-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TN4yE8WMnaDGC0TnA1VPwzXt+jEPPvTK9NxdtFub9zpfzBJ0h7mTAzpw/qK6xI2m cUWlXHSzamrhjErd4vLaQg== 0000950133-01-001162.txt : 20010409 0000950133-01-001162.hdr.sgml : 20010409 ACCESSION NUMBER: 0000950133-01-001162 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAFARGE CORP CENTRAL INDEX KEY: 0000716783 STANDARD INDUSTRIAL CLASSIFICATION: CEMENT, HYDRAULIC [3241] IRS NUMBER: 581290226 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08584 FILM NUMBER: 1589455 BUSINESS ADDRESS: STREET 1: 11130 SUNRISE VALLEY DR STE 300 CITY: RESTON STATE: VA ZIP: 22091-4329 BUSINESS PHONE: 7032643600 10-K 1 w47043e10-k.txt FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 COMMISSION FILE NUMBER 0-11936 ------------------------------------ LAFARGE CORPORATION INCORPORATED IN MARYLAND I.R.S. EMPLOYER IDENTIFICATION NO. 12950 WORLDGATE DR., SUITE 500 58-1290226 HERNDON, VIRGINIA 20170 (703) 480-3600
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Common Stock, par value $1.00 per share New York Stock Exchange, Inc. The Toronto Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the company (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 company 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 company'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. The aggregate market value of the voting stock held by nonaffiliates of the company at March 12, 2001 was $1,057,231,000. There were 67,614,235 shares of Common Stock and 4,457,239 Exchangeable Preference Shares of our subsidiary, Lafarge Canada Inc., outstanding as of March 12, 2001. DOCUMENTS INCORPORATED BY REFERENCE Portions of our definitive Proxy Statement for the 2001 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission, are incorporated by reference in Part III of this Annual Report on Form 10-K as indicated herein. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 LAFARGE CORPORATION ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business.................................................... 1 Executive Officers of the Company........................... 23 Item 2. Properties.................................................. 25 Item 3. Legal Proceedings........................................... 25 Item 4. Submission of Matters to a Vote of Security Holders......... 27 PART II Item 5. Market for our Common Equity and Related Stockholder Matters..................................................... 27 Item 6. Selected Consolidated Financial Data........................ 28 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 29 Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................................ 44 Item 8. Financial Statements and Supplementary Data................. 45 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 75 PART III Item 10. Directors and Executive Officers of the Company............. 76 Item 11. Executive Compensation...................................... 76 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 76 Item 13. Certain Relationships and Related Transactions.............. 76 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................................... 77 Signatures.................................................. 81
i 3 FORWARD-LOOKING STATEMENTS Statements we make in this Annual Report on Form 10-K that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions ("Factors") which are difficult to predict. Factors that could cause our actual results to differ materially from those in the forward-looking statements include, but are not limited to: - - the cyclical nature of our business - - national and regional economic conditions in the U.S. and Canada - - Canadian currency fluctuations - - the seasonality of our operations - - levels of construction spending in major markets - - the supply/demand structure of our industry - - competition from new or existing competitors - - unfavorable weather conditions during peak construction periods - - changes in and implementation of environmental and other governmental regulations - - our ability to successfully identify, complete and efficiently integrate acquisitions - - our ability to successfully penetrate new markets In general, we are subject to the risks and uncertainties of the construction industry and of doing business in the U.S. and Canada. The forward-looking statements are made as of the date of this report, and we undertake no obligation to update them, whether as a result of new information, future events or otherwise. Throughout this discussion, when we refer to Lafarge, us, we or our, we mean Lafarge Corporation and its subsidiaries. Our executive offices are located at 12950 Worldgate Drive, Suite 500, Herndon, Virginia 20170, and our telephone number is (703) 480-3600. PART I ITEM 1. BUSINESS Who are we? Lafarge Corporation, together with its subsidiaries, is North America's largest diversified supplier of construction materials. We provide the construction industry with a full range of aggregate, concrete and concrete products, asphalt, cement and cementitious materials and gypsum drywall that build your world. We have approximately 900 operations doing business in most states and throughout Canada where we conduct our business through our subsidiary, Lafarge Canada Inc. Our products are used in roads, hospitals, department stores, sports stadiums, banks, museums, high-rise apartments, amusement parks, swimming pools and bridges on which the world depends. In 2000, we generated net sales of $2.8 billion and we shipped 93.6 million tons of aggregate, 10.7 million cubic yards of ready-mixed concrete, 14.1 million tons of cement and 898 million square feet of gypsum drywall. Our geographic and product diversity, although essential to increasing and maintaining our leadership in the industry, is only part of Lafarge. The other essential part of our business is the more than 14,000 people we employ. Our employees provide customers with technical, engineering, research and customer service support to create, use and implement special types and applications of our products to meet specified structural and stringent environmental demands. How are we organized; what do we make? Our business is organized into three operating segments, Construction Materials, Cement and Cementitious Materials and Lafarge Gypsum. Each represents a separately managed strategic business unit with different capital requirements and marketing strategies. 1 4 - Construction Materials - Produces and supplies aggregate (crushed stone, sand and gravel); - Produces and supplies ready-mixed concrete, concrete products and asphalt; and - Provides road paving and construction services. - Cement and Cementitious Materials - Produces and distributes Portland and specialty cements; - Distributes cementitious materials such as fly ash, slag and silica fume; and - Processes fuel-quality waste and alternative raw materials for cement kilns. - Lafarge Gypsum - Produces and distributes a full line of gypsum drywall products for commercial and residential construction. You may evaluate the financial performance of each of our segments by reviewing "Management's Discussion of Income" in Management's Discussion and Analysis of Financial Condition and Results of Operations set forth under Part II, Item 7 of this Annual Report and the "Notes to Consolidated Financial Statements -- Segment and Related Information" in Financial Statements and Supplementary Data set forth under Part II, Item 8 of this Annual Report, which are incorporated herein by reference. What is the Lafarge Group? We are part of the Lafarge Group, which includes Lafarge S.A. and its consolidated subsidiaries. Lafarge S.A., a French Company, and its affiliates hold approximately 54 percent of our common stock. The Lafarge Group is the world leader in building materials, holding top-ranking positions in its four divisions: Cement; Aggregates and Concrete; Roofing; and Gypsum. The Lafarge Group employs approximately 66,000 people in 71 countries. In 2000, the Lafarge Group generated sales in excess of $11 billion. Among other things, the Lafarge Group provides marketing, technical, research and development and managerial assistance to us. For example, the Lafarge Group's 30-year experience in the gypsum business and building new plants around the world supported our entry into the gypsum industry. How our Company developed 1956 Our majority shareholder, Lafarge S.A., entered the North American cement market by building a cement plant in Richmond, British Columbia and forming Lafarge Cement North America. 1970 Lafarge S.A. acquired Canada Cement Company (now Lafarge Canada Inc., our Canadian subsidiary), already Canada's largest cement producer. 1974 Lafarge Canada entered the U.S. market through a joint venture to operate three U.S. cement plants. 1977 Although the joint venture terminated, we were incorporated in Maryland in 1977 as Citadel Cement Corporation of Maryland and operated two of the three U.S. cement plants. 1981 Lafarge Canada acquired the common stock of General Portland Inc., the second largest cement producer in the U.S. at that time. 1983 A corporate reorganization established us as the parent of Lafarge Canada and General Portland. We completed our initial public offering of Common Stock. 1986 We acquired National Gypsum's Huron Cement Division, consisting of the Alpena, Michigan cement plant (North America's largest cement plant), 13 inland cement terminals and several Great Lakes distribution facilities. We also acquired Systech Environmental Corporation, which processes fuel-quality waste and alternative raw materials for use in our cement kilns.
2 5 1989 We acquired 32 plant facilities in five states and mineral reserves from Standard Slag Holding Company, significantly expanding our construction materials operations in the U.S. 1991 We acquired three cement plants, 15 cement terminals, two quarries and more than 30 ready-mixed concrete and aggregate operations in the Mississippi River Basin when we acquired Missouri Portland Cement Company and Davenport Cement Company. 1993 We divested our Alabama cement assets and implemented new organizational structures in cement and construction materials to improve efficiency of our operations. 1994 We divested our Texas assets. 1995 We acquired National Portland Cement's 600,000 ton capacity cement grinding plant in Port Manatee, Florida. 1996 We entered the North American gypsum market when we bought two gypsum drywall plants located in Buchanan, New York and Wilmington, Delaware, creating our new operating segment, Lafarge Gypsum. 1997 We began work on new state-of-the-art cement manufacturing plants to replace existing facilities in Richmond, British Columbia and Sugar Creek, Missouri. The Richmond plant, completed in 1999, increased annual clinker production capacity from approximately 600,000 tons to 1.1 million tons. The Sugar Creek plant and underground limestone mine, expected to be fully operational in the latter half of 2001, should have a rated capacity of 900,000 tons of cement a year. 1998 We finalized the largest acquisition in our history when we bought the construction materials businesses of Denver, Colorado based Western Mobile, Inc.; Redland Genstar Inc. of Towson, Maryland; and the Ontario and New York based aggregate operations of Redland Quarries Inc. from Lafarge S.A. for $690 million. This acquisition, which we refer to as Redland, made Lafarge the largest diversified supplier of construction materials in North America. We also acquired a cement plant in Seattle, Washington, two cement distribution facilities (one of which we subsequently sold) and a limestone quarry in British Columbia from Holnam, Inc. Finally, we announced a definitive agreement to acquire Atlantic Group Limited, a Newfoundland gypsum drywall manufacturing plant and Atlantic Gypsum Resources, Inc., a Newfoundland gypsum quarry. 1999 We began construction of a state-of-the-art drywall manufacturing plant in Silver Grove, Kentucky. With an estimated annual capacity of 900 million square feet of drywall, the new plant, completed in June 2000, is the biggest single-line production facility in the U.S. The plant was built to satisfy 100 percent of its primary raw material requirements by using recycled materials, including reclaimed paper and synthetic gypsum. We also broke ground on an almost identical drywall manufacturing plant in Palatka, Florida, which became operational in January 2001. 2000 We acquired the Presque Isle Corporation, a Michigan-based quarry operation. We also completed a merger with the Warren Paving & Materials Group, at the time Canada's largest privately held supplier of construction aggregate. The Warren merger added 23 aggregate operations and 55 asphalt plants in British Columbia, Alberta, Saskatchewan, Ontario and Quebec. These acquisitions added 2 billion tons of aggregate reserves and over 25 million tons of annual sales volume.
What were our acquisitions and capital improvements in 2000? On June 30, 2000, we completed our acquisition of all the outstanding stock of Presque Isle Corporation, a Michigan-based company that operates one of the largest stone quarries in the U.S. The purchase price was approximately $56 million. In late December 2000, we completed a merger of Kilmer Van Nostrand Co. Limited's wholly-owned subsidiary, the Warren Paving & Materials Group Limited ("Warren"), with our construction materials operations in Canada. Warren is a supplier of construction aggregate and provides asphalt and paving services in five Canadian provinces. The transaction, in which a subsidiary of Lafarge Canada Inc. acquired all of the outstanding shares of Warren for cash, preferred stock and a note, was valued at $260 million. In conjunction 3 6 with the transaction, Kilmer Van Nostrand purchased from us a warrant to acquire 4.4 million shares of our common stock at $29.00 a share. Consideration for the warrant totaled Canadian $21,637,000. Our business is relatively capital-intensive. During the three-year period ended December 31, 2000, our capital expenditures approximated $972 million, principally for the construction of new facilities and the modernization or replacement of existing equipment. Of this amount, Construction Materials, Cement and Lafarge Gypsum expended approximately 26 percent, 50 percent and 20 percent, respectively. During the same period, excluding Redland which was financed by the issuance in July 1998 of $650 million in public debt, we also invested approximately $527 million in various acquisitions that expanded our market and product lines. Of this amount, Construction Materials, Cement and Lafarge Gypsum expended approximately 81 percent, 17 percent and 2 percent, respectively. During the three-year period ended December 31, 2000, operating cash flows and divestment proceeds totaled $1.36 billion. In 2000, operating cash flows and divestment proceeds totaled $517 million, while investments (capital expenditures and acquisitions), reached $674 million. During 2000, Lafarge's proceeds from the sale of non strategic assets, surplus land and other miscellaneous items totaled $29.1 million. In 2001, we expect capital expenditures to total approximately $400 to $450 million, excluding acquisitions. We intend to invest in projects that maintain or improve the performance of our plants, as well as in acquisition opportunities that will enhance our ability to compete. The 2001 capital expenditures will include portions of the gypsum drywall plant in Florida that we completed in early 2001. This plant has the capacity to produce 900 million square feet of drywall a year by using recycled materials and synthetic gypsum. In addition, we expect our 2001 capital expenditures to include amounts spent on the $170 million cement plant and underground limestone mine in Sugar Creek, Missouri. This plant is expected to become operational in the second half of 2001. What is our business strategy? Our core business strategy is to be defined by four fundamental elements -- growth and development, operational excellence, commitment to change and teamwork. - - GROWTH AND DEVELOPMENT, both through acquisitions and internal development, is one of our highest priorities. In 2000, we strengthened our competitive position through acquisitions and capital improvements in each of our three segments: Construction Materials, Cement and Lafarge Gypsum. These acquisitions and capital improvements are discussed previously in this Annual Report under "What were our acquisitions and capital improvements in 2000?" These actions and other internal developments (described in the Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Part II, Item 7 of this Annual Report) have changed our financial structure appreciably. Our ratio of long-term debt to total capitalization has decreased from 30 percent at the end of 1998 to 26 percent in 1999 and 22 percent in 2000, levels well within our internal target range. Our basic objective is to maintain a strong balance sheet with sufficient flexibility to capitalize on opportunities when they arise. We continue to pursue opportunities, particularly in aggregate and related activities. It is worth noting that the less cyclical aggregate and related businesses accounted for nearly 30 percent of our revenue stream in 2000, 1999 and 1998. - - OPERATIONAL EXCELLENCE encompasses the range of programs we have established for manufacturing efficiency, cost control and continuous improvement. Our vision of operational excellence includes common operating models, the rigorous application of best business practices and the implementation of management information systems to improve our operating performance. These types of programs remain priorities for all of our product lines and are supported at the corporate level through our Corporate Technical Services Department for the Cement segment and our Business Performance Department in the Construction Materials segment. In 2000, we also developed a comprehensive management development training program for our construction 4 7 materials business. This strategic and operationally focused program is expected to result in better business decisions and improved operations. - - COMMITMENT TO CHANGE provides a third pathway to superior performance. Based on our success with the Cement Shared Services Center we created in 1999, we opened a new Financial Services Center in 2000 to provide low-cost, high-volume accounting and transaction services for our Construction Materials segment. Previously, these services were performed in regional construction materials offices. Perhaps one of our most important changes is our current implementation of Economic Value Added (EVA(TM)) as a management tool to help us measure and capture value. Training programs and communications targeted at all managers were intensified in 2000 in preparation for expanding this concept in 2001. Following the Lafarge Group's lead, we will use EVA(TM) as one measurement tool for incentive compensation. We prudently advanced our efforts in e-business throughout 2000. We established a multi-disciplinary e-business team to define an enterprise-wide e-business strategy. Over the past year, this team has worked on numerous solutions, including an e-commerce site, e-procurement solutions and an online industry marketplace. - - TEAMWORK is the final element that guides how we will plan and execute our core business strategy. There is a clear competitive advantage associated with being a large company, but only if we can capitalize on synergies between our three operating segments. This requires communications, collaboration and teamwork. For example, purchasing activities that were once highly decentralized are now coordinated across product lines, leveraging the buying power of a $2.8 billion company so we can achieve substantial, permanent savings. Our goal is to create an atmosphere of common business values, in which employees are constantly looking for opportunities and risks that may impact not just their business but other Lafarge product lines or geographic areas as well. THE CONSTRUCTION MATERIALS SEGMENT Who are we? We became one of the largest producers of aggregate in North America after our 1998 acquisition of more than 100 aggregate, road paving, concrete and other operations that were once part of the UK-based Redland PLC group. This acquisition gave us leading market positions in the western mountain states and Maryland, plus operations that complemented existing businesses in New York and southwestern Ontario. It also increased our sales of aggregate by approximately 75 percent at that time. Our merger in late 2000 with the Warren Paving & Materials Group makes us the largest asphalt and paving operator in Canada. Our U.S. construction materials operations are located primarily in Colorado, New Mexico, Kansas, Louisiana, Missouri, Ohio, Maryland, Pennsylvania, West Virginia, Wisconsin and Michigan. In Canada, we are the largest producers of concrete-related building materials. We are the only producer of ready-mixed concrete and construction aggregate in Canada with operations extending from coast to coast. Our operations include ready-mixed concrete plants, crushed stone and sand and gravel sites, and concrete product and asphalt plants. During 2000, our Construction Materials segment accounted for 56 percent of consolidated net sales, after the elimination of intracompany sales, and 41 percent of consolidated gross profit. 5 8 We offer a broad range of products, including: - - Aggregate (crushed stone, sand or gravel) includes a full line of graded stone - - Concrete and masonry sand - - Slag aggregate - - Asphalt for road paving and construction - - Ready-mixed concrete - - Roller compacted concrete - - Gravity and pressure pipe - - Pipe couplings, pipeline weights and coatings - - Concrete brick, block and paving stones - - Reinforcing steel - - Dry bagged products - - Structural and architectural precast products - - Concrete drainage systems - - Other building supplies Aggregate is used as a base material in roads and buildings and as raw material for concrete, masonry, asphalt and many industrial processes. Our ready-mixed concrete (a blend of aggregate, water and cement) is used for a variety of applications from curbs and sidewalks to foundations, highways and buildings. Where are our aggregate, ready-mixed concrete and concrete products facilities located? In the U.S., we own or have a majority interest in approximately 250 construction materials locations at December 31, 2000, including: - 90 construction aggregate facilities, of which 50 percent are in Colorado, 17 percent in Ohio and the remainder in Missouri, Maryland, Michigan, New Mexico, New York, Pennsylvania, Wisconsin, and West Virginia; - 90 ready-mixed concrete plants, with 31 percent of the plants located in Colorado, with lesser concentrations in Maryland, Missouri, Louisiana, New Mexico and Wisconsin; and - 40 asphalt facilities concentrated in Colorado and New Mexico with the remaining plants in Maryland, New York and Missouri. We owned or had a majority or joint interest in approximately 550 construction materials facilities in Canada at December 31, 2000, including: - 240 construction aggregate facilities, approximately 39 percent of which are located in Ontario, while the others are located throughout Alberta, Quebec, British Columbia, Saskatchewan, Nova Scotia, Manitoba and New Brunswick; - 180 ready-mixed concrete plants concentrated in the provinces of Ontario (where approximately 44 percent of the plants are located), Alberta, Quebec and British Columbia and to a lesser extent in New Brunswick, Nova Scotia, Saskatchewan and Manitoba; and - 90 asphalt facilities concentrated primarily in Ontario with the remainder in British Columbia, Alberta, Quebec, Nova Scotia, Saskatchewan and New Brunswick. We own substantially all of our aggregate, ready-mixed concrete and concrete products plants and believe that all of our plants are in satisfactory operating condition. Where do we get the raw materials for our aggregate and ready-mixed concrete operations? The aggregate business consists of the mining, extraction, production and sale of stone, sand, gravel and lightweight aggregate such as expanded shale and clay. Aggregate is employed in virtually all types of construction, including highway construction and maintenance. The concrete business involves the mixing of cement with sand, gravel, crushed stone or other aggregate and water to form concrete which is subsequently marketed and distributed to customers. 6 9 We own the majority of our aggregate quarries and pits, as well as our facilities for production of ready-mixed concrete. We believe our aggregate reserves are adequate at current production levels. Moreover, even where our reserves are lower, we believe that new sources of aggregate would be available and obtainable without significant interruption to our business. Who buys our aggregate, ready-mixed concrete and concrete products? Aggregate is sold primarily to road building contractors and ready-mixed concrete producers. Ready-mixed concrete is sold primarily to building contractors and delivered to construction sites by mixer trucks. Precast concrete products and concrete pipe are sold primarily to contractors engaged in all types of construction activity. The states in which we had our most significant U.S. sales of construction materials in 2000 were Colorado, New Mexico and Maryland. Other states in which we had significant sales of construction materials included: Missouri, Ohio, Louisiana and Wisconsin. In Canada, we had our most significant sales of construction materials in Ontario, Alberta, British Columbia and Quebec. In 2000, no single unaffiliated customer accounted for more than 10 percent of our construction material sales. How do we distribute products to our customers? The cost to transport aggregate, ready-mixed concrete and concrete products is high, and consequently, producers are typically limited to market areas within 100 miles of their production facilities. We primarily utilize trucks and railroads to transport aggregate and concrete products to our customers. For our aggregate operations located on the Great Lakes and the west coast, we can also take advantage of the relatively low cost of waterborne transportation. How do changes in the seasons and weather affect our business? Demand for aggregate, ready-mix concrete and concrete products is seasonal because construction activity usually diminishes during the winter. Demand also may be adversely impacted by unfavorable weather conditions, including hurricanes, for example. Information with respect to quarterly financial results is set fourth in "Notes to Consolidated Financial Statements -- Quarterly Data (unaudited)" in Part II, Item 8, Financial Statements and Supplementary Data of this Annual Report, which is incorporated herein by reference. Who are our competitors? Most ready-mixed concrete local markets are highly competitive and are served by both large multi-national companies as well as many small producers. Most ready-mixed concrete companies employ 10 to 20 mixer trucks with annual sales in the $1.5 to $3.0 million range. Large ready-mixed concrete producers have over 300 mixer trucks. Some companies are vertically integrated and also own cement plants and aggregate operations. Aggregate markets are also highly competitive and are made up of numerous aggregate producers including large multi-national, integrated producers and many small producers. Demand for both aggregate and ready-mixed concrete depends largely on regional levels of construction activity. Both the aggregate and concrete industries are highly fragmented, with numerous participants operating in localized markets. Both aggregate and concrete products are sold in competition with offerings by other suppliers of the same product and with substitute products. The size of the market area for an aggregate quarry and a ready-mixed concrete plant is similar; therefore, the ability to compete is limited by the relatively high cost of truck and rail transportation compared with the value of the product. Proximity to customers is an important criterion. Most sales of ready-mixed concrete and aggregate are made on the basis of competitive prices in each market area, generally pursuant to telephone orders from customers who purchase quantities 7 10 sufficient for their immediate requirements. In addition to price, we compete on the basis of service and reliability. Customer Orders Our sales of ready-mixed concrete and aggregate do not typically involve long-term contractual commitments. In addition, we believe our reserves of aggregate and inventories of products are sufficient to fill customer orders in the normal course of business. THE CEMENT AND CEMENTITIOUS MATERIALS SEGMENT Who are we? We are the largest cement manufacturing company in Canada and the third largest in the U.S., and we operate North America's broadest cement distribution system by truck, rail, barge and lake freighter. Our Cement segment was formed by combining several prominent North American cement companies -- Canada Cement Lafarge, General Portland, National Gypsum's Huron Cement division and the Missouri Portland and Davenport Cement companies. In 2000, cement net sales increased 1 percent to $1.2 billion while operating profit decreased 1 percent to $318 million. During 2000, cement accounted for 39 percent of our consolidated net sales, after the elimination of intracompany sales, and 58 percent of consolidated gross profit. We manufacture a diverse product line that includes basic cements in both bulk and bags: - Portland - Masonry And specialty cements: - Oil well - Low alkali - High early strength - Moderate heat of hydration - Sulfate resistant cements - Silica fume cement Our cements are used in every facet of residential, institutional, commercial, industrial and public construction from offices and homes to dams, factories, tunnels, roads, highways and airports. In addition, our wholly-owned subsidiary, Systech Environmental Corporation, processes industrial hazardous and non-hazardous waste for use as fuel substitutes for coal, natural gas and petroleum coke used in heating cement kilns. Substitute fuels preserve natural resources and manage selected waste materials, while at the same time reducing fuel cost for manufacturing cement. At December 31, 2000, Systech had waste processing and storage facilities at two of Lafarge's U.S. cement plants, having closed a facility at one plant during the year. Systech processed approximately 54 million gallons of supplemental fuel in 2000 at these cement plants. Waste-derived fuels supplied by Systech constituted approximately 9 percent of all fuel used in our cement operations during 2000. Another wholly-owned subsidiary, Mineral Solutions Inc., manages and markets fly ash, a coal combustion product residue produced by coal burning, electricity generating plants. One use of fly ash is as a cement supplement (replacing a portion of the Portland cement) to enhance the performance of concrete used in large construction projects such as high-rise buildings, bridges and parking garages. Mineral Solutions is a leading North American supplier of fly ash. We include the financial results of Systech and Mineral Solutions in Cement's financial results. 8 11 How is cement made? Processed cement was discovered by Joseph Aspdin in 1824 and was called "portland cement" because it resembled a gray stone mined from the island of Portland off the coast of England. People often confuse cement with concrete. Cement is a fine powder that is the principle strength-giving and property-controlling component of concrete. Concrete is a mixture of cement, aggregate and water that hardens to form a building material used for everything from sidewalks to skyscrapers. While different types of cement vary in their ingredients, four common elements are found in all types of cement. They are (from most to least): calcium carbonates (limestone), silicates (sand), argillaceous material (clay, shale or kaolin) and iron. Cement is manufactured by a closely controlled chemical process: - first, limestone, sand, clay and iron-rich materials are crushed and mixed; - next, the crushed raw materials undergo a grinding process, which mixes the various materials more thoroughly and increases fineness in preparation for the kiln (this may be done by either a wet or dry process); - in the wet process, the materials are mixed with water to form "slurry," which is heated in kilns, forming hard pellets called "clinker"; - in the more fuel efficient dry process, clinker is formed by heating the dry raw materials directly without adding water; - in the preheater process, which provides further fuel efficiencies, dry raw materials are preheated by air exiting the kiln, starting the chemical reaction 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 heating in the kiln and, as a result, increases clinker production capacity; and - gypsum is added and the clinker is ground into an extremely fine powder called Portland cement, a binding agent which, when mixed with sand, stone or other aggregate and water, produces either concrete or mortar. Where do we get the raw materials to make cement? We obtain the limestone required to manufacture cement principally from operations we own or in which we have long-term quarrying rights. These sources are located close to our manufacturing plants except for the Joppa, Richmond and Seattle quarries which are located approximately 70, 80 and 180 miles, respectively, from their plant sites. Quarried materials are delivered to Joppa, Richmond and Seattle by barge. Each cement manufacturing plant is equipped with rock crushing equipment. At Joppa, we own the reserves, but lease the quarrying rights and purchase limestone from the lessee. At Whitehall and Kamloops, we subcontract the quarry operations. Lafarge Canada holds cement manufacturing limestone quarry rights under quarry leases in Quebec, Nova Scotia, Ontario, Alberta and British Columbia, some of which require annual royalty payments to provincial authorities. We estimate that limestone reserves for all 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 we own or are purchased from suppliers and are readily available. Where is our cement made? Our U.S. plants are primarily concentrated in the central and midwestern states, extending from the northern Great Lakes southward along the Mississippi River system. We are the only cement producer serving all regions of Canada. At December 31, 2000, we operated 15 full-production cement manufacturing plants 9 12 with a combined rated annual clinker production capacity of approximately 13.3 million tons consisting of 6.0 million tons in Canada and 7.3 million tons in the U.S. We also operated two cement grinding facilities. The Canadian Portland Cement Association's "Plant Information Summary" report which was prepared as of December 31, 1999, the most recent date for which information is available, shows that Lafarge Canada's capacity is the largest of the cement companies in Canada and represented approximately 36 percent of the total active industry clinker production capacity in Canada. A similar report for the U.S. prepared as of December 31, 1999, shows that our operating cement manufacturing plants in the U.S. accounted for an estimated 8 percent of total U.S. active industry clinker production capacity. The following table indicates the location, types of process and rated annual clinker production capacity (based on management's estimates) of each of our operating cement manufacturing plants at December 31, 2000. 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)*
U.S. PLANTS - ---------------------------------------------- CLINKER LOCATION PROCESS CAPACITY -------- ------- --------- Paulding, OH......... Wet 470,700 Fredonia, KS......... Wet 411,400 Whitehall, PA........ Dry*** 785,000 Alpena, MI........... Dry 2,354,000 Davenport, IA........ Dry** 1,055,600 Sugar Creek, MO...... Dry 517,500 Joppa, IL............ Dry*** 1,172,900 Seattle, WA.......... Wet 420,000 --------- Total Capacity.............. 7,187,100 ========= Total 2000 clinker production............... 6,877,000 ========= 2000 production as a percentage of total capacity................. 96% =========
CANADIAN PLANTS - ---------------------------------------------- CLINKER LOCATION PROCESS CAPACITY -------- ------- --------- Brookfield, N.S...... Dry 516,300 St-Constant, QUE..... Dry 1,046,300 Bath, ONT............ Dry*** 1,085,000 Woodstock, ONT....... Wet 560,200 Exshaw, ALTA......... Dry** 1,279,900 Kamloops, B.C........ Dry 211,000 Richmond, B.C........ Dry** 1,102,300 --------- Total Capacity.............. 5,801,000 ========= Total 2000 clinker production............... 5,056,000 ========= 2000 production as a percentage of total capacity................. 87% =========
- --------------- * One short ton equals 2,000 pounds. ** Preheater, pre-calciner plants. The capacity of Exshaw's preheater, pre-calciner kiln is 65% of the plant's clinker production capacity. *** Preheater plants. The capacity of Joppa's preheater kiln is 55% of the plant's clinker production capacity. All of our cement plants are fully equipped with raw grinding mills, kilns, finish grinding mills, environmental dust collection systems and storage facilities. We own all of our cement plants, and the land on which they are located, free of major encumbrances, except the Exshaw cement plant and the Kamloops limestone and cinerite quarries. 10 13 - 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 located on land we own. The limestone and cinerite quarries are located on land leased from the province of British Columbia until March 2022. The land, quarry, buildings and construction in progress related to the cement plant that we are building in Sugar Creek, Missouri are being leased from the City of Sugar Creek, Missouri pursuant to a Chapter 100 bond financing. The lease expires in 2020 and contains provisions that automatically transfer ownership of the leased facilities to Lafarge at the end of the lease term. We believe that each of our cement manufacturing plants is in satisfactory operating condition. At December 31, 2000, we owned cement grinding plants for the processing of clinker into cement at Fort Whyte, Manitoba; Edmonton, Alberta; Montreal East, Quebec; Superior, Wisconsin and Port Manatee and Tampa, Florida. After being shutdown for several years, the Montreal East grinding plant was retrofitted in 2000 and is now used as a slag grinding facility. The Fort Whyte grinding plant was shutdown in 1994; furthermore, the Edmonton and Superior grinding plants have been shutdown for several years because cement grinding has not been cost effective at these locations. The shutdown plants were used during 2000 for the storage of cement. The Port Manatee and Tampa plants include facilities for receiving clinker and cement by water. We also own clinker- producing plants that have been shutdown in Havelock, New Brunswick and Fort Whyte, Manitoba. The significance of fuel in making cement Fuel represents a significant portion of the cost of manufacturing cement. We place special emphasis on becoming, and have become, more efficient in our sourcing and use of fuel. In general, dry process plants consume significantly less fuel per ton of output than do wet process plants. At December 31, 2000, approximately 90 percent and 82 percent of our clinker production capacity in Canada and the U.S., respectively, used the dry process. The Portland Cement Association estimates that approximately 93 percent of the Canadian industry's capacity and approximately 75 percent of the U.S. cement industry's clinker capacity utilizes dry process technology. As an additional means of reducing energy costs, most of our cement plants are 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 us to take advantage of price variations between fuels. Our Exshaw, Alberta cement plant is not currently equipped to convert from natural gas fuel, and we consequently suffered from the high gas costs in 2000. We have begun a fuel flexibility project at this plant to enable it to convert to coal, which we expect to complete by the end of 2001. Our use of fuel-quality waste supplied by Systech Environmental Corporation also has resulted in substantial fuel cost savings. At December 31, 2000, we used fuel-quality waste materials obtained and processed by Systech as fuel at two of our U.S. cement plants. Fuel-quality waste supplied by Systech constituted approximately 9 percent of the fuel used by us in all of our cement operations during 2000. Our two U.S. cement plants which utilize fuel-quality waste are subject to emission limits and other requirements under the Federal Resource Conservation and Recovery Act ("RCRA") and Boiler and Industrial Furnaces ("BIF") regulations. See "Environmental Matters -- Resource Conservation and Recovery Act -- Boiler and Industrial Furnaces Regulations" in this Item 1 of the Annual Report for further discussion regarding the RCRA and BIF regulations. 11 14 The following table shows the possible alternative fuel sources for our cement manufacturing plants in the U.S. and Canada at December 31, 2000.
