
10.21 to the Registration Statement on Form S-1 (Registration No. 2-86589) of the
Registrant, filed with the Securities and Exchange Commission on September 16,
1983].
10.5 1993 Stock Option Plan of the Registrant [incorporated by reference to Exhibit 10.6
to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended
December 31, 1993].
10.6 1983 Stock Option Plan of the Registrant, as amended and restated May 2, 1989
[incorporated by reference to Exhibit 28 to the Registrant's report on Form 10-Q for
the quarter ended June 30, 1989].
10.7 Optional Stock Dividend Plan of the Registrant [incorporated by reference to Exhibit
10.22 to the Annual Report on Form 10-K filed by the Registrant for the fiscal year
ended December 31, 1987].
10.8 Description of Bonus Plan of the Registrant [incorporated by reference to Exhibit
10.24 to Amendment No. 1 to the Registration Statement on Form S-1 (Registration No.
2-86589) of the Registrant, filed with the Securities and Exchange Commission on
November 23, 1983].
IV - 13
100
INDEX OF EXHIBITS
-----------------
Exhibit Sequentially
Number Numbered Pages
------ ------------------------------------------------------------------------------------- --------------
10.9 Director Fee Deferral Plan of General Portland, assumed by the Registrant on January
29, 1988 [incorporated by reference to Exhibit 10(g) to the Annual Report on Form
10-K filed by General Portland for the fiscal year ended December 31, 1980].
10.10 Option Agreement for Common Stock dated as of November 1, 1993 between the
Registrant and Lafarge Coppee [incorporated by reference to Exhibit 10.11 to the
Annual Report on Form 10-K filed by the Registrant for the fiscal year ended
December 31, 1993].
10.11 Deferred Compensation Program of Canada Cement Lafarge [incorporated by reference to
Exhibit 10.57 to Amendment No. 1 to the Registration Statement on Form S-1
(Registration No. 2-86589) of the Registrant, filed with the Securities and Exchange
Commission on November 23, 1983].
10.12 Agreement dated November 8, 1983 between Canada Cement Lafarge and Standard
Industries Ltd. [incorporated by reference to Exhibit 10.58 to Amendment No. 1 to
the Registration Statement on Form S-1 (Registration No. 2-86589) of the Registrant,
filed with the Securities and Exchange Commission on November 23, 1983].
10.13 Stock Purchase Agreement dated September 17, 1986 between the Registrant and Lafarge
Coppee, S.A. [incorporated by reference to Exhibit B to the Registrant's report on
Form 10-Q for the quarter ended September 30, 1986].
10.14 Promissory Note dated December 11, 1987 of Philip A. Millington [incorporated by
reference to Exhibit 10.32 to the Annual Report on Form 10-K filed by the Registrant
for the fiscal year ended December 31, 1989].
IV - 14
101
INDEX OF EXHIBITS
-----------------
Exhibit Sequentially
Number Numbered Pages
------ ------------------------------------------------------------------------------------- --------------
10.15 Promissory Note dated July 17, 1987 of Bertrand P. Collomb [incorporated by
reference to Exhibit 10.64 to the Annual Report on Form 10-K filed by the Registrant
for the fiscal year ended December 31, 1987].
10.16 Promissory Note dated July 31, 1987 of Thomas W. Tatum [incorporated by reference to
Exhibit 10.65 to the Annual Report on Form 10-K filed by the Registrant for the
fiscal year ended December 31, 1987].
10.17 Promissory Note dated August 4, 1987 of Jean-Pierre Cloiseau [incorporated by
reference to Exhibit 10.66 to the Annual Report on Form 10-K filed by the Registrant
for the fiscal year ended December 31, 1987].
10.18 Cost Sharing Agreement dated December 2, 1988 between Lafarge Coppee, LCI and the
Registrant relating to expenses for research and development, strategic planning and
human resources and communication techniques [incorporated by reference to Exhibit
10.42 to the Annual Report on Form 10-K filed by the Registrant for the fiscal year
ended December 31, 1988].
10.19 Royalty Agreement dated December 2, 1988 between Lafarge Coppee, LCI and the
Registrant relating to access to the reputation, logo and trademarks of Lafarge
Coppee [incorporated by reference to Exhibit 10.43 to the Annual Report on Form 10-K
filed by the Registrant for the fiscal year ended December 31, 1988].
10.20 Amendment dated January 1, 1993 to Royalty Agreement filed as Exhibit 10.19
[incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K filed
by the Registrant for the fiscal year ended December 31, 1992].
IV - 15
102
INDEX OF EXHIBITS
-----------------
Exhibit Sequentially
Number Numbered Pages
------ ------------------------------------------------------------------------------------- --------------
10.21 Description of Nonemployee Director Retirement Plan of the Registrant, effective
January 1, 1989 [incorporated by reference to Exhibit 10.40 to the Annual Report on
Form 10-K filed by the Registrant for the fiscal year ended December 31, 1989].
10.22 Promissory Note dated February 6, 1989 of John M. Piecuch [incorporated by reference
to Exhibit 10.41 to the Annual Report on Form 10-K filed by the Registrant for the
fiscal year ended December 31, 1989].
10.23 Promissory Note dated February 27, 1989 of John M. Piecuch [incorporated by
reference to Exhibit 10.42 to the Annual Report on Form 10-K filed by the Registrant
for the fiscal year ended December 31, 1989].
10.24 Promissory Note dated January 17, 1989 of H. L. Youngblood [incorporated by
reference to Exhibit 10.44 to the Annual Report on Form 10-K filed by the Registrant
for the fiscal year ended December 31, 1989].
10.25 Promissory Note dated September 20, 1990 of John C. Porter [incorporated by
reference to Exhibit 10.40 to the Annual Report on Form 10-K filed by the Registrant
for the fiscal year ended December 31, 1990].
10.26 Reimbursement Agreement dated January 1, 1990, between Lafarge Coppee and the
Registrant relating to expenses for Strategic Planning and Communication techniques
[incorporated by reference to Exhibit 10.41 to the Annual Report on Form 10-K filed
by the Registrant for the fiscal year ended December 31, 1990].
*10.27 Form of Revolving Credit Facility Agreements, dated as of September 1, 1994, among
the Registrant and nine separate banking institutions.
IV - 16
103
INDEX OF EXHIBITS
-----------------
Exhibit Sequentially
Number Numbered Pages
------ ------------------------------------------------------------------------------------- --------------
*10.28 Promissory Note dated June 15, 1994 of Edward T. Balfe.
*10.29 Promissory Note dated September 1, 1994 of Duncan Gage.
*10.30 Promissory Note dated July 9, 1990 of Peter H. Cooke.
*10.31 Amendment dated September 13, 1991 to Cost Sharing Agreement filed as Exhibit 10.18.
10.32 Memorandum of Understanding dated September 1, 1992 between the Registrant and
Lafarge Coppee relating to the reimbursement to the Registrant of a portion of
Michel Rose's compensation and expenses [incorporated by reference to Exhibit 10.29
to the Annual Report on Form 10-K filed by the Registrant for the fiscal year ended
December 31, 1992].
*11 Statement regarding computation of net income per common equity share.
*22 Subsidiaries of the Registrant.
*24 Consent of Arthur Andersen LLP, independent public accountants.
-------------------------------
* Filed herewith
IV - 17
EX-3.2
2
BY-LAWS OF LAFARGE CORPORATION
1
EXHIBIT 3.2
BY-LAWS
OF
LAFARGE CORPORATION
As amended July 29, 1994
ARTICLE I
STOCKHOLDERS
SECTION 1.01. Annual Meetings. The Corporation shall hold each year
an annual meeting of the stockholders for the election of directors and the
transaction of any other business within the powers of the Corporation. Annual
meetings of stockholders shall be held on such day during the period April l5th
to May 14th of each calendar year as shall be designated by the Board of
Directors and at a time stated in the notice of meeting. Any business of the
Corporation may be considered at an annual meeting without the purpose of such
business being specified in the notice, except such business as is specifically
required by statute or by the Articles of Incorporation to be specified in the
notice. Failure to hold an annual meeting at the designated time shall not,
however, invalidate the corporate existence or affect any otherwise valid
corporate acts.
SECTION 1.02. Special Meetings. At any time in the interval between
annual meetings, special meetings of the stockholders may be called by the
Chairman of the Board, the Vice Chairman of the Board, the President and Chief
Executive Officer, a majority of the Board of Directors or by any other person
specified in the Charter. Special meetings of the stockholders shall also be
called by the
2
Secretary upon the written request of stockholders entitled to cast at least
twenty-five per cent (25%) of all the votes entitled to be cast at such
meeting; provided, however, that a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on at any
special meeting of the stockholders held during the preceding twelve (12)
months, unless a meeting is requested by stockholders entitled to cast a
majority of all the votes entitled to be cast at such meeting. In any case in
which a special meeting is called by written request of the stockholders, such
request shall state the purpose of the meeting and the matters proposed to be
acted on at it.
SECTION 1.03. Place of Meetings. Except as limited by statute, all
meetings of stockholders shall be held at such place within or without the
State of Maryland as shall be determined from time to time by the Board of
Directors and stated in the notice of meeting.
SECTION 1.04. Notice of Meetings. Except as provided below, not less
than ten (10) days nor more than ninety (90) days before the date of every
stockholders' meeting, the Secretary shall give to each stockholder entitled to
vote at such meeting, and to each stockholder not entitled to vote who is
entitled by statute to notice, written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or if otherwise
required by statute, the purpose or purposes for which the meeting is called,
either by mailing it to him at his address as it appears on the records of the
corporation or by delivering it to him
2
3
personally or by leaving it at his residence or usual place of business. If a
special meeting is called by the stockholders, the Secretary shall inform the
stockholders who make the request of the reasonably estimated cost of preparing
and mailing a notice of the meeting, and on payment of these costs to the
Corporation shall notify each stockholder entitled to notice of the meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail addressed to the stockholder at his post office address as it
appears on the records of the Corporation, with postage thereon prepaid.
Notwithstanding the foregoing provisions, a written waiver of any required
notice regarding any stockholder meeting, signed by the person or persons
entitled to such notice, whether before or after the holding thereof, and filed
with the records of the meeting, or by actual attendance at the meeting in
person or by proxy, shall be deemed equivalent to the giving of such notice to
such person.
SECTION 1.05. Conduct of Meetings. Meetings of stockholders shall be
presided over by the Chairman of the Board, or, if he is not present, by the
Vice Chairman of the Board, or, if he is not present, by the President and
Chief Executive Officer, or, if he is not present, by a Vice President, or, if
none of said officers is present, by a chairman to be elected at the meeting.
The Secretary or, if he is not present, any Assistant Secretary, shall act as
secretary of such meetings; in the absence of the Secretary and any Assistant
Secretary, the presiding officer may appoint a person to act as secretary of
the meeting.
3
4
SECTION 1.06. Quorum. Unless otherwise provided in the Charter, at
any meeting of stockholders the presence in person or by proxy of stockholders
entitled to cast a majority of the votes entitled to be cast thereat shall
constitute a quorum; but this Section shall not affect any requirement under
statute or under the Charter for the vote necessary for the adoption of any
measure. In the absence of a quorum, the stockholders present in person or by
proxy, by majority vote and without notice other than by announcement, may
adjourn the meeting from time to time until a quorum shall attend. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at any meeting as originally
notified. In the event that at any meeting a quorum exists for the transaction
of some business, but does not exist for the transaction of other business, the
business as to which a quorum is present may be transacted by the holders of
stock present in person or by proxy who are entitled to vote thereon. Any
meeting of stockholders, annual or special, may adjourn from time to time to
reconvene at the same or some other place at a date not to exceed more than 120
days after the original record date, and no notice need be given of any such
adjourned meeting other than by announcement.
SECTION 1.07. Proxies. A stockholder may vote the shares owned of
record by him either in person or by a written proxy signed by the stockholder
or by his duly authorized attorney-in-fact. No proxy shall be valid after
eleven (11) months from its date, unless otherwise provided in the proxy. A
proxy need not be
4
5
sealed, witnessed or acknowledged.
SECTION 1.08. Votes Required. A majority of the votes cast at a
meeting of stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may properly come
before the meeting, unless otherwise provided by statute or by the Charter.
Unless the Charter provides for a greater or lesser number of votes per share
or limits or denies voting rights, each outstanding share of stock, regardless
of class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of stockholders.
SECTION 1.09. Voting. In all elections for directors every
stockholder shall have the right to vote, in person or by proxy, each share of
stock owned of record by him, for as many persons as there are directors to be
elected and for whose election the share is entitled to be voted. At all
meetings of stockholders, unless the voting is conducted by inspectors, the
proxies and ballots shall be received, and all questions touching the
qualification of the voters and the validity of proxies and the acceptance or
rejection of votes shall be decided by the chairman of the meeting. If demanded
by a stockholder or stockholders, present at a meeting, in person or by proxy,
entitled to cast ten per cent (10%) of the votes entitled to be cast thereat,
or if ordered by the chairman, the vote upon any election or question shall be
taken by ballot and, upon like demand or order, the voting shall be conducted
by two inspectors, in which event the proxies and ballots shall be received,
and all questions touching the qualification of voters
5
6
and the validity of proxies and the acceptance or rejection of votes, shall be
decided by such inspectors. Unless so demanded or ordered, no vote need be by
ballot and voting need not be conducted by inspectors. If inspections are
demanded by the stockholders or ordered by the chairman, the stockholders at
any meeting may choose an inspector or inspectors to act at such meeting, and
in default of such election the chairman of the meeting shall appoint such
inspector or inspectors. No candidate for election as a director at a meeting
shall serve as an inspector thereat.
SECTION 1.10. Informal Action by Stockholders. Any action required or
permitted to be taken at any meeting of stockholders may be taken without a
meeting if there is filed with the minutes of proceedings of stockholders a
unanimous written consent which sets forth the action and is signed by each
stockholder entitled to vote on the matter; and a written waiver of any right
to dissent signed by each stockholder entitled to notice of the meeting, but
not entitled to vote at it.
SECTION 1.11. Voting Rights of Certain Control Shares.
Notwithstanding any other provision of the Charter of the Corporation or these
By-laws, Title 3, Subtitle 7 of the Corporations and Associations Article of
the Annotated Code of Maryland (or any successor statute) shall not apply to
any acquisition by any person of shares of stock of the Corporation. This
Section may be repealed, in whole or in part, at any time, whether before or
after an acquisition of control shares and, upon such repeal, may, to the
extent provided by any successor by-law,
6
7
apply to any prior or subsequent control share acquisition.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. Powers. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors. All powers of
the Corporation may be exercised by or under authority of the Board of
Directors, except as conferred upon or reserved to the stockholders by statute,
the Charter or the By-Laws.
SECTION 2.02. Number of Directors. The number of directors of the
Corporation which shall constitute the whole Board shall be seventeen (17). By
vote of a majority of the entire Board of Directors, the number of directors
fixed by the Charter or by the By-Laws may be increased or decreased, from time
to time, not to exceed seventeen (17) nor to be less than three (3) directors,
but the tenure of office of a director shall not be affected by any decrease in
the number of directors so made by the Board. Directors need not be
stockholders in the Corporation or residents of the State of Maryland.
SECTION 2.03. Election of Directors. At each annual meeting, the
stockholders shall elect directors to hold office until the next succeeding
annual meeting or until their successors are elected and qualify. At any
meeting of stockholders, duly called and at which a quorum is present, the
stockholders may, by the affirmative vote of the holders of a majority of the
votes entitled
7
8
to be cast thereon, remove any director or directors from office, except as
otherwise provided by statute, and may elect a successor or successors to fill
any resulting vacancies for the unexpired terms of the removed directors. In
case such a removal occurs but the stockholders entitled to vote thereon fail
to fill any resulting vacancies, such vacancies may be filled by the Board of
Directors pursuant to Section 2.04. Any director may resign at any time upon
written notice to the Corporation.
SECTION 2.04. Vacancies. Subject to Section 2.03, any vacancy
occurring in the Board of Directors for any cause other than by reason of an
increase in the number of directors may be filled by a majority of the
remaining members of the Board of Directors, although such majority is less
than a quorum. Any vacancy occurring by reason of an increase in the number of
directors may be filled by action of a majority of the entire Board of
Directors as constituted prior to such increase. A director elected by the
Board of Directors to fill a vacancy shall be elected to hold office until the
next annual meeting of the stockholders or until his successor is elected and
qualifies.
SECTION 2.05. Regular Meetings. After each meeting of stockholders at
which a Board of Directors shall have been elected, the Board of Directors so
elected shall meet as soon as practicable for the purpose of organization and
the transaction of other business; and in the event that no other time is
designated by the stockholders, the Board of Directors shall meet promptly
following the close of such meeting on the day of such meeting. Such first
8
9
meeting shall be held at such place within or without the State of Maryland as
may be designated by the stockholders, or in default of such designation at the
place designated by the Board of Directors for such first regular meeting, or
in default of such designation at the place of the holding of the immediately
preceding annual meeting of stockholders. No notice of such first meeting shall
be necessary if held as hereinabove provided. Other regular meetings of the
Board of Directors may be held on such dates and at such places within or
without the State of Maryland as may be designated from time to time by the
Board of Directors and no additional notice of such regular meetings shall be
required.
SECTION 2.06. Special Meetings. Special Meetings of the Board of
Directors may be called at any time by the Chairman of the Board, by the
President and Chief Executive Officer, or by a majority of the Board of
Directors by vote at a meeting, or in writing with or without a meeting. Such
special meetings shall be held at such place or places within or without the
State of Maryland as may be designated from time to time by the Board of
Directors.
SECTION 2.07. Notice of Meetings. Notice of the place, day and hour
of every special meeting shall be given to each director at least forty-eight
(48) hours before the time of the meeting, by delivering the same to him
personally, by telephone, by telegraph, or by delivering the same at his
residence or usual place of business, or, in the alternative, by mailing such
notice no later than the seventh day preceding the day upon which the meeting
is to
9
10
be held, postage paid, and addressed to him at his last known post office
address, according to the records of the Corporation; provided, however, that
if the person calling the meeting is of the opinion that the matters to be
considered thereat involve an emergency, notice of such meeting shall be given
by such means and within such time preceding the time at which the meeting is
to be held as the person calling the meeting shall in his discretion deem
reasonable and appropriate under the circumstances. Unless required by a
resolution of the Board of Directors, no notice of any meeting of the Board of
Directors and no waiver of notice of any such meeting need state the business
to be transacted thereat. No notice of any meeting of the Board of Directors
need be given to any director who attends such meeting, or to any director who
signs a waiver of notice of such meeting, either before or after the holding
thereof, and such waiver is filed with the records of the meeting. Any meeting
of the Board of Directors, regular or special, may adjourn from time to time to
reconvene at the same or some other place, and no notice need be given of any
such adjourned meeting other than by announcement.
