-----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, ILSyfPFiZXlN/C+IhC4+fLU14ai87E5bTuVOYfGoH84OI4mXZg73eEqneoyFOGuC BoYcAqqCdvc+40TbRwtkLg== 0000950130-00-001319.txt : 20000316 0000950130-00-001319.hdr.sgml : 20000316 ACCESSION NUMBER: 0000950130-00-001319 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 75 FILED AS OF DATE: 20000315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BETTER MINERALS & AGGREGATES CO CENTRAL INDEX KEY: 0001108673 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 550749125 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518 FILM NUMBER: 570338 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENNSYLVANIA GLASS SAND CORP CENTRAL INDEX KEY: 0000077245 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 943024593 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-01 FILM NUMBER: 570339 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US SILICA CO CENTRAL INDEX KEY: 0001108675 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 230958670 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-02 FILM NUMBER: 570340 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BETTER MATERIALS CORP CENTRAL INDEX KEY: 0001108676 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231542403 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-03 FILM NUMBER: 570341 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BMC TRUCKING INC CENTRAL INDEX KEY: 0001108677 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232986246 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-04 FILM NUMBER: 570342 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BUCKS COUNTY CRUSHED STONE CO CENTRAL INDEX KEY: 0001108679 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231468333 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-05 FILM NUMBER: 570343 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHIPPEWA FARMS CORP CENTRAL INDEX KEY: 0001108680 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232160463 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-06 FILM NUMBER: 570344 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHORE STONE CO INC CENTRAL INDEX KEY: 0001108681 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232243672 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-07 FILM NUMBER: 570345 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PETTINOS GEORGE F INC CENTRAL INDEX KEY: 0001108684 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 230966840 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-08 FILM NUMBER: 570346 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OTTAWA SILICA CO CENTRAL INDEX KEY: 0001108685 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 943093543 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-09 FILM NUMBER: 570347 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FULTON LAND & TIMBER CO CENTRAL INDEX KEY: 0001108686 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231622540 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-10 FILM NUMBER: 570348 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMERCIAL STONE CO INC CENTRAL INDEX KEY: 0001108687 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 251225764 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-11 FILM NUMBER: 570349 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELLEN JAY INC CENTRAL INDEX KEY: 0001108688 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 222033676 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-12 FILM NUMBER: 570350 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STONE MATERIALS CO LLC CENTRAL INDEX KEY: 0001108689 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522205266 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-13 FILM NUMBER: 570351 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMERCIAL AGGREGATES TRANSPORTATION & SALES LLC CENTRAL INDEX KEY: 0001108690 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 251846125 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-32518-14 FILM NUMBER: 570352 BUSINESS ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 BUSINESS PHONE: 3042582500 MAIL ADDRESS: STREET 1: ROUTE 522 NORTH STREET 2: P O BOX 187 CITY: BERKELEY SPRINGS STATE: WV ZIP: 25411 S-4 1 FORM S-4 As filed with the Securities and Exchange Commission on March 15, 2000. Registration No. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 BETTER MINERALS & AGGREGATES COMPANY AFFILIATE GUARANTORS LISTED ON SCHEDULE ATTACHED HERETO (Exact name of Registrant as specified in its charter) DELAWARE 1446-1 55-0749125 (State of Registrant's (Primary Standard (I.R.S. Employer Incorporation) Industrial Identification Number) Classification Code Number) ROUTE 522 NORTH, P.O. BOX 187 GARY E. BOCKRATH BERKELEY SPRINGS, WEST VIRGINIA 25411 Vice President and Chief Financial (304) 258-2500 Officer (Address, Including Zip Code, and Better Minerals & Aggregates Company Telephone Number, Including Area Code, Route 522 North, P.O. Box 187 of Registrant's Principal Executive Berkeley Springs, West Virginia 25411 Office) (304) 258-2500 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service of Process) With A Copy To: DAVID P. FALCK, ESQ. Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, NY 10004 (212) 858-1000 --------------- Approximate Date of Commencement of Proposed Sale to the Public: As soon as practicable after this registration statement becomes effective. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] --------------- CALCULATION OF REGISTRATION FEE - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
Proposed Proposed Maximum Maximum Offering Aggregate Title of Each Class Amount to be Price Offering Amount of of Securities to be Registered Registered (1) Per Unit Price (1) Registration Fee - --------------------------------------------------------------------------------------------------- 13% Senior Subordinated Notes due 2009...... $150,000,000 100% $150,000,000 $39,600 - --------------------------------------------------------------------------------------------------- Guarantees of 13% Senior Subordinated Notes due 2009................................... (2) (2) (2) (2) - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee. (2) U.S. Silica Company, Better Materials Corporation, BMC Trucking, Inc., Bucks County Crushed Stone Company, Chippewa Farms Corporation, Shore Stone Company, Inc., Pennsylvania Glass Sand Corporation, George F. Pettinos, Inc., Ottawa Silica Company, The Fulton Land and Timber Company, Ellen Jay, Inc., Stone Materials Company, LLC, Commercial Stone Co., Inc. and Commercial Aggregates Transportation and Sales, LLC will guarantee, jointly and severally, the obligations of Better Minerals & Aggregates Company under the 13% Senior Subordinated Notes due 2009. Pursuant to Rule 457(n), no additional registration fee is being paid in respect of the guarantees. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SCHEDULE OF ADDITIONAL REGISTRANT GUARANTORS
Primary Standard I.R.S. Exact Name Of Guarantor Registrants Industrial Employer As Specified State Of Classification Identification In Their Respective Charters Formation Number Number ----------------------------------- ------------ -------------- -------------- U.S. Silica Company Delaware 1446 23-0958670 Better Materials Corporation Pennsylvania 1429 23-1542403 BMC Trucking, Inc. Delaware 4212 23-2986246 Bucks County Crushed Stone Company Pennsylvania 1429 23-1468333 Chippewa Farms Corporation Pennsylvania 9999 23-2160463 Shore Stone Company, Inc. New Jersey 1442 23-2243672 Pennsylvania Glass Sand Corporation Delaware 1446 94-3024593 George F. Pettinos, Inc. Delaware 1442 23-0966840 Ottawa Silica Company Delaware 1446 94-3093543 The Fulton Land and Timber Company Pennsylvania 1446 23-1622540 Ellen Jay, Inc. New Jersey 1442 22-2033676 Stone Materials Company, LLC Delaware 1422-1 52-2205266 Commercial Stone Co., Inc. Pennsylvania 1422 25-1225764 Commercial Aggregates Transportation and Sales, LLC Delaware 4212 25-1846125
---------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. EXPLANATORY NOTE This registration statement covers the registration of $150,000,000 aggregate principal amount of 13% Senior Subordinated Notes due 2009 of Better Minerals & Aggregates Company, guaranteed by U.S. Silica Company, Better Materials Corporation, BMC Trucking, Inc., Bucks County Crushed Stone Company, Chippewa Farms Corporation, Shore Stone Company, Inc., Pennsylvania Glass Sand Corporation, George F. Pettinos, Inc., Ottawa Silica Company, The Fulton Land and Timber Company, Ellen Jay, Inc., Stone Materials Company, LLC, Commercial Stone Co., Inc. and Commercial Aggregates Transportation and Sales, LLC, that may be exchanged for an equal aggregate principal amount of the issuer's outstanding 13% Senior Subordinated Notes due 2009, also guaranteed by the listed note guarantors. This registration statement also covers the registration of new notes for resale by Chase Securities Inc. in market-making transactions. The complete prospectus relating to the exchange offer follows this explanatory note. Following the exchange offer prospectus are certain pages of the prospectus relating solely to those market-making transactions, including alternate front and back cover pages and alternate sections entitled "Risk Factors--You Cannot Be Sure that an Active Trading Market Will Develop for the New Notes," "Use of Proceeds" and "Plan of Distribution." In addition, the market-making prospectus will not include the following captions (or the information set forth under those captions) in the exchange offer prospectus: "Summary--Summary of the Terms of the Exchange Offer," "Risk Factors--Failure To Exchange Old Notes," "The Exchange Offer," "Exchange and Registration Rights Agreement" and "Certain United States Federal Tax Consequences." All other sections of the exchange offer prospectus will be included in the market-making prospectus. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may + +not sell these securities until the registration statement filed with the + +Securities and Exchange Commission is effective. This prospectus is not an + +offer to sell these securities and it is not soliciting an offer to buy these + +securities in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED MARCH 15, 2000 Prospectus Better Minerals & Aggregates Company Offer To Exchange All Outstanding 13% Senior Subordinated Notes due 2009 for 13% Senior Subordinated Notes due 2009, Which Have Been Registered Under the Securities Act of 1933 The Exchange Offer --We will exchange all old notes that are validly tendered and not validly withdrawn for an equal principal amount of new notes that are freely tradable. --You may withdraw tenders of old notes at any time prior to the expiration of the exchange offer. --The exchange offer expires at 5:00 p.m., New York City time, on , 2000, unless we extend the offer. --The exchange will not be a taxable event for U.S. federal income tax purposes. The New Notes --The terms of the new notes to be issued in the exchange offer are substantially identical to the old notes issued on October 1, 1999, except that the new notes will be freely tradeable. --No public market currently exists for the old notes. We do not intend to list the new notes on any securities exchange and, therefore, no active public market is anticipated. ----------------------------------------- YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 16 OF THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER. ----------------------------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. ----------------------------------------- The date of this prospectus is , 2000. TABLE OF CONTENTS
Page ---- Where You Can Find More Information...................................... ii Forward-Looking Statements............................................... ii Industry Data............................................................ iii Measurements............................................................. iii Summary.................................................................. 1 Risk Factors............................................................. 16 The Exchange Offer....................................................... 25 Use of Proceeds.......................................................... 36 Capitalization........................................................... 36 Unaudited Pro Forma Financial Data....................................... 37 Selected Financial Data.................................................. 41 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 42 Industry Overview........................................................ 52 Business................................................................. 54 Management............................................................... 65 Certain Relationships and Related Transactions........................... 69 Security Ownership of Certain Beneficial Owners and Management........... 71 Description of the New Credit Facilities................................. 76 Description of the New Notes............................................. 79 Exchange and Registration Rights Agreement............................... 121 Certain United States Federal Tax Consequences........................... 124 Book-Entry; Delivery and Form............................................ 128 Plan of Distribution..................................................... 131 Legal Matters............................................................ 131 Experts.................................................................. 132 Index to Consolidated Financial Statements............................... F-1
WHERE YOU CAN FIND MORE INFORMATION Upon effectiveness of the registration statement of which this prospectus is a part, we will file annual and quarterly reports and other information with the Securities and Exchange Commission. You may read and copy any reports, documents and other information we file at the Securities and Exchange Commission's public reference rooms in Washington, D.C., New York, New York, and Chicago, Illinois. Please call 1-800-SEC-0330 for further information on the public reference rooms. Our filings will also be available to the public from commercial document retrieval services and at the web site maintained by the Securities and Exchange Commission at http://www.sec.gov. We have filed a registration statement on Form S-4 to register with the Securities and Exchange Commission the new notes to be issued in exchange for the old notes. This prospectus is part of that registration statement. As allowed by the Securities and Exchange Commission's rules, this prospectus does not contain all of the information you can find in the registration statement and the exhibits to the registration statement. We have not authorized anyone to give you any information or to make any representations about us or the transactions we discuss in this prospectus other than those contained in this prospectus. If you are given any information or representations about these matters that is not discussed in this prospectus, you must not rely on that information. This prospectus is not an offer to sell or a solicitation of an offer to buy securities anywhere or to anyone where or to whom we are not permitted to offer or sell securities under applicable law. The delivery of this prospectus does not, under any circumstances, mean that there has not been a change in our affairs since the date of this prospectus. It also does not mean that the information in this prospectus is correct after this date. FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements" including, in particular, the statements about our plans, strategies and prospects under the headings "Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our plans, intentions and expectations reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that our plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements we make in this prospectus are set forth in this prospectus, including factors disclosed under "Risk Factors." We believe that the following factors, among others, could affect our future performance and cause actual results to differ materially from those expressed or implied by forward-looking statements made in this prospectus: -- general and regional economic conditions, including the economy in the states in which we have production facilities and in which we sell our products; -- demand for residential and commercial construction; -- demand for automobiles and other vehicles; -- levels of government spending on road and other infrastructure construction; -- the competitive nature of the industrial minerals and aggregates industries; -- operating risks typical of the industrial minerals and aggregates industries; -- difficulties in, and unanticipated expense of, assimilating newly- acquired businesses; -- fluctuations in prices for, and availability of, transportation and power; ii -- unfavorable weather conditions; -- regulatory compliance, including compliance with environmental and silica exposure regulations, by us and our customers; -- litigation affecting us and our customers; -- changes in the demand for our products due to the availability of substitutes for products of our customers; and -- labor unrest. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, our future performance may differ materially from that expressed or implied by the forward-looking statements discussed in this prospectus. INDUSTRY DATA Information contained in this prospectus concerning the industrial minerals and aggregates industries, our general expectations concerning these industries and our market position and market share within these industries and the end use markets we serve are based on estimates prepared by us using data from various sources (primarily the U.S. Geological Survey, including its web site at www.usgs.gov, the Committee on Environment and Public Works of the United States Senate and data from our internal research) and on assumptions made by us, based on that data and our knowledge of these industries, which we believe to be reasonable. We believe data regarding the industrial minerals and aggregates industries and our market position and market share within those industries and the end use markets we serve are inherently imprecise, but are generally indicative of their size and our market position and market share within those industries and end use markets. While we are not aware of any misstatements regarding any industry data presented in this prospectus, our estimates, particularly as they relate to our general expectations concerning the industrial minerals and aggregates industries, involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption "Risk Factors" in this prospectus. Information contained in this prospectus relating to the Transportation Equity Act for the 21st Century comes primarily from the United States Department of Transportation's web site located at www.fhwa.dot.gov. MEASUREMENTS When used in this prospectus: -- data in tons or tonnage is measured in "short" tons (2,000 pounds); -- mesh refers to size measured in sieve openings per square inch and thus as mesh size increases, particle size decreases; and -- microns refer to size (1 micron is equal to 0.00004 of an inch). iii SUMMARY This summary highlights information contained elsewhere in this prospectus. This prospectus includes information about the exchange offer, as well as information regarding our business, certain recent transactions entered into by us and detailed financial data. You should read this entire prospectus carefully, including the "Risk Factors" section and the financial statements and the notes thereto. Unless otherwise indicated or the context otherwise requires, all references in this prospectus to "we," "us," "our" and similar terms, as well as references to "Better Minerals & Aggregates," refer to Better Minerals & Aggregates Company (formerly known as USS Intermediate Holdco, Inc.) and its direct and indirect subsidiaries, including Commercial Stone Co., Inc. ("Commercial Stone Co.") and Commercial Aggregates Transportation and Sales, L.P. ("CATS"), which we acquired on October 1, 1999, and all references to the "issuer" refer to Better Minerals & Aggregates Company only and not to any of its subsidiaries. In addition, all references in this prospectus to "USS Holdings" refer to USS Holdings, Inc., our indirect parent, all references to "BMAC Holdings" refer to BMAC Holdings, Inc., our direct parent, and all references to "U.S. Silica" refer to U.S. Silica Company, one of our subsidiaries. Unless otherwise indicated, when we set forth financial or other information in this prospectus on a pro forma basis for the year ended December 31, 1999, that information gives effect to the Transactions (as defined below) and the acquisition of certain operating assets in southern New Jersey from Unimin Corporation (the "Morie Assets") on April 9, 1999 as if they had occurred on January 1, 1999. When we refer to our aggregates business in this prospectus, it includes our hot mixed asphalt business. Any reference to "notes" in this prospectus refers to both "old notes" and "new notes," unless the context otherwise requires. Better Minerals & Aggregates Company We mine, process and market industrial minerals, principally silica, in the eastern and midwestern United States. We also mine, process and market aggregates and produce and market hot mixed asphalt in certain geographic areas in Pennsylvania and New Jersey. We are the second leading producer of silica in the United States, accounting for approximately 23% of industry volume in 1999. We believe that we have leading positions in most of our key end use markets for our silica products, typically occupying the number one or two position by sales. These end use markets include container glass, fiberglass, specialty glass, flat glass, fillers and extenders (primarily used in paints and coatings), chemicals and ceramics. We also supply our silica products to the foundry, building materials and other end use markets. Our customers use our aggregates, which consist of high quality crushed stone, construction sand and gravel, for road construction and maintenance, other infrastructure projects and residential and commercial construction and to produce hot mixed asphalt and concrete products. We also use our aggregates to produce hot mixed asphalt. We operate a network of 25 production facilities in 14 states. Many of our production facilities are located near major modes of transportation and our significant customers, which reduces transportation costs and enhances customer service. Our principal industrial minerals and aggregates properties each have deposits that we believe will support production in excess of 15 years. On a pro forma basis, our industrial minerals business (substantially all the net sales of which consist of silica products) and our aggregates business accounted for 65.2% and 34.8% of our net sales, respectively, for the year ended December 31, 1999. On a pro forma basis, we had net sales of $248.1 million for the year ended December 31, 1999. Industry Overview In 1998, consumption of silica in the United States was approximately 29.0 million tons, generating sales of approximately $491 million. The distinct characteristics of silica--size, purity, color, inertness, hardness and resistance to high temperatures--make it difficult to substitute in a 1 variety of applications. From 1988 to 1998, sales of silica in the United States grew at a compound annual growth rate of approximately 2.7%. This growth resulted from increased demand across a wide variety of end use markets. In 1998, consumption of aggregates (not including hot mixed asphalt) in the United States was approximately 2.8 billion tons, generating sales of approximately $13.5 billion. Aggregates consist of crushed stone, construction sand and gravel. From 1988 to 1998, sales of aggregates in the United States grew at a compound annual growth rate of approximately 4.4%. This growth resulted from increased demand for road construction and maintenance, other infrastructure projects and residential and commercial construction. We believe demand for aggregates will increase due to the passage by Congress in 1998 of the Transportation Equity Act for the 21st Century ("TEA-21"). TEA-21 establishes a $218 billion transportation program that provides for increased federal funding for highways and related infrastructure improvements through 2003. TEA-21 authorizes average annual federal spending on highways and related infrastructure improvements of approximately $26 billion, approximately 44% higher than the average annual federal spending of $18 billion under the predecessor program. In Pennsylvania and New Jersey, our primary aggregates markets, average annual federal spending on highways and related infrastructure improvements under TEA-21 is projected to be approximately 47% and 30% higher, respectively, than under the predecessor program. Transportation costs are a significant portion of the total cost of industrial minerals and aggregates to customers, typically representing up to 50% of that cost. As a result, the industrial minerals and aggregates markets are typically local, and competition from beyond the local area is limited. Industrial minerals and aggregates are usually shipped within 200 miles and 75 miles of the plant, respectively, while hot mixed asphalt is usually shipped within 30 miles. However, certain high margin industrial minerals products, such as fine ground silica, may be distributed nationally and, in some cases, internationally due to the high value of these products relative to transportation costs. Competitive Strengths Leading Positions in Attractive End Use Markets and Geographic Areas. We are the second leading producer of silica in the United States, accounting for approximately 23% of industry volume in 1999. We believe that we have leading positions in most of our key end use markets for our silica products, typically occupying the number one or two position by sales. These end use markets include container glass, fiberglass, specialty glass, flat glass, fillers and extenders, chemicals and ceramics. In addition, we believe that our aggregates business maintains leading positions in the key geographic areas we serve, including the Pittsburgh and Philadelphia metropolitan areas. Both the industrial minerals and aggregates industries in the United States have been characterized by stable historical growth. For the period between 1988 and 1998, sales of silica and aggregates in the United States have increased at a compound annual growth rate of approximately 2.7% and 4.4%, respectively. We believe the growth in sales for silica will continue at this stable rate. Furthermore, we believe demand for aggregates will grow due to the passage of TEA-21, which will increase average annual federal spending on highways and related infrastructure improvements through 2003 by approximately 44% over the predecessor program. Low Cost Supplier. We believe that we are a low cost supplier of industrial minerals and aggregates in the end use markets and geographic areas in which we compete. Our largest industrial minerals facilities are located on major railroad routes and near our significant customers. In addition, we utilize multiple modes of transportation such as trucks, rail and rail-truck transfer facilities to obtain competitive freight rates. Our western Pennsylvania aggregates business is positioned closer 2 to the interstate highway system surrounding the Pittsburgh metropolitan area than the operations of many of our competitors, providing us with a cost advantage. In addition, our investments in technology have improved efficiencies and have also contributed to our position as a low cost supplier. Diverse Revenue Base. We provide a wide range of products to a diverse customer base, serving numerous end use markets. We believe that this diversity mitigates the impact of adverse economic conditions in any end use market that we serve. For example, on a pro forma basis for the year ended December 31, 1999, we exceeded $10 million in net sales in each of 10 distinct end use markets and no single customer accounted for more than 5% of our net sales. Strong Customer Relationships. We are a key supplier of silica to leaders in many of the end use markets that we serve. We have had relationships with many of our major customers for more than 20 years, including Corning Incorporated, Owens Corning, Owens-Illinois, Inc., PPG Industries, Inc., PQ Corporation and The Sherwin-Williams Company. We have also developed strong relationships with government contractors and others in our aggregates business that provide us with a diverse base of approximately 5,000 aggregates customers, primarily consisting of local contractors. Experienced Management Team. Our senior management team has an average of approximately 21 years of related industry experience. This experience has allowed us to improve productivity, reduce costs and enhance customer relationships in competitive markets. For example, during the period from the beginning of 1994 to the end of 1999, excluding the effect of acquisitions, we increased net sales in our industrial minerals business at a compound annual growth rate of approximately 4.0%. During the same period, excluding the effect of acquisitions, we reduced total operating costs per ton by 0.5%. Strong Financial Sponsors. D. George Harris & Associates, LLC ("DGHA") and Chase Capital Partners ("CCP") provide us with expertise in identifying and financing industrial minerals and aggregates acquisition opportunities. Since 1987, our chairman, D. George Harris, has overseen 30 acquisitions in the worldwide chemical and extractive minerals industries. DGHA is an independent private leveraged buyout group formed in 1987 whose principal business is to form investor groups to acquire and manage industrial businesses. DGHA has substantial experience in acquiring, operating and expanding chemical, industrial minerals and aggregates businesses, including Harris Chemical Group, Inc. and Harris Specialty Chemicals, Inc. CCP is the private equity group of The Chase Manhattan Corporation, one of the largest bank holding companies in the United States, and is one of the nation's largest private equity organizations, with over $15 billion under management. Through its affiliates, CCP invests in leveraged buyouts, recapitalizations and venture capital opportunities by providing equity and mezzanine debt capital. Since its inception in 1984, CCP has made over 950 direct investments in a variety of industries, including investments in over 30 industrial minerals and chemicals companies. Strategy Our goals are to build on our leading market positions by continuing to improve our existing operations and by pursuing acquisition opportunities. For our current operations, we intend to: --expand our aggregates and hot mixed asphalt production capacity by investing in additional plant and equipment; 3 --continue to focus on cost reductions by investing in technology, improving production processes and sharing manufacturing best practices throughout our organization as we integrate our acquisitions; and --introduce, at select locations, new products such as water filtration sand, golf course sands and a variety of other specialty products developed through new processing techniques and market knowledge gained through our recent acquisitions. In addition, we have grown through acquisitions and we will continue to pursue acquisitions that we believe will create value and enhance cash flow. We target opportunities that provide us with: --access to new geographic areas in close proximity to our existing operations; --an ability to market other industrial minerals in existing end use markets; and --additional technological, production and marketing expertise. The Transactions Commercial Stone Acquisition. On October 1, 1999 (the "closing date"), through two of our subsidiaries, we acquired Commercial Stone Co., CATS and related quarry properties (the "Commercial Stone acquisition"). The acquired companies and properties are collectively referred to in this prospectus as "Commercial Stone." The Commercial Stone acquisition substantially increased our aggregates business and expanded our presence in Pennsylvania to the Pittsburgh metropolitan area, where Commercial Stone is a leading producer of crushed stone and hot mixed asphalt. For its fiscal year ended March 31, 1999, Commercial Stone sold 3.2 million tons of crushed stone and 1.1 million tons of hot mixed asphalt. For the same period, Commercial Stone had net sales of $42.0 million. The total consideration for Commercial Stone was $139.0 million in cash, $8.0 million of which was placed in escrow to satisfy any future indemnity claims we may have against the sellers. The Commercial Stone acquisition was consummated simultaneously with the consummation of the other Transactions described below, including the offering of the old notes. New Credit Facilities. On the closing date, we entered into new senior secured credit facilities (the "new credit facilities") with Chase Securities Inc. ("CSI"), as syndication agent, book manager, lead arranger and documentation agent, and Banque Nationale de Paris, as administrative agent and collateral agent, and other lenders. The new credit facilities consisted of a $50.0 million revolving credit facility, a $45.0 million tranche A term loan facility, a $95.0 million tranche B term loan facility and a $40.0 million delayed draw term loan acquisition facility. Borrowings under the delayed draw term loan acquisition facility are conditioned on, among other things, meeting a specific leverage ratio. On the closing date, we borrowed the full amount of the term loans. See "Description of the New Credit Facilities." Cash Equity Contribution. On the closing date, USS Holdings issued and sold shares of common and preferred stock and warrants to purchase common stock of USS Holdings for $35.0 million (the "cash equity contribution"), which proceeds were contributed to us on the closing date. See "Security Ownership of Certain Beneficial Owners and Management." 4 The Commercial Stone acquisition, the repayment of certain debt, the borrowings under the new credit facilities, the cash equity contribution and the offering of the old notes are collectively referred to in this prospectus as the "Transactions." The sources and uses of funds for the Transactions are presented in the following table:
Amount --------------------- (Dollars in Millions) Sources: Tranche A term loan facility...................... $ 45.0 Tranche B term loan facility...................... 95.0 Old notes......................................... 150.0 Cash equity contribution.......................... 35.0 ------ Total sources................................... $325.0 ====== Uses: Purchase price of Commercial Stone................ $139.0 Repayment of certain debt......................... 167.2 Fees and expenses(1).............................. 18.8 ------ Total uses...................................... $325.0 ======
- -------- (1) Fees and expenses include the initial purchasers' discounts and other expenses in connection with the offering of the old notes, fees and expenses associated with the Commercial Stone acquisition and the new credit facilities and $1.3 million in bonuses paid to the management of Commercial Stone upon the consummation of the Commercial Stone acquisition. ---------------- The issuer is incorporated in Delaware with principal executive offices located at Route 522 North, P.O. Box 187, Berkeley Springs, West Virginia 25411. Its telephone number is (304) 258-2500. 5 The Exchange Offer On October 1, 1999, we completed the private offering of our 13% Senior Subordinated Notes due 2009. We entered into an exchange and registration rights agreement with the initial purchasers in the private placement in which we agreed to deliver to you this prospectus and we agreed to complete the exchange offer within 240 days after the date of original issuance of the old notes. You are entitled to exchange in the exchange offer your old notes for new notes which are identical in all material respects to the old notes except that: --the new notes have been registered under the Securities Act of 1933; --the new notes are not entitled to certain rights which are applicable to the old notes under the exchange and registration rights agreement; and --certain liquidated damages provisions are no longer applicable. The Exchange Offer.......... We are offering to exchange up to $150.0 million aggregate principal amount of 13% Senior Subordinated Notes due 2009 which have been registered under the Securities Act of 1933 for up to $150.0 million aggregate principal amount of 13% Senior Subordinated Notes due 2009 which were issued on October 1, 1999 in the private offering. Old notes may be exchanged only in integral multiples of $1,000. We will issue the new notes promptly after the expiration of the exchange offer. Resales..................... Based on an interpretation by the staff of the Securities and Exchange Commission set forth in no-action letters issued to third parties, we believe that the new notes issued pursuant to the exchange offer in exchange for old notes may be offered for resale, resold and otherwise transferred by you (unless you are our "affiliate" within the meaning of Rule 405 under the Securities Act of 1933) without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, provided that you are acquiring the new notes in the ordinary course of business and that you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the new notes. Each participating broker-dealer that receives new notes for its own account pursuant to the exchange offer in exchange for old notes that were acquired as a result of market-making or other trading activity must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. These broker-dealers may use this prospectus for this purpose. See "Plan of Distribution." Any holder of old notes who --is our affiliate, --does not acquire new notes in the ordinary course of its business, or 6 --tenders in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of new notes, cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in Exxon Capital Holdings Corporation, Morgan Stanley & Co. Incorporated or similar no-action letters and, in the absence of an exemption, must comply with the registration and prospectus delivery requirements of the Securities Act of 1933 in connection with the resale of the new notes. Expiration Date; Withdrawal of Tenders.................. The exchange offer will expire at 5:00 p.m., New York City time, on , 2000, unless we decide to extend the exchange offer. We do not currently intend to extend the expiration date, although we reserve the right to do so. A tender of old notes pursuant to the exchange offer may be withdrawn at any time prior to the expiration date, subject to compliance with the procedures for withdrawal described in "The Exchange Offer" section of this prospectus under the heading "Withdrawal of Tenders." Any old notes not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration or termination of the exchange offer. Conditions to the Exchange The exchange offer is subject to customary Offer....................... conditions, any of which we may waive. The exchange offer is not conditioned upon any minimum aggregate principal amount of old notes being tendered for exchange. See "The Exchange Offer--Conditions to Exchange Offer." Procedures for Tendering Old Notes................... If you wish to accept the exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a copy of the letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must also mail or otherwise deliver the letter of transmittal, or the copy, together with the old notes and any other required documents, to the exchange agent at the address set forth on the cover of the letter of transmittal on or prior to the expiration date. If you hold old notes through The Depository Trust Company ("DTC") and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC, by which you will agree to be bound by the letter of transmittal. By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things: --any new notes that you receive will be acquired in the ordinary course of your business; 7 --you have no arrangement or understanding with any person or entity to participate in the distribution of the new notes; --if you are a broker-dealer that will receive new notes for your own account in exchange for old notes that were acquired as a result of market-making activities, that you will deliver a prospectus, as required by law, in connection with any resale of the new notes; and --you are not our "affiliate" as defined in Rule 405 under the Securities Act of 1933, or, if you are an affiliate, you will comply with any applicable registration and prospectus delivery requirements of the Securities Act of 1933. Special Procedures for Beneficial Owners........... If you are a beneficial owner of old notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender those old notes for exchange, you should contact the registered holder promptly and instruct it to tender those notes on your behalf. If you wish to tender those notes yourself, you must either make appropriate arrangements to re-register ownership of those notes in your own name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership to your own name may take considerable time and you may not be able to complete the transfer prior to the expiration date. Guaranteed Delivery If you wish to tender your old notes and your old Procedures.................. notes are not immediately available or you cannot deliver your old notes, the letter of transmittal or any other documents required by the letter of transmittal or comply with the applicable procedures under DTC's Automated Tender Offer Program on or prior to the expiration date, you must tender your old notes according to the guaranteed delivery procedures described in "The Exchange Offer" section of this prospectus under the heading "Guaranteed Delivery Procedures." Effect on Holders of Old As a result of the making of, and upon acceptance Notes....................... for exchange of all validly tendered old notes pursuant to the terms of, the exchange offer, we will have fulfilled a covenant contained in the exchange and registration rights agreement and, accordingly, we will not be obligated to pay liquidated damages as described in the exchange and registration rights agreement. If you are a holder of old notes and do not tender your old notes in the exchange offer, you will continue to hold the old notes and you will be entitled to all the rights and limitations applicable to the old notes in the indenture, 8 except for any rights under the exchange and registration rights agreement that by their terms terminate upon the consummation of the exchange offer. Consequences of Failure to Exchange.................... All untendered old notes will continue to be subject to the restrictions on transfer provided for in the old notes and in the indenture. In general, the old notes may not be offered or sold unless registered under the Securities Act of 1933, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act of 1933 and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the old notes under the Securities Act of 1933. Certain United States Federal Income Tax The exchange of old notes for new notes in the Consequences................ exchange offer will not be a taxable event for U.S. federal income tax purposes. See "Certain United States Federal Tax Consequences." Use of Proceeds............. We will not receive any proceeds from the issuance of the new notes in the exchange offer. Exchange Agent.............. The Bank of New York, the trustee under the indenture governing the notes, is the exchange agent for the exchange offer. The address and telephone number of the exchange agent are set forth in the "The Exchange Offer" section of this prospectus under the heading "Exchange Agent." Exchange Offer, Registration Rights......... Subject to the applicable federal and state securities laws, we agreed to file on or prior to 135 days after the date of original issuance of the old notes, and to use our reasonable best efforts to cause to be declared effective within 195 days after the date of original issuance of the old notes, a registration statement with respect to an offer to exchange the old notes for new notes. We also agreed, under certain circumstances, to file and to use our reasonable best efforts to cause to become effective a shelf registration statement with respect to the resale of the old notes. As described in the exchange and registration rights agreement, liquidated damages with respect to the old notes are payable if we do not comply with certain of our registration obligations. The filing of the registration statement of which this prospectus is a part is intended to satisfy the requirement to file the exchange offer registration statement. The registration statement of which this prospectus is a part was not filed with the Securities and Exchange Commission 9 within 135 days after the date of original issuance of the old notes and, as a result, pursuant to the terms of the exchange and registration rights agreement, we have made a payment of liquidated damages on the old notes on March 15, 2000 in the amount of $123,428. The New Notes The following summary contains basic information about the new notes. It does not contain all the information that may be important to you. For a more complete description of the new notes, please refer to the section of this prospectus entitled "Description of the New Notes." Issuer...................... Better Minerals & Aggregates Company. New Notes Offered........... $150,000,000 aggregate principal amount of 13% Senior Subordinated Notes due 2009. Maturity.................... September 15, 2009. Interest.................... Annual rate: 13%. Payment frequency: every six months on March 15 and September 15. Holders of old notes whose old notes are accepted for exchange in the exchange offer will be deemed to have waived the right to receive any payment in respect of interest on the old notes accrued from March 15, 2000 (the first interest payment date of the old notes) to the date of issuance of the new notes. Consequently, holders who exchange their old notes for new notes will receive the same interest payment on September 15, 2000 (the next interest payment date with respect to the old notes and the new notes following consummation of the exchange offer) that they would have received had they not accepted the exchange offer. Optional Redemption......... After September 15, 2004, the issuer may redeem some or all of the new notes at the redemption prices listed in the "Description of the New Notes" section of this prospectus under the heading "Optional Redemption." Prior to that date, the issuer may not redeem the new notes, except as described in the following paragraph. At any time prior to September 15, 2002, the issuer may redeem up to 35% of the original aggregate principal amount of the new notes with the net cash proceeds of certain equity offerings at a redemption price equal to 113% of the principal amount thereof plus accrued and unpaid interest, so long as (a) at least 65% of the original aggregate amount of the new notes remain outstanding after each such redemption and (b) 10 any such redemption by the issuer is made within 90 days of that equity offering. See "Description of the New Notes--Optional Redemption." Change of Control........... Upon the occurrence of a transaction meeting the definition of a change of control, unless the issuer has exercised its right to redeem all of the new notes as described above, you will have the right to require the issuer to purchase all or a portion of your new notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase. See "Description of the New Notes--Change of Control." Note Guarantees............. The new notes will be fully and unconditionally guaranteed by an unsecured note guarantee made by each of the issuer's existing and future Domestic Subsidiaries (as defined in "Description of the New Notes--Certain Definitions"). The new notes will also be fully and unconditionally guaranteed by an unsecured note guarantee made by each existing and future Foreign Subsidiary (as defined in "Description of the New Notes--Certain Definitions") that guarantees any debt (other than debt of a Restricted Subsidiary (as defined) that is not a note guarantor) (collectively, the "note guarantors"). The new notes will be guaranteed by all of the issuer's subsidiaries except its Canadian subsidiary. This Canadian subsidiary is an inactive company that has an immaterial amount of assets and liabilities. The note guarantees will be subordinated to the guarantees of senior debt of the issuer issued by the note guarantors under the new credit facilities. See "Description of the New Notes-- Note Guarantees." Ranking..................... The new notes will be unsecured and: --will be subordinated in right of payment to all of the existing and future senior debt of the issuer; --will rank equally in right of payment with any of the issuer's future senior subordinated debt; --will rank senior in right of payment to any of the issuer's future subordinated debt; --will be effectively subordinated to any secured debt of the issuer and its subsidiaries to the extent of the value of the assets securing that debt; and --will be effectively subordinated to all liabilities (including trade payables) and preferred stock of each subsidiary of the issuer that is not a note guarantor. The issuer is a holding company that derives all of its operating income and cash flow from its subsidiaries. 11 Similarly, the note guarantees of each note guarantor will be unsecured and: --will be subordinated in right of payment to all of that note guarantor's existing and future senior debt; --will rank equally in right of payment with any of that note guarantor's future senior subordinated debt; --will rank senior in right of payment to any of that note guarantor's future subordinated debt; and --will be effectively subordinated to any secured debt of that note guarantor and its subsidiaries to the extent of the value of the assets securing that debt. See "Description of the New Notes--Ranking." As of December 31, 1999: --the issuer had $135.9 million of senior debt (excluding unused commitments under the new credit facilities), all of which was secured debt; --the issuer did not have any senior subordinated debt other than the old notes or any debt that was subordinate in right of payment to the old notes; --the note guarantors had $1.6 million of senior debt (excluding their guarantees of the issuer's debt under the new credit facilities); --the note guarantors did not have any senior subordinated debt other than their note guarantees or any debt that was subordinate in right of payment to the note guarantees; and --the issuer's Canadian subsidiary had an immaterial amount of liabilities. The indenture governing the new notes permits us to incur a significant amount of additional senior debt. Certain Covenants........... The indenture will, among other things, restrict the issuer's ability and the ability of its Restricted Subsidiaries to: --incur debt; --guarantee other debt; --make distributions, redeem equity interests or redeem subordinated debt; --make investments; --sell assets; --enter into agreements that restrict dividends from subsidiaries; --merge or consolidate; --enter into transactions with affiliates; and --sell capital stock of subsidiaries. 12 These covenants will be subject to a number of important exceptions and qualifications. See "Description of the New Notes--Certain Covenants" and "Description of the New Notes-- Merger and Consolidation." ---------------- Risk Factors Prospective investors in the new notes should carefully consider all of the information in this prospectus and, in particular, should evaluate the specific factors under "Risk Factors" beginning on page 16 for risks involved with an investment in the new notes. 13 Summary Condensed Historical and Unaudited Pro Forma Financial Data The following table sets forth our summary condensed historical and unaudited pro forma financial data. The summary condensed historical financial data as of and for the years ended December 31, 1997, 1998 and 1999 have been derived from our audited consolidated financial statements and the notes thereto included elsewhere in this prospectus. The summary condensed unaudited pro forma financial data is derived from the unaudited pro forma statement of operations contained under "Unaudited Pro Forma Consolidated Financial Data." The unaudited pro forma statement of operations data for the year ended December 31, 1999 gives effect to the Transactions and the acquisition of the Morie Assets as if they had occurred on January 1, 1999. The pro forma adjustments, as described in the notes to the unaudited pro forma statement of operations contained under "Unaudited Pro Forma Consolidated Financial Data," are estimates based on currently available information and certain adjustments that management believes are reasonable. The unaudited pro forma financial data is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the Transactions or the acquisition of the Morie Assets been consummated on or as of the date indicated nor is it necessarily indicative of future operating results. The unaudited pro forma financial data should be read in conjunction with "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes thereto included elsewhere in this prospectus.
Pro Forma Year Ended December Year Ended December 31, 31, 1997 1998(1) 1999(2) 1999 -------- -------- -------- -------------- (Dollars in Thousands) Statement of Operations Data: Net sales.................... $128,512 $142,294 $209,075 $248,053 Cost of goods sold........... 88,097 98,478 140,244 166,091 Depreciation, depletion and amortization................ 17,886 19,888 28,481 34,206 Selling, general and administrative.............. 14,345 16,930 21,843 23,437 Incentive stock compensation expense(3).................. -- 14,227 -- -- -------- -------- -------- -------- Operating income (loss)...... 8,184 (7,229) 18,507 24,319 Interest expense............. 10,513 10,269 19,590 34,705 Accretion of preferred stock warrants(4)................. 1,374 1,254 56 56 Other income net, including interest income............. (1,742) (1,881) (2,171) (2,665) -------- -------- -------- -------- (Loss) income before income taxes....................... (1,961) (16,871) 1,032 (7,777) Provision (Benefit) for income taxes................ (2,239) (2,204) (2,714) (6,754) -------- -------- -------- -------- Net income (loss) before extraordinary loss.......... 278 (14,667) 3,746 (1,023) Extraordinary loss(5)........ -- (2,102) (2,747) (2,747) -------- -------- -------- -------- Net income (loss)............ $ 278 $(16,769) $ 999 $ (3,770) ======== ======== ======== ======== Other Financial Data: Capital expenditures......... $ 5,537 $ 9,399 $ 14,572 $ 17,879 Cash interest expense........ 8,731 9,269 10,925 32,617 Ratio of earnings to fixed charges(6).................. -- (7) -- (7) 1.1 -- (7)
14
As of December 31, 1999 ------------ Balance Sheet Data: Cash.................................... $ 13,573 Working capital......................... 45,715 Total assets............................ 551,603 Total debt.............................. 287,505 Stockholder's equity.................... 64,335
- -------- (1) Includes (i) the results of the Nicks Silica Assets from January 16, 1998, the date of acquisition, (ii) with respect to the year ended December 31, 1998, the results of Pettinos from July 25, 1998, the date of acquisition, and (iii) with respect to the year ended December 31, 1998, the results of Better Materials from December 14, 1998, the date of acquisition, in each case, as further described in "Management's Discussion and Analysis of Financial Condition and Results of Operations". (2) Includes the results of the Morie Assets from April 9, 1999, the date of acquisition, and the results of Commercial Stone from October 1, 1999, the date of acquisition. (3) Represents non-cash compensation expense recorded in the second half of the year ended December 31, 1998 due to the waiver by USS Holdings of its right to repurchase certain capital stock held by our management. (4) Represents the non-cash accretion in value of certain warrants granted with respect to preferred stock of USS Holdings. Better Minerals & Aggregates recognizes this charge as part of push down accounting because the warrants were issued in connection with debt issued by U.S. Silica. The obligation to satisfy any payment due in connection with these warrants was forgiven by USS Holdings during 1999. (5) Represents non-cash charges and write-offs recorded in connection with the 1998 early retirement of certain subordinated debt and the 1999 early retirement of certain senior debt by Better Minerals & Aggregates. (6) Under Item 503 of Regulation S-K, "earnings" for purposes of this calculation have been computed by adding to "income before extraordinary items" all taxes based on income or profits, total interest charges and the estimated interest element of rentals charged to income. "Fixed charges" include total interest charges and the estimated interest element of rentals charged to income. (7) Earnings were insufficient to cover fixed charges by $2.0 million, $16.9 million and $7.8 million for the years ended December 31, 1997 and 1998 and on a pro forma basis for the year ended December 31, 1999, respectively. 15 RISK FACTORS Prospective investors should carefully consider the following factors in addition to the other information set forth in this prospectus before participating in the exchange offer. Our High Level of Debt May Adversely Affect Our Ability To Repay the Notes As a result of the Transactions, we have a substantial amount of debt. As of December 31, 1999, we had total debt of $287.5 million (excluding unused commitments) and total stockholder's equity of $64.4 million, giving us total debt representing 81.7% of total capitalization. Assuming that the Transactions and the acquisition of the Morie Assets had taken place on January 1, 1999, our interest expense for the year ended December 31, 1999 would have been $34.7 million. In addition, subject to restrictions in the new credit facilities and in the indenture, we may borrow more money for working capital, capital expenditures, acquisitions or other purposes. Our high level of debt could have important consequences for you, including the following: --we will need to use a large portion of the cash earned by our subsidiaries to pay principal and interest on the new credit facilities, the notes and other debt, which will reduce the amount of cash available to us to finance our operations, to invest in additional plant and equipment, to make improvements to existing plant and equipment and to improve our technology capabilities; --our debt level makes us more vulnerable to economic downturns and adverse developments in our business; --we may have a much higher level of debt than certain of our competitors, which may put us at a competitive disadvantage; --we may have difficulty borrowing money in the future for working capital, capital expenditures, acquisitions or other purposes; and --some of our debt has a variable rate of interest, which exposes us to the risk of increased interest rates. To Service Our Indebtedness, We Will Require a Significant Amount of Cash. Our Ability to Generate Cash Depends on Many Factors Beyond Our Control We expect to obtain the cash to pay our expenses and to pay the principal and interest on the notes, the new credit facilities and other debt from the operations of our subsidiaries. Availability under the revolving credit facility will be important for us to maintain liquidity to pay obligations as they become due. Our ability to meet our expenses and debt service obligations depends on the future performance of our subsidiaries, which will be affected by financial, business, economic and other factors. We will not be able to control many of these factors, such as economic conditions and pressure from competitors. We cannot be certain that the cash earned by our subsidiaries will be sufficient to allow us to pay principal and interest on our debt (including the notes) and meet our other obligations. If we do not have enough cash, we may be required to refinance all or part of our existing debt, including the notes, sell assets, borrow more money or raise equity. We cannot guarantee that we will be able to refinance our debt, sell assets, borrow more money or raise equity on terms acceptable to us, or at all. For example, neither CCP nor DGHA is obligated to make any additional equity investments in USS Holdings. In addition, the terms of existing or future debt agreements, including the new credit facilities and the indenture, may restrict us from adopting any of these alternatives. The indenture contains certain limitations on our operating flexibility. See "Description of the New Notes--Certain Covenants." In addition, the new credit facilities contain many similar and more 16 stringent limitations and will prohibit us from prepaying certain of our other debt (including the notes) while debt under the new credit facilities is outstanding. In addition, under the new credit facilities, we must also comply with certain specified financial ratios and tests. If we do not comply with these or other covenants and restrictions contained in the new credit facilities, we could default under the new credit facilities. Upon the occurrence of an event of default under the new credit facilities, the lenders could declare all amounts outstanding under the new credit facilities, together with accrued interest, to be immediately due and payable, which could cause all or a portion of our other debt, including the notes, to become immediately due and payable. If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that debt. If the lenders under the new credit facilities accelerate the payment of the debt, we cannot assure you that our assets would be sufficient to repay in full that debt and our other debt, including the notes. Furthermore, our ability to comply with the provisions of the new credit facilities may be affected by events beyond our control. See "Description of the New Credit Facilities." Demand for Our Products Is Affected by External Factors Demand in the markets served by the industrial minerals and aggregates industries is affected by many external factors, including the following: --general and regional economic conditions, including the economy in the states in which we have production facilities and in which we sell our products; --demand for automobiles and other vehicles; --the substitution of plastic or other materials for glass, a significant end use market for the industrial minerals business; --levels of government spending on road and other infrastructure construction; and --demand for residential and commercial construction. General or localized economic downturns in areas where we sell products, or other external factors adversely affecting demand in the markets we serve, such as the factors noted above, could result in a decrease in net sales and operating income and, therefore, could have a material adverse effect on us. For example, because our aggregates business is more geographically concentrated than the businesses of some of our competitors, we may be more vulnerable to local economic conditions in Pennsylvania and New Jersey. Demand for Our Aggregates May Be Affected by Weather Poor weather during the peak season of our aggregates business from April through November could result in lower sales of aggregates by reducing or delaying road construction and maintenance, other infrastructure projects and residential and commercial construction. In the past, significant changes in weather conditions during this period have caused variations in demand for aggregates. In addition, because we are not as geographically diverse as some of our aggregates competitors, we may be more vulnerable than these competitors to poor weather conditions in the geographic areas in which we operate. Our Business Is Subject to Operating Risks All of our revenue is and will be derived from our industrial minerals and aggregates businesses. The mining, processing and related infrastructure facilities of these businesses are subject to risks normally encountered in the industrial minerals and aggregates industries. These risks include environmental hazards, industrial accidents, technical difficulties or failures, late delivery of supplies, the price and availability of power, the price and availability of transportation, unusual or unexpected 17 geological formations or pressures, cave-ins, pit wall failures, rock falls, unanticipated ground, grade or water conditions, flooding and periodic or extended interruptions due to the unavailability of materials and equipment, inclement or hazardous weather conditions, fires, explosions or other accidents or acts of force majeure. In addition, the price or availability of oil, a raw material of hot mixed asphalt, could adversely affect operating costs, which could in turn adversely affect our operating results if we cannot pass these increased costs through to our customers. Any of these risks could result in damage to, or destruction of, our mining properties or production facilities, personal injury, environmental damage, delays in mining or processing, losses or possible legal liability. Any prolonged downtime or shutdowns at our mining properties or production facilities could have a material adverse effect on us. We Rely Heavily on Third Party Transportation We rely heavily on railroads and trucking companies to ship our industrial minerals and aggregates products to our customers. Because freight costs represent a significant portion of the total cost to the customer, fluctuations in freight rates can change the relative competitive position of our production facilities. Rail and trucking operations are subject to various hazards, including extreme weather conditions, work stoppages, operating hazards and year 2000 computer problems. If we are unable to ship our products as a result of the railroads or trucking companies failing to operate or if there are material changes in the cost or availability of railroad or trucking services, we may not be able to arrange alternative and timely means to ship our products, which could lead to interruptions or slowdowns in our businesses and, therefore, have a material adverse effect on us. Our Future Performance Will Depend on Our Ability To Succeed in Competitive Markets We compete in highly competitive industries. Due to the high cost of transportation relative to the value of our industrial minerals and aggregates products, competition tends to be limited to producers in proximity to our production facilities. The silica industry is a competitive market that is characterized by a small number of large, national producers and a larger number of small, regional producers. We are the second leading producer of silica in the United States, accounting for approximately 23% of industry volume in 1999. We compete with, among others, Unimin Corporation, Fairmount Minerals Ltd., Oglebay Norton Industrial Sands Inc. and Badger Mining Corporation. Competition in the industrial minerals industry is based on price, consistency and quality of product, site location, distribution capability, customer service, reliability of supply, breadth of product offering and technical support. In addition, there is significant unutilized capacity in the industrial minerals industry that could adversely affect the pricing of our industrial minerals products. In recent years, the aggregates industry has seen increasing consolidation, although competition remains primarily local. Competition in the aggregates industry is based primarily on price, quality of product, site location, distribution capability and customer service. In Pennsylvania and New Jersey we compete primarily with local or regional operations. In addition, slag, a residue from steel processing, also competes with our aggregates products. Many of our competitors are large companies that have greater financial resources than we do, may develop technology superior to ours and have production facilities that are located closer to key customers. There can be no assurance that we will be able to compete successfully against our competitors in the future or that competition will not have a material adverse effect on us. Silica Health Issues and Litigation Could Have a Material Adverse Effect on Our Business The exposure of persons to silica and the accompanying health risks have been, and will continue to be, a significant issue confronting the industrial minerals industry. Concerns over silicosis 18 and other potential adverse health effects, as well as concerns regarding potential liability from the use of silica, may have the effect of discouraging our customers' use of our silica products. The actual or perceived health risks of mining, processing and handling silica could materially and adversely affect silica producers, including us, through reduced use of silica products, the threat of product liability or employee lawsuits, increased levels of scrutiny by federal and state regulatory authorities of us and our customers (see "--Our Business Is Subject to Extensive Environmental, Health and Safety Regulations") or reduced financing sources available to the silica industry. The inhalation of respirable crystalline silica is associated with silicosis. There is recent evidence of an association between crystalline silica exposure or silicosis and lung cancer and a possible association with other diseases, such as immune system disorders like scleroderma. Since 1975, U.S. Silica has been named as a defendant in numerous products liability lawsuits brought by alleged employees or former employees of our customers alleging damages caused by silica exposure. As of March 1, 2000, there were an estimated 984 silica-related products liability claims pending in which U.S. Silica is a defendant. Almost all of the claims pending against U.S. Silica arise out of the alleged use of U.S. Silica products in foundries or as an abrasive blast media and have been filed in the states of Texas and Mississippi. We currently have certain limited sources of recovery for silica-related products liability claims, including an indemnity for those claims (including litigation expenses) from ITT Industries, Inc., successor to the former owner of U.S. Silica, and insurance coverage. The ITT Industries indemnity expires in 2005, only covers alleged exposure to U.S. Silica products for the period prior to September 12, 1985 and contains other limitations. Existing and potential insurance coverage only applies to occurrences of alleged silica exposure prior to certain dates in 1985 and 1986, respectively. We have no insurance or indemnity for claims relating to silica exposure after these dates. The silica- related litigation brought against us to date has not resulted in material liability to us. However, it is likely that we will continue to have silica- related products liability claims filed against us, including claims that allege silica exposure for periods after 1986. Any such claims or inadequacies of the ITT Industries indemnity or insurance coverage could have a material adverse effect on us. See "Business--Product Liability." Our Business Is Subject to Extensive Environmental, Health and Safety Regulations Environmental and Silica Exposure Regulations. We are subject to a variety of governmental regulatory requirements relating to the environment, including those relating to our handling of hazardous materials and air and wastewater emissions. Some environmental laws impose substantial penalties for noncompliance, and others, such as the federal Comprehensive Environmental Response, Compensation, and Liability Act, impose strict, retroactive and joint and several liability upon persons responsible for releases of hazardous substances. If we fail to comply with present and future environmental laws and regulations, we could be subject to liabilities or our operations could be interrupted. In addition, future environmental laws and regulations could restrict our ability to expand our facilities or extract our mineral deposits or could require us to acquire costly equipment or to incur other significant expenses in connection with our business. Although we believe we have made sufficient capital expenditures to achieve substantial compliance with existing environmental laws and regulations, future events, including changes in environmental requirements and the costs associated with complying with any such requirements, could have a material adverse effect on us. See "Business-- Government Regulation--Environmental Matters." In addition to environmental regulation, we are also subject to laws relating to human exposure to crystalline silica. We believe that we materially comply with governmental requirements for crystalline silica exposure and emissions and other regulations relating to silica and plan to continue to comply with these regulations. Several federal and state regulatory authorities, including the Occupational Safety and Health Administration and the Mining Safety and Health Administration, 19 have indicated that they will propose changes in their regulations regarding workplace exposure to crystalline silica. We cannot assure you that we will be able to comply with any new standards that are adopted or that these new standards will not have a material adverse effect on us by requiring us to modify our operations or equipment or shut down some of our plants. Additionally, we cannot assure you that our customers will be able to comply with any new standards or that any of these new standards will not have a material adverse effect on our customers by requiring them to shut down old plants or to relocate plants to locations with less stringent regulations that are further away from us. Accordingly, we cannot at this time reasonably estimate our costs of compliance or the timing of any costs associated with any new standards, or any material adverse effects that any new standards will have on our customers and, consequently, on us. See "Business--Government Regulation--Regulation of Silica." Other Regulations Affecting Mining Activity. In addition to the regulatory matters described above, the industrial minerals and aggregates industries are subject to extensive governmental regulation on matters such as permitting and licensing requirements, plant and wildlife protection, wetlands protection, reclamation and restoration of mining properties after mining is completed, the discharge of materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability. Our future success depends upon the quantity of our industrial minerals and aggregates deposits and our ability to extract these deposits profitably. It is difficult for us to estimate quantities of recoverable deposits, in part due to future permitting and licensing requirements. We believe we have obtained all material permits and licenses required to conduct our present mining operations. However, we will need additional permits and renewals of permits in the future. We may be required to prepare and present to governmental authorities data pertaining to the impact that any proposed exploration or production activities may have upon the environment. New site approval procedures may require the preparation of archaeological surveys, endangered species studies and other studies to assess the environmental impact of new sites. Compliance with these regulatory requirements is expensive, requires an investment of funds well before the potential producer knows if its operation will be economically successful and significantly lengthens the time needed to develop a new site. Furthermore, obtaining or renewing required permits is sometimes delayed or prevented due to community opposition and other factors beyond our control. New legal requirements, including those related to the protection of the environment, could be adopted that could materially adversely affect our mining operations (including the ability to extract mineral deposits), our cost structure or our customers' ability to use our industrial minerals or aggregates products. Finally, we could be adversely affected if our current provisions for mine reclamation and closure costs were later determined to be insufficient, or if future costs associated with reclamation are significantly greater than our current estimates. Accordingly, there can be no assurance that current or future mining regulation will not have a material adverse effect on our business or that we will be able to obtain or renew permits in the future. The Notes and Note Guarantees Are Contractually Subordinated to Senior Debt The notes are contractually subordinated in right of payment to all senior debt of the issuer and the note guarantees are contractually subordinated in right of payment to all senior debt of the applicable note guarantor. As of December 31, 1999, the issuer had approximately $135.9 million of senior debt (excluding unused commitments under the new credit facilities), all of which was secured debt, and the note guarantors had approximately $1.6 million of senior debt (excluding their guarantees of the issuer's debt under the new credit facilities). The indenture permits us to borrow certain additional debt, which may be senior debt, subject to certain restrictions. The issuer or the applicable note guarantor may not pay principal, premium (if any), interest or other amounts on account of the notes or a note guarantee in the event of a payment default or certain other defaults in respect of certain senior debt (including debt under the new credit facilities) 20 unless that senior debt has been paid in full or the default has been cured or waived. In addition, in the event of certain other defaults with respect to that senior debt, the issuer or the applicable note guarantor may not be permitted to pay any amount on account of the notes or the note guarantees for a designated period of time. If the issuer or a note guarantor is declared bankrupt or insolvent, or if there is a payment default under, or an acceleration of, any senior debt, the assets of the issuer or the applicable note guarantor, as the case may be, will be available to pay obligations on the notes or that note guarantor's note guarantee, as applicable, only after the senior debt of the issuer or the note guarantor has been paid in full. In such a case, there can be no assurance that there will be sufficient assets remaining to pay amounts due on all or any of the notes or any note guarantee. Further, the new credit facilities prohibit us, and our future senior debt may prohibit us, from purchasing any notes prior to maturity, even though the indenture requires the issuer to offer to purchase notes in certain circumstances. If the issuer or a note guarantor makes certain asset sales or if a change of control occurs when we are prohibited from purchasing notes, the issuer could ask the lenders under the new credit facilities (or such future senior debt) for permission to purchase the notes or the issuer could attempt to refinance the borrowings that contain those prohibitions. If the issuer does not obtain such a consent to repay those borrowings or is unable to refinance those borrowings, it would be unable to purchase the notes. The failure to purchase tendered notes at a time when their purchase is required by the indenture would constitute an event of default under the indenture, which, in turn, would constitute a default under the new credit facilities and may constitute an event of default under our future senior debt. In those circumstances, the subordination provisions in the indenture restrict payments to you. Our Holding Company Structure Causes Us To Rely on Funds from Our Subsidiaries The issuer is a holding company and as such it conducts substantially all its operations through its subsidiaries. As a holding company, the issuer is dependent upon dividends or other intercompany transfers of funds from its subsidiaries to meet its debt service and other obligations. Generally, creditors of a subsidiary will have a superior claim to the assets and earnings of that subsidiary than the claims of creditors of its parent company, except to the extent the claims of the parent's creditors are guaranteed by the subsidiary. Although the note guarantees provide the holders of the notes with a direct claim against the assets of the note guarantors, enforcement of the note guarantees against any note guarantor may be subject to legal challenge in a bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of that note guarantor, and would be subject to certain defenses available to guarantors generally. See "--The Notes and the Note Guarantees Are Subject to Fraudulent Conveyance and Preferential Transfer Laws." To the extent that a note guarantee is not enforceable, the notes would be effectively subordinated to all liabilities (including trade payables) and preferred stock of the relevant note guarantor. In any event, the notes will be effectively subordinated to all liabilities (including trade payables) and preferred stock of the issuer's Canadian subsidiary, which will not be a guarantor of the notes unless it guarantees any indebtedness (other than indebtedness of a Restricted Subsidiary that is not a note guarantor) in the future. This Canadian subsidiary is an inactive company that has an immaterial amount of assets and liabilities. As of December 31, 1999, the note guarantors had total liabilities of $483.4 million (excluding the note guarantees and liabilities owed to the issuer). In addition, the payment of dividends and other payments to the issuer by its subsidiaries may be restricted by, among other things, applicable corporate and other laws and regulations and agreements of the subsidiaries. Although the indenture will limit the ability of those subsidiaries to enter into consensual restrictions on their ability to pay dividends and make other payments, those 21 limitations are subject to a number of significant qualifications and exceptions. See "Description of the New Notes--Certain Covenants--Limitations on Restrictions on Distributions from Restricted Subsidiaries." The Notes Are Unsecured Obligations, While the New Credit Facilities Are Secured In addition to being contractually subordinated to all existing and future senior debt, our obligations under the notes are unsecured while our obligations under the new credit facilities are secured by a security interest in substantially all the tangible and intangible assets of BMAC Holdings, the issuer and each existing and subsequently acquired or organized domestic subsidiary of the issuer, including a pledge of (a) all the capital stock of the issuer, and (b) all the capital stock held by BMAC Holdings, the issuer and any domestic subsidiary of the issuer in each of the issuer's existing or subsequently acquired or organized domestic subsidiaries and 65% of the capital stock held by those entities in each of the issuer's existing or subsequently acquired or organized foreign subsidiaries. If we are declared bankrupt or insolvent or if we default under the new credit facilities, the lenders could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay that debt, the lenders could foreclose on the pledged stock of our subsidiaries and on the assets in which they have been granted a security interest, in each case to your exclusion, even if an event of default exists under the indenture at that time. Furthermore, under the note