PLANT LOCATION FUELS -------------- --------------------------------------------- U.S.: Paulding, Ohio.......................... Coal, Coke, Fuel-Quality Waste Fredonia, Kansas........................ Coal, Fuel-Quality Waste, Natural Gas, Coke Whitehall, Pennsylvania................. Coal, Oil, Coke, Tire Derived Fuel Alpena, Michigan........................ Coal, Coke, Natural Gas Davenport, Iowa......................... Coal, Coke Sugar Creek, Missouri................... Coal, Coke, Natural Gas Joppa, Illinois......................... Coal, Coke, Natural Gas Seattle, Washington..................... Natural Gas, Coal, Coke, Waste Oil Canada: Brookfield, Nova Scotia................. Coal, Oil, Fuel-Quality Waste St-Constant, Quebec..................... Natural Gas, Oil, Coke, Pitch Fuel, Tire Derived Fuel Bath, Ontario........................... Natural Gas, Coke, Coal Woodstock, Ontario...................... Natural Gas, Coal, Coke, Oil Exshaw, Alberta......................... Natural Gas Kamloops, British Columbia.............. Natural Gas, Coal, Coke Richmond, British Columbia.............. Natural Gas, Coke, Coal Tailings, Bio Gas
Who buys our cement? We sell cement to several thousand unaffiliated customers. Our primary customers are: - manufacturers of ready-mixed concrete and other concrete products - contractors throughout Canada and in many areas of the U.S. The states in which we had the most significant U.S. sales in 2000 were Michigan and Florida. Other states in which we had significant sales included: Wisconsin, Ohio, Minnesota, Washington, Louisiana, Illinois, Iowa, New York, Missouri, Indiana, Kansas, North Dakota, Pennsylvania, Tennessee and Nebraska. In Canada, we made our most significant sales of cement in Alberta and Ontario, which together accounted for approximately 51 percent of our total Canadian cement shipments in 2000. Other provinces in which we had significant sales included British Columbia and Quebec. Approximately 37 percent of our cement shipments in Canada were made to affiliates. No single unaffiliated customer accounted for more than 10 percent of our consolidated sales during 2000, 1999 or 1998. How do we distribute products to our customers? At December 31, 2000, our U.S. sales offices were located in Palmetto, Florida; Davenport, Iowa; Lansing, Michigan; Independence, Missouri; Orchard Park, New York; Valley City, North Dakota; Maumee, Ohio; Nashville, Tennessee; Seattle, Washington; Milwaukee, Wisconsin; and Kingwood, Texas. At December 31, 2000, our Canadian sales offices were located in Edmonton and Calgary, Alberta; Kamloops and Richmond, British Columbia; Winnipeg, Manitoba; Moncton, New Brunswick; Richmond Hill, Ontario; Montreal, Quebec; and Regina and Saskatoon, Saskatchewan. We maintain distribution and storage facilities at all cement manufacturing and finishing plants and at approximately 80 other locations including four 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 12 15 radius of 250 miles from the producing plant, except for waterborne shipments which can be economically shipped considerably greater distances. Our cement is distributed primarily in bulk but also in paper bags. We utilize trucks, rail cars and waterborne vessels to transport cement from our plants to distribution facilities or directly to our customers. Transportation equipment is owned, leased or contracted, as required. In addition, some of our customers in the U.S. make their own transportation arrangements and take delivery of cement at our manufacturing plant or distribution facility. Each cement plant has facilities for shipping by rail and by truck. The Richmond, Alpena, Bath, Davenport, Sugar Creek, Seattle and Joppa plants have facilities for transportation by water. How do changes in the seasons and weather affect our business? Our cement business is seasonal because construction activity usually diminishes during the winter. Demand also may be adversely impacted by unfavorable weather conditions, including hurricanes, for example. Information with respect to quarterly financial results is set forth in "Notes to Consolidated Financial Statements -- Quarterly Data (unaudited)" in Part II, Item 8, Financial Statements and Supplementary Data of this Annual Report. Who are our competitors? 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. Consequently, even cement producers with global operations compete on a regional basis in each market in which that company manufactures and distributes products. No single cement company in the U.S. has a production and distribution system extensive enough to serve all U.S. markets. A company's competitive position in a given market depends largely on the location and operating costs of its plants and associated distribution terminals. Vigorous price, service and quality competition is encountered in each of our primary marketing areas. Our operating cement plants located in Canada represent an estimated 36 percent of the rated annual active clinker production capacity of all Canadian cement plants. We are the only cement producer serving all regions of Canada. Our largest competitor in Canada accounted for approximately 18 percent of rated annual active clinker production capacity. Our cement plants operating in the U.S. represented an estimated 8 percent of the rated annual active clinker production capacity of all U.S. cement plants. Our three largest competitors in the U.S. accounted for approximately 12 percent, 11 percent and 6 percent, respectively, of the rated annual active clinker production capacity. These statements regarding our ranking and competitive position in the cement industry are based on the PCA's "U.S. and Canadian Portland Cement Industry: Plant Information Summary" report which was prepared as of December 31, 1999. Customer Orders Sales of cement, as stated above, 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. Our sales of these products do not typically involve long-term contractual commitments. The amount of backlog orders, as measured by written contracts, is normally not significant. THE GYPSUM SEGMENT Who are we? With the acquisition of two gypsum drywall manufacturing plants in September 1996, Lafarge Gypsum was created. The Buchanan, New York plant, located 30 miles outside of New York City, and the Wilmington plant in Delaware produce a wide-ranging line of gypsum drywall products. On January 1, 1999, we acquired Atlantic Group Ltd., a supplier of gypsum drywall in Newfoundland, Canada. In May 1999, we acquired Cel-Tex, a joint compound manufacturer in Quebec, Canada. 13 16 In June 1999, we began construction of a gypsum drywall plant in northern Kentucky, just outside of Cincinnati, which began operations at the end of the second quarter of 2000. This facility has the capacity to produce up to 900 million square feet of 1/2-inch drywall a year, which makes it the largest single production line in the U.S. The state-of-the-art plant uses 100 percent recycled materials, including synthetic gypsum generated from scrubbers of a nearby power plant. We have also completed construction of a nearly identical drywall plant in Palatka, Florida, which began operations in January 2001. This plant, like the Silver Grove, Kentucky plant, uses recycled materials and synthetic gypsum and also has the capacity to produce up to 900 million square feet of 1/2-inch drywall annually. We offer a full line of gypsum drywall products for: - Partitions - Paneling - Linings - Ceilings - Floors Our products are used for both new residential and commercial construction and for repair and remodeling. How is gypsum drywall made? Gypsum is the common term for calcium sulfate dihydrate. Water molecules are physically locked inside the crystal structure of the gypsum molecule. To make drywall: - gypsum rock or synthetic gypsum is fed into a dryer, where surface moisture is removed; - then the material is ground to a flour-like consistency known as land plaster; - the land plaster is then calcined, or heated, into calcium sulfate hemihydrate, also known as stucco. (Gypsum is unique because it is the only mineral that can be calcined, and yet go back to its original state when rehydrated. It is this property which is exploited in the manufacturing process.); - the stucco is blended with water and other ingredients in a mixer to form a slurry; - this slurry is extruded between two continuous sheets of paper at the forming station; - the product travels down a long line in order to give the stucco molecules time to rehydrate and recrystallize into gypsum; - as it travels, the gypsum crystals grow into each other and into the liner paper, giving the product 3-dimensional strength; - when the product has achieved initial "set" or firmness (approximately 3 minutes), the product is cut into lengths; - the individual boards are then dried in a kiln to remove excess water; and - the boards are packaged face to face and stored until ready for shipment. Where do we make our gypsum drywall? With the addition of the Palatka plant in early 2001, we now own five gypsum drywall manufacturing plants with a combined annual production capacity of approximately 2.7 billion square feet (MMSF). The Buchanan, Wilmington, Corner Brook, Silver Grove and Palatka plants have capacities of 350 MMSF, 435 MMSF, 105 MMSF, 900 MMSF and 900 MMSF, respectively. 14 17 All of the plants are fueled primarily by natural gas. Natural gas is purchased on a contract basis with transportation negotiated under long-term contracts. The Wilmington facility is located on leased property at the Port of Wilmington. All other facilities are located on property we own. We believe that each of our manufacturing plants is in satisfactory operating condition. Where do we get the raw materials to make our drywall? Currently, we have ten-year requirements contracts with an unaffiliated third party for gypsum rock used in the production of gypsum drywall at the Buchanan and Wilmington plants. This contract terminates in September 2006. The Corner Brook plant obtains its gypsum from a quarry that we own. The Silver Grove and Palatka plants use synthetic gypsum instead of natural rock, which is chemically equivalent to naturally formed gypsum and is a recycled by-product of coal combustion. We currently obtain this synthetic gypsum from nearby electrical generation plants. In 2000, Lafarge Gypsum entered a joint venture with Rock-Tenn Company to produce paperboard liner in Lynchburg, Virginia. When the ramp-up period is completed by the end of the fourth quarter of 2001, we expect to produce a major portion of our own paper while reducing material costs and enhancing drywall quality. Who buys our drywall? Our gypsum drywall products are sold to a variety of: - residential and commercial building materials dealers - individual and regional/national gypsum distributors - original equipment manufacturers - building materials distribution companies - lumber yards and "do-it-yourself" home centers The Silver Grove plant's principal market is centered around Kentucky and adjoining states in the mid-west. In addition, Silver Grove has the ability to reach markets in the southeast, Florida and southwest by rail. The Buchanan plant's principal markets include New York, Pennsylvania and New Jersey. The Wilmington plant's largest markets are Pennsylvania and North Carolina, followed closely by Maryland and Virginia. The Corner Brook drywall plant's principal markets include the eastern provinces of Canada. 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 requirements. Customer orders are taken at a centralized customer service facility. During 2000, our gypsum drywall operations accounted for 5 percent of consolidated net sales, after the elimination of intracompany sales, and 1 percent of consolidated gross profit. How do we distribute products to our customers? We utilize contracted trucks to transport finished gypsum board to distributors and other customers. Additionally, the Wilmington and Silver Grove plants are equipped to ship by rail. The Buchanan plant is in close proximity to its key markets resulting in over 90 percent of its production being shipped within 100 to 200 miles of the plant. The Wilmington plant ships over 50 percent of its production within 200 miles of the plant. The Corner Brook plant ships over 25 percent of its production on the island of Newfoundland. Distribution of drywall produced at Silver Grove is more widely spread than the northeast plants. In 2000, less than 50 percent was distributed within 500 miles due in part to shipments to the southeast market in preparation for the start-up of the new plant in Palatka, Florida. 15 18 How do changes in the seasons and in the weather affect our business? Our gypsum drywall business is seasonal because construction activity usually diminishes during the winter. Demand also may be adversely impacted by unfavorable weather conditions, including hurricanes, for example. Information with respect to quarterly financial results is set forth in "Notes to Consolidated Financial Statements -- Quarterly Data (unaudited)" in Part II, Item 8, Financial Statements and Supplementary Data of this Annual Report. Who are our competitors? The gypsum industry is a large integrated industry in which a few large companies predominate. These companies operate gypsum drywall plants and usually own the gypsum reserves used in manufacturing the drywall. They also sell gypsum for use in Portland cement production, agriculture and other manufactured gypsum products. The gypsum drywall industry is highly competitive. Drywall producers primarily compete on a regional basis. Producers whose customers are located close to their drywall plants benefit from lower transportation costs. We enjoy this competitive advantage with respect to drywall produced at our Buchanan and Wilmington plants because of their close proximity to key markets. Gypsum drywall is regarded as a commodity product. We intend to compete with other producers based on price, product quality and customer service. Customer Orders Sales of gypsum drywall products are made on the basis of competitive prices in each market area, generally pursuant to telephone orders from customers. Excluding Silver Grove, which was in a start-up mode, U.S. plant capacity utilization in 2000 was at 100 percent. TRADEMARKS AND PATENTS As of December 31, 2000, Lafarge owns, has the right to use or has pending applications for approximately 30 patents granted by the U. S. and Canada and 127 trademarks related to Cement, Construction Materials and Lafarge Gypsum and our trademarked, high performance concrete, cement and gypsum products for commercial, agricultural, industrial and public works construction. For example, trademarked precast concrete products such as SPLITROCK(TM) retaining wall modules and paving stones are commonly used in municipal, commercial and residential landscaping designs. In addition, our trademarked concrete mix designs, including Agilia(R), Futurecrete(R), Agrifarge(R) and WeatherMix(R), provide customers with enhanced performance for specific applications. Specialty cements and cementitious products like Lafarge's trademarked Tercem 3000(TM), Maxcem(TM), Supercem(R) and SF(R) cement are designed for durable applications such as bridges, underwater structures, skyscrapers and industrial floors. We believe that our rights under existing trademarks are of value to our operations, but no one trademark or group of trademarks is material to the conduct of our business as a whole. RESEARCH, DEVELOPMENT AND ENGINEERING We conduct research and development activities for the Cement segment's products at our laboratory located in Montreal, Canada, which we believe is one of the largest private laboratories in the North American cement industry. In addition, the Lafarge Group shares its new products developments and enhancements for the construction industry with the Construction Materials and the Cement segments and we have access to their state-of-the-art research and development resources. We are party to three agreements with Lafarge S.A. concerning the sharing of costs for research and development, strategic planning and marketing. In addition, we are involved in research and development through our participation in the Portland Cement Association. Our subsidiary, Systech, is engaged in research and development in an effort to further develop technology to handle additional waste materials. Research and development costs, which are charged to expense as incurred, were $7.2 million, $7.5 million and $7.4 million 16 19 for 2000, 1999 and 1998, respectively. This includes amounts we accrued for technical services rendered by Lafarge S.A., under the terms of the agreements discussed above, of $6.1 million during 2000, $7.0 million during 1999 and $6.1 million during 1998. WHO ARE OUR EMPLOYEES? As of December 31, 2000, we employed approximately 14,300 individuals of which approximately 10,400 were hourly employees. Of these hourly employees, approximately 8,800 were employed by Construction Materials, 1,200 by Cement and 400 by Lafarge Gypsum. Salaried employees totaled approximately 3,900. These employees generally act in administrative, managerial, marketing, professional and technical capacities. Overall, we consider our relations with our employees to be satisfactory. Construction Materials -- U.S. Construction Materials Operations Our approximately 3,700 U.S. construction materials employees consist of approximately 2,800 hourly employees and 900 salaried employees. In the U.S., our hourly workforce is covered by close to 40 collective bargaining agreements with twelve major labor unions. During 2000, fourteen collective bargaining and benefit agreements were successfully negotiated with union bargaining groups without a work stoppage and one withdrew their representation after a brief work stoppage, which we were able to restaff within 30 days. In 2001, nine labor and benefit agreements will expire. All of these agreements are expected to be successfully negotiated without a work stoppage. -- Canadian Construction Materials Operations Our employees in the Canadian construction materials operations totaled approximately 7,200 at the end of 2000, with approximately 6,000 hourly employees and 1,200 salaried employees. In eastern Canada, hourly employees are covered by 115 collective bargaining agreements with a number of unions. There are 50 non-union business units in which discussions are held directly with employees. During 2000, some 26 collective bargaining agreements became due and were renegotiated without incident. In Toronto, the collective bargaining agreement with the Teamsters Union resulted in a strike, which lasted two months. In the Ottawa area, a collective bargaining agreement with the Teamsters Union has not been concluded due to issues associated with the prevailing market. Discussions are ongoing. During the year, there were two successful union certifications. Some 40 collective bargaining agreements will expire throughout eastern Canada in 2001. We do not anticipate any major disruptions as a result of work stoppages during 2001. In western Canada, there are 58 collective labor agreements with several different unions. Six agreements are through employer associations. During 2000 and the first month of 2001, 18 collective labor agreements were successfully negotiated. We continue to negotiate 5 collective agreements that have expired, with no work stoppages anticipated. During 2001, a further thirteen collective labor agreements will expire. These agreements are expected to be renewed without work stoppage. Cement -- U.S. Cement Operations The majority of our U.S. hourly employees are represented by labor unions. During 2000, labor agreements were negotiated at the Paulding, Ohio cement plant. During 2001, the labor agreements will expire at the Fredonia, Kansas; Whitehall, Pennsylvania; and Davenport, Iowa cement plants as well as the Saginaw, Michigan and Detroit, Michigan distribution terminals. We expect the agreements to be successfully concluded without work stoppages. -- Canadian Cement Operations Substantially all of our approximately 400 hourly employees are covered by labor agreements. In 2000, the labor agreements at the Stoney Creek, Ontario slag plant, the Woodstock, Ontario cement plant, the 17 20 Richmond, British Columbia cement plant and the Saskatoon, Saskatchewan terminal have been renewed. In 2001, the collective agreements for the Montreal-East terminal, the Bath, Ontario cement plant, the Exchaw, Alberta cement plant and the Seattle, Washington cement plant will expire. All are expected to be renewed without a work stoppage. Lafarge Gypsum -- U.S. Gypsum Drywall Operations Less than half of Lafarge Gypsum's 350 U.S. hourly employees are covered by labor agreements. During 2000, Lafarge Gypsum hired approximately 180 hourly employees to staff the newly constructed Silver Grove, Kentucky and Palatka, Florida gypsum drywall manufacturing facilities. Discussions are held directly with employees at these facilities, both of which have non-union workforces. An extensive training and integration program was conducted at these plants and the relationship with employees is very good at these facilities. There are three local labor agreements in place with two unions at our Buchanan, New York and Wilmington, Delaware plants. In 2000, a new three year agreement was negotiated with the two unions in Buchanan following a three week strike. At Wilmington, Delaware the local contract expires in October of 2001. This agreement is expected to be renegotiated without a work stoppage. The Wilmington plant has no recent history of labor disputes. -- Canadian Gypsum Drywall Operations All of the approximately 50 hourly employees at our Corner Brook drywall manufacturing facility are covered by a labor agreement that expires in 2003. There is no recent history of labor disputes at the Corner Brook plant. There are 24 non-union hourly employees at the Chambly, Quebec joint treatment manufacturing plant where discussions are held directly with employees. ENVIRONMENTAL MATTERS The following discusses the environmental laws and their application to Lafarge, and sets forth the proposed changes to or new environmental laws or regulations that could affect us. Our 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. Our environmental program includes an environmental policy and an environmental ethics policy that are designed to provide corporate direction for all operations and employees, an environmental audit and follow-up program, routine compliance oversight of our facilities, environmental guidance on key issues confronting us, routine training and exchange of information by environmental professionals, an environmental recognition award program, routine and emergency reporting systems and environmental reports, and a voluntary environmental partnership with the World Wildlife Fund that commits us to a biodiversity program, establishing and tracking key environmental indicators to measure continued environmental improvement, and developing a CO(2) reduction program. The current environmental laws affecting us are summarized below and our policies regarding environmental expenditures are discussed in "Other Factors Affecting the Company -- Environmental Matters" in Management's Discussion and Analysis of Financial Condition and Results of Operations set forth under Part II, Item 7 of this Annual Report, which is incorporated herein by reference. For the years ended December 31, 2000, 1999 and 1998, total capital expenditures and remediation expenses incurred for environmental matters are not material to the financial position, results of operations or liquidity of Lafarge. Further, during the year ended December 31, 2000, no enforcement matters were initiated or resolved or are outstanding that have a material effect on our financial statements. However, our expenditures for environmental matters have increased and are likely to increase in the future. Because of different requirements in the environmental laws of the U.S. and Canada, the complexity and uncertainty of existing and future requirements of environmental laws, permit conditions, costs of new and existing technology, potential preventive and remedial costs, insurance coverages and enforcement related activities and costs, we cannot 18 21 determine at this time whether capital expenditures and other remedial actions that we may be required to undertake in the future will materially affect our financial position, results of operations or liquidity. With respect to known environmental contingencies, we have recorded provisions for estimated probable liabilities and do not believe that the ultimate resolution of such matters will have a material adverse effect on the financial condition, results of operations or liquidity of Lafarge. Some of the proposed changes to, or new environmental laws or regulations that could affect us, are discussed below. Resource Conservation and Recovery Act -- Boiler and Industrial Furnaces Regulations We currently operate two U.S. cement plants using fuel-quality wastes that are subject to emission limits and other requirements under the federal Resource Conservation and Recovery Act ("RCRA") and Boiler and Industrial Furnaces ("BIF") regulations (Paulding, Ohio and Fredonia, Kansas). The other BIF requirements include a permitting process, extensive record keeping of operational parameters and raw materials and waste-derived fuels use, demonstration of financial capability to cover future closures and spill cleanups, and corrective action requirements for other solid waste management units at the facilities. Our two BIF cement plants submitted, in a timely manner, formal Part B permit applications. The Fredonia and Paulding plants' final Part B permits became effective on January 18, 2000 and August 5, 2000, respectively. On October 22, 1998, we announced that our Alpena plant would cease using fuel-quality wastes no later than June 1, 2001. The Alpena plant is no longer burning waste derived fuels and is in the process of closing its waste-derived fuels operations and implementing any corrective actions required by applicable governmental agencies. Over the last few years, the U.S. Environmental Protection Agency ("EPA") was in the process of revising its BIF regulations. Proposed revisions of the BIF regulations were initially published in May 1996, citing both RCRA and Clean Air Act authority. The proposal relied heavily on maximum achievable control technology ("MACT") requirements of Title III of the Clean Air Act Amendments of 1990 with certain elements of the risk-based authority of RCRA incorporated into the proposal. The proposed standards were based on technologies from a "pool" of the top 12 environmental performers of existing facilities that use fuel-quality waste as a supplemental fuel. Our Alpena plant was a MACT pool facility; it uses a baghouse as its primary air pollution control device. In 1998, the Paulding plant installed a baghouse and a bypass system that should enable it to meet the final standards. We have actively participated in the regulatory process to help formulate revised BIF standards that are reasonable, cost-effective and comply with the RCRA and the Clean Air Act. In the past two years, the EPA has reopened the rulemaking process on several occasions to solicit public comment on new data and proposed regulatory approaches (i.e., new limits for semi-volatile metals and a particulate matter continuous emission monitoring system). A final revised regulation was published on September 30, 1999. Existing BIF facilities have up to three years to meet the new standards or cease using hazardous waste as a supplemental fuel. In late 1999, we petitioned the U.S. Court of Appeals for the District of Columbia Circuit to review certain aspects of the EPA final rule. Several other industries and other organizations also have sought judicial review of the final rule. A decision from the Court is anticipated in 2001. Resource Conservation and Recovery Act -- Cement Kiln Dust Cement kiln dust ("CKD") is a by-product of many of our cement manufacturing plants. CKD has been excluded from regulation as a hazardous waste under the so-called Bevill amendment to the RCRA until the EPA completes a study of CKD, determines whether it should be regulated as a hazardous waste and issues appropriate implementing regulations. In January 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 CKD management in karst terrain, fugitive emissions from CKD handling and management and surface water/storm water runoff from CKD management areas. In March 1995, we joined other cement manufacturers in submitting to the EPA a proposed enforceable agreement for managing CKD that included specific CKD management standards. After a lengthy legal review, the EPA decided that it lacks the legal authority to enter into an enforceable 19 22 agreement. In 1996, the EPA announced that it was recommencing the process of developing CKD management standards using industry standards as the technical starting point and Subtitle C of RCRA as its legal authority. We have indicated to the EPA that we believed it inappropriate for the EPA to develop CKD standards under Subtitle C of RCRA. Over the last few years, Lafarge and other cement manufacturers, through our trade association, have worked with the EPA and various states to develop a consensus approach for implementing CKD management standards primarily using state solid waste authority as the primary legal authority rather than federal Subtitle C authority. On August 20, 1999, the EPA published a proposed rule entitled "Standards for the Management of Cement Kiln Dust." In the proposed rule, the EPA includes comprehensive CKD management standards. The EPA's proposed approach is for the states to adopt CKD management standards similar to the proposed new part 259 standards as part of their non-hazardous solid waste management regime. CKD managed in conformity with these standards would remain a non-hazardous waste under RCRA. In instance of "egregious or repeated" violations of these standards, the EPA has proposed that it would classify the mismanaged CKD as a RCRA hazardous waste. This scenario would give the EPA federal Subtitle C enforcement authority over the violation in the event the state failed to take appropriate action. The EPA also stresses that it may never need to issue a final rule under this state approach, if states actively come forth with appropriate programs to manage CKD. In order to mitigate the anticipated future costs of CKD regulation at the federal and/or state levels, we have had a program in place to assess our management practices for CKD at operational and inactive facilities in both the U.S. and Canada, and to voluntarily take remedial steps and institute management practices consistent with the industry practices for CKD management. As part of this program, we also assess and modify our process operations, evaluate and use alternative raw materials and implement new technologies to reduce the generation of CKD. Historical waste disposal and/or contaminated sites As with many industrial companies in the U.S. and Canada, we have been involved in certain remedial actions to clean up or to close certain historical waste disposal and/or contaminated sites, as required by federal, provincial and/or state laws. In addition, we have voluntarily initiated cleanup activities at certain of our properties in order to mitigate long-term liability exposure and/or to facilitate the sale of such property. We routinely review all of our active properties, as well as our idle properties, to determine whether remediation is required, the adequacy of accruals for such remediation and the status of all remedial activities. It has been our experience that, over time, sites are added to and removed from the remediation list as cleanup actions are finalized and, where necessary, governmental sign-off is obtained or when it is determined that no governmental action will be initiated. Federal environmental laws that impose liability for remediation include the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, which together are referred to as "Superfund" and the corrective action provisions of the Resource Conservation and Recovery Act of 1976 ("RCRA"). Currently, we are involved in one Superfund remediation. At this site, which the EPA has listed on the National Priority List, some of the potentially responsible parties ("PRPs") named by the EPA have initiated a third-party action against 47 other parties, including us. We have also been named a PRP at this site. The suit alleges that in 1969 a predecessor of Lafarge sold equipment containing hazardous substances that may now be present at the site. It appears that the largest disposer of hazardous substances at this site is the U.S. Department of Defense and that numerous other large disposers of hazardous substances are associated with this site. We believe that this matter is not material to the financial condition, results of operations or liquidity of Lafarge. In 1999, the EPA delisted a site where we were a PRP and remedial activities had been completed. In December 1999, an action was filed against us and five others to recover response activity costs incurred by the state of Michigan in responding to alleged releases of hazardous substances from air-scrubber baghouse bags at a site in Michigan. We are vigorously defending this action and believe that it will not materially impact us. 20 23 Clean Air Act The Clean Air Act Amendments of 1990 require the EPA to develop air toxics regulations for a broad spectrum of industrial sectors, including Portland cement manufacturing. The new MACT standards are supposed to require plants to install the best feasible control equipment for certain hazardous air pollutants, thereby significantly reducing air emissions. We have actively participated with other cement manufacturers in working with the EPA to define test protocols, better define the scope of the MACT standards, determine the existence and feasibility of various technologies and develop realistic emission limitations and continuous emissions monitoring/reporting requirements for the cement industry. The EPA proposed standards for existing and new facilities were subject to review and public comment in 1998. On June 14, 1999, the EPA promulgated final MACT regulations, and existing facilities will have three years to meet the standards or close down operations. In September of 1999, the cement industry trade association filed a petition with the U.S. Court of Appeals for the District of Columbia Circuit challenging certain aspects of the final rules. The industry has entered into settlement discussions with the EPA in an effort to resolve as many of the issues as possible in order to avoid having to proceed with appellate litigation of these matters. On December 15, 2000, the Court of Appeals remanded certain issues to the agency for further consideration (i.e., the need for HCl, mercury and total hydrocarbons standards for new and existing cement plants). The EPA is considering seeking en banc review of this portion of the decision. The Court upheld all other elements of the MACT rule. Our Sugar Creek, Missouri plant that is being modernized and expanded will have to meet the new MACT standards at the time of start-up. Several of our other U.S. plants will need to upgrade and/or replace existing control and emissions monitoring equipment to be able to comply with the MACT regulations. Although the costs of such new equipment may be significant, the actual plant specific costs will vary depending on the level of existing controls and/or emissions monitoring equipment and whether or not it can be modified or new equipment will be required to meet the final MACT standards. We have audited all of our U.S. cement plants that are subject to the new MACT requirements to determine what actions and schedules are needed to assure compliance with the new MACT requirements and have identified and incorporated the specific costs associated with these actions in our 2001 budget. We do not anticipate that costs associated with complying with the new MACT standards will have a material impact on our financial statements. Title V of 1990 Clean Air Act Amendments could result in significant capital expenditures and operational expenses for us. The Clean Air Act Amendments established a new federal operating permit and fee program for many manufacturing operations. Under the Act, our U.S. operations deemed to be "major sources" of air pollution were required to submit detailed permit applications and pay recurring permit fees. Our "major sources" have been routinely paying permit fees for several years. The permitting requirements primarily affect our cement manufacturing, gypsum drywall and waste-fuel operations. We have submitted all applicable permit applications. Over the past few years, we have been reviewing draft Title V permits for several of our facilities. We anticipate that it will be several more years before all the initial Title V permits are drafted and issued. In July 1997, the EPA promulgated revisions to two National Ambient Air Quality Standards under the Clean Air Act- particulate matter and photochemical oxidants (ozone). Because of the nature of our operations, the proposed addition of a particulate matter standard that would regulate particles 2.5 microns or less in diameter, and the regulation of nitrogen oxides emissions as the precursor pollutant to ozone, is of potential concern. Implementation of these new standards would not immediately have an impact on industrial operations. The first step is several-year data collection and analysis activity by the states to determine whether or not the state will be able to meet the new standards. If a state were unable to demonstrate that it could meet the standards, it would then be required to modify its state air quality implementation plan to describe actions to meet the new standards. This initial phase would take several years to complete. It is presently unknown whether states in which we operate would be able to meet the new standards, how the states would modify their implementation plans to demonstrate compliance and/or the ultimate technology and the cost impact on our operations. In 1998, the U.S. Congress clarified the time schedule for implementation of the particulate matter 2.5 program. The EPA was prohibited by Congress from requiring states to revise their implementation plan until after the next 5-year review of the particulate matter 2.5 and ozone standards in 2001. On May 14, 1999, the U.S. Court of Appeals for the District of Columbia Circuit vacated these standards precluding their 21 24 implementation. The EPA has petitioned the U.S. Supreme Court seeking to reverse the appellate court decision. This matter is now pending before the Court. In 1998, the EPA also clarified its expectations of states in the ozone transport region (22 states east of the Mississippi River plus Missouri) in revising their NO(x) control strategies and standards to demonstrate future attainment of the ozone ambient air quality standards. After the U.S. Court of Appeals for the District of Columbia Circuit's decision on revisions of the ozone and new particulate matter 2.5 standards, the EPA reinstated the 8-hour ozone standard. The EPA indicated that the NO(x) State Implementation Program ("SIP") revision call would now be required to address attainment of the 8-hour ozone standard in the 22 eastern states. This regulatory determination was challenged by numerous industry petitioners. On March 3, 2000, the U.S. Court of Appeals for the District of Columbia Circuit upheld the EPA's NO(x) SIP-revision determination. As a result, the subject states must commence the NO(x) SIP revision process and submit new NO(x) state implementation plans and regulations to the EPA by a future date to be specified by the EPA. The court determination excluded Wisconsin, and parts of Missouri and Georgia originally covered by the NO(x) SIP revision call. The EPA is generally recommending to the states that they only require 30 percent reduction of NO(x) from cement plants. The EPA recommendation allows cement plants to consider all NO(x) reductions that have occurred from a 1995 baseline. We do not believe that the costs associated with revised state NO(x) regulations will have a material impact on us. Global Climate Change An evolving issue of significance to Lafarge in the U.S. and Canada is global climate change, or CO(2) stabilization/reduction. In December 1997, the United Nations held an international convention in Kyoto, Japan to take further international action to ensure CO(2) stabilization and/or reduction after the turn of the century. The international conference agreed to a protocol to the United Nations Framework Convention on Climate Change originally adopted in May 1992. The Kyoto Protocol establishes quantified emission reduction commitments for certain developed countries, including the U.S. and Canada, and certain countries that are undergoing the process of transition to a market economy. These reductions are to be obtained by 2008-2012. The Protocol was available for signature by member countries starting in the spring of 1998. Even though President Clinton signed the Kyoto Protocol in November 1998, it will require Senate ratification and enactment of implementing legislation before it becomes effective in the U. S. As of December 31, 2000, the treaty has not been submitted to the Senate for ratification. The consequences of CO(2) reduction measures for cement producers are potentially significant because CO(2) is generated from combustion of fuels such as coal and coke in order to generate the high temperatures necessary to manufacture clinker (which is then ground with gypsum to make cement). In addition, CO(2) is generated in the calcining of limestone to make clinker. Any imposition of raw material or production limitations, or fuel-use or carbon taxes, could have a significant impact on the cement manufacturing industry. The Canadian cement industry, including Lafarge, has entered into a voluntary commitment with the Canadian government to annually improve energy efficiency by approximately 1 percent per ton of clinker from 1990 to 2005, which commitment we have been able to meet. In the U.S. in 1996, we joined the EPA's Climate Wise program. This voluntary program promotes energy efficiency in industrial operations and reduces or stabilizes the CO(2) emissions that result from the generation of electricity. In 2000, Lafarge entered into a voluntary environmental partnership with the World Wildlife Fund. One element of the partnership is the development of a voluntary CO(2) reduction program. We are presently collecting our U.S. and Canadian CO(2) emissions data from 1990 to 2000 as the initial step for establishing a voluntary CO(2) reduction target. The Conference of the Parties has continued to work on issues not clearly resolved in the Kyoto Protocol. The primary focus was on developing more details on enforcement mechanisms, and the flexible market mechanisms provisions (i.e., country-to-country emissions trading, joint implementation and a clean development mechanism). These provisions are potentially important to us as an option for meeting potential CO(2) reductions other than by reducing production, should the U.S. Senate ratify the Kyoto Protocol, and the Protocol comes into force and effect. The most recent meeting of the Conference of Parties failed to result in an agreement on these and other matters. The parties agreed to keep working toward an agreement. It will not 22 25 be possible to determine the impact on Lafarge until international, U.S. and Canadian governmental requirements are defined and we can determine whether emission offsets or credits are obtainable and whether alternative cementitious products can be substituted. EXECUTIVE OFFICERS OF THE COMPANY The following sets forth the name, age and business experience for the last five years of each of our executive officers and indicates all positions and offices with Lafarge held by them.
NAME POSITION AGE ---- -------- --- Bertrand P. Collomb............... Chairman of the Board 58 Bernard L. Kasriel................ Vice Chairman of the Board 54 John M. Piecuch................... President and Chief Executive Officer 52 Edward T. Balfe................... Executive Vice President and 59 President -- Construction Materials Peter H. Cooke.................... Executive Vice President -- Cement 52 Larry J. Waisanen................. Executive Vice President and Chief Financial 50 Officer Michael J. Balchunas.............. Senior Vice President and President -- U.S. Cement 53 Operations Jean-Marc Lechene................. Senior Vice President and President -- Canadian 42 Cement Operations Alain Bouruet-Aubertot............ Senior Vice President and President -- Lafarge 44 Gypsum Eric C. Olsen..................... Senior Vice President -- Strategy and Development 37 James J. Nealis III............... Senior Vice President -- Human Resources 53 Joseph B. Sherk................... Vice President and Controller 52 David C. Jones.................... Vice President -- Legal Affairs and Secretary 59 David W. Carroll.................. Vice President -- Environment and Government 54 Affairs Kevin C. Grant.................... Vice President and Treasurer 45
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 S.A. since August 1989. From January 1989 to August 1989 he was Vice Chairman of the Board and Chief Operating Officer of Lafarge S.A., and from 1987 until January 1989 he was Senior Executive Vice President of Lafarge S.A. He served as Vice Chairman of the Board and Chief Executive Officer of Lafarge from February 1987 to January 1989. Bernard L. Kasriel was appointed to his current position in May 1996. He has also served as Vice Chairman and Chief Operating Officer of Lafarge S.A. since January 1995. Prior to that he served as Managing Director of Lafarge S.A. from 1989 to 1994, Senior Executive Vice President of Lafarge S.A. from 1987 to 1989 and Executive Vice President of Lafarge S.A. from 1982 until 1987. John M. Piecuch was appointed to his current position effective October 1996. He previously served as Group Executive Vice President of Lafarge S.A. from July 1994 until October 1996. He served as Senior Executive Vice President of Lafarge from 1992 to June 1994 and as Executive Vice President of Lafarge from 1989 to 1992. As discussed below, Mr. Piecuch has resigned effective May 8, 2001. Edward T. Balfe was appointed to his current position in July 1994. Prior to that he served as Senior Vice President of Construction Materials. He served as President of our Construction Materials Eastern Region and President and General Manager of Permanent Lafarge, a construction materials affiliate of Lafarge, from 1990 to 1993. Peter H. Cooke was appointed to his current position effective September 1999. Prior to that, he served as Executive Vice President and President -- Canadian Cement Operations from March 1996 to Septem- 23 26 ber 1999. He served as Senior Vice President and President of our Eastern Cement Region from July 1990 to February 1996. Larry J. Waisanen was appointed to his current position effective February 1998. He previously served as Senior Vice President and Chief Financial Officer of Lafarge from January 1996 to February 1998. He served as Assistant General Manager of Lafarge S.A.'s interests in Turkey from May 1992 to December 1995. Prior to that he served as Vice President Controller of Lafarge S.A. from March 1989 to April 1992. Michael J. Balchunas was appointed to his current position effective September 1999. He served as Senior Vice President and President -- Western Cement Region from July 1996 to September 1999. From March 1992 to July 1996 he was President of Systech Environmental Corporation, a wholly-owned subsidiary of Lafarge. Prior to that he served as Vice President of Operations of our Great Lakes Region from July 1990 to March 1992. Jean-Marc Lechene was appointed to his current position in September 1999. He previously served as Executive Vice President of Lafarge China from March 1996 to September 1999. Prior to that he served as Senior Vice President Cement Strategy of Lafarge S.A. from November 1995 to March 1996. Alain Bouruet-Aubertot was appointed to his current position effective September 1996. He served as Senior Vice President of Strategy & Development for Lafarge Platres, a division of Lafarge S.A., from December 1994 to September 1996. Prior to that, he was Project Director & Business Manager for Rhone-Poulenc Chemicals from November 1993 to November 1994 and Technical/Manufacturing Director for Rhone-Poulenc, Thann & Mulhouse from January 1992 to October 1993. Eric C. Olsen was appointed to his current position in August 1999. Prior to that, from May 1993 to August 1999, he was a partner in Trinity Associates, a management consulting firm focusing on certain capital intensive industries. James J. Nealis III was appointed to his current position effective January 1999. From August 1996 to December 1998 he served as Vice President -- International Human Resources for the Lafarge Group in Paris. From January 1994 to August 1996 he served as Vice President -- Human Resources, Cement Group. Joseph B. Sherk was appointed to his current position effective August 1998. From January 1994 to August 1998 he was Vice President and Controller, Construction Materials, Eastern Region for Lafarge Canada Inc. David C. Jones was appointed to his current position in February 1990. He served as Corporate Secretary of Lafarge 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 Lafarge from February 1990 to February 1992. Prior to that he was Director Environmental Programs for the Chemical Manufacturers Association from 1978 to 1990. Kevin C. Grant was appointed to his current position effective February 1998. He previously served as Treasurer of Lafarge from June 1995 to February 1998. He served as Vice President -- Human Resources Development from June 1994 to June 1995. He also was Sales Manager from June 1992 to June 1994 and Manager of Strategic Studies from June 1991 to June 1992 for Lafarge Fondu International, a subsidiary of Lafarge S.A. Effective May 8, 2001, Mr. Piecuch has resigned as President and Chief Executive Officer of Lafarge. Replacing him will be Philippe Rollier who, until his election as President and Chief Executive Officer of Lafarge, served as Regional President of Lafarge S.A. -- Central Europe and CIS for Cement, Aggregates and Concrete, a position he has held since 1995. Mr. Rollier, age 58, also has served as Groupe Executive Vice President of Lafarge S.A. since 1999. Since joining Lafarge S.A. in 1969, Mr. Rollier has held positions of increasing managerial importance throughout Europe and Canada. There is no family relationship between any of the executive officers of Lafarge 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 Lafarge expires at the first meeting of the Board of Directors 24 27 after the next annual meeting of stockholders following his or her election or appointment and until his or her successor is chosen and qualifies. ITEM 2. PROPERTIES Information set forth in Item 1 of this Annual Report that relates to the location and general character of the principal plants, mineral reserves and other significant physical properties owned in fee or leased by us is incorporated hereon by reference in answer to this Item 2. All of our cement plant sites (active and closed) and quarries (active and closed), as well as terminals, grinding plants, gypsum drywall plants and miscellaneous properties, are owned by us free of major encumbrances, except the Exshaw cement plant, the Kamloops limestone and cinerite quarries and the Wilmington gypsum drywall plant. - 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 limestone and cinerite quarries are located on land leased from the province of British Columbia until March 2022. - The Wilmington gypsum drywall facility is located at the Port of Wilmington, Delaware. The site is leased from Diamond State Port Corporation, an entity of the Delaware Department of Transportation. The lease expires in November 2020. The land, quarry, buildings and construction in progress related to the cement plant that we are building in Sugar Creek, Missouri are being leased from the City of Sugar Creek, Missouri pursuant to a Chapter 100 bond financing. The lease expires in 2020 and contains provisions that automatically transfer ownership of the leased facilities to Lafarge at the end of the lease term. Limestone quarry sites for our cement manufacturing plants are owned and are conveniently located near each plant, except for Joppa, Richmond and Seattle quarries which are located approximately 70, 80 and 180 miles, respectively, from their plant sites. Lafarge Canada Inc.'s cement manufacturing plant limestone quarrying rights in Quebec, Nova Scotia, Ontario, Alberta and British Columbia are held under quarry leases, some of which require annual royalty payments to provincial authorities. We estimate that 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 us or are purchased from suppliers and are readily available. We have ready-mixed concrete and construction aggregate operations extending from coast-to-coast in Canada. Our U.S. activities are concentrated in the Rocky Mountain, midwestern, north-central and northeast states and Louisiana. We have approximately 800 locations that offer an extensive line of construction materials, consisting primarily of crushed stone, sand, gravel and other aggregate; ready-mixed concrete; concrete products such as pipe, brick, block, paving stones and utility structures; asphalt paving and road construction services; and dry bagged goods. Deposits of raw materials for our aggregate producing plants are located on or near the plant sites. These deposits are either owned by us or leased upon terms which permit orderly mining of reserves. ITEM 3. LEGAL PROCEEDINGS In April and December 2000, the Ontario (Canada) Court rendered two decisions against our subsidiary Lafarge Canada Inc. and other defendants in a lawsuit originating in 1992 (the "1992 lawsuit") arising from claims of building owners, the Ontario New Home Warranty Program and other plaintiffs regarding allegedly defective concrete, fly ash and cement used in defective foundations. We estimate that the total amount of liability attributed to Lafarge Canada Inc. in capital, interest and third party costs represents approximately 25 28 Canadian $9.9 million, net of insured amounts. Lafarge Canada Inc. has appealed both decisions. We believe our insurance coverage and recorded reserves are adequate to cover the defense expenses and liabilities arising from the 1992 lawsuit. In 1999, Lafarge Canada Inc. was named a defendant in a class action related to the 1992 lawsuit. The action was certified as a class action in 2000, but will not proceed until after the Court of Appeals renders its decision in the 1992 lawsuit. Although the outcome of and the amount of any liability related to the 1999 class action cannot be predicted with certainty, we believe that any liability which Lafarge Canada Inc. may incur arising from the class action will not have a material adverse effect on our financial condition. On March 18, 1998, a stockholder derivative lawsuit was filed against our directors in the Circuit Court for Montgomery County, Maryland. The lawsuit alleged breach of fiduciary duty, corporate waste and gross negligence in connection with our purchase of North American construction materials assets from Lafarge S.A., our majority stockholder (the "Redland Transaction"). The Redland Transaction, proposed to us in late 1997, was evaluated by a special committee of independent directors after conducting extensive due diligence and being advised by independent professionals retained by the committee to assist with its evaluation, one of which, an investment banking firm, advised the committee regarding the fairness of the price and terms of the Redland Transaction. Based on its due diligence and the opinions of its specially-retained advisers, the special committee recommended the Redland Transaction for approval by the full Board of Directors of Lafarge. On March 16, 1998, the full Board, consisting of a majority of independent directors, approved the Redland Transaction, which was publicly announced on March 17, 1998. By order dated January 28, 2000, the Court granted the directors' motion for summary judgment. Plaintiffs appealed the decision to the Maryland Court of Special Appeals. Upon its own motion the Maryland Court of Appeals, Maryland's highest court, selected the appeal for hearing and decision. A hearing before the Court was held in December 2000. In early 2001, the Court of Appeals rendered its decision affirming the decision of the lower court. Currently, we are involved in one remediation under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, which together are referred to as "Superfund" and the corrective action provisions of the Resource Conservation and Recovery Act of 1976. At this site, which the EPA has listed on the National Priority List, some of the potentially responsible parties named by the EPA have initiated a third-party action against 47 other parties, including us. We also have been named a potentially responsible party for this site. The suit alleges that in 1969 one of our predecessor companies sold equipment containing hazardous substances that may now be present at the site. It appears that the largest disposer of hazardous substances at this new site is the U.S. Department of Defense and numerous other large disposers of hazardous substances are associated with this site. We believe that this matter is not material to our financial condition, results or operations or liquidity. In December 1999, an action was filed against us and five others to recover response activity costs incurred by the state of Michigan in responding to alleged releases of hazardous substances from air-scrubber baghouse bags at a site in Michigan. We are vigorously defending this action and believe that it will not materially impact us. When we determine that it is probable that a liability for our environmental matters or other legal actions has been incurred and the amount of the loss is reasonably estimable, an estimate of the required remediation costs is recorded as a liability in the financial statements. As of December 31, 2000, the liabilities recorded for the environmental obligations are not material to our financial statements. Although we believe our environmental accruals are adequate, environmental costs may be incurred that exceed the amounts provided at December 31, 2000. However, we have concluded that the possibility of material liability in excess of the amount reported in the December 31, 2000 Consolidated Balance Sheet is remote. In the ordinary course of business, we are involved in certain legal actions and claims, including proceedings under laws and regulations relating to environmental and other matters. Because such matters are 26 29 subject to many uncertainties and the outcomes are not predictable with assurance, the total amount of these legal actions and claims cannot be determined with certainty. Management believes that all legal and environmental matters will be resolved without material adverse impact to our financial condition, results of operations or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None during the fourth quarter ended December 31, 2000. PART II ITEM 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information required in response to Item 5 is reported in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations under the caption "Management's Discussion of Shareholders' Equity" of this Annual Report, and is incorporated herein by reference. On March 12, 2001, 67,614,235 shares of Common Stock ("Common Stock") were outstanding and held by 3,523 record holders. In addition, on March 12, 2001, 4,457,239 Exchangeable Preference Shares of Lafarge Canada Inc., which are exchangeable at the option of the holder into Common Stock on a one-for-one basis and have rights and privileges that parallel those of the shares of Common Stock, were outstanding and held by 6,923 record holders. We may obtain funds required for dividend payments, expenses and interest payments on our debt from our operations in the U.S., dividends from subsidiaries or from external sources, including bank or other borrowings. 27 30 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The table below summarizes selected financial information for Lafarge. For further information, refer to our consolidated financial statements and notes thereto presented under Item 8 of this Annual Report.