SECTION 2.08. Quorum. At all meetings of the Board of Directors, a
majority of the entire Board of Directors, but in no event fewer than two (2)
directors, shall be necessary and sufficient to constitute a quorum for the
transaction of business. Except as otherwise provided by statute, by the
Charter or by the By-Laws, the affirmative vote of a majority of the directors
present at a meeting at which a quorum is present shall be
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necessary to elect and pass any measure. In the absence of a quorum, the
directors present by majority vote and without notice other than by
announcement may adjourn the meeting from time to time until a quorum shall
attend. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 2.09. Compensation. The Board of Directors may provide for
the payment to directors of stated amounts annually for services incident to
serving as directors and committee members, or in the alternative, a fixed sum
for attendance at each meeting of the Board of Directors or committees thereof,
Directors shall be reimbursed by the Corporation for reasonable expenses
incurred in attending such meetings. Except as otherwise provided by the Board
of Directors, the receipt of amounts or sums authorized hereby shall not
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 2.10. Informal Action by Directors. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if a unanimous written
consent which sets forth such action is signed by all members of the Board of
Directors or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board of Directors or committee.
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SECTION 2.11. Telephone Meetings. Members of the Board of Directors
may participate in a meeting of such Board by means of a conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other at the same time, and participation by such
means shall constitute presence in person at a meeting.
ARTICLE III
COMMITTEES
SECTION 3.01. Committees. The Board of Directors may appoint from
among the directors an Executive Committee and such other committees, to
consist of such numbers of directors, not less than two, as the Board of
Directors may from time to time determine. The Board of Directors shall have
power at any time to remove any members of the Executive Committee and of each
other committee and to fill vacancies therein. When the Board of Directors is
not in session, the Executive Committee shall have and may exercise, in the
absence of or subject to any restrictions which the Board of Directors may from
time to time impose, all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, except the power to
declare dividends or distributions on stock, to issue stock (except as provided
by statute), to recommend to stockholders any action requiring stockholders'
approval, to amend the By-Laws, or to approve any merger or share exchange
which does not require stockholder approval. Other committees shall have such
powers, subject to
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applicable law, as shall be designated by the Board of Directors from time to
time.
SECTION 3.02. Advisory Committees. The Board of Directors may
designate such advisory committees from time to time as the Board of Directors,
in its discretion, deems necessary and proper, to perform such duties as may be
determined by the Board of Directors at the time of their designation or as may
be modified thereafter by the Board of Directors or the Executive Committee;
provided, however, that any such advisory committee or committees shall have
and may exercise only the power to recommend action to the Board of Directors
or the Executive Committee. Each advisory committee shall consist of two or
more individuals (with such alternates, if any, as may be deemed desirable)
selected by the Board of Directors, who may but need not be members of the
Board of Directors.
SECTION 3.03. Committee Meetings. Meetings of any committee of
directors or advisory committee may be called by the Chairman of the Board or
the President and Chief Executive Officer of the Corporation or by any member
of the committee and may be held at any office of the Corporation or elsewhere,
as specified in the notice or waiver of notice of the meeting, upon not less
than twenty-four (24) hours notice by telephone or telegram (notice by telegram
shall be deemed given upon delivery to the telegraph company), upon notice by
mail if such notice is mailed postage prepaid not later than the second day
preceding the day upon which the meeting is to be held, or upon written waiver
of notice given before or after the meeting; provided, however, that if the
person
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calling the meeting is of the opinion that the matters to be considered thereat
involve an emergency, notice of the meeting shall be given to each member by
such means and within such time preceding the time the meeting is to be held as
the person calling the meeting shall in his discretion deem reasonable and
appropriate under the circumstances. Notice of any meeting may be given by the
Chairman of the Board or the President and Chief Executive Officer of the
Corporation, by any member of the committee or by the secretary of the
committee. Neither the business to be transacted at, nor the purpose of, any
meeting of a committee need be specified in the notice or the waiver of notice
of such meeting. Members of any committee may participate in a meeting of the
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting through such means shall constitute presence in
person at such meeting. Any action required or permitted to be taken at any
meeting of a committee may be taken without a meeting if all members of the
committee consent thereto in writing filed with the minutes of the proceedings
of the committee. A majority of a committee shall constitute a quorum for the
transaction of business, and in the event a quorum is not present at any
meeting the member or members present may adjourn the meeting from time to time
without further notice until a quorum is present. Each committee shall
designate one of its members as chairman (except that the Chairman of the Board
of the Corporation shall act as
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Chairman of the Executive Committee) and shall appoint a secretary (who need
not be a member of the committee), who shall keep minutes of its meetings. As
soon as practicable, the minutes of each meeting and any writing evidencing
action by unanimous consent shall be submitted to the Board of Directors, with
or without a report, as such committee may deem appropriate.
ARTICLE IV
OFFICERS
SECTION 4.01. Elected Officers. The elected officers of the
Corporation shall be a Chairman of the Board; a Vice Chairman of the Board; a
President and Chief Executive Officer; one or more Executive Vice Presidents,
one or more Senior Vice Presidents and one or more Vice Presidents as may be
determined by the Board of Directors; a Secretary; a Treasurer; and a
Controller.
SECTION 4.02. Election. The Board of Directors at its first meeting
after each annual meeting of stockholders shall elect a Chairman of the Board
from among its members, and a Vice Chairman of the Board, a President and Chief
Executive Officer, one or more Executive Vice Presidents, one or more Senior
Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer and a
Controller, none of whom need be a member of the Board. With the exception of
the President and Chief Executive Officer, who may not serve concurrently as a
Vice President, any officer may hold more than one office. A person who holds
more than one office in the Corporation may not act in more than one capacity
to execute,
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acknowledge or verify an instrument required by law to be executed,
acknowledged or verified by more than one officer.
SECTION 4.03. Appointed Officers. The Board of Directors may appoint
such other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board of Directors.
SECTION 4.04. Compensation. The salaries of all officers and agents of
the Corporation shall be fixed by the Board of Directors, except to the extent
that the authority to fix such salaries has been delegated by the Board of
Directors to designated officers of the Corporation.
SECTION 4.05. Term of Office. Except as may be otherwise provided by
the Board of Directors or in the By-Laws, each officer of the Corporation shall
hold office until the first meeting of the Board of Directors after the next
annual meeting of stockholders following his election or appointment and until
his successor is chosen and qualifies. Any officer or agent elected or
appointed by the Board of Directors may be removed at any time by an action of
the Board of Directors. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
SECTION 4.06. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board of Directors and the stockholders. He
shall have and exercise such powers as are, from time to time, assigned to him
by the Board of Directors.
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SECTION 4.07. Vice Chairman of the Board. The Vice Chairman of the
Board shall, in the absence or disability of the Chairman of the Board, perform
the duties and exercise the powers of the Chairman of the Board and perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
SECTION 4.08. President and Chief Executive Officer. The President
and Chief Executive Officer shall be the chief executive officer of the
Corporation and shall report to the Executive Committee and the Board of
Directors, shall have and exercise general and active management of the
business and affairs of the Corporation and shall see that all orders and
resolutions of the Board of Directors and the Executive Committee are carried
into effect.
SECTION 4.09. The Vice Presidents. The Executive Vice Presidents, the
Senior Vice Presidents and the Vice Presidents shall, in the absence or
disability of the President and Chief Executive Officer and in the order
determined by the Board of Directors, perform the duties and exercise the
powers of the President and Chief Executive Officer and shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe.
SECTION 4.10. The Secretary and Assistant Secretaries. The Secretary
shall attend all meetings of the Board of Directors and the Executive Committee
and all meetings of the stockholders and record all the proceedings of the
meetings of the Corporation and
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of the Board of Directors and the Executive Committee in a book to be kept for
that purpose and shall perform like duties for the standing committees, if any.
He shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board of Directors, and shall perform all of the
duties incident to the office of secretary of a corporation and such other
duties as may be prescribed by the Board of Directors or the President and
Chief Executive Officer under whose supervision he shall be. He shall have
custody of the corporate seal of the Corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring
it and when so affixed, it may be attested by his signature or by the signature
of such Assistant Secretary. The Board of Directors may give general authority
to any other officer to affix the seal of the Corporation and to attest the
affixing by his signature. The Assistant Secretary, or if there be more than
one, the Assistant Secretaries in the order determined by the Board of
Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary, shall generally assist the
Secretary and shall perform such other duties and have such other powers as the
President and Chief Executive Officer or the Secretary may from time to time
prescribe.
SECTION 4.11. The Treasurer and Assistant Treasurers. The Treasurer
shall have charge of and be responsible for the collection, receipt, custody
and disbursement of corporate funds and securities. Subject to the supervision
and direction of the
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President and Chief Executive Officer or such Vice President or other officer
as shall be designated as the Chief Financial Officer of the Corporation, he
shall be responsible for: (a) carrying out policies with respect to the
approving, granting or extending of credit by the Corporation, (b) the
preparation and filing of all income tax returns and all other regular and
special reports to governmental agencies, and (c) the maintenance of adequate
records of authorized appropriations and the determination that all sums
expended pursuant thereto are accounted for properly. In general, the Treasurer
shall perform the duties incident to the office of treasurer of a corporation
and such other duties as may from time to time be assigned to him by the Board
of Directors, the President and Chief Executive Officer or by such Vice
President or other officer as shall be designated as the Chief Financial
Officer of the Corporation. In the absence or disability of the Treasurer or in
the event the office of Treasurer is or becomes vacant for any reason, the
duties of the Treasurer shall be performed by the Assistant Treasurers in the
order designated by the Board of Directors or in the absence of any designation
then in the order of their election, unless otherwise determined by the Board
of Directors. Each Assistant Treasurer shall generally assist the Treasurer and
shall perform such other duties and have such other powers as the President and
Chief Executive Officer or the Treasurer may from time to time prescribe.
SECTION 4.12. Delegation of Duties of Officers. In case of the
absence of any officer of the Corporation, or for any other
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reason that the Board of Directors may deem sufficient, the Board of Directors
may delegate, for the time being, the powers or duties, or any of them, of such
officer to any other officer, or to any director, provided that a majority of
the entire Board of Directors shall concur therein.
ARTICLE V
STOCK
SECTION 5.01. Certificates of Stock. The certificates of stock of the
Corporation shall be numbered and shall be entered in the books of the
Corporation as they are issued. Each stock certificate shall include on its
face the name of the Corporation, the name of the stockholder or other person
to whom it is issued, the class of stock and the number of shares represented
thereby and shall be signed by the Chairman of the Board, the President and
Chief Executive Officer or a Vice President and countersigned by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary, or by a
facsimile or facsimiles of the signatures of any of such officers, and sealed
with the seal of the Corporation or a facsimile of such seal. If any
certificate is signed (1) by a transfer agent other than the Corporation or its
employee, or (2) by a registrar other than the Corporation or its employee, any
other signature on the certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent,
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or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
SECTION 5.02. Transfers of Stock. Transfers of stock shall be made on
the books of the Corporation upon the surrender to the Corporation or a
transfer agent of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, and the
Corporation shall thereupon issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
The Board of Directors may appoint one or more transfer agents and one or more
registrars for any one or more classes of the capital stock of the Corporation.
SECTION 5.03. Registered Stockholders. The Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to, or interest in, such shares in the name of any
other person, whether or not it shall have express or other notice hereof,
except as expressly provided by the laws of the State of Maryland.
SECTION 5.04. Record Dates. The Board of Directors is hereby
empowered to fix, in advance, a date as the record date for the purpose of
determining stockholders entitled to notice of, or to vote at, any meeting of
stockholders, or stockholders entitled to receive payment of any dividend or
the allotment of any rights, or in order to make a determination of
stockholders for any other
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proper purpose. Except as otherwise provided by statute, such date shall not be
prior to the close of business on the day the record date is fixed, and in any
case shall be not more than ninety (90) days, and in case of a meeting of
stockholders, not less than ten (10) days, prior to the date on which the
particular action, requiring such determination of stockholders, is to be
taken. In lieu of fixing a record date, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not to exceed,
in any case, twenty (20) days. If the stock transfer books are closed for the
purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 5.05. Stock Ledgers. Original or duplicate stock ledgers,
containing the name and address of each stockholder of the Corporation and the
number of shares of each class held by each stockholder, shall be kept at the
principal executive office of the Corporation.
SECTION 5.06. Lost Certificates. A new certificate or certificates
for shares of stock of the Corporation may, upon the making of an affidavit of
that fact by the person claiming a certificate of stock to be lost, stolen or
destroyed, be issued in such manner and under such conditions as the Board of
Directors may at any time or from time to time prescribe, to replace the
certificate alleged to have been lost, stolen or destroyed, provided that the
Board of Directors may, in its discretion,
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require the owner of any such certificate, or his legal representatives, to
give the Corporation a bond, with sufficient surety to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of a
new certificate. A new certificate may be issued without requiring any bond
when in the judgment of the directors it is proper so to do.
ARTICLE VI
FINANCE; CONTRACTS
SECTION 6.01. Checks; Bank Accounts; Etc. Such officers or agents of
the Corporation as from time to time shall be designated by the Board of
Directors shall have authority to deposit any funds of the Corporation in such
banks or trust companies as from time to time shall be designated by the Board
of Directors. Such officers or agents of the Corporation as from time to time
shall be authorized by the Board of Directors may withdraw any or all of the
funds of the Corporation so deposited in any bank or trust company, upon
checks, drafts or other instruments or orders for the payment of money, drawn
against the account or in the name or behalf of the Corporation, and made or
signed by such officers or agents; and each bank or trust company with which
funds of the Corporation are so deposited is authorized to accept, honor, cash
and pay, without limit as to amount, all checks, drafts or other instruments or
orders for the payment of money, when drawn, made or signed by officers or
agents so designated by the Board of Directors until
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written notice of the revocation of the authority of such officers or agents by
the Board of Directors shall have been received by such bank or trust company.
From time to time there shall be certified to the banks or trust companies in
which funds of the Corporation are deposited, the signatures of the officers or
agents of the Corporation so authorized to draw against the same. In the event
that the Board of Directors shall fail to designate the persons by whom checks,
drafts and other instruments or orders for the payment of money shall be
signed, as hereinabove provided in this Section, all of such checks, drafts and
other instruments or orders for the payment of money shall be signed by any one
of the Chairman of the Board, the Vice Chairman of the Board, the President and
Chief Executive Officer, an Executive Vice President, a Senior Vice President,
a Vice President or an Assistant Vice President and countersigned by any one of
the Secretary, the Treasurer, an Assistant Secretary or an Assistant Treasurer.
SECTION 6.02. Loans. Such officers or agents of the Corporation as
from time to time shall be designated by the Board of Directors shall have
authority to effect loans, advances or other forms of credit at any time or
times for the Corporation from such banks, trust companies, institutions,
corporations, firms or persons, in such amounts and subject to such terms and
conditions as the Board of Directors from time to time shall designate; and, as
security for the repayment of any loans, advances, or other forms of credit so
authorized, to assign, transfer, endorse and deliver, either originally or in
addition or substitution, any or
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all personal property, real property, stocks, bonds, deposits, accounts,
documents, bills and accounts receivable and other commercial paper and
evidences of debt or other securities or any rights or interest at any time
held by the Corporation; and, in connection with any of the foregoing, for any
loans, advances or other forms of credit so authorized, such officers or agents
shall have authority to make, execute and deliver one or more notes, mortgages,
deeds of trust, financing statements, security agreements, acceptances or
written obligations of the Corporation, on such terms, and with such provisions
as to the security or sale or disposition thereof as such officers or agents
shall deem proper, and, also, to sell to, or discount or rediscount with, such
banks, trust companies, institutions, corporations, firms or persons any and
all commercial paper, bills and accounts receivable, acceptances and other
instruments and evidences of debt at any time held by the Corporation, and to
that end to endorse, transfer and deliver the same. From time to time there
shall be certified to each bank, trust company, institution, corporation, firm
or person so designated, the signatures of the officers or agents so
authorized; and each such bank, trust company, institution, corporation, firm
or person is authorized to rely upon such certification until written notice of
the revocation by the Board of Directors or the authority of such officers or
agents shall be delivered to such bank, trust company, institution,
corporation, firm or person.
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SECTION 6.03. Contracts. Contracts and other instruments in writing
which may be properly made or entered into by the Corporation may be executed
in its behalf and in its name by any one of the Chairman of the Board, the Vice
Chairman of the Board, the President and Chief Executive Officer, an Executive
Vice President, a Senior Vice President or a Vice President, under the
corporate seal, attested by the Secretary or an Assistant Secretary; provided,
that the Board of Directors may by resolution authorize the execution of
contracts and other instruments in writing generally or in specific instances
in such manner and by such persons as may therein be designated.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01. Fiscal Year. The fiscal year of the Corporation shall
be the calendar year beginning on the first calendar day of each year, unless
otherwise provided by the Board of Directors.
SECTION 7.02. Seal. The Board of Directors shall provide a suitable
seal, bearing the name of the Corporation, which shall be in the charge of the
Secretary. The Board of Directors may authorize one or more duplicate seals and
provide for the custody thereof. If the Corporation is required to place its
corporate seal to a document, it is sufficient to meet the requirement of any
law, rule or regulation relating to a corporate seal to place the word "(Seal)"
adjacent to the signature of the authorized officer of the Corporation.
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SECTION 7.03. Annual Reports. There shall be prepared annually a full
and correct statement of the affairs of the Corporation, including a balance
sheet and a financial statement of operations for the preceding fiscal year,
which shall be submitted at the annual meeting of the stockholders and placed
on file within twenty (20) days thereafter at the principal office of the
Corporation in the State of Maryland. Such statement shall be prepared or
caused to be prepared by such executive officer of the Corporation as may be
designated in an additional or supplementary by-law adopted by the Board of
Directors. If no other executive officer is so designated, it shall be the duty
of the President and Chief Executive Officer to prepare or cause to be prepared
such statement.