guarantees, if all shares of any note guarantor are sold to persons pursuant to an enforcement of the pledge of shares in that note guarantor for the benefit of the lenders under the new credit facilities, then the applicable note guarantor will be released from its note guarantee automatically and immediately upon such sale. See "Description of the New Credit Facilities." Our Aggregates Business Depends Heavily on Government Funding of Highways Many of our aggregates customers depend substantially on government funding of highway construction and maintenance and other infrastructure projects. Although the recently adopted TEA-21 program provides for increased federal funding for highways and related infrastructure improvements through 2003, there can be no assurance that any successor program adopted by Congress, if one is adopted at all, will provide for equivalent or increased government funding. Furthermore, although TEA-21 provides for federal funding through 2003, state and municipal governmental entities need to provide for matching funds in order to obtain federal funding under TEA-21, and state and municipal governmental entities have separate approval processes relating to the matching of any federal funding for highways that have not been completed. Accordingly, a decrease in federal funding of highways and related infrastructure improvements after the expiration of the TEA-21 program, or a failure of states or municipalities to match the federal funding to be provided by TEA-21, could adversely affect our revenue and profits in our aggregates business. In addition, unlike some of our competitors, we currently sell our aggregates products almost entirely in only two states, Pennsylvania and New Jersey. As a result, we are more vulnerable than our more geographically diverse competitors to decreases in state government highway spending in those states. We Depend on Good Labor Relations As of March 1, 2000, we had approximately 1,048 employees, of which approximately 527 were represented by 12 local unions under 12 union contracts. These union contracts have remaining durations ranging from one to five years. Over the last 10 years, we have been involved in numerous labor negotiations, only two of which have resulted in a work disruption at two of our 25 facilities. During these disruptions, the operations of the facilities and the ability to serve our customers were not materially affected. Although we consider our current relations with our employees to be good, if 22 we do not maintain these good relations, or if a work disruption were to occur, we could suffer a material adverse effect. Our Expansion Strategy May Adversely Affect Our Operations We intend to actively pursue acquisition opportunities, some of which could be material. We may finance future acquisitions through internally generated funds, bank borrowings, public offerings or private placements of equity or debt securities, or a combination of these sources. We might not be able to make acquisitions on terms that are favorable to us, or at all. If we do complete any future acquisitions, we will face many risks, including the possible inability to integrate an acquired business into our operations, diversion of our management's attention, failure to retain key acquired personnel and unanticipated problems or liabilities, some or all of which could have a material adverse effect on us. Acquisitions could place a significant strain on management, operating, financial and other resources and increased demands on our systems and controls. Control of USS Holdings; Stockholders Agreement The holders of all of the capital stock of USS Holdings are party to a stockholders agreement. Subject to certain exceptions, the stockholders agreement provides that the holders of USS Holdings' capital stock will elect a board of directors comprised of two directors designated by D. George Harris, a principal of DGHA, one director designated by Anthony J. Petrocelli, a principal of DGHA, three directors designated by an affiliate of CCP, and the President of USS Holdings (currently Richard E. Goodell (who is not affiliated with DGHA or CCP)). In addition, upon the occurrence of certain "trigger events" described in the stockholders agreement, the CCP affiliate will have the right to appoint two additional directors to the board of USS Holdings, thus giving it the right to appoint five of the nine directors of USS Holdings. The interests of these stockholders may conflict with your interests as a holder of the notes. See "Security Ownership of Certain Beneficial Owners and Management--The Stockholders Agreement." We May Be Unable To Purchase Your Notes upon a Change in Control Upon a change of control, the issuer will be required to offer to purchase all of the notes then outstanding at 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase. If a change of control were to occur, the issuer may not have sufficient funds to pay the purchase price for the outstanding notes tendered, and the issuer expects that it would require third-party financing; however, the issuer may not be able to obtain financing on favorable terms, if at all. In addition, the new credit facilities restrict our ability to purchase the notes, including pursuant to an offer in connection with a change of control. A change of control under the indenture may also result in an event of default under the new credit facilities and may cause the acceleration of other senior debt, if any, in which case the subordination provisions of the notes would require payment in full of the new credit facilities and any other senior debt before purchase of the notes. Our future debt may also contain restrictions on our ability to repay the notes upon certain events or transactions that could constitute a change of control under the indenture. The inability to repay senior debt upon a change of control or to purchase all of the tendered notes would each constitute an event of default under the indenture. See "--The Notes and the Note Guarantees Are Contractually Subordinated to Senior Debt," "Description of the New Notes-- Change of Control" and "Description of the New Credit Facilities." The change of control provisions in the indenture will not necessarily afford you protection in the event of a highly leveraged transaction, including a reorganization, restructuring, merger or other similar transaction involving us, that may adversely affect you. This type of transaction may not involve a change in voting power or beneficial ownership, or, even if it does, may not involve a change of the magnitude required under the definition of change of control in the indenture to trigger 23 those provisions. Except as described under "Description of the New Notes-- Change of Control," the indenture does not contain provisions that permit the holders of the notes to require us to purchase or redeem the notes in the event of a takeover, recapitalization or similar transaction. The Notes and the Note Guarantees Are Subject to Fraudulent Conveyance and Preferential Transfer Laws The incurrence of debt by the issuer or the note guarantors, such as the notes or the note guarantees, may be subject to review under federal bankruptcy law or relevant state fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors. Under these laws, if in such case or lawsuit a court were to find that, at the time the issuer or any note guarantor incurred debt (including debt under the notes or the note guarantees): --the issuer or any note guarantor, as applicable, incurred that debt with the intent of hindering, delaying or defrauding current or future creditors; or --the issuer or any note guarantor, as applicable, received less than reasonably equivalent value or fair consideration for incurring that debt, and --was insolvent or was rendered insolvent by reason of any of the transactions, --was engaged, or about to engage, in a business or transaction for which the assets remaining with the issuer or that note guarantor constituted unreasonably small capital to carry on our or its business, --intended to incur, or believed that the issuer or that note guarantor would incur, debts beyond its ability to pay as those debts matured (as all of the foregoing terms are defined in or interpreted under the relevant fraudulent transfer or conveyance statutes), or --was a defendant in an action for money damages, or had a judgment for money damages docketed against the issuer or that note guarantor (in either case, if, after final judgment, the judgment is unsatisfied), then that court could avoid or subordinate the amounts owing under the notes or the note guarantees to the issuer's or that note guarantor's existing and future debt and take other actions detrimental to you. The measure of insolvency for purposes of the foregoing considerations will vary depending upon the law of the jurisdiction that is being applied in any such proceeding. Generally, however, a debtor would be considered insolvent if, at the time that debtor incurred the debt, either (a) the sum of its debts (including contingent liabilities) is greater than its assets, at fair valuation, or (b) the present fair saleable value of its assets is less than the amount required to pay the probable liability on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured. There can be no assurance as to what standards a court would use to determine whether the issuer or any note guarantor were solvent at the relevant time, or whether, whatever standard was used, the notes would not be avoided or further subordinated on another of the grounds set forth above. In rendering their opinions in connection with the Transactions, our counsel will not express any opinion as to the applicability of federal or state fraudulent transfer and conveyance laws. If You Do Not Properly Tender Your Old Notes, You Will Continue To Hold Unregistered Old Notes and Your Ability To Transfer Old Notes Will Be Adversely Affected We will only issue new notes in exchange for old notes that are timely received by the exchange agent together with all required documents, including a properly completed and signed letter of transmittal, as described in this prospectus. Therefore, you should allow sufficient time to ensure timely delivery of the old notes and you should carefully follow the instructions on how to tender your 24 old notes. Neither we nor the exchange agent are required to inform you of any defects or irregularities with respect to your tender of the old notes. If you do not tender your old notes or if we do not accept your old notes because you did not tender your old notes properly, then, after we consummate the exchange offer, you will continue to hold old notes that are subject to the existing transfer restrictions and, except in certain limited circumstances, you will no longer have any registration rights or be entitled to any liquidated damages with respect to the old notes. In addition: --if you tender your old notes for the purpose of participating in a distribution of the new notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act of 1933 in connection with any secondary resale of the new notes, and --if you are a broker-dealer that receives new notes for your own account in exchange for old notes that you acquired as a result of market-making activities or any other trading activities, you will be required to acknowledge that you will deliver a prospectus in connection with any resale of those new notes. We have agreed that, for a period of up to 180 days after the exchange offer is consummated, we will make this prospectus available to any broker-dealer for use in connection with any such resale. After the exchange offer is consummated, if you continue to hold any old notes, you may have difficulty selling them because there will be less old notes outstanding. In addition, if a large amount of old notes are not tendered or are tendered improperly, the limited amount of new notes that would be issued and outstanding after we consummate the exchange offer could lower the market price of those new notes. You Cannot Be Sure that an Active Trading Market Will Develop for the New Notes The new notes are a new issue of securities with no established trading market and will not be listed on any securities exchange. The liquidity of the trading market in the new notes, and the market price quoted for the new notes, may be adversely affected by changes in the overall market for high yield securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, you cannot be sure that an active trading market will develop for the new notes. THE EXCHANGE OFFER Purpose and Effect of the Exchange Offer We have entered into an exchange and registration rights agreement with the initial purchasers of the old notes in which we agreed, under certain circumstances, to file a registration statement relating to an offer to exchange the old notes for the new notes. The registration statement of which this prospectus forms a part was filed in compliance with this obligation. We also agreed to use our reasonable best efforts to cause the exchange offer to be consummated within 240 days following the original issuance of the old notes. The new notes will have terms substantially identical to the old notes except that the new notes will not contain terms with respect to transfer restrictions, registration rights and liquidated damages for failure to observe certain obligations in the exchange and registration rights agreement. The old notes were issued on October 1, 1999. Under the circumstances set forth below, we will use our reasonable best efforts to cause the Securities and Exchange Commission to declare effective a shelf registration statement with respect 25 to the resale of the old notes and keep the shelf registration statement effective for up to two years after the effective date of the shelf registration statement. These circumstances include: --if pursuant to any changes in law, Securities and Exchange Commission rules or regulations or applicable interpretations thereof by the staff of the Securities and Exchange Commission do not permit us to effect the exchange offer as contemplated by the exchange and registration rights agreement; --if any old notes validly tendered in the exchange offer are not exchanged for new notes within 240 days after the original issue of the old notes; --if the initial purchaser of the old notes so requests (but only with respect to any old notes not eligible to be exchanged for new notes in the exchange offer); or --if any holder of the old notes notifies us that it is not permitted to participate in the exchange offer or would not receive fully tradable new notes pursuant to the exchange offer. Each holder of old notes that wishes to exchange old notes for transferable new notes in the exchange offer will be required to make the following representations: --any new notes will be acquired in the ordinary course of its business; --that holder has no arrangement or understanding with any person to participate in the distribution of the new notes; and --that holder is not our "affiliate," as defined in Rule 405 of the Securities Act of 1933, or, if it is an affiliate, that it will comply with the applicable registration and prospectus delivery requirements of the Securities Act of 1933. Resale of New Notes Based on interpretations of the Securities and Exchange Commission staff set forth in no-action letters issued to unrelated third parties, we believe that new notes issued in the exchange offer in exchange for old notes may be offered for resale, resold and otherwise transferred by any new note holder without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, if: --that holder is not an "affiliate" of ours within the meaning of Rule 405 under the Securities Act of 1933; --that new notes are acquired in the ordinary course of the holder's business; and --the holder does not intend to participate in the distribution of those new notes. Any holder who tenders in the exchange offer with the intention of participating in any manner in a distribution of the new notes: --cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in Exxon Capital Holdings Corporation, Morgan Stanley & Co. Incorporated or similar no-action letters; and --must, in the absence of an exemption, comply with the registration and prospectus delivery requirements of the Securities Act of 1933 in connection with a secondary resale transaction of the new notes. This prospectus may be used for an offer to resell, for the resale or for other re-transfer of new notes only as specifically set forth in this prospectus. With regard to broker-dealers, only broker-dealers that acquired the old notes as a result of market-making activities or other trading activities 26 may participate in the exchange offer. Each broker-dealer that receives new notes for its own account in exchange for old notes, where those old notes were acquired by that broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. These broker-dealers may use this prospectus for this purpose. Please read the "Plan of Distribution" section of this prospectus for more details regarding the transfer of new notes. Terms of the Exchange Offer Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept for exchange any old notes properly tendered and not properly withdrawn on or prior to the expiration date. We will issue $1,000 principal amount of new notes in exchange for each $1,000 principal amount of old notes surrendered under the exchange offer. Old notes may be tendered only in integral multiples of $1,000. The form and terms of the new notes will be substantially identical to the form and terms of the old notes except the new notes will be registered under the Securities Act of 1933, will not bear legends restricting their transfer and will not provide for any liquidated damages upon failure of the issuer to fulfill its obligations under the exchange and registration rights agreement to file, and cause to be effective, a registration statement. The new notes will evidence the same debt as the old notes. The new notes will be issued under and entitled to the benefits of the same indenture that authorized the issuance of the old notes. Consequently, both series will be treated as a single class of debt securities under that indenture. As of the date of this prospectus, $150.0 million aggregate principal amount of the old notes are outstanding. This prospectus and the letter of transmittal are being sent to all registered holders of old notes. There will be no fixed record date for determining registered holders of old notes entitled to participate in the exchange offer. We intend to conduct the exchange offer in accordance with the provisions of the exchange and registration rights agreement, the applicable requirements of the Securities Act of 1933 and the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission. Old notes that are not tendered for exchange in the exchange offer will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits those holders have under the indenture relating to the old notes. We will be deemed to have accepted for exchange properly tendered old notes when we have given oral or written notice of the acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the new notes from the issuer and delivering exchange notes to those holders. Subject to the terms of the exchange and registration rights agreement, we expressly reserve the right to amend or terminate the exchange offer, and not to accept for exchange any old notes not previously accepted for exchange, upon the occurrence of any of the conditions specified below under the caption "--Certain Conditions to the Exchange Offer." Holders who tender old notes in the exchange offer will not be required to pay brokerage commissions or fees, or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of old notes. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. It is important that you read the section labeled "--Fees and Expenses" below for more details regarding fees and expenses incurred in the exchange offer. 27 Expiration Date; Extensions; Amendments The exchange offer will expire at 5:00 p.m., New York City time on , 2000, unless we extend it in our sole discretion. In order to extend the exchange offer, we will notify the exchange agent orally or in writing of any extension. We will notify the registered holders of old notes of the extension no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date. We reserve the right, in our sole discretion: --to delay accepting for exchange any old notes; --to extend the exchange offer or to terminate the exchange offer and to refuse to accept old notes not previously accepted if any of the conditions set forth below under "--Certain Conditions to the Exchange Offer" have not been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent; or --subject to the terms of the exchange and registration rights agreement, to amend the terms of the exchange offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders of old notes. If we amend the exchange offer in a manner that we determine to constitute a material change, we will promptly disclose that amendment in a manner reasonably calculated to inform the holders of old notes of the amendment. Without limiting the manner in which we may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the exchange offer, we will have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to a financial news service. Certain Conditions to the Exchange Offer Despite any other term of the exchange offer, we will not be required to accept for exchange, or exchange any new notes for, any old notes, and we may terminate the exchange offer as provided in this prospectus before accepting any old notes for exchange if in our reasonable judgment: --the new notes to be received will not be tradable by the holder without restriction under the Securities Act of 1933 and without material restrictions under the blue sky or securities laws of substantially all of the states of the United States; --the exchange offer, or the making of any exchange by a holder of old notes, would violate applicable law or any applicable interpretation of the staff of the SEC; or --any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer. In addition, we will not be obligated to accept for exchange the old notes of any holder that has not made: --the representations described under "--Purpose and Effect of the Exchange Offer", "--Procedures for Tendering" and "Plan of Distribution", and --such other representations as may be reasonably necessary under applicable Securities and Exchange Commission rules, regulations or interpretations to make available to us an appropriate form for registration of the new notes under the Securities Act of 1933. 28 The exchange offer is not conditioned upon any minimum aggregate principal amount of old notes being tendered for exchange. We expressly reserve the right, at any time or at various times, to extend the period of time during which the exchange offer is open. Consequently, we may delay acceptance of any old notes by giving oral or written notice of the extension to the registered holders of the old notes. During any such extensions, all old notes previously tendered will remain subject to the exchange offer, and we may accept them for exchange unless they have been previously withdrawn. We will return any old notes that we do not accept for exchange for any reason without expense to their tendering holder as promptly as practicable after the expiration or termination of the exchange offer. We expressly reserve the right to amend or terminate the exchange offer, and to reject for exchange any old notes not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified above. We will give oral or written notice of any extension, amendment, non-acceptance or termination to the registered holders of the old notes as promptly as practicable. In the case of any extension, notice will be issued no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date. These conditions are for our sole benefit and we may assert them regardless of the circumstances that may give rise to them or waive them in whole or in part at any or at various times in our sole discretion. If we fail at any time to exercise any of the foregoing rights, that failure will not constitute a waiver of that right. Each such right will be deemed an ongoing right that we may assert at any time or at various times. In addition, we will not accept for exchange any old notes tendered, and will not issue new notes in exchange for any of those old notes, if at that time any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939. Procedures for Tendering Only a holder of old notes may tender those old notes in the exchange offer. To tender in the exchange offer, a holder must: --complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal; have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and mail or deliver the letter of transmittal or facsimile to the exchange agent on or prior to the expiration date; --comply with DTC's Automated Tender Offer Program procedures described below; or --comply with the guaranteed delivery procedures described below. In addition, unless the holder complies with the guaranteed delivery procedures described below, either: --the exchange agent must receive old notes along with the letter of transmittal; or --the exchange agent must receive, on or prior to the expiration date, a timely confirmation of book-entry transfer of those old notes into the exchange agent's account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent's message. To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at the address set forth below under "--Exchange Agent" on or prior to the expiration date. 29 The tender by a holder that is not withdrawn on or prior to the expiration date will constitute an agreement between that holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal. The method of delivery of old notes, the letter of transmittal and all other required documents to the exchange agent is at the holder's election and risk. Rather than mail these items, we recommend that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assure delivery to the exchange agent on or prior to the expiration date. Holders should not send the letter of transmittal or old notes to us. Holders may request their respective brokers, dealers, commercial banks, trust companies or other nominees to effect the above transactions for them. Any beneficial owner whose old notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct it to tender on the owners' behalf. If that beneficial owner wishes to tender on its own behalf, it must, prior to completing and executing the letter of transmittal and delivering its old notes; either: --make appropriate arrangements to register ownership of the old notes in that owner's name; or --obtain a properly completed bond power from the registered holder of old notes. The transfer of registered ownership may take considerable time and may not be completed prior to the expiration date. Signatures on a letter of transmittal or a notice of withdrawal described below must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another "eligible institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, unless the old note tendered pursuant thereto are tendered: --by a registered holder who has not completed the box entitled "Special Exchange Instructions" or "Special Delivery Instructions" on the letter of transmittal; or --for the account of an eligible institution. If the letter of transmittal is signed by a person other than the registered holder of any old notes listed on the old notes, those old notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder's name appears on the old notes and an eligible institution must guarantee the signature on the bond power. If the letter of transmittal or any old notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing. Unless waived by us, they should also submit evidence satisfactory to us of their authority to deliver the letter of transmittal. The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC's system may use DTC's Automated Tender Offer Program to tender. Participants in the program may, instead of physically completing and signing the letter of transmittal and delivering it to the exchange agent, transmit their acceptance of the exchange offer electronically. They may do so by causing DTC to transfer the old notes to the exchange agent in accordance with its procedures for transfer. DTC will then send an agent's message to the exchange agent. The term "agent's 30 message" means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, to the effect that: --DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering old notes that are the subject of such book-entry confirmation; --the participant has received and agrees to be bound by the terms of the letter of transmittal (or, in the case of an agent's message relating to guaranteed delivery, that the participant has received and agrees to be bound by the applicable notice of guaranteed delivery); and --the agreement may be enforced against that participant. We will determine in our sole discretion all questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered old notes and withdrawal of tendered old notes. Our determination will be final and binding. We reserve the absolute right to reject any old notes not properly tendered or any old notes the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular old notes. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to tenders of old notes, neither we, the exchange agent nor any other person will incur any liability for failure to give that notification. Tenders of old notes will not be deemed made until those defects or irregularities have been cured or waived. Any old notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the exchange agent without cost to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. In all cases, we will issue new notes for old notes that we have accepted for exchange under the exchange offer only after the exchange agent timely receives: --old notes or a timely book-entry confirmation of those old notes into the exchange agent's account at DTC; and --a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent's message. By signing the letter of transmittal or transmitting an acceptance of the exchange offer electronically through DTC, each tendering holder of old notes will represent to us that, among other things: --any new notes that the holder receives will be acquired in the ordinary course of its business; --the holder has no arrangement or understanding with any person or entity to participate in the distribution of the new notes; --if the holder is not a broker-dealer, that it is not engaged in and does not intend to engage in the distribution of the new notes; --if the holder is a broker-dealer that will receive new notes for its own account in exchange for old notes that were acquired as a result of market-making activities, that it will deliver a prospectus, as required by law, in connection with any resale of those new notes; and --the holder is not an "affiliate", as defined in Rule 405 of the Securities Act of 1933, of the issuer or, if the holder is an affiliate, it will comply with any applicable registration and prospectus delivery requirements of the Securities Act of 1933. 31 Book-Entry Transfer The exchange agent will establish an account with respect to the old notes at DTC for purposes of the exchange offer promptly after the date of this prospectus. Any financial institution participant in DTC's system may make book-entry delivery of old notes by causing DTC to transfer those old notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Holders of old notes who are unable to deliver confirmation of the book-entry tender of their old notes into the exchange agent's account at DTC or all other documents of transmittal to the exchange agent on or prior to the expiration date must tender their old notes according to the guaranteed delivery procedures described below. Guaranteed Delivery Procedures Holders wishing to tender their old notes but whose old notes are not immediately available or who cannot deliver their old notes, the letter of transmittal or any other required documents to the exchange agent or comply with the applicable procedures under DTC's Automated Tender Offer Program on or prior to the expiration date may tender if: --the tender is made through an eligible institution; --on or prior to the expiration date, the exchange agent receives from the eligible institution either a properly completed and duly executed notice of guaranteed delivery (by facsimile transmission, mail or hand delivery) or a properly transmitted agent's message and notice of guaranteed delivery: --setting forth the name and address of the holder, the registered number(s) of those old notes and the principal amount of old notes tendered; --stating that the tender is being made thereby; and --guaranteeing that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal (or facsimile thereof), together with the old notes or a book-entry confirmation, and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and --the exchange agent receives the properly completed and executed letter of transmittal (or facsimile thereof), as well as all tendered old notes in proper form for transfer or a book-entry confirmation, and all other documents required by the letter of transmittal, within three New York Stock Exchange trading days after the expiration date. Upon request to the exchange agent, a notice of guaranteed delivery will be sent to holders who wish to tender their old notes according to the guaranteed delivery procedures set forth above. Withdrawal of Tenders Except as otherwise provided in this prospectus, holders of old notes may withdraw their tenders at any time on or prior to the expiration date. For your withdrawal to be effective: --the exchange agent must receive a written notice (which may be by telegram, telex, facsimile transmission or letter) of withdrawal at one of the addresses set forth below under "--Exchange Agent," or --holders must comply with the appropriate procedures of DTC's Automated Tender Offer Program system. 32 Any such notice of withdrawal must: --specify the name of the person who tendered the old notes to be withdrawn; --identify the old notes to be withdrawn (including the principal amount of those old notes); and --where certificates for old notes have been transmitted, specify the name in which those old notes were registered, if different from that of the withdrawing holder. If certificates for old notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of those certificates, the withdrawing holder must also submit: --the serial numbers of the particular certificates to be withdrawn; and --a signed notice of withdrawal with signatures guaranteed by an eligible institution unless the holder is an eligible institution. If old notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn old notes and otherwise comply with the procedures of DTC. We will determine all questions as to the validity, form and eligibility (including time of receipt) of those notices, and our determination shall be final and binding on all parties. We will deem any old notes so withdrawn not to have been validly tendered for exchange for purposes of the exchange offer. Any old notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder without cost to the holder (or, in the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC according to the procedures described above, those old notes will be credited to an account maintained with DTC for old notes specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn old notes may be re-tendered by following one of the procedures described under "--Procedures for Tendering" above at any time on or prior to the expiration date. Exchange Agent The Bank of New York has been appointed as exchange agent for the exchange offer. You should direct questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent addressed as follows: For Overnight Delivery, Delivery by Hand or Delivery by Registered or Certified Mail: Bank of New York 101 Barclay Street New York, NY 10286 Attn: Kim Lau, Reorg--7 east By Facsimile Transmission (for eligible institutions only): (212) 815-6339 Confirm facsimile by telephone only: (212) 815-3750 DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL. 33 Fees and Expenses We will bear the expenses of soliciting tenders. The principal solicitation is being made by mail; however, we may make additional solicitations by telegraph, telephone or in person by our officers and regular employees and those of our affiliates. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related reasonable out-of-pocket expenses. Our expenses in connection with the exchange offer include: -- Securities and Exchange Commission registration fees; -- fees and expenses of the exchange agent and the trustee; -- accounting and legal fees and printing costs; and -- related fees and expenses. Transfer Taxes We will pay all transfer taxes, if any, applicable to the exchange of old notes under the exchange offer. The tendering holder, however, will be required to pay any transfer taxes (whether imposed on the registered holder or any other person) if: -- certificates representing old notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of old notes tendered; -- tendered old notes are registered in the name of any person other than the person signing the letter of transmittal; or -- a transfer tax is imposed for any reason other than the exchange of old notes under the exchange offer. If satisfactory evidence of payment of those taxes is not submitted with the letter of transmittal, the amount of those transfer taxes will be billed to that tendering holder. Holders who tender their old notes for exchange will not be required to pay any transfer taxes. However, holders who instruct the issuer to register new notes in the name of, or request that old notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be required to pay any applicable transfer tax. Consequences of Failure to Exchange Holders of old notes who do not exchange their old notes for new notes under the exchange offer will remain subject to the restrictions on transfer applicable to the old notes: -- as set forth in the legend printed on the old notes as a consequence of the issuance of the old notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act of 1933 and applicable state securities laws; and -- otherwise as set forth in the offering memorandum distributed in connection with the private offering of the old notes. In general, you may not offer or sell the old notes unless they are registered under the Securities Act of 1933, or if the offer or sale is exempt from registration under, or not subject to, the Securities 34 Act of 1933 and applicable state securities laws. Except as required by the exchange and registration rights agreement, we do not intend to register resales of the old notes under the Securities Act of 1933. Based on interpretations of the Securities and Exchange Commission staff, new notes issued pursuant to the exchange offer may be offered for resale, resold or otherwise transferred by their holders (other than any holder that is our "affiliate" within the meaning of Rule 405 under the Securities Act of 1933) without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, provided that the holders acquired the new notes in the ordinary course of the holders' business and the holders have no arrangement or understanding with respect to the distribution of the new notes to be acquired in the exchange offer. Any holder who tenders in the exchange offer for the purpose of participating in a distribution of the new notes: -- could not rely on the applicable interpretations of the Securities and Exchange Commission; and -- in the absence of an exemption, must comply with the registration and prospectus delivery requirements of the Securities Act of 1933 in connection with any secondary resale of the new notes. After the exchange offer is consummated, if you continue to hold any old notes, you may have difficulty selling them because there will be less old notes outstanding. In addition, if a large amount of old notes are not tendered or are tendered improperly, the limited amount of new notes that would be issued and outstanding after we consummate the exchange offer could lower the market price of those new notes. Accounting Treatment We will record the new notes in our accounting records at the same carrying value as the old notes, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer. We will amortize the expenses of the exchange offer over the life of the notes. Other Participation in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take. We may in the future seek to acquire untendered old notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any old notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered old notes. 35 USE OF PROCEEDS We will not receive any proceeds from the issuance of the new notes. In consideration for issuing the new notes as contemplated in this prospectus, we will receive in exchange old notes in like principal amount, which will be cancelled and as such will not result in any increase in our indebtedness. The proceeds from the sale of the old notes were approximately $150.0 million. We used these proceeds, together with borrowings under the new credit facilities ($140.0 million) and proceeds from the cash equity contribution ($35.0 million), to finance the Commercial Stone acquisition ($139.0 million), repay certain debt ($167.2 million) and pay related fees and expenses ($18.8 million). CAPITALIZATION The following table sets forth our capitalization as of December 31, 1999. This information should be read in conjunction with "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes thereto included elsewhere in this prospectus.