YEARS ENDED DECEMBER 31 ------------------------------------------------------------ 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- (IN MILLIONS EXCEPT AS INDICATED BY AN*) OPERATING RESULTS Net Sales (a)..................... $2,787.6 $2,721.6 $2,508.5 $1,842.9 $1,679.2 ======== ======== ======== ======== ======== INCOME BEFORE THE FOLLOWING ITEMS: $ 430.7 $ 481.6 $ 407.0 $ 300.9 $ 236.4 Interest expense, net............. (26.9) (44.8) (27.2) (6.6) (14.1) Income taxes...................... (146.4) (161.4) (144.3) (112.3) (81.4) -------- -------- -------- -------- -------- NET INCOME........................ 257.4 275.4 235.5 182.0 140.9 Depreciation, depletion and amortization.................... 168.3 168.3 156.8 106.3 100.5 Other items not affecting cash.... 61.9 (45.2) (16.2) 47.7 (33.4) -------- -------- -------- -------- -------- NET CASH PROVIDED BY OPERATIONS... $ 487.6 $ 398.5 $ 376.1 $ 336.0 $ 208.0 ======== ======== ======== ======== ======== TOTAL ASSETS................. $3,902.6 $3,293.4 $2,892.5 $2,774.9 $1,813.0 ======== ======== ======== ======== ======== FINANCIAL CONDITION AT DECEMBER 31 Working capital................... $ 336.1 $ 626.6 $ 524.4 $ (127.1)(b) $ 394.9 Property, plant and equipment, net............................. 2,122.4 1,618.3 1,400.8 1,296.0 867.7 Other assets...................... 703.6 539.6 553.8 529.4 213.0 -------- -------- -------- -------- -------- TOTAL NET ASSETS............. $3,162.1 $2,784.5 $2,479.0 $1,698.3 $1,475.6 ======== ======== ======== ======== ======== Long-term debt.................... $ 687.4 $ 710.3 $ 740.4 $ 135.2 $ 161.9 Other long-term liabilities and minority interest............... 582.5 351.3 323.4 307.4 203.2 Shareholders' equity.............. 1,892.2 1,722.9 1,415.2 1,255.7 1,110.5 -------- -------- -------- -------- -------- TOTAL CAPITALIZATION......... $3,162.1 $2,784.5 $2,479.0 $1,698.3 $1,475.6 ======== ======== ======== ======== ======== COMMON EQUITY SHARE INFORMATION Net income -- basic*.............. $ 3.51 $ 3.79 $ 3.27 $ 2.56 $ 2.02 Net income -- diluted*............ $ 3.51 $ 3.77 $ 3.24 $ 2.54 $ 1.95 Dividends*........................ $ 0.60 $ 0.60 $ 0.51 $ 0.42 $ 0.40 Book value at December 31*........ $ 26.27 $ 23.55 $ 19.57 $ 17.52 $ 15.79 Average shares and equivalents outstanding..................... 73.3 72.6 72.1 71.1 69.8 Shares outstanding at December 31.............................. 72.0 73.2 72.3 71.7 70.4 ======== ======== ======== ======== ======== STATISTICAL DATA Capital expenditures.............. $ 431.7 $ 315.7 $ 224.3 $ 124.0 $ 124.8 Acquisitions...................... $ 242.0(c) $ 58.3 $ 99.3(d) $ 8.8 $ 83.5 Net income as a percentage of net sales*.......................... 9.2% 10.1% 9.4% 9.9% 8.4% Return on average shareholders' equity*......................... 14.2% 17.6% 17.6% 15.4% 13.5% Long-term debt as a percentage of total capitalization*........... 21.7% 25.5% 29.9% 8.0% 11.0% Number of employees at December 31*............................. 14,300 10,500 10,400 10,100 6,800 Exchange rate at December 31 (Cdn. to U.S.)*................. 0.667 0.692 0.654 0.699 0.730 Average exchange rate for the year (Cdn. to U.S.)*................. 0.673 0.673 0.674 0.722 0.733 ======== ======== ======== ======== ========
- --------------- (a) Net sales includes shipping and handling costs billed to customers as required by the Emerging Issues Task Force ("EITF") Issue No. 00-10 -- see "Revenue Recognition" in the Notes to Consolidated Financial Statements. 28 31 (b) Includes a liability of $690 million to Lafarge S.A. for the Redland acquisition, of which $40 million was repaid in 1998 and the remaining $650 million was financed with long-term public debt in 1998. (c) Excludes preferred shares and note payable totaling $127.7 million issued in conjunction with the Warren Paving & Materials Group merger treated as non-cash financing activities for cash flow reporting. (d) Excludes the Redland acquisition that was accounted for similar to a pooling of interests. 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 included in Item 8 of this Annual Report summarize the operating performance of Lafarge Corporation for the past three years. To facilitate analysis, net sales and operating profit are discussed by operating segment and are summarized in the table below. (See "Segment and Related Information" in the Notes to Consolidated Financial Statements for further segment information.) Our three operating segments are: Construction Materials -- the production and distribution of construction aggregate, ready-mixed concrete, other concrete products and asphalt and the construction and paving of roads. Cement and Cementitious Materials -- the production and distribution of Portland and specialty cements and cementitious materials and the processing of fuel-quality waste and alternative raw materials for use in cement kilns. Lafarge Gypsum -- the production and distribution of gypsum drywall and related products. 29 32
YEARS ENDED DECEMBER 31 ------------------------------------ 2000 1999 1998 -------- -------- -------- (IN MILLIONS) NET SALES Construction materials..................................... $1,575.7 $1,486.4 $1,402.6 Cement and cementitious materials.......................... 1,215.4 1,202.8 1,123.7 Gypsum..................................................... 134.1 152.5 102.4 Eliminations............................................... (137.6) (120.1) (120.2) -------- -------- -------- TOTAL............................................ $2,787.6 $2,721.6 $2,508.5 ======== ======== ======== GROSS PROFIT Construction materials..................................... $ 281.8 $ 263.4 $ 250.9 Cement and cementitious materials.......................... 399.4 405.2 367.7 Gypsum..................................................... 7.1 56.7 30.6 -------- -------- -------- TOTAL............................................ 688.3 725.3 649.2 -------- -------- -------- OPERATIONAL OVERHEAD AND OTHER EXPENSES Construction materials..................................... (89.7) (73.9) (79.6) Cement and cementitious materials.......................... (81.1) (84.7) (79.0) Gypsum..................................................... (25.1) (14.8) (10.6) -------- -------- -------- TOTAL............................................ (195.9) (173.4) (169.2) -------- -------- -------- INCOME FROM OPERATIONS Construction materials..................................... 192.1 189.5 171.3 Cement and cementitious materials.......................... 318.3 320.5 288.7 Gypsum..................................................... (18.0) 41.9 20.0 -------- -------- -------- TOTAL............................................ 492.4 551.9 480.0 Corporate and unallocated expenses......................... (61.7) (70.3) (73.0) -------- -------- -------- EARNINGS BEFORE INTEREST AND TAXES......................... $ 430.7 $ 481.6 $ 407.0 ======== ======== ======== ASSETS Construction materials..................................... $1,416.3 $1,239.1 $1,095.3 Cement and cementitious materials.......................... 1,381.1 1,098.3 956.4 Gypsum..................................................... 269.7 125.1 70.6 Corporate, Redland goodwill and unallocated assets......... 835.5 830.9 770.2 -------- -------- -------- TOTAL............................................ $3,902.6 $3,293.4 $2,892.5 ======== ======== ========
YEAR ENDED DECEMBER 31, 2000 NET SALES Our net sales increased by 2 percent in 2000 to $2,787.6 million from $2,721.6 million in 1999. U.S. net sales remained relatively unchanged from 1999 levels at $1,904.4 million as the result of several factors: lower ready-mixed concrete and cement sales volumes due to poor weather conditions in the fourth quarter and lower average selling prices for gypsum drywall. These factors were mostly offset by aggregate sales volumes from the Presque Isle acquisition and increased ready-mixed concrete and cement average selling prices due to implemented increases and changes in product mix. Canadian net sales were $883.2 million, an increase of $66.7 million or 8 percent. The increase was due to improving economic conditions in eastern Canada, increased infrastructure spending and project work in British Columbia and a strong oil and gas marketplace in northern Alberta, which helped improve ready-mixed concrete, aggregate and cement sales volumes and average selling prices. 30 33 Construction Materials Net sales from construction materials operations in the U.S. and Canada were $1,575.7 million, an increase of 6 percent from 1999. Overall ready-mixed concrete shipments to customers were 10.7 million cubic yards in 2000, 2 percent higher than 1999, and aggregate sales volumes were 93.6 million tons, 15 percent higher than 1999. In the U.S., net sales increased by $14.5 million, or 2 percent, to $893.5 million. Ready-mixed concrete sales volumes decreased by 1 percent. Average selling prices for ready-mixed concrete in the U.S. regions increased by 4 percent due to implemented price increases and increased sales of higher-value ready-mixed concrete. Aggregate sales volumes in the U.S. increased by 18 percent, of which 6 percent was due to growth in our existing operations with the remainder coming from volumes associated with the Presque Isle, Michigan quarry acquired in June 2000. Despite general price increases, average selling prices decreased by 4 percent when compared to 1999. The reduced selling price was due to increased sales of lower-valued products and the impact of the Presque Isle quarry, which, because of its product mix, brought with it lower average prices than existing U.S. operations. In Canada, net sales increased by $74.8 million, or 12 percent, to $682.2 million, reflecting an increase in both sales volumes and average selling prices. Ready-mixed concrete sales volumes in Canada increased 4 percent from 1999 levels and average selling prices increased by 3 percent. Sales volumes increased over 1999 primarily due to increased project work. The increase in average selling price resulted from general price increases and increased sales of higher value ready-mixed concrete. Canadian aggregate sales volumes were 11 percent ahead of 1999 levels and average selling prices increased 6 percent. Volumes increased due to a strong market in Ontario, and higher infrastructure spending, increased activity in the oil and gas sector and project work in western Canada. The average selling price increase was mainly due to a shift in the product mix to more premium products. Cement and Cementitious Materials Net sales from cement operations increased by 1 percent to $1,215.4 million from $1,202.8 million in 1999 due to higher average selling prices. Cement sales volumes declined by 0.2 million tons to 14.1 million tons, which represents a 1 percent decline, while the average selling price per ton to customers, net of freight costs ("net realization"), increased by 1.5 percent. U.S. net sales decreased by $1.3 million to $919.4 million. Cement shipments through September were ahead of last year, but due to a 15 percent decline in the fourth quarter brought on by heavy snowfall and extremely cold weather, annual cement shipments declined 3 percent. Net realization in the U.S. increased only 1.4 percent due to competitive pressures in our markets. Canadian cement sales increased 5 percent to $296.0 million from $282.1 million in 1999. Cement shipments in Canada increased by 4 percent and net realization rose by 1.8 percent. The improvement in volumes was primarily due to a strong Northern Alberta market, again in oil and gas infrastructure spending, increased oil well cement sales and expanded project work. The increase of net realization resulted from improved product mix and annual price increases. Also included in sales of our cement operations are sales of cementitious material of $106 million, representing 2.8 million tons of slag and fly ash. This represents a 9 percent increase in sales from 1999. Gypsum Despite a 1 percent increase in sales volumes, net sales from gypsum operations decreased by 12 percent to $134.1 million from $152.5 million in 1999. Average selling prices declined nearly 20 percent compared to 1999 due to increased capacity in the industry and lower demand, with year-end prices more than 50 percent below those at year-end 1999. The volume increase is due to 137 million square feet of drywall sold from our new Silver Grove, Kentucky plant, which started production in June 2000. This increase was mostly offset by reduced sales of imported drywall and a decline in sales of drywall from our Newfoundland, Canada plant. A new drywall plant in northern Florida began operating in early 2001. GROSS PROFIT AND COST OF GOODS SOLD Gross profit as a percentage of net sales decreased to 25 percent from 27 percent in 1999, reflecting a significant decline in gypsum results and modest reductions in the cement operations. 31 34 Construction materials gross margin remained at 18 percent in 2000. This was due to higher ready-mixed concrete average selling prices in the U.S. and Canada and higher aggregate average selling prices in Canada. These factors were offset by higher material and fuel costs in all regions and increased operating costs in the western U.S. and in eastern and western Canada, as well as lower aggregate average selling prices in the U.S. Cement gross profit declined to 33 percent compared to 34 percent in 1999. The decline was the result of a 4 percent increase in cash production cost per ton partially offset by higher average selling prices. In the U.S., cash production cost per ton increased slightly compared to 1999. In Canada, cash production cost per ton increased by 9 percent, primarily due to increased natural gas costs at the Exshaw, Alberta plant and increased maintenance and purchased clinker costs at the Bath, Ontario plant, partially offset by lower maintenance and fuel costs and other operating efficiencies associated with the new kiln at the Richmond, British Columbia plant. The following table summarizes our cement and clinker production (in millions of tons) and the clinker production capacity utilization rate:
YEARS ENDED DECEMBER 31 -------------- 2000 1999 ----- ----- Cement production........................................... 13.53 13.55 Clinker production.......................................... 11.93 11.76 Clinker capacity utilization................................ 92% 97% ===== =====
Cement production was essentially in line with 1999, while clinker production was 1 percent higher than 1999. U.S. cement production totaled 8.3 million tons, down 2 percent. Clinker capacity utilization at U.S. plants declined to 96 percent due to increases in capacity at several plants and slightly reduced production. Canadian cement production was 5.2 million tons, up 3 percent. Canadian clinker capacity utilization decreased to 87 percent from 92 percent. This decline was due to an increase in capacity, compared to prior year, at the Richmond, British Columbia plant. Lafarge Gypsum's gross profit as a percentage of sales decreased by 32 percentage points to 5 percent, primarily due to erosion of selling prices during 2000 resulting from increased capacity in the industry, slowing demand, costs associated with the start-up of two new production facilities, as well as increased raw material and energy costs. SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative expenses were $269.4 million in 2000 compared with $235.0 million in 1999. The increase was due to growth in our construction materials business, increased staffing (particularly in the human resource and strategic development functions), the restructuring of the Canadian gypsum operations, increased costs to support the 1.8 billion square foot increase of gypsum drywall production capacity, costs associated with establishing a shared service center in our construction materials operations and the study and integration of several acquisitions throughout the year. Selling and administrative expenses as a percentage of net sales increased to 9.7 percent from 8.6 percent in 1999. GOODWILL AMORTIZATION Amortization of goodwill was $17.2 million in both 2000 and 1999. We continually evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. We expect to amortize the remaining goodwill over periods ranging from 15 to 40 years, based on the expected economic lives of the assets purchased. OTHER (INCOME) EXPENSE, NET Other (income) expense, net, consists of items such as equity income and gains and losses from divestitures. Other (income) expense, net, was a gain of $29.0 million in 2000 compared with a gain of 32 35 $8.5 million in 1999. The $20.5 million increase was primarily due to increased pension income of $11.8 million, lower post-retirement benefits costs of $2.8 million and higher gains on asset dispositions of $3.0 million. PERFORMANCE BY LINE OF BUSINESS Construction Materials Operating profit from construction materials operations (before corporate and unallocated expenses) was $192.1 million, $2.6 million higher than 1999. The improvement was due to higher ready-mixed concrete and aggregate sales volumes and higher average selling prices for ready-mixed concrete. These items were partially offset by higher liquid asphalt, diesel and natural gas costs in most regions. The significant increase in the cost of natural gas, diesel and liquid asphalt, as well as the costs associated with implementing a number of management training programs and establishing a shared service center for accounting and transaction processing, impacted year 2000 operating profit by approximately $15 million. U.S. operations earned $116.2 million, $1.4 million better than 1999. This increase was due to higher aggregate sales volumes of 18 percent, higher average selling prices for ready-mixed concrete of 4 percent and lower depreciation expense, partially offset by reduced ready-mixed concrete sales volumes of 1 percent, and increased material, delivery and overhead costs. Earnings in the eastern U.S. were favorably impacted by the acquisition of the Presque Isle quarry in June 2000 and the divestment of the unprofitable Maryland paving operations in 1999. In the western U.S., earnings were below prior year due to increased aggregate operating costs, primarily in central Missouri, reduced ready-mixed concrete sales volumes from poor weather conditions in the fourth quarter in the majority of our major markets and lower average selling prices for aggregate. The Canadian operations earned $75.9 million, $1.2 million better than 1999, primarily reflecting higher ready-mixed concrete and aggregate sales volumes of 4 percent and 11 percent, respectively, and higher average selling prices of 3 percent and 6 percent, respectively, partially offset by increased material, delivery and overhead costs. Cement and Cementitious Materials Operating profit from cement operations (before corporate and unallocated expenses) was $318.3 million, a $2.2 million or 1 percent decline from 1999. The decline was due to lower cement sales volumes and higher energy and operating costs, partially offset by increased net realization due to general price increases. For the full year, energy cost increases for process fuel and delivery totaled approximately $12 million. The most significant impact was at our Exshaw, Alberta plant. In the U.S., where we burn primarily coal and petroleum coke, the process fuel cost increase was limited. However, freight costs, particularly in the second half of the year, were affected more significantly. In the U.S., operating profit was $219.0 million, $3.5 million (2 percent) lower than 1999. The decline resulted from lower cement sales volumes of 3 percent due largely to poor weather in the fourth quarter and increased transportation costs. Our Canadian cement operations reported an operating profit of $99.3 million, $1.3 million higher than in 1999, primarily due to increased sales volumes of 4 percent and net realization of 2 percent which was largely offset by rising fuel costs and increased maintenance and purchased clinker at the Bath, Ontario plant. Operating profit from our cementitious business (slag and fly ash) included in the cement results was $22 million, an increase of $2 million from 1999. Gypsum Our gypsum drywall operations reported an operating loss of $18.0 million, a $59.9 million decline from last year's operating profit of $41.9 million. The swing in profitability was due to declining drywall prices, rising raw material costs, increased energy costs, costs associated with the start-up of the new Silver Grove, Kentucky plant in 2000, preparations to start-up the new Palatka, Florida plant in 2001, and additional administrative and marketing costs required to support a 1.8 billion square foot increase in production capacity. Average selling prices declined nearly 20 percent compared to 1999 with year-end prices off more than 50 percent from a year ago. 33 36 EARNINGS BEFORE INTEREST AND TAXES (EBIT) In 2000, EBIT was $430.7 million, a $50.9 million (11 percent) decline from 1999. This drop in profitability was due to the $59.9 million swing in our gypsum segment's results. Through the first three quarters of 2000, improvements in our construction materials and cement segments largely offset the reduction in gypsum profitability. However, heavy snowfall and extremely cold weather in the last quarter reversed these earlier gains. EBIT in the U.S. was $275.9 million, $58.6 million lower than 1999. EBIT from Canadian operations was $154.8 million, $7.7 million higher than 1999. INTEREST EXPENSE Interest expense decreased by $12.1 million in 2000 to $50.6 million primarily due to an increase in capitalized interest. Interest capitalized was $11.7 million and $4.7 million in 2000 and 1999, respectively. INTEREST INCOME Interest income increased $5.8 million in 2000. This increase is composed of $11.5 million of interest receivable from the Canadian Customs and Revenue Agency recorded as the result of the settlement of transfer pricing and cost sharing issues for the 1986 to 1994 calendar years (see "Income Taxes" in the Notes to the Consolidated Financial Statements for further information). This was partially offset by lower average Canadian short-term investment balances during 2000. INCOME TAXES Income tax expense decreased from $161.4 million in 1999 to $146.5 million in 2000, primarily due to lower profits in 2000 in the United States and a reduction in our effective income tax rate to 36.3 percent in 2000 from 37.0 percent in 1999. NET INCOME We reported net income of $257.4 million in 2000 compared with $275.4 million in 1999. The major reason for the decline in profitability was the losses incurred in our gypsum operations, as well as higher energy costs and higher selling and administrative expenses. GENERAL OUTLOOK We expect earnings to improve in 2001, as most sectors of construction in the U.S. still appear to be fairly strong, particularly highway and public works construction. Residential construction, which is expected to weaken in 2001, should benefit from the recent reduction in interest rates. As the only nationwide supplier of construction materials in Canada, we are encouraged by projections that the economy in Canada will grow faster than in the U.S. this year, aided in part by a new round of tax cuts. The outlook for our construction materials operations in 2001 is positive. We expect demand for construction aggregate, ready-mixed concrete and our other products and services to remain high in the markets we serve. In 2001, we should benefit from a full year of operations of the Presque Isle acquisition and the Warren Paving merger. In addition, we expect operating profits to strengthen as one-time investment costs, expended in 2000, involving training programs and the establishment of a shared service center for accounting and transaction processing, have been completed. We believe that U.S. cement consumption in 2001 will remain at or close to the record levels achieved in 2000. While we expect new residential construction to decline somewhat in 2001, TEA-21 funding continues to be appropriated by the federal government, and we believe the outlook for road and highway construction in a number of our key markets is positive for 2001. Our expanding cementitious business -- slag and fly ash -- is becoming more important in our portfolio and should have a positive influence in 2001. In our gypsum business, the key unknown factor for 2001 is the evolution of selling prices. Recently announced price increases are a positive sign and may indicate that prices are stabilizing. With our two new 34 37 drywall plants operating in 2001 and with the action plans we have implemented to improve efficiency and reduce costs, we believe that our gypsum operating performance should improve in 2001. YEAR ENDED DECEMBER 31, 1999 NET SALES Net sales increased by 8 percent in 1999 to $2,721.6 million from $2,508.5 million in 1998. U.S. net sales increased 10 percent to $1,905.1 million. The improvement in U.S. sales was primarily due to the continuation of favorable economic conditions supporting demand in all three segments. Sales volumes and prices generally increased in construction materials, cement and gypsum. Canadian net sales were $816.5 million, an increase of $40.7 million or 5 percent. The increase was due to the improving economic conditions in eastern Canada, higher cement and ready-mix concrete prices, and increased aggregate volumes and prices. Other positive factors improving Canadian sales included the gypsum segment's purchase of a gypsum drywall factory and a joint compound manufacturing facility. These increases were partially offset by a slight decline of 0.2 percent in the average value of the Canadian dollar relative to the U.S. dollar and lower sales in western Canada. Construction Materials Net sales from construction materials operations in the U.S. and Canada were $1,486.4 million, which represents an increase of 6 percent from 1998. Ready-mixed concrete shipments to customers in the U.S. and Canada were 10.6 million cubic yards in 1999, 3 percent higher than 1998, while aggregate sales volumes of 81.6 million tons were essentially unchanged from last year. In the U.S., net sales increased by $71.0 million or 9 percent to $879.0 million. Ready-mixed concrete sales volumes increased by 4 percent as most major markets posted gains. Average selling prices in the U.S. regions increased by 3 percent due to increased sales of higher-valued ready-mixed concrete. Aggregate sales volumes in the U.S. decreased by 3 percent while average selling prices increased by 6 percent when compared to 1998. The decrease in aggregate sales volumes despite overall healthy demand was accounted for by softness in some key markets, such as New Mexico, Ohio and Maryland. In Canada, net sales increased by $12.8 million or 2 percent. This increase reflects an increase in the average selling price of most products. Ready-mixed concrete sales volumes in Canada increased 1 percent from 1998 levels while average selling prices increased by 3 percent. In eastern Canada, sales volumes were 13 percent higher and average selling prices were slightly higher than 1998 levels. Several acquisitions in 1999 as well as increased project work and mild weather combined to increase sales. Western Canada ready-mixed concrete volumes were below prior year by 11 percent; however, average selling prices increased by 7 percent. The volume decline was primarily due to the weak economy in British Columbia and depressed commodity prices for most of the year in the Prairie Provinces. Canadian aggregate sales volumes were 7 percent ahead of 1998 levels and average selling prices increased 4 percent. Volumes in eastern Canada increased by 10 percent with an average selling price increase of 6 percent. The average selling price increase was mainly due to a shift in the product mix to premium products coupled with strong prices in recently acquired operations. Aggregate volumes in western Canada remained relatively flat while average selling prices increased only slightly, mainly due to the weak economic conditions in British Columbia. Cement and Cementitious Materials Net sales from cement operations increased by 7 percent to $1,202.8 million from $1,123.7 million in 1998 due to higher sales volumes and average selling prices. Cement sales volumes increased by 0.7 million tons to 14.3 million tons, which represents a 5 percent increase, while the average selling price per ton to customers net of freight costs ("net realization") increased by 2 percent. U.S. net sales increased by $69.9 million to $920.7 million, an 8 percent improvement, which reflects high levels of construction spending. Cement shipments advanced 6 percent as most major markets posted gains. Net realization in the U.S. increased 2 percent. Canadian cement sales increased 3 percent to $282.1 million from $272.9 million. Cement shipments in Canada increased by 1 percent while net realization increased by 3 percent. In eastern Canada, cement sales volumes and net realization increased by 7 percent and 4 percent, respectively. Cement shipments in the Atlantic provinces were 11 percent higher than in 1998 primarily due to increased 35 38 commercial and public works projects. Quebec and Ontario experienced increased shipments of 8 percent and 5 percent, respectively, due to increases in residential and commercial construction related to continued strengthening of the provincial economies. In western Canada, cement shipments were 6 percent lower than 1998, reflecting weaker demand in all major markets. The two major factors were the negative impact on British Columbia of the depressed Asian economy, low world commodity prices and lower sales of oil well cement due to a decline in drilling activity. Gypsum Net sales from gypsum operations increased by 49 percent to $152.5 million from $102.4 million in 1998. Strong market demand in the residential and commercial construction sectors resulted in average selling price increases of 22 percent. Volumes also increased by 22 percent to 890 million square feet. Due to productivity improvements, both U.S. gypsum plants achieved record production levels for the second straight year. Volumes from existing facilities in Wilmington, Delaware and Buchanan, New York rose by 43 million square feet or 6 percent. Volumes from the recently acquired drywall plant in Newfoundland, Canada and volumes of imported drywall of 87 million and 30 million square feet, respectively, accounted for the remaining increase. We announced the construction of two state-of-the-art gypsum drywall plants in northern Kentucky and northern Florida during the year. When the plants begin operating in mid- 2000 and early 2001, respectively, Lafarge's gypsum drywall capacity should increase to more than 2.5 billion square feet per year. GROSS PROFIT AND COST OF GOODS SOLD Gross profit as a percentage of net sales increased to 27 percent from 26 percent in 1998, reflecting improvements in most major product lines. Construction materials gross profit was comparable to 1998 at 18 percent. The U.S. and Canada both experienced higher aggregate and ready-mixed concrete average selling prices. These were offset by higher material costs in all regions and increased operating costs in the eastern and western U.S. and in western Canada. Cement gross profit was 34 percent compared with 33 percent in 1998. The improvement resulted from higher average selling prices partially offset by a 2 percent increase in cash production cost per ton. In Canada, cash production cost per ton increased by 3 percent primarily due to increased maintenance and higher power costs at the Woodstock, Ontario plant, and increased fuel costs at the Exshaw, Alberta and the old Richmond, British Columbia plants. In addition, costs were negatively impacted by costs associated with the start-up of the new kiln at the Richmond plant. These were partially offset by a slight improvement in cash production cost per ton in the U.S. Cement cost per ton is heavily influenced by plant capacity utilization. The following table summarizes our cement and clinker production (in millions of tons) and the clinker production capacity utilization rate:
YEARS ENDED DECEMBER 31 -------------- 1999 1998 ----- ----- Cement production........................................... 13.55 12.77 Clinker production.......................................... 11.76 11.18 Clinker capacity utilization................................ 97% 95% ===== =====
Cement and clinker production were 6 and 5 percent higher than 1998, respectively. U.S. cement production totaled 8.5 million tons, up 9 percent. Clinker capacity utilization at U.S. plants increased to 99 percent from 98 percent as several U.S. plants established clinker production records. Production capacity increased in 1999 compared with 1998 with the acquisition of the Seattle, Washington plant in the fourth quarter of 1998. The Alpena, Michigan plant experienced a significant production increase due to increased efficiencies. Canadian cement production was 5 million tons, up 2 percent. Canadian clinker capacity utilization increased to 92 percent from 90 percent. These improvements were due to higher cement and 36 39 clinker production at five of the seven Canadian cement plants. The largest increases are attributed to the Brookfield, Nova Scotia and the Woodstock, Ontario plants producing with two kilns. Lafarge Gypsum's gross profit as a percentage of sales increased by 7 percentage points to 37 percent. This was primarily due to four price increases during the year resulting from favorable market conditions. For the second straight year, both U.S. plants set production records in 1999. These favorable factors were offset somewhat by the impact of the higher costs associated with the imported drywall and lower margins associated with the new Canadian operations. SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative expenses were $235.0 million in 1999 compared with $216.8 million in 1998. The increase was due to the purchase and integration of several acquisitions throughout the year, financial system upgrades in all segments and an increase in consulting fees paid due to the Year 2000 compliance program. Additionally, gypsum operations saw increases due to the implementation of changes to their marketing, administrative and customer service areas that were necessary to support the planned growth of the gypsum division. Despite this, selling and administrative expenses as a percentage of net sales remained unchanged from 1998 at 8.6 percent. GOODWILL AMORTIZATION Amortization of goodwill was $17.2 million in 1999 compared with $17.6 million in 1998. We continually evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. We expect to amortize the remaining goodwill over periods ranging from 15 to 40 years, based on the expected economic lives of the assets purchased. OTHER (INCOME) EXPENSE, NET Other (income) expense, net, consists of items such as equity income and gains and losses from divestitures. Other (income) expense, net, was a gain of $8.5 million in 1999 compared with an expense of $7.8 million in 1998. Other (income) expense, net, increased primarily as a result of favorable nonrecurring gains, including the settlement of an outstanding insurance claim and the gain on the sale of asphalt and paving operations in Maryland and the absence of certain nonrecurring expenses incurred in 1998. PERFORMANCE BY LINE OF BUSINESS Construction Materials Operating profit from construction materials operations (before corporate and unallocated expenses) was $189.5 million, $18.2 million higher than 1998. The improvement was due to higher ready-mixed concrete sales volumes in both the U.S. and Canada and higher average selling prices for ready-mixed concrete and aggregate in the U.S. and Canada, partially offset by higher material and delivery costs in most regions. U.S. operations earned $114.8 million, $12.8 million better than 1998 due to increased ready-mixed concrete sales volumes of 4 percent and higher average selling prices for both ready-mixed concrete and aggregate of 3 percent and 6 percent, respectively, partially offset by reduced aggregate volumes of 3 percent and increased material and delivery costs. The Canadian operations earned $74.7 million, $5.3 million better than 1998, primarily reflecting higher ready-mixed concrete and aggregate sales volumes of 1 percent and 7 percent, respectively, and higher average selling prices of 3 percent and 4 percent, respectively. In eastern Canada, higher shipments and increased average selling prices in all markets contributed to higher earnings. Earnings in western Canada were below prior year due to lower ready-mixed concrete sales volumes and increased material costs partially offset by increased average selling prices. 37 40 Cement and Cementitious Materials Operating profit from cement operations (before corporate and unallocated expenses) was $320.5 million, a $31.8 million or 11 percent improvement from 1998. In the U.S., operating profit was $222.5 million, $36.3 million or 19.5 percent higher than 1998. The improvement was due to 7 percent higher shipments and a 2 percent increase in net realization partly offset by higher plant costs and increased clinker and cement purchases (to supplement production). Of the 7 percent increase in cement shipments, 1.7 percent was due to the acquisition of the Seattle, Washington cement plant on October 16, 1998. Our Canadian cement operations reported an operating profit of $98.0 million, $4.5 million worse than in 1998 primarily due to reduced volumes in western Canada. This was partially offset by increased volumes in eastern Canada. Canadian cement cash cost per ton was 3 percent higher than 1998 levels mainly due to increased maintenance and higher power costs at the Woodstock, Ontario plant, increased contract work due to the start-up of the new kiln at the Richmond, British Columbia plant and higher fuel costs at the Exshaw, Alberta plant. Gypsum Our gypsum drywall operations reported an operating profit of $41.9 million, which was more than double last year's operating profit of $20.0 million. Operating margins increased from 19.5 percent in 1998 to 27.5 percent in 1999 primarily due to a strong market throughout the year that supported four price increases. The existing plants also improved operating efficiencies. EARNINGS BEFORE INTEREST AND TAXES (EBIT) In 1999, EBIT was $481.6 million, a $74.6 million or 18 percent improvement from 1998, reflecting better results in most of our operations. Growing cement volumes in the U.S. and eastern Canada, outstanding results of Lafarge Gypsum and higher profits in our construction materials business in Colorado and eastern Canada contributed to the improvement. EBIT in the U.S. was $334.5 million, $75.0 million better than in 1998. EBIT from Canadian operations was $147.1 million, $0.4 million lower than 1998 as a depressed western Canadian economy offset the gains realized in eastern Canada. INTEREST EXPENSE Interest expense increased by $15.1 million in 1999 to $62.7 million primarily due to a full year's interest on $650 million of external debt issued in July 1998 (see the Notes to Consolidated Financial Statements) to finance the Redland acquisition. Interest capitalized was $4.7 million and $3.6 million in 1999 and 1998, respectively. INTEREST INCOME Interest income decreased $2.5 million in 1999 primarily due to lower average Canadian short-term investment balances. INCOME TAXES Income tax expense increased from $144.3 million in 1998 to $161.4 million in 1999 due to higher profits in both the U.S. and Canada. Our effective income tax rate was 37.0 percent in 1999 and 38.0 percent in 1998. NET INCOME We reported net income of $275.4 million in 1999 compared with $235.5 million in 1998. The 17 percent improvement resulted from higher volumes in most of our product lines. Higher cement, ready-mixed concrete, aggregate and gypsum drywall average selling prices also contributed to the improvement. These increases were partially offset by higher interest expense and higher selling and administrative expenses. 38 41 OTHER FACTORS AFFECTING THE COMPANY Environmental Matters Our operations, like those of our competitors, are subject to state, federal, local and Canadian environmental laws and regulations, which impose liability for cleanup or remediation of environmental pollution and hazardous waste arising from past acts; and require pollution control and prevention, site restoration and operating permits and/or approvals to conduct certain of our operations. Federal environmental laws that impose liability for remediation include the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, which together are referred to as "Superfund," and the corrective action provisions of the Resource Conservation and Recovery Act of 1976 ("RCRA"). Under Superfund's current broad liability provisions, the U.S. Environmental Protection Agency ("EPA") may commence a civil action against potentially responsible parties ("PRPs") or order PRPs to remediate sites containing hazardous substances and pollution associated with past or ongoing practices. Under Superfund, strict liability for cleanup costs can be imposed even if a PRP was not directly responsible for site conditions. In addition, the liability is joint and several, which means that the EPA can seek the entire cost of cleaning up a site from one PRP, even if other PRPs were responsible for a substantial portion of the contamination. Some of the environmental laws intended to control or prevent pollution include the pollution control provisions of RCRA (controlling solid and hazardous wastes), the Clean Water Act (controlling discharge of pollutants into the waters of the U.S.) and the Clean Air Act (controlling emission of pollutants into the atmosphere). To prevent, control and remediate environmental problems and maintain compliance with permitting requirements, we maintain an environmental program designed to monitor and control environmental matters. This program is based upon our environmental policy and includes recruitment, training and retention of personnel experienced in environmental matters. Company employees are responsible for identifying potential environmental issues and bringing them to the attention of management who are responsible for addressing environmental matters. In this regard, we require local/regional management to immediately report to corporate management any spills or material instances of non-compliance. Further, routine environmental matters are required to be reported quarterly. If necessary, we engage outside consultants to determine an appropriate course of action and estimate the likely financial exposure presented by the environmental matter. We routinely audit our properties to determine whether remediation is required, the adequacy of accruals for such remediation, the status of remedial activities and whether improvements to the site are required to meet current and future permit or other requirements under the environmental laws. Our program also includes an environmental recognition award program, an environmental report, and a voluntary environmental partnership with the World Wildlife Fund focusing on biodiversity, indicators to measure continuing environmental improvement, and development of a CO(2) reduction initiative. We are involved in one Superfund remediation. At this site, which the EPA has listed on the National Priority List, several PRPs have initiated an action against 47 other parties, including us. The suit alleges that a predecessor of ours sold equipment containing hazardous substances that may now be present at the site. It appears that the U.S. Department of Defense is the largest disposer and that many others may have disposed large amounts of hazardous substances at this site. Our management believes that this matter is not material to us. In 1999, the EPA delisted a site where we were a potentially responsible party and remedial activities had been completed. In December 1999, an action was filed against us and five others to recover response activity costs incurred by the state of Michigan in responding to alleged releases of hazardous substances from air-scrubber baghouse bags at a site in Michigan. We are vigorously defending this action and believe it will not materially impact us. We may also be involved in certain environmental enforcement matters. During 2000, no material enforcement matters were initiated, resolved or outstanding. We record environmental accruals when it is probable that a reasonably estimable liability has been incurred. Environmental remediation accruals are based on internal studies and estimates, including shared financial liability with third parties. Accruals are adjusted when further information or additional studies warrant. Environmental accruals are undiscounted estimates of required remediation costs without offset of potential insurance or other claims. When such recoveries become probable, those amounts are reflected as 39 42 receivables in the financial statements, and are not netted against the accruals. Recorded environmental liabilities are not material to us. While we believe the possibility of incurring material environmental liability in excess of recorded amounts is remote, we may incur environmental costs in excess of amounts recorded at December 31, 2000. Environmental expenditures that extend the life, increase the capacity, improve the safety or efficiency of assets or are incurred to mitigate or prevent future environmental contamination may be capitalized. Other environmental costs are expensed when incurred. For the years ended December 31, 2000, 1999 and 1998, our environmental capital expenditures and remediation expenses were not material. However, our environmental expenditures have increased and are likely to increase in the future. Currently, proposed changes or new environmental laws or regulations include: promulgation of revised EPA Boiler and Industrial Furnaces regulations under RCRA and the maximum achievable control technology provision of the Clean Air Act; promulgation of new cement kiln dust management standards under RCRA and implementation under state solid waste laws and regulations; promulgation of final Clean Air Act maximum achievable control technology regulations governing air toxic emissions from non-waste burning cement plants; state revisions of (Clean Air Act) state implementation plans to require NOx reductions for cement plants operating in certain areas east of the Mississippi; state revisions of (Clean Air Act) state implementation plans to require reduction of particulate matter particles 2.5 microns or less from our various operations; new permit requirements under Title V of the Clean Air Act; and the potential U.S. Senate ratification and enactment of legislation to implement the Kyoto Protocol which may require us to reduce CO(2) emissions. We cannot presently determine whether these proposed changes will require capital expenditures or other remedial actions, or the effect of such changes on our financial statements. Because of different requirements in the environmental laws of the U.S. and Canada, the complexity and uncertainty of existing and future requirements of environmental laws, permit conditions, costs of new and existing technology, potential preventive and remedial costs, insurance coverages and enforcement-related activities and costs, we cannot determine at this time whether capital expenditures and other remedial actions that we may be required to undertake in the future will materially affect our financial position, results of operations or liquidity. With respect to known environmental contingencies, we have recorded provisions for estimated probable liabilities and do not believe that the ultimate resolution of such matters will have a material adverse effect on our financial condition, results of operations or liquidity. MANAGEMENT'S DISCUSSION OF CASH FLOWS The Consolidated Statements of Cash Flows summarize our main sources and uses of cash. These statements show the relationship between the operations presented in the Consolidated Statements of Income and liquidity and financial resources depicted in the Consolidated Balance Sheets. Our liquidity requirements arise primarily from the funding of our capital expenditures, working capital needs, debt service obligations and dividends. We usually meet our operating liquidity needs through internal generation of cash except in the event of significant acquisitions. Short-term borrowings are generally used to fund seasonal operating requirements, particularly in the first two calendar quarters. CASH FLOWS FROM OPERATIONS The net cash provided by operations for each of the three years presented reflects our net income adjusted for non-cash items. The changes in working capital are discussed in Management's Discussion of Financial Position. Depreciation, depletion and amortization in 2000 remained at 1999 levels because increases from capital expenditures and acquisitions were offset by lower depreciation expense in our construction materials business. In conformity with prior year practices, we continually evaluate our long-lived assets and adjust the depreciable lives accordingly. Depreciation, depletion and amortization increased in 1999 from 1998 due to depreciation and depletion associated with various acquisitions and other capital projects completed in 1998 and 1999. The changes in working capital are discussed in Management's Discussion of Financial Position. 40 43 CASH FLOWS FROM INVESTING Capital expenditures increased in 2000 due largely to ongoing development projects such as the construction of the Silver Grove, Kentucky and Palatka, Florida gypsum drywall plants and the Sugar Creek, Missouri cement plant expansion. Capital expenditures are expected to be approximately $400 million to $450 million in 2001 (excluding acquisitions). We intend to invest in projects that maintain or improve the performance of our plants as well as in acquisition opportunities that we believe will enhance our competitive position in the U.S. and Canada. In 2001 we expect to spend approximately $60 million on slag production and grinding operations in Chicago, $40 million on the Sugar Creek, Missouri cement plant, $19 million on the optimization of our Joppa, Illinois cement plant and $17 million on the completion of the Palatka, Florida gypsum drywall plant, which began operations in early 2001. Spending on acquisitions increased $184 million from 1999 due to the merger with the Warren Paving and Materials group in late December and the acquisition of the Presque Isle quarry in June 2000. Proceeds from the sale of non-strategic assets, surplus land and other miscellaneous items totaled $29 million in 2000 compared to $46 million in 1999. Capital expenditures increased in 1999 from 1998 due to various projects such as the construction of the Silver Grove, Kentucky gypsum drywall plant and the Richmond, British Columbia and Sugar Creek, Missouri cement plant expansions. Spending for acquisitions in 1999 fell below the prior year due to the acquisition of the Seattle, Washington cement plant, American Flyash and the Texada quarry in the prior year. Proceeds from the sale of non-strategic assets, surplus land and other miscellaneous items, including the disposition of asphalt and paving operations in Maryland, totaled $46 million for 1999 and $23 million for 1998. CASH FLOWS FROM FINANCING In 2000, net cash provided by financing increased $122 million due to an increase in short-term borrowings, partially offset by the repurchase of common stock (see "Common Equity Interests" in the Notes to Consolidated Financial Statements concerning the buyback program of common stock). On June 3, 1998, we acquired a number of construction materials businesses from Lafarge S.A., our majority shareholder, for $690 million in cash. This use of cash is reflected in the Consolidated Statements of Cash Flows as a repayment of a $690 million payable to Lafarge S.A., which was replaced in July 1998 with long-term senior notes with a face value of $650 million and proceeds, net of deferred losses on forward treasury lock and original issue discount, of $632 million. We have access to a wide variety of short-term and long-term financing alternatives in both the U.S. and Canada and have a syndicated, committed, five-year revolving credit facility with nine participants totaling $300 million. At December 31, 2000 and 1999, no amounts were outstanding under these credit facilities. MANAGEMENT'S DISCUSSION OF FINANCIAL POSITION The Consolidated Balance Sheets summarize our financial position at December 31, 2000 and 1999. We are exposed to foreign currency exchange rate risk inherent in our Canadian revenues, expenses, assets and liabilities denominated in Canadian dollars, as well as interest rate risk inherent in our debt. As more fully described in the Notes to Consolidated Financial Statements, we primarily use fixed-rate debt instruments to reduce the risk of exposure to changes in interest rates and have used forward treasury lock agreements in the past to hedge interest rate changes on anticipated debt issuances. The value reported for Canadian dollar denominated net assets decreased from December 31, 1999 as a result of a decrease in the value of the Canadian dollar relative to the U.S. dollar. At December 31, 2000, the U.S. dollar equivalent of a Canadian dollar was $0.67 versus $0.69 at December 31, 1999. Based on 2000 results, if the value of the Canadian dollar relative to the U.S. dollar changed by 10 percent, our consolidated net assets would change by approximately 4 percent and net income would change by approximately 4 percent. Liquidity is not materially impacted, however, since Canadian earnings are considered to be permanently invested in Canada. 41 44 Working capital, excluding cash, short-term investments, current portion of long-term debt and the impact of exchange rate changes ($7.1 million), decreased $14.8 million from December 31, 1999 to December 31, 2000. Accounts receivable, excluding an exchange rate impact of $6.6 million, decreased $29.2 million primarily because during 2000 we entered into a receivables securitization program to provide us with an additional source of working capital and short-term financing. Inventories increased $89.0 million, excluding the exchange rate impact of $4.8 million, due to lower levels of sales in the fourth quarter and the growth of the business. The increase of $95.8 million, excluding the exchange rate impact of $5.4 million, in accounts payable and accrued liabilities resulted mainly from our growth and the timing of purchases and payments. Income taxes payable decreased $12.0 million, with no exchange rate impact, due to a decline in the effective rates, decreased levels of income and timing of payments. Net property, plant and equipment increased $526.6 million during 2000, excluding the exchange rate impact of $22.5 million, primarily due to acquisitions, the expansion of the Sugar Creek, Missouri cement plant, the construction of the Palatka, Florida and Silver Grove, Kentucky drywall plants. Capital expenditures and acquisitions of fixed assets totaled $673.7 million. The excess of cost over net tangible assets of businesses acquired relates primarily to the Redland, Warren and Presque Isle transactions. Our capitalization is summarized in the following table:
DECEMBER 31 -------------- 2000 1999 ----- ----- Long-term debt.............................................. 21.7% 25.5% Other long-term liabilities and minority interests.......... 18.4% 12.6% Shareholders' equity........................................ 59.9% 61.9% ----- ----- Total capitalization.............................. 100.0% 100.0% ===== =====
The decrease in long-term debt is discussed in Management's Discussion of Cash Flows. The decrease in shareholders' equity as a percentage of total capitalization is discussed in Management's Discussion of Shareholders' Equity. MANAGEMENT'S DISCUSSION OF SHAREHOLDERS' EQUITY The Consolidated Statements of Shareholders' Equity summarize the activity in each component of shareholders' equity for the three years presented. In 2000, shareholders' equity increased by $169.3 million, mainly from net income of $257.4 million and the issuance of a warrant for $14.4 million. These were partially offset by dividend payments, net of reinvestments, of $18.7 million, a change in the foreign currency translation adjustment of $37.1 million (resulting from a 4 percent decrease in the value of the Canadian dollar relative to the U.S. dollar) and share repurchases of $49.9 million. In 1999, shareholders' equity increased by $307.7 million, mainly from net income of $275.4 million and a change in the foreign currency translation adjustment of $52.8 million (resulting from a 6 percent increase in the value of the Canadian dollar relative to the U.S. dollar). These were partially offset by dividend payments, net of reinvestments, of $24.2 million. Dividend reinvestments increased in 1999 due to Lafarge S.A. reinvesting 100 percent of its dividends. Common equity interests include our $1.00 par value per share Common Stock and the Lafarge Canada Inc. Exchangeable Preference Shares, which are exchangeable into our Common Stock and have comparable voting, dividend and liquidation rights. Our Common Stock is traded on the New York and Toronto Stock Exchanges under the ticker symbol "LAF" and the Exchangeable Preference shares on the Toronto Stock Exchange under the ticker symbol "LCI.PR.E." 42 45 The following table reflects the range of high and low closing prices of Common Stock by quarter for 2000 and 1999 as quoted on the New York Stock Exchange:
QUARTERS ENDED ----------------------------------------------- MAR 31 JUN 30 SEP 30 DEC 31 ------ ------ ------ ------ 2000 Stock Prices High................................... $27.75 $31.81 $26.13 $23.63 Low.................................... 19.25 21.00 20.75 16.75 1999 Stock Prices High................................... $40.69 $37.25 $35.06 $31.13 Low.................................... 27.13 27.06 26.38 25.94
Dividends are summarized in the following table (in thousands, except per share amounts):
YEARS ENDED DECEMBER 31 ----------------------------------- 2000 1999 1998 ------- ------- ------- Common equity dividends.......................... $43,986 $43,696 $36,880 Less dividend reinvestments...................... (25,324) (19,474) (3,736) ------- ------- ------- Net cash dividend payments....................... $18,662 $24,222 $33,144 ======= ======= ======= Common equity dividends per share................ $ 0.60 $ 0.60 $ 0.51 ======= ======= =======
The Board of Directors increased the quarterly dividend per share to $0.15 at our October 1998 Board of Directors meeting. There have been no changes in the dividend rate since October 1998. MANAGEMENT'S DISCUSSION OF SELECTED CONSOLIDATED FINANCIAL DATA The Selected Consolidated Financial Data highlights certain significant trends in our financial condition and results of operations. Net sales in 1997 increased 10 percent mainly due to increased product shipments, higher cement and ready-mixed concrete prices and the first full year of operations of the gypsum drywall business. In 1998, net sales increased by 36 percent primarily due to the addition of the Redland operations as well as increased shipments and prices. In 1999, net sales increased by 8 percent primarily due to favorable economic conditions supporting demand in most segments and increased average selling prices. In 2000, net sales increased by 2 percent due to acquisitions throughout our operations and improving economic conditions, increased infrastructure spending and project work in Canada, partially offset by poor weather conditions in the fourth quarter in our U.S. operations and a 20 percent decline in average selling prices of gypsum drywall. See Management's Discussion of Income for additional details. Inflation rates in recent years have not been a significant factor in our net sales or earnings growth; however, in 2000 we saw a rapid increase in fuel costs for our mobile fleet as well as in natural gas costs, most notably in our cement plant at Exshaw, Alberta and in our gypsum and asphalt operations. We continually attempt to offset the effect of inflation by improving operating efficiencies, especially in the areas of selling and administrative expenses, productivity and energy costs, including, where possible, the use of alternative fuels -- for example, at our Exshaw, Alberta cement plant we have launched a project to enable the plant to burn coal instead of natural gas. We compete with other suppliers of our products in all of our markets. The ability to recover increasing costs by obtaining higher prices for our products varies with the level of activity in the construction industry, the number, size and strength of competitors and the availability of products to supply a local market. Net cash provided by operations consists of net income adjusted primarily for depreciation and changes in operating working capital. We are in a capital-intensive industry and, as a result, we recognize large amounts of depreciation. We have used our cash provided by operations to expand our markets, improve the 43 46 performance of our plants and other operating equipment, and for the years prior to the Redland acquisition, to reduce debt. During 1998, we acquired Redland for $690 million. Since we acquired Redland from our majority shareholder, we treated the acquisition similar to a pooling of interests. Consequently, Redland's balance sheet was consolidated with our balance sheet at December 31, 1997 and Redland's operating results were consolidated with ours for the full year 1998. Capital expenditures and acquisitions, excluding Redland, totaled $1,712.4 million over the past five years, which included: the purchase of three gypsum drywall facilities and the construction of new drywall plants in Kentucky and Florida; acquisition of a cement plant and related limestone quarry; cement plant projects to increase production capacity and reduce costs including the new Richmond, British Columbia cement plant and the Sugar Creek, Missouri cement plant currently under construction; the installation of receiving and handling facilities for substitute fuels and raw materials; the building and purchasing of additional distribution terminals and water transportation facilities to extend markets and improve existing supply networks; the expansion of our cementitious operations; the expansion of asphalt paving and aggregate operations through the merger with the Warren Paving and Materials group in late December 2000; the acquisition of ready-mixed concrete plants and aggregate operations, including our acquisition of the Presque Isle quarry in June 2000; and the renewal of the construction materials mobile equipment fleet. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required by this Item is contained in a) "Management's Discussion of Financial Position" in Management's Discussion and Analysis of Financial Condition and Results of Operations reported in Item 7 of Part II of this Annual Report and is incorporated herein by reference, and b) the "Debt" note of the Notes to Consolidated Financial Statements reported in Item 8 of Part II of this Annual Report and is incorporated herein by reference. 44 47 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
PAGE ---- Financial Report: Report of Independent Public Accountants, Arthur Andersen LLP.................................................... 46 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 2000 and 1999................................................... 47 Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998....................... 48 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998........... 49 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2000, 1999 and 1998........... 50 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998....................... 51 Notes to Consolidated Financial Statements................ 52 Financial Statement Schedule: Schedule II -- Consolidated Valuation and Qualifying Accounts for the Years Ended December 31, 2000, 1999 and 1998............................................... 75 All other schedules are omitted because they are not applicable.