SECTION 7.04. Bonds. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more
sureties and in such amount as may be satisfactory to the Board of Directors.
SECTION 7.05. Voting upon Shares in Other Corporations. Any shares in
other corporations or associations, which may from time to time be held by the
Corporation, may be voted at any meeting of the stockholders thereof by the
President and Chief Executive Officer or a Vice President of the Corporation or
by proxy or proxies appointed by the President and Chief Executive Officer or a
Vice President of the Corporation. A by-law or a resolution of the Board of
Directors may appoint some other person or persons to
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vote such shares, in which case such person or persons shall be entitled to
vote such shares upon the production of a certified copy of such resolution.
SECTION 7.06. Amendments. (a) Any and all provisions of the By-Laws
may be altered or repealed and new by-laws may be adopted at any annual meeting
of the stockholders, or at any special meeting called for that purpose, and (b)
the Board of Directors shall have the power, at any regular or special meeting
thereof, to make and adopt new by-laws, or to amend, alter or repeal any of the
By-Laws of the Corporation.
SECTION 7.07. Books and Records. The Corporation shall keep correct
and complete books and records of its accounts (including its capital accounts
in the manner provided by statute) and transactions and minutes of the
proceedings of its stockholders and Board of Directors and of any executive or
other committee when exercising any of the powers of the Board of Directors.
The books and records of the Corporation may be in written form or in any other
form which can be converted within a reasonable time into written form for
visual inspection. Minutes shall be recorded in written form but may be
maintained in the form of a reproduction. The original or a certified copy of
the By-Laws of the Corporation, including any amendments to them, shall be kept
at the Corporation's principal office.
SECTION 7.08. Inspection of Books. The Board of Directors shall
determine, subject to law, from time to time, whether, and to what extent and
at what time and places and under what conditions
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and regulations the books, accounts and records of the Corporation or any of
them shall be open to the inspection of the stockholders; and no stockholder
shall have any right to inspect any book, record, account or document of the
Corporation, except as conferred by law or authorized by resolution of the
directors. Unless provided otherwise by statute, any request by a stockholder
to examine the books, accounts or records of the Corporation shall be referred
to the Board of Directors for action at the first meeting thereof following
such request to the end that proper consideration may be given to such request
in the light of existing circumstances and of applicable provisions of law.
SECTION 7.09. Dividends. The Corporation, if declared by the Board of
Directors at any meeting thereof, may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Corporation's
Charter.
SECTION 7.10. Reserves. Before payment of any dividend there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose or purposes as the directors shall think conducive to
the interest of the Corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
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SECTION 7.11. Severability. The invalidity of any provision of the
By-Laws shall not affect the validity of any other provision, and each
provision shall be enforced to the extent permitted by law.
SECTION 7.12. Gender. Whenever used herein, the masculine gender
includes all genders.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Required Indemnification of Directors. The Corporation
shall indemnify any director made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), unless it is proved that (1) the act or
omission of the director was material to the cause of action adjudicated in the
Proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (2) the director actually received an improper
personal benefit in money, property or services, or (3) in the case of any
criminal proceeding, the director had reasonable cause to believe that the act
or omission was unlawful. Indemnification may be against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director
in connection with the Proceeding; provided, however, if the Proceeding was one
by or in the right of the Corporation, indemnification may not be made in
respect of any Proceeding in which the director shall have been adjudged to be
liable to the
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Corporation. The termination of any Proceeding by judgment, order or settlement
does not create a presumption that the director did not meet the requisite
standard of conduct set forth in this Section. The termination of any
Proceeding by conviction, or upon a plea of nolo contendere or its equivalent
or entry of an order of probation prior to judgment, creates a rebuttable
presumption that the director did not meet the requisite standard of conduct
set forth in this Section.
SECTION 8.02. Prohibited Indemnification of Directors. A director
shall not be indemnified under Section 8.01 in respect if any Proceeding
charging improper personal benefit to the director, whether or not involving
action in the director's official capacity, in which the director was adjudged
to be liable on the basis that personal benefit was improperly received.
SECTION 8.03. Indemnification for Successful Defense. Unless limited
by the Charter, a director who has been successful, on the merits or otherwise,
in the defense of any Proceeding referred to in Section 8.01 shall be
indemnified against reasonable expenses incurred by the director in connection
with such Proceeding.
SECTION 8.04. Determination that Indemnification is Proper.
Indemnification under Section 8.01 shall not be made by the Corporation unless
authorized for a specific Proceeding after a determination has been made that
indemnification of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in Section 8.01. Such
determination shall be made (1) by the Board of Directors by a majority vote of
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a quorum consisting of directors not, at the time, parties to the Proceeding,
or, if such a quorum cannot be obtained, then by a majority vote of a committee
of the Board consisting solely of two or more directors not, at the time,
parties to such Proceeding and who were duly designated to act in the matter by
a majority vote of the full Board in which the designated directors who are
parties may participate, (2) by special legal counsel selected by the Board of
Directors or a committee of the Board by vote as set forth in (1) above, or, if
the requisite quorum of the full Board cannot be obtained therefor and the
committee cannot be established, by a majority vote of the full Board in which
directors who are parties may participate, or (3) by the stockholders.
Authorization of indemnification and determination as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses shall be
made in the manner specified for selection of such counsel. Shares held by
directors who are parties to the Proceeding may not be voted on the subject
matter under this Section.
SECTION 8.05. Payment of Expenses in Advance of Final Disposition.
Reasonable expenses incurred by a director who is a party to a Proceeding may
be paid or reimbursed by the Corporation in advance of the final disposition of
the Proceeding upon receipt by the Corporation of (1) a written affirmation by
the director of
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the director's good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and (2) a written undertaking
by or on behalf of the director to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met. The undertaking
required shall be an unlimited general obligation of the director but need not
be secured and may be accepted without reference to financial ability to make
the repayment. Payments under this Section shall be made as provided by the
Charter, these By-Laws or contract or as specified in Section 8.04.
SECTION 8.06. Expenses of Directors Incurred as a Witness. The
Corporation shall pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a Proceeding at a time when the
director has not been named as a defendant or respondent to the Proceeding.
SECTION 8.07. Director's Service to Employee Benefit Plan. For
purposes of this Article, (1) the Corporation shall be deemed to have requested
a director to serve an employee benefit plan where the performance of the
director's duties to the Corporation also imposes duties on, or otherwise
involves services by, the director to the plan or participants or beneficiaries
of the plan, (2) excise taxes assessed on a director with respect to an
employee benefit plan pursuant to applicable law shall be deemed fines; and (3)
action taken or omitted by the director with respect to an employee benefit
plan in the performance of the director's duties for a purpose reasonably
believed by the director to be in the
33
34
interest of the participants and beneficiaries of the plan shall be deemed to
be for a purpose which is not opposed to the best interests of the Corporation.
SECTION 8.08. Officers, Employees or Agents. Unless limited by the
Charter, (1) an officer of the Corporation shall be indemnified as and to the
extent provided in Section 8.03 for a director, (2) the Corporation may
indemnify and advance expenses to an officer, employee, or agent of the
Corporation or of any subsidiary of the Corporation or a director of such a
subsidiary to the same extent that it may indemnify directors of the
Corporation under this Article, and (3) the Corporation, in addition, may
indemnify and advance expenses to an officer, employee, or agent of the
Corporation or of any subsidiary of the Corporation or a director of such a
subsidiary who is not a director of the Corporation to such further extent,
consistent with law as may be provided by the Charter, the By-Laws, by action
of the Board of Directors or by contract.
SECTION 8.09. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the Corporation or of any subsidiary of the Corporation, or who,
while a director, officer, employee, or agent of the Corporation or of any
subsidiary of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
other enterprise, or employee benefit plan against
34
35
any liability asserted against and incurred by such person in any such capacity
or arising out of such person's position, whether or not the Corporation would
have the power to indemnify against liability under the provisions of this
Article. The Corporation may provide similar protection, including a trust
fund, letter of credit, or surety bond, not inconsistent with this Section. The
insurance or similar protection provided pursuant to this Section may be
provided by a subsidiary or an affiliate of the Corporation.
SECTION 8.10. Report of Indemnification to Stockholders. Any
indemnification of, or advance of expenses to, a director in accordance with
this Article, if arising out of a Proceeding by or in the right of the
Corporation, shall be reported in writing to the stockholders with the notice
of the next stockholders' meeting or prior to the meeting.
SECTION 8.11. Terms. Terms used in this Article, which are not
otherwise defined herein, shall have the meaning set forth in Section 2-418 of
the General Corporation Law of the State of Maryland.
SECTION 8.12. Scope. The indemnification and advancement of expenses
provided or authorized by this Article shall not be deemed exclusive of any
other rights, by indemnification or otherwise, to which a director, officer,
employee or agent of the Corporation or of a subsidiary of the Corporation may
be entitled under the Charter, the By-Laws, a resolution of stockholders or
directors, an agreement or statute or otherwise, as to action in an official
capacity or as to action in another capacity while holding such
35
36
office, and the provisions of this Article shall not be construed to in any way
limit any such other rights.
ARTICLE IX
NOTICES
SECTION 9.01. Manner of Giving Notice. Whenever under the provisions
of the statutes or of the Charter or of the By-Laws, notice is required to be
given to any director or stockholder of the Corporation, and no provision is
made as to how such notice shall be given, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, by
depositing the same in a post office or letter box, in a postpaid sealed
wrapper, addressed to such director or stockholder at such address as it
appears on the books of the Corporation, or, in default of other address, to
such director or stockholder at the General Post Office in the City of
Baltimore, Maryland, and such notice shall be deemed to be given at the time
when the same shall be thus mailed.
SECTION 9.02. Waiver of Notice. Whenever any notice is required to be
given under the provisions of the statutes or of the Charter, or of the
By-Laws, a waiver thereof in writing signed by the person or persons entitled
to said notice, whether before or after the holding of the meeting or the
taking of any other action referred to therein, shall be deemed equivalent
thereto.
36
EX-10.27
3
REVOLING CREDIT FACILITY AGREEMENT
1
EXHIBIT 10.27
-------------------------------------
LAFARGE CORPORATION
REVOLVING CREDIT FACILITY AGREEMENT
DATED AS OF SEPTEMBER 1, 1994
-------------------------------------
Lafarge Corporation entered into a Revolving Credit Facility Agreement, dated
as of September 1, 1994, with each of the following lenders for the principal
amount set forth below opposite the name of such lender.
LENDER COMMITMENT
------ ----------
Banque Nationale de Paris, $20,000,000
New York Branch
CIBC, Inc. $20,000,000
Credit Lyonnais, New York $20,000,000
Branch and/or Cayman
Islands Branch
Credit Commercial de France $15,000,000
NBD Bank, N.A. $15,000,000
Royal Bank of Canada $15,000,000
Societe Generale, $15,000,000
New York Branch
The First National Bank $15,000,000
of Chicago
Wachovia Bank of Georgia, $15,000,000
N.A.
2
[W&C DRAFT: 8/15/94]
[Blacklined to reflect revisions
from W&C Draft 6/23/94]
================================================================================
REVOLVING CREDIT FACILITY AGREEMENT
dated as of
September 1, 1994
between
LAFARGE CORPORATION
and
[NAME OF BANK]
================================================================================
3
TABLE OF CONTENTS
Page
ARTICLE I CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II CREDIT FACILITY OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.01. Commitment to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.02. Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.03. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.04. Duration of Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.05. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.06. Facility Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.07. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.08. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.09. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.10. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.01. Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.03. Increased Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.04. Base Loans Substituted for Affected Fixed Rate Loans . . . . . . . . . . . . . . . . . . 20
SECTION 3.05. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . . 21
SECTION 3.06. Bank's Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.07. Increased Cost to the Company; Right to Substitute . . . . . . . . . . . . . . . . . . . 22
SECTION 3.08. Euro-Dollar Reserve Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.01. Initial Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.02. Each Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(i)
4
Page
SECTION 5.02. Corporate and Governmental Authorization; Contravention . . . . . . . . . . . . . . . . . 26
SECTION 5.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.07. Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.08. Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.09. Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.02. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.03. Total Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.04. Minimum Consolidated Interest Coverage . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.05. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.06. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.07. Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.09. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.01. Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.02. Transfer of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.04. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.05. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.06. Expenses; Documentary Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.07. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.08. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.09. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.10. New York Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.11. Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.12. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(ii)
5
Exhibit A - Domestic Note
Exhibit B - Euro-Dollar Note
Exhibit C - Opinion of Counsel to the Company
Exhibit D - Opinion of Special New York Counsel to the Bank
Exhibit E - Opinion of Canadian Counsel for Lafarge Canada
(iii)
6
REVOLVING CREDIT FACILITY AGREEMENT dated as of September 1,
1994 between Lafarge Corporation, a Maryland corporation (the "Company") and
____________________ (the "Bank").
W I T N E S S E T H :
Introduction
1. This Introduction is included for convenience but shall
not affect the interpretation or construction of this Agreement. Capitalized
terms used in this Introduction have the meaning assigned to them in Article I.
2. Upon the terms and conditions set forth herein, the Bank
agrees to make a revolving credit facility available to the Company.
3. The Bank's aggregate Commitment to extend credit under
this Agreement will at no time exceed $_________________.
ARTICLE I
CONSTRUCTION
SECTION 1.01. Definitions. For the purposes of this
Agreement, unless the context otherwise requires:
"Adjusted CD Rate" has the meaning set forth in Section
2.05(b).
"Agreement" means this Revolving Credit Facility Agreement, as
modified, supplemented or amended from time to time.
"Applicable Facility Fee Rate" means the rate per annum set
forth below in Column B opposite the level status in Column A that describes
the Company's senior unsecured long-term bond ratings in effect on the
immediately preceding last day of November, February, May or August, as the
case may be:
7
Column A Column B
---------------- ----------------
Level I Status .1250%
Level II Status .1500%
Level III Status .1875%
Level IV Status .2000%
"Applicable Margin" means for each CD Loan or Euro-Dollar
Loan, the rate of interest per annum set forth below in Column B opposite the
level status in Column A that describes the Company's senior unsecured
long-term bond ratings in effect on the first day of an Interest Period for
such CD Loan or Euro-Dollar Loan:
Column A Column B
---------------- ----------------
Level I Status .2500%
Level II Status .2500%
Level III Status .3000%
Level IV Status .3750%
"Assessment Rate" has the meaning set forth in Section 2.05(b).
"Bank" has the meaning set forth in the first paragraph of
this Agreement, provided that for purposes of Sections 3.02 and 3.03 all
references to "Bank" shall mean and include the Bank and, if any, any Person
directly or indirectly controlling the Bank.
"Base Loan" means a Loan to be made as a Base Loan pursuant to
the applicable Notice of Borrowing, Section 2.04(b) or Article III.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Borrowing" means a borrowing hereunder consisting of a Loan
made to the Company by the Bank pursuant to Article II. A Borrowing is a
"Domestic Borrowing" if such Loan is a Domestic Loan or a "Euro-Dollar
Borrowing" if such Loan is a Euro- Dollar Loan. A Domestic Borrowing is a "CD
Borrowing" if such Domestic Loan is a CD Loan or a "Base Borrowing" if such
Domestic Loan is a Base Loan.
"CD Base Rate" has the meaning set forth in Section 2.05(b).
-2-
8
"CD Loan" means a Loan to be made as a CD Loan pursuant to the
applicable Notice of Borrowing.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor statute.
"Commitment" means $__________, as the same may be reduced
from time to time pursuant to Section 3.01 or 7.01.
"Company" has the meaning set forth in the first paragraph of
this Agreement.
"Consolidated EBITDA" means the EBITDA for an applicable
twelve-month period for the Company and its Consolidated Subsidiaries.
"Consolidated Interest Expense" means the "Interest Expense,
Net" as set forth on the Consolidated Statements of Income of the Company and
its Consolidated Subsidiaries for an applicable twelve-month period.
"Consolidated Net Worth" means at any date the "Total
Shareholders' Equity" as set forth on the Consolidated Balance Sheets of the
Company and its Consolidated Subsidiaries.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Company in its consolidated financial statements as of such date.
"Consolidated Total Debt" means at any date the Debt of the
Company and its Consolidated Subsidiaries.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414(b) or 414(c) of the Code.
"Credit Facility Event" has the meaning set forth in Section
3.02.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable
-3-
9
arising in the ordinary course of business, (iv) all obligations of such Person
as lessee under capitalized leases, (v) all obligations of such Person to
purchase securities (or other property) which arise out of or in connection
with the sale of the same or substantially similar securities or property, (vi)
all obligations of such Person to reimburse any bank or other Person in respect
of amounts paid under a letter of credit or similar instrument, (vii) all Debt
of others secured by a Lien on any asset of such Person to the extent of the
fair market value of such asset, whether or not such Debt is assumed by such
Person, and (viii) all Debt of others Guaranteed by such Person to the extent
such Debt represents a liability of such Person; provided that liabilities
resulting from the recognition of other postretirement benefits required by
Financial Accounting Standard No. 106 shall not constitute "Debt."
"Default" means any Event of Default or any event or condition
which with the giving of notice or lapse of time or both would, unless cured or
waived, become an Event of Default.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are authorized
by law to close.
"Domestic Lending Office" means the Bank's office located at
its address set forth on the signature page hereof (or identified on the
signature page hereof as its Domestic Lending Office) or such other office as
the Bank may hereafter designate as its Domestic Lending Office by notice to
the Company; provided that the Bank may from time to time by notice to the
Company designate separate Domestic Lending Offices for its Base Loans, on the
one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of the Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Loans or both.
"Domestic Note" means the promissory note of the Company
substantially in the form of Exhibit A hereto, evidencing the obligation of the
Company to repay the Domestic Loans.
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.05(b).
-4-
10
"EBITDA" means "Pre-Tax Income (Loss)" plus "Interest Expense,
Net" as set forth on the Consolidated Statements of Income of the Company and
its Consolidated Subsidiaries plus "Depreciation, Depletion, and Amortization"
as set forth on the Consolidated Statements of Cash Flows of the Company and
its Consolidated Subsidiaries.