At December 31, 1999 -------------------- (Dollars in Millions) Cash................................................ $ 13.6 ====== Debt (including current maturities): New credit facilities(1): Tranche A term loan facility.................... $ 41.1 Tranche B term loan facility.................... 94.8 Other debt........................................ 1.6 Notes offered hereby.............................. 150.0 ------ Total debt...................................... 287.5 Stockholder's equity: Common stock...................................... -- Additional paid-in capital........................ 81.4 Retained earnings (deficit)....................... (17.0) ------ Total stockholder's equity...................... 64.4 ------ Total capitalization.......................... $351.9 ======
- -------- (1) The tranche A term loan facility provided for a tranche of loans denominated in Canadian dollars in an amount equal to $2.0 million, which was borrowed on the closing date by George F. Pettinos (Canada) Limited. In connection with the sale by us of George F. Pettinos (Canada) Limited on February 29, 2000, we repaid this portion of the tranche A term loan facility. In addition, the revolving credit facility provides for borrowings of up to $50.0 million with a sublimit of $12.0 million for letters of credit and a sublimit of $3.0 million for swingline loans. We also have availability under the acquisition term loan facility of up to $40.0 million, subject to, among other things, meeting a leverage ratio test. See "Description of the New Credit Facilities." 36 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA The following unaudited pro forma consolidated financial data has been prepared by applying pro forma adjustments to our consolidated financial statements included elsewhere in this prospectus. The unaudited pro forma consolidated statement of operations for the year ended December 31, 1999 gives effect to the Transactions and the acquisition of the Morie Assets as if they had occurred on January 1, 1999. The Commercial Stone acquisition was accounted for using the purchase method of accounting. The purchase price was allocated to the assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over the adjusted book value of the net assets of Commercial Stone was allocated to mineral deposits and goodwill. The historical financial data for the acquisition of the Morie Assets was derived from unaudited financial statements. The acquisition of the Morie Assets was accounted for using the purchase method of accounting pursuant to which the purchase price of the acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the adjusted book value of the net assets of the Morie Assets was allocated to goodwill. The pro forma adjustments, as described in the notes to the unaudited pro forma consolidated statement of operations, are estimates based on currently available information and certain adjustments that management believes are reasonable. The unaudited pro forma consolidated financial data is presented for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred had the Transactions or the acquisition of the Morie Assets been consummated on or as of the date indicated nor is it necessarily indicative of future operating results or financial position. The unaudited pro forma consolidated financial data should be read in conjunction with "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes thereto included elsewhere in this prospectus. 37 BETTER MINERALS & AGGREGATES COMPANY (formerly USS Intermediate Holdco, Inc.) UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 1999 (Dollars in Thousands)
Historical Better Pro Forma Minerals & Historical Historical Adjustments Aggregates Morie Commercial for the Pro Company (1) Assets (1) Stone (1) Transactions Forma ----------- ---------- ---------- ------------ -------- Net sales............... $209,075 $3,548 $35,430 $ -- $248,053 Cost of goods sold...... 140,244 2,820 23,490 (463)(2) 166,091 Depreciation, depletion and amortization....... 28,481 441 2,444 2,840 (3) 34,206 Selling, general and administrative......... 21,843 -- 2,741 (1,147)(4) 23,437 -------- ------ ------- ------- -------- Operating income (loss)............... 18,507 287 6,755 (1,230) 24,319 Interest expense........ 19,590 -- 185 14,930 (5) 34,705 Accretion of preferred stock warrants......... 56 -- -- -- 56 Other income, net of interest income........ (2,171) (5) (489) -- (2,665) -------- ------ ------- ------- -------- (Loss) income before income taxes......... 1,032 292 7,059 (16,160) (7,777) Benefit for income taxes.................. (2,714) 120 2,466 (6,626)(6) (6,754) -------- ------ ------- ------- -------- Net income (loss) before extraordinary loss................. $ 3,746 $ 172 $ 4,593 $(9,534) $ (1,023) ======== ====== ======= ======= ========
See Notes to the Unaudited Pro Forma Consolidated Statement of Operations. 38 NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in Thousands) (1) The historical statement of operations of the Company and the businesses acquired for the year ended December 31, 1999 and the respective periods prior to the date of acquisition by the Company were derived from the consolidated audited financial statements of the Company that are included elsewhere in this prospectus, the unaudited interim financial statements of the Morie Assets for the period January 1, 1999 to April 8, 1999 and the unaudited combined financial statements of Commercial Stone and CATS for the nine months ended September 30, 1999. (2) Commercial Stone historically paid a family trust of the shareholders of Commercial Stone an annual royalty fee equal to 6% of the average selling price of the total stone mined from the 1,000 acre property owned by the trust. The annual royalty fee will not continue following the Commercial Stone acquisition as the Company will own the property. (3) The adjustment reflects the estimated increase in depreciation, depletion and amortization expense after giving effect to the purchase accounting adjustments for the difference between historical cost and estimated fair value and useful lives of property, plant and equipment and other intangible assets for the Morie Assets and the Commercial Stone acquisition as follows: Depreciation and depletion of property, plant and equipment (a)............................................................ $2,373 Amortization of other intangible assets (b)..................... 467 ------ Net adjustment.................................................. $2,840 ======
-------- (a) Depreciation of plant and equipment is computed using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 15 years. Depletion is computed based on units of production for the properties. The adjustment is the result of purchase accounting adjustments made in connection with the acquisition of the Morie Assets and Commercial Stone. (b) Represents the amortization of goodwill over 15 years associated with the Morie Assets and Commercial Stone. (4) The adjustment represents the reduction of salary expenses paid to former principal owners of Commercial Stone and CATS, which expenses were reduced to the level in effect subsequent to the acquisition by the Company. Also, prior to the consummation of the Transactions, DGHA conducted certain of its operations as a subsidiary of the Company. As a result, the acquisition fees payable to DGHA under the Management Services Agreement were expensed. Upon consummation of the Transactions, DGHA became an unconsolidated entity. The adjustment eliminates the acquisition fees paid (which would have been capitalized and not expensed had DGHA not conducted operations as one of our subsidiaries), net of increased management fees expected to be paid upon consummation of the Transactions. See "Certain Relationships and Related Transactions--Management Services Agreement." Commercial Stone salary expense and employee bonuses............ $ (520) DGHA fees....................................................... (627) ------- Total adjustment................................................ $(1,147) =======
39 (5) The adjustment reflects (i) interest expense associated with borrowings under the new credit facilities and the notes, (ii) amortization of the related deferred financing fees and (iii) the elimination of the Company's historical interest expense and related deferred financing fees after giving effect to the $35.0 million equity contribution made on October 1, 1999.
Principal Amount Adjustment --------- ---------- New Credit Facilities: Term Loan A (a).................................. $ 45,000 $ 3,852 Term Loan B (a).................................. 95,000 8,607 Notes (a)........................................ 150,000 19,500 Other debt....................................... 1,446 140 Amortization of deferred financing fees (b)...... 1,924 Non-cash accretion of liabilities recorded at fair market value............................... 164 Interest rate protection......................... 210 Other, including commitment fees................. 308 -------- 34,705 Elimination of historical interest expense....... (19,775) -------- Net adjustment (a)............................... $ 14,930 ========
-------- (a) At assumed variable rates of 8.56% and 9.06% for the new credit facilities and an actual rate of 13.0% for the new notes. The effect of a 1/8% increase or decrease in interest rates on variable rate debt would increase or decrease total interest expense by approximately $0.2 million for the year ended December 31, 1999. (b) Adjustment reflects the amortization of incremental deferred financing fees associated with the new credit facilities. Deferred financing fees are amortized using the straight-line method over the term of the related debt. (6) The adjustment represents the income tax benefit at an effective rate of 41.0% for the effects of the aforementioned adjustments (2) through (5). 40 SELECTED FINANCIAL DATA The following table sets forth selected historical consolidated financial and other data of U.S. Silica (Predecessor) and the Company (Successor) as of the end of and for the periods presented. The Company acquired U.S. Silica on February 9, 1996. U.S. Silica is therefore the Predecessor for financial reporting purposes. The selected historical consolidated financial data as of and for the year December 31, 1995 is derived from the unaudited consolidated financial statements of the Predecessor that are not included in this prospectus. The selected historical consolidated financial data as of and for the year ended December 31, 1996 is presented as two separate periods, January 1, 1996 through February 9, 1996 (Predecessor) and February 10, 1996 through December 31, 1996 (Successor), and are derived from the audited consolidated financial statements of the Predecessor and the Successor, respectively, that are not included in this prospectus. The selected historical consolidated financial data as of and for the years ended December 31, 1997, 1998 and 1999 have been derived from the audited consolidated financial statements of the Company and the notes thereto included elsewhere in this prospectus. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes thereto included elsewhere in this prospectus.
Predecessor Successor ------------------------- -------------------------------------------------- January 1, February 10, Year Ended 1996 through 1996 through December 31, February 9, December 31, Year Ended December 31, ------------ ------------ ------------ ------------------------------------ 1995 1996 1996 1997 1998(1) 1999(2) ------------ ------------ ------------ ----------- ------------ -------- (unaudited) (Dollars in Thousands) Statement of Operations Data: Net sales............... $115,446 $ 11,827 $106,782 $ 128,512 $ 142,294 $209,075 Cost of goods sold...... 83,976 9,394 73,625 88,097 98,478 140,244 Depreciation, depletion and amortization....... 11,659 1,033 15,225 17,886 19,888 28,481 Selling, general and administrative......... 12,561 1,404 12,077 14,345 16,930 21,843 Incentive stock compensation expense(3)............. -- -- -- -- 14,227 -- Operating income (loss)................. 7,250 (4) 5,855 8,184 (7,229) 18,507 Interest expense........ 162 13 10,074 10,513 10,269 19,590 Accretion of preferred stock warrants(4)...... -- -- -- 1,374 1,254 56 Other income net, including interest income................. (4,327) (534) (598) (1,742) (1,881) (2,171) (Loss) income before income taxes........... 11,415 517 (3,621) (1,961) (16,871) 1,032 Provision (Benefit) for income taxes........... 2,722 963 (2,101) (2,239) (2,204) (2,714) Net income (loss) before extraordinary loss..... 8,693 (446) (1,520) 278 (14,667) 3,746 Extraordinary loss(5)... -- -- -- -- (2,102) (2,747) Net income (loss)....... $ 8,693 $ (446) $ (1,520) $ 278 $ (16,769) $ 999 Balance Sheet Data: Cash.................... $ 1,361 $ 748 $ 954 $ 402 $ 2,222 $ 13,573 Working capital......... 23,932 16,573 11,724 12,277 19,508 45,715 Total assets............ 105,958 104,112 195,787 183,647 274,678 551,603 Total debt.............. -- -- 89,154 83,163 137,448 287,505 Stockholder's equity.... 60,066 54,984 22,755 26,022 23,396 64,335 Other Financial Data: Capital expenditures.... $ 6,312 $ 567 $ 7,216 $ 5,537 $ 9,399 $ 14,572 Cash interest expense... -- -- 6,609 8,731 9,269 10,925 Ratio of earnings to fixed charges(6)....... 46.3 25.6 -- (7) -- (7) -- (7) 1.1
- ------- (1) Includes (i) the results of the Nicks Silica Assets from January 16, 1998, the date of acquisition, (ii) with respect to the year ended December 31, 1998, the results of Pettinos from July 25, 1998, the date of acquisition, and (iii) with respect to the year ended December 31, 1998, the results of Better Materials from December 14, 1998, the date of acquisition, in each case, as further described in "Management's Discussion and Analysis of Financial Condition and Results of Operations". (2) Includes the results of the Morie Assets from April 9, 1999, the date of acquisition, and the results of Commercial Stone from October 1, 1999, the date of acquisition. (3) Represents non-cash compensation expense recorded in the second half of the year ended December 31, 1998 due to the waiver by USS Holdings of its right to repurchase certain capital stock held by our management. (4) Represents the non-cash accretion in value of certain warrants granted with respect to preferred stock of USS Holdings. The Company recognizes this charge as part of push down accounting because the warrants were issued in connection with debt issued by U.S. Silica. The obligation to satisfy any payments due in connection with these warrants was forgiven by USS Holdings during 1999. (5) Represents non-cash charges and write-offs recorded in connection with the Company's early retirement of certain subordinated debt in 1998, and the early retirement of certain senior debt in 1999. (6) Under Item 503 of Regulation S-K, "earnings" for purposes of this calculation have been computed by adding to "income before extraordinary items" all taxes based on income or profits, total interest charges and the estimated interest element of rentals charged to income. "Fixed charges" include total interest charges and the estimated interest element of rentals charged to income. (7) Earnings were insufficient to cover fixed charges by $3.6 million, $2.0 million and $16.9 million for the period February 10, 1996 through December 31, 1996, the years ended December 31, 1997 and 1998, respectively. 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General We mine, process and market industrial minerals, principally silica, in the eastern and midwestern United States. We also mine, process and market aggregates and produce and market hot mixed asphalt in certain geographic areas in Pennsylvania and New Jersey. We are the second leading producer of silica in the United States, accounting for approximately 23% of industry volume in 1999. We believe that we have leading positions in most of our key end use markets for our silica products, typically occupying the number one or two position by sales. These end use markets include container glass, fiberglass, specialty glass, flat glass, fillers and extenders, chemicals and ceramics. We also supply our silica products to the foundry, building materials and other end use markets. Our customers use our aggregates, which consist of high quality crushed stone, construction sand and gravel, for road construction and maintenance, other infrastructure projects and residential and commercial construction and to produce hot mixed asphalt and concrete products. We also use our aggregates to produce hot mixed asphalt. We operate a network of 25 production facilities in 14 states. Many of our production facilities are located near major modes of transportation and our significant customers, which reduces transportation costs and enhances customer service. Our principal industrial minerals and aggregates properties each have deposits that we believe will support production in excess of 15 years. On a pro forma basis, our industrial minerals business (substantially all the net sales of which consist of silica products) and our aggregates business accounted for 65.2% and 34.8% of our net sales, respectively, for the year ended December 31, 1999. We recognize net sales at the time product is shipped to our customers and title passes (generally when the product leaves our facility). Except for certain limited instances in our aggregates business where we ship our products in trucks that we own, net sales do not include the costs of transportation borne by our customers. Generally, either our customers pay freight costs directly, or we pay the costs on their behalf and are reimbursed (in which case we record a liability and an accounts receivable on our balance sheet). Cost of goods sold includes the ongoing mining and processing costs of our operations (primarily labor costs, power costs, repair and maintenance costs, costs of hiring third party subcontractors to drill and blast in our mining operations, as well as lease royalty payments, where applicable) and non-cash charges associated with estimated net future costs of restoring and reclaiming operating mine sites. This provision is made at each operating location based on units of production and engineering estimates of total deposits. Selling, general and administrative expenses are the costs of operating our business, including corporate overhead and associated fees and expenses related to acquisitions. Management fees to our acquisition advisors and due diligence costs for any acquisitions that we are unable to complete are also included in this category. Acquired property and mineral deposits are recorded at cost. The purchase price of business acquisitions is allocated based on the fair values of assets acquired and liabilities assumed at that time. Depreciation is computed using the straight line method over the estimated useful lives of the assets, which ranges from 3 to 15 years. Depletion of mineral deposits is accounted for as the minerals are extracted, based on units of production and engineering estimates of total deposits. Accordingly, depletion expense will increase or decrease with changes in the volumes of minerals or aggregates extracted. Amortization of various non-current assets such as non-competition agreements are made on a straight line basis over the life of the related agreement. Goodwill related to purchased acquisitions is amortized over 15 years. 42 History and Recent Acquisitions U.S. Silica was organized in 1927 as the Pennsylvania Glass Sand Corporation. Pennsylvania Glass Sand Corporation was acquired by the International Telephone and Telegraph Corporation in 1968, which in turn sold it to U.S. Borax (formerly Pacific Coast Resources) in 1985. In 1986, the U.S. Silica name was adopted and U.S. Borax acquired Ottawa Silica Company. In 1987, Ottawa Silica Company was merged into U.S. Silica. In February 1996, we purchased U.S. Silica from U.S. Borax. We subsequently completed the following acquisitions: --In January 1998, we acquired certain silica-producing assets (the "Nicks Silica Assets") from Nicks Silica Company, a silica producer in Jackson, Tennessee. These assets generated $4.3 million in revenues during 1996. --In July 1998, we acquired George F. Pettinos, Inc. ("Pettinos"), a producer of aggregates with operations in Berlin, New Jersey, and a processor of silica with operations in Ontario, Canada. Pettinos had $14.9 million in revenues during 1997. --In December 1998, we acquired Better Materials Corporation ("Better Materials"), an aggregates producer in southeastern Pennsylvania. Better Materials had $24.7 million in revenues during 1997. --In April 1999, we acquired the Morie Assets from Unimin Corporation, which are used in the production and sale of silica and aggregates. The Morie Assets generated $17.8 million in revenues during 1998. --In October 1999, we acquired Commercial Stone, a crushed stone and hot mixed asphalt producer in southwestern Pennsylvania. Commercial Stone had $42.0 million in revenues for its fiscal year ended March 31, 1999. We paid $233.7 million in total consideration for the acquisition of these businesses and assets. 43 Results of Operations--Better Minerals & Aggregates Company The following table sets forth Better Minerals & Aggregates' (including its direct and indirect subsidiaries) statement of operations data for the three years ended December 31, 1997, 1998 and 1999, and the percentage of net sales of each line item for the periods presented. This statement of operations data is derived from the consolidated financial statements of Better Minerals & Aggregates and the notes thereto included elsewhere in this prospectus.
Year Ended December 31, -------------------------------------------------- 1997 1998 1999 --------------- --------------- --------------- (Dollars in Thousands) Net sales: Industrial minerals....... $128,512 100.0% $138,797 97.5% $159,168 76.1% Aggregates................ -- -- 3,497 2.5 49,907 23.9 -------- -------- -------- Total net sales........... 128,512 100.0 142,294 100.0 209,075 100.0 Cost of goods sold........ 88,097 68.6 98,478 69.2 140,244 67.1 Depreciation, depletion and amortization......... 17,886 13.9 19,888 14.0 28,481 13.6 Selling, general and administrative........... 14,345 11.2 16,930 11.9 21,843 10.4 Incentive stock compensation expense..... -- -- 14,227 10.0 -- -- -------- -------- -------- Operating income (loss)... 8,184 6.4 (7,229) (5.1) 18,507 8.9 Interest expense.......... 10,513 8.2 10,269 7.2 19,590 9.4 Accretion of preferred stock warrants........... 1,374 1.1 1,254 0.9 56 -- Other income net, including interest income................... (1,742) (1.4) (1,881) (1.3) (2,171) (1.0) -------- -------- -------- (Loss) income before income taxes............. (1,961) (1.5) (16,871) (11.9) 1,032 0.5 Provision (Benefit) for income taxes............. (2,239) (1.7) (2,204) 1.5 (2,714) (1.3) -------- -------- -------- Net income (loss) before extraordinary loss....... 278 0.2 (14,667) (10.3) 3,746 1.8 Extraordinary loss........ -- -- (2,102) (1.5) (2,747) (1.3) -------- -------- -------- Net income (loss)......... $ 278 0.2% $(16,769) (11.8)% $ 999 0.5% ======== ======== ========
Year Ended December 31, 1999 Compared with Year Ended December 31, 1998 Net Sales. Net sales increased $66.8 million, or 46.9%, to $209.1 million in the year ended December 31, 1999 from $142.3 million in the year ended December 31, 1998. Net sales of industrial minerals increased $20.4 million, or 14.7%, to $159.2 million in the year ended December 31, 1999 from $138.8 million in the year ended December 31, 1998. The increase was primarily due to the acquisition of the Morie Assets, which resulted in the inclusion of $8.7 million for the period of April 8, 1999 through December 31, 1999, and the full year results of the Pettinos acquisition, which resulted in an increase of $5.3 million in the year ended December 31, 1999 from the year ended December 31, 1998. Excluding the acquisitions, net sales of industrial minerals increased $6.3 million, or 4.6%, to $141.6 million in the year ended December 31, 1999 from $135.3 million in the year ended December 31, 1998, primarily from $4.1 million of increased silica sales to the glass container, flat glass, specialty glass and filler extender and use markets. Net sales of aggregates increased $46.4 million to $49.9 million in the year ended December 31, 1999 from $3.5 million in the year ended December 31, 1998. The increase was primarily due to the full year results from the 1998 acquisitions of Better Materials and Pettinos, which resulted in the inclusion of additional net sales of $27.9 million in the year ended December 31, 1999, the acquisition of the Morie Assets, which resulted in the inclusion of net sales of $6.1 million for the period of April 8, 1999 through December 31, 1999 and the acquisition of Commercial Stone, which resulted in the inclusion of net sales of $12.4 million for the period of October 1, 1999 through December 31, 1999. 44 Cost of Goods Sold. Cost of goods sold increased $41.7 million, or 42.3%, to $140.2 million in the year ended December 31, 1999 from $98.5 million in the year ended December 31, 1998. Cost of goods sold of industrial minerals increased $12.0 million, or 12.5%, to $107.7 million in the year ended December 31, 1999 from $95.7 million in the year ended December 31, 1998. The increase was primarily due to the acquisition of the Morie Assets and the full year results from the Pettinos acquisition, which resulted in the inclusion of $9.7 million in cost of goods sold. Excluding acquisitions, cost of goods sold increased $2.3 million, or 2.5%, on a volume increase of 4.6% in the year ended December 31, 1999 compared to the year ended December 31, 1998. Cost of goods sold of aggregates increased $29.7 million to $32.5 million in the year ended December 31, 1999 from $2.8 million in the year ended December 31, 1998. The increase was due to the inclusion of the full year results from the 1998 acquisitions of Better Materials and Pettinos, and the 1999 acquisition of the Morie Assets and Commercial Stone, which resulted in the inclusion of $29.7 million in additional cost of goods sold in the year ended December 31, 1999. Depreciation, Depletion and Amortization. Depreciation, depletion and amortization increased $8.6 million, or 43.2%, to $28.5 million in the year ended December 31, 1999 from $19.9 million in the year ended December 31, 1998. The increase was primarily due to the acquisitions of Better Materials, the Morie Assets and Commercial Stone. Selling, General and Administrative. Selling, general and administrative expenses increased $4.9 million, or 29.0%, to $21.8 million in the year ended December 31, 1999 from $16.9 million in the year ended December 31, 1998. The increase was primarily due to the acquisitions of Pettinos, Better Materials, the Morie Assets and Commercial Stone, which resulted in the inclusion of $4.3 million in additional expense in the year ended December 31, 1999. Excluding these items, selling, general and administrative expenses increased $0.6 million, or 3.6%, to $17.5 million in the year ended December 31, 1999 from $16.9 million in the year ended December 31, 1998 due to normal annual increases. Operating Income. Operating income increased $25.7 million to $18.5 million in the year ended December 31, 1999 from a $7.2 million operating loss in the year ended December 31, 1998. Operating income of industrial minerals increased $19.8 million to $12.5 million in the year ended December 31, 1999 from an operating loss of $7.3 million in the year ended December 31, 1998. The increase is primarily due to the non-recurring incentive stock compensation expense recognized in 1998, as well as the results from the acquisitions and other factors noted earlier. Operating income of aggregates increased $6.9 million to $6.6 million in the year ended December 31, 1999 from an operating loss of $0.3 million in the year ended December 31, 1998 as a result of the acquisitions noted earlier. Corporate expenses not allocated to the business segments increased $0.9 million to $0.6 million in the year ended December 31, 1999. Interest (Income) Expense. Interest expense increased $9.3 million, or 90.3%, to $19.6 million in the year ended December 31, 1999 from $10.3 million in the year ended December 31, 1998. The increase was primarily due to increased borrowings related to acquisitions and increased interest rates. Net Income (Loss). Net income (loss) increased $17.8 million to $1.0 million in the year ended December 31, 1999 from a $16.8 million net loss in the year ended December 31, 1998. The increase in net income is primarily due to the factors noted above, especially the incentive stock 45 compensation expense recognized in 1998. This is partially offset by an increase of $0.6 million in extraordinary losses to $2.7 million in the year ended December 31, 1999 from $2.1 million in the year ended December 31, 1998. The 1999 loss reflects the after-tax charge recognized to write off debt issuance fees that were previously capitalized in connection with our 1998 financing. The 1998 extraordinary loss reflects the after-tax charge to write off capitalized debt issuance fees for subordinated debt first issued in 1996 and retired in 1998. Year Ended December 31, 1998 Compared with Year Ended December 31, 1997 Net Sales. Net sales increased $13.8 million, or 10.7%, to $142.3 million in the year ended December 31, 1998 from $128.5 million in the year ended December 31, 1997. Net sales of industrial minerals increased $10.3 million, or 8.0%, to $138.8 million in the year ended December 31, 1998 from $128.5 million in the year ended December 31, 1997. The increase was primarily due to the acquisition of Pettinos, which resulted in the inclusion of net sales of $3.6 million for the period of July 25, 1998 to December 31, 1998, and the acquisition of Nicks Silica Assets, which resulted in the inclusion of net sales of $1.5 million for the period of January 17, 1998 to December 31, 1998. Excluding these acquisitions, net sales of industrial minerals increased $5.2 million, or 4.0%, to $133.7 million in the year ended December 31, 1998 from $128.5 million in the year ended December 31, 1997. Excluding these acquisitions, net sales of silica increased $5.2 million. The increase was due primarily to new accounts obtained in the glass container and flat glass end use markets and demand for silica in the fiberglass end use market. Net sales of aggregates in the year ended December 31, 1998 were $3.5 million, due to the acquisition of Pettinos, which resulted in the inclusion of net sales of $2.7 million for the period of July 25, 1998 to December 31, 1998, and the acquisition of Better Materials, which resulted in the inclusion of net sales of $0.8 million for the period of December 15, 1998 to December 31, 1998. There were no sales of aggregates in the year ended December 31, 1997. Cost of Goods Sold. Cost of goods sold increased $10.4 million, or 11.8%, to $98.5 million in the year ended December 31, 1998 from $88.1 million in the year ended December 31, 1997. The increase was primarily due to the acquisition of the Nicks Silica Assets, Pettinos and Better Materials, which resulted in the inclusion of $9.5 million of operating expenses, including expenses of $0.6 million incurred to improve the safety and operating standards of the operations of the Nicks Silica Assets. Excluding acquisitions, cost of goods sold increased $0.8 million, or 0.9% on a volume increase of 2.6%, in the year ended December 31, 1998 compared to the year ended December 31, 1997. Depreciation, Depletion and Amortization. Depreciation, depletion and amortization increased $2.0 million, or 11.2%, to $19.9 million in the year ended December 31, 1998 from $17.9 million in the year ended December 31, 1997. The increase was primarily due to the acquisition of the Nicks Silica Assets, Pettinos and Better Materials, increased production and an increase in the amortization of non-competition agreements with the former owner of the Nicks Silica Assets. Selling, General and Administrative. Selling, general and administrative expenses increased $2.6 million, or 18.2%, to $16.9 million in the year ended December 31, 1998 from $14.3 million in the year ended December 31, 1997. The increase was primarily due to $1.1 million of costs associated with the acquisition of the Nicks Silica Assets, Pettinos and Better Materials and non- recurring professional fees of $1.0 million incurred in connection with the refinancing of our indebtedness in July 1998. Excluding these items, selling, general and administrative expenses increased $0.5 million, or 3.6%, to $14.3 million in the year ended December 31, 1998 from $13.8 million in the year ended December 31, 1997 due to normal annual increases and one-time expenses associated with a reorganization of our sales and marketing departments. 