45 48 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, 2000 and 1999, and the related consolidated statements of income, shareholders' equity, comprehensive income and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 present fairly, in all material respects, the financial position of Lafarge Corporation and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II in this Item 8 of Part II of the Annual Report 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 Vienna, Virginia January 25, 2001 46 49 LAFARGE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
DECEMBER 31 ----------------------- 2000 1999 ---------- ---------- ASSETS Cash and cash equivalents................................... $ 214,089 $ 237,812 Short-term investments...................................... -- 91,626 Receivables, net............................................ 385,912 421,796 Inventories................................................. 372,423 288,200 Deferred tax assets......................................... 45,014 43,015 Other current assets........................................ 59,147 53,052 ---------- ---------- Total current assets.............................. 1,076,585 1,135,501 Property, plant and equipment, net.......................... 2,122,390 1,618,319 Excess of cost over net tangible assets of businesses acquired, net............................................. 438,345 335,464 Other assets................................................ 265,264 204,158 ---------- ---------- TOTAL ASSETS...................................... $3,902,584 $3,293,442 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities.................... $ 502,030 $ 411,677 Income taxes payable........................................ 48,199 60,222 Short-term borrowings and current portion of long-term debt...................................................... 190,250 36,986 ---------- ---------- Total current liabilities......................... 740,479 508,885 Long-term debt.............................................. 687,448 710,335 Minority interests.......................................... 117,010 5,606 Other long-term liabilities................................. 465,478 345,732 ---------- ---------- Total Liabilities................................. 2,010,415 1,570,558 ---------- ---------- Common Equity Common stock ($1.00 par value; authorized 150.0 million shares; issued 67.5 and 68.7 million shares, respectively).......................................... 67,492 68,686 Exchangeable shares (no par or stated value; authorized 24.3 million shares; issued 4.5 million shares)........ 34,402 32,957 Additional paid-in capital.................................. 690,072 697,324 Retained earnings........................................... 1,237,117 1,023,736 Accumulated other comprehensive income (loss)............... (136,914) (99,819) ---------- ---------- Total Shareholders' Equity........................ 1,892,169 1,722,884 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $3,902,584 $3,293,442 ========== ==========
See the Notes to Consolidated Financial Statements. 47 50 LAFARGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except amounts per common equity share)
YEARS ENDED DECEMBER 31 -------------------------------------------- 2000 1999 1998 ---------- ---------- ---------- NET SALES........................................ $2,787,629 $2,721,637 $2,508,533 ---------- ---------- ---------- Costs and expenses Cost of goods sold............................. 2,099,332 1,996,321 1,859,314 Selling and administrative..................... 269,368 235,027 216,829 Amortization of goodwill....................... 17,213 17,164 17,586 Other (income) expense, net.................... (29,036) (8,492) 7,757 Interest expense............................... 50,620 62,736 47,652 Interest income................................ (23,697) (17,905) (20,429) ---------- ---------- ---------- Total costs and expenses............... 2,383,800 2,284,851 2,128,709 ---------- ---------- ---------- Earnings before income taxes..................... 403,829 436,786 379,824 Income taxes..................................... 146,462 161,412 144,324 ---------- ---------- ---------- NET INCOME....................................... $ 257,367 $ 275,374 $ 235,500 ========== ========== ========== NET INCOME PER SHARE-BASIC....................... $ 3.51 $ 3.79 $ 3.27 ========== ========== ========== NET INCOME PER SHARE-DILUTED..................... $ 3.51 $ 3.77 $ 3.24 ========== ========== ========== DIVIDENDS PER SHARE.............................. $ 0.60 $ 0.60 $ 0.51 ========== ========== ==========
See the Notes to Consolidated Financial Statements. 48 51 LAFARGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands)
YEARS ENDED DECEMBER 31 --------------------------------------------------------------- 2000 1999 1998 ------------------- ------------------- ------------------- AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES ---------- ------ ---------- ------ ---------- ------ COMMON EQUITY INTERESTS COMMON STOCK Balance at January 1......... $ 68,686 68,686 $ 67,370 67,370 $ 65,268 65,268 Share repurchases............ (2,469) (2,469) -- -- -- -- Issuance of shares for: Dividend reinvestment plans................... 1,173 1,173 677 677 83 83 Employee stock purchase plan.................... 61 61 47 47 31 31 Conversion of Exchangeable Shares..................... 13 13 502 502 1,527 1,527 Exercise of stock options.... 28 28 90 90 461 461 ---------- ------ ---------- ------ ---------- ------ Balance at December 31....... $ 67,492 67,492 $ 68,686 68,686 $ 67,370 67,370 ========== ====== ========== ====== ========== ====== EXCHANGEABLE SHARES Balance at January 1......... $ 32,957 4,472 $ 35,814 4,936 $ 45,259 6,409 Issuance of shares for: Dividend reinvestment plan.................... 699 31 505 17 966 29 Employee stock purchase plan.................... 837 33 147 21 172 25 Conversion of Exchangeable Shares..................... (91) (13) (3,509) (502) (10,583) (1,527) ---------- ------ ---------- ------ ---------- ------ Balance at December 31....... $ 34,402 4,523 $ 32,957 4,472 $ 35,814 4,936 ========== ====== ========== ====== ========== ====== ADDITIONAL PAID-IN CAPITAL Balance at January 1............ $ 697,324 $ 672,555 $ 649,082 Share repurchases............... (47,407) -- -- Issuance of shares for: Dividend reinvestment plans................... 23,452 18,292 2,687 Employee stock purchase plan.................... 1,493 2,055 1,923 Conversion of Exchangeable Shares....................... 78 3,007 9,056 Exercise of stock options....... 696 1,415 10,170 Issuance of warrants............ 14,436 -- -- Other........................... -- -- (363) ---------- ---------- ---------- Balance at December 31.......... $ 690,072 $ 697,324 $ 672,555 ========== ========== ========== RETAINED EARNINGS Balance at January 1............ $1,023,736 $ 792,058 $ 593,438 Net income...................... 257,367 275,374 235,500 Dividends -- common equity interests.................... (43,986) (43,696) (36,880) ---------- ---------- ---------- Balance at December 31.......... $1,237,117 $1,023,736 $ 792,058 ========== ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Balance at January 1............ $ (99,819) $ (152,623) $ (97,359) Foreign currency translation adjustments.................. (37,095) 52,804 (55,264) ---------- ---------- ---------- Balance at December 31.......... $ (136,914) $ (99,819) $ (152,623) ========== ========== ========== TOTAL SHAREHOLDERS' EQUITY........ $1,892,169 $1,722,884 $1,415,174 ========== ========== ==========
See the Notes to Consolidated Financial Statements. 49 52 LAFARGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands)
YEARS ENDED DECEMBER 31 ------------------------------------------ 2000 1999 1998 -------- -------- -------- NET INCOME........................................ $257,367 $275,374 $235,500 Foreign currency translation adjustments........ (37,095) 52,804 (55,264) -------- -------- -------- COMPREHENSIVE INCOME.............................. $220,272 $328,178 $180,236 ======== ======== ========
See the Notes to Consolidated Financial Statements. 50 53 LAFARGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
YEARS ENDED DECEMBER 31 --------------------------------- 2000 1999 1998 --------- --------- --------- CASH FLOWS FROM OPERATIONS Net income.............................................. $ 257,367 $ 275,374 $ 235,500 Adjustments to reconcile net income to net cash provided by operations Depreciation, depletion and amortization............. 168,294 168,272 156,782 Provision for bad debts.............................. 2,451 2,490 3,395 Deferred income taxes................................ 12,156 10,457 17,331 Gain on sale of assets............................... (12,769) (10,750) (2,964) Other noncash charges and credits, net............... (16,723) 6,507 (9,948) Net change in operating working capital (see Analysis below)*............................................ 76,810 (53,832) (23,971) --------- --------- --------- Net Cash Provided by Operations........................... 487,586 398,518 376,125 --------- --------- --------- CASH FLOWS FROM INVESTING Capital expenditures.................................... (431,698) (315,724) (224,353) Acquisitions, net of cash acquired...................... (242,036) (58,268) (99,280) Redemptions (purchases) of short-term investments, net.................................................. 91,626 (74,556) 138,298 Proceeds from property, plant and equipment dispositions......................................... 29,083 45,939 22,910 Other................................................... (10,990) 12,603 (541) --------- --------- --------- Net Cash Used for Investing............................... (564,015) (390,006) (162,966) --------- --------- --------- CASH FLOWS FROM FINANCING Repayment of Lafarge S.A. payable....................... -- -- (690,000) Issuance of senior notes, net........................... -- -- 631,597 Other repayment of long-term debt....................... (30,317) (31,370) (30,636) Issuance (repayment) of short-term borrowings, net...... 156,804 (9,491) 14,730 Issuance of equity securities, net...................... 3,115 3,944 12,757 Repurchase of common stock.............................. (49,876) -- -- Dividends, net of reinvestments......................... (18,662) (24,222) (33,144) Financing costs and other............................... -- -- (951) --------- --------- --------- Net Cash Provided (Consumed) by Financing................. 61,064 (61,139) (95,647) --------- --------- --------- Effect of exchange rate changes........................... (8,358) 19,301 (20,537) --------- --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents...... (23,723) (33,326) 96,975 Cash and Cash Equivalents at January 1.................... 237,812 271,138 174,163 --------- --------- --------- Cash and Cash Equivalents at December 31.................. $ 214,089 $ 237,812 $ 271,138 ========= ========= ========= *ANALYSIS OF CHANGES IN OPERATING WORKING CAPITAL ITEMS Receivables, net........................................ $ 148,562 $ (85,211) $ (18,217) Inventories............................................. (48,077) (33,842) (16,566) Other current assets.................................... 746 (24,554) (822) Accounts payable and accrued liabilities................ (7,932) 46,490 28,789 Income taxes payable.................................... (16,489) 43,285 (17,155) --------- --------- --------- NET CHANGE IN OPERATING WORKING CAPITAL................... $ 76,810 $ (53,832) $ (23,971) ========= ========= =========
See the Notes to Consolidated Financial Statements. 51 54 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Lafarge Corporation, together with its subsidiaries ("Lafarge" or the "company"), is North America's largest diversified supplier of construction materials. The company's major operating subsidiary, Lafarge Canada Inc. ("LCI"), operates in Canada. The company's core businesses are organized into three operating segments: Construction Materials, Cement and Lafarge Gypsum. For information regarding the company's operating segments and products, see the "Segment and Related Information" note herein. Lafarge operates in the U.S. and throughout Canada. The primary U.S. markets are in the northeast, midsouth, midwest, northcentral, mountain and northwest areas. Lafarge's wholly-owned subsidiary, Systech Environmental Corporation, supplies cement plants with substitute fuels and raw materials. Lafarge S.A., a French corporation, and certain of its affiliates ("Lafarge S.A.") own a majority of the voting securities of Lafarge, including the company's outstanding Common Stock, par value $1.00 per share (the "Common Stock"), and LCI's Exchangeable Preference Shares (the "Exchangeable Shares"). ACCOUNTING AND FINANCIAL REPORTING POLICIES Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses. Actual results may differ from these estimates. Principles of Consolidation The consolidated financial statements include the accounts of Lafarge and all of its wholly and majority-owned subsidiaries, after the elimination of intercompany balances and transactions. Investments in affiliates in which the company has less than a majority ownership are accounted for by the equity method. Certain reclassifications have been made to prior years to conform to the 2000 presentation. Foreign Currency Translation The company uses the U.S. dollar as its functional currency for operations in the U.S. and the Canadian dollar for LCI. The assets and liabilities of LCI are translated at the exchange rate prevailing at the balance sheet date. Related revenue and expense accounts for this subsidiary are translated using the average exchange rate during the year. Foreign currency translation adjustments are included in "accumulated other comprehensive income (loss)" in the Consolidated Balance Sheets and in the Consolidated Statements of Shareholders' Equity. Cash and Cash Equivalents The company considers liquid investments purchased with an original maturity of three months or less to be cash equivalents. Because of the short maturity, their carrying amounts approximate fair value. Short-Term Investments Short-term investments consist primarily of commercial paper with original maturities beyond three months and fewer than 12 months. Such short-term investments were carried at cost, which approximates fair value, due to the short period of time to maturity. Derivative Financial Instruments The company at times uses derivative financial instruments ("Derivatives") in order to hedge the impact of changes in interest rates. These Derivatives are not held or issued for trading purposes. 52 55 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) At December 31, 1998, the company maintained one $25 million (notional amount) interest swap contract, which matured in 1999. The company did not utilize any other derivative financial instruments during 2000 or 1999. As of December 31, 2000 and 1999, the company did not have any derivative financial instruments outstanding. The company previously entered into forward contracts used to hedge interest rate changes on anticipated debt issuances. The differentials received or paid under such contracts designated as forward interest rate hedges are recognized in income over the life of the associated debt as adjustments to interest expense. Concentration of Credit Risk Financial instruments that potentially subject the company to concentrations of credit risk are primarily cash equivalents, short-term investments and receivables. The company places its cash equivalents and short- term investments in investment grade, short-term debt instruments and limits the amount of credit exposure to any one commercial issuer. The company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral from its customers. The allowances for non-collection of receivables are based upon analysis of economic trends in the construction industry and the expected collectibility of overall receivables. Inventories Inventories are valued at the lower of cost or market. The majority of the company's U.S. cement 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 40 years on certain buildings. Land and mineral deposits include depletable raw material reserves with depletion recorded using the units-of-production method. Repair and maintenance costs are expensed as incurred. Excess of Cost Over Net Tangible Assets of Businesses Acquired The excess of cost over fair value of net tangible assets of businesses acquired ("goodwill") is amortized using the straight-line method over periods not exceeding 40 years. The company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. In evaluating impairment, the company estimates the sum of the expected future cash flows, undiscounted and without interest charges, derived from such goodwill over its remaining life. The company believes that no impairment exists at December 31, 2000. The amortization recorded for 2000, 1999 and 1998 was $17.2 million, $17.2 million and $17.6 million, respectively. Accumulated amortization at December 31, 2000 and 1999 was $101.0 million and $83.8 million, respectively. Other Postretirement Benefits The company accrues the expected cost of retiree health care and life insurance benefits and charges it to expense during the years that the employees render service. In addition, the company accrues for benefits provided to former or inactive employees after employment but before retirement when it becomes probable that such benefits will be paid and when sufficient information exists to make reasonable estimates of the amounts to be paid. 53 56 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Environmental Remediation Liabilities When the company determines that it is probable that a liability for environmental matters has been incurred, an undiscounted estimate of the required remediation costs is recorded as a liability in the consolidated financial statements, without offset of potential insurance recoveries. Costs that extend the life, increase the capacity or improve the safety or efficiency of company-owned assets or are incurred to mitigate or prevent future environmental contamination may be capitalized. Other environmental costs are expensed when incurred. Revenue Recognition Revenue from the sale of cement, concrete, concrete products, aggregate and gypsum drywall is recorded when the products are shipped. Revenue from waste recovery and disposal is recognized when 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. During 2000, the company adopted the provisions of the Emerging Issues Task Force Issue No. 00-10 ("EITF 00-10"), "Accounting for Shipping and Handling Costs," which provides guidance regarding how shipping and handling costs incurred by the seller and billed to a customer should be treated. EITF 00-10 requires that all amounts billed to a customer in a sales transaction related to shipping and handling be classified as revenue, and the costs incurred by the seller for shipping and handling be classified as an expense. Historically, certain amounts the company billed for shipping and handling have been shown as an offset to shipping costs which are recorded in cost of goods sold in the accompanying Consolidated Statements of Income. There was no impact to the company's income from operations or net income as a result of the adoption of this new pronouncement. Prior year financial statements have been restated to conform to the requirements of EITF 00-10. The amount of billed shipping and handling costs reclassified from cost of goods sold to net sales in the accompanying consolidated statements of income were $87.8 million, $67.3 million and $60.3 million in 2000, 1999 and 1998, respectively. In December 1999, the U.S. Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements," ("SAB 101") which summarizes certain of the SEC staff's views in applying U.S. generally accepted accounting principles to revenue recognition in financial statements. SAB 101 became effective for the fourth quarter ended December 31, 2000, and did not have a material impact on the company's financial statements. Research and Development The company 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 $7.2 million, $7.5 million and $7.4 million for 2000, 1999 and 1998, respectively. Interest The company capitalizes interest costs incurred during the construction of new facilities as an element of construction in progress and amortizes such costs over the assets' estimated useful lives. Interest of $11.7 million, $4.7 million and $3.6 million was capitalized in 2000, 1999 and 1998, respectively. Income Taxes Income taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences 54 57 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. This method also requires the recognition of future tax benefits such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Net Income Per Common Equity Share The calculation of basic net income per common equity share is based on the weighted average number of shares of Common Stock and Exchangeable Shares outstanding in each period. The weighted average number of shares and share equivalents outstanding was (in thousands) 73,254, 72,637 and 72,071 in 2000, 1999 and 1998, respectively. The weighted average number of shares and share equivalents outstanding, assuming dilution, was (in thousands) 73,379, 73,022 and 72,665 in 2000, 1999 and 1998, respectively. Accounting for Stock-Based Compensation The company accounts for employee stock options using the method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and the associated interpretations. Generally, no expense is recognized related to the company's stock options because the option's exercise price is set at the stock's fair market value on the date the option is granted. In accordance with the Financial Accounting Standards Board's ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," the company discloses the compensation cost based on the estimated fair value of the options at the grant dates. Accounting Pronouncements Not Yet Effective In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June 2000, FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activity, an Amendment of SFAS 133." SFAS No. 133 and SFAS No. 138 establish accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The standards also require that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company formally document, designate and assess the effectiveness of transactions that receive hedge accounting. The company's effective date of adoption of SFAS No. 133 and SFAS No. 138 is January 1, 2001. The company has reviewed the provisions of SFAS No. 133 and its amendments and concluded that they will not materially impact its consolidated results of operations or financial condition. In September 2000, FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125," which is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The company has reviewed the provisions of SFAS No. 140 and does not expect it to have a material impact on its consolidated results of operations or financial condition. 55 58 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Acquisitions, Dispositions and Significant Capital Developments Lafarge S.A., the majority stockholder of the company, acquired Redland PLC in December 1997. On June 3, 1998, the company acquired certain of the Redland PLC businesses in North America ("Redland") from Lafarge S.A. for $690 million. Since the company acquired Redland from its majority stockholder, the acquisition is accounted for similar to a pooling of interests for financial reporting purposes. Accordingly, as of December 31, 1997, Redland assets and liabilities acquired by the company from Lafarge S.A. were recorded on the company's books at Lafarge S.A.'s historical cost, which approximates the $690 million purchase price paid by the company. The company's results of operations include Redland from January 1, 1998 forward. A payable to Lafarge S.A. for $690 million was recorded as part of the acquisition. A portion of this payable ($40 million) was repaid in June 1998 and the balance of $650 million was financed in June 1998 with an interest-bearing short-term note to Lafarge S.A. This note was refinanced in July 1998 with long-term public debt. Redland produces and sells aggregate, ready-mixed concrete and asphalt, and also performs paving and related contracting services. Redland operates primarily in the U.S. and owns two quarry operations in Ontario, Canada. Goodwill related to the Redland businesses acquired is amortized over lives averaging 27 years. In 1998, the company completed other acquisitions totaling $99 million, including the acquisition of American Flyash Inc. and the acquisition from Holnam, Inc. of a cement plant in Seattle, Washington and a related limestone quarry operation located on Texada Island, British Columbia in October 1998. In 1999, the company completed acquisitions totaling $58 million, including the acquisitions of a gypsum drywall plant located in Newfoundland, Canada in January 1999, and Corn Construction Co., an aggregate and asphalt paving business in New Mexico and southern Colorado, in March 1999. In September 1999, the company announced that Lafarge Gypsum would build a new $85 million gypsum drywall manufacturing facility in northern Florida, which became operational in January 2001. In late 1999, the company sold under-performing and non-strategic asphalt and paving operations in Maryland for approximately $25 million. In late December 2000, the company completed its merger of Kilmer Van Nostrand Co. Limited's wholly-owned subsidiary, the Warren Paving & Materials Group Limited ("Warren"), with the company's construction materials operations in Canada. Warren is a supplier of construction aggregate and provides asphalt and paving services in five Canadian provinces. The transaction, in which a subsidiary of LCI acquired all of the outstanding shares of Warren for cash, preferred stock and a note, was valued at $260 million. The acquisition was recorded under the purchase method of accounting and, therefore, the purchase price has been allocated, on a preliminary basis, to assets acquired and liabilities assumed based on estimated fair values. The excess of purchase price over the fair value of the net assets is being amortized on a straight-line basis over 40 years. The estimated fair value of assets acquired and liabilities assumed relating to the Warren merger, which is subject to further refinement, is summarized below (in thousands): Working capital............................................. $ 50,146 Property, plant and equipment............................... 158,477 Other assets................................................ 1,270 Goodwill.................................................... 92,506 Long-term liabilities....................................... (42,544) -------- Total............................................. $259,855 ========
The following unaudited pro forma financial information for the company gives effect to the Warren merger as if the transaction had been completed as of the beginning of Lafarge's fiscal years 2000 and 1999. These pro forma results have been prepared for comparative purposes only and include certain adjustments, 56 59 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) such as depreciation and depletion on the revalued property, plant and equipment and amortization of goodwill and do not reflect any benefits which might be attained from combining the operations. The pro forma results of operations do not necessarily reflect the actual results that would have occurred, nor is such information necessarily indicative of future results of operations (in thousands, except per share amounts):
YEARS ENDED DECEMBER 31 ------------------------ 2000 1999 ---------- ---------- Pro forma (unaudited): Net sales................................................ $3,192,194 $3,062,323 Net income............................................... $ 259,776 $ 269,176 Net income per share -- basic............................ $ 3.55 $ 3.71 Net income per share -- diluted.......................... $ 3.54 $ 3.69
In addition to Warren, the company completed other acquisitions in 2000 totaling $110 million, including the Presque Isle Corporation, a Michigan-based quarry operation, in June 2000. During the first half of 2000, the company also formed a joint venture with Rock-Tenn Company to produce gypsum drywall paperboard liner and in March 2000 entered into an agreement with Ispat Inland Inc. to manage up to 1 million tons per year of blast furnace slag. Additionally, in June 2000, the company completed the construction of a $90 million state-of-the-art gypsum drywall plant in northern Kentucky, just outside of Cincinnati. RECEIVABLES Receivables consist of the following (in thousands):
DECEMBER 31 ------------------- 2000 1999 -------- -------- Trade and notes receivable.................................. $316,019 $432,511 Subordinated interest in receivables........................ 36,635 -- Retainage on long-term contracts............................ 21,397 8,823 Other receivables........................................... 39,290 8,134 Allowances.................................................. (27,429) (27,672) -------- -------- TOTAL RECEIVABLES, NET............................ $385,912 $421,796 ======== ========
During 2000, the company entered into a receivables securitization program to provide the company with a cost-effective source of working capital and short-term financing. Under the program, the company agreed to sell, on a revolving basis, certain of its accounts receivable to a wholly-owned, special purpose subsidiary (the "SPS"). The SPS in turn entered into an agreement to transfer, on a revolving basis, an undivided percentage ownership interest in a designated pool of accounts receivable to unrelated third-party purchasers up to a maximum of $200 million. According to SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities," the transactions were accounted for as sales and, as a result, the related receivables have been excluded from the accompanying Consolidated Balance Sheets. The related fees and discounting expense have been recorded as "other (income) expense, net" in the accompanying Consolidated Statements of Income. The SPS holds a subordinated retained interest in the receivables not sold to third parties. The subordinated interest in receivables is recorded at fair value, which is determined based on the present value of future expected cash flows estimated using management's best estimates of credit losses, timing of prepayments and discount rates commensurate with the risks involved. Under the agreements, new receivables are added to the pool as collections reduce previously sold receivables. The company will service, administer and collect the receivables sold. At December 31, 2000, net accounts receivable amounting to $146.0 million had been sold under this agreement. 57 60 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) INVENTORIES Inventories consist of the following (in thousands):
DECEMBER 31 -------------------- 2000 1999 -------- -------- Finished products........................................... $205,328 $154,567 Work in process............................................. 31,499 16,639 Raw materials and fuel...................................... 69,745 52,650 Maintenance and operating supplies.......................... 65,851 64,344 -------- -------- TOTAL INVENTORIES................................. $372,423 $288,200 ======== ========
Included in the finished products, work in process and raw materials and fuel categories are inventories valued using the LIFO method of $83.6 million and $69.8 million at December 31, 2000 and 1999, respectively. If these inventories were valued using the average cost method, such inventories would have decreased by $6.6 million and $7.4 million, respectively. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following (in thousands):
DECEMBER 31 ------------------------- 2000 1999 ----------- ----------- Land and mineral deposits................................. $ 550,921 $ 396,465 Buildings, machinery and equipment........................ 2,668,372 2,299,874 Construction in progress.................................. 303,342 234,240 ----------- ----------- Property, plant and equipment, at cost.................... 3,522,635 2,930,579 Accumulated depreciation and depletion.................... (1,400,245) (1,312,260) ----------- ----------- TOTAL PROPERTY, PLANT AND EQUIPMENT, NET........ $ 2,122,390 $ 1,618,319 =========== ===========
OTHER ASSETS Other assets consist of the following (in thousands):
DECEMBER 31 ------------------- 2000 1999 -------- -------- Long-term receivables....................................... $ 24,343 $ 19,174 Investments in unconsolidated companies..................... 38,431 27,942 Prepaid pension asset....................................... 136,429 101,948 Property held for sale...................................... 14,476 14,463 Other....................................................... 51,585 40,631 -------- -------- TOTAL OTHER ASSETS................................ $265,264 $204,158 ======== ========
Property held for sale represents land that is carried at the lower of cost or estimated net realizable value. 58 61 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consist of the following (in thousands):
DECEMBER 31 ------------------- 2000 1999 -------- -------- Trade accounts payable...................................... $201,917 $144,743 Accrued payroll expense..................................... 74,392 70,926 Bank overdrafts............................................. 26,172 36,667 Payable to bank under receivable sales agreement............ 21,712 -- Other accrued liabilities................................... 177,837 159,341 -------- -------- TOTAL ACCOUNTS PAYABLE AND ACCRUED LIABILITIES.... $502,030 $411,677 ======== ========
DEBT Debt consists of the following (in thousands):
DECEMBER 31 ------------------- 2000 1999 -------- -------- Senior notes in the amounts of $250,000, $200,000 and $200,000, maturing in 2005, 2008 and 2013, respectively, bearing interest at fixed rates of 6.4 percent, 6.5 percent and 6.9 percent, respectively, stated net of deferred losses on forward treasury lock and original issue discount. The average effective interest rate is 6.9 percent................................................... $635,422 $633,362 Medium-term notes maturing in various amounts between 2001 and 2006, bearing interest at fixed rates that range from 9.3 percent to 9.8 percent................................ 41,841 71,500 Tax-exempt bonds maturing in various amounts between 2001 and 2026, bearing interest at floating rates that range from 3.9 percent to 7.5 percent........................... 26,917 33,500 Short-term borrowings....................................... 156,804 -- Other....................................................... 16,714 8,959 -------- -------- Subtotal............................................... 877,698 747,321 Less short-term borrowings and current portion of long-term debt, net of deferred losses on forward treasury lock and original issue discount of $2,060......................... (190,250) (36,986) -------- -------- TOTAL LONG-TERM DEBT.............................. $687,448 $710,335 ======== ========
The fair value of debt at December 31, 2000 and 1999, respectively, was approximately $835.3 million and $717.2 million compared with $877.7 million and $747.3 million included in the Consolidated Balance Sheets. This fair value was estimated based on quoted market prices or current interest rates offered to the company for debt of the same maturity. 59 62 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The scheduled annual principal payment requirements on debt for each of the five years in the period ending December 31, 2005 are as follows (in thousands): 2001...................................................... $192,310 2002...................................................... 18,789 2003...................................................... 2,493 2004...................................................... 1,755 2005...................................................... 250,931 Thereafter................................................ 425,998 Less deferred losses on forward treasury lock and original issue discount.......................................... (14,578) -------- TOTAL........................................... $877,698 ========
The company has a syndicated, committed revolving credit facility totaling $300 million extending through December 8, 2003. At the end of 2000, no amounts were outstanding. The company is required to pay annual commitment fees of 0.10 percent of the total amount of the facilities. Short-term borrowings outstanding at December 31, 2000 of $156.8 million were made under various bi-lateral credit facilities which bear interest at variable rates based on a bank's prime lending rate or the applicable federal funds rate and are subject to certain conditions. The company's debt agreements require the maintenance of certain financial ratios relating to fixed charge coverage and leverage, among other restrictions. At December 31, 2000, the company was in compliance with these requirements. MINORITY INTERESTS Minority interests primarily consist of 166.4 million shares of no par preferred stock (the "Preferred Shares") issued by a subsidiary of the company on December 29, 2000 in conjunction with the Warren merger. No gain or loss was recognized as a result of the issuance of these securities, and the company owned substantially all of the voting equity of the subsidiary both before and after the transaction. The holder of the Preferred Shares is entitled to receive cumulative, preferential cash dividends at the annual rate of 6.0 percent of the issue price ($111.0 million) from 2001 to 2003, 5.5 percent of the issue price from 2004 to 2005 and 5 percent of the issue price thereafter. The Preferred Shares are redeemable at the original issue price, in whole or in part, on or after December 29, 2005 at the option of holder thereof. Further, at any time following December 29, 2015, the company may redeem all or a portion of the then outstanding Preferred Shares at an amount equal to the issuance price. The Preferred Shares are entitled to a preference over the Common Stock and Exchangeable Shares with respect to the payment of dividends and to the distribution of assets in the event of the company's liquidation or dissolution. 60 63 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) OTHER LONG-TERM LIABILITIES Other long-term liabilities consist of the following (in thousands):
DECEMBER 31 ------------------- 2000 1999 -------- -------- Deferred income taxes....................................... $206,067 $118,699 Accrued postretirement benefit cost......................... 174,165 153,476 Accrued pension liability................................... 33,084 29,532 Other....................................................... 52,162 44,025 -------- -------- TOTAL OTHER LONG-TERM LIABILITIES................. $465,478 $345,732 ======== ========
COMMON EQUITY INTERESTS Holders of Exchangeable Shares have voting, dividend and liquidation rights that parallel those of holders of the Common Stock. The Exchangeable Shares may be converted to the Common Stock 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 company's Common Stock. The company has agreed not to pay dividends on its Common Stock 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, 2000, the company had reserved for issuance approximately 8.9 million shares of Common Stock for the exchange of outstanding Exchangeable Shares. Additional common equity shares are reserved to cover grants under the company's stock option program (6.1 million) and issuances pursuant to the employee stock purchase plan (1.5 million). In July 2000, the company announced a buyback program of its Common Stock over the following 18 months. The plan allows the company, at management's discretion, to buy back its Common Stock from time to time on the market or through privately negotiated transactions. At the same time, the Board of Directors of LCI approved a complementary share repurchase program in Canada through a normal course issuer bid. The LCI program, which has been approved by Canadian regulatory authorities, will permit LCI to repurchase, at market price, over a one-year period beginning November 1, 2000, up to 365,000 of its Exchangeable Shares, representing slightly less than 10 percent of LCI's public float. In total, up to $100 million may be spent for share repurchases under the two programs. As of December 31, 2000, the company has bought back approximately 2.5 million shares of Common Stock at an average cost of $20.20 per share. In connection with the Warren merger, the company issued a common stock warrant for $14.4 million. The warrant entitles the holder to acquire up to 4.4 million shares of Common Stock at an exercise price of $29 per share and is exercisable for a period of 10 years commencing on December 29, 2005. OPTIONAL STOCK DIVIDEND PLAN The company 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. 61 64 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) STOCK OPTION AND PURCHASE PLANS The company maintains a fixed stock option plan and an employee stock purchase plan. Under the fixed stock option plan, directors and key employees of the company may be granted stock options that entitle the holder to receive shares of the company's Common Stock based on the market price of the securities at the date of grant. Director's options are exercisable based on the length of a director's service on the Board of Directors and become fully exercisable when a director has served on the Board for over four years. Employee options vest evenly over a four-year period. The options expire ten years after the date of grant. There were approximately 3.8 million and 3.0 million outstanding options at December 31, 2000 and 1999, respectively. The employee stock purchase plan allows substantially all employees to purchase Common Stock of the company, through payroll deductions, at 90 percent of the lower of the beginning or end of the plan year market prices. During 2000, 93,500 shares were issued under the plan at a share price of $22.95, in 1999, 67,800 shares were issued at a price of $30.09, and in 1998, 56,000 shares were issued at a price of $22.28. At December 31, 2000 and 1999, $1.2 million and $0.9 million, respectively, were subscribed for future share purchases. The company accounts for its stock option plans under APB Opinion No. 25 and the associated interpretations. Accordingly, no compensation expense was recognized for these plans. Under SFAS No. 123, "Accounting for Stock-Based Compensation," employee stock options are valued at the grant date using the Black-Scholes option-pricing model, and compensation expense is recognized ratably over the vesting period. The weighted average assumptions used in the Black-Scholes model to value the option awards in 2000, 1999 and 1998, respectively, are as follows: dividend yield of 2.61, 1.57 and 1.45 percent; expected volatility of 33.0, 28.5 and 25.8 percent; risk-free interest rates of 6.7, 4.9 and 5.8 percent; and expected lives of 5.4 years for all three years. If the company had recognized compensation expense for the fixed stock option plan based on the fair value at the grant dates for awards, pro forma income statements for 2000, 1999 and 1998 would be as follows:
YEARS ENDED DECEMBER 31 ------------------------------ 2000 1999 1998 -------- -------- -------- NET INCOME As reported......................................... $257,367 $275,374 $235,500 Pro forma........................................... $252,805 $271,976 $232,567 BASIC EARNINGS PER SHARE As reported......................................... $ 3.51 $ 3.79 $ 3.27 Pro forma........................................... $ 3.45 $ 3.74 $ 3.23 DILUTED EARNINGS PER SHARE As reported......................................... $ 3.51 $ 3.77 $ 3.24 Pro forma........................................... $ 3.45 $ 3.72 $ 3.20
The SFAS No. 123 method of accounting does not apply to options granted before January 1, 1995. The pro forma compensation cost may not be representative of that to be expected in future years. 62 65 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) A summary of the status of the company's fixed stock option plans as of December 31, 2000, 1999 and 1998, and changes during the years ended on these dates, is presented below:
YEARS ENDED DECEMBER 31 --------------------------------------------------------------- 2000 1999 1998 ------------------- ------------------- ------------------- AVERAGE AVERAGE AVERAGE OPTION OPTION OPTION SHARES PRICE SHARES PRICE SHARES PRICE --------- ------- --------- ------- --------- ------- Balance outstanding at January 1..... 2,987,875 $28.32 2,333,800 $24.74 1,984,050 $19.43 Options granted...................... 938,800 23.00 828,200 38.13 843,500 33.98 Options exercised.................... (28,852) 19.36 (89,250) 18.90 (471,250) 18.88 Options canceled..................... (62,648) 30.13 (84,875) 34.98 (22,500) 35.21 --------- ------ --------- ------ --------- ------ BALANCE OUTSTANDING AT DECEMBER 31... 3,835,175 $27.08 2,987,875 $28.32 2,333,800 $24.74 ========= ====== ========= ====== ========= ====== OPTIONS EXERCISABLE AT DECEMBER 31... 1,840,716 $24.62 1,272,233 $21.82 839,725 $19.33 ========= ====== ========= ====== ========= ====== WEIGHTED AVERAGE FAIR VALUE OF OPTIONS GRANTED DURING THE YEAR.... $ 7.45 $11.39 $10.32 ====== ====== ======
As of December 31, 2000, the 3.8 million fixed stock options outstanding under the plans have an exercise price between $14.25 per share and $38.13 per share and a weighted average remaining contractual life of 6.73 years. NET INCOME PER COMMON EQUITY SHARE
YEARS ENDED DECEMBER 31 PER SHARE (IN THOUSANDS, EXCEPT PER SHARE AMOUNT) INCOME SHARES AMOUNT --------------------------------------- -------- ------ --------- 2000 BASIC Net income............................................. $257,367 73,254 $3.51 ===== DILUTED Options................................................ 125 -------- ------ Income available to common stockholders plus assumed conversions......................................... $257,367 73,379 $3.51 ======== ====== ===== 1999 BASIC Net income............................................. $275,374 72,637 $3.79 ===== DILUTED Options................................................ 385 -------- ------ Income available to common stockholders plus assumed conversions......................................... $275,374 73,022 $3.77 ======== ====== ===== 1998 BASIC Net income............................................. $235,500 72,071 $3.27 ===== DILUTED Options................................................ 594 -------- ------ Income available to common stockholders plus assumed conversions......................................... $235,500 72,665 $3.24 ======== ====== =====
63 66 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Basic earnings per common equity share were computed by dividing net income by the weighted average number of shares of Common Stock and Exchangeable Shares outstanding during the year. Diluted earnings per common equity share assumed the exercise of stock options for all years presented. INCOME TAXES Earnings before income taxes is summarized by country in the following table (in thousands):
YEARS ENDED DECEMBER 31 ------------------------------ 2000 1999 1998 -------- -------- -------- U.S................................................... $248,476 $280,854 $214,608 Canada................................................ 155,353 155,932 165,216 -------- -------- -------- EARNINGS BEFORE INCOME TAXES.......................... $403,829 $436,786 $379,824 ======== ======== ========
The provision for income taxes includes the following components (in thousands):
YEARS ENDED DECEMBER 31 ------------------------------ 2000 1999 1998 -------- -------- -------- Current: U.S................................................. $ 88,501 $100,152 $ 68,434 Canada.............................................. 45,805 50,803 58,559 -------- -------- -------- TOTAL CURRENT.................................... 134,306 150,955 126,993 -------- -------- -------- Deferred: U.S................................................. 3,277 2,472 14,083 Canada.............................................. 8,879 7,985 3,248 -------- -------- -------- TOTAL DEFERRED................................... 12,156 10,457 17,331 -------- -------- -------- TOTAL INCOME TAXES.......................... $146,462 $161,412 $144,324 ======== ======== ========
The Federal Statute of Limitations has closed for all U.S. income tax returns through 1996. The company's Canadian federal tax liability for all taxation years through 1997 has been reviewed and finalized by Canada Customs and Revenue Agency ("CCRA"). During 1995, an agreement was reached with CCRA related to the pricing of certain cement sales between the company's operations in Canada and the U.S. Under the terms of the Canada-U.S. Income Tax Convention, the agreement was submitted to the Competent Authorities of Canada and the U.S. The Competent Authorities reached an agreement in 2000 that resulted in reductions of the above noted transfer prices and certain administrative expenses for 1986 to 1994 totaling $27.8 million and granted compensating adjustments in the U.S. for the same years totaling $22.3 million. As a result of those adjustments, $11.5 million of interest income was accrued in 2000. 64 67 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) A reconciliation of taxes at the U.S. federal income tax rate to the company's actual income taxes is as follows (in millions):
YEARS ENDED DECEMBER 31 ------------------------ 2000 1999 1998 ------ ------ ------ Taxes at the U.S. federal income tax rate.................. $141.3 $152.9 $133.4 U.S./Canadian tax rate differential........................ 4.3 4.7 5.0 Canadian tax incentives.................................... (9.2) (9.6) (10.4) State and Canadian provincial income taxes, net of federal benefit.................................................. 15.0 19.3 17.0 Other items................................................ (4.9) (5.9) (0.7) ------ ------ ------ PROVISION FOR INCOME TAXES................................. $146.5 $161.4 $144.3 ====== ====== ======
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. Temporary differences and carryforwards that give rise to deferred tax assets and liabilities are as follows (in thousands):
DECEMBER 31 ------------------- 2000 1999 -------- -------- Deferred tax assets: Reserves and other liabilities............................ $ 70,425 $ 72,074 Other postretirement benefits............................. 73,185 63,634 Tax loss carryforwards.................................... 5,020 4,135 Tax credit carryforwards.................................. 743 5,192 -------- -------- Gross deferred tax assets................................... 149,373 145,035 Valuation allowance......................................... (23,296) (23,296) -------- -------- NET DEFERRED TAX ASSETS..................................... 126,077 121,739 -------- -------- Deferred tax liabilities: Property, plant and equipment............................. 219,100 159,889 Prepaid pension asset..................................... 41,614 23,270 Other..................................................... 26,416 14,264 -------- -------- GROSS DEFERRED TAX LIABILITIES.............................. 287,130 197,423 -------- -------- Net deferred tax liability.................................. 161,053 75,684 Net deferred tax asset -- current........................... 45,014 43,015 -------- -------- NET DEFERRED TAX LIABILITY -- NONCURRENT.................... $206,067 $118,699 ======== ========
A valuation allowance is provided to reduce the deferred tax assets to a level which, more likely than not under the rules of SFAS No. 109, will be realized. At December 31, 2000, the company had net operating loss and tax credit carryforwards of $16.9 million and $0.7 million, respectively. The net operating loss carryforwards are limited to use in varying annual amounts through 2006. The tax credit carryforwards are alternative minimum tax credits that have no expiration date. Deferred tax assets include approximately $5.3 million representing the tax effect of transfer pricing adjustments that have not been deducted in the U.S. pending agreement with the Internal Revenue Service regarding the final computation of tax liability for 1986 to 1994. 65 68 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) At December 31, 2000, cumulative undistributed earnings of LCI were $951.1 million. No provision for U.S. income taxes or Canadian withholding taxes has been made since the company considers the undistributed earnings to be permanently invested in Canada. Management has decided that the determination of the amount of any unrecognized deferred tax liability for the cumulative undistributed earnings of LCI is not practical to determine since it would depend on a number of factors that cannot be known until such time as a decision to repatriate the earnings might be made. SEGMENT AND RELATED INFORMATION Segment information is presented in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and geographic areas. Lafarge's two geographic areas consist of the U.S. and Canada for which it reports revenues, EBIT (Earnings Before Interest and Taxes) and fixed assets. Revenues from the major products sold to external customers include: cement, ready-mixed concrete, aggregate, gypsum drywall and other miscellaneous products. Operating segments are defined as components of an enterprise that engage in business activities which earn revenues, incur expenses and prepare separate financial information that is evaluated regularly by the company's chief operating decision makers in order to allocate resources and assess performance. Lafarge's three reportable operating segments, which represent separately managed strategic business units that have different capital requirements and marketing strategies, are construction materials, cement and gypsum. Construction materials produces and distributes construction aggregate, ready-mixed concrete, other concrete products (gravity and pressure pipe, precast structures, pavers and masonry units) and asphalt, and also constructs and paves roads. Cement produces Portland, masonry and mortar cements, as well as slag, and distributes silica fume and fly ash. It also includes Systech Environmental Corporation, a subsidiary that supplies fuel-quality waste and raw materials to cement kilns. Lafarge Gypsum produces drywall for the commercial and residential construction sectors. The accounting policies of the operating segments are described in "Accounting and Financial Reporting Policies." Lafarge evaluates operating performance based on profit or loss from operations before the following items: other postretirement benefit expense for retirees, goodwill amortization related to the Redland acquisition, income taxes, interest and foreign exchange gains and losses. 66 69 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Lafarge accounts for intersegment sales and transfers at market prices. Revenues are attributed to geographic areas based on the location of the assets producing the revenues. Operating segment information consists of the following (in millions):
YEARS ENDED DECEMBER 31 ------------------------------ 2000 1999 1998 -------- -------- -------- Net sales: Construction materials: Revenues from external customers.................. $1,575.4 $1,483.7 $1,400.3 Intersegment revenues............................. 0.3 2.7 2.3 Cement and cementitious materials: Revenues from external customers.................. 1,078.1 1,085.4 1,005.8 Intersegment revenues............................. 137.3 117.4 117.9 Gypsum: Revenues from external customers.................. 134.1 152.5 102.4 Eliminations......................................... (137.6) (120.1) (120.2) -------- -------- -------- TOTAL NET SALES.............................. $2,787.6 $2,721.6 $2,508.5 ======== ======== ========
YEARS ENDED DECEMBER 31 ------------------------------ 2000 1999 1998 -------- -------- -------- Income from operations: Construction materials (a)........................... $ 192.1 $ 189.5 $ 171.3 Cement and cementitious materials (a)................ 318.3 320.5 288.7 Gypsum (a)........................................... (18.0) 41.9 20.0 Corporate and other.................................. (61.7) (70.3) (73.0) -------- -------- -------- Earnings before interest and income taxes.............. 430.7 481.6 407.0 Interest expense, net................................ (26.9) (44.8) (27.2) -------- -------- -------- EARNINGS BEFORE INCOME TAXES........................... $ 403.8 $ 436.8 $ 379.8 ======== ======== ========
- --------------- (a) Excludes other postretirement benefit expense for retirees, goodwill amortization related to the Redland acquisition, income taxes, interest and foreign exchange gains and losses.