"Effective Date" means the date on which this Agreement shall
become effective in accordance with Section 8.11.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks in the London interbank market are open for
international business (including dealing in dollar deposits).
"Euro-Dollar Lending Office" means the Bank's office, branch
or affiliate located at its address set forth on the signature page hereof (or
identified on the signature page hereof as its Euro-Dollar Lending Office) or
such other office, branch or affiliate of the Bank as it may hereafter
designate as its Euro-Dollar Lending Office by notice to the Company.
"Euro-Dollar Loan" means a Loan to be made as a Euro-Dollar
Loan pursuant to the applicable Notice of Borrowing.
"Euro-Dollar Note" means the promissory note of the Company,
substantially in the form of Exhibit B hereto, evidencing the obligation of the
Company to repay the EuroDollar Loans.
"Euro-Dollar Rate" has the meaning set forth in Section
2.05(c).
"Event of Default" means any of the events set forth in
Section 7.01.
"Existing Credit Agreement" means the Revolving Credit
Facility Agreement dated as of December 15, 1992, as amended, among the
Company, the banks named therein, and Banque Nationale de Paris, New York
Branch, as agent.
"Facility Period" means the period from the Effective Date to
but excluding the Termination Date.
-5-
11
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Bank on such
day on such transactions as determined by the Bank.
"Fixed CD Rate" has the meaning set forth in Section 2.05(b).
"Fixed Rate Borrowing" means a CD Borrowing or a Euro-Dollar
Borrowing.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or both.
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Interest Period" means: (A) with respect to each Euro-Dollar
Borrowing:
-6-
12
(i) initially, the period commencing on the date of such
Borrowing and ending 1, 3, 6 or 12 months thereafter, as the Company
may elect in the applicable Notice of Borrowing; and
(ii) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Borrowing and
ending 1, 3, 6 or 12 months thereafter, as the Company may elect
pursuant to Section 2.04;
provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall, subject to clause (c) below, end
on the last Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which begins before the
Termination Date and would otherwise end after the Termination Date
shall end on the Termination Date.
(B) with respect to each CD Borrowing:
(i) initially, the period commencing on the date of such
Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Company
may elect in the applicable Notice of Borrowing; and
(ii) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Borrowing and
ending 30, 60, 90 or 180 days thereafter, as the Company may elect
pursuant to Section 2.04;
provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which
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13
would otherwise end on a day which is not a Domestic Business Day
shall be extended to the next succeeding Domestic Business Day; and
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the Termination Date
shall end on the Termination Date.
"Lafarge Canada" means Lafarge Canada Inc., a corporation
organized and existing under the laws of Canada and a Wholly-Owned Consolidated
Subsidiary of the Company, and its successors.
"Lafarge Coppee" means Lafarge Coppee, a corporation organized
and existing under the laws of France, and its successors.
"Lending Office" means the Bank's Domestic Lending Office or
its Euro-Dollar Lending Office, as the context may require.
"Level I Status" means any date when the Company's senior
unsecured long-term debt is rated A or higher by S & P or A2 or higher by
Moody's
"Level II Status" means any date when (i) the requirements
necessary to achieve Level I Status have not been satisfied and (ii) the
Company's senior unsecured long-term debt is rated A- or higher by S & P or A3
or higher by Moody's.
"Level III Status" means any date when (i) the requirements
necessary to achieve Level I Status or Level II Status have not been satisfied
and (ii) the Company's senior unsecured long-term debt is rated BBB+ or higher
by S & P or Baa1 or higher by Moody's.
"Level IV Status" means any date when (i) the requirements
necessary to achieve Level I Status, Level II Status or Level III Status have
not been satisfied and (ii) the Company's senior unsecured long-term debt is
rated BBB or lower by S & P and Baa2 or lower by Moody's.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Company or any Subsidiary shall
be deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any
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14
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan and "Loans"
means Domestic Loans or Euro-Dollar Loans or both.
"Material Plan" has the meaning set forth in Section 7.01(i).
"Material Subsidiary" means at any time a Subsidiary which as
of such time meets the definition of a "significant subsidiary" contained as of
the date hereof in Regulation S-X of the Securities and Exchange Commission.
"Moody's" means Moody's Investors Service, Inc.
"Note" means the Domestic Note or the Euro-Dollar Note, and
"Notes" means the Domestic Note or the Euro-Dollar Note or both.
"Notice of Borrowing" has the meaning set forth in Section
2.02.
"Other Bank" shall mean each bank with which the Company is
entering into an Other Bank Agreement.
"Other Bank Agreement" has the meaning set forth in Section
5.08.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by a
member of the Controlled Group for employees of a member of the Controlled
Group or (ii) maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an obligation
to make con-
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15
tributions or has within the preceding five plan years made contributions.
"Prime Rate" means, for any day, the rate of interest per
annum determined by the Bank, from time to time as its prime commercial lending
rate or corporate base rate for such day. Such term shall not be construed to
be the Bank's best or most favorable rate.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Regulation X" means Regulation X of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Significant Subsidiary" means at any time any Subsidiary of
the Company or group of Subsidiaries of the Company which, in either case,
holds or owns total assets with a book value in excess of $10,000,000 or has
annual revenues in excess of $10,000,000.
"S & P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Company.
"Termination Date" means the date referred to in Section 8.01.
"Unfunded Vested Liabilities" means, with respect to any Plan
at any time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the
PBGC or the Plan under Title IV of ERISA.
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16
"Unused Commitment" shall mean, at any time, the Commitment at
such time less the sum of the aggregate principal amount of outstanding Loans
at such time.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary, all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Company.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Company's independent public accountants) with the most
recent audited consolidated financial statements of the Company and its
Consolidated Subsidiaries delivered to the Bank.
ARTICLE II
CREDIT FACILITY OPERATION
SECTION 2.01. Commitment to Lend. The Bank agrees, on the
terms and conditions set forth in this Agreement, to lend to the Company from
time to time during the Facility Period amounts not to exceed in the aggregate
at any one time outstanding the amount of its Commitment. Each Borrowing under
this Section shall be in a principal amount of $5,000,000 or any larger
multiple of $1,000,000. Within the foregoing limits, the Company may borrow
under this Section 2.01, prepay under Section 2.07 and reborrow at any time
during the Facility Period under this Section 2.01.
SECTION 2.02. Method of Borrowing. (a) The Company shall
give the Bank notice (a "Notice of Borrowing") (x) by 10:00 a.m. (New York City
time) on the date of any Base Borrowing and (y) by 11:00 a.m. (New York City
time) at least one Domestic Business Day before each CD Borrowing and at least
three Euro-Dollar Business Days before each Euro-Dollar Borrowing, in each case
specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing,
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17
(ii) the amount of such Borrowing,
(iii) whether the Loan comprising such Borrowing is to be a
CD Loan, a Base Loan or a Euro-Dollar Loan, and
(iv) in the case of a Fixed Rate Borrowing, the duration
of the initial Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
Neither a Notice of Borrowing nor a notice of prepayment pursuant to Section
2.07(b) shall be required in connection with a Base Borrowing pursuant to
Section 2.04(b).
(b) Upon receipt of a Notice of Borrowing, such Notice of
Borrowing shall not thereafter be revocable by the Company.
(c) Not later than 11:00 a.m. (New York City time) (1:00
p.m. (New York City time) in the case of a Base Borrowing the Notice of
Borrowing with respect to which was given on the date of such Borrowing) on the
date of each Borrowing, the Bank shall make available such Borrowing, in
Federal or other funds immediately available, to the Company at such bank
account in the United States as the Company may specify to the Bank in writing.
SECTION 2.03. Notes. (a) The Domestic Loans of the Bank
shall be evidenced by a single Domestic Note payable to the order of the Bank
for the account of its Domestic Lending Office on the Termination Date in an
amount equal to the aggregate unpaid principal amount of the Bank's Domestic
Loans.
(b) The Euro-Dollar Loans of the Bank shall be evidenced
by a single Euro-Dollar Note payable to the order of the Bank for the account
of its Euro-Dollar Lending Office on the Termination Date in an amount equal to
the aggregate unpaid principal amount of the Bank's Euro-Dollar Loans.
(c) The Bank shall record, and prior to any transfer of
its Notes shall endorse on the schedules forming a part thereof appropriate
notations to evidence, the date and amount of each Loan made by it and the date
and amount of each payment of principal made by the Company with respect
thereto; provided that the failure of the Bank to make any such recordation
shall not affect the obligations of the Company hereunder or under the Notes.
The Bank is hereby irrevocably authorized by the Company so to endorse its
Notes
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18
and to attach to and make a part of any Note a continuation of any such
schedule as and when required.
SECTION 2.04. Duration of Interest Periods. (a) The
duration of the initial Interest Period for each Fixed Rate Borrowing shall be
as specified in the applicable Notice of Borrowing. The Company shall have the
option to elect the duration of each subsequent Interest Period applicable to
such Borrowing, by giving notice of such election to the Bank at least one
Domestic Business Day, in the case of a CD Borrowing, and three Euro-Dollar
Business Days, in the case of a Euro-Dollar Borrowing, before the end of the
immediately preceding Interest Period applicable thereto.
(b) If the Bank does not receive a notice of election for
the duration of an Interest Period for a Fixed Rate Borrowing pursuant to
subsection (a) above within the applicable time limits specified therein, the
Company shall be deemed to have elected to repay such Borrowing in whole
pursuant to Section 2.07 on the last day of the current Interest Period with
respect thereto and, absent the occurrence of an Event of Default, to reborrow
the principal amount of such Borrowing on such date as a Base Borrowing.
(c) Notwithstanding the foregoing, the duration of each
Interest Period shall be subject to the provisions of the definition of
Interest Period.
SECTION 2.05. Interest Rates. (a) Each Base Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
Base Rate. Such interest shall be payable on the last day of each calendar
month, commencing on the first such date after such Base Loan is made, and on
the date such Base Loan is repaid. Any overdue principal of and, to the extent
permitted by law, overdue interest on any Base Loan shall bear interest,
payable on demand, for each day from and including the date payment thereof was
due to but excluding the date of actual payment, at a rate per annum equal to
the sum of 2% plus the otherwise applicable rate for such day for Base Loans.
(b) Each CD Loan shall bear interest on the outstanding
principal amount thereof, for each Interest Period applicable thereto, at a
rate per annum equal to the applicable Fixed CD Rate; provided that if any CD
Loan or any portion thereof shall, as a result of clause (B)(b) of the
definition of Interest Period, have an Interest Period of less than 30 days,
such portion shall bear interest during
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such Interest Period at the rate applicable to Base Loans during such period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than 90 days, at intervals of 90 days
after the first day thereof. Any overdue principal of and, to the extent
permitted by law, overdue interest on any CD Loan shall bear interest, payable
on demand, for each day from and including the date payment thereof was due to
but excluding the date of actual payment, at a rate per annum equal to the sum
of 2% plus the rate applicable to Base Loans for such day.
The "Fixed CD Rate" applicable to any CD Loan for any Interest
Period means a rate per annum equal to the sum of the Applicable Margin plus
the applicable Adjusted CD Rate.
The "Adjusted CD Rate" applicable to any Interest Period means
a rate per annum determined pursuant to the following formula:
(1/)
[ CDBR ]
ACDR = [------------ ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate, if any
The "CD Base Rate" applicable to any Interest Period is the
rate of interest determined by the Bank to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 a.m. (New York City time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two or more New York certificate of
deposit dealers of recognized standing for the purchase at face value from the
Bank (or its designated affiliate) of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of the Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"Domestic Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect
--------------------
(1/) The amount in brackets being rounded upwards, if necessary, to the next
higher 1/100 of 1%.
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20
on such day, as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves)
for a member bank of the Federal Reserve System in New York City with deposits
exceeding five billion dollars in respect of new non-personal time deposits in
dollars in New York City having a maturity comparable to the related Interest
Period and in an amount of $100,000 or more. The Fixed CD Rate shall be
adjusted automatically on and as of the effective date of any change in the
Domestic Reserve Percentage.
"Assessment Rate" means for any Interest Period the net annual
assessment rate, if any (rounded upwards, if necessary, to the next higher
1/100 of 1%), actually incurred by the Bank to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of the Bank in the United States during the
most recent period for which such rate has been determined prior to the
commencement of such Interest Period.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin plus the
applicable Euro-Dollar Rate. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
three months, at intervals of three months after the first day thereof.
The "Euro-Dollar Rate" applicable to any Interest Period shall
mean the rate per annum determined by the Bank as the arithmetic average
(rounded upwards, if necessary, to the nearest 1/16th of 1%) of the rates per
annum at which deposits in dollars are offered by each of the reference banks
shown on page 3875 of the Telerate Systems Incorporated screen service or, if
such service is not available, page LIBOR on the Reuter Monitor Money Rates
Service, in the London interbank market at approximately 11:00 a.m. (London
time) on the date which is two Business Days prior to the first day of the
relevant Interest Period, on an immediately available funds basis, for a period
comparable to such Interest Period.
(d) Any overdue principal of and, to the extent permitted
by law, overdue interest on any Euro-Dollar Loan shall bear interest, payable
on demand, for each day from and including the date payment thereof was due to
but excluding
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the date of actual payment, at a rate per annum equal to the sum of 2% plus the
rate applicable to Base Loans for such day.
(e) The Bank shall determine each interest rate
applicable to the CD Loans, Euro-Dollar Loans and Base Loans hereunder and
shall give prompt notice to the Company of each rate of interest so determined.
The foregoing determinations shall be conclusive in the absence of manifest
error and shall be binding whether or not such notice is actually given.
SECTION 2.06. Facility Fees. The Company shall pay to the
Bank a facility fee accruing each day during the period from and including the
Effective Date to but excluding the Termination Date at the Applicable Facility
Fee Rate for such day multiplied by the Bank's Commitment (whether used or
unused). Such facility fee shall be payable quarterly in arrears on the last
day of February, May, August and November, commencing on the first such date to
occur after the date hereof, and on the Termination Date.
SECTION 2.07. Optional Prepayments. (a) The Company may,
upon at least one Domestic Business Day's notice to the Bank, prepay the Base
Loans in whole at any time, or from time to time in part in amounts aggregating
$5,000,000 or any larger multiple of $1,000,000, by paying the principal amount
to be prepaid together with accrued interest thereon to the date of prepayment.
(b) The Company may, upon at least one Domestic Business
Day's notice to the Bank, in the case of CD Loans, or upon at least two
Euro-Dollar Business Days' notice to the Bank, in the case of Euro-Dollar
Loans, prepay on the last day of any Interest Period the Fixed Rate Loans to
which such Interest Period applies, in whole, or in part in amounts aggregating
$5,000,000 or any larger multiple of $1,000,000, by paying the principal amount
to be prepaid together with accrued interest thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay such Fixed Rate Loans,
subject to Section 3.04.
(c) Upon receipt of a notice of prepayment pursuant to
this Section, such notice shall not thereafter be revocable by the Company.
SECTION 2.08. General Provisions as to Payments. The Company
shall make each payment of principal of, and interest on, the Loans and of
facility fees hereunder, not
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22
later than 11:00 a.m. (New York City time) on the date when due, in Federal or
other funds immediately available to the Bank, in each case to such bank
account in the United States as the Bank may specify to the Company in writing.
Whenever any payment of principal of, or interest on, the Domestic Loans or of
facility fees shall be due on a day which is not a Domestic Business Day, the
date for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business
Day, the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day, subject to the provisions of the definition of
"Interest Period" contained in Section 1.01. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
SECTION 2.09. Funding Losses. If the Company makes any
payment of principal with respect to any Fixed Rate Loan (pursuant to Article
III or VII or otherwise) on any day other than the last day of an Interest
Period applicable thereto, or if the Company fails to borrow or prepay any
Fixed Rate Loans after notice has been given to the Bank in accordance with
Section 2.02(a) or 2.07(b), the Company shall reimburse the Bank on demand for
any resulting loss or expense incurred by it, including (without limitation)
any loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment,
provided that the Bank shall have delivered to the Company a certificate as to
the amount of such loss or expense, which certificate shall be conclusive in
the absence of manifest error.
SECTION 2.10. Computation of Interest and Fees. Interest on
Domestic Loans based on the Base Rate and facility fees hereunder shall be
computed on the basis of a year of 365 days (or 366 days in a leap year) and
paid for the actual number of days elapsed (including the first day but
excluding the last day). Interest on Fixed Rate Loans shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day).
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23
ARTICLE III
PROVISIONS OF GENERAL APPLICATION
SECTION 3.01. Reduction of Commitments. The Company may,
upon five Domestic Business Days' written notice to the Bank, terminate at any
time, or reduce from time to time by the amount of $5,000,000 or any larger
multiple of $1,000,000, the Unused Commitment. For purposes of Section 8.01,
the Termination Date shall be the date on which the Commitment is reduced to
zero pursuant to this Section. All such reductions of the Unused Commitment
shall be permanent and each notice of such a reduction shall be irrevocable.
SECTION 3.02. Illegality. If, after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by the Bank or its
Lending Office with any request or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency makes it
unlawful or impossible for the Bank or its Euro-Dollar Lending Office to make,
maintain or fund its Euro- Dollar Loans (a "Credit Facility Event") the Bank
shall forthwith give notice thereof to the Company, which notice shall specify
that a Credit Facility Event has occurred. Before giving any notice of a
Credit Facility Event to the Company pursuant to this Section, the Bank shall
use reasonable efforts to designate a different Euro-Dollar Lending Office if
such designation will avoid the need for giving such notice and will not, in
the judgment of the Bank, be otherwise disadvantageous to the Bank. If a
Credit Facility Event has occurred, the Company shall, upon receipt of such
notice, prepay in full the then outstanding principal amount of each
Euro-Dollar Loan of the Bank, together with accrued interest thereon, on either
(a) the last day of the then current Interest Period applicable to such
Euro-Dollar Loan if the Bank may lawfully continue to maintain and fund the
Euro-Dollar Loan to such day or (b) immediately if the Bank may not lawfully
continue to fund and maintain such Euro-Dollar Loan to such day. Concurrently
with prepaying each Euro-Dollar Loan of the Bank, the Company shall borrow a
Base Loan in an equal principal amount from the Bank, and the Bank shall make
such a Base Loan.