46 Incentive Stock Compensation Expense. In 1998, we recognized non-cash compensation expense due to the fact that USS Holdings waived its right to repurchase certain outstanding shares of its capital stock held by our management. Operating Loss. Operating loss increased $15.4 million to $7.2 million in the year ended December 31, 1998 from operating income of $8.2 million in the year ended December 31, 1997. The change was primarily due to the incentive stock compensation expense recorded in this period. Interest (Income) Expense. Interest expense decreased $0.2 million, or 1.9%, to $10.3 million in the year ended December 31, 1998 from $10.5 million in the year ended December 31, 1997. The decrease was primarily due to reduced interest rates on borrowings under our existing credit facilities. Other Income (Expense). Other income increased $0.1 million to $1.9 million in the year ended December 31, 1998 from $1.8 million in the year ended December 31, 1997. Net (Loss) Income. Net income decreased $17.1 million to a net loss of $16.8 million in the year ended December 31, 1998. The decrease in net income was primarily due to the factors previously noted and an extraordinary after tax charge of $2.1 million recognized in 1998 to write off debt issuance fees that were previously capitalized in connection with our 1996 financing. The charge represents the write-off of the components that were related to the subordinated debt that was repaid in connection with the refinancing in July 1998. Liquidity and Capital Resources Our principal liquidity requirements have historically been to service our debt and meet our working capital, capital expenditure and mine development expenditure needs and to finance acquisitions. We have historically met our liquidity and capital investment needs with internally generated funds while acquisitions have required borrowings and equity investments. Our total long- term debt as of December 31, 1999 was $287.5 million. Net cash provided by operating activities was $16.0 million for the year ended December 31, 1997, $15.4 million for the year ended December 31, 1998 and $29.5 for the year ended December 31, 1999. Cash provided from operating activities decreased $0.6 million from 1997 to 1998 due to net changes in working capital, partially offset by increases in depreciation. For the year ended December 31, 1999, cash flow from operating activities was $14.1 million more than in 1998 due to increased operating income, partially offset by increased interest expense. Cash used for investing activities was $5.2 million for the year ended December 31, 1997, $66.6 million for the year ended December 31, 1998 and $185.6 million for the year ended December 31, 1999. Cash used in investing for the year ended December 31, 1997 represented investments in capital expenditures. For the year ended December 31, 1998, $57.5 million was used to purchase the Nicks Silica Assets, Pettinos and Better Materials as well as $9.4 million in capital expenditures. For the year ended December 31, 1999, cash used in investing activities increased $119.0 million due primarily to the acquisitions of the Morie Assets completed in April 1999 and Commercial Stone completed in October 1999, which aggregated $172.4 million inclusive of transaction costs, as well as a $5.2 million increase in capital expenditures. Cash flow from (used for) financing activities was ($11.3) million for the year ended December 31, 1997, $53.1 million for the year ended December 31, 1998 and $167.5 million for the year ended December 31, 1999. For the year ended December 31, 1997, there was a $7.0 million reduction in long-term debt as well as a $5.0 million redemption of preferred stock from the former parent of U.S. Silica. For the year ended December 31, 1998, long-term debt was increased in a 47 refinancing to complete the acquisitions of Pettinos and Better Materials as well as to retire approximately $15.7 million in subordinated debt and pay fees and prepayment penalties. For the year ended December 31, 1999, long-term debt increased due to the issuance of $150.0 million of the subordinated notes, which was used to complete the acquisition of Commercial Stone. In addition, we received a $35.0 million equity contribution from USS Holdings. Net cash provided by financing activities was partially offset by $15.8 million in financing fees. Interest payments on the notes, senior debt service under the new credit facilities, working capital, capital expenditures and mine development expenditures incurred in the normal course of business as current deposits are depleted represent the significant liquidity requirements of Better Minerals & Aggregates (including its direct and indirect subsidiaries). Future, but as yet unidentified, acquisition opportunities will also represent potentially significant liquidity requirements. On October 1, 1999, the new credit facilities provided us with (i) a $50.0 million revolving credit facility, (ii) a fully drawn $45.0 million tranche A term loan facility (including a tranche of loans denominated in Canadian dollars in an amount equal to $2.0 million borrowed on the closing date by George F. Pettinos (Canada) Limited), (iii) a fully drawn $95.0 million tranche B term loan facility and (iv) an undrawn $40.0 million acquisition term loan facility. The revolving credit facility is available for general corporate purposes, including working capital and capital expenditures, but excluding acquisitions, and includes sublimits of $12.0 million and $3.0 million, respectively, for letters of credit and swingline loans. The acquisition term loan facility is available for three years after the closing date, during which time we may make no more than three borrowings, each borrowing being subject to achieving a pro forma leverage ratio as defined not exceeding 5.00 to 1.00. For a description of the amortization and interest rates with respect to the new credit facilities, see "Description of the New Credit Facilities." Simultaneously with the issuance of the new credit facilities on October 1, 1999, we retired in full $167.2 million in senior debt under a credit agreement that was entered into on July 21, 1998 and later amended on April 8, 1999. We repaid $3.9 million of the tranche A term loan facility and $200,000 of the tranche B facility in the fourth quarter of 1999. On February 29, 2000, we completed the sale of one of our two Canadian subsidiaries, George F. Pettinos (Canada) Limited, for $3.2 million. We used the proceeds of this sale to repay $2.0 million of the tranche A term loan facility, which had been borrowed on the closing date by this former subsidiary, and for general corporate purposes. The new credit facilities and the indenture impose certain restrictions on us, including restrictions on our ability to incur indebtedness, pay dividends, make investments, grant liens, sell our assets and engage in certain other activities. In addition, the new credit facilities require us to maintain certain financial ratios. Debt under the new credit facilities is secured by substantially all of our assets, including our real and personal property, inventory, accounts receivable and other intangibles. See "Description of the New Credit Facilities." We incurred fees and expenses of approximately $18.8 million in connection with the acquisition of Commercial Stone, the issuance of the notes and the borrowings under the new credit facilities. Financing fees were approximately $15.0 million and will be amortized over the life of the debt. Fees totaling $2.5 million were capitalized as a cost of the Commercial Stone acquisition. The remaining $1.3 million in fees and expenses were bonuses paid to certain Commercial Stone employees as a loyalty bonus. Our expected capital expenditure requirements for 2000 and 2001 are $26.1 million and $21.7 million, excluding possible acquisitions, respectively. 48 Our ability to satisfy our debt obligations and to pay principal and interest on our debt, including the notes, fund working capital, mine development and acquisition requirements and make anticipated capital expenditures will depend on our future performance, which is subject to general economic, financial and other factors, some of which are beyond our control. We believe that based on current levels of operations and anticipated growth, cash flow from operations, together with borrowings under the revolving credit facility and, if available, the acquisition term loan facility, will be adequate for the foreseeable future to make required payments of principal and interest on our debt, including the notes, fund working capital, mine development and capital expenditure requirements and pursue acquisitions. There can be no assurance, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available under the revolving credit facility and the acquisition term loan facility in an amount sufficient to enable us to service our debt, including the notes, or to fund our other liquidity needs. Inflation We do not believe that inflation has had a material impact on our financial position or results of operations during the periods covered by the financial statements included in this prospectus. Seasonality Our aggregates business is seasonal, due primarily to the effect of weather conditions in winter months on construction activity in our Pennsylvania and New Jersey markets. Due to this, peak sales of aggregates occur primarily in the months of April through November. Accordingly, our results of operations in any individual quarter may not be indicative of our results of operations for the full year. Year 2000 Compliance Background The year 2000 issue refers to the inability of certain computer programs to recognize a date ending in "00" as the year 2000 as a result of being written using two digits, rather than four, to define the applicable year. Systems that have time-sensitive hardware or software may recognize a date using "00" as the year 1900 rather than the year 2000. If not corrected, many computer applications could have failed or produced erroneous data on or about January 1, 2000. As part of an overall company program that began in 1994 to upgrade all of our hardware and software systems, the issue of year 2000 compliance was reviewed as each of our major systems was evaluated and changed. Replacement systems were installed, and confirmation letters were received from software and hardware suppliers attesting to the compliance of the systems installed. We also made efforts to determine the year 2000 compliance status of the significant third parties with whom we do business. In 1998, questionnaires were sent to our most significant service providers and material suppliers. No unsatisfactory responses regarding year 2000 compliance were received. Costs In 1998 and 1999, we spent $252,600 and $286,000, respectively, to upgrade several major systems to year 2000-compliant system releases. Additionally, plant automation control software was upgraded at two facilities at a cost of $62,000 and $239,000, respectively, in 1998 and 1999. There can be no assurance that we will not incur further costs as a result of the discovery of unexpected need for additional remediation work. 49 Results The results of the year 2000 program are now documented. During the rollover to 2000, neither we, nor any of our major customers or vendors, experienced service interruptions due to computer hardware, software or embedded chips that adversely affected our business. Qualitative and Quantitative Disclosures About Market Risk We do not expect to enter into financial instruments for trading purposes. We anticipate periodically entering into interest rate swap agreements to effectively convert all or a portion of our floating-rate debt to fixed-rate debt in order to reduce our exposure to movements in interest rates. Such agreements would involve the exchange of fixed and floating interest rate payments over the life of the agreement without the exchange of the underlying principal amounts. The impact of fluctuations in interest rates on the interest rate swap agreements is expected to be offset by the opposite impact on the related debt. We record the payments or receipts on the agreements as adjustments to interest expense. Swap agreements will only be entered into with syndicate banks. In addition, we may enter into interest rate cap agreements, which limit our variable rate interest to a specified level. In the future, we may enter into natural gas and other energy related hedge arrangements in order to reduce our exposure to changes in commodity energy prices. At this time, we have no energy hedge agreements outstanding. We are exposed to various market risks, including changes in interest rates. Market risk related to interest rates is the potential loss arising from adverse changes in interest rates. At December 31, 1999, we had outstanding interest rate swap agreements maturing in 2001 with an aggregate notional principal amount of $30.0 million. At December 31, 1998, we had outstanding interest rate swap agreements maturing in 1999 and 2001 with an aggregate notional principal amount of $85.0 million. These swaps effectively convert the variable interest rates on the notional principal amounts to a fixed interest rate. In addition, we had interest rate cap agreements at December 31, 1999 and 1998 with aggregate notional principal amounts of $51.0 million and $30.0 million, respectively. These agreements effectively limit the variable portion of the interest rate on the notional principal amount of variable rate debt to 6.5%. The fair value of interest rate swap and cap agreements represents the estimated receipts or payments that we would make to terminate the agreements. At December 31, 1999, we would have received $0.4 million to terminate the interest rate swap agreements and $0.3 million to terminate the interest rate cap agreements. The fair market value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of the fixed interest rate debt will increase as the interest rates fall and decrease as interest rates rise. At December 31, 1999, the estimated fair value of our fixed interest rate long-term debt (including current portion) approximated its carrying value of $150.0 million due to its recent issuance. If the prevailing interest rates at December 31, 1999 increased by 1.0%, the fair value of our total long-term debt would decrease by approximately $6.2 million. Environmental and Related Matters See "Business--Government Regulation" for a discussion of certain environmental matters relating to our various production and other facilities, certain regulatory requirements relating to human exposure to crystalline silica and our mining activity and how such matters may affect our business in the future. 50 Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"), which is required to be adopted in years beginning after June 15, 2000. Because of our minimal use of derivatives, we do not anticipate that the adoption of FAS 133 will have a significant impact on our results of operations or financial condition. 51 INDUSTRY OVERVIEW Set forth below is information about the key industries in which we operate: Silica Industry Silica, often termed "industrial sand," "silica sand" and "quartz sand," includes sands with high silicon dioxide content. Silica is a naturally occurring mineral that has a broad range of distinct characteristics, such as size, purity, color, inertness, hardness and resistance to high temperatures, which make it difficult to substitute in a variety of applications. Silica is used in a wide range of end use markets, including the container glass, fiberglass, specialty glass, flat glass, chemicals, foundry, fillers and extenders, and ceramics end use markets. In 1998, consumption of silica in the United States was approximately 29.0 million tons, generating sales of approximately $491 million. The United States silica industry has been characterized by stable growth. From 1988 to 1998, sales of silica in the United States grew at a compound annual growth rate of approximately 2.7%. This growth resulted from increased demand across a wide variety of end use markets. Silica producers are typically either large, national producers that produce many grades of silica or smaller, regional companies that produce silica for limited uses. According to the U.S. Geological Survey, the five leading United States producers of silica in 1998, in descending order, were Unimin Corporation, U.S. Silica, Fairmount Minerals Ltd., Oglebay Norton Industrial Sands Co. and Badger Mining Corporation. Competition generally occurs among participants in geographic proximity to each other because transportation cost represents a significant portion of the overall cost of silica to customers. Therefore, competition within any given geographic area is distinct, as transportation costs generally limit the market to within 200 miles of a producer's facilities. However, certain high margin industrial minerals products, such as fine ground silica, may be distributed nationally and, in some cases, internationally due to the high value of these products relative to transportation costs. Aggregates Industry Aggregates consist of crushed stone, construction sand and gravel and are a basic raw material used in a wide variety of applications including asphalt, concrete, road construction and residential and commercial construction. In 1998, consumption of aggregates (not including hot mixed asphalt) in the United States was approximately 2.8 billion tons, generating sales of approximately $13.5 billion. The United States aggregates industry is characterized by stable growth. From 1988 to 1998, sales of aggregates in the United States grew at a compound annual growth rate of approximately 4.4%. This growth resulted from increased demand for road construction and maintenance, other infrastructure projects and residential and commercial construction. According to the U.S. Geological Survey, aggregates prices range from approximately $2 per ton for construction sand and gravel fill to approximately $35 per ton for special whiting crushed stone. Due to the high cost of transportation relative to the value of the product, competition within the aggregates industry favors producers with aggregate production facilities in close proximity to transportation modes and customers. As a result, competition is generally limited to a 75 mile area. The United States aggregates industry is currently experiencing consolidation. According to the U.S. Geological Survey, in 1997 there were 3,362 active crushed stone quarries and 7,658 active construction sand and gravel operations in the United States. The U.S. Geological Survey states that the five leading aggregates producers in 1998, in descending order, were Vulcan Materials Company, Martin Marietta Aggregates, a division of Martin Marietta Materials, Inc., Cornerstone Construction & 52 Material, Inc., Lafarge Corporation and Oldcastle, Inc./Materials Group. According to the U.S. Geological Survey, these producers accounted for approximately 18.7% of total United States aggregates production in 1998. We believe demand for aggregates will increase due to the passage by Congress in 1998 of TEA-21. TEA-21 establishes a $218 billion transportation program that provides for increased federal funding for highways and related infrastructure improvements through 2003. TEA-21 authorizes average annual federal spending on highways and related infrastructure improvements of approximately $26 billion, approximately 44% higher than the average annual federal spending of $18 billion under the predecessor program. In Pennsylvania and New Jersey, our primary aggregates markets, average annual federal spending on highways and related infrastructure improvements under TEA-21 is projected to be approximately 47% and 30% higher, respectively, than under the predecessor program. Another trend expected to impact the aggregates market is the adoption of the Superpave system. Superpave is a new approach to asphalt mix design, which provides designers with standards for customizing roadway mixes for specific weather and traffic conditions. This new set of standards generally requires high quality aggregates that conform to a variety of specific characteristics, including hardness, absorption, size and shape. We believe our aggregates comply with the high Superpave standards. Many state governments have elected to require their roadways to conform to the Superpave standards. For example, the Pennsylvania Department of Transportation has stated that it will require, as of September 2000, all roadway contracts to include the use of the Superpave standards. Hot mixed asphalt is a densely packed combination of approximately 95% crushed stone, sand or gravel bound together by asphalt oil. A major component of the road system in the United States, hot mixed asphalt covers approximately 95% of the paved roads in the United States. The United States hot mixed asphalt industry generates over $10 billion in sales annually. Market growth is primarily driven by road construction and population growth. 53 BUSINESS General We mine, process and market industrial minerals, principally silica, in the eastern and midwestern United States. We also mine, process and market aggregates and produce and market hot mixed asphalt in certain geographic areas in Pennsylvania and New Jersey. We are the second leading producer of silica in the United States, accounting for approximately 23% of industry volume in 1999. We believe that we have leading positions in most of our key end use markets for our silica products, typically occupying the number one or two position by sales. These end use markets include container glass, fiberglass, specialty glass, flat glass, fillers and extenders, chemicals and ceramics. We also supply our silica products to the foundry, building materials and other end use markets. Our customers use our aggregates, which consist of high quality crushed stone, construction sand and gravel, for road construction and maintenance, other infrastructure projects and residential and commercial construction and to produce hot mixed asphalt and concrete products. We also use our aggregates to produce hot mixed asphalt. We operate a network of 25 production facilities in 14 states. Many of our production facilities are located near major modes of transportation and our significant customers, which reduces transportation costs and enhances customer service. Our principal industrial minerals and aggregates properties each have deposits that we believe will support production in excess of 15 years. On a pro forma basis, our industrial minerals business (substantially all the net sales of which consists of silica products) and our aggregates business accounted for 65.2% and 34.8% of our net sales, respectively, for the year ended December 31, 1999. On a pro forma basis, we had net sales of $248.1 million for the year ended December 31, 1999. Products We produce a variety of industrial minerals and aggregates that are designed to meet a broad range of customer needs. Industrial Minerals. Our industrial minerals products are processed to meet a broad range of chemical purity, particle shape and sizing specifications. Our key industrial minerals products are known as unground silica, ground silica, fine ground silica, kaolin and aplite. Our unground silica products consist of silica of various size grades ranging from 120 to 20 mesh. For the year ended December 31, 1999 we sold 5.4 million tons of unground silica. Our ground silica products consist of unground silica that is further processed into sizes of 40 to 125 microns and are marketed under the Sil-Co-Sil(R) brand name. For the year ended December 31, 1999 we sold 610,000 tons of ground silica. The average selling price for ground silica is approximately $30 per ton more than for unground silica. Our fine ground silica products consist of ground silica which we have further processed with highly engineered equipment into size grades of 5 to 40 microns and are marketed under the Min-U-Sil(R) brand name. We believe that no other producer in the United States currently produces a 5 micron product with the consistent quality and size of our 5 micron product. For the year ended December 31, 1999 we sold 59,000 tons of fine ground silica. The average selling price for fine ground silica is approximately $170 per ton more than for ground silica. In addition to our silica products we also produce a limited amount of kaolin and aplite. Kaolin is a mineral co-product in our production of silica in Kosse, Texas that we sell primarily as a filler and extender to the paints and coatings industry. Aplite is an alumina source produced at our Montpelier, Virginia facility that we sell primarily to the glass industry. Aggregates. Our aggregates products include high quality crushed stone, construction sand and gravel, which we provide in various sizes, and hot mixed asphalt. On a pro forma basis, we sold 7.4 million tons of our aggregates products (excluding sales of hot mixed asphalt) for the year ended December 31, 1999. On a pro forma basis, we sold 1.8 million tons of our hot mixed asphalt for the 54 year ended December 31, 1999. We produce a high quality, anti-skid asphalt using the Superpave system. The Pennsylvania Department of Transportation has stated that it will require, as of September 2000, all roadway contracts to include the use of the Superpave standards. We are competitively positioned to benefit from this new requirement due to our ability both to supply our customers with the quality of aggregates required by the Superpave system as well as to manufacture Superpave-compliant asphalt from our own aggregates. See "Industry Overview--Aggregates Industry." End Use Markets and Customers We sell our products to a wide variety of customers within numerous end use markets. The following table sets forth the net sales, products, primary applications and representative customers by end use market served by our industrial minerals and aggregates businesses.