DECEMBER 31 ------------------------------ 2000 1999 1998 -------- -------- -------- Assets: Construction materials............................... $1,416.3 $1,239.1 $1,095.3 Cement and cementitious materials.................... 1,381.1 1,098.3 956.4 Gypsum............................................... 269.7 125.1 70.6 Corporate, Redland goodwill and other................ 835.5 830.9 770.2 -------- -------- -------- TOTAL ASSETS................................. $3,902.6 $3,293.4 $2,892.5 ======== ======== ========
67 70 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31 ------------------------------ 2000 1999 1998 -------- -------- -------- Capital expenditures: Construction materials............................... $ 100.8 $ 83.8 $ 66.3 Cement and cementitious materials.................... 172.4 162.9 146.3 Gypsum............................................... 135.8 54.4 3.0 Corporate and other.................................. 22.7 14.6 8.7 -------- -------- -------- TOTAL CAPITAL EXPENDITURES................... $ 431.7 $ 315.7 $ 224.3 ======== ======== ========
YEARS ENDED DECEMBER 31 ------------------------------ 2000 1999 1998 -------- -------- -------- Depreciation, depletion and amortization: Construction materials............................... $ 70.8 $ 78.3 $ 71.6 Cement and cementitious materials.................... 75.4 70.5 66.2 Gypsum............................................... 7.8 5.2 4.6 Corporate and goodwill amortization.................. 14.3 14.3 14.4 -------- -------- -------- TOTAL DEPRECIATION, DEPLETION AND AMORTIZATION............................... $ 168.3 $ 168.3 $ 156.8 ======== ======== ========
Information concerning product information was as follows (in millions):
YEARS ENDED DECEMBER 31 ------------------------------ 2000 1999 1998 -------- -------- -------- Net sales from external customers: Cement and cementitious materials.................... $1,078.1 $1,085.4 $1,005.8 Ready-mixed concrete................................. 636.5 584.1 535.9 Aggregate............................................ 516.7 366.7 368.1 Gypsum drywall....................................... 134.1 152.5 102.4 Other miscellaneous products......................... 422.2 532.9 496.3 -------- -------- -------- TOTAL NET SALES.............................. $2,787.6 $2,721.6 $2,508.5 ======== ======== ========
No single customer represented more than 10 percent of Lafarge's revenues. Information concerning principal geographic areas was as follows (in millions):
YEARS ENDED DECEMBER 31 ------------------------------------------------------------------------------------------ 2000 1999 1998 ---------------------------- ---------------------------- ---------------------------- NET FIXED NET FIXED NET FIXED SALES EBIT ASSETS SALES EBIT ASSETS SALES EBIT ASSETS -------- ------ -------- -------- ------ -------- -------- ------ -------- U.S.................. $1,904.4 $275.9 $1,355.7 $1,905.1 $334.5 $1,056.5 $1,732.7 $259.5 $ 937.5 Canada............... 883.2 154.8 766.7 816.5 147.1 561.8 775.8 147.5 463.3 -------- ------ -------- -------- ------ -------- -------- ------ -------- $2,787.6 $430.7 $2,122.4 $2,721.6 $481.6 $1,618.3 $2,508.5 $407.0 $1,400.8 ======== ====== ======== ======== ====== ======== ======== ====== ========
Net revenues exclude intersegment revenues. SUPPLEMENTAL CASH FLOW INFORMATION Non-cash investing and financing activities included the issuance of 1,204,000, 694,000 and 112,000 common equity shares on the reinvestment of dividends totaling $25.3 million, $19.5 million and $3.7 million in 2000, 1999 and 1998, respectively. Cash paid for acquisitions does not reflect the Preferred Shares or a $16.7 million note payable issued in conjunction with the Warren merger in 2000, nor the business 68 71 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) combination with Redland in 1998 since it was accounted for similar to a pooling of interests. Financing activities do not reflect the $14.4 million common stock warrants issued in 2000 for a note receivable. Cash paid during the year for interest and income taxes was as follows (in thousands):
YEARS ENDED DECEMBER 31 ------------------------------ 2000 1999 1998 -------- -------- -------- Interest (net of amounts capitalized)................. $ 56,812 $ 51,202 $ 40,435 Income taxes (net of refunds)......................... $161,701 $131,946 $152,945 ======== ======== ========
PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS The company has several defined benefit and defined contribution retirement plans covering substantially all employees and directors. Benefits paid under the defined benefit plans are generally based on either 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 company's funding policy is to contribute amounts that are deductible for income tax purposes. For 2000 and 1999, the assumed settlement interest rates for pension plans and other postretirement benefits were 7.75 percent for the company's U.S. plans, and 6.95 percent and 7.35 percent, respectively, for the Canadian plans. For 2000 and 1999, the assumed rates of increase in future compensation levels used in determining the actuarial present values of the projected benefit obligations were 4.5 percent for the company's U.S. plans and 3.5 percent for the Canadian plans. The benefit multiplier increase rate was 2.0 percent for the company's U.S. hourly plans and 4.5 percent for the Canadian hourly plans. 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. The company 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 the U.S. and Canada. Benefits, eligibility and cost-sharing provisions for hourly employees vary by location and/or bargaining unit. Generally, the health care plans pay a stated percentage of most medical and dental expenses reduced for any deductible, copayment and 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 company are covered under other health 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 $1.0 million 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 postretirement life insurance benefits. In the U.S., postretirement life insurance is provided for a number of hourly employees as stipulated in their hourly bargained agreements, but it is not provided for salaried employees, except those of certain acquired companies. 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 7.8 percent, decreasing to 5.5 percent over six years. For post-65 retirees in the U.S., the 69 72 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) assumed rate was 6.6 percent, decreasing to 5.5 percent over six years, with a Medicare assumed rate for the same group of 6.4 percent, decreasing to 5.5 percent over six years. For post-65 retirees in Canada, the assumed rate was 7.7 percent, decreasing to 5.5 percent over six years. The following table summarizes the consolidated funded status of the company's defined benefit retirement plans and other postretirement benefits and provides a reconciliation to the consolidated prepaid pension asset, accrued pension liability and accrued postretirement benefit cost recorded on the company's Consolidated Balance Sheets at December 31, 2000 and 1999 (in millions).
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS ----------------------- ------------------------------ 2000 1999 1998 2000 1999 1998 ------ ------ ----- -------- -------- -------- Amounts recognized in the Statement of Financial Position consist of: Prepaid asset.......................... $136.4 $101.9 $93.5 $ -- $ -- $ -- Accrued liability...................... (33.1) (29.5) (24.6) (174.2) (153.5) (149.8) ------ ------ ----- ------- ------- ------- NET AMOUNT RECOGNIZED AT DECEMBER 31... $103.3 $ 72.4 $68.9 $(174.2) $(153.5) $(149.8) ====== ====== ===== ======= ======= ======= Components of Net Periodic Benefit Cost: Service cost........................... $ 17.6 $ 20.1 $15.7 $ 2.8 $ 2.7 $ 2.1 Interest cost.......................... 37.9 35.5 34.1 11.2 10.3 9.5 Expected return on plan assets......... (57.1) (50.3) (45.4) -- -- -- Amortization of prior service cost..... 1.6 2.7 1.3 (0.6) (1.0) (0.6) Amortization of transition asset....... (1.4) (1.5) (1.4) -- -- -- Amortization of actuarial (gain) loss................................ (5.5) 4.4 4.0 -- 0.3 0.1 Settlement (gain) loss................. (0.2) 2.4 (0.1) -- -- -- Other.................................. (1.0) (0.4) -- -- -- -- ------ ------ ----- ------- ------- ------- NET PERIODIC BENEFIT COST (BENEFIT)...... (8.1) 12.9 8.2 13.4 12.3 11.1 Defined contribution plan cost........... 7.1 4.5 4.2 -- -- -- ------ ------ ----- ------- ------- ------- NET RETIREMENT COST (BENEFIT)............ $ (1.0) $ 17.4 $12.4 $ 13.4 $ 12.3 $ 11.1 ====== ====== ===== ======= ======= =======
70 73 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
OTHER PENSION BENEFITS POSTRETIREMENT BENEFITS -------------------- ----------------------- 2000 1999 2000 1999 -------- ------ -------- --------- Change in Benefit Obligation: Projected benefit obligation at January 1...... $ 520.0 $529.4 $ 135.5 $ 150.9 Exchange rate changes....................... (8.8) 9.2 (0.7) 1.2 Service cost................................ 11.1 20.1 2.8 2.7 Interest cost............................... 37.9 35.5 11.2 10.3 Employee contributions...................... 2.4 1.9 -- -- Plan amendments............................. 0.1 2.8 -- (2.3) Acquisitions................................ 45.6 -- 17.1 -- Settlement.................................. (0.4) 2.4 -- -- Benefits paid............................... (36.7) (36.2) (9.3) (7.8) Actuarial (gain) loss....................... 24.0 (44.7) 10.5 (19.5) Other....................................... 0.7 (0.4) -- -- -------- ------ ------- -------- PROJECTED BENEFIT OBLIGATION AT DECEMBER 31...... 595.9 520.0 167.1 135.5 -------- ------ ------- -------- Change in Plan Assets: Fair value of plan assets at January 1......... 705.8 614.8 Exchange rate changes....................... (10.3) 14.4 Actual return on plan assets................ 24.9 103.5 Acquisitions................................ 55.2 -- Employer contributions...................... 9.2 8.7 Employee contributions...................... 2.3 1.9 Benefits paid............................... (36.7) (36.2) Settlement.................................. (0.4) -- Administrative expenses..................... (1.5) (1.3) -------- ------ FAIR VALUE OF PLAN ASSETS AT DECEMBER 31......... 748.5 705.8 -------- ------ Reconciliation of Prepaid (Accrued) Benefit Cost: Funded status............................... 152.6 185.8 (167.1) (135.5) Unrecognized actuarial gain................. (58.3) (122.7) (5.9) (16.2) Unrecognized transition asset............... 7.0 (2.0) -- -- Unrecognized prior service cost............. 2.0 11.3 (1.2) (1.8) -------- ------ ------- -------- PREPAID (ACCRUED) BENEFIT COST AT DECEMBER 31.... $ 103.3 $ 72.4 $(174.2) $ (153.5) ======== ====== ======= ========
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $49.8 million, $43.5 million and $7.4 million, respectively, as of December 31, 2000, and $36.5 million, $33.1 million and $1.6 million, respectively, as of December 31, 1999. During the fourth quarter of 1999, the company divested the paving and asphalt division of Redland Genstar, Inc. through a series of sales. This triggered a $2.4 million one-time charge for contractual 71 74 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) termination benefits provided to a select group of employees in the divested operations. The termination benefits provided were an immediate unreduced early retirement pension and a monthly Social Security Bridge payment. 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 include contributions to such plans of $6.5 million, $6.5 million and $4.5 million for 2000, 1999 and 1998, respectively. The data available from administrators of the multi-employer plans are not sufficient to determine the accumulated benefit obligation or the net assets attributable to these plans. The defined contribution plans' cost in the preceding table relate to thrift savings plans for eligible U.S. and Canadian employees. Under the provisions of these plans, the company matches a portion of each participant's contribution. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point increase or decrease in assumed health care cost trend rates would have the following effects (stated in millions of dollars):
ONE-PERCENTAGE-POINT ----------------------- INCREASE DECREASE -------- -------- Increase (decrease) in postretirement benefit obligation at December 31, 2000......................................... $11.8 $(10.5) Increase (decrease) in the total of service and interest cost components for 2000.................................. $ 1.2 $ (1.0)
COMMITMENTS AND CONTINGENCIES The company leases certain land, buildings and equipment. Total rental expenses under operating leases was $24.6 million, $16.1 million and $15.7 million for each of the three years ended December 31, 2000, 1999 and 1998, respectively. The table below shows the future minimum lease payments (in millions) due under noncancelable operating leases at December 31, 2000. Such payments total $129.2 million.
YEARS ENDING DECEMBER 31 --------------------------------------------------- 2001 2002 2003 2004 2005 LATER YEARS ----- ----- ----- ----- ----- ----------- Operating leases....................... $23.4 $21.1 $17.7 $12.9 $10.5 $43.6
The company self-insures for workers' compensation, automobile and general liability claims up to a maximum per claim. The undiscounted estimated liability is accrued based on a determination by an outside actuary. This determination is impacted by assumptions made and actual experience. In April and December 2000, the Ontario (Canada) Court rendered two decisions against LCI and other defendants in a lawsuit originating in 1992 (the "1992 lawsuit") arising from claims of building owners, the Ontario New Home Warranty Program and other plaintiffs regarding allegedly defective concrete, fly ash and cement used in defective foundations. Lafarge estimates that the total amount of liability attributed to LCI in capital, interest and third-party costs represents approximately Canadian $9.9 million, net of insured amounts. LCI has appealed both decisions. The company believes its insurance coverage and recorded reserves are adequate to cover the defense expenses and liabilities arising from the 1992 lawsuit. In 1999, LCI became involved as a defendant in a class action related to the 1992 lawsuit. The action has been certified as a class action in 2000, but will not proceed until after the decision by the Court of appeal in the 1992 lawsuit is delivered. Although the outcome of any liability related to the 1999 class action cannot be predicted with certainty, the company believes that any liability which LCI may incur arising from the class action will not have a material adverse effect on the financial condition of the company. 72 75 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) By order dated January 28, 2000, the Court granted summary judgment in favor of the company's directors in the stockholder derivative lawsuit filed against them on March 18, 1998 in the Circuit Court for Montgomery County, Maryland. This lawsuit alleged breach of fiduciary duty, corporate waste and gross negligence in connection with the company's purchase of certain North American construction materials assets from Lafarge S.A., the company's majority stockholder. Plaintiffs appealed the decision to the Maryland Court of Special Appeals. Upon its own motion, the Maryland Court of Appeals, Maryland's highest court, selected the appeal for hearing and decision. A hearing before the Court was held in December 2000. In early 2001, the Court of Appeals rendered its decision affirming the decision of the lower court. Currently, the company is involved in one remediation under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, which together are referred to as Superfund, and the corrective action provisions of the Resource Conservation and Recovery Act of 1976 ("RCRA"). At this site, which the U.S. Environmental Protection Agency ("EPA") has listed on the National Priority List, some of the potentially responsible parties named by the EPA have initiated a third-party action against 47 parties, including the company. The company also has been named a potentially responsible party for this site. The suit alleges that in 1969 one of the company's predecessor companies sold equipment containing hazardous substances that may now be present at the site. It appears that the largest disposer of hazardous substances at this new site is the U.S. Department of Defense and numerous other large disposers of hazardous substances are associated with this site. The company believes that this matter will not have a material impact on its financial condition. The company is involved in one state cleanup in the State of Michigan. In December 1999, the company was served with a complaint alleging that some time between 1952 and 1992, air-scrubber baghouse bags were transported to and disposed of at the Arthur Fivenson Iron and Metal Company. The company is one of six defendants in the state action to recover response activity costs which Michigan incurred in responding to releases and threatened releases of hazardous substances at this site. The company is vigorously defending this action and believes that resolution of this matter will not have a material impact on its financial condition. When the company determines that it is probable that a liability for environmental matters or other legal actions has been incurred and the amount of the loss is reasonably estimable, an estimate of the required remediation costs is recorded as a liability in the financial statements. As of December 31, 2000, the liabilities recorded for the environmental obligations are not material to the company's financial statements. Although the company believes its environmental accruals are adequate, environmental costs may be incurred that exceed the amounts provided at December 31, 2000. However, the company has concluded that the possibility of material liability in excess of the amount reported in the December 31, 2000 Consolidated Balance Sheet is remote. In the ordinary course of business, the company is involved in certain legal actions and claims, including proceedings under laws and regulations relating to environmental and other matters. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the total amount of these legal actions and claims cannot be determined with certainty. Management believes that all legal and environmental matters will be resolved without material adverse impact to the company's financial condition, results of operations or liquidity. RELATED PARTY TRANSACTIONS The company is a participant to agreements with Lafarge S.A. for the sharing of certain costs incurred for marketing, technical, research and managerial assistance and for the use of certain trademarks. The net expenses accrued for these services were $6.1 million, $7.0 million and $6.1 million during 2000, 1999 and 1998, respectively. In addition, the company purchases various products from Lafarge S.A. Such purchases 73 76 LAFARGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) totaled $67.7 million, $68.5 million and $60.6 million in 2000, 1999 and 1998, respectively. All transactions with Lafarge S.A. were conducted on an arms-length basis. Lafarge S.A. reinvested a portion of dividends it was entitled to receive on the company's Common Stock and Exchangeable Shares during 2000 and 1999. These reinvestments totaled $22.8 million and $17.0 million, respectively. QUARTERLY DATA (UNAUDITED) The following table summarizes financial data by quarter for 2000 and 1999 (in millions, except per share information):
FIRST SECOND THIRD FOURTH TOTAL ------ ------ ----- ------ ------ 2000 Net sales...................................... $ 438 $ 775 $ 924 $ 651 $2,788 Gross profit................................... 35 231 273 149 688 Net income (loss).............................. (25) 96 127 59 257 Net income (loss) per common equity share (a) Basic........................................ (0.34) 1.30 1.73 0.81 3.51 Diluted...................................... (0.34) 1.30 1.72 0.81 3.51 ====== ===== ===== ===== ====== 1999 Net sales...................................... $ 375 $ 739 $ 896 $ 712 $2,722 Gross profit................................... 20 215 287 203 725 Net income (loss).............................. (29) 88 139 77 275 Net income (loss) per common equity share (a) Basic........................................ (0.40) 1.22 1.91 1.05 3.79 Diluted...................................... (0.40) 1.22 1.90 1.05 3.77 ====== ===== ===== ===== ======
- ------------------------ (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. 74 77 SCHEDULE II LAFARGE CORPORATION AND SUBSIDIARIES CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
ADDITIONS DEDUCTIONS --------- ----------------------- FROM RESERVE FOR PURPOSES BALANCE AT CHARGE TO FOR WHICH BEGINNING OF COST AND RESERVE WAS OTHER BALANCE AT END DESCRIPTIONS YEAR EXPENSES CREATED (1) OF YEAR ------------ ------------ --------- ------------ -------- -------------- Reserve applicable to current receivable For doubtful accounts: 2000............................. $24,632 $ 2,440 $ (1,195) $ (247) $25,630 1999............................. $24,619 $ 2,490 $ (2,858) $ 381 $24,632 1998............................. $24,899 $ 3,395 $ (3,328) $ (347) $24,619 For cash and other discounts: 2000............................. $ 3,040 $32,550 $(33,707) $ (84) $ 1,799 1999............................. $ 3,232 $44,211 $(43,735) $ (668) $ 3,040 1998............................. $ 3,182 $41,107 $(40,025) $(1,032) $ 3,232
- --------------- (1) Primarily foreign currency translation adjustments. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 75 78 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The section captioned "Item 1 -- Election of Directors" in our Proxy Statement for the 2001 Annual Meeting of Stockholders sets forth certain information with respect to the directors and nominees for election as directors of the company and is incorporated herein by reference. Pursuant to General Instruction G (3) of Form 10-K and Instruction 3 to Item 401 (b) of Regulation S-K, certain information with respect to persons who are or may be deemed to be executive officers of the company is set forth under the caption "Executive Officers of the Company" in Part I of this Annual Report. ITEM 11. EXECUTIVE COMPENSATION The section captioned "Executive Compensation" in our Proxy Statement for the 2001 Annual Meeting of Stockholders sets forth certain information with respect to the compensation of management of the company and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The section captioned "Stock Ownership" in our Proxy Statement for the 2001 Annual Meeting of Stockholders sets forth certain information with respect to the ownership of our securities and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The sections captioned "Executive Compensation -- Compensation Committee Interlocks and Insider Participation," "Certain Relationships and Related Transactions -- Indebtedness of Management" and "Certain Relationships and Related Transactions -- Transactions with Management and Others" in our Proxy Statement for the 2001 Annual Meeting of Stockholders set forth certain information with respect to relations of and transactions by management of the company and are incorporated herein by reference. 76 79 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS -- The financial statements listed in the accompanying Index to Consolidated Financial Statements and Financial Statement Schedule are filed as part of this Annual Report and such Index to Consolidated Financial Statements and Financial Statement Schedule is incorporated herein by reference. 2. FINANCIAL STATEMENT SCHEDULES -- The financial statement schedule listed in the accompanying Index to Consolidated Financial Statements and Financial Statement Schedule is filed as part of this Annual Report and such Index to Consolidated Financial Statements and Financial Statement Schedule is incorporated herein by reference. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
PAGE ---- Financial Report: Report of Independent Public Accountants, Arthur Andersen LLP.......................................... 46 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 2000 and 1999.................................................. 47 Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998...................... 48 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998.......... 49 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2000, 1999 and 1998.......... 50 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998................ 51 Notes to Consolidated Financial Statements............. 52 Financial Statement Schedule: Schedule II -- Consolidated Valuation and Qualifying Accounts for the Years Ended December 31, 2000, 1999 and 1998.............................................. 75 All other schedules are omitted because they are not applicable.
3. EXHIBITS -- The exhibits listed on the accompanying List of Exhibits are filed as part of this Annual Report and such List of Exhibits is incorporated herein by reference.
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- *3.1 Articles of Amendment and Restatement of the company, filed May 29, 1992, as amended by the Articles of Amendment of the company dated May 8, 2000. *3.2 Amended By-Laws of the company, amended on October 15, 1999. 4.1 Form of Indenture dated as of October 1, 1989 between the company and Citibank, N.A., as Trustee, relating to $250 million of debt securities of the company [incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (Registration No. 33-31333) of the company, filed with the Securities and Exchange Commission on October 3, 1989]. 4.2 Form of Fixed Rate Medium-Term Note of the company [incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-3 (Registration No. 33-31333) of the company, filed with the Securities and Exchange Commission on October 3, 1989]. 4.3 Instruments with respect to long-term debt which do not exceed 10 percent of the total assets of the company and its consolidated subsidiaries have not been filed. The company agrees to furnish a copy of such instruments to the Commission upon request.
77 80
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 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 company, 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 company, 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 company, 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 company, filed with the Securities and Exchange Commission on May 5, 1983]. Canada Cement Lafarge changed its name in 1988 to Lafarge Canada Inc. Lafarge Coppee changed its name in 1995 to Lafarge S.A. 10.2 Guarantee Agreement dated as of May 1, 1983 between the company 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 company, 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 company, filed with the Securities and Exchange Commission on March 21, 1983]. 10.4 Director Fee Deferral Plan of the company [incorporated by reference to Exhibit 10.21 to the Registration Statement on Form S-1 (Registration No. 2-86589) of the company, filed with the Securities and Exchange Commission on September 16, 1983]. 10.5 1993 Stock Option Plan of the company, as amended and restated February 7, 1995 [incorporated by reference to Exhibit 10.5 to the Annual Report on Form 10-K filed by the company for the fiscal year ended December 31, 1997]. 10.6 1983 Stock Option Plan of the company, as amended and restated May 2, 1989 [incorporated by reference to Exhibit 28 to our report on Form 10-Q for the quarter ended June 30, 1989]. *10.7 Optional Stock Dividend Plan of the company dated September 1999. 10.8 Director Fee Deferral Plan of General Portland, assumed by the company 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]. 10.9 Option Agreement for Common Stock dated as of November 1, 1993 between the company and Lafarge Coppee [incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed by the company for the fiscal year ended December 31, 1993]. 10.10 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 company, filed with the Securities and Exchange Commission on November 23, 1983]. 10.11 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 company, filed with the Securities and Exchange Commission on November 23, 1983]. 10.12 Stock Purchase Agreement dated September 17, 1986 between the company and Lafarge Coppee, S.A. [incorporated by reference to Exhibit B to our report on Form 10-Q for the quarter ended September 30, 1986].
78 81
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.13 Cost Sharing Agreement dated December 2, 1988 between Lafarge Coppee, LCI and the company 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 company for the fiscal year ended December 31, 1988]. 10.14 Royalty Agreement dated December 2, 1988 between Lafarge Coppee, LCI and the company 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 company for the fiscal year ended December 31, 1988]. 10.15 Amendment dated January 1, 1993 to Royalty Agreement filed as Exhibit 10.14 [incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K filed by the company for the fiscal year ended December 31, 1992]. 10.16 Description of Nonemployee Director Retirement Plan of the company, effective January 1, 1989 [incorporated by reference to Exhibit 10.40 to the Annual Report on Form 10-K filed by the company for the fiscal year ended December 31, 1989]. 10.17 Reimbursement Agreement dated January 1, 1990 between Lafarge Coppee and the company 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 company for the fiscal year ended December 31, 1990]. 10.18 Amendment dated September 13, 1991 to Cost Sharing Agreement filed as Exhibit 10.13 [incorporated by reference to Exhibit 10.31 to the Annual Report on Form 10-K filed by the company for the fiscal year ended December 31, 1994]. 10.19 Receivables Purchase Agreement dated as of October 13, 2000 among Sierra Bay Receivables, Inc. as Seller, Lafarge Corporation, as Initial Servicer, Blue Ridge Asset Funding Corporation, the Liquidity Banks from time to time party hereto and Wachovia Bank, N.A. as Agent [incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the company for the fiscal quarter ended September 30, 2000]. 10.20 Receivables Sale Agreement dated as of October 13, 2000 among Lafarge Corporation and certain of its Subsidiaries, as Originators, and Sierra Bay Receivables, Inc. as Buyer [incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the company for the fiscal quarter ended September 30, 2000]. 10.21 Cost Sharing Agreement dated January 2, 1996 between Lafarge Materiaux de Specialties and the company related to costs of a new unit established for researching potential profitable markets for their respective products in North America [incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K filed by the company for the fiscal year ended December 31, 1996]. 10.22 Marketing and Technical Assistance Agreement dated October 1, 1996 between Lafarge S.A. and the company related to research and development, marketing, strategic planning, human resources and communication techniques in relation to gypsum activities [incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K filed by the company for the fiscal year ended December 31, 1996]. 10.23 Amendment No. 1 to Option Agreement for Common Stock dated as of May 2, 2000 between Lafarge Corporation and Lafarge S.A. [incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the company for the fiscal quarter ended June 30, 2000]. 10.24 1998 Stock Option Plan of the company [incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 (Regulation No. 333-65897) of the company, filed with the Securities and Exchange Commission on October 20, 1998]. 10.25 Credit Agreement dated as of December 8, 1998 between the company and nine separate banking institutions [incorporated by reference to Exhibit 10.25 to the Annual Report on Form 10-K filed by the company for the fiscal year ended December 31, 1998]. 10.26 Amendment dated August 1, 1998 to Nonemployee Director Retirement Plan of the company filed as Exhibit 10.16.[incorporated by reference to Exhibit 10.26 to the Annual Report on Form 10-K filed by the company for the fiscal year ended December 31, 1998].
79 82
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- *10.27 Non-Employee Directors' Deferred Compensation Plan Cash or Phantom Stock Investment Options *10.28 Commercial Paper Dealer Agreement dated as of March 2, 2001 between Lafarge Corporation and Salomon Smith Barney Inc. concerning notes to be issued pursuant to an Issuing and Paying Agency Agreement dated as of March 2, 2001 between Lafarge Corporation and Citibank, N.A. *10.29 Commercial Paper Dealer agreement dated as of March 2, 2001 between Lafarge Corporation and Suntrust Bank concerning notes to be issued pursuant to an Issuing and Paying Agency Agreement dated as of March 2, 2001 between Lafarge Corporation and Citibank N.A. *10.30 Commercial Paper Issuing and Paying Agent Agreement dated as of March 2, 2001 between Citibank, N.A. and Lafarge Corporation. *10.31 Credit Agreement dated as of March 2, 2001 among Lafarge Corporation as Borrower, the Initial Lenders named therein, Citibank, N.A. as Administrative Agent, Salomon Smith Barney Inc. as Arranger and Bayerische Landesbank Girozentrale, BNP Paribas, Suntrust Bank and Westdeustche Landesbank Girozentrale as Syndication Agents. *21 Subsidiaries of the company. *23 Consent of Arthur Andersen LLP, independent public accountants.
- --------------- * Filed herewith (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. 80 83 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS ANNUAL REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. LAFARGE CORPORATION By: /s/ LARRY J. WAISANEN ------------------------------------ LARRY J. WAISANEN EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Date: March 28, 2001 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 COMPANY AND IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOHN M. PIECUCH President and Chief Executive Officer March 28, 2001 - ------------------------------------------ and Director JOHN M. PIECUCH /s/ LARRY J. WAISANEN Executive Vice President and Chief March 28, 2001 - ------------------------------------------ Financial Officer LARRY J. WAISANEN /s/ JOSEPH B. SHERK Vice President and Controller March 28, 2001 - ------------------------------------------ JOSEPH B. SHERK /s/ BERTRAND P. COLLOMB Chairman of the Board March 28, 2001 - ------------------------------------------ BERTRAND P. COLLOMB Director March , 2001 - ------------------------------------------ THOMAS A. BUELL /s/ MARSHALL A. COHEN Director March 28, 2001 - ------------------------------------------ MARSHALL A. COHEN /s/ PHILIPPE P. DAUMAN Director March 28, 2001 - ------------------------------------------ PHILIPPE P. DAUMAN /s/ BERNARD L. KASRIEL Director March 28, 2001 - ------------------------------------------ BERNARD L. KASRIEL
81 84
SIGNATURE TITLE DATE --------- ----- ---- /s/ JACQUES LEFEVRE Director March 28, 2001 - ------------------------------------------ JACQUES LEFEVRE /s/ PAUL W. MACAVOY Director March 28, 2001 - ------------------------------------------ PAUL W. MACAVOY /s/ CLAUDINE B. MALONE Director March 28, 2001 - ------------------------------------------ CLAUDINE B. MALONE /s/ ROBERT W. MURDOCH Director March 28, 2001 - ------------------------------------------ ROBERT W. MURDOCH /s/ BERTIN F. NADEAU Director March 28, 2001 - ------------------------------------------ BERTIN F. NADEAU /s/ JOHN D. REDFERN Director March 28, 2001 - ------------------------------------------ JOHN D. REDFERN /s/ JOE M. RODGERS Director March 28, 2001 - ------------------------------------------ JOE M. RODGERS Director March , 2001 - ------------------------------------------ MICHEL ROSE /s/ LAWRENCE M. TANENBAUM Director March 28, 2001 - ------------------------------------------ LAWRENCE M. TANENBAUM /s/ GERALD H. TAYLOR Director March 28, 2001 - ------------------------------------------ GERALD H. TAYLOR
82 EX-3.1 2 w47043ex3-1.txt EX-3.1 ARTICLES OF AMENDMENT 1 EXHIBIT 3.1 ARTICLES OF AMENDMENT AND RESTATEMENT OF LAFARGE CORPORATION Lafarge Corporation, a Maryland corporation (the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: 1. The Corporation desires to amend and restate, and hereby amends and restates, its charter as set forth below. The provisions set forth in these Articles of Amendment and Restatement are all the provisions of the charter as currently in effect. 2. Pursuant to Sections 2-607, 2-608 and 2-609 of the Maryland General Corporation Law, the Board of Directors of the Corporation, at a meeting duly called and held on February 11, 1992, approved and recommended for shareholder approval these Articles of Amendment and Restatement, and the shareholders of the Corporation, at a meeting duly called and held on May 5, 1992, approved these Articles of Amendment and Restatement by a vote of more than two-thirds of all outstanding shares entitled to vote. 3. Information regarding (i) the current address of the principal office of the Corporation, (ii) the name and address of the Corporation's current resident agent and (iii) the number and names of the directors of the Corporation, contained in the charter reflect current information with respect thereto in accordance with Section 2-608(d) of the Maryland General Corporation Law. 4. In connection with the deletion of the provisions regarding the First Preferred Stock, the Second Preferred Stock and the Third Preferred Stock from Article Fourth, certain provisions have been renumbered or relettered in the charter as restated. 5. The following is the charter of the Corporation as amended and restated by these articles of Amendment and Restatement: FIRST: The name of the Corporation is LAFARGE CORPORATION SECOND: The Corporation shall have the following purposes and powers: (1) To engage in the production, distribution, marketing and sale of cement. (2) To import, export, manufacture, produce, buy, sell and otherwise deal in and with goods, commodities, wares and merchandise of every class and description. (3) To engage in and carry on any other business which may conveniently be conducted in conjunction with any of the business of the Corporation. (4) To be a promoter, partner, member, associate, stockholder, manager, joint venturer or other participant of or in any person, corporation, partnership, joint venture, organization or other entity whether or not engaged in activities which the Corporation is authorized to carry on. (5) Anywhere in the world to apply for, purchase or in any manner to acquire; to hold, own, work, develop, use and operate; to sell or in any manner dispose of; to grant or license other rights in respect of; and in any manner deal with any and all patents, copyrights, licenses, trade-marks, trade names, rights, processes, inventions, know-how, trade secrets, formulas and the like. (6) To acquire in any manner all or any part of the good will, rights, property, business and other 1 2 assets of any person, corporation, partnership, joint venture, organization or other entity, to assume or undertake in connection therewith all or any part of the liabilities or obligations thereof, and to hold, utilize, enjoy and in any manner dispose of the whole or any part of the rights, property, business and other assets so acquired. (7) To acquire by purchase, subscription or in any other manner, take, receive, hold, own, guarantee, use, employ, sell, assign, transfer, exchange, pledge, mortgage, lease, dispose of and otherwise deal in and with, any and all shares, warrants, options, bonds, debentures, notes, mortgages, evidences of indebtedness or any other interests or instruments commonly known as securities, issued or created by any person, corporation, partnership, joint venture, organization or other entity, public or private, wherever in the world or however formed or resident, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof. (8) To aid in any manner any person, corporation, partnership, joint venture, organization or other entity of which any shares, warrants, options, bonds, debentures, notes, mortgages or other securities or obligations are held directly or indirectly by or for the Corporation, in which the Corporation is a partner, joint venturer, promoter, member, associate or other participant or in which or in the welfare of which the Corporation shall have any interest, and to do any and all other acts or things designed to protect, preserve, improve and enhance the value of any such property or interest, or any other property of the Corporation. (9) To guarantee the payment of dividends or other distributions upon any shares of stock or shares in, or the performance of any contract by, any shareholder of the Corporation or any other person, corporation, partnership, joint venture, organization or other entity in which or in the welfare of which the Corporation has an interest, or in return for benefits to or for assets given to the Corporation, and to endorse or otherwise guarantee the payment of the principal of and the prepayment charge, if any, and interest on any bonds, debentures, notes or other evidences of indebtedness created or issued by any such shareholder or other person, corporation, partnership, joint venture, organization or other entity. (10) To engage in any commercial, financial, mercantile, industrial, manufacturing, marine, exploration, mining, agricultural, research, licensing, servicing, or agency business not prohibited by law, and any, some or all of the foregoing. (11) To cause to be organized under the laws of the United States of America or of any state, commonwealth, territory, dependency or possession thereof, or of any foreign country or of any political subdivision, territory, dependency, possession or municipality thereof, one or more persons, corporations, partnerships, joint venturers, organizations, or other entities and to cause the same to be dissolved, wound up, liquidated, merged or consolidated, and to create, purchase or otherwise acquire (in whole or in part), own, and in any manner sell, transfer or otherwise dispose of businesses, corporations, enterprises and other entities, and to act as a parent company or holding company in relation to such entities. (12) To carry out all or any part of the foregoing purposes and to do all and everything necessary, suitable or proper for the accomplishment of any of the purposes, the attainment of any of the objects or the furtherance of any of the powers hereinabove set forth as principal, partner, joint venturer, factor, agent, contractor or otherwise, either alone or through or in conjunction with any person, corporation, partnership, joint venture, organization or other entity, whether as principal, partner, joint venturer, factor, agent, contractor or otherwise, and, in carrying on its business and for the purpose of attaining or furthering any of its objects and purposes, to make and perform any contracts and to do any and all acts and things, and to exercise any powers suitable, convenient or proper for the accomplishment of any of the objects and purposes herein enumerated or incidental to the powers herein specified, or which at any 2 3 time may appear conducive to or expedient for the accomplishment of any of such objects and purposes. (13) To carry out all or any part of the foregoing purposes anywhere in the world, and to maintain offices, branches and agencies anywhere in the world. The purposes and powers specified in the foregoing paragraphs shall, except where otherwise expressed, be in no ways limited or restricted by reference to, or inference from, the terms of any other paragraph of this or any other Article of these Articles of Incorporation, but the purposes and powers specified in each of the foregoing paragraphs of this Article shall be regarded as independent, and construed as powers as well as objects and purposes. The Corporation shall be authorized to exercise and enjoy all of the powers, rights and privileges granted to, or conferred upon, corporations of a similar character by the General Laws of the State of Maryland now or hereafter in force, and the enumeration herein of any specific purposes or powers shall not be held to limit or restrict in any manner the exercise by the Corporation of any powers, rights or privileges so granted or conferred and shall be in addition to the general powers of corporations under the General Laws of the State of Maryland. THIRD: The post office address of the principal office of the Corporation in this State is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The name of the resident agent of the Corporation in this State is The Corporation Trust Incorporated, a corporation of this State, and the post office address of the resident agent is 32 South Street, Baltimore, Maryland 21202. FOURTH: The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 180,000,000, of which, subject to the power of the Board of Directors to classify and reclassify unissued shares of Common Stock as provided in the next paragraph, (i) 30,000,000 shares of the par value of $0.0001 each are to be of the class designated "Voting Stock", and (ii) 150,000,000 shares of the par value of $1.00 each are to be of the class designated "Common Stock". The aggregate par value of all shares of all classes is to be $150,003,000. The Board of Directors may classify or reclassify any unissued shares of Common Stock from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of such shares of stock. Subject to the foregoing, the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions or redemption of the classes of stock of the Corporation are as follows: (1) The holders of Voting Stock shall not be entitled to any dividends whatsoever, whether payable in cash, property or stock; provided, however, that the holders of Voting Stock shall be entitled, to the exclusion of the holders of any other class or series of capital stock of the Corporation (including, without limitation, Common Stock), to such stock dividends, payable solely in shares of Voting Stock, as from time to time may be declared by the Board of Directors, acting in its sole discretion. (2) Subject to the rights of the holders of any class or series of capital stock having a preference over the Common Stock as to dividends, the holders of Common Stock shall be entitled, to the exclusion of the holders of any other class or series of capital stock of the Corporation, to receive such dividends as from time to time may be declared by the Board of Directors. (3) The Corporation may, at its election expressed by resolution of the Board of Directors, at any time redeem all, or from time to time any part, of the Voting Stock, upon not less than five business days' prior notice to the holders of record of Voting Stock to be redeemed, given in such manner as may be prescribed by resolution or resolutions of the Board of Directors, at a redemption price equal to $0.0001, 3 4 for every share redeemed; provided, however, that any fraction of a cent payable to any holder of Voting Stock on account of any redemption of such shares shall be rounded upward to the nearest whole cent. If fewer than all the outstanding shares of Voting Stock are to be redeemed, the redemption may be made in such manner as may be prescribed by resolution of the Board of Directors. On and after the date fixed in any such notice of redemption as the date of redemption (unless default shall be made by the Corporation in providing moneys for the payment of the redemption price pursuant to such notice) all rights of the holders of the Voting Stock to be redeemed as stockholders of the Corporation, except the right to receive the redemption price as hereinafter provided, shall cease and terminate. At any time on or after the date fixed as aforesaid for such redemption, the respective holders of record of the Voting Stock to be redeemed shall be entitled to receive the redemption price upon actual delivery to the Corporation of certificates for the shares to be redeemed, such certificates, if required, to be properly stamped for transfer and duly indorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly executed in blank. Voting Stock redeemed pursuant to the provisions of this paragraph shall, upon such redemption, be retired automatically without further act or deed of the Corporation, and such shares shall not be reissued by the Corporation. (4) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary: (a) The holders of shares of Voting Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, before any payment shall be made to the holders of any other class or series of capital stock of the Corporation (including, without limitation, Common Stock), an amount equal to $0.0001 for every share of their holdings of Voting Stock; provided, however that any fraction of a cent payable to any holder of Voting Stock on account of any such liquidation, dissolution or winding up shall be rounded upward to the nearest whole cent. If, upon any liquidation, dissolution or winding up of the Corporation the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Voting Stock the full amounts to which they respectively shall be entitled, the holders of shares of Voting Stock shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares of Voting Stock held by them upon such distribution if all amounts payable on or with respect to Voting Stock were paid in full. (b) After payment shall have been made to all of the holders of all other classes or series of the Corporation's capital stock (including, without limitation, Voting Stock) of the full amount to which they respectively shall be entitled pursuant to the Corporation's charter, the holders of shares of Common Stock then outstanding shall be entitled, to the exclusion of the holders of all other classes or series of the Corporation's capital stock (including without limitation, Voting Stock), to share, ratably according to the number of shares of Common Stock held by each such holder, in all remaining assets of the Corporation available for distribution to its stockholders. Provided, however, that neither the merger or consolidation of the Corporation into or with another corporation nor the merger or consolidation of any other corporation into or with the Corporation, nor the sale, transfer or lease of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation. (5) No holder of shares of stock of any class or any other securities, whether now or hereafter authorized, shall be entitled as a matter of right to subscribe for or purchase or receive any stock of any class or any securities convertible into shares of stock of any class, or to any right of subscription to, or to any warrant or option for the purchase of, any thereof other than such (if any) as the Board of Directors, in its discretion, may determine from time to time; and any stock or other securities which the Board of 4 5 Directors may determine to offer for subscription may, as the Board of Directors in its sole discretion shall determine, be offered to the holders of any class, series or type of stock or other securities at the time outstanding to the exclusion of the holders of any or all other classes, series or types of stock or other securities at the time outstanding. (6) Subject to the provisions of the Corporation's charter and except as otherwise provided by law, the shares of stock of the Corporation, regardless of class, may be issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine. (7) Subject to the provisions of any applicable law and the Corporation's charter, or of the By-Laws of the Corporation as from time to time amended, with respect to the closing of the transfer books or the fixing of a record date for the determination of stockholders entitled to vote, and except as otherwise provided by law or by the Corporation's charter, the holder of the outstanding shares of Voting Stock, Common Stock and any other class or series of capital stock of the Corporation having general voting rights shall vote as one class for the election of directors and for all other purposes, each holder of record of such shares being entitled to one vote for each such share of capital stock standing in his name on the books of the Corporation FIFTH: The Board of Directors is hereby empowered to authorize the issuance from time to time of shares of the Corporation's stock of any class, whether now or hereafter authorized, and securities convertible into shares of its stock of any class or classes, whether now or hereafter authorized, and securities convertible into shares of its stock of any class or classes, whether now or hereafter authorized, for such considerations as the Board of Directors may deem advisable and without any action by the stockholders. SIXTH: The number of directors of the Corporation shall be sixteen, which number may be increased or decreased pursuant to the By-Laws of the Corporation but shall never be less than three. The names of the directors who shall act until the next annual meeting or until their successors are duly chosen and qualify are: James G. Affleck Alonzo L. McDonald Joe M. Rodgers Bertrand P. Collomb David E. Mitchell Michel Rose Marshall A. Cohen Robert W. Murdoch Ronald D. Southern Bernard L. Kasriel Bertin F. Nadeau Edward H. Tuck Jacques Lefevre John D. Redfern H. Richard Whittall SEVENTH: The By-Laws of the Corporation may be made, altered, amended or repealed by the Board of Directors. The books of the Corporation (subject to the provisions of the laws of the State of Maryland) may be kept outside of the State of Maryland at such places as from time to time may be designated by the Board of Directors. EIGHTH: The Corporation shall indemnify its directors and officers to the full extent permitted by the General Laws of the State of Maryland now or hereafter in force, including the advance of related expenses, upon a determination by the Board of Directors or independent legal counsel (who may be regular counsel for the Corporation) made in accordance with applicable statutory standards; and, upon authorization by the Board of Directors, may indemnify other employees or agents to the same extent. To the fullest extent permitted by Maryland statutory or decisional law, as amended or interpreted, no director or officer of this Corporation shall be personally liable to the Corporation or its stockholders for money damages. No amendment of the charter of the Corporation or repeal of any of its provisions shall limit or eliminate the benefits provided to directors and officers under this provision with respect to any act or omission which occurred prior to such amendment or repeal. NINTH: Notwithstanding any provision of law requiring any action to be taken or authorized by the 5 6 affirmative vote of the holders of a majority or other greater designated proportion of the shares or of the shares of each class entitled to vote thereon, such action shall be effective and valid if taken or authorized by the affirmative vote of the holders of a majority of the total number of shares outstanding and entitled to vote thereon, except as otherwise provided in these Articles of Incorporation. TENTH: The Corporation reserves the right from time to time to amend, alter, change or repeal any provision contained in the Corporation's charter, including any provision setting forth the terms or rights of any of its capital stock, in the manner now or hereafter authorized by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ELEVENTH: The duration of the Corporation shall be perpetual. 6 EX-3.2 3 w47043ex3-2.txt EX-3.2 BY-LAWS OF LARFARGE CORPORATION 1 EXHIBIT 3.2 BY-LAWS OF LAFARGE CORPORATION As amended October 15, 1999 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 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 1 2 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 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 2 3 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. 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 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. 3 4 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 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. 4 5 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, 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 sixteen (16). 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 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 5 6 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 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 6 7 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 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 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 7 8 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. 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 8 9 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 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 calling the meeting is of the opinion that the matters to be considered thereat involve an emergency, notice of the meeting shall be 9 10 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 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. 10 11 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, 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. 11 12 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 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 12 13 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 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 reason that the Board of Directors may deem sufficient, the Board of 13 14 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, 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. 14 15 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 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, require the owner of 15 16 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 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, 16 17 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 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. 17 18 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. 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. 18 19 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 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 19 20 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. 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 20 21 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 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 21 22 be made (1) by the Board of Directors by a majority vote of 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 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. 22 23 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 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, 23 24 partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan against 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 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 24 25 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. 25 EX-10.7 4 w47043ex10-7.txt EX-10.7 OPTIONAL STOCK DIVIDEND PLAN 1999 1 EXHIBIT 10.7 LAFARGE CORPORATION OPTIONAL STOCK DIVIDEND PLAN SEPTEMBER 1999 2 TABLE OF CONTENTS