SECTION 3.03. Increased Cost. (a) If after the date hereof,
the adoption or effectiveness of any applicable law, rule or regulation, or any
change therein, or any change
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in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank (or its Lending Office) with
any request or directive which is effective after the date hereof (whether or
not having the force of law) of any such authority, central bank or comparable
agency:
(i) shall subject the Bank (or its Lending Office) to any
tax, duty or other charge with respect to its Fixed Rate Loans, its
Notes or its obligation to make Fixed Rate Loans or shall change the
basis of taxation of payments to the Bank of the principal of or
interest on its Fixed Rate Loans or any other amounts due under this
Agreement in respect of its Fixed Rate Loans or its obligation to make
Fixed Rate Loans (except for changes in the rate of tax on the overall
net income of the Bank or its Lending Office imposed by the
jurisdiction in which the Bank's principal executive office or Lending
Office is located, or by any political subdivision or taxing authority
in any such jurisdiction); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve Percentage and
excluding with respect to any Euro-Dollar Loan any such requirement
taken into account pursuant to Section 3.08) against assets of,
deposits with or for the account of, or credit extended by, the Bank's
Lending Office or shall impose on the Bank (or its Lending Office) or
on the United States market for certificates of deposit or the London
or New York interbank market any other condition affecting this
Agreement, its Fixed Rate Loans, its Notes or its obligation to make
Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to the Bank (or
its Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce
the amount of any sum received or receivable by the Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto by an
amount deemed by the Bank to be material, then, within 15 days after demand by
the Bank, the Company shall pay to the Bank such additional amount or amounts
as will compensate the Bank for such increased cost or reduction.
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25
(b) If after August 1, 1994, the adoption or
effectiveness of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Bank (or its Lending Office) with any request or directive
regarding capital adequacy which is effective after August 1, 1994 (whether or
not having the force of law) of any such authority, central bank or comparable
agency, increases the capital required to be maintained by the Bank as a
consequence of its obligations hereunder, which increase results in a reduction
of the rate of return on the Bank's capital to a level below that which the
Bank would have achieved but for such adoption, change or compliance (taking
into consideration the Bank's policies with respect to capital adequacy) by an
amount deemed by the Bank to be material, then from time to time, within 15
days after demand by the Bank, the Company shall pay to the Bank such
additional amount or amounts as will compensate the Bank for such reduction.
(c) The Bank will promptly notify the Company of any
event of which it has knowledge, occurring after the date hereof, which will
entitle the Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of the Bank, be
otherwise disadvantageous to the Bank or contrary to its policies. A
certificate of the Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount, the
Bank may use any reasonable averaging and attribution methods. If the Bank
demands compensation under this Section, the Company may at any time, upon at
least two Euro-Dollar Business Days' prior notice to the Bank, prepay in full
the then outstanding CD Loans or Euro-Dollar Loans, as the case may be, of the
Bank, together with accrued interest thereon to the date of prepayment, if such
action will avoid the need for, or reduce the amount of, such compensation.
Concurrently with prepaying such Fixed Rate Loans of the Bank, the Company
shall borrow from the Bank a Base Loan in an amount equal to the aggregate
principal amount of such Fixed Rate Loans, and the Bank shall make such a Base
Loan.
SECTION 3.04. Base Loans Substituted for Affected Fixed Rate
Loans. If notice has been given by the Bank pur-
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26
suant to Section 3.02 or by the Company pursuant to Section 3.03 requiring
Fixed Rate Loans of the Bank to be prepaid, then, unless and until the Bank
notifies the Company that the circumstances giving rise to such prepayment no
longer apply:
(a) all Loans which would otherwise be made by the Bank
as CD Loans or Euro-Dollar Loans, as the case may be, shall be made
instead as Base Loans,
(b) after each of its CD Loans or Euro-Dollar Loans, as
the case may be, has been so prepaid, all payments and prepayments of
principal which would otherwise be applied to repay such Fixed Rate
Loans shall be applied to repay its Base Loans instead, and
(c) all Loans made as Base Loans which would otherwise be
made as CD Loans or Euro-Dollar Loans shall be considered for purposes
of this Agreement as part of the related Borrowing of CD Rate Loans or
Euro-Dollar Loans, respectively.
If the Bank notifies the Company that the circumstances giving rise to such
prepayment no longer apply, the Company shall borrow a CD Loan or a Euro-Dollar
Loan, as the case may be, from the Bank on the first day of the next succeeding
Interest Period applicable to each related Borrowing in the amount of the Fixed
Rate Loan which would have been outstanding from the Bank as part of such
Borrowing if the provisions of Section 3.02 or 3.03 had never applied, and
concurrently with each such Borrowing shall prepay an equal principal amount of
the Bank's outstanding Base Loans.
SECTION 3.05. Basis for Determining Interest Rate Inadequate
or Unfair. If with respect to any Interest Period:
(i) The Bank determines that deposits in dollars (in the
applicable amounts) are not being offered to leading banks in the
relevant market for such Interest Period, or
(ii) the Bank advises the Company that the Adjusted CD
Rate or the Euro-Dollar Rate as determined by the Bank will not
adequately and fairly reflect the cost to the Bank of maintaining or
funding its Fixed Rate Loans for such Interest Period,
the Bank shall forthwith give notice thereof to the Company, whereupon until
the Bank notifies the Company that the cir-
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cumstances giving rise to such suspension no longer exist, (a) the obligations
of the Bank to make CD Loans or Euro-Dollar Loans, as the case may be, shall be
suspended and (b) the Company shall prepay in full the then outstanding
principal amount of each CD Loan or Euro-Dollar Loan, as the case may be,
together with accrued interest thereon, on the last day of the then current
Interest Period applicable to such Loan. Concurrently with prepaying each such
Fixed Rate Loan of the Bank pursuant to this Section, the Company shall borrow
a Base Loan in an equal principal amount from the Bank, and the Bank shall make
such a Base Loan, unless the Company notifies the Bank at least one Domestic
Business Day before the date of such prepayment that it elects not to borrow
any Base Loans on such date.
SECTION 3.06. Bank's Right of Setoff. The Company hereby
grants to the Bank the right, to the extent permitted by applicable law, upon
the occurrence of an Event of Default, at any time and from time to time,
without notice to the Company (any such notice being expressly waived by the
Company), to set off, exercise any banker's lien or any right of attachment or
garnishment and apply any and all balances, credits, deposits (general or
special, time or demand, provisional or final), accounts or monies at any time
held and other indebtedness at any time owing by the Bank or any of the Bank's
affiliates to or for the credit or the account of the Company, at any branch or
office or in any currency, against any and all of the obligations of the
Company now or hereafter existing under this Agreement and each Note, when the
same shall become due and payable, whether at maturity, upon the acceleration
of the maturity thereof or otherwise and irrespective of whether or not the
Bank shall have made any demand under this Agreement or such Note and although
such obligations may be unmatured. Subject to the foregoing, the rights of the
Bank under this Section are in addition to and in augmentation of and do not
derogate from or impair other rights and remedies (including, without
limitation, other rights of setoff) which the Bank may have.
SECTION 3.07. Increased Cost to the Company; Right to
Substitute. (a) Unless required by applicable law, court order or order of a
regulatory authority, the Bank shall not, without the consent of the Company,
change the designation of its Lending Office if as a result thereof the Company
would incur costs (other than those payable hereunder) in excess of those
incurred immediately prior to any such change.
(b) The Bank agrees to notify the Company of impending
events of which the Bank has knowledge which would
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entitle the Bank to (i) give notice to the Company of a Credit Facility Event
pursuant to Section 3.02 or (ii) make a demand pursuant to Section 3.03 or
3.08.
(c) If the Bank has demanded compensation under Section
3.03 or 3.08, the Company shall have the right to seek a mutually satisfactory
substitute bank or banks to purchase the Notes and assume the Commitment of the
Bank and the Bank shall, at the direction of the Company, assign its Loans, its
Notes and its rights and obligations under this Agreement to such bank or banks
in the manner set forth in Section 8.08.
SECTION 3.08. Euro-Dollar Reserve Requirements. In the event
that the Bank shall determine at any time that by reason of Regulation D or any
other reserve requirement the Bank is required to maintain reserves in respect
of Eurocurrency loans outstanding or sold or liabilities relating to a
Euro-Dollar Loan during any period that it has a Euro-Dollar Loan to the
Company outstanding, then the Bank shall promptly give notice (by telephone
confirmed in writing) to the Company specifying the additional amounts required
to reimburse the Bank for the cost of maintaining reserves against such
Euro-Dollar Loans of the Bank, and upon receipt of such notice and the written
demand specified below, the Company shall pay to the Bank such specified
amounts as additional interest at the time that it is otherwise required to pay
interest in respect of such Euro-Dollar Loan or, if later, within 15 Domestic
Business Days after demand. Such additional interest shall be determined by
the Bank, to the extent feasible, with reference to aggregate amounts (which
may be reasonable approximations) of Eurocurrency liabilities of the Bank
subject to reserves and assets of the Bank of the same type as the Euro-Dollar
Loans. In determining the amount of any such additional interest due
hereunder, the Bank may use any reasonable averaging and attribution methods.
The Bank shall furnish the Company with its written demand for increased
interest pursuant to this Section 3.08, which demand shall specify the reserve
percentage being utilized to calculate the additional interest payable by the
Company and the calculation of the additional interest payable with respect to
such Euro-Dollar Loans as a result of the application of such reserve
percentage. If the Bank becomes entitled to claim any amounts pursuant to this
Section 3.08, it agrees to designate an alternative Euro-Dollar Lending Office
if by doing so any such additional amounts will be avoided; provided that such
designation results in no additional costs to the Bank and is not otherwise
materially disadvantageous to the Bank, in the Bank's sole discretion.
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ARTICLE IV
CONDITIONS PRECEDENT
The obligations of the Bank to make Loans to the Company
pursuant to Article II are subject to the following conditions:
SECTION 4.01. Initial Borrowing. On or before the date of
the initial Borrowing, the Bank shall have received, in addition to those
documents otherwise required to be delivered pursuant to this Agreement, the
following documents (which shall be in form and substance satisfactory to it):
(a) duly executed counterparts of this Agreement;
(b) a duly executed Domestic Note and Euro-Dollar Note
for the Bank, each dated on or before the date of the initial
Borrowing, complying with the provisions of Section 2.03;
(c) the favorable written opinion, dated such date of
David C. Jones, Esq., Vice President - Legal Affairs and Secretary of
the Company, substantially in the form set forth in Exhibit C hereto
and given upon the express instructions of the Company;
(d) the favorable written opinion, dated such date of
White & Case, special New York counsel to the Bank, substantially in
the form set forth in Exhibit D hereto;
(e) the favorable written opinion, dated such date of
Canadian counsel for Lafarge Canada, substantially in the form set
forth in Exhibit E hereto and given upon the express instructions of
Lafarge Canada;
(f) a certificate signed by the Chief Financial Officer
and the Treasurer of the Company, to the effect that (A) the
representations and warranties of the Company set forth herein are
true and correct with the same effect as though such representations
and warranties had been made on and as of such date and (B)
immediately after such initial Borrowing, no Default shall have
occurred and be continuing;
(g) evidence satisfactory to it that all outstanding
Loans (as defined in the Existing Credit Agreement) have been paid in
full and that its
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Commitment (as defined in the Existing Credit Agreement) has been
terminated; and
(h) all documents it may reasonably request relating to
the existence of the Company, the corporate authority for and the
validity of this Agreement and the Notes and any other matters
relevant hereto.
SECTION 4.02. Each Borrowing. On the date of each Borrowing
(including without limitation the first Borrowing):
(i) the representations and warranties of the Company set
forth herein shall be true and correct with the same effect as though
such representations and warranties had been made on and as of such
date;
(ii) immediately after such Borrowing, no Default shall
have occurred and be continuing;
(iii) the Company shall have paid all fees due and payable
hereunder on or prior to such date; and
(iv) receipt by the Bank of a Notice of Borrowing as
required by Section 2.02.
The giving by the Company of each Notice of Borrowing hereunder shall be deemed
to be a representation and warranty by the Company on the date of such Loan as
to the facts specified in clauses (i) and (ii) of this Section.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
SECTION 5.01. Corporate Existence and Power. (a) The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Maryland and has all corporate powers
and all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted and is duly qualified to do
business and is in good standing in each state in which it has a significant
business presence.
(b) Each of the Company's Material Subsidiaries is a
corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corpor-
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ate powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and is duly
qualified to do business and is in good standing in each state in which the
nature of its business or properties requires such qualification.
SECTION 5.02. Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by the Company of this
Agreement and the Notes are within the Company's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Company
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or result in the creation or imposition of any Lien on
any asset of the Company or any of its Subsidiaries.
SECTION 5.03. Binding Effect. This Agreement constitutes the
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms and the Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms.
SECTION 5.04. Financial Information. (a) The consolidated
balance sheet of the Company and its Consolidated Subsidiaries as of December
31, 1993 and the related consolidated statements of income and cash flows for
the fiscal year then ended, reported on by Arthur Andersen & Co. and set forth
in the Company's 1993 Form 10-K, a copy of which has been delivered to the
Bank, fairly present, in conformity with GAAP, the consolidated financial
position of the Company and its Consolidated Subsidiaries as of such date and
their consolidated results of operations and cash flows for such fiscal year.
(b) The unaudited condensed consolidated balance sheet of
the Company and its Consolidated Subsidiaries as of June 30, 1994 and the
related unaudited condensed consolidated statements of income (loss) and cash
flows for the three months then ended, set forth in the Company's quarterly
report for the fiscal quarter ended June 30, 1994 as filed with the Securities
and Exchange Commission on Form 10-Q, a copy of which has been delivered to the
Bank, fairly present,
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in conformity with GAAP (except as noted therein) applied on a basis consistent
with the financial statements referred to in paragraph (a) of this Section, the
consolidated financial position of the Company and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such three-month period (subject to normal year-end
adjustments).
(c) Since June 30, 1994 there has been no material
adverse change in the business, financial position or results of operations of
the Company and Lafarge Canada considered as a whole, and to the knowledge of
the Company, the Company has no material contingent obligations (including any
liability for taxes) not disclosed by or reserved against in the financial
statements referred to in paragraph (b) of this Section and there are no
material unrealized or anticipated losses from any present commitment of the
Company.
SECTION 5.05. Litigation. Except as disclosed in the
Company's Forms 10-K and 10-Q as filed with the Securities and Exchange
Commission for the fiscal year ended December 31, 1993 and the fiscal quarter
ended June 30, 1994, respectively, there is no action, suit or proceeding
pending against, or to the knowledge of the Company threatened against or
affecting, the Company or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially adversely
affect the business, consolidated financial position or consolidated results of
operations of the Company and its Consolidated Subsidiaries or which in any
manner draws into question the validity of this Agreement or the Notes.
SECTION 5.06. Compliance with ERISA. Each member of the
Controlled Group has fulfilled its obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and is in compliance
in all material respects with the presently applicable provisions of ERISA and
the Code, and has not incurred any liability to the PBGC or a Plan under Title
IV of ERISA.
SECTION 5.07. Not an Investment Company. The Company is not
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 5.08. Other Banks. Substantially concurrently with
the execution of this Agreement by the Company and the Bank, the Company is
executing with each Other Bank a substantively identical (other than with
respect
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to the amount of the Commitment) form of this Agreement (each an "Other Bank
Agreement").
SECTION 5.09. Compliance with Statutes, etc. The Company is
in compliance with all applicable statutes, regulations, and orders of and all
applicable restrictions imposed by all governmental bodies in respect of the
conduct of its business and the ownership and use of its property and assets
(including without limitation, compliance with all applicable federal, state
and local environmental laws and regulations) except where such non-compliance
would not have a material adverse effect on the business, consolidated
financial position or consolidated results of operations of the Company and its
Consolidated Subsidiaries.
ARTICLE VI
COVENANTS
The Company agrees that, so long as the Bank has any
Commitment hereunder or any amount payable under any Note remains unpaid:
SECTION 6.01. Information. The Company will deliver to the
Bank:
(a) as soon as available and in any event within 100 days
after the end of each fiscal year of the Company, a consolidated
balance sheet of the Company and its Consolidated Subsidiaries at the
end of such fiscal year and the related consolidated statements of
income, shareholders' equity and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on in a manner acceptable to the
Securities and Exchange Commission by Arthur Andersen & Co. or other
independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within 50 days
after the end of each of the first three quarters of each fiscal year
of the Company, a condensed consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of the end of such quarter and
the related condensed consolidated statements of income and cash flows
for such quarter and for the portion of the Company's fiscal year
ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter and the
corre-
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sponding portion of the Company's previous fiscal year, all certified
(subject to normal year-end adjustments) as to fairness of
presentation, compliance with GAAP (except as noted therein) and
consistency by the chief financial officer or the chief accounting
officer of the Company;
(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b) above, a
certificate of the chief financial officer or the chief accounting
officer of the Company (i) setting forth in reasonable detail the
calculations required to establish whether the Company was in
compliance with the requirements of Sections 6.03 and 6.04, on the
date of such financial statements, (ii) stating whether there exists
on the date of such certificate any Default and, if any Default then
exists, setting forth the details thereof and the action which the
Company is taking or proposes to take with respect thereto and (iii)
stating, as of such date, whether or not there is any action, suit or
proceeding pending against, or to the knowledge of the Company
threatened against or affecting, the Company or any of its
Subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an
adverse decision which could materially adversely affect the business,
consolidated financial position or consolidated results of operation
of the Company and its Consolidated Subsidiaries or which in any
manner draws into question the validity of this Agreement or the
Notes;
(d) simultaneously with the delivery of each set of
financial statements referred to in clause (a) above, a statement of
the firm of independent public accountants which reported on such
statements whether anything has come to their attention to cause them
to believe that there existed on the date of such statements any
Default;
(e) forthwith upon the occurrence of any Default, a
certificate of the chief financial officer or the chief accounting
officer of the Company setting forth the details thereof and the
action which the Company is taking or proposes to take with respect
thereto;
(f) promptly upon the mailing thereof to the shareholders
of the Company generally, copies of all
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financial statements, reports and proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and annual or
quarterly reports which the Company shall have filed with the
Securities and Exchange Commission;
(h) if and when any member of the Controlled Group (A)
gives or is required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such reportable event,
a copy of the notice of such reportable event given or required to be
given to the PBGC; (B) receives notice of complete or partial
withdrawal liability under Title IV of ERISA, a copy of such notice;
or (C) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate or appoint a trustee to administer any Plan, a
copy of such notice; and
(i) from time to time such additional information
regarding the financial position or business of the Company as the
Bank may reasonably request.