Pro Forma Year Ended December 31, 1999 Primary Representative End Use Markets Net Sales Products Applications Customers - --------------- -------------------- ---------------- ---------------- -------------------------------- (Dollars in Millions) Industrial Minerals Container glass.......... $ 27.2 Unground silica, Food, beverage Ball-Foster, Inc., aplite and liquor Owens-Illinois, Inc. bottles Fiberglass............... 15.9 Unground silica, Roofing Owens Corning, PPG Industries, ground silica, products, Inc. aplite automotive parts, sports equipment, boats, insulation Specialty glass.......... 14.5 Unground silica, Television Anchor Hocking, Inc., ground silica, tubes, lights, Corning Asahi aplite tableware, Video,Corning Incorporated, optical lenses Libbey Inc., General Electric Flat glass............... 10.6 Unground silica Automobile AFG Industries, Inc., glass, windows Guardian Industries Corp.,Pilkington plc, PPG Industries, Inc. Foundry.................. 23.7 Unground silica, Automotive, Caterpillar Inc., ground silica heavy equipment Citation Corporation and machine tool castings Fillers and extenders.... 22.7 Unground silica, Industrial and Behr Process Corporation, Delphi ground silica, traffic paints, Packard Electric, Dow Corning fine ground epoxy molded Corporation,Sherwin-Williams silica, kaolin countertops, silicone rubber Building materials....... 18.3 Unground silica, Bricks, stucco, CertainTeed Corporation, Owens ground silica, concrete, Corning fine ground asphalt shingles silica, kaolin Chemicals................ 10.3 Unground silica, Detergents, J.M. Huber Corp., ground silica paper textile Occidental Chemical Corporation, finishing, PQ Corporation dental products Ceramics................. 5.1 Unground silica, Ceramic American Marazzi Tile, Cooper ground silica, whiteware, floor Power Systems, Ideal-Standard, fine ground tiles, glaze The Pfaltzgraff Co. silica, kaolin formulations Other.................... 13.4 Unground silica, Fracturing Toys 'R Us Inc., various country ground silica, sands, sand clubs fine ground boxes, silica, kaolin, playgrounds, aplite athletic fields, racetracks, golf courses Aggregates Paving and construction.. 86.4 Crushed stone, Pavement, Various local contractors construction outside sand, gravel, recreational hot mixed facilities, asphalt sport stadiums, residential and commercial construction Total.................... $248.1
55 We generate net sales from a diversified base of customers and end use markets. On a pro forma basis for the year ended December 31, 1999, 65.2% of our net sales was derived from our industrial minerals business and 34.8% of our net sales was derived from our aggregates business. During that same period, we exceeded $10 million in net sales in each of 10 distinct end use markets and no single customer accounted for more than 5% of our net sales. Industrial Minerals. Our industrial mineral products are sold into a variety of end use markets, as described below. Container Glass. We supply unground silica and aplite to the container glass end use market for use in the production of food, beverage and liquor bottles. Fiberglass. We supply unground and ground silica and aplite to the textile and insulation fiberglass end use markets. Textile fiberglass is used in the production of roofing products and composites for automotive parts, sports equipment and boats. Insulation fiberglass is used to maximize energy efficiency in buildings by insulating heating and cooling ducts, attics, basements and exterior walls. Specialty Glass. We supply unground and ground silica and aplite to the specialty glass end use market for use in the production of television tubes, lights, tableware and optical lenses. These end use markets have enjoyed steady growth due to the development of innovative and sophisticated new specialty glass products. Because of the higher quality standards in this market, certain of our industrial minerals for specialty glass are shipped nationally as well as regionally. Flat Glass. We supply unground silica to the flat glass end use market for use in the production of automotive glass and windows. Windows are primarily used in commercial and residential construction and remodeling. We estimate that in 1999 our shipments of industrial silica to the container glass, fiberglass, specialty glass and flat glass end use markets accounted for approximately 30% of the total volume of industrial silica shipped to the glass end use markets in the United States. Foundry. We supply unground and ground silica to the foundry end use market for use in the production of automotive, heavy equipment and machine tool castings. We estimate that in 1999 we accounted for approximately 20% of the silica volume shipped to the foundry end use market in the United States. Fillers and Extenders. We supply unground, ground and fine ground silica and kaolin to the paints and coatings end use market as fillers and extenders in the production of architectural, industrial and traffic paints, and to the rubber and plastic end use market for use in the production of epoxy molded countertops and silicone rubber. We estimate that in 1999 we accounted for approximately 60% of the silica volume shipped to the fillers and extenders end use market in the United States. This is our highest value end use market, as a premium is placed on the particle size and whiteness of our silica. As a result of the high margin products we sell in this market, we are able to ship certain of these products to customers nationally as well as regionally. In addition, we are also able to compete internationally with some of these products. Building Materials. We supply unground, ground and fine ground silica and kaolin to the building materials end use market for use in the production of bricks, stucco, concrete and asphalt shingles. We estimate that in 1999 we accounted for approximately 20% of the silica volume shipped to the building materials end use market in the United States. Chemicals. We supply unground and ground silica to the chemicals end use market where it is used in the manufacture of sodium silicate, which is used in products such as detergents, paper 56 textile, finishing and dental products. We estimate that in 1999 we accounted for approximately 80% of the silica volume shipped to the chemicals end use market in the United States. Ceramics. We supply unground, ground and fine ground silica and kaolin to the ceramics end use market for use in the production of ceramic whiteware, floor tiles and glaze formulations. We estimate that in 1999 we accounted for approximately 50% of the silica volume shipped to the ceramics end use market in the United States. Other. We also supply our unground, ground and fine ground silica and our kaolin and aplite to a variety of additional markets. For example, our silica is used as fracturing sand in the oil and gas end use market and in athletic fields, race tracks, sand boxes, playgrounds and golf courses. Aggregates Paving and Construction. We supply our aggregates products primarily to the paving and construction end use market in southern New Jersey and southeastern and western Pennsylvania for use in pavements. Most of our aggregates production is sold directly to local contractors. We also supply our aggregates for use in outside recreational facilities, sport stadiums and residential and commercial construction. We use the remainder of our aggregates to produce hot mixed asphalt, which we also sell to local contractors. Sales and Marketing We market our industrial minerals products primarily on a local basis. Our local sales and marketing efforts are divided among 10 regions, each managed by a regional sales person, and are directed to meet our local customers' specific needs. Our technical and customer service personnel support our local sales and marketing personnel. Certain of our smaller local customers are primarily serviced by customer service representatives located at our facilities. We also sell to distributors for resale outside our 10 sales regions or to customers who desire to purchase a combination of our industrial minerals and other products which the distributor supplies. In the case of our customers that have facilities in multiple states, we also direct our sales and marketing efforts at the corporate headquarters level. While competition for these customers generally remains at the local level, the terms of certain of our agreements are negotiated with the customer at the corporate level. Our national account managers also coordinate multi- disciplinary teams that work with these customers and their technical and engineering departments to jointly develop specifications for industrial minerals to meet their local product and application needs. In addition, we provide technical and customer service to these customers' individual facility locations at the local level. We market our aggregates products, including our hot mixed asphalt, directly through our local sales force, which calls on our customers at their facilities. Competition Due to the high cost of transportation relative to the value of our industrial minerals and aggregates products, competition tends to be limited to producers in proximity to our production facilities. Although we experience competition in all of our markets, we believe that we are a leading producer in the key end use markets and geographic areas that we serve. The silica industry is a competitive market that is characterized by a small number of large, national producers and a larger number of small, regional producers. We are the second leading producer of silica in the United States, accounting for approximately 23% of industry volume in 1999. We compete with, among others, Unimin Corporation, Fairmount Minerals Ltd., Oglebay Norton Industrial Sands Inc. and Badger Mining Corporation. Competition in the industrial minerals industry is based on price, consistency and quality of product, site location, distribution capability, customer service, reliability of supply, breadth of product offering and technical support. In addition, there is 57 significant unutilized capacity in the industrial minerals industry that could adversely affect the pricing of our industrial minerals products. In recent years, the aggregates industry has seen increasing consolidation, although competition remains primarily local. Competition in the aggregates industry is based primarily on price, quality of product, site location, distribution capability and customer service. In Pennsylvania and New Jersey we compete primarily with local or regional operations. In addition, in western Pennsylvania, slag, a residue from steel processing, also competes with our aggregates products. Production and Distribution Our production process for our industrial minerals generally consists of mining mineral ore followed by a number of processing steps. All of our industrial minerals mining operations involve surface mining. As is customary in our industry, some of our mining operations, particularly drilling and blasting, are outsourced to third parties. After the mineral ore is mined we crush it into various sizes, depending on the specific customer application. We then remove impurities from the materials in a washing process and remove oversized particles by screening. Moisture is removed through a drying process and the product is loaded into trucks or rail cars for shipment or is bagged before shipping. We ship our industrial mineral products direct to our customers by either truck or rail. Bagged product is generally distributed by truck. We sometimes utilize rail-truck transfer stations to deliver our products if we can thereby achieve lower delivery costs to a given customer or region. Almost all our truck shipments of industrial minerals are carried out by third parties. Our rail shipments are generally made by railcar equipment owned by the railroad, although for some customers and regions we lease our own railcars. Given the value to weight ratio of most of our industrial mineral products, the cost- effective distribution range is approximately 200 miles. For some of our high margin fine ground silica and other specialty products such as kaolin, we can effectively distribute our products nationally and, in some cases, internationally. Our production process for our aggregates consists of mining mineral ore and then crushing it into various sizes based on customer specifications. All of our aggregates mining operations involve surface mining, except for one which involves underground mining. Generally, surface mining is subject to less operational risk than underground mining. We either ship our aggregates products product directly to our customers by truck, or store it at our facility to meet future customer demand. In certain instances we deliver large orders by rail. Our hot mixed asphalt is produced by mixing our aggregates with asphalt oil, blending to customer specifications and then delivering by truck. The Commercial Stone acquisition provided us with CATS, a subsidiary that runs a cooperative fleet of dump trucks owned by independent contractors. CATS hires these trucks for hauling of aggregates and other bulk materials. In return, the independent trucking contractors benefit from a steady source of work and bulk discounts on fuel, tires and other services. CATS enables us to secure reliable access to a fleet of approximately 200 dump trucks on a cost- effective basis. Technical Support We operate a laboratory to monitor the quality of our products, plants and services. The laboratory has four principal functions. The technical service function provides support to both current and prospective customers and performs controlled tests for a variety of applications. The lab also assists foundries in their quality control programs through periodic testing of their sand and equipment, a service that has enabled us to increase our business by acquiring several large foundries as customers. The application function evaluates the chemical, physical and performance characteristics of our products and those of our competitors. These evaluations assist us in 58 developing new products and applications and enable us to provide our customers with technical support and recommendations. The analytical function both provides support for plants lacking the ability to provide certain technical information to customers, and analyzes drill core samples to provide data for short- and long-term mine planning. The mineral processing function is designed to simulate all plant processes, primarily preparing and analyzing drill core samples for mine planning purposes and providing expertise in plant problem troubleshooting. We are ISO 9002 registered at eight plants. Employees As of March 1, 2000, we had approximately 1,048 employees, of which approximately 527 were represented by 12 local unions under 12 union contracts. These union contracts have remaining durations ranging from one to five years. Over the last 10 years, we have been involved in numerous labor negotiations, only two of which have resulted in a work disruption at two of our 25 facilities. During these disruptions, the operations of the facilities and the ability to serve our customers were not materially affected. We believe that our current relations with our employees are good. Properties and Mineral Deposits We own or lease a number of properties located in the eastern and midwestern United States. Our headquarters is in Berkeley Springs, West Virginia. Set forth below are the locations and a description of our principal properties:
Location Use Status -------- --- ------ Berkeley Springs, WV Corporate offices Owned Industrial Minerals Berkeley Springs, WV Silica mining and processing Owned Cedar Lake, NJ Silica mining and processing Owned Columbia, SC Silica mining and processing Leased Dubberly, LA Silica mining and processing Owned/Leased Dundee, OH Silica mining and processing Owned Hurtsboro, AL Silica mining and processing Owned/Leased Jackson, TN Silica mining and processing Owned Kosse, TX Silica and kaolin mining and processing Owned/Leased Mapleton Depot, PA Silica mining and processing Owned/Leased Mauricetown, NJ Silica processing Owned Mill Creek, OK Silica mining and processing Owned/Leased Millville, NJ Silica mining and processing Owned/Leased Montpelier, VA Aplite mining and processing Owned/Leased Ottawa, IL Silica mining and processing Owned Pacific, MO Silica mining and processing Owned Port Elizabeth, NJ Silica mining and processing Owned Rockwood, MI Silica processing Owned Aggregates Adamsburg, PA Hot mixed asphalt plant Owned Berlin, NJ Construction sand mining and processing Owned Ottsville, PA Stone quarry; hot mixed asphalt plant Owned Penns Park, PA Stone quarry; hot mixed asphalt plant Owned Rich Hill, PA Stone quarry; sand plant Owned/Leased Springfield Pike, PA Stone quarry; hot mixed asphalt plant; offices Owned Upper Township, NJ Construction sand mining and processing Owned/Leased Washington, PA Hot mixed asphalt plant Owned
59 With respect to each operation at which we mine industrial minerals and aggregates, we obtain permits from various governmental authorities prior to the commencement of mining. The current permitted deposits on our properties are sufficient to support production, based on historical rates of production, for an average of approximately 10 years, ranging from approximately four years to approximately 50 years. We obtain permits to mine deposits as needed in the normal course of business based on our mine plans and state and local regulatory provisions regarding mine permitting and licensing. Based on our historical permitting experience, we expect to be able to continue to obtain necessary mining permits to support historical rates of production. Industrial minerals and aggregates properties which have deposits (which include both permitted and unpermitted deposits) that we believe are sufficient to support production for over 15 years accounted for approximately 95% of our net sales on a pro forma basis for the year ended December 31, 1999. Additionally, to further assure sufficient deposits and adequate facilities to meet future demand, we plan to obtain new deposits through expansion of existing sites, where feasible, and acquisitions of industrial minerals and aggregates businesses. Some of our mining leases can be indefinitely renewed by us on an annual basis while others have terms ranging from two to 50 years (including unilateral renewal rights). These leases generally provide for royalty payments to the lessor based on a specific amount per ton or a percentage of revenue. In addition, we have a number of non-mining leases that relate to the above properties that permit us to perform activities that are ancillary to the mining of industrial minerals or aggregates such as surface use leases that allow haul trucks to transport material from the mine to the plant site. Legal Proceedings We are a defendant in various lawsuits related to our businesses. These matters include lawsuits relating to the exposure of persons to silica as discussed in detail under "--Product Liability" below. Although we do not believe that these lawsuits are likely to have a material adverse effect upon our business, we cannot predict what the full impact of these or other lawsuits will be. We currently believe, however, that these claims and proceedings in the aggregate are unlikely to have a material adverse effect on us. Product Liability The inhalation of respirable crystalline silica is associated with several adverse health effects. First, it has been known since at least the 1930s that prolonged inhalation of respirable crystalline silica can cause silicosis, an occupational disease characterized by fibrosis, or scarring, of the lungs. Second, since the mid-1980s, the carcinogenicity of crystalline silica has been at issue and the subject of much debate and research. In 1987, the International Agency for Research on Cancer ("IARC"), an agency of the World Health Organization, classified crystalline silica as a probable human carcinogen. In 1996, a working group of IARC voted to reclassify crystalline silica as a known human carcinogen. The National Toxicology Program ("NTP"), part of the United States Department of Health and Human Services, has recently proposed upgrading crystalline silica from its current NTP classification as "a reasonably anticipated carcinogen" to "a known human carcinogen." Third, the disease silicosis is associated with an increased risk of tuberculosis. Finally, there is evidence of a possible association between crystalline silica exposure or silicosis and other diseases such as immune system disorders, like scleroderma, and end-stage renal disease. U.S. Silica has been named as a defendant in an estimated 70 product liability claims alleging silica exposure filed in the period January 1, 2000 to March 1, 2000. U.S. Silica was named as a defendant in 89 similar claims filed in 1997, 154 filed in 1998 and 497 filed in 1999. U.S. Silica has been named as a defendant in similar suits since 1975; in each of the years 1983, 1987, 1995 and 1996, more than 100 claims were filed against U.S. Silica. The plaintiffs, who allege that they are employees or former employees of our customers, claim that our silica products were defective or 60 that we acted negligently in selling our silica products without a warning, or with an inadequate warning. The plaintiffs further claim that these alleged defects or negligent actions caused them to suffer injuries and sustain damages as a result of exposure to our products. In almost all cases, the injuries alleged by the plaintiffs are silicosis or "mixed dust disease," a claim which allows the plaintiffs to pursue litigation against the sellers of both crystalline silica and other minerals. There are no pending claims of this nature against any of our other subsidiaries. As of March 1, 2000, there were an estimated 984 silica-related products liability claims pending in which U.S. Silica is a defendant. Almost all of the claims pending against U.S. Silica arise out of the alleged use of U.S. Silica products in foundries or as an abrasive blast media and have been filed in the states of Texas and Mississippi. Our financial liability to date for all silica-related claims has not been material. ITT Industries, successor to a former owner of U.S. Silica, has agreed to indemnify U.S. Silica for third party silicosis claims (including litigation expenses) filed against it prior to September 12, 2005 alleging exposure to U.S. Silica products for the period prior to September 12, 1985, to the extent of the alleged exposure prior to that date. This indemnity is subject to an annual deductible of $275,000, which is cumulative and subject to carry-forward adjustments. Pennsylvania Glass Sand Corporation, as a predecessor to U.S. Silica, was a named insured on insurance policies issued to ITT Industries for the period April 1, 1974 to September 12, 1985 and to U.S. Borax (another former owner) for the period September 12, 1985 to December 31, 1985. We have not sought coverage under these policies. Although we cannot provide any assurance, coverage under these policies may be available to us. Ottawa Silica Company (a predecessor that merged into U.S. Silica in 1987) had insurance coverage on an occurrence basis prior to July 1, 1985. Except as set forth above, U.S. Silica currently is not insured or indemnified for product liability claims related to alleged silica exposure, including for any exposure after January 1, 1986. The silica-related litigation brought against us to date has not resulted in any material liability to us. However, it is likely that we will continue to have silica-related product liability claims filed against us, including claims that allege silica exposure for periods after January 1, 1986. We cannot guarantee or assure you that our current indemnity agreement with ITT Industries (which currently expires in 2005 and in any event only covers alleged exposure to U.S. Silica products for the period prior to September 12, 1985), or potential insurance coverage (which, in any event, only covers periods prior to January 1, 1986) will be adequate to cover any amount for which we may be found liable in such suits. Any such claims or inadequacies of the ITT Industries indemnity or insurance coverage could have a material adverse effect on us. Government Regulation Environmental Matters. We are subject to a variety of governmental regulatory requirements relating to the environment, including those relating to our handling of hazardous materials and air and wastewater emissions. Some environmental laws impose substantial penalties for noncompliance, and others, such as the federal Comprehensive Environmental Response, Compensation, and Liability Act, impose strict, retroactive and joint and several liability upon persons responsible for releases of hazardous substances. We believe that we have all material environmental permits, that our operations are in substantial compliance with applicable laws and that any noncompliance is not likely to have a material adverse effect on us. Through periodic self-audits, we continually evaluate whether we must take additional steps to ensure compliance with existing environmental laws. However, if we fail to comply with present and future environmental laws and regulations, we could be subject to liabilities or our operations could be interrupted. In addition, future environmental laws and regulations could 61 restrict our ability to expand our facilities or extract our mineral deposits or could require us to acquire costly equipment or to incur other significant expenses in connection with our business. Although we believe we have made sufficient capital expenditures to achieve substantial compliance with existing environmental laws and regulations, future events, including changes in environmental requirements and the costs associated with complying with any such requirements, could have a material adverse effect on us. We have taken a number of steps to minimize potential environmental liabilities and address environmental activities in a pro-active manner, including: --performing regular environmental audits; --performing Phase 1 environmental assessments on all of our properties in 1995, and prior to acquisition on all properties acquired after that time; --removing all known underground storage tanks; --replacing PCB-containing transformers with non-PCB transformers; --entering into a national waste disposal contract that limits our waste disposal liability; and --developing and implementing an "environmental information management system" to allow us to better track permits and compliance matters. Some of our facilities have a long history of industrial operations. As such, we may have liability for cleanup of contamination from historical discharges of hazardous materials. For example, we may be required to remediate groundwater contamination at our Rockwood, Michigan facility. Although the contamination has not moved off of our site and has not affected drinking water supplies, further action may be required by state authorities. Our Ottawa, Illinois facility has trace levels of arsenic contamination in the groundwater beneath the quarries. Studies show that there is no health risk to workers and that the product is not contaminated. We believe that we have claims against responsible third parties or have insurance coverage for these matters. We also believe that, even assuming third-party or insurance recoveries are not successful, all such remediation matters, individually or in the aggregate, will not have a material adverse effect on us. We have identified other areas of historic waste disposal on our properties. Historically, the waste, pallets, bags, scrap metal and other wastes from the plant sites were dumped on certain of our lands. The presence of the disposal areas has not materially impacted, and is not expected to materially impact, our operations or otherwise have a material adverse effect on us. Regulation of Silica. The Occupational Safety and Health Administration regulates work place exposure to crystalline silica at our customer locations through a "permissible exposure level," commonly referred to as a PEL. OSHA has designated crystalline silica as a priority for rulemaking and announced that it will publish a Notice of Proposed Rule Making, or NPRM, on crystalline silica in 2000. The NPRM is expected to propose a lower PEL for crystalline silica. Although we are uncertain as to what OSHA will ultimately propose, it is probable that a significantly lower PEL will be proposed for quartz, the form of silica mined, processed and sold by us. However, we do not expect any final OSHA rule on crystalline silica to be adopted until several years after the NPRM is published. The Mining Safety and Health Administration regulates occupational health and safety matters for mining. Accordingly, MSHA regulates our quarries, underground mines and industrial mineral processing facilities. The MSHA "threshold limit value," or TLV, for crystalline silica as quartz is the same as the current OSHA PEL. MSHA is expected to follow OSHA's actions regarding the permissible limits of exposure to crystalline silica for mining. The United States Environmental Protection Agency recently announced that it would begin its review of crystalline silica in 1999 under its Integrated Risk Information System ("IRIS") program. 62 Essentially, the EPA will conduct a risk assessment regarding the cancer and non-cancer health effects of crystalline silica and possibly develop reference concentrations for non-cancer health effects and unit risk factors for cancer health effects. These reference concentrations and unit risk factors, if developed, will be entered into the EPA IRIS database. In addition, several states have considered, and a few have promulgated, regulations regarding crystalline silica air emissions. For example, in Oklahoma and Texas, crystalline silica is considered a toxic air contaminant. As such, these states have established maximum allowable ambient concentrations, or MAACs, for crystalline silica (quartz). Generally, these MAACs establish limits for facility crystalline silica emissions, measured at the facility property line. The IRIS initiative and state MAAC standards could result in lower permit limits requiring costly equipment upgrades or operational restrictions. In 1999, Massachusetts proposed that crystalline silica be defined as a toxic for purposes of the state's toxic use reduction act program. The toxic use reduction act program imposes fees on the use of toxic substances and requires certain users of toxic substances to develop plans to reduce the use of the toxic substance. California requires that a warning accompany any chemical that the state has published as being known to cause cancer. "Silica, crystalline (airborne particles of respirable size)" has been included as a carcinogen under these criteria since 1988. These state programs may have the effect of reducing our customers' demand for silica products. We believe that we materially comply with governmental requirements for crystalline silica exposure and emissions and other regulations relating to silica and plan to continue to comply with these regulations. However, we cannot assure you that we will be able to comply with any new standards that are adopted or that these new standards will not have a material adverse effect on us by requiring us to modify our operations or equipment or shut down some of our plants. Additionally, we cannot assure you that our customers will be able to comply with any new standards or that any of these new standards will not have a material adverse effect on our customers by requiring them to shut down old plants and to relocate plants to locations with less stringent regulations that are further away from us. Accordingly, we cannot at this time reasonably estimate our costs of compliance or the timing of any costs associated with any new standards, or any material adverse effects that any new standards will have on our customers and, consequently, on us. Mining and Processing of Minerals. In addition to the regulatory matters described above, the industrial minerals and aggregates industries are subject to extensive governmental regulation on matters such as permitting and licensing requirements, plant and wildlife protection, wetlands protection, reclamation and restoration of mining properties after mining is completed, the discharge of materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability. Our future success depends upon the quantity of our industrial minerals and aggregates deposits and our ability to extract these deposits profitably. It is difficult for us to estimate quantities of recoverable deposits, in part due to future permitting and licensing requirements. We believe we have obtained all material permits and licenses required to conduct our present mining operations. However, we will need additional permits and renewals of permits in the future. We may be required to prepare and present to governmental authorities data pertaining to the impact that any proposed exploration or production activities may have upon the environment. New site approval procedures may require the preparation of archaeological surveys, endangered species studies and other studies to assess the environmental impact of new sites. Compliance with these regulatory requirements is expensive, requires an investment of funds well before the potential producer knows if its operation will be economically successful and significantly lengthens the time needed to develop a new site. Furthermore, obtaining or renewing required permits is sometimes delayed or prevented due to community opposition and other factors beyond our control. New legal requirements, including those related to the protection of the environment, could be adopted that could materially adversely affect our mining operations (including the ability to 63 extract mineral deposits), our cost structure or our customers' ability to use our industrial minerals or aggregates products. For most of our operations, state statutes and regulations or local ordinances require that mine property be restored in accordance with specific standards and an approved reclamation plan. We believe that we are making adequate provisions for all expected reclamation and other costs relating to expected mine closures in the reasonably foreseeable future. We believe that future costs associated with reclamation provisions and mine closures will not have a material adverse effect on us. Nevertheless, we could be adversely affected if these provisions were later determined to be insufficient, or if future costs associated with reclamation are significantly greater than our current estimates. 64 MANAGEMENT Directors and Executive Officers The following table identifies members of the Board of Directors and the executive officers of the issuer and USS Holdings, the issuer's indirect parent.
Name Age Title - ---- --- ----- D. George Harris.......... 66 Chairman and Director Anthony J. Petrocelli..... 62 Vice Chairman and Director Richard E. Goodell........ 55 President, Chief Executive Officer and Director Gary E. Bockrath.......... 47 Vice President and Chief Financial Officer Craig S. Cinalli.......... 41 President of Better Materials Corporation Richard J. Donahue........ 56 Vice President, Assistant Treasurer, Assistant Secretary and Director Donald G. Kilpatrick...... 45 Vice President and Secretary Richard J. Nick........... 56 Vice President, Treasurer and Assistant Secretary Richard J. Shearer........ 49 President of U.S. Silica Company John A. Ulizio............ 44 Vice President and General Counsel Arnold Chavkin............ 48 Director Ruth Dreessen............. 44 Director Timothy J. Walsh.......... 36 Director
D. George Harris has been the Chairman and a director since 1996. Mr. Harris has also been Chairman and a director of DGHA since 1989 and has served as an officer or director of various affiliated companies, including Harris Chemical Group, Inc., Harris Specialty Chemicals, Inc. and Penrice Pty Ltd. Mr. Harris also serves as Chairman of the Shareholders Committee of Vestolit GmbH & Co., KG, a German manufacturer of polyvinylchloride and other chemicals. From 1987 through 1988, Mr. Harris was a Senior Advisor in the Investment Banking Department of Robert Fleming & Co., Ltd. where he was involved in global investment banking activities covering Europe, the Far East and the United States. From 1981 through 1986, Mr. Harris was President of SCM Chemicals (1981-1985) and SCM Corporation (1985-1986), a major producer of consumer and industrial products. From 1975 through 1981, Mr. Harris was President of Rhone- Poulenc Inc., Rhone-Poulenc's United States subsidiary. Mr. Harris is also a director of McWhorter Technologies, Inc. Anthony J. Petrocelli has been the Vice Chairman and a director since 1996. Mr. Petrocelli was a co-founder of DGHA and has served as Vice Chairman of DGHA since 1989. Mr. Petrocelli has served as an officer of various affiliated companies, including Harris Chemical Group, Inc., Harris Specialty Chemicals, Inc. and Penrice Pty Ltd. Mr. Petrocelli also serves as Vice Chairman of the Shareholders Committee of Vestolit GmbH & Co., KG, a German manufacturer of polyvinylchloride and other chemicals. From 1984 through 1986, Mr. Petrocelli was the President of Crystal Greeting, Inc., a manufacturer and distributor of greeting cards. Richard E. Goodell has been the President and a director since 1996 and was named Chief Executive Officer in 1999. He was appointed President of Pennsylvania Glass Sand Corporation in 1985 and continued as President when Pennsylvania Glass Sand was re-named U.S. Silica Company in 1986. Before joining Pennsylvania Glass Sand in 1983 as Senior Vice President of Operations, he worked in the mineral division of Pfizer (1971-1983) in various operating and technical management positions and as an engineer at Sikorsky Aircraft (1966-1971). Gary E. Bockrath has been Senior Vice President of Finance of U.S. Silica since 1993 and was named Vice President and Chief Financial Officer in 1999. Previously, Mr. Bockrath was Vice 65 President and Assistant Treasurer from 1996 to 1999. Mr. Bockrath was group controller at Libbey-Owens-Ford Company prior to joining U.S. Silica in 1993. He served in several finance positions at Guardian Industries, Inc. from 1984 to 1990, Peabody International Corporation from 1976 to 1984 and GTE Service Corporation from 1974 to 1976. Craig S. Cinalli has been President and Chief Operating Officer of Better Materials since 1989. Prior to that, Mr. Cinalli held various positions at Better Materials since 1980. Richard J. Donahue has been Vice President, Assistant Treasurer and Assistant Secretary and a director since 1996. Mr. Donahue was a co-founder of DGHA and has served as Managing Director since 1989. Mr. Donahue has also served as an officer of various affiliated companies, including Harris Chemical Group, Inc. and Harris Specialty Chemicals, Inc. Prior to joining DGHA, Mr. Donahue was Vice President in the Corporate Finance Department of Robert Fleming & Co., Ltd. from 1987 through 1988. From 1978 through 1986, he held a series of financial and corporate development positions at SCM Corporation. Donald G. Kilpatrick has been Vice President and Secretary since 1996. Since 1992, Mr. Kilpatrick has also been a Managing Director and General Counsel of DGHA and has served as an officer of various affiliated companies, including Harris Chemical Group, Inc. and Harris Specialty Chemicals, Inc. From 1981 to 1992, Mr. Kilpatrick was an attorney with Winthrop, Stimson, Putnam & Roberts, where he was made a member of the firm in 1990. Mr. Kilpatrick is currently on a leave of absence from Winthrop. Winthrop provides legal services to us on an ongoing basis. Richard J. Nick has been Vice President, Treasurer and Assistant Secretary since 1996. Mr. Nick has also been a Managing Director of DGHA since 1989. From 1989 to 1998 Mr. Nick was an officer of various affiliated companies including Harris Chemical Group, Inc. and Harris Specialty Chemicals, Inc. From 1987 to 1989, Mr. Nick was Vice President--Finance & Administration of Baltimore Spice, Inc., a subsidiary of Hanson, plc. Richard J. Shearer was named President of U.S. Silica in 1999. Previously, Mr. Shearer was Executive Vice President of U.S. Silica from 1997 to 1999. Before joining U.S. Silica in 1997, he held the position of Vice President, General Manager at North American Chemical Company. Mr. Shearer previously held various positions in sales, market management and operations for 16 years at Union Carbide Corporation, rising to the position of Vice President--Unison Division. John A. Ulizio has been Vice President and General Counsel since 1996. Mr. Ulizio joined U.S. Silica in 1991 as Associate General Counsel, was named Secretary in 1994 and assumed the management of environmental, health and safety matters in 1994. Prior to joining U.S. Silica, Mr. Ulizio was in private practice in western Pennsylvania, concentrating in litigation, including the defense of products liability cases asserted against sellers of silica- containing materials. Arnold Chavkin has been a director since 1996. He has been a General Partner of CCP since 1992. Prior to joining CCP in 1992, Mr. Chavkin was a member of Chemical Bank's merchant banking group and a generalist in its corporate finance group specializing in mergers and acquisitions and private placements for the energy industry. Ruth Dreessen has been a director since 1996. She is also a Managing Director of CSI. Ms. Dreessen joined The Chase Manhattan Corporation in 1980 in its international department. Since 1987, Ms. Dreessen has primarily focused on structuring leveraged chemical industry transactions. In 1994, Ms. Dreessen opened the Houston office of Chase's Global Chemicals Group. Timothy J. Walsh has been a director since 1998. He is also a partner with CCP. Prior to joining CCP in 1996, Mr. Walsh worked for The Chase Manhattan Corporation where he held positions in various industry-focused client teams in North America. Mr. Walsh currently also serves on the board of directors of MetoKote Holdings, Inc. 66 Executive and Director Compensation Executive Compensation. The following table sets forth information regarding the annual compensation for services rendered to us during the fiscal years ended December 31, 1999, 1998 and 1997 by our (i) chief executive officer and (ii) four other most highly compensated executive officers (collectively, the "Named Executive Officers"). Summary Compensation Table
Long-term Compensation Annual Compensation Awards --------------------------------- ---------------- All Other Other Annual Compensation Name and Principal Compensation Restricted Stock ($) (3) (4) Position Year Salary ($) Bonus ($) ($) Award(s) ($) (2) (5) - ------------------------ ---- ---------- --------- ------------ ---------------- ------------ Richard E. Goodell...... 1999 $238,125 $196,685 -- $61,350 8,569 Chief Executive Officer 1998 215,700 94,512 -- -- 8,929 1997 271,250 149,188 -- -- 8,947 Richard J. Shearer...... 1999 $219,675 $123,018 -- $69,530 $ 19,244(6) President 1998 196,200 78,480 $ 40,825(1) -- 14,479 (U.S. Silica Company) 1997 77,083 38,542 20,000(1) -- -- Craig S. Cinalli........ 1999 $175,000 $138,600 -- $24,540 $ 10,536(7) President 1998 8,000 -- -- -- 165,000(8) (Better Materials Corporation) 1997 -- -- -- -- -- Lewis McM. Pettinos..... 1999 $186,624 $114,960 -- -- $ 720 Vice President 1998 76,958 55,241 -- -- -- (George F. Pettinos, Inc.) 1997 -- -- -- -- -- Brian Hessenthaler...... 1999 $175,000 $123,200 -- $24,540 $ 1,051 Senior Vice President 1998 8,000 -- -- -- 165,000(8) (Better Materials Corporation) 1997 -- -- -- -- --
- -------- (1) Reflects payment by Better Minerals & Aggregates of expenses for relocation. (2) As of December 31, 1999, outstanding shares of restricted stock held by the Named Executive Officers were as follows: Mr. Goodell, 15,000 shares; Mr. Shearer, 17,000 shares; Mr. Cinalli, 6,000 shares; and Mr. Hessenthaler, 6,000 shares. (3) Includes Life Insurance premiums paid by us on behalf of the Named Executive Officers for 1999 as follows: Mr. Goodell, $1,770; Mr. Shearer, $660; Mr. Cinalli, $60; and Mr. Hessenthaler, $57. (4) Includes matching contributions by Better Minerals & Aggregates to the U.S. Silica Company Retirement Savings and Investment Plan for Salaried Employees on behalf of the Named Executive Officers for 1999 as follows: Mr. Goodell, $6,799; and Mr. Shearer, $9,292. (5) Includes imputed income from the personal use of a company-owned vehicle in 1999 for each of the Named Executive Officers as follows: Mr. Cinalli, $876; Mr. Hessenthaler, $994; and Mr. Pettinos, $720. (6) Includes maximum annual contributions by Better Minerals & Aggregates for 1999 in the amount of $6,400 to the U.S. Silica Company Retirement Savings and Investment Plan for Salaried Employees on behalf of Mr. Shearer. In addition, includes a contribution by Better Minerals & Aggregates in the amount of $2,892 under the U.S. Silica Company Deferred Compensation Plan for 1999 (which is designed to make up for benefits not payable under the U.S. Silica Company Retirement Savings and Investment Plan for Salaried Employees due to Internal Revenue Code limitations) on behalf of Mr. Shearer. (7) Includes imputed income from the personal use of a company-owned residence in 1999 by Mr. Cinalli in the amount of $9,600. (8) In December 1998, Mr. Cinalli and Mr. Hessenthaler each entered into an employment agreement with the Company that provided for a one-time signing bonus of $165,000. 67 U.S. Silica Company Retirement Plan for Salaried Employees
Years of Service ------------------------------------------------------------------- Remuneration 15 20 25 30 35 - ------------ ------- -------- -------- -------- -------- $125,000 $29,100 $ 38,800 $ 48,400 $ 58,100 $ 67,800 150,000 35,400 47,200 59,000 70,700 82,500 175,000 41,700 55,600 69,500 83,400 97,200 200,000 48,000 64,000 80,000 96,000 112,000 225,000 54,300 72,400 90,500 108,600 126,700 250,000 60,600 80,800 101,000 121,200 141,400 300,000 73,200 97,600 122,000 146,400 170,800 400,000 98,400 131,300 164,100 196,900 229,700
At December 31, 1999, credited Years of Service under the U.S. Silica Company Retirement Plan for Salaried Employees (the "Retirement Plan") for Mr. Goodell, the only Named Executive Officer who participates, were 18 years. The compensation covered by the Retirement Plan includes the amount listed in the salary column of the Summary Compensation Table only. The estimated annual retirement benefit indicated in the Retirement Plan table includes enhanced pension provisions under the U.S. Silica Company Pension Restoration Plan, which is an unfunded plan providing benefits to participants in the Retirement Plan that are not payable under the Retirement Plan because of the limitations stipulated by the Internal Revenue Code. Estimated benefits set forth in the Retirement Plan table were calculated on the basis of a single life annuity. Annual benefits payable under the Retirement Plan are not offset by any amount. Better Materials Corporation Pension Plan
Years of Service ----------------------------------------------------------------------- Remuneration 15 20 25 30 35 - ------------ ------- ------- ------- ------- ------- $125,000 $18,710 $24,947 $31,183 $37,420 $43,657 150,000 23,142 30,857 38,571 46,285 53,999 175,000 27,120 36,160 45,199 54,239 63,279 200,000 27,749 36,998 46,248 55,497 64,747
At December 31, 1999, credited Years of Service under the Better Materials Corporation Pension Plan ("BMC Plan") for Mr. Cinalli was 19 years and Mr. Hessenthaler was 15 years. The compensation covered under the BMC Plan includes total cash remuneration paid to the Named Executive Officer. Estimated benefits set forth in the BMC Plan table were calculated on the basis of a single life annuity, and are not offset by any amount. Employment Agreements. In December 1998, Better Materials Corporation entered into substantially similar employment agreements with each of Messrs. Cinalli and Hessenthaler. The employment agreements each provide for a two-year term at a base salary of $175,000 per year, plus a performance-based bonus, a signing bonus of $165,000, eligibility for a grant of restricted stock, and the use of a company-owned vehicle. Under his agreement, Mr. Cinalli is also entitled to live in a company-owned residence. These agreements provide for termination of employment upon disability, death or cause, as defined in the agreements. Better Materials Corporation may terminate the executive's employment for any reason other than "cause" with thirty days' prior written notice. If Better Materials Corporation terminates the executive without cause, the executive is entitled to severance in the amount of two years' compensation. The executives are subject to confidentiality and non-compete covenants contained in their agreements. Director Compensation. Members of our Board of Directors are not compensated for their services as directors, but may be reimbursed for actual expenses incurred in attending meetings of the Board of Directors or committees thereof. 68 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Loans to Stockholders to Purchase Series B Preferred Stock In 1996, our indirect parent, USS Holdings, made loans to certain of its management stockholders in order to finance their purchase of USS Holdings' Series B preferred stock. The loans are evidenced by promissory notes that accrue interest at 7% per annum payable quarterly, and are collateralized by the stock. Loans outstanding as of December 31, 1999 were approximately $449,000. New Credit Facilities and Old Notes CSI is syndication agent, book manager, lead arranger and documentation agent under the new credit facilities, and The Chase Manhattan Bank, an affiliate of CSI, is a lender under the new credit facilities. CSI was an initial purchaser of the old notes and both CSI and The Chase Manhattan Bank are affiliates of CCP. Certain other affiliates of CCP that own a majority of the outstanding preferred stock of USS Holdings have the right under the stockholders agreement to appoint three directors of USS Holdings. See "Security Ownership of Certain Beneficial Owners and Management." Arnold Chavkin, one of our directors, is also a general partner of CCP. Ruth Dreessen, one of our directors, is also a managing director of CSI. Timothy J. Walsh, one of our directors, is also a partner with CCP. Management Services Agreement Pursuant to an agreement among the issuer, USS Holdings, BMAC Holdings and DGHA, DGHA (the principals of which are stockholders of USS Holdings) provides management advisory services to us from time to time. In consideration of these management services, we have agreed to pay an annual management fee to DGHA. The base annual fee is $500,000 but is adjusted based on the amount that our actual EBITDA (as defined in the agreement) for a fiscal year exceeds or falls short of a budgeted EBITDA for that fiscal year. Pursuant to the agreement, the budgeted EBITDA for a fiscal year and the amount of the fee are adjusted for acquisitions approved by the stockholders as provided in the stockholders agreement or any disposition of stock or assets. We estimate that we will pay approximately $955,000 to DGHA as the annual management fee in 2000. The agreement provides that in the event of a business acquisition by us, we will pay DGHA an acquisition fee equal to 1% of the total purchase price of the acquisition, including all third party indebtedness assumed by us in connection with the acquisition. The agreement also provides that, at DGHA's request, U.S. Silica is obligated to provide DGHA with one or more interest-free loans not exceeding an aggregate of $1.0 million in any calendar year. As of the date of this prospectus, a loan of $1.0 million is currently outstanding. This loan is guaranteed by D. George Harris, Anthony J. Petrocelli, Richard J. Donahue, Donald G. Kilpatrick and Richard J. Nick. Finally, pursuant to the agreement, the other companies party to the agreement will reimburse DGHA for all transaction expenses incurred in relation to completed acquisitions; those companies will also reimburse DGHA for other expenses incurred relating to company business up to $100,000 in any calendar year. The agreement initially terminates on December 31, 2000, but shall be automatically extended unless terminated (i) by USS Holdings or DGHA upon nine months' prior written notice, (ii) upon certain events of sale, merger, change of stock ownership or appointment of additional directors or (iii) at the option of USS Holdings if neither Messrs. Harris or Petrocelli is actively involved in the management of DGHA. We paid approximately $877,000 in management fees and $672,000 in acquisition fees for the year ended December 31, 1999 under this agreement. Additionally, $1,040,000 in accrued acquisition fees relating to Commercial Stone were unpaid as of December 31, 1999. 69 Tax Sharing Agreement Pursuant to a tax sharing agreement, USS Holdings has agreed to file consolidated federal income tax returns (and in certain circumstances, state and local income tax returns) with the issuer and its domestic subsidiaries. Under this agreement, the issuer has agreed to pay USS Holdings amounts designed to approximate the amount of income tax that the issuer and its domestic subsidiaries would have paid had the issuer filed consolidated federal income tax returns (and, if applicable, state and local income tax returns) separate from USS Holdings. 70 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security Ownership All of our outstanding capital stock is owned by BMAC Holdings, which in turn is wholly owned by USS Holdings. On the closing date, in connection with the initial portion of the cash equity contribution, USS Holdings issued 15,000 shares of Series D preferred stock, 135,350 shares of Class A common stock, 365,903 shares of Class B common stock, warrants to purchase 97,480 shares of Class B common stock and warrants to purchase 14,298 shares of Class C common stock, for an aggregate purchase price of $35.0 million principally to certain existing stockholders consisting of an affiliate of CCP, affiliates of Massachusetts Mutual Life Insurance Company and certain principals of DGHA. In connection with the initial portion of the cash equity contribution, the right of first refusal set forth in the stockholders agreement was waived by the necessary holders of USS Holdings' capital stock under the stockholders agreement. However, USS Holdings offered to those stockholders who were not offered the opportunity to purchase additional equity on the closing date the right to purchase, pro rata based on each such stockholder's equity ownership immediately prior to the closing date, up to an aggregate of 89,737 shares of Class A common stock, 2,685 shares of Series D preferred stock, warrants to purchase up to 17,452 shares of Class B common stock and warrants to purchase up to 2,551 shares of Class C common stock after the closing date. Depending on the results of the additional offering, stockholders who purchased Series D preferred stock on the closing date will receive on a pro rata basis additional warrants to purchase Class B common stock. Any shares not purchased in the additional offering will not be issued or reoffered. All purchasers of common and preferred stock and warrants to purchase common stock pursuant to the cash equity contribution are subject to the terms of the stockholders agreement. The following table sets forth, to the best of our knowledge, certain information regarding the ownership of the capital stock of USS Holdings as of March 1, 2000 after giving effect to the cash equity contribution with respect to the following: (i) each person known by us to own beneficially more than 5% of the outstanding shares of any class of capital stock of USS Holdings; (ii) each of our directors; (iii) each of the named executive officers set forth in the table under "Management--Executive and Director Compensation--Executive Compensation"; and (iv) all of our directors and executive officers as a group. 71 Except as otherwise indicated, each person listed in the following table has sole voting and investment power with respect to the shares listed opposite that person's name.