PAGE ---- PRINCIPAL FEATURES AND BENEFITS.................................................. 1 THE PLAN - DESCRIPTION, TERMS AND CONDITIONS..................................... 4 ELIGIBLE SHARES.......................................................... 4 PARTICIPATION............................................................ 4 ELIGIBLE STOCKHOLDERS.................................................... 4 ENROLLMENT............................................................... 5 VALUATION AND PRICE OF ADDITIONAL SHARES OF COMMON STOCK................. 6 CERTIFICATES FOR ADDITIONAL SHARES OF COMMON STOCK....................... 6 STATEMENTS OF ACCOUNT.................................................... 7 TERMINATION OF PARTICIPATION............................................. 8 STOCKHOLDER VOTING....................................................... 9 RIGHTS OFFERINGS, STOCK SPLITS AND STOCK DIVIDENDS....................... 9 RESPONSIBILITIES OF THE CORPORATION AND THE PLAN AGENT................... 10 RISK OF MARKET PRICE FLUCTUATIONS........................................ 10 AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION OF THE PLAN....................................................... 10 NOTICES.................................................................. 10 ADMINISTRATION FEES...................................................... 11 APPLICATION OF FUNDS..................................................... 11 PRINCIPAL STOCKHOLDER.................................................... 11 EFFECTIVE DATE........................................................... 11 TAX CONSIDERATION................................................................ 11 U.S. FEDERAL INCOME TAX CONSIDERATIONS................................... 12 CANADIAN INCOME TAX CONSIDERATIONS....................................... 13
3 THIS CIRCULAR DESCRIBES THE OPTION AVAILABLE TO HOLDERS OF SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE ("COMMON STOCK"), OF LAFARGE CORPORATION (THE "CORPORATION") OR OF SHARES OF ANY OTHER CLASS OR SERIES OF STOCK OF THE CORPORATION DESIGNATED BY THE BOARD OF DIRECTORS, TO RECEIVE PAYMENT OF THEIR DIVIDENDS ON SUCH SHARES IN THE FORM OF NEW SHARES OF COMMON STOCK ISSUED AS STOCK DIVIDENDS (THE "PLAN"). PRINCIPAL FEATURES AND BENEFITS AVAILABILITY. This Plan is available to registered holders of shares of Common Stock or shares of any other class or series of stock of the Corporation which have been determined from time to time to be eligible to participate in the Plan by the Board of Directors of the Corporation (collectively, the "Eligible Shares"). The Corporation will promptly notify the stockholders of any such additional class or series of stock which the Board of Directors has determined to be eligible to participate in the Plan. PARTICIPATION. Any holder of record of Eligible Shares may participate in the program at any time by signing an Authorization Form and returning it to EquiServe Trust Company, N.A. as the agent designated by the Corporation to administer the Plan (the "Plan Agent"). FRACTIONAL SHARES. The Plan allows fractions of shares of Common Stock to be credited to a Participant's account. NO BROKERAGE COMMISSIONS. Participants will pay no brokerage commissions. Administrative charges for the operation of the Plan by the Plan Agent will be paid by the Corporation. HOLDING OF NEW SHARES. The additional shares of Common Stock issued under the Plan will be held for Participants by the Plan Agent. Such shares will be registered in the name of the Plan Agent or its nominee. STATEMENTS OF ACCOUNT. Statements of account will be sent to all Participants by the Plan Agent following each dividend payment date. TERMINATION OF PARTICIPATION. Participation in the Plan can be terminated at any time upon written notice to the Plan Agent. TAX IMPLICATIONS. In general, dividends paid by the Corporation, whether in cash or stock, to United States citizens, residents and corporations will be subject to United States tax in the hands of the recipient at the ordinary income rates on the amount of cash or the full fair market value of the stock. 1 4 BEGINNING OF PARTICIPATION. Participation in the Plan becomes effective on the next declaration date for dividends declared on the Eligible Shares following receipt by the Plan Agent of a duly completed Authorization Form. Stockholders who wish to participate in the Plan with respect to the payment of a particular dividend must have their completed Authorization Forms in the hands of the Plan Agent in advance of such DIVIDEND DECLARATION DATE, which is expected to be approximately two weeks prior to the record date for payment of such dividend. EFFECT OF PARTICIPATION. A stockholder who chooses to participate in the Plan (a "Participant") elects thereby to receive new shares of Common Stock of the Corporation which will be issued by the Corporation as stock dividends in lieu of cash dividends on all the Eligible Shares of a class or series registered in the name of such stockholder (including shares of Common Stock previously acquired by such Participant pursuant to the Plan), less any applicable withholding tax. Shares of Common Stock issued as stock dividends under the Plan will be valued at 95% of the Average Market Price (as defined herein) for shares of Common Stock. In general, dividends paid by the Corporation, whether in cash or stock, to a United States citizen or resident will not be subject to backup tax withholding unless such person fails to certify as to no loss of exemption from backup withholding or otherwise fails to comply with the backup withholding rules. United States corporations are not subject to backup withholding. Dividends paid, whether in cash or stock, to United States citizens, residents or corporations generally will be subject to tax at ordinary income rates in an amount equal, in the case of individuals, to the amount of the cash or the full fair market value of the stock on the date of distribution, and in the case of corporations, in a net amount equal to 30% of the cash or such value. In addition, a Participant will recognize gain or loss when shares received as stock dividends are sold or exchanged by the Participant after receipt of certificates for such shares or withdrawal from or termination of the Plan. The amount of such gain or loss will equal the difference between the amount which the Participant receives for the shares and the tax basis therefor. Such gain or loss will be capital gain or loss, provided the Participant holds such shares as a capital asset on the date of sale or exchange. Capital gains recognized after 1987 will be taxed at ordinary income rates. In general, dividends paid by the Corporation, whether in cash or stock, to persons other than United States citizens, residents and corporation will be subject to withholding of United States tax on the amount of cash or the full fair market value of the stock. Stock dividends received by Canadian resident individuals generally will be taxed as dividends by Canada. The amount to be included in income is limited, however, to the increase in the paid-up capital of the Corporation resulting from the issue of the shares as a stock dividend. Stock dividends received by corporations and mutual fund trusts generally will not be taxed as dividends by Canada. The United States withholding tax 2 5 paid will also be regarded as a taxable cash dividend, but the tax may be creditable against Canadian taxes within prescribed limitations or deductible from income. Cash dividends received from the Corporation by Canadian residents who do not elect to participate in the Plan will generally be fully taxable in Canada. United States withholding tax on the dividends will be eligible for foreign tax credits or deductions where applicable. The foregoing constitutes only a summary of the Plan. The Plan, its terms and conditions and the tax considerations applicable thereto are described in the following pages of this Circular and you are advised to read them carefully before completing an authorization form. Questions regarding the Plan can be addressed to the Plan Agent. If any interpretation of the Plan is required, the text of the section entitled "The Plan - Description, Terms and Conditions" shall govern. 3 6 THE PLAN DESCRIPTION, TERMS AND CONDITIONS ELIGIBLE SHARES Shares of Common Stock, par value $1.00 per share (the "Common Stock"), or shares of any other class or series of stock of Lafarge Corporation (the "Corporation") which have been determined from time to time to be eligible to participate in the Optional Stock Dividend Plan (the "Plan") by the Board of Directors of the Corporation (collectively, the "Eligible Shares") are eligible to participate in the Plan. The Corporation will promptly notify the stockholders of any such additional class or series of stock which the Board of Directors has determined to be eligible to participate in the Plan. PARTICIPATION Except as provided under "Eligible Stockholders" below, a registered holder of Eligible Shares (a "Stockholder") may participate in the Plan with respect to any class or series of Eligible Shares that he or she holds. Participation by a Stockholder in the Plan with respect to a particular class or series of Eligible Shares may only be made (as indicated on the enclosed Authorization Form) in respect of all, but not part of, the Eligible Shares of that class or series held by such Stockholder. ELIGIBLE STOCKHOLDERS Stockholders who are residents of Canada or the United States are eligible to participate in the Plan. A Stockholder residing outside Canada and the United States is also eligible to participate in the Plan unless the Corporation or EquiServe Trust Company, N.A., as the agent designated by the Corporation to administer the Plan (the Plan Agent"), has reason to believe that such participation is not, at the time, permitted under the laws of the jurisdiction in which such Stockholder resides. Beneficial owners of Eligible Shares whose shares are not registered in their own names may participate in the Plan by having their Eligible Shares of the class or series which they desire to enroll in the Plan transferred into their own names, unless those shares are held in a specific segregated registered account, such as a numbered or nominee account with a bank, trust company or broker, in which case Eligible Shares held in such account may be enrolled in the Plan by directing such bank, trust company or broker to complete and return the Authorization Form on behalf of the beneficial owners thereof. 4 7 Stockholders who intend to enroll in the Plan are strongly urged to ensure that all of their Eligible Shares (of the same or different class or series of shares) which they intend to enroll in the Plan are registered in exactly the same name and address. An Authorization Form will not be accepted from or on behalf of any Stockholder who the Corporation or the Plan Agent has reason to believe is not eligible to participate in the Plan. ENROLLMENT A STOCKHOLDER WHO WISHES TO CONTINUE RECEIVING DIVIDENDS ON HIS ELIGIBLE SHARES IN CASH IS NOT REQUIRED TO COMPLETE OR FILE ANY DOCUMENTS OR TAKE ANY ACTION FOR THAT PURPOSE. To join the Plan, an eligible Stockholder must complete, sign and return to the Plan Agent the enclosed Authorization Form if he or she elects to enroll his or her Eligible Shares in the Plan. An addressed envelope is enclosed for such purpose. Additional Authorization Forms are available from the Plan Agent upon request. Once a Stockholder has enrolled in the Plan (a "Participant"), participation continues in respect of his or her Eligible Shares enrolled in the Plan (the "Participating Eligible Shares") until terminated by the Participant or by the Corporation in accordance with the terms of the Plan. Stockholders who intend to enroll all of their Eligible Shares of any class or series in the Plan and who have received more than one Authorization Form for that class or series as a result of such shares being registered in different names or addresses must return all of such Authorization Forms. Stockholders are reminded that they may consolidate all their different accounts by so advising the Plan Agent, and it is recommended that they do so. By completing an Authorization Form, with respect to each class or series of Eligible Shares covered thereby, a Participant thereby authorizes and directs the Corporation to pay dividends on all, but not part, of the Eligible Shares of that class or series registered in his or her name by the issuance of additional shares of Common Stock (after deduction of any applicable withholding tax). Such shares will be delivered to the Plan Agent on behalf of the Participants, and the Plan Agent will credit the account of each Participant with the number of such shares to which such Participant is entitled. Shares of Common Stock issued under the Plan will be registered in the name of the Plan Agent or its nominee. Subsequent dividends payable on additional shares of Common Stock acquired by a Participant pursuant to his or her participation in the Plan will be payable in the form of additional shares of Common Stock issued as stock dividends for the account of the Participant. 5 8 A Stockholder shall become a Participant in the Plan in respect of a class or series of Eligible Shares effective as of the date of the next declaration of dividends (the "Declaration Date") on such class or series of Eligible Shares, following receipt by the Plan Agent of a duly completed Authorization Form for that class or series. A Stockholder who wishes to participate in the Plan with respect to a particular dividend on a class or series of Eligible Shares must have his or her Authorization Form for that class or series in the hands of the Plan Agent in advance of the relevant Declaration Date for that class or series of Eligible Shares. If an Authorization Form is received by the Plan Agent from a Stockholder on or after a particular Declaration Date, that dividend will be paid to the Participant in the manner specified by the Board of Directors of the Corporation for Stockholders not participating in the Plan, and participation in the Plan will commence with the following Declaration Date for that class or series of Eligible Shares. Dividend payment dates for the Common Stock are expected to be the first business day of March, June, September and December. Declaration Dates may vary but are approximately four weeks before the corresponding dividend payment dates. VALUATION AND PRICE OF ADDITIONAL SHARES OF COMMON STOCK On each dividend payment date for Participating Eligible Shares, the Corporation will issue and deliver to the Plan Agent on behalf of Participants, after deduction of any applicable withholding tax, the number of shares of Common Stock distributed as stock dividends, computed in the manner described below. Such additional shares of Common Stock will, in turn, be entitled to the benefit of subsequence stock dividends under the Plan. Each Participant's account with the Plan Agent will be credited with the numbers of shares of Common Stock including fractions thereof computed to four decimal places, which is equal to the aggregate of cash dividends (after deduction of any applicable withholding tax) which would otherwise be payable on such Participant's Participating Eligible Shares and on all shares of Common Stock held on behalf of such Participant by the Plan Agent under the Plan divided by 95% of the applicable Average Market Price (as hereinafter defined). The average market price (the "Average Market Price") on any dividend payment date will be (a) in respect of dividends on participating shares of Common Stock, the average of the closing prices of a round lot of Common Stock traced on the principal securities market on which the Common Stock is traded (as determined by the Board of Directors of the Corporation) on the last five trading days on which at least a round lot of Common Stock was traded, ending on the business day immediately preceding the applicable dividend payment date for the Common Stock, or (b) in respect of dividends on Participating Eligible Shares of a class or series other than Common Stock, the average of the closing prices of a round lot of Common Stock traced on the principal 6 9 securities market on which the Common Stock is traded (as determined by the Board of Directors of the Corporation) on the last five trading days on which at least a round lot of Common Stock was traded, ending on the business day immediately preceding the most recent dividend payment date for the Common Stock, unless such dividend payment date precedes by more than five days the dividend payment date for such class or series of Eligible Shares, in which case the aforementioned calculation shall be made with reference to the period ending on the dividend payment date for such class or series of Eligible Shares. CERTIFICATES FOR ADDITIONAL SHARES OF COMMON STOCK Certificates for shares of Common Stock issued under the Plan will not initially be issued to Participants but will be registered in the name of the Plan Agent or its nominee. The number of shares of Common Stock issued under the Plan for each Participant will be credited to a Plan account established for that Participant and shown on his or her statement of account. A Participant may, without terminating his or her participation in the Plan, upon written request to the Plan Agent, have certificates registered in such Participant's name and delivered to such Participant for any number of whole shares of Common Stock held for such Participant's account under the Plan. Such requests must be mailed to EquiServe Shareholder Services, P.O. Box 8218, Boston, MA 02266-8218. Normally such certificates will be issued to a Participant within seven days following receipt by the Plan Agent of such Participant's account under the Plan, and the Participant will remain enrolled in the Plan. Accounts under the Plan will be maintained in the names in which stock certificates of the Participants were registered at the time they entered the Plan. As a result, stock certificates for whole shares of Common Stock will be similarly registered when issued. Shares of Common Stock held by the Plan Agent under the Plan may not be pledged, sold or otherwise disposed of by a Participant. A Participant who wishes to pledge, sell or otherwise dispose of such shares must request that certificates for such shares be issued to him or her. A certificate will not be issued for a fraction of a share. STATEMENTS OF ACCOUNT The Plan Agent will maintain an account for each Participant. A statement of account will be mailed to each Participant by the Plan Agent as soon as practicable after each dividend payment date for Participating Eligible Shares. 7 10 Each such statement will indicate, among other things, (a) the number of additional whole shares of Common Stock and any fraction thereof to which such Participant became entitle by reason of such dividend payment, and (b) as of a date following such dividend payment date, the total number of whole shares of Common Stock standing to the credit of such Participant in the Plan and any fraction of a share of Common Stock held for the account of such Participant by the Plan Agent. These statements are a Participant's continuing permanent record of the value or price of the additional shares of Common Stock acquired under the Plan and should be retained for tax purposes. TERMINATION OF PARTICIPATION Participation in the Plan may be terminated in respect of any class or series of Participating Eligible Shares by a Participant by written notice to the Plan Agent at the address specified under the heading "Certificates for Additional Shares of Common Stock." Termination of participation will become effective on the declaration date for any dividend declared on such class or series of Participating Eligible Shares immediately following receipt by the Plan Agent of the notice of termination. If such notice is received by the Plan Agent on or after the declaration date for any dividend declared on such class or series of Participating Eligible Shares, termination will not become effective until after the payment of such dividend. After termination, all subsequent dividends on such class or series of Participating Eligible Shares will be paid to the Stockholder in cash or in such other manner as may be specified by the Board of Directors of the Corporation for Stockholders not participating in the Plan. Participants are reminded that if the Participating Eligible Shares with respect to which they desire to terminate participation in the Plan are registered under different, or partially different, names and addresses, they must ensure that they advise the Plan Agent as to each account which they desire to terminate. Upon termination of participation in the Plan by a Participant of any class or series of Participating Eligible Shares held by a Participant, such Participant will be sent a stock certificate registered in his or her name representing the number of whole shares of Common Stock held for the account of such Participant, together with a cash payment for any fraction of a share of Common Stock credited to such Participant's account based on the Average Market Price prevailing on the last preceding dividend payment date for any class or series of Eligible Shares. Participation in the Plan by any Participant will automatically terminate in respect of all classes or series of Participating Eligible Shares upon receipt by the Plan Agent of a written notice satisfactory to the Plan Agent of the death of such Participant (in the case of a natural person) or dissolution of such Participant (in the case of a corporation or other business entity). In the event of such termination, and upon receipt by the Plan 8 11 Agent of documentation satisfactory to it, the legal representative of or successor in interest to such Participant will be sent a stock certificate registered in his or her name representing the number of whole shares of Common Stock held for the account of such Participant together with a cash payment for any fraction of a share of Common Stock credited to such Participant's account based on the Average Market Price prevailing on the last preceding dividend payment date for any class or series of Eligible Shares. If a Participant disposes of all the shares of any class or series of Eligible Shares registered in his or her name, the Participant shall direct the disposition of the shares of Common Stock held by the Plan Agent for his or her account under the Plan. Until the Plan Agent is otherwise notified, dividends will continue to be paid on such shares by the issuance of additional shares of Common Stock to the Plan Agent for the account of such Participant. STOCKHOLDER VOTING Whole shares of Common Stock held for a Participant's account under the Plan on the record date for a vote of Stockholders will be voted in the same manner as the Participant's Eligible Shares of record are voted either by proxy or by the Participant in person. Participants who cease to be Stockholders of record will continue to receive the same information as Stockholders of record so that shares held under the Plan may be voted in accordance with their instructions. Shares for which instructions are not received will not be voted. Fractional shares of Common Stock credited to a Participant's account will have voting rights. RIGHTS OFFERINGS, STOCK SPLITS AND STOCK DIVIDENDS In the event that the Corporation makes available to its holders of Common Stock rights to subscribe for additional shares of Common Stock or other securities, Participants will be sent rights certificates for the aggregate number of shares of Common Stock registered in the name of such Participant and the additional whole shares of Common Stock standing to the credit of such Participant in the Plan. No such rights will be made available in respect of fractions of such shares held for the account of such Participant by the Plan Agent. Any shares of Common Stock distributed as a result of a stock dividend (other than a stock dividend paid to Participants in the Plan) on, or a stock split of, shares held by the Plan Agent for the account of a Participant under the Plan will be retained by the Plan Agent and credited proportionately to the accounts of all Participants in the Plan. Stock certificates for any shares of Common Stock resulting from a stock dividend (except as aforesaid) on, or a stock split of, shares of Common Stock held of record by a 9 12 Participant will be mailed directly to such Participant in the same manner as to Stockholders not participating in the Plan. RESPONSIBILITIES OF THE CORPORATION AND THE PLAN AGENT Neither the Corporation nor the Plan Agent shall be liable for any act done in good faith or for any good faith omission to act nor shall the Corporation or the Plan Agent have any duties, responsibilities or liabilities except such as are expressly set forth in the Plan. RISK OF MARKET PRICE FLUCTUATIONS A Participant's investment in shares of Common Stock acquired under the Plan is recognized as being no different from an investment in shares of Common Stock directly held. Accordingly, neither the Corporation nor the Plan Agent can assure a profit or protect Participants against a loss on shares acquired under the Plan and each Participant shall bear the risk of loss and enjoy the benefits of any gain from market price with respect to shares of Common Stock acquired under the Plan. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION OF THE PLAN The Corporation reserves the right to amend, modify, suspend or terminate the Plan or participation therein, in whole or in part, or in regard to any or all Participants, at any time, provided such action has no retroactive effect that would prejudice the interests of Participants. All Participants will be sent written notice of any such amendment, modification, suspension or termination. If the Plan or participation therein is terminated in whole or in part by the Corporation, a certificate for the additional whole shares of Common Stock standing to the credit of each affected Participant will be issued together with a cash payment for any fraction of a share of Common Stock based on the Average Market Price prevailing on the last preceding dividend payment date for any class or series of Eligible Shares. In the event of suspension of the Plan by the Corporation, dividends payable on Participating Eligible Shares after the effective date of suspension will be paid to the Participants in cash or in such other manner as may be specified by the Board of Directors of the Corporation. NOTICES All communications with or notices required to be given to the Plan Agent should be addressed to: EquiServe Shareholder Services Dividend Reinvest Section P.O. Box 8218 Boston, MA 02266-8218 10 13 Additional Authorization Forms may be requested and inquiries made about the Plan, by writing to the mailing address shown above or by calling the Plan Agent at 1-800-633-4236. All communications with or notices required to be given to a Participant will be sent to the Participant at the most recent address appearing on the list of Stockholders maintained by the transfer agent of the Corporation or at a more recent address as furnished in writing by the Participant to the Plan Agent in the manner specified above. ADMINISTRATION FEES Participants will pay no brokerage commissions in connection with shares of Common Stock issued under the Plan, and all administrative charges for the operation of the Plan by the Plan Agent will be paid by the Corporation. APPLICATION OF FUNDS The funds which otherwise would have been paid out by the Corporation as cash dividends and which are retained by the Corporation as a result of the issuance of additional shares of Common Stock under the Plan will form part of the Corporation's general funds and will provide additional working capital for the Corporation. PRINCIPAL STOCKHOLDER Lafarge S.A., which owned directly or indirectly 37,695,406 shares of Common Stock (approximately 55.3% of the outstanding Common Stock) of the Corporation as of June 30, 1999, is currently a participant in the Plan in respect of all of the shares of Common Stock that it holds in several of its affiliates. Under the provisions of the Plan, Lafarge S.A., as any other Participant, may reinstate its participation thereunder at any time in respect of any class or series of Participating Eligible Shares. EFFECTIVE DATE The effective date of the Plan is August 1, 1983. TAX CONSIDERATION The following is a summary of the income tax considerations relating to participation in the Plan. These comments are based on the Canadian (federal and Quebec) and United States federal tax legislation currently in effect. 11 14 Any Stockholder who wishes to participate in the Plan should consult his or her tax adviser as to the tax consequences in his or her country of residence. U.S. FEDERAL INCOME TAX CONSIDERATIONS Dividends paid, whether in cash or stock, to United States citizens, residents or corporations generally will be subject to tax at ordinary income rates in an amount equal, in the case of individuals, to the amount of the cash or the full fair market value of the stock on the date of distribution, and in the case of corporations, in a net amount equal to 30% of the cash or such value. The basis of shares distributed as stock dividends will equal their fair market value on the date of distribution, and their holding period will begin on the day following the date of distribution. A Participant will not realize taxable income when the Participant receives certificates for whole shares credited to the Participant's account, either upon the Participant's request for certain of those shares or upon withdrawal from or termination of the Plan. A Participant will recognize gain or loss when shares are sold or exchanged by the Participant after receipt of certificates for such shares or upon withdrawal from or termination of the Plan. A Participant will recognize gain or loss when shares are sold or exchanged by the Participant after receipt of certificates for such shares or withdrawal from or termination of the Plan. In the case of a fractional share, a Participant will recognize gain or loss when the Participant receives a cash adjustment for a fraction of a share credited to the Participant's account upon withdrawal from or termination of the Plan. The amount of such gain or loss will equal the difference between the amount which the Participant receives for the shares or fraction of a share and the tax basis therefor. Such gain or loss will be capital gain or loss, provided the Participant holds such shares as a capital asset on the date of the sale or exchange. Capital gains recognized after 1987 will be taxed at ordinary income rates. Dividends paid, whether in cash or stock, to a United States citizen or resident may be subject to United States backup withholding at the rate of 31% of the cash or the full fair market value of the stock on the date of distribution unless such person (a) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact; or (b) provides a taxpayer identification number (social security number for individuals), certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. Dividends paid, whether in cash or stock, to Canadian resident individuals who are not United States citizens or residents and as to whom the dividends are not effectively connected with a United States trade or business and to Canadian corporations as to which the dividends are not so effectively connected, generally will be subject to United States withholding tax at the rate of 15% of the cash or the full fair market value of the stock on the date of distribution under the applicable income tax treaty. 12 15 Dividends paid, whether in cash or stock, to persons resident in other countries who are not United States citizens or residents and as to whom the dividends are not effectively connected with a United States trade or business generally will be subject to United States withholding tax at the rate of 30% of the cash or the full fair market value of the stock on the date of distribution or, if an income tax treaty is in effect between the country of the recipient and the United States, at the lower treaty rate. In measuring the amount of the dividend for United States tax purposes, the shares will be valued at their full fair market value, not at 95% thereof. CANADIAN INCOME TAX CONSIDERATIONS Canadian resident individuals receiving a stock dividend from the Corporation will generally be regarded as receiving a dividend includable in income for Canadian federal or Quebec income tax purposes in an amount equal to the increase in the paid-up capital of the Corporation by virtue of the payment of the stock dividend, which amount will be $1.00 per share so issued. The cost of the shares received will be the same amount. Stock dividends received by corporations and mutual fund trusts will not be taxed as dividends and the cost of the shares received will be nil. After receipt of the stock dividend, the average cost of all the shares of the class or series held by the Participant may therefore be reduced for tax purposes. It is considered that no taxable benefit will arise as a result of the granting of a right to receive stock dividends calculated at 95% of the Average Market Price, or as a result of the exercise of such a right. The United States withholding tax of 15% deducted by the Corporation will be regarded for Canadian federal and Quebec income tax purposes as a cash dividend received by the Participant and must be included in the Participant's income. The United States tax withheld may be available to the Participant as a credit against Canadian taxes otherwise payable within prescribed limitations or as a deduction in computing the Participant's income. Special rules are applicable whether a corporation owns, directly or indirectly, not less than 10% of any class of shares in the Corporation. Cash dividends received from the Corporation by Canadian residents who do not elect to participate in the Plan will generally be fully taxable in Canada. United States withholding tax on the dividends will be eligible for foreign tax credits or deductions where applicable. September 1999 13 EX-10.27 5 w47043ex10-27.txt EX-10.27 1 EXHIBIT 10.27 NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN CASH OR PHANTOM STOCK INVESTMENT OPTIONS Each year, directors may elect to defer payment of their fees for that year until termination of their service as a director. Any such election must be made prior to that year's annual stockholder meeting and must specify one of two payment options--lump sum or up to ten annual installments. Effective for May 2001, directors may elect either to have their deferred fees bear interest computed quarterly at the average prime rate for the quarter or to invest their deferred fees (in increments from 10% to 100%) in "phantom" shares of the Company's common stock. Investments in phantom shares will be valued at the NYSE closing price of the Company's common stock on the date non-deferred fees would be payable. Dividends will be credited to deferred phantom shares and will be reinvested in additional phantom shares at the NYSE closing price on the dividend payment date. Directors may change existing deferred compensation investments (from cash to phantom shares or vice versa) each quarter during prescribed window periods. Phantom shares will have no voting rights and may not be sold or transferred. Distributions from phantom shares will be valued at the NYSE closing price of the Company's common stock on the last trading day before the payment date. PHANTOM STOCK INVESTMENT RULES - - Directors may elect to invest deferred fees in phantom stock in increments of 10% up to 100%. The initial election for investing future fees in phantom stock must be made at the time of the annual deferral election. - - Investments in phantom shares will be valued at the Lafarge Corporation closing price on the New York Stock Exchange on the date that non-deferred fees would be payable. If Lafarge stock is not traded on that date, the shares will be valued at the closing price of the most recent prior trading day. - - Dividends will be credited to the deferred phantom shares on the regular dividend payment dates and will be reinvested in additional phantom shares at the NYSE closing price on the dividend payment date. - - Directors may change existing deferred compensation investments into phantom shares from cash or out of phantom shares to cash only during the 10 business days beginning on the 3rd business day after Lafarge Corporation's public release of quarterly results by providing a written request to the Corporate Secretary. Investments of current deferred balances into or out of phantom shares will be valued at the NYSE closing price on the date that the Corporate Secretary receives the transfer request. 1 2 - - Former directors may continue to change investments of their unpaid deferred compensation balances under the same process. After the former director ceases to be an "Affiliated Person," they may change their investment options in any month. Such investment changes will be effective on the first day of the month following the month in which the Corporate Secretary receives written notice of the investment change. Phantom shares so changed will be valued at the NYSE closing price of the stock on the last trading day of the month in which the notice is received. - - Phantom shares have no voting rights and may not be sold or transferred. The number of phantom shares held in a director's deferred compensation account on December 31 of each year will be included in required disclosures of their holdings. - - In the event that Lafarge Corporation is merged or acquired, or due to any other transaction, the common stock of the corporation is no longer publicly traded, any deferred compensation investments held in phantom shares at the time of such transaction will be converted to cash value at the final trading price on the last day that the stock is publicly traded. DISTRIBUTIONS OF DEFERRED COMPENSATION - - Distributions will be made in accordance with the election made by the director, either as a lump sum or in up to ten annual installments. The initial distribution will take place on January 31 of the year following the calendar year in which the director's service is terminated. If January 31 is not a business day, the distribution will be on the last business day before January 31. - - Directors may change their distribution election up until one year prior to the date of their termination of board service, by notifying the Corporate Secretary in writing. At the date of termination, the most recent distribution election that has been on file with the Corporate Secretary for at least one full year will be binding. - - All distributions of deferred directors' compensation will be in cash. Distributions from accounts invested in phantom shares will be valued at the NYSE closing price of the stock on the last trading day before the payment dated. - - If a director's deferred compensation account is invested in both cash and phantom shares on the date of an annual installment distribution, the distribution will be subtracted from the cash and stock portions of the account in proportion to the investments. For example, if the account is invested 60% in phantom shares and 40% in cash, the installment will be made 60% from the stock investment and 40% from the cash investment. 2 3 - - In the event of the death of a director or former director prior to the full distribution of his/her deferred compensation account, the entire remaining balance will be paid in cash to the director's beneficiary within 30 days after the Corporate Secretary receives formal certification of the death. If no beneficiary has been designated by the director, the unpaid balance will be paid to his or her estate. Directors or former directors may change their beneficiary designation at any time by providing written notification to the Corporate Secretary. 3 4 EX-10.28 6 w47043ex10-28.txt EX-10.28 COMMERCIAL PAPER DEALER AGREEMENT 1 [SALOMON SMITH BARNEY LOGO] EXHIBIT 10.28 Commercial Paper Dealer Agreement - -------------------------------------------------------------------------------- 3(a)3 Program Between: Lafarge Corporation, as Issuer and Salomon Smith Barney Inc., as Dealer Concerning Notes to be issued pursuant to an Issuing and Paying Agency Agreement dated as of March 2, 2001 between the Issuer and Citibank, N.A., as Issuing and Paying Agent Dated as of March 2, 2001 COMMERCIAL PAPER DEALER AGREEMENT 3(a)3 PROGRAM This agreement ("Agreement") sets forth the understandings between the Issuer and the Dealer, each named on the cover page hereof, in connection with the issuance and sale by the Issuer of its short-term promissory notes (the "Notes") through the Dealer. Certain terms used in this Agreement are defined in Section 6 hereof. The Addendum to this Agreement, and any Annexes or Exhibits described in this Agreement or such Addendum, are hereby incorporated into this Agreement and made fully a part hereof. 1. ISSUANCE AND SALE OF NOTES. 1.1 While (i) the Issuer has and shall have no obligation to sell the Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for the account of the Issuer, and (ii) the Dealer has and shall have no obligation to purchase the Notes from the Issuer or to arrange any sale of the Notes for the account of the Issuer, the parties hereto agree that in any case where the Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the Issuer, such Notes will be purchased or sold by the Dealer in reliance on the representations, warranties, covenants and agreements of the Issuer contained herein or made pursuant hereto and on the terms and conditions and in the manner provided herein. 1.2 So long as this Agreement shall remain in effect, the Issuer shall not, without the consent of the Dealer, offer, solicit or accept offers to purchase, or sell, any Notes or notes substantially similar to the Notes in reliance upon the exemption from registration under the Securities Act contained in Section 3(a) (3) thereof, except (a) in transactions with one or more dealers which may from time to time after the date 2 hereof become dealers with respect to the Notes by executing with the Issuer one or more agreements, of which the Issuer hereby undertakes to provide the Dealer prompt notice, (b) in transactions with the other dealers listed on the Addendum hereto, which are executing agreements with the Issuer contemporaneously herewith, or (c) directly on its own behalf in transactions with persons other than broker-dealers with respect to which no commission is payable. 1.3 The Notes shall be in a minimum denomination of $100,000 or integral multiples of $1,000 in excess thereof, will bear such interest rates, if interest bearing, or will be sold at such discount from their face amounts, as shall be agreed upon by the Dealer and the Issuer; shall have a maturity not exceeding 270 days from the date of issuance (exclusive of days of grace); and shall not contain any provision for extension, renewal or automatic "rollover." The Notes shall be issued in the ordinary course of the Issuer's business. 1.4 The authentication and issuance of, and payment for, the Notes shall be effected in accordance with the Issuing and Paying Agency Agreement, and the Notes shall be either individual physical certificates or book-entry notes evidenced by a Master Note registered in the name of DTC or its nominee, in the form or forms annexed to the Issuing and Paying Agency Agreement(1). 1.5 If the Issuer and the Dealer shall agree on the terms of the purchase of any Note by the Dealer or the sale of any Note arranged by the Dealer (including, but not limited to, agreement with respect to the date of issue, purchase price, principal amount, maturity and interest rate (in the case of interest-bearing Notes) or discount thereof (in the case of Notes issued on a discount basis), and appropriate compensation for the Dealer's services hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be issued and delivered in accordance with the terms of the Issuing and Paying Agency Agreement and payment for such Note shall be made by the purchaser thereof, either directly or through the Dealer, to the Issuing and Paying Agent, for the account of the Issuer. Except as otherwise agreed, in the event that the Dealer is acting as an agent and a purchaser shall either fail to accept delivery of or make payment for a Note on the date fixed for settlement, the Dealer shall promptly notify the Issuer, and if the Dealer has theretofore paid the Issuer for the Note, the Issuer will promptly return such funds to the Dealer against its return of the Note to the Issuer, in the case of a certificated Note, and upon notice of such failure in the case of a book-entry Note. If such failure occurred for any reason other than default by the Dealer, the Issuer shall reimburse the Dealer on an equitable basis for the Dealer's loss of the use of such funds for the period such funds were credited to the Issuer's account. 2. REPRESENTATIONS AND WARRANTIES OF ISSUER. The Issuer represents and warrants that: 2.1 The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all the requisite power and authority to execute, deliver and perform its obligations under the Notes, this Agreement and the Issuing and Paying Agency Agreement. - -------- (1) If the form or forms of Notes are not annexed to the Issuing and Paying Agency Agreement, they should be annexed to this Agreement or delivered to the Dealer, with appropriate certification by the Secretary of the Issuer, pursuant to section 3.6 of this Agreement. 3 2.2 This Agreement and the Issuing and Paying Agency Agreement have been duly authorized, executed and delivered by the Issuer and constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.3 The Notes have been duly authorized, and when issued as provided in the Issuing and Paying Agency Agreement, will be duly and validly issued and will constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.4 The Notes are not required to be registered under the Securities Act, pursuant to the exemption from registration contained in Section 3(a)(3) thereof, and no indenture in respect of the Notes is required to be qualified under the Trust Indenture Act of 1939, as amended; and the Notes are and will be rated as "prime quality" commercial paper by at least one nationally recognized statistical rating organization and will rank at least pari passu with all other unsecured and unsubordinated indebtedness of the Issuer. 2.5 No consent or action of, or filing or registration with, any governmental or public regulatory body or authority, including the SEC, is required to authorize, or is otherwise required in connection with the execution, delivery or performance of, this Agreement, the Notes or the Issuing and Paying Agency Agreement, except as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Notes. 2.6 Neither the execution and delivery of this Agreement and the Issuing and Paying Agency Agreement, nor the issuance of the Notes in accordance with the Issuing and Paying Agency Agreement, nor the fulfillment of or compliance with the terms and provisions hereof or thereof by the Issuer, will (i) result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Issuer, or (ii) violate or result in a breach or a default under any of the terms of the Issuer's charter documents or by-laws, any contract or instrument to which the Issuer is a party or by which it or its property is bound, or any law or regulation, or any order, writ, injunction or decree of any court or government instrumentality, to which the Issuer is subject or by which it or its property is bound, which breach or default might have a material adverse effect on the condition (financial or otherwise), operations or business prospects of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.7 There is no litigation or governmental proceeding pending, or to the knowledge of the Issuer threatened, against or affecting the Issuer or any of its subsidiaries which might result in a material adverse change in the condition (financial or otherwise), operations or business prospects of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.8 The Issuer is not an "investment company" or an entity "controlled" by an "investment 4 company" within the meaning of the Investment Company Act of 1940, as amended. 2.9 Neither the Offering Materials nor the Company Information contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 2.10 Each (a) issuance of Notes by the Issuer hereunder and (b) amendment or supplement of the Offering Materials shall be deemed a representation and warranty by the Issuer to the Dealer, as of the date thereof, that, both before and after giving effect to such issuance, and after giving effect to such amendment or supplement, (i) the representations and warranties given by the Issuer set forth above in this Section 2 remain true and correct on and as of such date as if made on and as of such date, (ii) in the case of an issuance of Notes, the Notes being issued on such date have been duly and validly issued and constitute legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding inequity or at law), (iii) in the case of an issuance of Notes, since the date of the most recent Offering Materials, there has been no material adverse change in the condition (financial or otherwise), operations or business prospects of the Issuer which has not been disclosed to the Dealer in writing and (iv) the Issuer is not in default of any of its obligations hereunder, under the Notes or under the Issuing and Paying Agency Agreement. 3. COVENANTS AND AGREEMENTS OF ISSUER. The Issuer covenants and agrees that: 3.1 The Issuer will give the Dealer prompt notice (but in any event prior to any subsequent issuance of Notes hereunder) of any amendment to, modification of or waiver with respect to, the Notes or the Issuing and Paying Agency Agreement, including a complete copy of any such amendment, modification or waiver. 3.2 The Issuer shall, whenever there shall occur any change in the Issuer's condition (financial or otherwise), operations or business prospects or any development or occurrence in relation to the Issuer that would be material to holders of the Notes or potential holders of the Notes (including any downgrading or receipt of any notice of intended or potential downgrading or any review for potential change in the rating accorded any of the Issuer's securities by any nationally recognized statistical rating organization which has published a rating of the Notes), promptly, and in any event prior to any subsequent issuance of Notes hereunder, notify the Dealer (by telephone, confirmed in writing) of such change, development or occurrence. 3.3 The Issuer shall from time to time furnish to the Dealer such information as the Dealer may reasonably request, including, without limitation, any press releases or material provided by the Issuer to any national securities exchange or rating agency, regarding (i) the Issuer's operations and financial condition, (ii) the due authorization and execution of the Notes and (iii) the Issuer's ability to pay the Notes as they mature. 3.4 The Issuer will take all such action as the Dealer may reasonably request to ensure that each offer and each sale of the Notes will comply with any applicable state Blue Sky 5 laws; provided, however, that the Issuer shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. 3.5 The Issuer will use the proceeds of the sale of the Notes for "current transactions" within the meaning of Section 3(a)(3) of the Securities Act. 3.6 The Issuer will not be in default of any of its obligations hereunder, under the Notes or under the Issuing and Paying Agency Agreement, at any time that any of the Notes are outstanding. 3.7 The Issuer shall not issue Notes hereunder until the Dealer shall have received (a) an opinion of counsel to the Issuer, addressed to the Dealer, satisfactory in form and substance to the Dealer, (b) a copy of the executed Issuing and Paying Agency Agreement as then in effect, (c) a copy of resolutions adopted by the Board of Directors of the Issuer, satisfactory in form and substance to the Dealer and certified by the Secretary or similar officer of the Issuer authorizing the execution and delivery by the Issuer of this Agreement, the Notes and the Issuing and Paying Agency Agreement and consummation by the Issuer of the transactions contemplated hereby and thereby, (d) prior to the issuance of any Notes represented by a book-entry Note registered in the name of DTC or its nominee, a copy of the executed Letter of Representations among the Issuer, the Issuing and Paying Agent and DTC and (e) such other certificates, letters, opinions and documents as the Dealer shall have reasonably requested. 3.8 The Issuer shall reimburse the Dealer for all of the Dealer's out-of-pocket expenses related to this Agreement, including expenses incurred in connection with its preparation and negotiation, and the transactions contemplated hereby (including, but not limited to, the printing and distribution of the Offering Materials and any advertising expense), and, if applicable, for the reasonable fees and out-of-pocket expenses of the Dealer's counsel. 4. DISCLOSURE. 4.1 Offering Materials which may be provided to purchasers and prospective purchasers of the Notes shall be prepared for use in connection with the transactions contemplated by this Agreement. The Offering Materials and their contents (other than the Dealer Information) shall be the sole responsibility of the Issuer. The Issuer authorizes the Dealer to distribute the Offering Materials as determined by the Dealer. 4.2 The Issuer agrees promptly to furnish the Dealer the Company Information as it becomes available. 4.3 (a) The Issuer further agrees to notify the Dealer promptly upon the occurrence of any event relating to or affecting the Issuer that would cause the Offering Materials then in existence to include an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. (b) In the event that the issuer gives the Dealer notice pursuant to Section 4.3(a) and the Dealer notifies the Issuer that it then has Notes it is holding in inventory, the Issuer agrees promptly to supplement or amend the Offering Materials so that the Offering Materials, as amended or supplemented, shall not contain an untrue statement of a 6 material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Issuer shall make such supplement or amendment available to the Dealer. (c) In the event that (i) the Issuer gives the Dealer notice pursuant to Section 4.3(a), (ii) the Dealer does not notify the Issuer that it is then holding Notes in inventory and (iii) the Issuer chooses not to promptly amend or supplement the Offering Materials in the manner described in clause (b) above, then all solicitations and sales of Notes shall be suspended until such time as the Issuer has so amended or supplemented the Offering Materials, and made such amendment or supplement available to the Dealer. 5. INDEMNIFICATION AND CONTRIBUTION. 5.1 The Issuer will indemnify and hold harmless the Dealer, each individual, corporation, partnership, trust, association or other entity controlling the Dealer, any affiliate of the Dealer or any such controlling entity and their respective directors, officers, employees, partners, incorporators, shareholders, servants, trustees and agents (hereinafter the "Indemnitees") against any and all liabilities, penalties, suits, causes of action, losses, damages, claims, costs and expenses (including, without limitation, fees and disbursements of counsel) or judgments of whatever kind or nature (each a "Claim"), imposed upon, incurred by or asserted against the Indemnitees arising out of or based upon (i) any allegation that the Offering Materials, the Company Information or any information provided by the Issuer to the Dealer included (as of any relevant time) or includes an untrue statement of a material fact or omitted (as of any relevant time) or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (ii) arising out of or based upon the breach by the Issuer of any agreement, covenant or representation made in or pursuant to this Agreement. This indemnification shall not apply to the extent that the Claim arises out of or is based upon Dealer Information. 5.2 Provisions relating to claims made for indemnification under this Section 5 are set forth on Exhibit A to this Agreement. 5.3 In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 5 is held to be unavailable or insufficient to hold harmless the Indemnitees, although applicable in accordance with the terms of this Section 5, the Issuer shall contribute to the aggregate costs incurred by the Dealer in connection with any Claim in the proportion of the respective economic interests of the Issuer and the Dealer; provided, however, such contribution by the Issuer shall be in an amount such that the aggregate costs incurred by the Dealer do not exceed the aggregate of the commissions and fees earned by the Dealer hereunder with respect to the issue or issues of Notes to which such Claim relates. The respective economic interests shall be calculated by reference to the aggregate proceeds to the Issuer of the Notes issued hereunder and the aggregate commissions and fees earned by the Dealer hereunder. 6. DEFINITIONS. 6.1 "Claim" shall have the meaning set forth in Section 5.1. 6.2 "Company Information" at any given time shall mean the Offering Materials together with, to the extent applicable, (i) the Issuer's most recent report on Form 10-K filed 7 with the SEC and each report on Form 10-Q or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, (ii) the Issuer's most recent annual audited financial statements and each interim financial statement or report prepared subsequent thereto, if not included in item (i) above, (iii) the Issuer's and its affiliates' other publicly available recent reports, including, but not limited to, any publicly available filings or reports provided to their respective shareholders, (iv) any other information or disclosure prepared pursuant to Section 4.3 hereof and (v) any information prepared or approved by the Issuer for dissemination to investors or potential investors in the Notes. 6.3 "Dealer Information" shall mean material concerning the Dealer provided by the Dealer in writing expressly for inclusion in the Offering Materials. 6.4 "DTC" shall mean The Depository Trust Company. 6.5 "Indemnitee" shall have the meaning set forth in Section 5.1. 6.6 "Issuing and Paying Agency Agreement" shall mean the issuing and paying agency agreement described on the cover page of this Agreement, as such agreement may be amended or supplemented from time to time. 6.7 "Issuing and Paying Agent" shall mean the party designated as such on the cover page of this Agreement, as issuing and paying agent under the Issuing and Paying Agency Agreement, or any successor thereto in accordance with the Issuing and Paying Agency Agreement. 6.8 "Offering Materials" shall mean offering materials prepared in accordance with Section 4, which may be provided to purchasers and prospective purchasers of the Notes, and shall include amendments and supplements thereto which may be prepared from time to time in accordance with this Agreement (other than any amendment or supplement that has been completely superseded by a later supplement or amendment). 6.9 "SEC" shall mean the U.S. Securities and Exchange Commission. 6.10 "Securities Act" shall mean the U.S. Securities Act of 1933, as amended. 7. GENERAL. 7.1 Unless otherwise expressly provided herein, all notices under this Agreement to parties hereto shall be in writing and shall be effective when received at the address of the respective party set forth in the Addendum to this Agreement. 7.2 This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws provisions. 7.3 The Issuer agrees that any suit, action or proceeding brought by the Issuer against the Dealer in connection with or arising out of this Agreement or the Notes or the offer and sale of the Notes shall be brought solely in the United States federal courts located in the Borough of Manhattan or the courts of the State of New York located in the Borough of Manhattan. EACH OF THE DEALER AND THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 7.4 This Agreement may be terminated, at any time, by the Issuer, upon one business 8 day's prior notice to such effect to the Dealer, or by the Dealer upon one business day's prior notice to such effect to the Issuer. Any such termination, however, shall not affect the obligations of the Issuer under Sections 3.8, 5 and 7.3 hereof or the respective representations, warranties, agreements, covenants, rights or responsibilities of the parties made or arising prior to the termination of this Agreement. 7.5 This Agreement is not assignable by either party hereto without the written consent of the other party; provided, however, that the Dealer may assign its rights and obligations under this Agreement to any affiliate of the Dealer. 7.6 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. 7.7 This Agreement is for the exclusive benefit of the parties hereto, and their respective successors and permitted assigns hereunder, and shall not be deemed to give any legal or equitable right, remedy or claim to any other person whatsoever. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. Lafarge Corporation, AS ISSUER Salomon Smith Barney Inc., AS DEALER By:/s/ Kevin Grant By:/s/ James M. Hennessy --------------------------------- ----------------------------- Name: Kevin Grant Name: James M. Hennessy Title: Treasurer Title: Director, Money Markets Origination