SECTION 6.02. Payment of Obligations. The Company will pay
and discharge, and will cause each Subsidiary to pay and discharge, at or
before maturity, all their respective obligations and liabilities, including,
without limitation, tax liabilities, except (i) for an aggregate amount of
obligations and liabilities not to exceed $5,000,000 and (ii) where such
obligations and liabilities may be contested in good faith by appropriate
proceedings, and will maintain, and will cause each Subsidiary to maintain, in
accordance with GAAP, appropriate reserves for the accrual of any of the same.
SECTION 6.03. Total Debt. Consolidated Total Debt will not
exceed, at December 31 of any year, 50% of the sum of Consolidated Total Debt
plus Consolidated Net Worth. For purposes of this Section any preferred stock
(other than any Exchangeable Preference Shares of Lafarge Canada) issued after
the date hereof of a Consolidated Subsidiary held by a Person other than the
Company or a Wholly-Owned Consolidated
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Subsidiary shall be included, at the higher of its voluntary or involuntary
liquidation value, in "Consolidated Total Debt."
SECTION 6.04. Minimum Consolidated Interest Coverage.
Consolidated EBITDA for any twelve-month period ended March 31, June 30,
September 30 and December 31 will not be less than 300% of Consolidated
Interest Expense for the same twelve-month period.
SECTION 6.05. Inspection of Property, Books and Records. The
Company will permit, and will cause each Subsidiary to permit, representatives
of the Bank at such Bank's expense to visit and inspect any of their respective
properties, to examine and make abstracts from any of their respective books
and records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be desired.
SECTION 6.06. Negative Pledge. Neither the Company nor any
of its Significant Subsidiaries will create, assume or suffer to exist any Lien
securing Debt or otherwise on any asset now owned or hereafter acquired by it,
except:
(a) Liens existing on the date of this Agreement securing
Debt outstanding on the date of this Agreement in an aggregate
principal amount not exceeding $5,000,000;
(b) any Lien on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of the cost of
acquiring such asset, provided that such Lien attaches to such asset
concurrently with or within 90 days after the acquisition thereof;
(c) any Lien on any asset of any corporation existing at
the time such corporation is merged or consolidated with or into the
Company or any of its Significant Subsidiaries and not created in
contemplation of such event;
(d) any Lien existing on any asset prior to the
acquisition thereof by the Company or any of its Significant
Subsidiaries and not created in contemplation of such acquisition;
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(e) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any
of the foregoing clauses of this Section, provided that such Debt is
not increased and is not secured by any additional assets;
(f) any Lien arising pursuant to any order of attachment,
distraint or similar legal process arising in connection with court
proceedings so long as the execution or other enforcement thereof is
effectively stayed and the claims secured thereby are being contested
in good faith by appropriate proceedings; and
(g) Liens not otherwise permitted by the foregoing
clauses of this Section securing Debt in an aggregate principal amount
at any time outstanding not to exceed $20,000,000.
SECTION 6.07. Consolidations, Mergers and Sales of Assets.
The Company will maintain its corporate existence and will not (i) consolidate
or merge with or into any other Person or (ii) sell, lease or otherwise
transfer all or any substantial part of its assets to any other Person;
provided that the Company may merge with another Person if (A) the Company is
the corporation surviving such merger and (B) immediately after giving effect
to such merger, no Default shall have occurred and be continuing. The Company
will not permit any Material Subsidiary to consolidate or merge with or into,
or transfer all or any substantial part of its assets to, any Person other than
the Company or a Wholly-Owned Consolidated Subsidiary; provided that the
Company may permit a Material Subsidiary to merge with another Person if (A)
such Material Subsidiary is the corporation surviving such merger, (B)
immediately after giving effect to such merger, no Default shall have occurred
and be continuing and (C) such surviving Material Subsidiary shall continue to
be a Subsidiary.
SECTION 6.08. Use of Proceeds. The proceeds of the Loans
made under this Agreement will be used by the Company for the Company's general
corporate purposes, provided that none of such proceeds will be used, directly
or indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any "margin stock" within the meaning of Regulation U or
in violation of Regulation X.
SECTION 6.09. Insurance. The Company will, and will cause
each of its Subsidiaries to, maintain (either in the name of the Company or in
such Subsidiary's own name)
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with financially sound and responsible insurance companies or through a program
of self-insurance, insurance on all their respective properties in at least
such amounts and against at least such risks (and with such risk retention) as
are usually insured against in the same general area by companies of
established repute engaged in the same or a similar business; and will furnish
to the Bank, upon request from the Bank, information presented in reasonable
detail as to the insurance so carried.
ARTICLE VII
DEFAULTS
SECTION 7.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Company shall fail to pay when due any principal
of any Note, or shall fail to pay within three days of the due date
thereof any interest on either Note, any fees or any other amount
payable hereunder;
(b) the Company shall fail to observe or perform any
covenant contained in Sections 6.03 or 6.04, inclusive, or 6.06 to
6.09, inclusive;
(c) the Company shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those
covered by clauses (a) and (b) above) for 30 days after written notice
thereof has been given to the Company by the Bank;
(d) any representation, warranty, certification or
statement made or deemed made by the Company in this Agreement or in
any certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been incorrect or
misleading in any material respect when made or deemed made, as the
case may be;
(e) the Company or any Subsidiary shall fail to make any
payment in respect of Debt having an aggregate principal amount
exceeding $5,000,000 (other than the Notes) when due or within any
applicable grace period;
(f) any event or condition shall occur which results in
the acceleration of the maturity of Debt of the
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Company or any Subsidiary having an aggregate principal amount
exceeding $5,000,000 or enables (or, with the giving of notice or
lapse of time or both, would enable) the holder of such Debt or any
Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) the Company or any Significant Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for
a period of 60 days; or an order for relief shall be entered against the
Company or any Significant Subsidiary under the federal bankruptcy laws as now
or hereafter in effect;
(i) any member of the Controlled Group shall fail to pay
when due an amount or amounts aggregating in excess of $5,000,000
which it shall have become liable to pay to the PBGC or to a Plan
under Title IV of ERISA; or notice of intent to terminate a Plan or
Plans having aggregate Unfunded Vested Liabilities in excess of
$10,000,000 (collectively, a "Material Plan") shall be filed under
Title IV of ERISA by any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate or to cause
a trustee to be appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any Material Plan
against any member of the Controlled
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40
Group to enforce Section 515 of ERISA and such proceeding shall not
have been dismissed within 30 days thereafter; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated;
(j) a judgment or order for the payment of money in
excess of $5,000,000 shall be rendered against the Company or any
Subsidiary and such judgment or order shall continue unsatisfied and
unstayed for a period of 30 days;
(k) the validity or enforceability of this Agreement or
either Note shall be contested by the Company; or the Company shall
deny generally its liability hereunder or thereunder;
(l) the Company shall cease to own all of the shares of
common stock of Lafarge Canada; or
(m) Lafarge Coppee shall cease to own, directly or
indirectly, at least 50% of the outstanding voting securities of the
Company (assuming the exercise of all outstanding conversion and
exchange rights);
then, and in every such event and at any time thereafter during the continuance
of such event, the Bank may, by notice to the Company (which notice may be oral
if immediately confirmed in writing (including telex or telecopier
transmission), provided that the lack of such an immediate confirmation shall
not affect the conclusiveness and binding effect of such notice) take any one
or more or all of the following actions at the same or different times:
(i) terminate the Commitment, whereupon the same shall
terminate without demand or further notice of any kind, all of which
are expressly waived hereby, anything contained herein to the contrary
notwithstanding;
(ii) exercise any of its rights under Section 3.06; or
(iii) demand that the Company pay forthwith to the Bank an
amount equal to the amount then outstanding on the Notes plus any
other amounts due hereunder or under the Notes, whereupon the same
shall immediately become due and payable by the Company, without
presentment, demand, protest or any other notice of any kind, all of
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which are hereby expressly waived, anything contained herein or in the
Notes to the contrary notwithstanding;
provided that in the case of any of the Events of Default specified in
paragraph (g) or (h) above with respect to the Company, without any notice to
the Company or any other act by the Bank, the Commitment shall thereupon
immediately and automatically terminate and the Notes (together with accrued
interest thereon and all other amounts due hereunder or under the Notes) shall
become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company.
Any funds received by the Bank pursuant to this Section may be
applied by the Bank at its discretion to the payment of any obligation of the
Company hereunder. Any such funds remaining after all of the Company's
obligations hereunder and under the Notes have been discharged to the
satisfaction of the Bank shall be returned by the Bank to the Company or as a
court shall otherwise direct. The remedies herein provided in case of an Event
of Default shall not be deemed to be exclusive but shall be cumulative and
shall be in addition to all other remedies existing at law, in equity or in
bankruptcy.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Termination Date. (a) The obligation of the
Bank to make any Loan hereunder shall terminate at 5:00 p.m. (New York City
time) on August 31, 1999 (or, if such date is not a Domestic Business Day, then
on the next succeeding Domestic Business Day), unless earlier terminated
pursuant to the provisions of Section 3.01, 3.02 or 7.01 or unless extended
pursuant to subsection (b) hereof (each of August 31, 1999 (or such next
succeeding Domestic Business Day) or such earlier date of termination or the
date to which the obligation of the Bank is so extended being the "Termination
Date"). On the Termination Date, the Commitment shall be reduced automatically
to zero and the principal amount of all outstanding Loans, together with
accrued and unpaid interest thereon and all other amounts payable under this
Agreement, shall become due and payable.
(b) If the Company requests, by notice delivered to the Bank
at least 14 full months prior to the Termination Date as then in effect, that
the Bank extend its obligation
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42
pursuant to this Agreement to make Loans and the Bank agrees in writing to such
request within the forty-five-day period following delivery of such notice,
then such obligations shall be extended to the date one year from such former
Termination Date (or if such date is not a Domestic Business Day, then to the
next succeeding Domestic Business Day).
SECTION 8.02. Transfer of Funds. All deposits and other
transfers of funds in respect of this Agreement shall be made in Federal or
other immediately available funds, unless otherwise specified herein or the
recipient thereof shall otherwise agree.
SECTION 8.03. Notices. Unless otherwise specified herein,
all notices, requests and other communications to any party hereunder shall be
in writing (including bank wire, telex, telecopier or similar writing) and
shall be given to such party at its address or the telex or telecopier numbers
set forth on the signature pages hereof or such other address or telex number
as such party may hereafter specify by notice to the other parties hereto.
Each such notice, request or other communication shall be effective (a) if
given by telex, when such telex is transmitted to the telex number specified in
this Section and the appropriate answerback is received, (b) if given by
telecopier or other form of facsimile transmission thereof, when so transmitted
or (c) if given by any other means, when delivered at the address specified in
this Section; provided that notices to the Bank under Section 2.02, 2.04, 2.07,
3.01 or 3.03 shall not be effective until received.
SECTION 8.04. Survival. All covenants, agreements,
representations and warranties made herein and in the making of any Loans
hereunder and in any certificates, documents or other instruments delivered
pursuant hereto or thereto shall survive the making of any Loan and shall
continue in full force and effect so long as the Notes remain outstanding or
any obligation to make any payment hereunder, under the Notes outstanding and
unpaid or any obligation to perform any other act hereunder remains
unsatisfied. All covenants, promises and agreements by or on behalf of the
Company which are contained in the Notes or this Agreement shall inure to the
benefit of the successors and assigns of the Bank.
SECTION 8.05. No Waivers. No failure or delay by the Bank in
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any
-37-
43
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 8.06. Expenses; Documentary Taxes. (a) The Company
shall pay (i) all out-of-pocket expenses of the Bank, including fees and
disbursements of special counsel for the Bank, in connection with the
preparation of this Agreement, any waiver or consent hereunder, any amendment
hereof (whether or not ultimately executed), any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses
incurred by the Bank, including fees and disbursements of counsel, in
connection with such Event of Default and collection and other enforcement
proceedings resulting therefrom. The Company shall indemnify the Bank against
any transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of this
Agreement or the Notes.
(b) The Company agrees to indemnify the Bank and hold the
Bank harmless from and against any and all liabilities, losses, damages, costs
and expenses of any kind (including, without limitation, the reasonable fees
and disbursements of counsel for the Bank in connection with any investigative,
administrative or judicial proceeding, whether or not the Bank shall be
designated a party thereto) which may be incurred by the Bank, relating to or
arising out of this Agreement, the Notes or any transaction contemplated
herein; provided, that the Bank shall not have the right to be indemnified
hereunder for its own gross negligence or willful misconduct as determined by a
court of competent jurisdiction in a final non-appealable judgment.
SECTION 8.07. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Company and the Bank.
SECTION 8.08. Successors and Assigns. (a) This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto; provided, however,
that the Company may not assign or transfer any of its rights and obligations
hereunder.
(b) The Bank may transfer, assign or grant participations
in its rights hereunder and under the Notes, provided that the Bank shall
remain a "Bank" for all purposes
-38-
44
hereunder (and may not transfer or assign its Commitment hereunder except
pursuant to clause (c) below) and the participant shall not constitute a "Bank"
hereunder and the Bank shall not transfer, grant or assign any participation
under which the participant shall have rights to approve any amendment to or
waiver of this Agreement. In the case of any such participation, the
participant shall not have any rights under this Agreement or the Notes (the
participant's rights against the Bank in respect of such participation to be
those set forth in the agreement executed by the Bank in favor of the
participant relating thereto) and all amounts payable by the Company hereunder
shall be determined as if the Bank had not sold such participation. If the
Bank grants a participation in any of its rights under this Agreement and its
Notes, it shall give prompt notice thereof to the Company.
(c) Notwithstanding anything to the contrary in Section
8.08(a) or (b), the Bank may assign all or a portion of its Commitment and its
rights and obligations hereunder or under its Notes; provided, however, that
(i) the Bank may not effect such an assignment without the prior written
consent of the Company, which consent shall not be unreasonably withheld, (ii)
the aggregate amount of the Commitment of the Bank subject to each such
assignment shall in no event be less than $5,000,000, and no such assignment
may result in the Bank having a Commitment of less than $5,000,000 unless such
Bank assigns its entire Commitment pursuant to such assignment, (iii) upon such
assignment, the Bank's Commitment hereunder shall be reduced by an amount equal
to the amount so assigned and this Agreement shall be deemed amended to reflect
such reduction in the Bank's Commitment hereunder, and (iv) the Company shall
enter into a new credit agreement substantially similar to this Agreement with
such assignee. In the event of any such assignment and concurrently with the
surrender to the Company of the applicable Note of the assigning Bank, the
Company will issue new Notes to the Bank in conformity with the requirements of
Section 2.03.
(d) Notwithstanding anything to the contrary contained in
this Section 8.08, no assignment or other transfer by the Bank shall result in
any additional expense to the Company, nor shall any assignee or other
transferee of the Bank be entitled to receive any greater payment under Section
3.03 than the Bank would have been entitled to receive with respect to the
rights assigned or otherwise transferred, unless such assignment or transfer is
made by reason of the provisions of Section 3.02 or 3.03 requiring the Bank to
designate a different Lending Office under certain circum-
-39-
45
stances or at a time when the circumstances giving rise to such greater payment
did not exist.
SECTION 8.09. Collateral. The Bank represents that it in
good faith is not relying upon any "margin stock" (as defined in Regulation U)
as collateral in the extension or maintenance of the credit provided for in
this Agreement.
SECTION 8.10. New York Law. This Agreement and each Note
shall be construed in accordance with and governed by the law of the State of
New York applicable to agreements executed and to be performed solely within
such state and without regard to its conflict of laws principles. By its
execution hereof the Company hereby submits to the jurisdiction of the United
States Federal and New York State Courts sitting in New York, New York. The
Company hereby consents to the service of process in any action or proceeding
brought against it by the Bank by means of registered mail to the Company at
its address set forth herein. Nothing herein, however, shall prevent service
of process by any other means recognized as valid by law within or without the
State of New York. The Company hereby further waives any objection which it
now has or hereafter may have to the laying of venue in any action or
proceeding arising out of or relating to this Agreement or either Note in any
United States Federal or New York State court sitting in New York, New York,
and any such objection to the ground that any such action or proceeding in any
such United States Federal or New York State court has been brought in an
inconvenient forum.
SECTION 8.11. Counterparts; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement shall become effective as of
September 1, 1994 when the Bank shall have received counterparts hereof signed
by both parties hereto.
SECTION 8.12. Waiver of Jury Trial. THE COMPANY HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
-40-
46
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
11130 Sunrise Valley Drive LAFARGE CORPORATION
Reston, Virginia 22091
By
-----------------------
Tel: (703) 264-3673 Title:
Fax: (703) 264-0634
Att: Philip A. Millington
Treasurer
------------------------ [NAME OF BANK]
------------------------
Tel: By
-------------- ------------------------
Title:
Fax:
--------------
Att:
--------------
By
-------------- ------------------------
Title:
-41-
47
EXHIBIT A
DOMESTIC NOTE
$___________ New York, New York
________ __, 199__
On the Termination Date, for value received, Lafarge
Corporation, a Maryland corporation (the "Company"), promises to pay to the
order of _______________ (the "Bank"), for the account of its Domestic Lending
Office, the principal sum of ___________ _ U.S. dollars or, if less, the
aggregate unpaid principal amount of all Domestic Loans made by the Bank to the
Company pursuant to the Credit Agreement referred to below. The Company
promises to pay interest on the aggregate unpaid principal amount of such
Domestic Loans on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds for
the account of the Bank at _________________________________________________.
All Domestic Loans made by the Bank and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof.
This Note is the Domestic Note referred to in the Revolving
Credit Facility Agreement dated as of September 1, 1994 between the Company and
the Bank (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the
same meanings. Reference is made to the Credit Agreement for provisions for
the prepayment hereof and the acceleration of the maturity hereof.
This Note shall be construed in accordance with and be
governed by the law of the State of New York.
LAFARGE CORPORATION
By
-----------------------
Title:
48
EXHIBIT A
Page 2
Domestic Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Amount Amount of Unpaid
Base or of Principal Principal Notation
Date CD Loan Loan Repaid Balance Made By
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49
EXHIBIT B
EURO-DOLLAR NOTE
$____________ New York, New York
________ __, 199__
On the Termination Date, for value received, Lafarge
Corporation, a Maryland corporation (the "Company"), promises to pay to the
order of ___________ (the "Bank"), for the account of its Euro-Dollar Lending
Office, the principal sum of $_________ U.S. dollars or, if less, the aggregate
unpaid principal amount of all Euro-Dollar Loans made by the Bank to the
Company pursuant to the Credit Agreement referred to below. The Company
promises to pay interest on the aggregate unpaid principal amount of such Euro-
Dollar Loans on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds for
the account of the Bank at
____________________________________________________.
All Euro-Dollar Loans made by the Bank and all repayments of
the principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof.
This Note is the Euro-Dollar Note referred to in the Revolving
Credit Facility Agreement dated as of September 1, 1994 between the Company and
the Bank (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the
same meanings. Reference is made to the Credit Agreement for provisions for
the prepayment hereof.
This Note shall be construed in accordance with and be
governed by the law of the State of New York.
LAFARGE CORPORATION
By
--------------------------
Title:
50
EXHIBIT B
Page 2
Euro-Dollar Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
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51
EXHIBIT C
OPINION OF DAVID C. JONES, ESQ.,
VICE PRESIDENT - LEGAL AFFAIRS
AND SECRETARY OF THE COMPANY
[Dated as provided in
Section 4.01 of the
Credit Agreement]
[Name and Address of Bank]
Re: Revolving Credit Facility Agreement,
dated as of September 1, 1994
(the "Credit Agreement") between
Lafarge Corporation (the "Company")
and _________________
Dear Sirs:
As Vice President - Legal Affairs and Secretary for Lafarge
Corporation, a Maryland corporation (the "Corporation"), I have acted as
counsel for the Corporation in connection with the Revolving Credit Facility
Agreement dated as of September 1, 1994 (the "Credit Agreement") between the
Corporation and the Bank. Unless otherwise defined herein, capitalized terms
defined in the Credit Agreement are used herein as therein defined.
I have reviewed a copy of the Credit Agreement and the Notes
and have examined the Articles of Incorporation and by-laws of the Corporation
and such other corporate records, certificates, agreements and other documents
as I deemed necessary for the opinions hereinafter expressed.
Based upon the foregoing and subject to the qualifications and
exceptions hereinafter set forth, I am of the opinion that:
1. The Corporation is duly incorporated, validly existing and
in good standing under the laws of the State of Maryland.
52
EXHIBIT C
Page 2
2. The Corporation is duly qualified to do business in the
State of Maryland and is duly qualified as a foreign corporation in each of the
jurisdictions set forth on Schedule 1 hereto, which jurisdictions, to the best
of my knowledge, are all of the jurisdictions in which the Corporation has a
significant business presence.
3. The execution, delivery and performance by the Corporation
of the Credit Agreement and the Notes are within the Corporation's corporate
powers, have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene any provision of the Articles of Incorporation
or by-laws of the Corporation, or contravene or constitute a default under any
provision of applicable law or regulation or, to the best of my knowledge, of
any agreement, judgment, injunction, order, decree or other instrument binding
upon the Corporation or, except as permitted by the Credit Agreement, result in
the creation or imposition of any Lien on any asset of the Corporation or any
of its Subsidiaries.
4. The Credit Agreement constitutes the valid and binding
agreement of the Corporation and the Notes constitute valid and binding
obligations of the Corporation, enforceable in accordance with their respective
terms except to the extent that enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by equity principles (regardless of whether
enforcement is sought in equity or at law).
5. Except as set forth in the Corporation's Forms 10-K and
10-Q as filed with the Securities and Exchange Commission for the fiscal year
ended December 31, 1993 and the fiscal quarter ended June 30, 1994,
respectively, there is no action, suit or proceeding pending, to the best of my
knowledge, or threatened against or affecting the Corporation or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision that
could materially adversely affect the business, consolidated financial position
or consolidated results of operations of the Corporation and its Consolidated
Subsidiaries, considered as a whole, or the ability of the Corporation to
satisfy its
53
EXHIBIT C
Page 3
obligations under the Agreement or either Note, or which questions the validity
of the Credit Agreement or either Note.
The opinions expressed above are based in part upon the
assumptions and are subject to the exceptions, limitations and qualifications
set forth below:
(a) The foregoing opinions are limited in all respects to the
laws of the Commonwealth of Virginia and, to the extent applicable,
the Annotated Code of Maryland, Corporations and Associations (without
regard to case law), with respect to the State of Maryland. I am
licensed to practice law in the Commonwealth of Virginia and I am not
an expert on, and, except for applicable federal law, have not in
connection with this opinion made any investigation of, the laws of
any other jurisdiction. Insofar as this opinion relates to matters of
New York law, I have, with your permission, relied upon the opinion
dated ____________ of Messrs. White & Case, special New York counsel
for the Bank, a copy of which opinion has been delivered to you.
(b) In rendering the opinion set forth in paragraph 4 above,
I have assumed that (i) the Bank is duly authorized to and has
executed and delivered the Credit Agreement and (ii) upon the
execution and delivery of the Credit Agreement by the Bank, such
agreement will constitute the valid and binding obligation of the
Bank.
(c) In rendering the opinion set forth in paragraph 2 above
as to the Corporation's qualification to do business and good standing
in each state listed on Schedule 1 hereto, I have relied solely upon
certificates of public officials of such states dated as of _________,
19__ together with a certificate of an officer of the Corporation
dated the date hereof as to the Corporation's continued qualification
to do business and good standing in such states.
(d) No opinion is expressed herein with respect to the
securities laws of the United States or of any state or jurisdiction
other than the Commonwealth of Virginia.
54
EXHIBIT C
Page 4
(e) This opinion is limited to, and no opinion is implied or
may be inferred beyond, the matters expressly stated herein.
(f) This opinion is provided to you pursuant to Section 4.01
of the Credit Agreement and for no other purpose. This opinion is to
be limited in its use to reliance by you in connection with the
transactions contemplated by the Credit Agreement. No other person or
entity may rely upon any opinion set forth herein except with my prior
written consent.
Respectfully submitted,
55
EXHIBIT C
Page 5
SCHEDULE 1
STATES OF FOREIGN QUALIFICATION
LAFARGE CORPORATION
Florida 1-21-88
Illinois 1-28-88
Iowa 1-15-91
Kansas 1-22-88
Michigan 1-21-88
Missouri 1-17-91
Ohio 1-22-88
Pennsylvania 1-25-88
Texas 4-25-83
56
EXHIBIT D
OPINION OF WHITE & CASE
SPECIAL NEW YORK COUNSEL TO THE BANK
[Dated as provided in
Section 4.01 of the
Credit Agreement]
To: [Name of Bank]
Re: Revolving Credit Facility Agreement,
dated as of September 1, 1994
(the "Credit Agreement") between
Lafarge Corporation (the "Company")
and _________________
Ladies and Gentlemen:
We have acted as your special counsel in connection with the
execution and delivery of the Credit Agreement. This opinion is delivered to
you pursuant to Section 4.01 of the Credit Agreement. Terms used herein which
are defined in the Credit Agreement shall have the respective meanings set
forth in the Credit Agreement unless otherwise defined herein.
In connection with this opinion, we have examined the
originals, or certified, conformed or reproduction copies, of all records,
agreements, instruments and documents as we have deemed relevant or necessary
as the basis for the opinions hereinafter expressed. In stating our opinion,
we have assumed the genuineness of all signatures on original or certified
copies, the authenticity of documents submitted to us as originals and the
conformity to original or certified copies of all copies submitted to us as
certified or reproduction copies.
We have also assumed, for purposes of the opinions expressed
herein, that the parties to the Credit Agreement have the corporate power and
authority to enter into and perform the Credit Agreement, and in the Company's
case the Notes, and that the Credit Agreement has been duly authorized,
executed and delivered by each such party and that the Notes have been duly
executed and delivered by the Company.
57
EXHIBIT D
Page 2
Based upon the foregoing, and subject to the limitations set
forth herein, we are of the opinion that the Credit Agreement and the Notes
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their respective terms except to the extent that enforcement
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally and by equity principles
(regardless of whether enforcement is sought in equity or at law).
We have not been requested to render and, with your
permission, we express no opinion as to the applicability to the obligations of
the Company under the Credit Agreement of Section 548 of the Bankruptcy Code
and Article 10 of the New York Debtor & Creditor Law relating to fraudulent
transfers and obligations.
In rendering his opinion to the Bank on the date hereof, David
C. Jones, Esq., Vice President -- Legal Affairs of the Company, may rely on
this opinion as if this opinion were addressed to him.
This opinion is limited to the federal law of the United
States of America and the law of the State of New York.
Very truly yours,
58
EXHIBIT E
OPINION OF CANADIAN
COUNSEL FOR LAFARGE CANADA
[Dated as provided in
Section 4.01 of the
Credit Agreement]
[Name and Address of Bank]
Dear Sirs:
As Director, Legal Services and Secretary of Lafarge Canada
Inc., a Canadian corporation (the "Company"), I have acted as counsel for the
Company in connection with the Revolving Credit Facility Agreement dated as of
1 September 1994 (the "Credit Agreement"), between Lafarge Corporation and
___________________.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
extra-provincial licenses and other similar documents issued by governmental
authorities and other documents, and have conducted such other investigations
of fact and law as I have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, I am of the opinion that:
1) the Company is duly incorporated, validly existing and in
good standing under the laws of Canada;
2) the Company has all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted and
is duly qualified to do business and is in good standing in each province or
other jurisdiction in which the nature of its business or properties requires
such qualification, except for those provinces or jurisdictions in which the
failure to be so qualified or be in good standing would not have a material
adverse effect on Lafarge Corporation and its subsidiaries taken as a whole.
In rendering this opinion, I am not purporting to opine as to
any laws other than the laws of the Province of
59
EXHIBIT E
Page 2
Quebec and the federal laws of Canada applicable therein in effect on the date
hereof.
This opinion is provided to you pursuant to Section 4.01 of
the Credit Agreement and for no other purpose. This opinion is to be limited
and to be used in reliance by you in connection with the transactions
contemplated by the Credit Agreement. No other person or entity may rely upon
any opinion set forth herein except with my prior written consent.
Very truly yours,
------------------------
Alain Fredette
Director, Legal Services
and Secretary
EX-10.28
4
PROMISSORY NOTE DATED JUNE 15, 1994 - ED BALFE
1
EXHIBIT 10.28
NOTE
June 15, 1994 Fairfax, Virginia
------------- -----------------
City
793 Stephanie Circle, Great Falls, Virginia 22066
-------------------------------------------------------------------------------
Property Address City State Zip Code
1. BORROWER'S PROMISE TO PAY
In return for a loan that I have received for the purpose of purchasing
a new residence in connection with my transfer to a new place of employment, I
promise to pay U.S. $200,000.00 (this amount will be called "principal"), [plus
interest], to the order of the Lender. The Lender is LAFARGE CORPORATION, a
Maryland corporation I understand that the Lender may transfer this Note. The
Lender or anyone who takes this Note by transfer and who is entitled to receive
payments under this Note will be called the "Note Holder."
[2. INTEREST
I will pay interest at a yearly rate of %.
Interest will be charged on that part of principal which has not been
paid. Interest will be charged beginning on the date of this Note and
continuing until the full amount of principal has been paid.]
3. PAYMENTS
I will pay principal [and interest] by making payments once each month
[or twice each month depending on whether salary is paid monthly or
semimonthly. If] I am paid monthly my monthly payment will be in the amount of
U.S. $833.33. [If am paid semimonthly my semimonthly payment will be in the
amount] of U.S. $833.33.
I will make my payments on the 1st day of each month if my payments are
made monthly, [and on the _________ and__________ day of each month if my
payments are made semimonthly] beginning on August 1, 1994. I will make these
payments every month until I have paid all of the principal [and interest] and
any other charges, described below, that I may owe under this Note. If, on
July 1, 2014, I still owe amounts under this Note, I will pay all those
amounts, in full, on that date.
I will make monthly payments by payroll deduction or in any other
manner as may be hereafter required by the Note Holder upon notice to me or at
a different place if required by the Note Holder.
4. BORROWER'S FAILURE TO PAY AS REQUIRED
[(A) Late Charge for Overdue Payments]
[If the Note Holder has not received the full amount of any of my
monthly payments by the end of ______________ calendar days after the date it
is due, I will pay a late charge to the Note Holder. The amount of the charge
will be __________________% of my overdue payment but not less than U.S.
$________________________________ and not more than U.S.
$___________________________ I will pay this late charge only once on any late
payment.]
(B) NOTICE FROM NOTE HOLDER
If I do not pay the full amount of each monthly [or semimonthly]
payment on time, the Note Holder may send me a written notice telling me that
if I do not pay the overdue amount by a certain date I will be in default. That
date must be a least 10 days after the date on which the notice is mailed to me
or, if it is not mailed, 10 days after the date on which it is delivered to me.
(C) DEFAULT
If I do not pay the overdue amount by the date stated in the notice
described in (B) above or if I am in default under the Deed of Trust
(hereinafter defined), I will be in default hereunder. If I am in default, the
Note Holder may require me to pay immediately the full amount of principal
which has not been paid [and all the interest that I owe on that amount.]
Even if, at a time when I am in default, the Note Holder does not
require me to pay immediately in full as described above, the Note Holder will
still have the right to do so if I am in default at a later time.
(D) PAYMENT OF NOTE HOLDER'S COSTS AND EXPENSES
If the Note Holder has required me to pay immediately in full as
described above, the Note Holder will have the right to be paid back for all of
its costs and expenses to the extent not prohibited by applicable law. Those
expenses include, for example, reasonable attorneys' fees.
5. THIS NOTE SECURED BY A DEED OF TRUST
In addition to the protections given to the Note Holder under this
Note, a Deed of Trust, dated June 15, 1994 protects the Note Holder from
possible losses which might result if I do not keep the promises which I make
in this Note. That Deed of Trust describes how and under what conditions I may
be required to make immediate payment in full of all amounts that I owe under
this Note.
6. BORROWER'S PAYMENTS BEFORE THEY ARE DUE
I have the right to make payments of principal at any time before they
are due. A payment of principal only is known as a "prepayment". When I make a
prepayment, I will tell the Note Holder in a letter that I am doing so. A
[logo]
2
prepayment of all of the unpaid principal is known as a "full prepayment". A
prepayment of only part of the unpaid principal is known as a "partial
prepayment".
I amy make a full prepayment or a partial prepayment without paying any
penalty. The Note Holder will use all of my prepayments to reduce the amount of
principal that I owe under this Note. If I make a partial prepayment, there
will be no delays in the due dates or changes in the amounts of my monthly
payments unless the Note Holder agrees in writing to those delays or changes.
I may make a full prepayment at any time. If I choose to make a partial
prepayment, the Note Holder may require me to make the prepayment on the same
day that one of my monthly payments is due. The Note Holder may also require
that the amount of my partial prepayment be equal to the amount of principal
that would have been part of my next one or more monthly [or semimonthly]
payments.
7. BORROWER'S WAIVERS
I waive my rights to require the Note Holder to do certain things.
Those things are: (A) to demand payment of amounts due (known as
"presentment"); (B) to give notice that amounts due have not been paid (known
as "notice of dishonor"); (C) to obtain an official certification of nonpayment
(known as "protest"). Anyone else who agrees to keep the promises made in this
Note, or who agrees to make payments to the Note Holder if I fail to keep my
promises under this Note, or who signs this Note to transfer it to someone else
also waives these rights. These persons are known as "guarantors, sureties and
endorsers".
8. GIVING OF NOTICES
Any notice that must be given to me under this Note will be given by
delivering it or by mailing it by certified mail addressed to me at the
Property Address above. A notice will be delivered or mailed to me at a
different address if I give the Note Holder a notice of my different address.
Any notice that must be given to the Note Holder under this Note will
be given by mailing it by certified mail to the Note Holder at the address
stated in Section 3 above. A notice will be mailed to the Note Holder at a
different address if I am given a notice of that different address.
9. RESPONSIBILITY OF PERSONS UNDER THIS NOTE
If more than one person signs this Note, each of us is fully and
personally obligated to pay the full amount owed and to keep all of the
promises made in this Note. Any guarantor, surety, or endorser of this Note (as
described in Section 7 above) is also obligated to do these things. The Note
Holder may enforce its rights under this Note against each of us individually
or against all of us together. This means that any one of us may be required to
pay all of the amounts owned under this Note. I understand that this Note is
personal to me and is not transferable to any third party. [Any person who
takes over my rights or obligations under this Note will have all of my rights
and must keep all of my promises made in this Note. Any person who takes over
the rights or obligations of a guarantor, surety, or endorser of this Note (as
described in Section 7 above) is also obligated to keep all of the promises
made in this Note.]
10. HOMESTEAD EXEMPTION
I waive my Homestead Exemption.
/s/ EDWARD T. BALFE (Seal)
---------------------------------------------
Borrower
(Seal)
---------------------------------------------
Borrower
(Seal)
---------------------------------------------
Borrower
(Sign Original Only)
This is to certify that this is the Note described in and secured by a
Deed of Trust dated June 15, 1994 on property located in Fairfax, Virginia. My
commission expires: 8-31-97
/s/ MONICA WIMFERY
---------------------------------------------
Notary Public
EX-10.29
5
PROMISSORY NOTE DATED SEPT. 1, 1994 - DUNCAN GAGE
1
NOTE EXHIBIT 10.29
September , 1994
1343 Echo Court (City) (State)
Bloomfield Hills, Michigan 48302
(Property Address)
1. BORROWER'S PROMISE TO PAY
In return for a loan that I have received, I promise to pay U.S. $
200,000.00 (this amount is called "principal"), [plus interest], to the order
of the Lender. The Lender is Lafarge Corporation Maryland Corporation I
understand that the Lender may transfer this Note. The Lender or anyone who
takes this Note by transfer and who is entitled to receive payments under this
Note is called the "Note Holder."
[2. INTEREST
Interest will be charged on unpaid principal until the full amount of
principal has been paid. I will pay interest at a yearly rate of
%.