9 ADDENDUM The following additional clauses shall apply to the Agreement and be deemed a part thereof when the respective parties have placed their initials in the left margin beside the respective paragraph number. 1. The other dealers referred to in clause (b) of Section 1.2 of the Agreement are Suntrust Equitable Securities Corporation. 2. The following Section 3.9 is hereby added to the Agreement: 3.9 Without limiting any obligation of the Issuer pursuant to this Agreement to provide the Dealer with credit and financial information, the Issuer hereby acknowledges and agrees that the Dealer may share the Company Information and any other information or matters relating to the Issuer or the transactions contemplated hereby with affiliates of the Dealer, including, but not limited to, Citibank N.A. and that such affiliates may likewise share information relating to the Issuer or such transactions with the Dealer. 3. The addresses of the respective parties for purposes of notices under Section 7.1 are as follows: For the Issuer: Address: 12950 Worldgate Drive Herndon, VA 20170 Attention: Kevin Grant, Treasurer Telephone number: (703) 480-3673 Fax number: (703) 480-3758 For the Dealer: Address: Salomon Smith Barney Inc. 390 Greenwich Street, 4th Floor New York, NY 10013 Attention: Money Markets Origination Telephone number: (212) 723-6341 Fax number: (212) 723-8624 10 EXHIBIT A FURTHER PROVISIONS RELATING TO INDEMNIFICATION (a) The Issuer agrees to reimburse each Indemnitee for all expenses (including reasonable fees and disbursements of internal and external counsel) as they are incurred by it in connection with investigating or defending any loss, claim, damage, liability or action in respect of which indemnification may be sought under Section 5 of the Agreement (whether or not it is a party to any such proceedings). (b) Promptly after receipt by an Indemnitee of notice of the existence of a Claim, such Indemnitee will, if a claim in respect thereof is to be made against the Issuer, notify the Issuer in writing of the existence thereof; provided that (i) the omission so to notify the Issuer will not relieve the Issuer from any liability which it may have hereunder unless and except to the extent it did not otherwise learn of such Claim and such failure results in the forfeiture by the Issuer of substantial rights and defenses, and (ii) the omission so to notify the Issuer will not relieve it from liability which it may have to an Indemnitee otherwise than on account of this indemnity agreement. In case any such Claim is made against any Indemnitee and it notifies the Issuer of the existence thereof, the Issuer will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the Indemnitee, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnitee; provided that if the defendants in any such Claim include both the Indemnitee and the Issuer, and the Indemnitee shall have concluded that there may be legal defenses available to it which are different from or additional to those available to the Issuer, the Issuer shall not have the right to direct the defense of such Claim on behalf of such Indemnitee, and the Indemnitee shall have the right to select separate counsel to assert such legal defenses on behalf of such Indemnitee. Upon receipt of notice from the Issuer to such Indemnitee of the Issuer's election so to assume the defense of such Claim and approval by the Indemnitee of counsel, the Issuer will not be liable to such Indemnitee for expenses incurred thereafter by the Indemnitee in connection with the defense thereof (other than reasonable costs of investigation) unless (i) the Indemnitee shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Issuer shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel in the jurisdiction in which any Claim is brought), approved by the Dealer, representing the Indemnitee who is party to such Claim), (ii) the Issuer shall not have employed counsel reasonably satisfactory to the Indemnitee to represent the Indemnitee within a reasonable time after notice of existence of the Claim or (iii) the Issuer has authorized in writing the employment of counsel for the Indemnitee. The indemnity, reimbursement and contribution obligations of the Issuer hereunder shall be in addition to any other liability the Issuer may otherwise have to an Indemnitee and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Issuer and any Indemnitee. The Issuer agrees that without the Dealer's prior written consent, it will not settle, compromise or consent to the entry of any judgment in any Claim in respect of which indemnification may be sought under the indemnification provision of the Agreement (whether or not the Dealer or any other Indemnitee is an actual or potential party to such Claim), unless such settlement, compromise or consent includes an unconditional release of each Indemnitee from all liability arising out of such Claim. EX-10.29 7 w47043ex10-29.txt EX-10.29 COMMERCIAL PAPER DEALER AGREEMENT 1 SUN TRUST EQUITABLE SECURITIES Exhibit 10.29 Commercial Paper Dealer Agreement - -------------------------------------------------------------------------------- 3(a)3 Program Between: Lafarge Corporation, as Issuer and Sun Trust Equitable Securities, as Dealer Concerning Notes to be issued pursuant to an Issuing and Paying Agency Agreement dated as of March 2, 2001 between the Issuer and Citibank, N.A., as Issuing and Paying Agent Dated as of March 2, 2001 COMMERCIAL PAPER DEALER AGREEMENT 3(a)3 PROGRAM This agreement ("Agreement") sets forth the understandings between the Issuer and the Dealer, each named on the cover page hereof, in connection with the issuance and sale by the Issuer of its short-term promissory notes (the "Notes") through the Dealer. Certain terms used in this Agreement are defined in Section 6 hereof. The Addendum to this Agreement, and any Annexes or Exhibits described in this Agreement or such Addendum, are hereby incorporated into this Agreement and made fully a part hereof. 1. ISSUANCE AND SALE OF NOTES. 1.1 While (i) the Issuer has and shall have no obligation to sell the Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for the account of the Issuer, and (ii) the Dealer has and shall have no obligation to purchase the Notes from the Issuer or to arrange any sale of the Notes for the account of the Issuer, the parties hereto agree that in any case where the Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the Issuer, such Notes will be purchased or sold by the Dealer in reliance on the representations, warranties, covenants and agreements of the Issuer contained herein or made pursuant hereto and on the terms and conditions and in the manner provided herein. 1.2 So long as this Agreement shall remain in effect, the Issuer shall not, without the consent of the Dealer, offer, solicit or accept offers to purchase, or sell, any Notes or notes substantially similar to the Notes in reliance upon the exemption from registration under the Securities Act contained in Section 3(a) (3) thereof, except (a) in transactions with one or more dealers which may from time to time after the date hereof become dealers with respect to the Notes by executing with the Issuer one or 2 more agreements, of which the Issuer hereby undertakes to provide the Dealer prompt notice, (b) in transactions with the other dealers listed on the Addendum hereto, which are executing agreements with the Issuer contemporaneously herewith, or (c) directly on its own behalf in transactions with persons other than broker-dealers with respect to which no commission is payable. 1.3 The Notes shall be in a minimum denomination of $100,000 or integral multiples of $1,000 in excess thereof, will bear such interest rates, if interest bearing, or will be sold at such discount from their face amounts, as shall be agreed upon by the Dealer and the Issuer; shall have a maturity not exceeding 270 days from the date of issuance (exclusive of days of grace); and shall not contain any provision for extension, renewal or automatic "rollover." The Notes shall be issued in the ordinary course of the Issuer's business. 1.4 The authentication and issuance of, and payment for, the Notes shall be effected in accordance with the Issuing and Paying Agency Agreement, and the Notes shall be either individual physical certificates or book-entry notes evidenced by a Master Note registered in the name of DTC or its nominee, in the form or forms annexed to the Issuing and Paying Agency Agreement(1). 1.5 If the Issuer and the Dealer shall agree on the terms of the purchase of any Note by the Dealer or the sale of any Note arranged by the Dealer (including, but not limited to, agreement with respect to the date of issue, purchase price, principal amount, maturity and interest rate (in the case of interest-bearing Notes) or discount thereof (in the case of Notes issued on a discount basis), and appropriate compensation for the Dealer's services hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be issued and delivered in accordance with the terms of the Issuing and Paying Agency Agreement and payment for such Note shall be made by the purchaser thereof, either directly or through the Dealer, to the Issuing and Paying Agent, for the account of the Issuer. Except as otherwise agreed, in the event that the Dealer is acting as an agent and a purchaser shall either fail to accept delivery of or make payment for a Note on the date fixed for settlement, the Dealer shall promptly notify the Issuer, and if the Dealer has theretofore paid the Issuer for the Note, the Issuer will promptly return such funds to the Dealer against its return of the Note to the Issuer, in the case of a certificated Note, and upon notice of such failure in the case of a book-entry Note. If such failure occurred for any reason other than default by the Dealer, the Issuer shall reimburse the Dealer on an equitable basis for the Dealer's loss of the use of such funds for the period such funds were credited to the Issuer's account. 2. REPRESENTATIONS AND WARRANTIES OF ISSUER. The Issuer represents and warrants that: 2.1 The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all the requisite power and authority to execute, deliver and perform its obligations under the Notes, this Agreement and the Issuing and Paying Agency Agreement. 2.2 This Agreement and the Issuing and Paying Agency Agreement have been duly - -------- (1) If the form or forms of Notes are not annexed to the Issuing and Paying Agency Agreement, they should be annexed to this Agreement or delivered to the Dealer, with appropriate certification by the Secretary of the Issuer, pursuant to section 3.6 of this Agreement. 3 authorized, executed and delivered by the Issuer and constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.3 The Notes have been duly authorized, and when issued as provided in the Issuing and Paying Agency Agreement, will be duly and validly issued and will constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.4 The Notes are not required to be registered under the Securities Act, pursuant to the exemption from registration contained in Section 3(a)(3) thereof, and no indenture in respect of the Notes is required to be qualified under the Trust Indenture Act of 1939, as amended; and the Notes are and will be rated as "prime quality" commercial paper by at least one nationally recognized statistical rating organization and will rank at least pari passu with all other unsecured and unsubordinated indebtedness of the Issuer. 2.5 No consent or action of, or filing or registration with, any governmental or public regulatory body or authority, including the SEC, is required to authorize, or is otherwise required in connection with the execution, delivery or performance of, this Agreement, the Notes or the Issuing and Paying Agency Agreement, except as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Notes. 2.6 Neither the execution and delivery of this Agreement and the Issuing and Paying Agency Agreement, nor the issuance of the Notes in accordance with the Issuing and Paying Agency Agreement, nor the fulfillment of or compliance with the terms and provisions hereof or thereof by the Issuer, will (i) result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Issuer, or (ii) violate or result in a breach or a default under any of the terms of the Issuer's charter documents or by-laws, any contract or instrument to which the Issuer is a party or by which it or its property is bound, or any law or regulation, or any order, writ, injunction or decree of any court or government instrumentality, to which the Issuer is subject or by which it or its property is bound, which breach or default might have a material adverse effect on the condition (financial or otherwise), operations or business prospects of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.7 There is no litigation or governmental proceeding pending, or to the knowledge of the Issuer threatened, against or affecting the Issuer or any of its subsidiaries which might result in a material adverse change in the condition (financial or otherwise), operations or business prospects of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.8 The Issuer is not an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 4 2.9 Neither the Offering Materials nor the Company Information contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 2.10 Each (a) issuance of Notes by the Issuer hereunder and (b) amendment or supplement of the Offering Materials shall be deemed a representation and warranty by the Issuer to the Dealer, as of the date thereof, that, both before and after giving effect to such issuance, and after giving effect to such amendment or supplement, (i) the representations and warranties given by the Issuer set forth above in this Section 2 remain true and correct on and as of such date as if made on and as of such date, (ii) in the case of an issuance of Notes, the Notes being issued on such date have been duly and validly issued and constitute legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding inequity or at law), (iii) in the case of an issuance of Notes, since the date of the most recent Offering Materials, there has been no material adverse change in the condition (financial or otherwise), operations or business prospects of the Issuer which has not been disclosed to the Dealer in writing and (iv) the Issuer is not in default of any of its obligations hereunder, under the Notes or under the Issuing and Paying Agency Agreement. 3. COVENANTS AND AGREEMENTS OF ISSUER. The Issuer covenants and agrees that: 3.1 The Issuer will give the Dealer prompt notice (but in any event prior to any subsequent issuance of Notes hereunder) of any amendment to, modification of or waiver with respect to, the Notes or the Issuing and Paying Agency Agreement, including a complete copy of any such amendment, modification or waiver. 3.2 The Issuer shall, whenever there shall occur any change in the Issuer's condition (financial or otherwise), operations or business prospects or any development or occurrence in relation to the Issuer that would be material to holders of the Notes or potential holders of the Notes (including any downgrading or receipt of any notice of intended or potential downgrading or any review for potential change in the rating accorded any of the Issuer's securities by any nationally recognized statistical rating organization which has published a rating of the Notes), promptly, and in any event prior to any subsequent issuance of Notes hereunder, notify the Dealer (by telephone, confirmed in writing) of such change, development or occurrence. 3.3 The Issuer shall from time to time furnish to the Dealer such information as the Dealer may reasonably request, including, without limitation, any press releases or material provided by the Issuer to any national securities exchange or rating agency, regarding (i) the Issuer's operations and financial condition, (ii) the due authorization and execution of the Notes and (iii) the Issuer's ability to pay the Notes as they mature. 3.4 The Issuer will take all such action as the Dealer may reasonably request to ensure that each offer and each sale of the Notes will comply with any applicable state Blue Sky laws; provided, however, that the Issuer shall not be obligated to file any general 5 consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. 3.5 The Issuer will use the proceeds of the sale of the Notes for "current transactions" within the meaning of Section 3(a)(3) of the Securities Act. 3.6 The Issuer will not be in default of any of its obligations hereunder, under the Notes or under the Issuing and Paying Agency Agreement, at any time that any of the Notes are outstanding. 3.7 The Issuer shall not issue Notes hereunder until the Dealer shall have received (a) an opinion of counsel to the Issuer, addressed to the Dealer, satisfactory in form and substance to the Dealer, (b) a copy of the executed Issuing and Paying Agency Agreement as then in effect, (c) a copy of resolutions adopted by the Board of Directors of the Issuer, satisfactory in form and substance to the Dealer and certified by the Secretary or similar officer of the Issuer authorizing the execution and delivery by the Issuer of this Agreement, the Notes and the Issuing and Paying Agency Agreement and consummation by the Issuer of the transactions contemplated hereby and thereby, (d) prior to the issuance of any Notes represented by a book-entry Note registered in the name of DTC or its nominee, a copy of the executed Letter of Representations among the Issuer, the Issuing and Paying Agent and DTC and (e) such other certificates, letters, opinions and documents as the Dealer shall have reasonably requested. 3.8 The Issuer shall reimburse the Dealer for all of the Dealer's out-of-pocket expenses related to this Agreement, including expenses incurred in connection with its preparation and negotiation, and the transactions contemplated hereby (including, but not limited to, the printing and distribution of the Offering Materials and any advertising expense), and, if applicable, for the reasonable fees and out-of-pocket expenses of the Dealer's counsel. 4. DISCLOSURE. 4.1 Offering Materials which may be provided to purchasers and prospective purchasers of the Notes shall be prepared for use in connection with the transactions contemplated by this Agreement. The Offering Materials and their contents (other than the Dealer Information) shall be the sole responsibility of the Issuer. The Issuer authorizes the Dealer to distribute the Offering Materials as determined by the Dealer. 4.2 The Issuer agrees promptly to furnish the Dealer the Company Information as it becomes available. 4.3 (a) The Issuer further agrees to notify the Dealer promptly upon the occurrence of any event relating to or affecting the Issuer that would cause the Offering Materials then in existence to include an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. (b) In the event that the issuer gives the Dealer notice pursuant to Section 4.3(a) and the Dealer notifies the Issuer that it then has Notes it is holding in inventory, the Issuer agrees promptly to supplement or amend the Offering Materials so that the Offering Materials, as amended or supplemented, shall not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements 6 therein, in light of the circumstances under which they were made, not misleading, and the Issuer shall make such supplement or amendment available to the Dealer. (c) In the event that (i) the Issuer gives the Dealer notice pursuant to Section 4.3(a), (ii) the Dealer does not notify the Issuer that it is then holding Notes in inventory and (iii) the Issuer chooses not to promptly amend or supplement the Offering Materials in the manner described in clause (b) above, then all solicitations and sales of Notes shall be suspended until such time as the Issuer has so amended or supplemented the Offering Materials, and made such amendment or supplement available to the Dealer. 5. INDEMNIFICATION AND CONTRIBUTION. 5.1 The Issuer will indemnify and hold harmless the Dealer, each individual, corporation, partnership, trust, association or other entity controlling the Dealer, any affiliate of the Dealer or any such controlling entity and their respective directors, officers, employees, partners, incorporators, shareholders, servants, trustees and agents (hereinafter the "Indemnitees") against any and all liabilities, penalties, suits, causes of action, losses, damages, claims, costs and expenses (including, without limitation, fees and disbursements of counsel) or judgments of whatever kind or nature (each a "Claim"), imposed upon, incurred by or asserted against the Indemnitees arising out of or based upon (i) any allegation that the Offering Materials, the Company Information or any information provided by the Issuer to the Dealer included (as of any relevant time) or includes an untrue statement of a material fact or omitted (as of any relevant time) or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (ii) arising out of or based upon the breach by the Issuer of any agreement, covenant or representation made in or pursuant to this Agreement. This indemnification shall not apply to the extent that the Claim arises out of or is based upon Dealer Information. 5.2 Provisions relating to claims made for indemnification under this Section 5 are set forth on Exhibit A to this Agreement. 5.3 In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 5 is held to be unavailable or insufficient to hold harmless the Indemnitees, although applicable in accordance with the terms of this Section 5, the Issuer shall contribute to the aggregate costs incurred by the Dealer in connection with any Claim in the proportion of the respective economic interests of the Issuer and the Dealer; provided, however, such contribution by the Issuer shall be in an amount such that the aggregate costs incurred by the Dealer do not exceed the aggregate of the commissions and fees earned by the Dealer hereunder with respect to the issue or issues of Notes to which such Claim relates. The respective economic interests shall be calculated by reference to the aggregate proceeds to the Issuer of the Notes issued hereunder and the aggregate commissions and fees earned by the Dealer hereunder. 6. DEFINITIONS. 6.1 "Claim" shall have the meaning set forth in Section 5.1. 6.2 "Company Information" at any given time shall mean the Offering Materials together with, to the extent applicable, (i) the Issuer's most recent report on Form 10-K filed with the SEC and each report on Form 10-Q or 8-K filed by the Issuer with the SEC 7 since the most recent Form 10-K, (ii) the Issuer's most recent annual audited financial statements and each interim financial statement or report prepared subsequent thereto, if not included in item (i) above, (iii) the Issuer's and its affiliates' other publicly available recent reports, including, but not limited to, any publicly available filings or reports provided to their respective shareholders, (iv) any other information or disclosure prepared pursuant to Section 4.3 hereof and (v) any information prepared or approved by the Issuer for dissemination to investors or potential investors in the Notes. 6.3 "Dealer Information" shall mean material concerning the Dealer provided by the Dealer in writing expressly for inclusion in the Offering Materials. 6.4 "DTC" shall mean The Depository Trust Company. 6.5 "Indemnitee" shall have the meaning set forth in Section 5.1. 6.6 "Issuing and Paying Agency Agreement" shall mean the issuing and paying agency agreement described on the cover page of this Agreement, as such agreement may be amended or supplemented from time to time. 6.7 "Issuing and Paying Agent" shall mean the party designated as such on the cover page of this Agreement, as issuing and paying agent under the Issuing and Paying Agency Agreement, or any successor thereto in accordance with the Issuing and Paying Agency Agreement. 6.8 "Offering Materials" shall mean offering materials prepared in accordance with Section 4, which may be provided to purchasers and prospective purchasers of the Notes, and shall include amendments and supplements thereto which may be prepared from time to time in accordance with this Agreement (other than any amendment or supplement that has been completely superseded by a later supplement or amendment). 6.9 "SEC" shall mean the U.S. Securities and Exchange Commission. 6.10 "Securities Act" shall mean the U.S. Securities Act of 1933, as amended. 7. GENERAL. 7.1 Unless otherwise expressly provided herein, all notices under this Agreement to parties hereto shall be in writing and shall be effective when received at the address of the respective party set forth in the Addendum to this Agreement. 7.2 This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws provisions. 7.3 The Issuer agrees that any suit, action or proceeding brought by the Issuer against the Dealer in connection with or arising out of this Agreement or the Notes or the offer and sale of the Notes shall be brought solely in the United States federal courts located in the Borough of Manhattan or the courts of the State of New York located in the Borough of Manhattan. EACH OF THE DEALER AND THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 7.4 This Agreement may be terminated, at any time, by the Issuer, upon one business day's prior notice to such effect to the Dealer, or by the Dealer upon one business 8 day's prior notice to such effect to the Issuer. Any such termination, however, shall not affect the obligations of the Issuer under Sections 3.8, 5 and 7.3 hereof or the respective representations, warranties, agreements, covenants, rights or responsibilities of the parties made or arising prior to the termination of this Agreement. 7.5 This Agreement is not assignable by either party hereto without the written consent of the other party; provided, however, that the Dealer may assign its rights and obligations under this Agreement to any affiliate of the Dealer. 7.6 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. 7.7 This Agreement is for the exclusive benefit of the parties hereto, and their respective successors and permitted assigns hereunder, and shall not be deemed to give any legal or equitable right, remedy or claim to any other person whatsoever. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. Lafarge Corporation, AS ISSUER Salomon Smith Barney Inc., AS DEALER By:/s/ Kevin Grant By:/s/ Matt Vincent --------------------------------- ----------------------------- Name: Kevin Grant Name: Matt Vincent Title: Treasurer Title: Director, Money Market Trading
9 ADDENDUM The following additional clauses shall apply to the Agreement and be deemed a part thereof when the respective parties have placed their initials in the left margin beside the respective paragraph number. 1. The other dealers referred to in clause (b) of Section 1.2 of the Agreement are Suntrust Equitable Securities Corporation. 2. The following Section 3.9 is hereby added to the Agreement: 3.9 Without limiting any obligation of the Issuer pursuant to this Agreement to provide the Dealer with credit and financial information, the Issuer hereby acknowledges and agrees that the Dealer may share the Company Information and any other information or matters relating to the Issuer or the transactions contemplated hereby with affiliates of the Dealer, including, but not limited to, Citibank N.A. and that such affiliates may likewise share information relating to the Issuer or such transactions with the Dealer. 3. The addresses of the respective parties for purposes of notices under Section 7.1 are as follows: For the Issuer: Address: 12950 Worldgate Drive Herndon, VA 20170 Attention: Kevin Grant, Treasurer Telephone number: (703) 480-3673 Fax number: (703) 480-3758 For the Dealer: Address: SunTrust Equitable Securities Corporation 303 Peachtree St. 23rd Floor Atlanta, GA 30308 Attention: Money Markets -- Center 3924 Telephone number: (404) 588-8445 Fax number: (404) 588-7005 10 EXHIBIT A FURTHER PROVISIONS RELATING TO INDEMNIFICATION (a) The Issuer agrees to reimburse each Indemnitee for all expenses (including reasonable fees and disbursements of internal and external counsel) as they are incurred by it in connection with investigating or defending any loss, claim, damage, liability or action in respect of which indemnification may be sought under Section 5 of the Agreement (whether or not it is a party to any such proceedings). (b) Promptly after receipt by an Indemnitee of notice of the existence of a Claim, such Indemnitee will, if a claim in respect thereof is to be made against the Issuer, notify the Issuer in writing of the existence thereof; provided that (i) the omission so to notify the Issuer will not relieve the Issuer from any liability which it may have hereunder unless and except to the extent it did not otherwise learn of such Claim and such failure results in the forfeiture by the Issuer of substantial rights and defenses, and (ii) the omission so to notify the Issuer will not relieve it from liability which it may have to an Indemnitee otherwise than on account of this indemnity agreement. In case any such Claim is made against any Indemnitee and it notifies the Issuer of the existence thereof, the Issuer will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the Indemnitee, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnitee; provided that if the defendants in any such Claim include both the Indemnitee and the Issuer, and the Indemnitee shall have concluded that there may be legal defenses available to it which are different from or additional to those available to the Issuer, the Issuer shall not have the right to direct the defense of such Claim on behalf of such Indemnitee, and the Indemnitee shall have the right to select separate counsel to assert such legal defenses on behalf of such Indemnitee. Upon receipt of notice from the Issuer to such Indemnitee of the Issuer's election so to assume the defense of such Claim and approval by the Indemnitee of counsel, the Issuer will not be liable to such Indemnitee for expenses incurred thereafter by the Indemnitee in connection with the defense thereof (other than reasonable costs of investigation) unless (i) the Indemnitee shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Issuer shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel in the jurisdiction in which any Claim is brought), approved by the Dealer, representing the Indemnitee who is party to such Claim), (ii) the Issuer shall not have employed counsel reasonably satisfactory to the Indemnitee to represent the Indemnitee within a reasonable time after notice of existence of the Claim or (iii) the Issuer has authorized in writing the employment of counsel for the Indemnitee. The indemnity, reimbursement and contribution obligations of the Issuer hereunder shall be in addition to any other liability the Issuer may otherwise have to an Indemnitee and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Issuer and any Indemnitee. The Issuer agrees that without the Dealer's prior written consent, it will not settle, compromise or consent to the entry of any judgment in any Claim in respect of which indemnification may be sought under the indemnification provision of the Agreement (whether or not the Dealer or any other Indemnitee is an actual or potential party to such Claim), unless such settlement, compromise or consent includes an unconditional release of each Indemnitee from all liability arising out of such Claim. EX-10.30 8 w47043ex10-30.txt EX-10.30 COMMERCIAL PAPER ISSUING AGREEMENT 1 EXHIBIT 10.30 COMMERCIAL PAPER ISSUING AND PAYING AGENT AGREEMENT Agreement, dated as of March 2, 2001, between Citibank, N.A., a national banking association, having an office at 111 Wall Street, New York, New York 10005 ("Citibank") and Lafarge Corporation, a corporation organized under the laws of the State of Maryland, having an office at 12950 Worldgate Drive, Herndon, Virginia 20170 (the "Company"). WITNESSETH: THAT WHEREAS, the Company wishes to appoint Citibank as its agent in connection with the issuance and payment of its short-term promissory notes described below and Citibank wishes to accept such appointment, each on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and of the agreements hereinafter set forth, the parties hereby agree as follows: SECTION 1. APPOINTMENT AND ACCEPTANCE The Company hereby appoints Citibank as its agent for the Company in connection with the issuance and payment of Notes (as defined below), and Citibank agrees to act as such upon the terms and conditions set forth in this Agreement. SECTION 2. FORM OF NOTES The Company's short-term promissory notes to be issued by the Company hereunder shall mean promissory notes of the Company, offered for sale in a transaction which is exempt from registration under either (i) Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and having maturities of 390 days or less, or (ii) Section 3(a)3, or 3(a)2 of the 1933 Act and having maturities of 270 days or less, and will be book-entry notes only represented by a master note issued by the Company in connection with the book-entry commercial paper program of The Depository Trust Company ("DTC") or other depository (book-entry notes herein called the "Notes" and individually a "Note"). SECTION 3. ISSUANCE OF NOTES; AUTHORIZED AGENTS (A) Pursuant to the Citi Treasury Manager ("CTM") Agreement with Citibank, Citibank will accept issuance and payment instructions for the Notes through CTM from certain officers and employees of the Company, dealers, or others authorized by the Company to access CTM (the "Authorized Agents"). 1 2 If an Authorized Agent specifies that a Note shall be issued in book-entry form represented by a Master Note, the Authorized Agent shall transmit its instructions through CTM in accordance with the standard prevailing book-entry Note program procedures of the DTC. The release by an Authorized Agent of the issuance instructions to the DTC shall consititute the issuance of a book-entry Note. (B) The Authorized Agents shall not instruct Citibank to issue any Note with a maturity date which is (i) greater than the tenor allowable under the applicable law or (ii) a day on which Citibank's or, the appropriate depository's offices in New York, New York are not open for business. If applicable under this Agreement, Extendible Commercial Notes ("ECNs") shall have maturities of 390 days or less. (C) The Company, or in the case of its dealers, the dealer, will supply Citibank with an incumbency certificate listing the names of the Authorized Agents together with specimens of their signatures. Until Citibank receives a subsequent incumbency certificate from the Company or the dealer, as the case may be, Citibank shall be entitled to rely on the last such certificate delivered to it for purposes of determining the Authorized Agents. SECTION 4. DELIVERY OF NOTES AND PAYMENT FOR NOTE (A) All Notes shall be delivered in accordance with DTC rules. (B) All funds to be used in payment for Notes are to be credited to the Company's account number 40687759 at Citibank. This account may be changed upon written instruction from the Company, accepted by Citibank. SECTION 5. PAYMENT OF NOTES AT MATURITY Citibank agrees to effect payment on the Company's behalf by debiting the Company's Account maintained with Citibank in the amount of the face value amount of such Note, plus interest, if applicable, and to enter appropriate notations of payment. The Company agrees to maintain a sufficient credit balance in said account to pay each Note at maturity. The Company acknowledges that nothing in this Agreement shall obligate Citibank to extend credit, grant financial accommodation, or otherwise advance funds to the Company for the purpose of making any such payments or part thereof or otherwise effecting such transactions. 2 3 SECTION 6. INSTRUCTIONS (A) The Company understands that all instructions are to be in writing, directed to Citibank's Agency and Trust Department. Instructions transmitted through computer terminals (including CTM) or by facsimile shall be considered written instructions for the purpose of this Agreement. (B) All instructions with respect to the issuance of Notes must be given via computer terminal (including CTM) by 1:00 p.m. New York time. (C) Prepayment instructions and cancellations of a previous issuance instruction will be accepted for bookentry issuances from an Authorized Agent if received by Citibank by 2:00 p.m. and, in the case of facsimile instructions, only after a confirming telephone call back to another Authorized Agent of the entity which gave the instruction. Regarding ECNs, notice that the Company will not redeem any Notes on the relevant Initial Redemption Date ("as defined in the applicable Extendible Commercial Note Announcement") must be received in writing by Citibank by 11:00 a.m., New York time, on such Initial Redemption Date. (D) If Citibank acts on any instruction sent or purported to be sent by an Authorized Agent, Citibank shall not, provided it complies with this Section 6, be responsible if that instruction is not an authorized instruction of the Company or is not in the form the Company sent or intended to send (whether due to fraud, distortion or otherwise) and the Company shall indemnify Citibank against any loss, liability claim or expense (including reasonable legal fees) it may incur in connection with its acting in accordance with that instruction. SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY (A) The Company represents and warrants as follows: (i) The Company is a duly organized and validly existing corporation in good standing under the laws of the state of its incorporation and has the corporate power and authority to own its property, to carry on its business as presently being conducted, to execute and deliver this Agreement, and the Notes, and to perform and observe the conditions hereof and thereof. (ii) This Agreement has been duly and validly authorized, executed and delivered by the Company and constitutes the legal, valid and binding agreement of the Company. The issuance and sale of Notes by the Company hereunder have been duly and validly authorized by the Company and when delivered by Citibank as provided in this Agreement, each Note will be the legal, valid and binding obligation of the Company. 3 4 (iii) The offer and sale by the Company of such Notes will constitute exempt transactions under Section 4(2) or 3(a)(3) of the 1933 Act and, accordingly, registration of the Notes under the 1933 Act will not be required. Qualification of an indenture with respect to the Notes under the Trust Indenture Act of 1939, as amended, will not be required in connection with the offer, issuance, sale or delivery of the Notes. (iv) No consent or action of, or filing or registration with, any governmental or public regulatory body or authority is required to authorize, or is otherwise required in connection with, the execution, delivery or performance of this Agreement or the Notes. (B) Each issuance of Notes by the Company shall be deemed a representation and warranty by the Company to Citibank, as of the date thereof, that, both before and after giving effect to such issuance the representations and warranties of the Company set forth in Section 7(A) hereof remain true and correct on and as of such date as if made on and as of such date (except to the extent such representations and warranties expressly relate solely to an earlier date). SECTION 8. GOVERNING LAW AND JURISDICTION This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Any claims made under this Agreement shall be heard and determined in the Federal or state courts located in the State of New York. The Company and Citibank hereby agree to submit to the jurisdiction of the Federal and state courts located in the State of New York for the resolution of any proceedings brought therein relating to claims arising from or in connection with this Agreement. SECTION 9. FEES The Company agrees to pay the fees and expenses for the services rendered under this Agreement, as set forth in writing from time to time, between the Company and Citibank. The Company will be provided thirty (30) days advance notice of any prospective increase in fees. 4 5 SECTION 10. INDEMNIFICATION The Company agrees to indemnify Citibank and its affiliates, their respective directors, officers, employees, and agents, and any successor thereto (each such person being an "Indemnified Person") from and against any and all losses, claims, damages and liabilities, joint or several, to which such Indemnified Person may become subject under any applicable federal or state law, or otherwise, related to or arising out of any matter or transaction contemplated by this Agreement, and to the performance by Citibank of the services contemplated by this Agreement and shall promptly reimburse any Indemnified Person for all expenses (including, but not limited to, fees and disbursements of internal and external counsel), as they are incurred , in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Person is a party, provided, however, that the Company shall not be liable in any such case to the extent such loss, claim, damage or liability is finally judicially determined to have resulted from an Indemnified Person's gross negligence or willful misconduct. SECTION 11. ASSIGNMENT This Agreement shall not be assignable by either party without the written consent of the other and any purported assignment made in contravention of this Section 12, shall be null and void and of no effect whatsoever. However, Citibank shall have the right to assign, transfer, or subcontract either in whole or in part, any of its rights or obligations under this Agreement to any affiliate of Citibank, upon at least 30 days prior written notice to the Company. SECTION 12. FORCE MAJEURE Either party is excused from performance and shall not be liable for any delay in delivery or for nondelivery, in whole or in part, caused by the occurrence of any contingency beyond the control of the party including, but not limited to, fires, civil disobedience, riots, rebellions, accident, explosion, flood, storm, Acts of God and similar occurrences. SECTION 13. TERMINATION This Agreement may be terminated by either party upon 30 days prior written notice to the other. Termination of this Agreement shall not affect the Company's liabilities to Citibank hereunder in connection with any Notes issued prior to such termination. Citibank shall have a continuing obligation to act on behalf of the Company in accordance with the terms and conditions of this Agreement with respect to Notes outstanding, as of the termination date, until such Notes have matured and been paid by the Company, but shall have no obligation with respect to the issuance of Notes after such termination date. 5 6 SECTION 14. COMPLETE AGREEMENT; COUNTERPARTS. This Agreement, together with the Schedules attached hereto, constitutes the entire Agreement between the parties with respect to the subject matter hereof and supersedes in all respects all prior proposals, negotiations, conversations, discussions and agreements between the parties concerning the subject matter hereof. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto, through their duly authorized officers, have executed this Agreement as of the day and year set forth above. LAFARGE CORPORATION CITIBANK, N.A. By:/s/ Kevin Grant By: /s/ F. Mills --------------------------------- -------------------------------- Name: Kevin Grant Name: F. Mills ------------------------------ ----------------------- (print) (print) Title: Vice President & Treasurer Title :Senior Trust Officer ----------------------------- ----------------------------- Date: March 2, 2001 Date: March 2, 2001 ------------------------------ -------------------------------
6 EX-10.31 9 w47043ex10-31.txt EX-10.31 CREDIT AGREEMENT 1 EXHIBIT 10.31 CREDIT AGREEMENT Dated as of March 2, 2001 LAFARGE CORPORATION, a Maryland corporation (the "Borrower"), the banks, financial institutions and other institutional lenders (the "Initial Lenders") listed on the signature pages hereof, BAYERISCHE LANDESBANK GIROZENTRALE, BNP PARIBAS, SUNTRUST BANK, WESTDEUTSCHE LANDESBANK GIROZENTRALE, as syndication agents, SALOMON SMITH BARNEY INC., as arranger, and CITIBANK, N.A. ("Citibank"), as administrative agent (the "Agent") for the Lenders (as hereinafter defined), agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Advance" means a Revolving Credit Advance or a Competitive Bid Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 10% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Agent's Account" means the account of the Agent maintained by the Agent at Citibank at its office at 399 Park Avenue, New York, New York 10043, Account No. 36852248, Attention: Bank Loan Syndications. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance and, in the case of a Competitive Bid Advance, the office of such Lender notified by such Lender to the Agent as its Applicable Lending Office with respect to such Competitive Bid Advance. "Applicable Margin" means (a) for Base Rate Advances, 0% per annum and (b) for Eurodollar Rate Advances, as of any date prior to the Term Loan Conversion Date, 0.42% per annum and, as of any date after the Term Loan Conversion Date, 0.75% per annum. "Applicable Percentage" means, as of any date prior to the Term Loan Conversion Date, 0.08% per annum. "Applicable Utilization Fee" means, as of any date prior to the Term Loan Conversion Date that the aggregate Advances exceed 25% of the aggregate Commitments, 0.125% per annum. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit C hereto. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of: 2 (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; (b) the sum (adjusted to the nearest 1/4 of 1% or, if there is no nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1% per annum, plus (ii) the rate obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average (adjusted to the basis of a year of 360 days) being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank with respect to liabilities consisting of or including (among other liabilities) three-month U.S. dollar non-personal time deposits in the United States, plus (iii) the average during such three-week period of the annual assessment rates estimated by Citibank for determining the then current annual assessment payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of Citibank in the United States; and (c) 1/2 of one percent per annum above the Federal Funds Rate. "Base Rate Advance" means a Revolving Credit Advance that bears interest as provided in Section 2.07(a)(i). "Borrowing" means a Revolving Credit Borrowing or a Competitive Bid Borrowing. "Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances or LIBO Rate Advances, on which dealings are carried on in the London interbank market. "Commitment" means as to any Lender (a) the amount set forth opposite such Lender's name on the signature pages hereof, or (b) if such Lender has entered into any Assignment and Acceptance, the amount set forth for such Lender in the Register maintained by the Agent pursuant to Section 8.07(d), as such amount may be reduced pursuant to Section 2.05. "Competitive Bid Advance" means an advance by a Lender to the Borrower as part of a Competitive Bid Borrowing resulting from the competitive bidding procedure described in Section 2.03 and refers to a Fixed Rate Advance or a LIBO Rate Advance. "Competitive Bid Borrowing" means a borrowing consisting of simultaneous Competitive Bid Advances from each of the Lenders whose offer to make one or more Competitive Bid Advances as part of such borrowing has been accepted under the competitive bidding procedure described in Section 2.03. "Competitive Bid Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from a Competitive Bid Advance made by such Lender. "Competitive Bid Reduction" has the meaning specified in Section 2.01. 2 3 "Confidential Information" means confidential or proprietary information that the Borrower furnishes to the Agent or any Lender, but does not include any such information that is or becomes generally available to the public or that is or becomes available to the Agent or such Lender from a source other than the Borrower that, to the knowledge of the Agent or such Lender, is subject to a confidentiality arrangement with the Borrower. "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Convert", "Conversion" and "Converted" each refers to a conversion of Revolving Credit Advances of one Type into Revolving Credit Advances of the other Type pursuant to Section 2.08 or 2.09. "Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (e) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit or similar extensions of credit, (f) all Synthetic Lease Liabilities of such Person, (g) all Debt of others referred to in clauses (a) through (f) above or clause (h) below guaranteed by such Person, or in effect guaranteed by such Person and (h) all Debt referred to in clauses (a) through (g) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt, which Debt, in the case of this clause (h) shall be deemed not to exceed the fair market value of such encumbered property. "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Disclosed Litigation" has the meaning specified in Section 3.01(b). "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "EBITDA" means, for any period, net income (or net loss) plus the sum of (a) interest expense net of interest income, (b) income tax expense, (c) depreciation expense, (d) depletion expense and (e) amortization expense, in each case determined in accordance with GAAP for such period. "Effective Date" has the meaning specified in Section 3.01. "Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender; and (iii) any other Person approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 8.07, the Borrower, such approval not to be unreasonably withheld or delayed; provided, however, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee. "Environmental Action" means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. 3 4 "Environmental Law" means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any Person that for purposes of Title IV of ERISA is a member of the Borrower's controlled group, or under common control with the Borrower, within the meaning of Section 414 of the Internal Revenue Code. "ERISA Event" means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of the Borrower or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for the imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, a Plan. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum) appearing on Telerate Markets Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period or, if for any reason such rate is not available, the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such 4 5 Interest Period in an amount substantially equal to such Reference Bank's Eurodollar Rate Advance comprising part of such Revolving Credit Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. If the Telerate Markets Page 3750 (or any successor page) is unavailable, the Eurodollar Rate for any Interest Period for each Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "Eurodollar Rate Advance" means a Revolving Credit Advance that bears interest as provided in Section 2.07(a)(ii). "Eurodollar Rate Reserve Percentage" for any Interest Period for all Eurodollar Rate Advances or LIBO Rate Advances comprising part of the same Borrowing means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances or LIBO Rate Advances is determined) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fixed Rate Advances" has the meaning specified in Section 2.03(a)(i). "GAAP" has the meaning specified in Section 1.03. "Hazardous Materials" means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity future or option contracts and other similar agreements. "Information Memorandum" means the information memorandum dated January 25, 2001 used by the Agent in connection with the syndication of the Commitments. "Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing and each LIBO Rate Advance comprising part of the same Competitive Bid Borrowing, the period commencing on the date of such Eurodollar Rate Advance or LIBO Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, with respect to Eurodollar Rate Advances, each subsequent period commencing on the last day of the immediately 5 6 preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, upon notice received by the Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (i) the Borrower may not select any Interest Period that ends after the Termination Date or, if the Revolving Credit Advances have been converted to a term loan pursuant to Section 2.06 prior to such selection, that ends after the Maturity Date; (ii) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Revolving Credit Borrowing or for LIBO Rate Advances comprising part of the same Competitive Bid Borrowing shall be of the same duration; (iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (iv) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Lenders" means the Initial Lenders and each Person that shall become a party hereto pursuant to Section 8.07. "LIBO Rate" means, for any Interest Period for all LIBO Rate Advances comprising part of the same Competitive Bid Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum) appearing on Dow Jones Markets Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period or, if for any reason such rate is not available, the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to the amount that would be the Reference Banks' respective ratable shares of such Borrowing if such Borrowing were to be a Revolving Credit Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. If the Dow Jones Markets Telerate Page 3750 (or any successor page) is unavailable, the LIBO Rate for any Interest Period for each LIBO Rate Advance comprising part of the same Competitive Bid Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "LIBO Rate Advances" means a Competitive Bid Advance bearing interest based on the LIBO Rate. 6 7 "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Material Adverse Change" means any material adverse change in the business, condition (financial or otherwise), results of operations, performance, properties or prospects of the Borrower and its Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, condition (financial or otherwise), results of operations, performance, properties or prospects of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or any Lender under this Agreement or any Note or (c) the ability of the Borrower to perform its obligations under this Agreement or any Note. "Maturity Date" means the earlier of (a) the first anniversary of the Termination Date and (b) the date of termination in whole of the aggregate Commitments pursuant to Section 2.05 or 6.01. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and at least one Person other than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Note" means a Revolving Credit Note or a Competitive Bid Note. "Notice of Competitive Bid Borrowing" has the meaning specified in Section 2.03(a). "Notice of Revolving Credit Borrowing" has the meaning specified in Section 2.02(a). "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced unless being contested in good faith and for which appropriate reserves are being maintained: (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b) hereof; (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 60 days; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; and (d) easements, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such property for its present purposes. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Reference Banks" means Citibank, SunTrust Bank Atlanta and Westdeutsche Landesbank Girozentrale. 7 8 "Register" has the meaning specified in Section 8.07(d). "Required Lenders" means at any time Lenders owed at least a majority in interest of the then aggregate unpaid principal amount of the Revolving Credit Advances owing to Lenders, or, if no such principal amount is then outstanding, Lenders having at least a majority in interest of the Commitments. "Revolving Credit Advance" means an advance by a Lender to the Borrower as part of a Revolving Credit Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "Type" of Revolving Credit Advance). "Revolving Credit Borrowing" means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by each of the Lenders pursuant to Section 2.01. "Revolving Credit Note" means a promissory note of the Borrower payable to the order of any Lender, delivered pursuant to a request made under Section 2.16 in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Credit Advances made by such Lender. "Significant Subsidiary" means any 'Subsidiary of the Borrower or group of Subsidiaries of the Borrower 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. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and no Person other than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Synthetic Lease Liabilities" of a Person means any liability under any tax retention operating lease or so-called "synthetic" lease transaction, or any obligations arising with respect to any other similar transaction which the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the Consolidated balance sheets of such Person and its Subsidiaries (other than leases which do not have an attributable interest component that are not leases that have been, or should be, in accordance with GAAP, recorded as capital leases). "Term Loan Conversion Date" means the Termination Date on which all Revolving Credit Advances outstanding on such date are converted into a term loan pursuant to Section 2.06. "Term Loan Election" has the meaning specified in Section 2.06. "Termination Date" means the earlier of March 4, 2002 and the date of termination in whole of the Commitments pursuant to Section 2.05 or 6.01. 8 9 "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e) ("GAAP"). ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Credit Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in an aggregate amount not to exceed at any time outstanding such Lender's Commitment provided that the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the Competitive Bid Advances then outstanding and such deemed use of the aggregate amount of the Commitments shall be allocated among the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a "Competitive Bid Reduction"). Each Revolving Credit Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Revolving Credit Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, the Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.10 and reborrow under this Section 2.01. SECTION 2.02. Making the Revolving Credit Advances. (a) Each Revolving Credit Borrowing shall be made on notice, given not later than (x) 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Eurodollar Rate Advances or (y) 11:00 A.M. (New York City time) on the first Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Base Rate Advances, by the Borrower to the Agent, which shall give to each Lender prompt notice thereof by telecopier. Each such notice of a Revolving Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be by telephone, confirmed immediately in writing, or telecopier in substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such Revolving Credit Borrowing, (ii) Type of Advances comprising such Revolving Credit Borrowing, (iii) aggregate amount of such Revolving Credit Borrowing, and (iv) in the case of a Revolving Credit Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Revolving Credit Advance. Each Lender shall, before 11:00 A.M. (New York City time) on the date of such Revolving Credit Borrowing make available for the account of its Applicable Lending Office to the Agent at the Agent's Account, in same day funds, such Lender's ratable portion of such Revolving Credit Borrowing. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the Borrower at the Agent's address referred to in Section 8.02. (b) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for any Revolving Credit Borrowing if the aggregate amount of such Revolving Credit Borrowing is less than $10,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or 2.12 and (ii) the Eurodollar Rate Advances may not be outstanding as part of more than six separate Revolving Credit Borrowings. (c) Each Notice of Revolving Credit Borrowing shall be irrevocable and binding on the Borrower. In the case of any Revolving Credit Borrowing that the related Notice of Revolving Credit Borrowing 9 10 specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Revolving Credit Borrowing for such Revolving Credit Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Revolving Credit Advance to be made by such Lender as part of such Revolving Credit Borrowing when such Revolving Credit Advance, as a result of such failure, is not made on such date. (d) Unless the Agent shall have received notice from a Lender prior to the date of any Revolving Credit Borrowing that such Lender will not make available to the Agent such Lender's ratable portion of such Revolving Credit Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Revolving Credit Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Agent, such Lender and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to Revolving Credit Advances comprising such Revolving Credit Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Revolving Credit Advance as part of such Revolving Credit Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the Revolving Credit Advance to be made by it as part of any Revolving Credit Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Revolving Credit Advance to be made by such other Lender on the date of any Revolving Credit Borrowing. SECTION 2.03. The Competitive Bid Advances. (a) Each Lender severally agrees that the Borrower may make Competitive Bid Borrowings under this Section 2.03 from time to time on any Business Day during the period from the date hereof until the date occurring 30 days prior to the Termination Date in the manner set forth below; provided that, following the making of each Competitive Bid Borrowing, the aggregate amount of the Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (computed without regard to any Competitive Bid Reduction). (i) The Borrower may request a Competitive Bid Borrowing under this Section 2.03 by delivering to the Agent, by telecopier, a notice of a Competitive Bid Borrowing (a "Notice of Competitive Bid Borrowing"), in substantially the form of Exhibit B-2 hereto, specifying therein the requested (v) date of such proposed Competitive Bid Borrowing, (w) aggregate amount of such proposed Competitive Bid Borrowing, (x) in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, Interest Period, or in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances, maturity date for repayment of each Fixed Rate Advance to be made as part of such Competitive Bid Borrowing (which maturity date may not be earlier than the date occurring 7 days after the date of such Competitive Bid Borrowing or later than the earlier of (I) 180 days after the date of such Competitive Bid Borrowing and (II) the Termination Date), (y) interest payment date or dates relating thereto, and (z) other terms (if any) to be applicable to such Competitive Bid Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed Competitive Bid Borrowing, if the Borrower shall specify in the Notice of Competitive Bid Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum (the Advances comprising any such Competitive Bid Borrowing being referred to herein as "Fixed Rate Advances") and (B) at least four Business Days prior to the date of the proposed Competitive Bid Borrowing, if the Borrower shall instead specify in the Notice of Competitive Bid Borrowing that the Advances comprising such Competitive Bid Borrowing shall be LIBO Rate Advances. Each Notice of Competitive Bid Borrowing shall be irrevocable and binding on the Borrower. The Agent shall in turn promptly notify each Lender of each request for a Competitive Bid Borrowing 10 11 received by it from the Borrower by sending such Lender a copy of the related Notice of Competitive Bid Borrowing. (ii) Each Lender may, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more Competitive Bid Advances to the Borrower as part of such proposed Competitive Bid Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Agent (which shall give prompt notice thereof to the Borrower), (A) before 9:30 A.M. (New York City time) on the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances and (B) before 10:00 A.M. (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances of the minimum amount and maximum amount of each Competitive Bid Advance which such Lender would be willing to make as part of such proposed Competitive Bid Borrowing (which amounts of such proposed Competitive Bid may, subject to the proviso to the first sentence of this Section 2.03(a), exceed such Lender's Commitment, if any), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such Competitive Bid Advance; provided that if the Agent in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower of such offer at least 30 minutes before the time and on the date on which notice of such election is to be given to the Agent, by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Agent before 10:00 A.M. (New York City time), and such Lender shall not be obligated to, and shall not, make any Competitive Bid Advance as part of such Competitive Bid Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Bid Advance as part of such proposed Competitive Bid Borrowing. (iii) The Borrower shall, in turn, (A) before 10:30 A.M. (New York City time) on the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances and (B) before 11:00 A.M. (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, either: (x) cancel such Competitive Bid Borrowing by giving the Agent notice to that effect, or (y) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in its sole discretion, by giving notice to the Agent of the amount of each Competitive Bid Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Borrower by the Agent on behalf of such Lender for such Competitive Bid Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such Competitive Bid Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Agent notice to that effect. The Borrower shall accept the offers made by any Lender or Lenders to make Competitive Bid Advances in order of the lowest to the highest rates of interest offered by such Lenders. If two or more Lenders have offered the same interest rate, the amount to be borrowed at such interest rate will be allocated among such Lenders in proportion to the amount that each such Lender offered at such interest rate. (iv) If the Borrower notifies the Agent that such Competitive Bid Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Agent shall give prompt notice thereof to the Lenders and such Competitive Bid Borrowing shall not be made. (v) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above, of the date and aggregate amount of such Competitive Bid Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above 11 12 have been accepted by the Borrower, (B) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, of the amount of each Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing, and (C) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, upon receipt, that the Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article III. Each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing shall, before 11:00 A.M. (New York City time) on the date of such Competitive Bid Borrowing specified in the notice received from the Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Agent at its address referred to in Section 8.02, in same day funds, such Lender's portion of such Competitive Bid Borrowing. Upon fulfillment of the applicable conditions set forth in Article III and promptly after receipt by the Agent of such funds, the Agent will make such funds available to the Borrower at the location specified by the Borrower in its Notice of Competitive Bid Borrowing. Promptly after each Competitive Bid Borrowing the Agent will notify each Lender of the amount of the Competitive Bid Borrowing, the consequent Competitive Bid Reduction and the dates upon which such Competitive Bid Reduction commenced and will terminate. (vi) If the Borrower notifies the Agent that it accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, such notice of acceptance shall be irrevocable and binding on the Borrower. The Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in the related Notice of Competitive Bid Borrowing for such Competitive Bid Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing when such Competitive Bid Advance, as a result of such failure, is not made on such date. (b) Each Competitive Bid Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and, following the making of each Competitive Bid Borrowing, the Borrower shall be in compliance with the limitation set forth in the proviso to the first sentence of subsection (a) above. (c) Within the limits and on the conditions set forth in this Section 2.03, the Borrower may from time to time borrow under this Section 2.03, repay or prepay pursuant to subsection (d) below, and reborrow under this Section 2.03, provided that a Competitive Bid Borrowing shall not be made within three Business Days of the date of any other Competitive Bid Borrowing. (d) The Borrower shall repay to the Agent for the account of each Lender that has made a Competitive Bid Advance, on the maturity date of each Competitive Bid Advance (such maturity date being that specified by the Borrower for repayment of such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and provided in the Competitive Bid Note evidencing such Competitive Bid Advance), the then unpaid principal amount of such Competitive Bid Advance. The Borrower shall have no right to prepay any principal amount of any Competitive Bid Advance unless, and then only on the terms, specified by the Borrower for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and set forth in the Competitive Bid Note evidencing such Competitive Bid Advance. (e) The Borrower shall pay interest on the unpaid principal amount of each Competitive Bid Advance from the date of such Competitive Bid Advance to the date the principal amount of such Competitive Bid Advance is repaid in full, at the rate of interest for such Competitive Bid Advance specified by the Lender making such Competitive Bid Advance in its notice with respect thereto delivered pursuant to subsection (a)(ii) above, payable on the interest payment date or dates specified by the Borrower for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above, as provided in the Competitive Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the amount of unpaid principal of and interest on each 12 13 Competitive Bid Advance owing to a Lender, payable in arrears on the date or dates interest is payable thereon, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Competitive Bid Advance under the terms of the Competitive Bid Note evidencing such Competitive Bid Advance unless otherwise agreed in such Competitive Bid Note. (f) The indebtedness of the Borrower resulting from each Competitive Bid Advance made to the Borrower as part of a Competitive Bid Borrowing shall be evidenced by a separate Competitive Bid Note of the Borrower payable to the order of the Lender making such Competitive Bid Advance. SECTION 2.04. Fees. (a) Facility Fee. The Borrower agrees to pay to the Agent for the account of each Lender a facility fee on the aggregate amount of such Lender's Commitment from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date at a rate per annum equal to the Applicable Percentage in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing March 31, 2001, and on the Termination Date. (b) Agent's Fees. The Borrower shall pay to the Agent for its own account such fees as may from time to time be agreed between the Borrower and the Agent. SECTION 2.05. Termination or Reduction of the Commitments. (a) Optional. The Borrower shall have the right, upon at least three Business Days' notice to the Agent, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders, provided that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and provided further that the aggregate amount of the Commitments of the Lenders shall not be reduced to an amount that is less than the aggregate principal amount of the Competitive Bid Advances then outstanding. (b) Mandatory. On the Termination Date, if the Borrower has made the Term Loan Election in accordance with Section 2.06 prior to such date, and from time to time thereafter upon each prepayment of the Revolving Credit Advances, the Commitments of the Lenders shall be automatically and permanently reduced on a pro rata basis by an amount equal to the amount by which (i) the aggregate Commitments immediately prior to such reduction exceeds (ii) the aggregate unpaid principal amount of all Revolving Credit Advances outstanding at such time. SECTION 2.06. Repayment of Revolving Credit Advances. The Borrower shall, subject to the next succeeding sentence, repay to the Agent for the ratable account of the Lenders on the Termination Date the aggregate principal amount of the Revolving Credit Advances then outstanding. The Borrower may, upon not less than 15 days' notice to the Agent, elect (the "Term Loan Election") to convert all of the Revolving Credit Advances outstanding on the Termination Date in effect at such time into a term loan which the Borrower shall repay in full ratably to the Lenders on the Maturity Date; provided that the Term Loan Election may not be exercised if a Default has occurred and is continuing on the date of notice of the Term Loan Election or on the date on which the Term Loan Election is to be effected. All Revolving Credit Advances converted into a term loan pursuant to this Section 2.06 shall continue to constitute Revolving Credit Advances except that the Borrower may not reborrow pursuant to Section 2.01 after all or any portion of such Revolving Credit Advances have been prepaid pursuant to Section 2.10. SECTION 2.07. Interest on Revolving Credit Advances. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Revolving Credit Advance owing to each Lender from the date of such Revolving Credit Advance until such principal amount shall be paid in full, at the following rates per annum: (i) Base Rate Advances. During such periods as such Revolving Credit Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to time plus (y) the Applicable Margin in effect from time to time plus (z) the Applicable Utilization Fee in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or paid in full. 13 14 (ii) Eurodollar Rate Advances. During such periods as such Revolving Credit Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Revolving Credit Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such Revolving Credit Advance plus (y) the Applicable Margin in effect from time to time plus (z) the Applicable Utilization Fee in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. (b) Default Interest. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on (i) the unpaid principal amount of each Revolving Credit Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Revolving Credit Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to clause (a)(i) above. SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the Agent timely information for the purpose of determining each Eurodollar Rate and each LIBO Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Agent for the purpose of determining any such interest rate, the Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.07(a)(i) or (ii), and the rate, if any, furnished by each Reference Bank for the purpose of determining the interest rate under Section 2.07(a)(ii). (b) If, with respect to any Eurodollar Rate Advances, the Required Lenders notify the Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to Convert Revolving Credit Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (c) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, be Converted into Base Rate Advances. (d) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such Advances shall automatically Convert into Base Rate Advances. (e) Upon the occurrence and during the continuance of any Event of Default, (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended. (f) If Telerate Markets Page 3750 is unavailable and fewer than two Reference Banks furnish timely information to the Agent for determining the Eurodollar Rate or LIBO Rate for any Eurodollar Rate Advances or LIBO Rate Advances, as the case may be, 14 15 (i) the Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances or LIBO Rate Advances, as the case may be, (ii) with respect to Eurodollar Rate Advances, each such Advance will automatically, on the last day of the then existing Interest Period therefor, be prepaid by the Borrower or, at the Borrower's option, be automatically Converted into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (iii) the obligation of the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances or to Convert Revolving Credit Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 2.09. Optional Conversion of Revolving Credit Advances. The Borrower may on any Business Day, upon notice given to the Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.08 and 2.12, Convert all Revolving Credit Advances of one Type comprising the same Borrowing into Revolving Credit Advances of the other Type; provided, however, that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b) and no Conversion of any Revolving Credit Advances shall result in more separate Revolving Credit Borrowings than permitted under Section 2.02(b). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Revolving Credit Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower. SECTION 2.10. Prepayments of Revolving Credit Advances. The Borrower may, upon notice at least two Business Days' prior to the date of such prepayment, in the case of Eurodollar Rate Advances, and not later than 11:00 A.M. (New York City time) on the date of such prepayment, in the case of Base Rate Advances, to the Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amount of the Revolving Credit Advances comprising part of the same Revolving Credit Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) in the event of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(c). SECTION 2.11. Increased Costs. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances or LIBO Rate Advances (excluding for purposes of this Section 2.11 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.14 shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower and the Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, upon demand by such Lender 15 16 (with a copy of such demand to the Agent), the Borrower shall pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. A certificate as to such amounts submitted to the Borrower and the Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.12. Illegality. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances hereunder, (a) each Eurodollar Rate Advance will automatically, upon such demand, Convert into a Base Rate Advance and (b) the obligation of the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances or to Convert Revolving Credit Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 2.13. Payments and Computations. (a) The Borrower shall make each payment hereunder not later than 11:00 A.M. (New York City time) on the day when due to the Agent at the Agent's Account in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.03, 2.11, 2.14 or 8.04(c)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(c), from and after the effective date specified in such Assignment and Acceptance, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or under the Note held by such Lender, to charge from time to time against any or all of the Borrower's accounts with such Lender any amount so due. (c) All computations of interest based on the Base Rate shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, all computations of interest based on the Eurodollar Rate, the LIBO Rate or the Federal Funds Rate or in respect of Fixed Rate Advances and of facility fees shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or facility fees are payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances or LIBO Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest 16 17 thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.14. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.13, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction under the laws of which such Lender or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) The Borrower shall indemnify each Lender and the Agent for and hold it harmless against the full amount of Taxes or Other Taxes (including, without limitation, taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.14) imposed on or paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Agent, at its address referred to in Section 8.02, the original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder or under the Notes by or on behalf of the Borrower through an account or branch outside the United States or by or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Agent, at such address, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender and on the date of the Assumption Agreement or the Assignment and Acceptance pursuant to which it becomes a Lender in the case of each other Lender, and from time to time thereafter as requested in writing by the Borrower (but only so long as such Lender remains lawfully able to do so), shall provide each of the Agent and the Borrower with two original Internal Revenue Service forms W-8BEN or W-8ECI, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or the Notes. If the form provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender assignee becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding 17 18 taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W-8BEN or W-8ECI, that the Lender reasonably considers to be confidential, the Lender shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. (f) For any period with respect to which a Lender has failed to provide the Borrower with the appropriate form described in Section 2.14(e) (other than if such failure is due to a change in law occurring subsequent to the date on which a form originally was required to be provided, or if such form otherwise is not required under subsection (e) above), such Lender shall not be entitled to indemnification under Section 2.14(a) or (c) with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as the Lender shall reasonably request to assist the Lender to recover such Taxes. SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Revolving Credit Advances owing to it (other than pursuant to Section 2.11, 2.14 or 8.04(c)) in excess of its ratable share of payments on account of the Revolving Credit Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Revolving Credit Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. SECTION 2.16. Evidence of Debt. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Revolving Credit Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder in respect of Revolving Credit Advances. The Borrower agrees that upon notice by any Lender to the Borrower (with a copy of such notice to the Agent) to the effect that a Revolving Credit Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Revolving Credit Advances owing to, or to be made by, such Lender, the Borrower shall promptly execute and deliver to such Lender a Revolving Credit Note payable to the order of such Lender in a principal amount up to the Commitment of such Lender. (b) The Register maintained by the Agent pursuant to Section 8.07(d) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iv) the amount of any sum received by the Agent from the Borrower hereunder and each Lender's share thereof. (c) Entries made in good faith by the Agent in the Register pursuant to subsection (b) above, and by each Lender in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement. 18 19 SECTION 2.17. Use of Proceeds. The proceeds of the Advances shall be available (and the Borrower agrees that it shall use such proceeds) solely for general corporate purposes of the Borrower and its Subsidiaries. ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied: (a) There shall have occurred no Material Adverse Change since December 31, 1999. (b) There shall exist no action, suit, investigation, litigation or proceeding affecting the Borrower or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect other than the matters described on Schedule 3.01(b) hereto (the "Disclosed Litigation") or (ii) purports to affect the legality, validity or enforceability of this Agreement or any Note or the consummation of the transactions contemplated hereby, and there shall have been no adverse change in the status, or financial effect on the Borrower or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 3.01(b) hereto. (c) Nothing shall have come to the attention of the Lenders during the course of their due diligence investigation to lead them reasonably to believe that the Information Memorandum was or has become misleading, incorrect or incomplete in any material respect; without limiting the generality of the foregoing, the Lenders shall have been given such access to the management, records, books of account, contracts and properties of the Borrower and its Subsidiaries as they shall have reasonably requested. (d) All governmental and third party consents and approvals necessary in connection with the transactions contemplated hereby shall have been obtained (without the imposition of any conditions that are not reasonably acceptable to the Lenders) and shall remain in effect, and no law or regulation shall be applicable in the reasonable judgment of the Lenders that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby. (e) The Borrower shall have notified each Lender and the Agent in writing as to the proposed Effective Date. (f) The Borrower shall have paid all accrued fees and expenses of the Agent and the Lenders (including the accrued fees and expenses of counsel to the Agent). (g) On the Effective Date, the following statements shall be true and the Agent shall have received for the account of each Lender a certificate signed by a duly authorized officer of the Borrower, dated the Effective Date, stating that: (i) The representations and warranties contained in Section 4.01 are correct on and as of the Effective Date, and (ii) No event has occurred and is continuing that constitutes a Default. (h) The Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Agent and (except for the Revolving Credit Notes) in sufficient copies for each Lender: 19 20 (i) The Revolving Credit Notes to the order of the Lenders to the extent requested by any Lender pursuant to Section 2.16. (ii) Certified copies of the resolutions of the Board of Directors of the Borrower approving this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes. (iii) A certificate of the Secretary or an Assistant Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder. (iv) A favorable opinion of Tim Power, Assistant General Counsel for the Borrower, substantially in the form of Exhibit D hereto and as to such other matters as any Lender through the Agent may reasonably request. (v) A favorable opinion of Shearman & Sterling, counsel for the Agent, in form and substance satisfactory to the Agent. SECTION 3.02. Conditions Precedent to Each Revolving Credit Borrowing. The obligation of each Lender to make a Revolving Credit Advance on the occasion of each Revolving Credit Borrowing shall be subject to the conditions precedent that the Effective Date shall have occurred and on the date of such Revolving Credit Borrowing (a) the following statements shall be true (and each of the giving of the applicable Notice of Revolving Credit Borrowing and the acceptance by the Borrower of the proceeds of such Revolving Credit Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing such statements are true): (i) the representations and warranties contained in Section 4.01 (except, in the case of Revolving Credit Borrowings, the representations set forth in the last sentence of subsection (e) thereof and in subsection (f)(i) thereof) are correct on and as of such date, before and after giving effect to such Revolving Credit Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and (ii) no event has occurred and is continuing, or would result from such Revolving Credit Borrowing or from the application of the proceeds therefrom, that constitutes a Default; and (b) the Agent shall have received such other approvals, opinions or documents as any Lender through the Agent may reasonably request. SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing. The obligation of each Lender that is to make a Competitive Bid Advance on the occasion of a Competitive Bid Borrowing to make such Competitive Bid Advance as part of such Competitive Bid Borrowing is subject to the conditions precedent that (i) the Agent shall have received the written confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on or before the date of such Competitive Bid Borrowing, but prior to such Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note payable to the order of such Lender for each of the one or more Competitive Bid Advances to be made by such Lender as part of such Competitive Bid Borrowing, in a principal amount equal to the principal amount of the Competitive Bid Advance to be evidenced thereby and otherwise on such terms as were agreed to for such Competitive Bid Advance in accordance with Section 2.03, and (iii) on the date of such Competitive Bid Borrowing the following statements shall be true (and each of the giving of the applicable Notice of Competitive Bid Borrowing and the acceptance by the Borrower of the proceeds of such Competitive Bid Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Competitive Bid Borrowing such statements are true): 20 21 (a) the representations and warranties contained in Section 4.01 are correct on and as of the date of such Competitive Bid Borrowing, before and after giving effect to such Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, (b) no event has occurred and is continuing, or would result from such Competitive Bid Borrowing or from the application of the proceeds therefrom, that constitutes a Default, and (c) no event has occurred and no circumstance exists as a result of which the information concerning the Borrower that has been provided to the Agent and each Lender by the Borrower in connection herewith would include an untrue statement of a material fact or omit to state any material fact or any fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. SECTION 3.04. Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that the Borrower, by notice to the Lenders, designates as the proposed Effective Date, specifying its objection thereto. The Agent shall promptly notify the Lenders of the occurrence of the Effective Date. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland. (b) The execution, delivery and performance by the Borrower of this Agreement and the Notes to be delivered by it, and the consummation of the transactions contemplated hereby, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's charter or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance by the Borrower of this Agreement or the Notes to be delivered by it. (d) This Agreement has been, and each of the Notes to be delivered by it when delivered hereunder will have been, duly executed and delivered by the Borrower. This Agreement is, and each of the Notes when delivered hereunder will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. (e) The Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 1999, and the related Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of Arthur Andersen LLP, independent public accountants, and the Consolidated balance sheet of the Borrower and its Subsidiaries as at September 30, 2000, and the related Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the nine months then ended, duly certified by the chief financial officer of the 21 22 Borrower, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheet as at September 30, 2000, and said statements of income and cash flows for the nine months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles consistently applied. Since December 31, 1999, there has been no Material Adverse Change. (f) There is no pending or threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) purports to affect the legality, validity or enforceability of this Agreement or any Note or the consummation of the transactions contemplated hereby, and there has been no adverse change in the status, or financial effect on the Borrower or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 3.01(b) hereto. (g) No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading. (h) The Borrower and its Subsidiaries are in compliance with Regulations T, U and X. Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder. (i) Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect. (j) The Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective property, except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect. (k) On the date of this Agreement, the Borrower and its Subsidiaries have good title, free of all Liens other than those permitted by Section 5.02(a) to all of the property and assets reflected in the Borrower's most recent consolidated financial statements provided to the Agent as owned by the Borrower and its Subsidiaries. (l) The Borrower and each of its Subsidiaries owns or possesses all material patents, trademarks, trade names, service marks, copyright, licenses and rights with respect to the foregoing necessary for the future conduct of its business, without any known material conflict with the rights of others. (m) In the ordinary course of its business, the officers of the Borrower consider the effect of Environmental Laws on the business of the Borrower and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Borrower and its Subsidiaries due to Environmental Laws. On the basis of this consideration, the Borrower has concluded that Environmental laws cannot reasonably be expected to have a Material Adverse Effect. Except as disclosed on Schedule 3.01(b) hereto, neither the Borrower nor any Subsidiary has received any notice to the effect that is operations are not in material compliance with any of the requirements of applicable Environmental Laws 22 23 or are the subject of any foreign or domestic, federal, state or local investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect. (n) Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by and "investment company" or an "affiliated person" thereof or an "affiliated person" of such affiliated person, in each case within the meaning of the Investment Company Act of 1940, as amended. (o) Neither the Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and Environmental Laws, which, if violated, could reasonably be expected to have a Material Adverse Effect. (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. (c) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. (d) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Borrower and its Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(b) and provided further that neither the Borrower nor any of its Subsidiaries shall be required to preserve any right or franchise if the Board of Directors of the Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Subsidiary or the Lenders. (e) Visitation Rights. At any reasonable time and from time to time, permit the Agent or any of the Lenders or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants. 23 24 (f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time. (g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (h) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under this Agreement with any of their Affiliates on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate. (i) Conduct of Business. Carry on and conduct its business, and cause each of its Subsidiaries to carry on and conduct its business, in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted or lines of business reasonably related thereto. (j) Reporting Requirements. Furnish to the Lenders: (i) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, the Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified (subject to year-end audit adjustments) by the chief financial officer of the Borrower as having been prepared in accordance with generally accepted accounting principles and certificates of the chief financial officer of the Borrower as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 5.03, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.03, a statement of reconciliation conforming such financial statements to GAAP; (ii) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such year for the Borrower and its Subsidiaries, containing the Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal year, in each case accompanied by an opinion acceptable to the Required Lenders by Arthur Andersen LLP or other independent public accountants acceptable to the Required Lenders, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.03, a statement of reconciliation conforming such financial statements to GAAP; (iii) as soon as possible and in any event within five days after the occurrence of each Default continuing on the date of such statement, a statement of the chief financial officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto; (iv) promptly after the sending or filing thereof, copies of all reports that the Borrower sends to any of its securityholders, and copies of all reports and registration statements that the Borrower or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; 24 25 (v) promptly after the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting the Borrower or any of its Subsidiaries of the type described in Section 4.01(f); and (vi) such other information respecting the Borrower or any of its Subsidiaries as any Lender through the Agent may from time to time reasonably request. SECTION 5.02. Negative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not: (a) Liens, Etc. Create or suffer to exist, or permit any of its Subsidiaries to create or suffer to exist, any Lien on or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, other than: (i) Permitted Liens, (ii) purchase money Liens upon or in any assets acquired or held by the Borrower or any Subsidiary in the ordinary course of business to secure the purchase price of such assets or to secure Debt incurred solely for the purpose of financing the acquisition of such assets, or Liens existing on such assets at the time of its acquisition (other than any such Liens created in contemplation of such acquisition that were not incurred to finance the acquisition of such assets) or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided, however, that no such Lien shall extend to or cover any assets of any character other than the assets being acquired, and no such extension, renewal or replacement shall extend to or cover any assets not theretofore subject to the Lien being extended, renewed or replaced, (iii) the Liens existing on the Effective Date and described on Schedule 5.02(a) hereto, (iv) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Borrower or any Subsidiary of the Borrower or becomes a Subsidiary of the Borrower; provided that such Liens were not created in contemplation of such merger, consolidation or acquisition and do not extend to any assets other than those of the Person so merged into or consolidated with the Borrower or such Subsidiary or acquired by the Borrower or such Subsidiary, (v) Liens on cash and cash equivalents securing obligations under Hedge Agreements, provided that the aggregate amount of cash and cash equivalents subject to such Liens shall not exceed $5,000,000 at any time outstanding, (vi) other Liens securing Debt in an aggregate principal amount not to exceed $25,000,000 at any time outstanding, and (vii) the replacement, extension or renewal of any Lien permitted by clause (ii), (iii) or (iv) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby. (b) Mergers, Etc. Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, any Person, or permit any of its Subsidiaries to do so, except that any Subsidiary of the Borrower may merge or consolidate with or into, or dispose of assets to, any other Subsidiary of the Borrower, and except that any Subsidiary of the Borrower may merge into or 25 26 dispose of assets to the Borrower, provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom. (c) Subsidiary Debt. Permit any of its Subsidiaries to incur or at any time be liable with respect to any Debt or to issue or have outstanding any preferred stock, except: (i) Debt or preferred stock outstanding on the date hereof, (ii) Debt or preferred stock of a Subsidiary issued to and held by the Borrower or a wholly-owned Subsidiary of the Borrower, (iii) Debt or preferred stock of any corporation existing at the time such corporation becomes a Subsidiary of the Borrower and not created in contemplation of such event, (iv) refinancing, extension, renewal or refunding of any Debt or preferred stock permitted by the foregoing clauses (i) though (iii) and (v) Debt or preferred stock in addition to that set forth in clauses (i) through (iv) if, after giving effect thereto, the aggregate outstanding principal amount of Debt of all Subsidiaries pursuant to this clause (v) does not exceed $250,000,000 at any time outstanding. (d) Hedge Agreements. Enter into, or permit any of its Subsidiaries to enter into, any Hedge Agreements other than Hedge Agreements pursuant to which the Borrower or any Subsidiary has hedged its reasonably estimated interest rate, foreign currency or commodity exposure. SECTION 5.03. Financial Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will: (a) Leverage Ratio. Maintain a ratio of Consolidated Debt to Consolidated Debt plus shareholders' equity of not greater than 0.50 : 1.00: (b) Fixed Charge Coverage Ratio. Maintain, as of the last day of each fiscal quarter, a ratio of Consolidated EBITDA of the Borrower and its Subsidiaries for the period of four fiscal quarters then ended to interest payable on, and amortization of debt discount in respect of, all Debt during such period by the Borrower and its Subsidiaries of not less than 3.0 : 1.0. ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Advance when the same becomes due and payable; or the Borrower shall fail to pay any interest on any Advance or make any other payment of fees or other amounts payable under this Agreement or any Note within three Business Days after the same becomes due and payable; or (b) Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made; or 26 27 (c) (i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(d), (e), (h) or (j), 5.02 or 5.03, or (ii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender; or (d) The Borrower or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any Debt that is outstanding in a principal or notional amount of at least $10,000,000 in the aggregate (but excluding Debt outstanding hereunder) of the Borrower or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (e) The Borrower or any of its Significant Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of its Significant Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower or any of its Significant Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Judgments or orders for the payment of money in excess of $10,000,000 in the aggregate shall be rendered against the Borrower or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) Lafarge S.A. shall own directly or indirectly 50% or less of the outstanding shares of Voting Stock of the Borrower on a fully diluted basis; or (h) The Borrower or any of its ERISA Affiliates shall incur, or shall be reasonably likely to incur liability as a result of one or more of the following that, individually or in the aggregate, could reasonably be likely to have a Material Adverse Effect: (i) the occurrence of any ERISA Event; (ii) the partial or complete withdrawal of the Borrower or any of its ERISA Affiliates from a Multiemployer Plan; or (iii) the reorganization or termination of a Multiemployer Plan; then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall 27 28 become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE VII THE AGENT SECTION 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement or applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (i) may treat the Lender that made any Advance as the holder of the Debt resulting therefrom until the Agent receives and accepts an Assignment and Acceptance entered into by such Lender, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. Citibank and Affiliates. With respect to its Commitment, the Advances made by it and the Note issued to it, Citibank shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Citibank in its individual capacity. Citibank and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, the Borrower, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any such Subsidiary, all as if Citibank were not the Agent and without any duty to account therefor to the Lenders. SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. 28 29 SECTION 7.05. Indemnification. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Revolving Credit Advances then owed to each of them (or if no Revolving Credit Advances are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under this Agreement (collectively, the "Indemnified Costs"), provided that no Lender shall be liable for any portion of the Indemnified Costs resulting from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed for such expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by the Agent, any Lender or a third party. SECTION 7.06. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 7.07. Other Agents. Each Lender hereby acknowledges that neither the documentation agent nor any other Lender designated as any "Agent" on the signature pages hereof has any liability hereunder other than in its capacity as a Lender. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Revolving Credit Notes, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (a) waive any of the conditions specified in Section 3.01, (b) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce or subordinate the principal of, or interest on, the Revolving Credit Advances or any fees or other amounts payable hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Revolving Credit Advances or any fees or other amounts payable hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Revolving Credit Advances, or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder or (f) amend this Section 8.01; and provided further that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any Note. SECTION 8.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier communication) and mailed, telecopied or delivered, if to the Borrower, at its 29 30 address at 12950 Worldgate Drive, Herndon, Virginia 20170, Attention: Treasurer; if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; and if to the Agent, at its address at Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department; or, as to the Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. All such notices and communications shall, when mailed or telecopied, be effective when deposited in the mails or telecopied, respectively, except that notices and communications to the Agent pursuant to Article II, III or VII shall not be effective until received by the Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, (A) all due diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, consultant, and audit expenses and (B) the reasonable fees and expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this Agreement. The Borrower further agrees to pay on demand all costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, reasonable fees and expenses of counsel for the Agent and each Lender in connection with the enforcement of rights under this Section 8.04(a). (b) The Borrower agrees to indemnify and hold harmless the Agent and each Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances or (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way to the Borrower or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found in a judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 8.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Borrower also agrees not to assert any claim for special, indirect, consequential or punitive damages against the Agent, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, arising out of or otherwise relating to the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances. (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance, LIBO Rate Advance is made by the Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.08(d) or (e), 2.10 or 2.12, acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or by an Eligible Assignee to a Lender other than on the last day of the Interest Period for such Advance upon an assignment of rights and obligations under this Agreement pursuant to Section 8.07 as a result of a demand by the Borrower pursuant to 30 31 Section 8.07(a), the Borrower shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (d) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Sections 2.11, 2.14 and 8.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes. SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and the Note held by such Lender, whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its Affiliates may have. SECTION 8.06. Binding Effect. This Agreement shall become effective (other than Sections 2.01 and 2.03, which shall only become effective upon satisfaction of the conditions precedent set forth in Section 3.01) when it shall have been executed by the Borrower and the Agent and when the Agent shall have been notified by each Initial Lender that such Initial Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 8.07. Assignments and Participations. (a) Each Lender may and, if demanded by the Borrower (following a demand by such Lender pursuant to Section 2.11 or 2.14 or upon a reasonable determination by the Borrower that a change in law or circumstances has created a reasonable likelihood that such Lender will make a demand pursuant to Section 2.11 or 2.14) upon at least five Business Days' notice to such Lender and the Agent, will assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Revolving Credit Advances owing to it and the Revolving Credit Note or Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement (other than any right to make Competitive Bid Advances, Competitive Bid Advances owing to it and Competitive Bid Notes), (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof, (iii) each such assignment shall be to an Eligible Assignee, (iv) each such assignment made as a result of a demand by the Borrower pursuant to this Section 8.07(a) shall be arranged by the Borrower after consultation with the Agent and shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement, (v) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section 8.07(a) unless and until such Lender shall have received one or more payments from either the Borrower or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement, and (vi) the parties to each such assignment shall execute and deliver 31 32 to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Revolving Credit Note subject to such assignment and a processing and recordation fee of $3,500 payable by the parties to each such assignment, provided, however, that in the case of each assignment made as a result of a demand by the Borrower, such recordation fee shall be payable by the Borrower except that no such recordation fee shall be payable in the case of an assignment made at the request of the Borrower to an Eligible Assignee that is an existing Lender, and (vii) any Lender may, without the approval of the Borrower and the Agent, assign all or a portion of its rights to any of its Affiliates so long as such assignment does not result in any increased cost to, or obligation of, the Borrower. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Section 2.11, 2.14 and 8.04 to the extent any claim thereunder relates to an event arising prior such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. (c) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Revolving Credit Note or Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (d) The Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Each Lender may sell participations to one or more banks or other entities (other than the Borrower or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and any Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely 32 33 responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any Note, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information relating to the Borrower received by it from such Lender. (g) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and any Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. SECTION 8.08. Confidentiality. Neither the Agent nor any Lender shall disclose any Confidential Information to any other Person without the consent of the Borrower, other than (a) to the Agent's or such Lender's Affiliates and their officers, directors, employees, agents and advisors and, as contemplated by Section 8.07(f), to actual or prospective assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process and (d) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking. SECTION 8.09. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.10. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the Notes, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. The Borrower hereby agrees that service of process in any such action or proceeding brought in the any such New York State court or in such federal court may be made upon The Prentice-Hall Corporation System, Inc. at its offices at 80 State Street, Albany, New York 12207-2543 (the "Process Agent") and the Borrower hereby irrevocably appoints the Process Agent its authorized agent to accept such service of process, and agrees that the failure of the Process Agent to give any notice of any such service shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. The Borrower hereby further irrevocably consents to the service of process in any action or proceeding in such courts by the mailing thereof by any parties hereto by registered or certified mail, postage prepaid, to the Borrower at its address specified pursuant to Section 8.02, with a copy addressed to the Law Department. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this 33 34 Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or the Notes in the courts of any jurisdiction. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. SECTION 8.12. Waiver of Jury Trial. Each of the Borrower, the Agent and the Lenders hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the Notes or the actions of the Agent or any Lender in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. LAFARGE CORPORATION By /s/ Kevin Grant --------------- Title: VP & Treasurer CITIBANK, N.A., as Agent By /s/ Robert D. Wetrus -------------------- Title: Managing Director and Vice President 34 35
Initial Lenders --------------- Commitment Administrative Agent -------------------- $40,000,000 CITIBANK, N.A. By /s/ Robert D. Wetrus -------------------- Title: Managing Director and Vice President Syndication Agents ------------------ $40,000,000 BAYERISCHE LANDESBANK GIROZENTRALE By /s/ Hereward Drummond --------------------- Title: Senior Vice President By /s/ Wolfgang Kottmann --------------------- Title: Vice President $40,000,000 BNP PARIBAS. By /s/ Francois Fahy ----------------- Title:Vice President By /s/ Christopher Criswell ------------------------ Title: Director $40,000,000 SUNTRUST BANK By /s/ Andrew P. Hines ------------------- Title: Vice President $40,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE By /s/ Andreas Schroeter --------------------- Title: Director By /s/ Lars Kickstein ------------------ Title:Manager Lenders ------- $40,000,000 THE BANK OF NOVA SCOTIA By /s/ Brian S. Allen ------------------
35 36 Title: Managing Director $40,000,000 FIRST UNION NATIONAL BANK By /s/ G. Mendel Lay, Jr. ---------------------- Title: Sr. Vice President $20,000,000 WACHOVIA BANK By /s/ Robert A. Boss ------------------------- Title: Senior Vice President $300,000,000 Total of the Commitments
36 EX-21 10 w47043ex21.txt EX-21 MAJOR SUBSIDIARIES 1 Exhibit 21 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.
Name(s) Jurisdiction of Incorporation - ------------------------------------------ ----------------------------- American Transport Leasing, Inc. Delaware Cement Transport, Ltd. North Dakota Friday Harbor Sand & Gravel Co. Washington International Atlantins Insurance Company Vermont Lafarge Dakota Inc. North Dakota Lafarge Florida Inc. Florida Lafarge Midwest, Inc. Delaware Mineral Solutions Inc. Delaware Presque Isle Corporation Delaware Redland Inc. Delaware Redland Genstar, Inc. Delaware Western Mobile, Inc. Delaware Sierra Bay Receivables Inc. Nevada Systech Environmental Corporation Delaware Tews Company Delaware Lafarge Canada Inc. Canada Gestion Carim Inc. Quebec International Atlantins Agencies Inc. British Columbia Johnson Concrete & Material Ltd. Saskatchewan LCI-Warren Merger Inc. Canada Lafarge Canada Finance Inc. Canada The Warren Paving & Materials Group Limited Ontario Les sablieres Forestville Inc. Quebec Lulu Transport Inc. British Columbia N C Rubber Products Inc. Ontario Quality Ready-Mix Limited Ontario Re-Wa Holdings Ltd. Alberta Richvale York Block Inc. Ontario Valley Rite-Mix Ltd. British Columbia
Lafarge Corporation also does business under the following names: Florida Portland Cement Company, Lafarge Construction Materials, Lafarge Gypsum, Trinity Portland Cement Company. Lafarge Canada Inc. also does business under the following names: Alberta Concrete Products, Apex Gravel, Bestpipe, Canada Concrete, Capital Concrete, Challenge Concrete, Champion Concrete, Cinq Concrete, Coldstream Concrete, Columbia Concrete, Conmac Western Industries, Country Building Supplies, Crown Equipment, Crown Paving and Engineering, Duracon, Francon-Lafarge, Great Lakes Flyash, High River Concrete, Johnston Ready Mix, Lafarge Concrete, Lafarge Construction Materials, Lafarge Gypsum, Lethbridge Concrete Products, Maritime Cement, Nelson Aggregate Co., O.K. Construction Materials, Permanent-Lafarge, Red-D-Mix Block, Richvale - McCord, Richvale - York, Rocky Mountain Precast, Spartan Explosives, Standard Aggregates, Standard Asphalt, Supercrete, Trans-Alta Flyash. 2 Information regarding 86 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-23 11 w47043ex23.txt EX-23 ARTHUR ANDERSEN CONSENT 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report 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, Form 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), (vii) Registration Statement on Form S-8, File No. 33-51873, (viii) Registration Statement on Form S-8, File No. 333-65897, (ix) Registration Statement on Form S-8, File No. 333-65899, and (x) Registration Statement on Form S-3, File No. 333-57333. ARTHUR ANDERSEN LLP Vienna, Virginia March 27, 2001 -----END PRIVACY-ENHANCED MESSAGE-----