The interest rate required by this Section 2 is the rate I will pay
both before and after any default described in Section 6(B) of this Note.]
3. PAYMENTS
(A) TIME AND PLACE OF PAYMENTS
I will pay principal [and interest] by making payments every month.
I will make my monthly payments on the 1st day of each month beginning
on November 1, 1994 I will make these payments every month until I have paid
all of the principal [and interest] and any other charges described below that
I may owe under this Note. My monthly payments will be applied to [interest
before] principal. If, on October 1, 2014, I still owe amounts under this Note,
I will pay those amounts in full on that date, which is called the "maturity
date."
I will make my monthly payments by payroll deduction or in any other
manner as may be thereafter required by the Noteholder upon notice to me. or at
a different place if required by the Note Holder.
(B) AMOUNT OF MONTHLY PAYMENTS
My monthly payment will be in the amount of U.S. $ 833.33
4. BORROWER'S RIGHT TO PREPAY
I have the right to make payments of principal at any time before they
are due. A payment of principal only is known as a "prepayment." When I make a
prepayment, I will tell the Note Holder in writing that I am doing so.
I may make a full prepayment or partial prepayments without paying any
prepayment charge. The Note Holder will use all of my prepayments to reduce the
amount of principal that I owe under this Note. If I make a partial prepayment,
there will be no changes in the due date or in the amount of my monthly payment
unless the Note Holder agrees in writing to those changes.
5.LOAN CHARGES
If a law, which applies to this loan and which sets maximum loan
charges, is finally interpreted so that the interest or other loan charges
collected or to be collected in connection with this loan exceed the permitted
limits, then: (i) any such loan charge shall be reduced by the amount necessary
to reduce the charge to the permitted limit; and (ii) any sums already
collected from me which exceeded permitted limits will be refunded to me. The
Note Holder may choose to make this refund by reducing the principal I owe
under this Note or by making a direct payment to me. If a refund reduces
principal, the reduction will be treated as a partial prepayment.
6. BORROWER'S FAILURE TO PAY AS REQUIRED
[(A) LATE CHARGE FOR OVER DUE PAYMENTS
If the Note Holder has not received the full amount of any monthly
payment by the end of calendar days after the date it is due, I will pay a
late charge to the Note Holder. The amount of the charge will be % of
my overdue payment of principal and interest. I will pay this late charge
promptly but only once on each late payment.]
(B) DEFAULT
If I do not pay the full amount of each monthly payment on the date it
is due, or if I am in default under the Security Instrument (hereinafter
defined), I will be in default hereunder.
(C) NOTICE OF DEFAULT
I am in default, the Note Holder may send me a written notice telling
me that if I do not pay the overdue amount by a certain date, the Note Holder
may require me to pay immediately the full amount of principal which has not
been paid [and all the interest that I owe on that amount.] That date must be
at least 30 days after the date on which the notice is delivered or mailed to
me.
(D) NO WAIVER BY NOTE HOLDER
Even if, at a time when I am in default, the Note Holder does not
require me to pay immediately in full as described above, the Note Holder will
still have the right to do so if I am in default at a later time.
(E) PAYMENT OF NOTE HOLDER'S COSTS AND EXPENSES.
If the Note Holder has required me to pay immediately in full as
described above, the Note Holder will have the right to be paid back by me for
all of its costs and expenses in enforcing this Note to the extent not
prohibited by applicable law. Those expenses include, for example, reasonable
attorneys' fees.
7. GIVING OF NOTICES
Unless applicable law requires a different method, any notice that must
be given to me under this Note will be given by delivering it or by mailing it
by first class mail to me at the Property Address above or at a different
address if I give the Note Holder a notice of my different address.
Any notice that must be given to the Note Holder under this Note will
be given by mailing it by first class mail to the Note Holder at the address
stated in Section 3(A) above or at a different address if I am given a notice
of that different address.
[LOGO]
2
8. OBLIGATIONS OF PERSONS UNDER THIS NOTE
If more than one person signs this Note, each person is fully and
personally obligated to keep all of the promises made in this Note, including
the promise to pay the full amount owned. Any person who is a guarantor, surety
or endorser of this Note is also obligated to do these things. [Any person who
takes over these obligations, including the obligations of a guarantor, surety
or endorser of this Note, is also obligated to keep all of the promises made in
this Note. The Note Holder may enforce its rights under this Note against each
person individually or against all of us together. This means that any one of
us may be required to pay all of the amounts owned under this Note.] I
understand that this Note is personal to me and is not transferable to any
third party.
9. WAIVERS
I and any other person who has obligations under this Note waive the
rights of presentment and notice of dishonor. "Presentment" means the right to
require the Note Holder to demand payment of amounts due. "Notice of dishonor"
means the right to require the Note Holder to give notice to other persons that
amounts due have not been paid.
10. UNIFORM SECURED NOTE
This Note is a uniform instrument with limited variations in some
jurisdictions. In addition to the protections given to the Note Holder under
this Note, a Mortgage, Deed of Trust or Security Deed (the "Security
Instrument"), dated the same date as this Note, protects the Note Holder from
possible losses which might result if I do not keep the promises which I make
in this Note. That Security Instrument describes how and under what conditions
I may be required to make immediate payment in full of all amounts I owe under
this Note. Some of those conditions are described as follows:
TRANSFER OF THE PROPERTY OR A BENEFICIAL INTEREST IN BORROWER. If
all or any part of the Property or any interest in it is sold or
transferred (or if a beneficial interest in Borrower is sold or
transferred and Borrower is not a natural person) without Lender's
prior written consent, Lender may, at its option, require immediate
payment in full of all sums secured by this Security Instrument.
However, this option shall not be exercised by Lender if exercise is
prohibited by federal law as of the date of this Security Instrument.
If Lender exercise this option. Lender shall give Borrower notice
of acceleration. The notice shall provide a period of not less than 30
days from the date the notice is delivered or mailed within which
Borrower must pay all sums secured by this Security Instrument. If
Borrower fails to pay these sums prior to the expiration of this
period, Lender may invoke any remedies permitted by this Security
Instrument without further notice or demand on Borrower.
11. Homestead Exemption. Borrower hereby waives his Homestead Exemption.
WITNESS THE HAND(S) AND SEAL(S) OF THE UNDERSIGNED.
/s/ DUNCAN GAGE
----------------------------------------------------(Seal)
Borrower
/s/ KATHY D. GAGE
----------------------------------------------------(Seal)
Borrower
----------------------------------------------------(Seal)
Borrower
----------------------------------------------------(Seal)
Borrower
(Sign Original Only)
EX-10.30
6
PROMISSORY NOTE DATED JULY 9, 1994 - PETER COOKE
1
EXHIBIT 10.30
PROMISSORY NOTE
DATE: July 9, 1990
On demand, after date, I promise to pay to Canada Cement Lafarge Ltd. on order
$ One Hundred Thousand Canadian Dollars at its Corporate Office, 606 Cathcart
Street, Montreal, Quebec, H3B 1L7 (at no interest charge).
SIGNED /s/ P. COOKE
--------------------------------
P. Cooke
$ 100,000
WITNESSED BY:
/s/ G. GUILBERT
--------------------------------
G. Guilbert
EX-10.31
7
COST SHARING AGREEMENT / AMEND. DATED SEPT 13,1991
1
EXHIBIT 10.31
THIS AGREEMENT ENTERED INTO WITH EFFECT AS OF AND FROM THE FIRST DAY OF
JANUARY, 1991
BETWEEN: LAFARGE COPPEE, a corporation duly incorporated under the laws of
France, having its corporate office at 28, rue Emile Menier,
Paris, 75116, France, herein acting and represented by Mr. Patrick
Baviere duly authorized as he so declares;
LAFARGE CORPORATION, a corporation duly incorporated under the
laws of Maryland, USA, having its corporate office at 11130
Sunrise Valley Drive, Reston, Virginia 22091, USA, herein acting
and represented by Mr. Robert W. Murdoch, duly authorized as he so
declares;
AND: LAFARGE CANADA INC., a corporation duly incorporated under laws of
Canada having its corporate office at 606 Cathcart Street,
Montreal, Province of Quebec, H3B 1L7, Canada, herein acting and
represented by Mr. Robert W. Murdoch, duly authorized as he so
declares.
WHEREAS, LAFARGE COPPEE, Lafarge Corporation and Lafarge Canada Inc. have
entered on December 2nd, 1988 in a Cost Sharing Agreement (the Cost Sharing
Agreement) whereby LAFARGE COPPEE charges Lafarge Corporation and Lafarge
Canada Inc. for costs incurred in the field of research and development,
strategic planning, human resources and communication.
WHEREAS, LAFARGE COPPEE during the last few years has substantially expanded
its cement worldwide activities through acquisitions of cement companies or
assets in Spain (Asland SA) in Turkey (Aslan Cimento) or Germany (Karsdorf
plant). Also Lafarge Corporation completed recently the acquisition of the
Missouri Portland and Davenport Cement Companies in the U.S.
WHEREAS, LAFARGE COPPEE, Lafarge Corporation and Lafarge Canada Inc. intend to
have the formula used for the calculation of share of expenses in respect of
research and development to be allocated in the aggregate to Lafarge
Corporation and Lafarge Canada Inc. revised to reflect the above described
expansion of cement activities.
NOW, THEREFORE this agreement WITNESSETH that in consideration of the premises
herein contained the parties hereto agree to amend the Cost Sharing Agreement
as of January 1st, 1991 as follows.
2
1/ Amendment to section 2.4.2 (i) of the Cost Sharing Agreement
This section is amended as follows:
" 2.4.2 (i) The fair and proportionate share of expenses incurred in
each year by LAFARGE COPPEE in respect of research and
development to be allocated in the aggregate to L.Corp
and LCI shall be the fraction thereof that the total
tons of cement sold by L.Corp and LCI is of the total
tons of cement sold by Ciments Lafarge S.A., Companhia
National de Cimento Portland, Wossinger Zement GmbH
(Wossinger and Karsdorf cement plants), Asland S.A.,
Aslan Cimento, L. Corp and LCI. The fair and
proportionate share of L.Corp shall be the fraction of
such expenses allocated in the aggregate to L.Corp and
LCI that L.Corp's consolidated sales less LCI's sales is
of L.Corp's consolidated sales, and the fair and
proportionate share of LCI shall be the fraction thereof
that LCI's sales is of L.Corp's consolidated sales."
2/ Other terms and provisions of the Cost Sharing Agreement
All terms and provisions of the Cost Sharing Agreement other than the
above mentioned section 2.4.2 (i) remain valid and unchanged.
IN WITNESS WHEREOF, the parties have signed this Amendment No. 1 to the
Cost Sharing Agreement, this 13th day of September 1991.
LAFARGE COPPEE LAFARGE CORPORATION
per /s/ P. BAVIERE PER /s/ R. W. MURDOCH
--------------------------- ----------------------------
P. Baviere R. W. Murdoch
Senior Vice President President and
Finance Chief Executive Officer
LAFARGE CANADA INC.
per /s/ R. W. MURDOCH
----------------------------
R. W. Murdoch
President and
Chief Executive Officer
EX-11
8
COMPUTATION OF NET INCOME PER COMMON EQUITY SHARE
1
LAFARGE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON EQUITY SHARE EXHIBIT 11
(Unaudited and in thousands except per share amounts)
Years Ended December 31
-------------------------------------------------
1994 1993 (b) 1992
-------------------------------------------------
Primary Calculation
Net income (loss) applicable to common
equity shareholders $ 80,636 $ 5,897 $(100,644)
=================================================
Weighted average number of common equity
shares outstanding 67,736 61,097 58,652
Net effect of dilutive stock options-based
on the treasury stock method using average
market price 518 539 -
-------------------------------------------------
Weighted average number of common equity
shares and share equivalents outstanding 68,254 61,636 58,652
=================================================
Primary net income (loss) per common equity share $ 1.18 $ 0.10 $ (1.72)
=================================================
Fully diluted calculation
Net income (loss) $ 80,636 $ 5,897 $(100,644)
Add after tax interest expense applicable to
7% Convertible Debentures 7,000 7,000 7,000
-------------------------------------------------
Net income (loss) assuming full dilution $ 87,636 $ 12,897 $ (93,644)
=================================================
Weighted average number of common equity
shares outstanding 67,736 61,097 58,652
Net effect of dilutive stock options-based on
the treasury stock method using the higher
of average or year-end market price 518 850 212
Add additional shares assuming conversion of
7% Convertible Debentures 4,520 4,520 4,520
-------------------------------------------------
Weighted average number of common equity
shares assuming full conversion of all
potentially dilutive securities 72,774 66,467 63,384
=================================================
Fully diluted net income (loss) per common
equity share $ 1.20 (a) $ 0.19 (a) $ (1.48) (a)
=================================================
(a) This calculation is submitted in accordance with regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No.
15 because it produces an anti-dilutive result.
(b) All calculations for 1992 include the cumulative effect of changes in
accounting principles.
EX-22
9
SUBSIDIAIES OF THE REGISTRANT
1
Exhibit 22
MAJOR SUBSIDIARIES OF LAFARGE CORPORATION
The following indicates the corporate names (and all other significant names,
if any, under which business is conducted) and jurisdictions of incorporation
of the subsidiaries of Lafarge Corporation, all of which are wholly owned or
majority owned. Indirect subsidiaries of Lafarge Corporation are indented and
listed following their direct parent corporations.
Jurisdiction
Name(s) of Incorporation
------------------------------ ----------------
1988 Associates, Inc. Delaware
Adminco Corp. Missouri
Anchor Wate Company Delaware
CMAC Corporation Delaware
Cement Transport, Ltd. North Dakota
Concrete Holding Company Missouri
Friday Harbor Sand & Gravel Co. Washington
Gen-Tex Trucking, Inc. Texas
International Atlantins Insurance Company Vermont
Lafarge Concrete, Inc. Louisiana
Lafarge Dakota Inc. North Dakota
Lafarge K.C.K. Inc. Missouri
National Minerals Corporation Minnesota
Parker Lafarge Inc. Texas
Paving Holding Company Missouri
Robertson Construction Materials, Inc. Delaware
Systech Environmental Corporation Delaware
Walter N. Handy Co., Inc. Missouri
Lafarge Canada Inc. Canada
Allan G. Cook Limited Ontario
Gestion Carim Inc. Quebec
International Atlantins Agencies Inc. British Columbia
Johnson Concrete & Material Ltd. Saskatchewan
Lulu Transport Inc. British Columbia
N C Rubber Products Inc. Ontario
Quality Ready-Mix Limited Ontario
Standard Aggregates Inc. Ontario
Standard Paving Maritime Limited Nova Scotia
Systech Environmental Inc. Ontario
Valley Rite-Mix Ltd. British Columbia
2
Lafarge Corporation also does business under the following names: Davenport
Cement Company, Duquesne Slag Products Company, Florida Portland Cement,
General Portland Inc., Kurtz-Lafarge, Lafarge Concrete, Lafarge Construction
Materials, Missouri Portland Cement Company, Pittsburgh Sand and Gravel,
Robertson Construction Materials, St. Charles Quarry Company, St. Louis Slag
Products Company, Standard Aggregates, Standard Lafarge, The Standard Slag
Company, Sullivan Lafarge, Trinity Portland Cement Company, The Whitehall
Cement Manufacturing Company.
Lafarge Canada Inc. also does business under the following names: Alberta
Concrete Products, Apex Gravel, Bradstone, Brunswick Ready Mix Concrete, Canada
Concrete, Capital Concrete, Challenge Concrete, Champion Concrete, Cinq
Concrete, Coldstream Concrete, Columbia Concrete, Concrete Pipe Company, Conmac
Western Industries, Construction Chemicals, Constructive Communications,
Country Building Supplies, Crown Equipment, Crown Paving and Engineering,
Forbes Ready Mix, Francon Lafarge, High River Concrete, Jiffy Concrete
Products, Johnston Ready Mix, Lafarge Concrete, Lafarge Concrete Products,
Lafarge Construction Materials, Lafarge Materials, Lethbridge Concrete
Products, Maritime Cement, Marker Building Materials, Masonry Products, McCord,
O.K. Construction Materials, Oaks Precast Industries, Permanent Paving,
Permanent-Lafarge, Red-D-Mix Block, Red-D-Mix Concrete, Redmond Sand & Gravel,
Richvale Block and Ready-Mix, Richvale - McCord, Richvale - York, Rocky
Mountain Precast, Supercrete, Superior Concrete Products, Standard Industries,
Standard Paving, Standard Pressure Pipe, Standard Slag Cement, York Block, York
Brick, Trans-Alta Flyash.
Information regarding 55 additional subsidiaries of the Registrant has been
omitted because such subsidiaries, considered in the aggregate as a single
subsidiary, do not constitute a "significant subsidiary" as defined in Rule
1-02(v) of Regulation S-X [17 CFR 210.1-02(v)].
EX-24
10
CONSENT OF ARTHUR ANDERSON LLP
1
EXHIBIT 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K into the following Registration
Statements of Lafarge Corporation previously filed with the Securities and
Exchange Commission: (i) Registration Statement on Form S-8, File No. 2-92414,
(ii) Registration Statement on Form S-8, File No. 33-9813, (iii) Registration
Statement on Form S-8, File No. 33-32645, (iv) Registration Statement on Form
S-3, File No. 33-32644 (which also constitutes Post- Effective Amendment No. 6
to Registration Statement on Form S-1, File No. 2-82548), (v) Registration
Statement on Form S-8, File No. 33-20865, (vi) Registration Statement on Form
S-3, File No. 33-46093 (which also constitutes Post-Effective Amendment No. 7
of Registration Statement on Form S-1, File No. 2-82548), and (vii)
Registration Statement on Form S-8, File No. 33-51873.
ARTHUR ANDERSEN LLP
Washington, D.C.
March 29, 1995
EX-27
11
FINANCIAL DATA SCHEDULE
5
1,000
12-MOS
DEC-31-1994
JAN-01-1994
DEC-31-1994
193,057
50,500
285,440
28,347
175,433
707,135
1,657,499
905,619
1,651,431
304,805
290,668
693,553
0
0
147,901
1,651,431
1,563,250
1,563,250
1,254,646
1,254,646
3,366
0
28,780
113,087
32,451
80,636
0
0
0
80,636
1.18
1.18