Percentage of Beneficial Owners(1) Shares of Common Stock Common Stock(2)* -------------------- -------------------------------- ----------------------- Class A(3) Class B(4) Class C(5) Class A Class B Class C ---------- ---------- ---------- ------- ------- ------- Chase Manhattan Capital, L.P.(9)(10)............ 0 340,069 8,800 ** 79.8% 2.3% Massachusetts Mutual Life Insurance Company(11)............ 0 104,211 2,697 ** 27.1% ** D. George Harris(12).... 124,653 8,186 42,291 24.9% 2.2% 11.1% Anthony J. Petrocelli(13)(15)..... 73,222 5,184 41,850 14.6% 1.4% 11.0% Richard E. Goodell...... 6,640 0 15,000 1.3% ** 3.9% Richard J. Donahue...... 65,972 1,950 41,376 13.7% ** 10.8% Richard J. Shearer...... 1,059 0 17,000 ** ** 4.5% Craig S. Cinalli........ 2000 0 6,000 0.4% ** 1.6% Brian Hessenthaler...... 2000 0 6,000 0.4% ** 1.6% Lewis McM. Pettinos..... 0 0 0 ** ** ** Richard J. Nick(15)..... 34,161 1,744 41,346 6.8% ** 10.8% Donald G. Kilpatrick(13)......... 50,962 0 41,090 10.2% ** 10.8% Arnold Chavkin(10)(14).. 0 0 0 ** ** ** Ruth Dreessen........... 0 0 0 ** ** ** Timothy J. Walsh(10)(14).......... 0 0 0 ** ** ** All directors and officers as a group (13 persons) (10)(12)(14).. 386,317 17,064 269,748 77.2% 4.5% 70.3%
Percentage of Beneficial Owners(1) Shares of Preferred Stock Preferred Stock(2)* -------------------- ----------------------------------- -------------------------- Series A(6) Series B(7) Series D(8) Series A Series B Series D ----------- ----------- ----------- -------- -------- -------- Chase Manhattan Capital, L.P.(9)(10)............ 678,035 1,356,070 9,232 74.2% 66.9% 61.5% Massachusetts Mutual Life Insurance Company(11)............ 207,778 415,556 2,829 22.4% 20.2% 18.9% D. George Harris(12).... 15,268 57,495 1,260 1.7% 2.9% 8.4% Anthony J. Petrocelli(13)......... 9,035 27,070 780 1.0% 1.4% 5.2% Richard E. Goodell...... 0 20,000 0 ** 1.0% ** Richard J. Donahue...... 1,104 16,291 300 ** ** 2.0% Richard J. Shearer...... 596 1,775 0 ** ** ** Craig S. Cinalli........ 0 0 0 ** ** ** Brian Hessenthaler...... 0 0 0 ** ** ** Lewis McM. Pettinos..... 0 0 0 ** ** ** Richard J. Nick......... 3,312 16,874 268 ** ** 1.8% Donald G. Kilpatrick(13)......... 1,534 9,422 0 ** ** ** Arnold Chavkin(10)(14).. 0 0 0 ** ** ** Ruth Dreessen........... 0 0 0 ** ** ** Timothy J. Walsh(10)(14).......... 0 0 0 ** ** ** All directors and officers as a group (13 persons) (10)(12)(14)........... 30,849 168,927 2,608 3.4% 8.4% 17.4%
- -------- * All share percentages assume that each respective beneficial owner, and only that owner, has exercised its warrants to purchase shares of preferred stock or common stock, as the case may be, of USS Holdings, if any. The preferred stock warrants were issued in connection with the issuance of subordinated debt in February 1996. The common stock warrants were issued in connection with the cash equity contribution in October 1999. ** Less than 1%. (1) The address of Chase Manhattan Capital, L.P. and its affiliates referred to in note (9) below is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New York, New York 10017. The address of Massachusetts Mutual Life Insurance Company and its affiliates is 1295 State Street, Springfield, Massachusetts 01111. The address of each other person is c/o D. George Harris & Associates, Inc., 399 Park Avenue, 32nd Floor, New York, New York 10022. (2) Notwithstanding the enumerated percentage shares of beneficial ownership of common and preferred stock, a stockholders agreement dated as of February 9, 1996, as amended (the "stockholders agreement"), among all of the stockholders of USS Holdings (the "Stockholders") governs the Stockholders' exercise of their voting rights with respect to election of directors and certain other material events. The parties to the stockholders agreement have agreed to vote their shares of USS Holdings to elect the Board of Directors as set forth therein. See "--The Stockholders Agreement." 72 (3) Holders of Class A common stock are entitled to one vote with respect to all matters to be voted on by USS Holdings' Stockholders for each share of Class A common stock held, subject to the stockholders agreement. (4) Holders of Class B common stock, except as otherwise required by law, have no voting rights. The Class B common stock will automatically be converted into shares of Class A common stock on a one-for-one basis at the time of a trigger event or an event of conversion. A "trigger event" is defined in the stockholders agreement as (i) a default under certain debt documents or a failure to achieve a designated level of EBITDA (as defined in the stockholders agreement), (ii) after February 9, 2000, the passage of 180 days after CMCLP (as defined in note (9)) has exercised its right to demand a sale of USS Holdings and the failure of the principals of DGHA to sell USS Holdings or purchase the shares of the Institutional Stockholders (as defined below) or (iii) both D. George Harris and Anthony J. Petrocelli no longer serving on the USS Holdings' Board of Directors due to death, disability or resignation. An "event of conversion" is defined in the stockholders agreement as (i) the consummation of an initial public offering resulting in net proceeds to USS Holdings and/or any selling stockholders of not less than $30 million or (ii) the conversion of more than 50% of the Series B preferred stock originally issued. CB Capital (as defined in note 9) and certain DGHA principals, so long as they hold at least 50% of the then outstanding shares of the Class B common stock and Class C common stock issued or issuable upon exercise of the Class B and Class C common stock purchase warrants and Mass Mutual, so long as it holds at least 50% of the then outstanding Class B common stock and Class C common stock issued or issuable upon exercise of the Class B and Class C common stock purchase warrants held by Mass Mutual, have the right to require USS Holdings to purchase all (but not less than all) of the Class B and Class C common stock purchase warrants and shares issued upon exercise of such warrants held by such holder or holders at any time after October 1, 2004 and prior to a sale, public offering of common stock or liquidation of USS Holdings. Upon the exercise of those put rights, if USS Holdings cannot obtain the consents from third parties necessary to purchase those shares after using reasonable efforts, USS Holdings will be released from its obligation to purchase the warrants. At any time after October 1, 2005, USS Holdings has the right to purchase all (but not less than all) of the warrants to purchase shares of Class B common stock held by CB Capital, Mass Mutual and certain DGHA principals. (5) Holders of Class C common stock are entitled to one vote with respect to all matters to be voted on by USS Holdings' stockholders for each share of Class C common stock held, subject to the stockholders agreement. Those shares are subject to repurchase by USS Holdings in certain circumstances upon the occurrence of certain liquidity events, including the sale of all or substantially all of the assets of USS Holdings and its subsidiaries, a merger of USS Holdings or any subsidiary and a sale of USS Holdings and upon the occurrence of certain termination events, including death, disability, retirement or termination of employment. The total number of shares of Class C common stock issuable under the warrants will be reduced by the number of shares of Class C common stock which did not vest and/or which are repurchased in accordance with the terms of the restricted stock purchase agreements pursuant to which the shares of Class C common stock are issued. CB Capital (as defined in note 9) and certain DGHA principals, so long as they hold at least 50% of the then outstanding shares of the Class B common stock and Class C common stock issued or issuable upon exercise of the Class B and Class C common stock purchase warrants and Mass Mutual, so long as it holds at least 50% of the then outstanding Class B common stock and Class C common stock issued or issuable upon exercise of the Class B and Class C common stock purchase warrants held by Mass Mutual, have the right to require USS Holdings to purchase all (but not less than all) of the Class B and Class C common stock purchase warrants and shares issued upon exercise of such warrants held by such holder or holders at any time after October 1, 2004 and prior to a sale, public offering of common stock or liquidation of USS Holdings. Upon the exercise of those put rights, if USS Holdings cannot obtain the consents from third parties necessary to purchase those shares after using reasonable efforts, USS Holdings will be released from its obligation to purchase the warrants. At any time after October 1, 2005, USS Holdings has the right to purchase all (but not less than all) of the warrants to purchase shares of Class C common stock held by CB Capital, Mass Mutual and certain DGHA principals. (6) Holders of Series A preferred stock, except as otherwise required by law, have no voting rights, except in the event that there is a proposal to amend the terms of the Series A preferred stock so as to affect it adversely or a proposal to authorize or issue (i) any equity or convertible debt securities or (ii) certain rights to purchase equity or convertible debt securities, in either case ranking equal or superior to the Series A preferred stock (with certain exceptions), which shall then require the consent of the holders of two-thirds of the outstanding shares of Series A preferred stock. Holders of more than 50% of the Series B preferred stock originally issued have the right to require USS Holdings to purchase all (but not less than all) of the shares of Series A preferred stock and warrants to purchase Series A preferred stock held by CVCA (as defined in note (9)) and Mass Mutual (as defined in note (11)) at any time after October 1, 2004 and prior to a sale, public offering of common stock or liquidation of USS Holdings. Upon the exercise of those put rights, if USS Holdings cannot obtain the consents from third parties necessary to purchase those shares and warrants after using reasonable efforts, USS Holdings will be released from its obligation to purchase the shares and warrants. At any time after October 1, 2005, USS Holdings has the right to purchase all (but not less than all) of the Series A preferred stock held by CVCA and Mass Mutual. (7) Holders of Series B preferred stock shall not, prior to the occurrence of a "trigger event" (as defined in note (4) above), have any voting rights, except as otherwise required by law and except in the event of a proposal to authorize or issue additional shares of Series B preferred stock or change the preferences, rights or powers of the Series B preferred stock so as to affect it adversely, which shall then require the consent of the holders of a majority of the outstanding shares of Series B preferred stock. After a trigger event, the holders of Series B preferred stock shall vote, together with the 73 holders of Class A common stock, as one class, with each share of Series B preferred stock entitling its holder to that number of votes equal to the number of shares of common stock issuable upon conversion thereof (currently one share of Class B common stock for each share of Series B preferred stock (subject to adjustment)) on the date of any such vote, subject to the Stockholders Agreement. Holders of more than 50% of the Series B preferred stock originally issued have the right to require USS Holdings to purchase all (but not less than all) of the shares of Series B preferred stock and warrants to purchase Series B preferred stock held by CVCA (as defined in note (9)) and Mass Mutual (as defined in note (11)) at any time after October 1, 2004 and prior to a sale, public offering of common stock or liquidation of USS Holdings. Upon the exercise of those put rights, if USS Holdings cannot obtain the consents from third parties necessary to purchase those shares and warrants after using reasonable efforts, USS Holdings will be released from its obligation to purchase the shares and warrants. At any time after October 1, 2005, USS Holdings has the right to purchase all (but not less than all) of the Series B preferred stock held by CVCA and Mass Mutual. The Series B preferred stock will automatically be converted into an equal number of shares of Class B common stock (before a trigger event) or Class A common stock (after a trigger event) upon an event of conversion (as defined in note (4) above). Moreover, any holder of the Series B preferred stock can at any time and from time to time convert all or a portion of his Series B preferred stock into an equal number of shares of Class B common stock (before a trigger event) or Class A common stock (after a trigger event). (8) Holders of Series D preferred stock, except as otherwise required by law, have no voting rights, except in the event there is a proposal to amend the terms of the Series D preferred stock so as to affect it adversely or a proposal to authorize or issue (i) any equity or convertible debt securities or (ii) certain rights to purchase equity or convertible debt securities, in either case ranking equal or superior to the Series D preferred stock, which shall then require the consent of the holders of a majority of the outstanding shares of Series D preferred stock. (9) Includes (i) 664,146 shares of Series A preferred stock and 1,328,292 shares of Series B preferred stock owned by Chase Manhattan Capital, L.P. ("CMCLP"), a Delaware limited partnership, the general partner of which is Chase Manhattan Capital Corporation ("CMCC"), (ii) 13,889 shares of Series A preferred stock and 27,778 shares of Series B preferred stock issuable upon exercise of preferred stock warrants owned by Chase Venture Capital Associates, L.P. ("CVCA"), a California limited partnership, the general partner of which is CCP and (iii) 9,232 shares of Series D preferred stock, 280,076 shares of Class B common stock and 59,993 shares of Class B common stock issuable upon the exercise of common stock warrants and 8,800 shares of Class C Common Stock issuable upon exercise of common stock purchase warrants owned by CB Capital Investors, L.P. ("CB Capital"), an affiliate of CMCLP and CVCA. Each of CMCLP, CMCC, CVCA, CB Capital and CCP may be deemed the beneficial owner of the foregoing shares. CMCLP, CVCA and CB Capital are licensed small business investment companies (an "SBIC") and as such are subject to certain restrictions imposed upon SBICs by the regulations established and enforced by the United States Small Business Administration. Among these restrictions are certain limitations on the extent to which an SBIC may exercise control over companies in which it invests. (10) Messrs. Chavkin and Walsh may be deemed the beneficial owners of the shares of common stock and preferred stock and warrants to purchase preferred and common stock referred to in note (9) above given their positions as a general partner and partner, respectively, of CCP. (11) Includes (i) 180,000 shares of Series A preferred stock and warrants to purchase 27,778 shares of Series A preferred stock, (ii) 360,000 shares of Series B preferred stock and warrants to purchase 55,556 shares of Series B preferred stock (iii) 2,829 shares of Series D preferred stock, (iv) 85,827 shares of Class B common stock, (v) warrants to purchase 18,384 shares of Class B common stock issuable upon exercise of common stock purchase warrants and (vi) 2,697 shares of Class C common stock issuable upon exercise of common stock purchase warrants owned by Massachusetts Mutual Life Insurance Company, MassMutual Participation Investors, MassMutual Corporate Investors and Gerlach & Co (collectively, "Mass Mutual"). (12) Does not include 18,092 shares of Class A common stock, 938 shares of Series A preferred stock, 20,647 shares of Series B preferred stock, 219 shares of Series D preferred stock, 1,421 shares of Class B common stock issuable upon exercise of common stock purchase warrants and 208 shares of Class C common stock issuable upon exercise of common stock purchase warrants held in two trusts over which Mr. Harris, as co-trustee, shares voting control and investment control. (13) Does not include 22,025 shares of Class A common stock, 13,500 shares of Series B preferred stock, 95 shares of Series D preferred stock, 619 shares of Class B common stock issuable upon exercise of common stock purchase warrants and 91 shares of Class C common stock issuable upon exercise of common stock purchase warrants held in fourteen trusts over which Messrs. Petrocelli and Kilpatrick, as co-trustees, share voting control and investment control. (14) Does not include the shares of common stock and preferred stock and warrants to purchase preferred and common stock referred to in note (9) above. (15) Does not include 750 shares of Class A Common held in two trusts over which Messrs. Nick and Petrocelli as co-trustees share voting control and investment control. 74 The Stockholders Agreement The stockholders agreement governs the holders' exercise of their voting rights with respect to election of directors and certain other material events. The parties to the agreement have agreed to vote their shares of USS Holdings to elect (i) for as long as Mr. Harris owns 50% or more of the securities of USS Holdings (subject to certain exceptions set forth in the agreement) held by him on February 9, 1996 (the date of the U.S. Silica acquisition), two directors designated by Mr. Harris, including himself; (ii) for as long as Mr. Petrocelli owns 50% or more of the securities of USS Holdings (subject to certain exceptions set forth in the agreement) held by him on February 9, 1996, one director designated by Mr. Petrocelli, and (iii) three directors designated by a majority of the institutional stockholders party to the stockholders agreement (the "Institutional Stockholders"). CMCLP currently owns 76.5% of the stock owned by the Institutional Stockholders. For so long as each shall be a director, Mr. Harris will always be elected as Chairman of the board, and Mr. Petrocelli will always be elected as the Vice Chairman of the board. The President of USS Holdings is also a director. Upon a trigger event, a majority of the Institutional Stockholders have the right to designate two additional directors, thus enabling them to choose the majority of directors serving on the board. The provisions of the stockholders agreement also govern: --restrictions on certain actions by USS Holdings and its subsidiaries without the consent of (i) prior to the occurrence of a trigger event, a majority of the Institutional Stockholders and the DGHA Stockholders (as defined in the stockholders agreement), and (ii) after the occurrence of a trigger event, a majority of the Institutional Stockholders only, including, among other things: the consummation of a public offering; the issuance of certain equity securities; the merger or consolidation with or into another entity; the acquisition of another entity; certain sales of assets; the liquidation or reorganization of USS Holdings; and the incurrence of certain debt; --stockholder rights of first refusal to purchase certain capital stock or equity securities to be issued by USS Holdings; --USS Holdings' and stockholder rights of first offer to purchase certain shares of USS Holdings to be sold by stockholders; --USS Holdings' and stockholder rights to purchase, and stockholder rights to sell, certain shares of USS Holdings held by stockholders in certain instances (including a person's termination of employment); --rights of certain stockholders to cause all of the other stockholders to sell stock in connection with the sale of USS Holdings; and --rights of certain stockholders to participate in certain sales of the shares of USS Holdings by other stockholders. 75 DESCRIPTION OF THE NEW CREDIT FACILITIES The following summary of the new credit facilities is qualified in its entirety by reference to the complete text of the facilities themselves and all ancillary documents, copies of which will be available upon request. General On the closing date we entered into the new credit facilities, consisting of the $45.0 million tranche A term loan facility, the $95.0 million tranche B term loan facility, the $50.0 million revolving credit facility and the $40.0 million acquisition term loan facility. CSI, one of the initial purchasers of the old notes, is syndication agent, book manager, lead arranger and documentation agent. Banque Nationale de Paris, an affiliate of the other initial purchaser of the old notes, is administrative agent, collateral agent and a lender. The Chase Manhattan Bank, an affiliate of CSI, is also a lender. On the closing date, we borrowed the full amount of the term loans (including a portion of the tranche A term loan facility denominated in Canadian dollars in an amount equal to $2.0 million borrowed by George F. Pettinos (Canada) Limited). Our borrowings under the new credit facilities were used, together with the proceeds of the offering of the old notes and the cash equity contribution, to (i) finance the Commercial Stone acquisition, (ii) repay certain debt and (iii) pay related fees and expenses. The Canadian tranche of the tranche A term loan facility was repaid in connection with our sale of George F. Pettinos (Canada) Limited on February 29, 2000. Availability under the new credit facilities is subject to various conditions precedent typical of bank loans, and the commitment of the lenders to provide financing under the new credit facilities is also subject to, among other things, the absence of any event, condition or circumstance that has had or is reasonably expected to have a material adverse effect on our business operations, properties, assets or financial condition, taken as a whole. Term Loans Excluding the Canadian tranche, which was retired on February 29, 2000, the tranche A term loan facility will mature six years after the closing date and amortize as follows: $1.20 million per quarter for the first two quarters commencing with the quarter ending June 30, 2000, $1.55 million per quarter for the following four quarters and $2.15 million per quarter for the last sixteen quarters. The tranche B term loan facility will mature eight years after the closing date and amortize as follows: $0.25 million per quarter for the first four quarters commencing with the quarter ending December 31, 1999, $0.5 million per quarter for the following twenty quarters, $9.0 million per quarter for the following four quarters and $12.0 million per quarter for the last four quarters. Amounts repaid or prepaid under the term loans will not be permitted to be reborrowed. Revolving Credit Facility The revolving credit facility will mature six years after the closing date and include sublimits of $12.0 million and $3.0 million, respectively, for letters of credit and swingline loans. Amounts repaid under the revolving credit facility may be reborrowed. We are using the proceeds of the revolving credit facility for general corporate purposes, including working capital and capital expenditures, but excluding acquisitions. Acquisition Term Loan Facility The acquisition term loan facility will mature six years after the closing date and amortize in quarterly installments after the third anniversary of the closing date. 76 The acquisition term loan facility is available for three years after the closing date, during which we may make no more than three borrowings. Each borrowing is conditioned on, among other things, our leverage ratio (after giving effect to that borrowing and the relevant acquisition) not exceeding 5.00 to 1.00. Amounts repaid under the acquisition term loan facility will not be permitted to be reborrowed. Guarantees and Security Our obligations under the new credit facilities are unconditionally and irrevocably guaranteed, jointly and severally, by BMAC Holdings and each of the issuer's existing and subsequently acquired or organized domestic subsidiaries. The new credit facilities are secured by liens on substantially all the assets of BMAC Holdings, the issuer and each of the issuer's existing and subsequently acquired or organized domestic subsidiaries, including but not limited to, and subject to customary exceptions, the following: --a first priority pledge of all the capital stock of the issuer; --a first priority pledge of all the capital stock held by BMAC Holdings, the issuer and each existing or subsequently acquired or organized domestic subsidiary of the issuer in each existing or subsequently acquired or organized domestic subsidiary of the issuer and 65% of the capital stock held by those entities in that existing or subsequently acquired or organized foreign subsidiary of the issuer; and --perfected first-priority security interests in substantially all of the tangible and intangible assets (including, but not limited to, accounts receivable, inventory, trademarks, other intellectual property, licensing agreements, real property, leasehold mortgages, cash and proceeds of the foregoing) held by BMAC Holdings, the issuer and each of the issuer's existing or subsequently acquired or organized domestic subsidiaries. Interest Rates Indebtedness under the tranche A term loan facility, the acquisition term loan facility and the revolving credit facility bears interest at an adjusted London inter-bank offered rate ("LIBOR") plus 3.00% or the higher of Banque Nationale de Paris' prime rate and the Federal Funds effective rate plus 0.50% ("ABR") plus 2.00%, to be selected at our option and subject to increase or reduction based on our leverage ratio. Indebtedness under the tranche B term loan facility bears interest at LIBOR plus 3.50% or ABR plus 2.50%, to be selected at our option. Amounts outstanding under the new credit facilities not paid when due bear interest at a default rate equal to 2.00% above the rates otherwise applicable to the loans under the new credit facilities. Fees We have paid or are currently paying (i) commitment fees of 0.75% and 0.50% per annum on the undrawn portion of the commitments in respect of the acquisition term loan facility and the revolving credit facility, respectively, subject to reduction based on our leverage ratio; (ii) letter of credit fees on the aggregate face amount of outstanding letters of credit equal to the then applicable borrowing margin for LIBOR loans under the revolving credit facility and a 0.25% per annum issuing bank fee for the issuing bank; (iii) annual administration fees; and (iv) agent, arrangement and other similar fees. 77 Optional and Mandatory Prepayment We have the right to prepay borrowings under the new credit facilities, subject to paying certain costs and expenses in certain circumstances. In addition, the term loans are subject to mandatory prepayments in an amount equal to (i) 100% of the net cash proceeds of certain equity issuances by BMAC Holdings or any of its subsidiaries, (ii) 100% of the net cash proceeds of certain debt issuances by BMAC Holdings or any of its subsidiaries, (iii) 75% of the excess cash flow of the issuer and its subsidiaries (subject to decrease to 50% upon satisfaction of certain financial criteria) and (iv) 100% of the net cash proceeds of certain asset sales or other dispositions of property by BMAC Holdings or any of its subsidiaries, in each case subject to certain exceptions. Certain Covenants The new credit facilities contain customary covenants, including: --restrictions on our ability to pay dividends or other distributions; --redeem or repurchase capital stock; --dispose of assets; --prepay other debt or amend other debt instruments (including the indenture); --create liens on assets; --make investments, loans or advances; --change the business conducted by us; --make capital expenditures; --engage in certain transactions with affiliates; --incur lease obligations; --incur other debt and enter into other credit facilities; and --merge with and acquire other entities. The new credit facilities also require us to comply with certain maintenance covenants, including a maximum leverage ratio and a minimum interest coverage ratio. Events of Default The new credit facilities contain customary events of default, including, but not limited to: --nonpayment of principal, interest or fees; --violation of covenants; --incorrectness of representations or warranties in any material respect; --cross-default to other debt; --ERISA events; --material judgments and liabilities; --invalidity of security interests; --bankruptcy; and --change in control. 78 DESCRIPTION OF THE NEW NOTES Definitions of certain terms used in this description of the new notes may be found under the heading "--Certain Definitions." For purposes of this section, the term (i) "Company" refers only to Better Minerals & Aggregates Company and not any of its subsidiaries, (ii) "Parent" refers only to BMAC Holdings, Inc. and not any of its subsidiaries and (iii) "Holdings" refers only to USS Holdings, Inc. and not any of its subsidiaries, in each case until a successor replaces it, and thereafter, means the successor. All of the Company's Domestic Subsidiaries guarantee the notes and therefore are subject to many of the provisions contained in this description of the new notes. Each company which guarantees the notes is referred to in this section as a "Note Guarantor." Each such guarantee is termed a "Note Guarantee." The Company issued the old notes and will issue the new notes under the indenture, dated as of October 1, 1999, among the Company, the Note Guarantors and The Bank of New York, as trustee (the "Trustee"), a copy of which has been filed as an exhibit to the registration statement of which this prospectus is a part. The indenture contains provisions which define your rights under the notes. In addition, the indenture governs the obligations of the Company and of each Note Guarantor under the notes. The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the TIA. On October 1, 1999, the Company issued $150.0 million aggregate principal amount of old notes under the indenture. The terms of the new notes are identical in all material respects to the old notes, except the new notes will not contain transfer restrictions and holders of new notes will no longer have any registration rights or be entitled to any liquidated damages. The Trustee will authenticate and deliver new notes for original issue only in exchange for a like principal amount of old notes. Any old notes that remain outstanding after the consummation of the exchange offer, together with the new notes, will be treated as a single class of securities under the indenture. Accordingly, all references in this section to specified percentages in aggregate principal amount of the outstanding notes shall be deemed to mean, at any time after the exchange offer is consummated, such percentage in aggregate principal amount of the old notes and the new notes then outstanding. The following description is meant to be only a summary of certain provisions of the indenture. It does not restate the terms of the indenture in their entirety. We urge that you carefully read the indenture as it, and not this description, governs your rights as Holders. Overview of the New Notes and the Note Guarantees The New Notes The new notes: --are general unsecured obligations of the Company; --rank equally in right of payment with all existing and future Senior Subordinated Indebtedness of the Company; --are subordinated in right of payment to all existing and future Senior Indebtedness of the Company; --re senior in right of payment to all existing and future Subordinated Obligations of the Company; --are effectively subordinated to any Secured Indebtedness of the Company and its Subsidiaries to the extent of the value of the assets securing such Indebtedness; and 79 --are effectively subordinated to all liabilities (including Trade Payables) and Preferred Stock of each Subsidiary of the Company that is not a Note Guarantor. The Note Guarantees The old notes are, and the new notes will be, initially guaranteed by each of the Company's Domestic Subsidiaries existing on the Closing Date. The Note Guarantee of each Note Guarantor, and all Note Guarantees, if any, made by future subsidiaries of the Company: --is a general unsecured obligation of such Note Guarantor; --ranks equally in right of payment with all existing and future Senior Subordinated Indebtedness of such Note Guarantor; --is subordinated in right of payment to all existing and future Senior Indebtedness of such Note Guarantor; --is senior in right of payment to all existing and future Subordinated Obligations of such Note Guarantor; and --is effectively subordinated to any Secured Indebtedness of that Note Guarantor and its Subsidiaries to the extent of the value of the assets securing that Indebtedness. The notes will not be guaranteed by the Company's Canadian Subsidiary unless such Subsidiary Guarantees any Indebtedness (other than Indebtedness of a Restricted Subsidiary that is not a Note Guarantor). This Canadian Subsidiary is an inactive company that has an immaterial amount of assets and liabilities. Principal, Maturity and Interest We issued the old notes in an aggregate principal amount of $150.0 million. The notes are limited to $150,000,000 in aggregate principal amount and will mature on September 15, 2009. The old notes are, and the new notes will be, in fully registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000. Each note bears interest at a rate of 13% per annum from the Closing Date, or from the most recent date to which interest has been paid or provided for. We will pay interest semiannually on March 15 and September 15 of each year, to Holders of record at the close of business on the March 1 or September 1 immediately preceding the interest payment date. We will pay interest on overdue principal and, to the extent lawful, overdue installments of interest at the rate borne by the notes. Holders of old notes whose old notes are accepted for exchange in the exchange offer will be deemed to have waived the right to receive any payment in respect of interest on the old notes accrued from March 15, 2000 (the first interest payment date of the old notes) to the date of issuance of the new notes. Consequently, Holders who exchange their old notes for new notes will receive the same interest payment on September 15, 2000 (the next interest payment date with respect to the old notes and the new notes following consummation of the exchange offer) that they would have received had they not accepted the exchange offer. Paying Agent and Registrar We will pay the principal of, premium, if any, and interest on the notes at any office of ours or any agency designated by us which is located in the Borough of Manhattan, The City of New York. We have initially designated the corporate trust office of the Trustee to act as the agent of the Company in such matters. The location of the corporate trust office is 101 Barclay Street, Floor 21 80 West, New York, New York 10286. We, however, reserve the right to pay interest to Holders by check mailed directly to Holders at their registered addresses. Holders may exchange or transfer their notes at the same location given in the preceding paragraph. No service charge will be made for any registration of transfer or exchange of notes. We, however, may require Holders to pay any transfer tax or other similar governmental charge payable in connection with any such transfer or exchange. Optional Redemption Except as set forth in the following paragraph, we may not redeem the notes prior to September 15, 2004. After this date, we may redeem the notes, in whole or in part, on not less than 30 nor more than 60 days' prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest and liquidated damages thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on September 15 of the years set forth below:
Year Redemption Price ---- ---------------- 2004.................................. 106.500% 2005.................................. 104.333% 2006.................................. 102.167% 2007 and thereafter................... 100.000%
Prior to September 15, 2002, we may, on one or more occasions, also redeem up to a maximum of 35% of the original aggregate principal amount of the notes with the Net Cash Proceeds of one or more Public Equity Offerings (1) by the Company or (2) by Parent or Holdings to the extent the Net Cash Proceeds thereof are contributed to the Company or used to purchase Capital Stock (other than Disqualified Stock) of the Company from the Company following which there is a Public Market, at a redemption price equal to 113% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that after giving effect to any such redemption: (1) at least 65% of the original aggregate principal amount of the notes remains outstanding; and (2) any such redemption by the Company must be made within 90 days of such Public Equity Offering and must be made in accordance with certain procedures set forth in the indenture. Selection If we partially redeem notes, the Trustee will select the notes to be redeemed on a pro rata basis, by lot or by such other method as the Trustee shall deem to be fair and appropriate, although no note of $1,000 in original principal amount or less will be redeemed in part. If we redeem any note in part only, the notice of redemption relating to such note shall state the portion of the principal amount thereof to be redeemed. A new note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original note. On and after the redemption date, interest will cease to accrue on notes or portions thereof called for redemption so long as we have deposited with the Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid interest and liquidated damages, if any, on the notes to be redeemed. 81 Ranking The notes are unsecured Senior Subordinated Indebtedness of the Company, are subordinated in right of payment to all existing and future Senior Indebtedness of the Company, rank equally in right of payment with all existing and future Senior Subordinated Indebtedness of the Company and are senior in right of payment to all existing and future Subordinated Obligations of the Company. The notes also are effectively subordinated to any Secured Indebtedness of the Company and its Subsidiaries to the extent of the value of the assets securing such Indebtedness. However, payment from the money or the proceeds of U.S. Government Obligations held in any defeasance trust described below under the caption "--Defeasance" will not be subordinated to any Senior Indebtedness or subject to the restrictions described herein. The Note Guarantees are unsecured Senior Subordinated Indebtedness of the applicable Note Guarantor, are subordinated in right of payment to all existing and future Senior Indebtedness of such Note Guarantor, rank equally in right of payment with all existing and future Senior Subordinated Indebtedness of such Note Guarantor and are senior in right of payment to all existing and future Subordinated Obligations of such Note Guarantor. The Note Guarantees also are effectively subordinated to any Secured Indebtedness of the applicable Note Guarantor and its Subsidiaries to the extent of the value of the assets securing such Secured Indebtedness. As of December 31, 1999, our subsidiaries had total liabilities, including trade payables, of approximately $487.3 million. The Company currently conducts all of its operations through its Subsidiaries. To the extent such Subsidiaries are not Guarantors, creditors of such Subsidiaries, including trade creditors, and preferred stockholders, if any, of such Subsidiaries generally will have priority with respect to the assets and earnings of such Subsidiaries over the claims of creditors of the Company, including Holders. The notes, therefore, are effectively subordinated to the claims of creditors, including trade creditors, and preferred stockholders, if any, of Subsidiaries of the Company that are not Note Guarantors. This Canadian subsidiary is an inactive company that has an immaterial amount of assets and liabilities. As of December 31, 1999, there was outstanding: (1) $135.9 million of Senior Indebtedness of the Company (exclusive of unused commitments under the Credit Agreement), all which was Secured Indebtedness; (2) no Senior Subordinated Indebtedness of the Company (other than the notes) and no indebtedness of the Company that is subordinate in right of repayment to the notes; (3) $1.6 million of Senior Indebtedness of the Note Guarantors (exclusive of guarantees of Indebtedness under the Credit Agreement); and (4) no Senior Subordinated Indebtedness of the Note Guarantors (other than the Note Guarantees) and no Indebtedness of the Note Guarantors that is subordinate or junior in right of payment to the Note Guarantees. Although the indenture limits the Incurrence of Indebtedness by the Company and the Restricted Subsidiaries and the issuance of Preferred Stock by the Restricted Subsidiaries, such limitation is subject to a number of significant qualifications. The Company and its Subsidiaries may be able to Incur substantial amounts of Indebtedness in certain circumstances. Such Indebtedness may be Senior Indebtedness. "Senior Indebtedness" of the Company or any Note Guarantor means the principal of, premium (if any) and accrued and unpaid interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of the Company or any Note Guarantor, regardless of whether or not a claim for post-filing interest is allowed in such proceedings), and fees and other amounts owing in respect of, Bank Indebtedness and all other Indebtedness of the Company or any 82 Note Guarantor, as applicable, whether outstanding on the Closing Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the notes or such Note Guarantor's Note Guarantee, as applicable; provided, however, that Senior Indebtedness of the Company or any Note Guarantor shall not include: (1) any obligation of the Company to Parent, Holdings or any Subsidiary of the Company or of such Note Guarantor to Parent, Holdings, the Company or any other Subsidiary of the Company; (2) any liability for federal, state, local or other taxes owed or owing by the Company or such Note Guarantor, as applicable; (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities but excluding liabilities of the Company or a Note Guarantor, as applicable, with respect to performance or surety bonds or similar obligations, in each case entered into in the ordinary course of business); (4) any Indebtedness or obligation of the Company or such Note Guarantor, as applicable (and any accrued and unpaid interest in respect thereof) that by its terms is subordinate or junior in right of payment to any other Indebtedness or obligation of the Company or such Note Guarantor, as applicable, including any Senior Subordinated Indebtedness and any Subordinated Obligations of the Company or such Note Guarantor, as applicable; (5) any obligations with respect to any Capital Stock; or (6) any Indebtedness Incurred in violation of the indenture. Only Indebtedness of the Company that is Senior Indebtedness will rank senior to the notes. The notes will rank equally in right of payment with all other Senior Subordinated Indebtedness of the Company. The Company will not Incur, directly or indirectly, any Indebtedness which is subordinate or junior in ranking in any respect to Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness merely because it is unsecured. The Company may not pay principal of, premium (if any) or interest on the notes, or make any deposit pursuant to the provisions described under "Defeasance" below, and may not otherwise repurchase, redeem or otherwise acquire or retire for value any notes (collectively, "pay the notes") if: (1) any Designated Senior Indebtedness of the Company is not paid when due, or (2) any other default on any Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded, or (y) such Designated Senior Indebtedness has been paid in full; provided, however, that the Company may pay the notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Designated Senior Indebtedness with respect to which either of the events set forth in clause (1) or (2) above has occurred and is continuing. 83 During the continuance of any default (other than a default described in clause (1) or (2) of the immediately preceding paragraph) with respect to any Designated Senior Indebtedness of the Company pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, we may not pay the notes for a period (a "Payment Blockage Period") commencing upon the receipt by a Responsible Officer of the Trustee (with a copy to us) of written notice (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated: (1) by written notice to the Trustee and the Company from the person or persons who gave such Blockage Notice, (2) by repayment in full of such Designated Senior Indebtedness, or (3) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the second preceding and in the immediately succeeding paragraph), unless the holders of such Designated Senior Indebtedness or the Representative of such holders have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the notes after the end of such Payment Blockage Period, including any missed payments. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. However, if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give another Blockage Notice within such period. In no event, however, may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this paragraph, no default or event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. Upon any payment or distribution of the assets of the Company to creditors upon a liquidation or a dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) the holders of Senior Indebtedness of the Company will be entitled to receive payment in full of such Senior Indebtedness before the Holders are entitled to receive any payment of principal of or interest on the notes; and (2) until such Senior Indebtedness is paid in full any payment or distribution to which Holders would be entitled but for the subordination provisions of the indenture will be made to holders of such Senior Indebtedness as their interests may appear, except that Holders may receive: (x) shares of stock; and (y) any debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the notes. 84 If a payment or distribution is made to Holders that due to the note subordination provisions of the indenture should not have been made to them, such Holders will be required to hold it in trust for the holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. If payment of the notes is accelerated because of an Event of Default, the Company or the Trustee (provided that the Trustee shall have received written notice from the Company, on which notice the Trustee shall be entitled to conclusively rely) shall promptly notify the holders of the Designated Senior Indebtedness of the Company (or their Representative) of the acceleration. If any Designated Senior Indebtedness of the Company is outstanding, the Company may not pay the notes until five Business Days after such holders or the Representative of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the notes only if the note subordination provisions of the indenture otherwise permit payment at that time. By reason of the subordination provisions of the indenture, in the event of insolvency, creditors of the Company who are holders of Senior Indebtedness of the Company may recover more, ratably, than the Holders, and creditors of the Company who are not holders of Senior Indebtedness of the Company or of Senior Subordinated Indebtedness of the Company (including the notes) may recover less, ratably, than holders of Senior Indebtedness of the Company and may recover more, ratably, than the holders of Senior Subordinated Indebtedness of the Company. The indenture contains substantially identical subordination provisions relating to each Guarantor's obligations under its Note Guarantee. Note Guarantees The Note Guarantors, and certain future subsidiaries of the Company (as described below), as primary obligors and not merely as sureties, jointly and severally irrevocably and unconditionally Guarantee on an unsecured senior subordinated basis the performance and full and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of the Company under the indenture (including obligations to the Trustee) and the notes, whether for payment of principal of or interest on or liquidated damages in respect of the old notes, expenses, indemnification or otherwise (all such obligations guaranteed by such Note Guarantors being herein called the "Guaranteed Obligations"). Such Note Guarantors agree or will agree to pay, in addition to the amount stated above, any and all costs and expenses (including reasonable counsel fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under the Note Guarantees. Each Note Guarantee is or will be limited in amount to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Note Guarantor without rendering the Note Guarantee, as it relates to such Note Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. The Company has agreed to cause (a) each newly formed or acquired Domestic Subsidiary and (b) each existing, newly formed or acquired Foreign Subsidiary that Guarantees any Indebtedness (other than Indebtedness of a Restricted Subsidiary that is not a Note Guarantor), to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiary will Guarantee payment of the notes. See "Certain Covenants--Future Note Guarantors" below. The obligations of a Note Guarantor under its Note Guarantee are senior subordinated obligations. As such, the rights of Holders to receive payment by a Note Guarantor pursuant to its Note Guarantee will be subordinated in right of payment to the rights of holders of Senior Indebtedness of such Note Guarantor. The terms of the subordination provisions described above with respect to the Company's obligations under the notes apply equally to a Note Guarantor and the obligations of such Note Guarantor under its Note Guarantee. 85 Each Note Guarantee is a continuing guarantee and shall --remain in full force and effect until payment in full of all the Guaranteed Obligations, --be binding upon each Note Guarantor and its successors and --inure to the benefit of, and be enforceable by, the Trustee, the Holders and their successors, transferees and assigns. Any Guarantee by a Subsidiary of the Company will be automatically released upon the sale or other disposition (including through merger or consolidation) of the Capital Stock, or all or substantially all the assets, of the applicable Subsidiary if such sale or other disposition is made in compliance with the covenant described under the caption "Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock". Change of Control Upon the occurrence of any of the following events (each a "Change of Control"), each Holder will have the right to require the Company to repurchase all or any part of such Holder's notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest (and, in the case of the old notes, liquidated damages, if any), to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to repurchase notes pursuant to this section in the event that it has exercised its right to redeem all the notes under the terms of the section titled "Optional Redemption": (1) prior to the earliest to occur of (A) the first public offering of common stock of Parent, (B) the first public offering of common stock of Holdings or (C) the first public offering of common stock of the Company (each, a "Public Market Offering"), the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of Parent, Holdings or the Company, whether as a result of issuance of securities of Parent, Holdings or the Company, any merger, consolidation, liquidation or dissolution of Parent, Holdings or the Company, any direct or indirect transfer of securities by any Permitted Holder or otherwise (for purposes of this clause (1) and clause (2) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of an entity (the "specified entity") held by any other entity (the "parent entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity); (2) after a Public Market Offering has occurred, (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (1) above), whether by merger, consolidation, other business combination or otherwise, directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company, Holdings or Parent and (B) the Permitted Holders "beneficially own" (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company, Holdings or Parent than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of the Company, Holdings or Parent, as the case may be (for the 86 purposes of this clause (2), such other person shall be deemed to beneficially own any Voting Stock of a specified entity held by a parent entity, if such other person is the beneficial owner (as defined in clause (1) above), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders "beneficially own" (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity); or (3) during any period of two consecutive years, individuals who at the beginning of that period constituted the board of directors of the Company, Holdings or Parent, as the case may be (together with any new directors whose election by such board of directors of the Company, Holdings or Parent, as the case may be, or whose nomination for election by the shareholders of the Company, Holdings or Parent, as the case may be, was approved by a vote of 662/3% of the directors of the Company, Holdings or Parent, as the case may be, then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors of the Company, Holdings or Parent, as the case may be, then in office; or (4) the adoption of a plan relating to the liquidation or dissolution of the Company, Holdings or Parent. In the event that at the time of such Change of Control the terms of the Bank Indebtedness restrict or prohibit the repurchase of notes pursuant to this covenant, then prior to the mailing of the notice to Holders provided for in the immediately following paragraph but in any event within 45 days following any Change of Control, the Company shall: (1) repay in full all Bank Indebtedness or, if doing so will allow the purchase of notes, offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness of each lender who has accepted such offer, or (2) obtain the requisite consent under the agreements governing the Bank Indebtedness to permit the repurchase of the notes as provided for in the immediately following paragraph. Within 45 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase all or a portion of such Holder's notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts and financial information regarding such Change of Control; (3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its notes purchased. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a Change of Control Offer made by the Company and purchases all notes validly tendered and not withdrawn under such Change of Control Offer. 87 The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the purchase of notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. The Change of Control purchase feature is a result of negotiations between the Company and the initial purchasers of the old notes in the private offering. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Company would decide to do so in the future. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancings or recapitalizations, that would not constitute a Change of Control under the indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. Restrictions on the ability of the Company to Incur additional Indebtedness are contained in the covenants described under "Certain Covenants--Limitation on Indebtedness." Such restrictions can only be waived with the consent of the Holders of a majority in principal amount of the notes then outstanding. Except for the limitations contained in such covenants, however, the indenture will not contain any covenants or provisions that may afford Holders protection in the event of a highly leveraged transaction. The occurrence of certain of the events which would constitute a Change of Control would constitute a default under the Credit Agreement. Future Senior Indebtedness of the Company may contain prohibitions of certain events which would constitute a Change of Control or require such Senior Indebtedness to be repurchased or repaid upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to purchase the notes could cause a default under such Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. Finally, the Company's ability to pay cash to the Holders upon a purchase may be limited by the Company's then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required purchases. The provisions under the indenture relative to the Company's obligation to make an offer to purchase the notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the notes. Certain Covenants The indenture contains covenants including, among others, the following: Limitation on Indebtedness. (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company and the Note Guarantors may Incur Indebtedness if on the date of such Incurrence and after giving effect thereto the Consolidated Coverage Ratio would be greater than 2.00:1 if such Indebtedness is Incurred on or prior to December 31, 2001 and 2.25:1 if such Indebtedness is Incurred thereafter. (b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness: (1) (A) Bank Indebtedness in an aggregate principal amount not to exceed $190.0 million less the aggregate amount of all prepayments of principal applied to permanently reduce any such Indebtedness pursuant to the covenant described under "--Limitation on Sales of Assets and Subsidiary Stock" and (B) (i) Indebtedness under the acquisition term loan facility in an aggregate principal amount not to exceed $40.0 million less the aggregate amount of all prepayments applied to 88 permanently reduce any principal of such Indebtedness pursuant to the covenant described under "--Limitation on Sales of Assets and Subsidiary Stock"; provided, however, that at the time the Company or any Restricted Subsidiary Incurs any Indebtedness under this clause (b)(1)(B), the Company has a Consolidated Leverage Ratio of 5.00:1 or less; and (ii) any Refinancing Indebtedness in respect thereof; (2) Indebtedness of the Company owed to and held by any Wholly Owned Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company or any Wholly Owned Subsidiary; provided, however, that (A) any subsequent issuance or transfer of any Capital Stock or any other event that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof, (B) if the Company is the obligor on such Indebtedness, such Indebtedness is made subordinate and junior in right of payment to the notes and (C) if a Restricted Subsidiary that is a Note Guarantor is the obligor on such Indebtedness and such Indebtedness is owed to and held by a Wholly Owned Subsidiary that is not a Note Guarantor, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations of such Restricted Subsidiary with respect to its Note Guarantee; (3) Indebtedness (A) represented by the notes and the Note Guarantees, (B) outstanding on the Closing Date (other than the Indebtedness described in clauses (1) and (2) above), (C) consisting of Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (3) (including Indebtedness that is Refinancing Indebtedness) or the foregoing paragraph (a), (D) consisting of Guarantees of any Indebtedness permitted under clauses (1) and (2) of this paragraph (b) and (E) consisting of (i) Guarantees by the Company of Indebtedness or other obligations of any of its Restricted Subsidiaries or (ii) Guarantees by any Note Guarantor of Indebtedness of the Company or a Restricted Subsidiary, in each case so long as the Incurrence of the Indebtedness being Guaranteed is permitted under the terms of the indenture; provided that if such Guaranteed Indebtedness is by its express terms subordinated in right of payment to the notes or the Note Guarantee of such Restricted Subsidiary, as applicable, any such Guarantee of the Company or such Note Guarantor with respect to such Indebtedness shall be subordinated in right of payment to the notes or such Note Guarantor's Note Guarantee with respect to the notes substantially to the same extent as such Indebtedness is subordinated to the notes or the Note Guarantee of such Restricted Subsidiary, as applicable; (4) (A) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Restricted Subsidiary was acquired (including by way of merger) by the Company or any Restricted Subsidiary (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Subsidiary of or was otherwise acquired by the Company); provided, however, that on the date 89 that such Restricted Subsidiary is acquired, the Company or such Restricted Subsidiary would have been able to Incur such Indebtedness under this covenant and (B) Refinancing Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by such Restricted Subsidiary pursuant to this clause (4); (5) Indebtedness (A) in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds provided by the Company or the Restricted Subsidiaries in the ordinary course of their business, and (B) under Currency Agreements, Interest Rate Agreements and Commodity Agreements entered into for bona fide hedging purposes of the Company or a Restricted Subsidiary in the ordinary course of business; provided, however, that such agreements do not increase the Indebtedness of the Company or the Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in interest rates, currency exchange rates or commodity prices or by reason of fees, indemnities and compensation payable thereunder; (6) Indebtedness (including Capitalized Lease Obligations and Attributable Debt) incurred by the Company or any of the Restricted Subsidiaries to finance the purchase, lease or improvements of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount which, when aggregated with the principal amount of all other Indebtedness then outstanding and incurred pursuant to this clause (6) and all Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (6), does not exceed the greater of $25.0 million or 5.0% of Total Assets; (7) Indebtedness of Foreign Subsidiaries in an aggregate principal amount not to exceed $15.0 million outstanding at any one time; or (8) Indebtedness (other than Indebtedness permitted to be Incurred pursuant to the foregoing paragraph (a) or any other clause of this paragraph (b)) in an aggregate principal amount on the date of Incurrence that, when added to all other Indebtedness Incurred pursuant to this clause (8) and then outstanding, shall not exceed $30.0 million. (c) Notwithstanding the foregoing, the Company may not Incur any Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated Obligations unless such Indebtedness will be subordinated to the notes to at least the same extent as such Subordinated Obligations. The Company may not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. In addition, the Company may not Incur any Secured Indebtedness which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the notes equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the notes) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. A Note Guarantor may not Incur any Indebtedness if such Indebtedness is by its terms expressly subordinate or junior in ranking in any respect to any Senior Indebtedness of such Note Guarantor unless such Indebtedness is Senior Subordinated Indebtedness of such Note Guarantor or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Note Guarantor. In addition, a Note Guarantor shall not Incur any Secured Indebtedness that is not Senior Indebtedness of such Note Guarantor unless contemporaneously therewith effective provision is made to secure the Note Guarantee of such Note Guarantor equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to such Note Guarantee) such Secured Indebtedness for as long as such Secured Indebtedness is secured by a Lien. 90 (d) Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may Incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rates of currencies. For purposes of determining the outstanding principal amount of any particular Indebtedness Incurred pursuant to this covenant: (1) Indebtedness Incurred pursuant to the Credit Agreement prior to or on the Closing Date shall be treated as Incurred pursuant to clause (1) of paragraph (b) above, (2) Indebtedness permitted by this covenant need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness, and (3) in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in this covenant, the Company, in its sole discretion, shall classify such Indebtedness and only be required to include the amount of such Indebtedness in one of such clauses, and may from time to time reclassify Indebtedness permitted under paragraph (b) of this covenant among the different clauses thereof. Limitation on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to: (1) declare or pay any dividend, make any distribution on or in respect of its Capital Stock or make any similar payment (including any payment in connection with any merger or consolidation involving the Company or any Subsidiary of the Company) to the direct or indirect holders of its Capital Stock, except (x) dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and (y) dividends or distributions payable to the Company or a Restricted Subsidiary (and, if such Restricted Subsidiary has shareholders other than the Company or other Restricted Subsidiaries, to its other shareholders on a pro rata basis), (2) purchase, repurchase, redeem, retire or otherwise acquire for value any Capital Stock of (i) Parent, Holdings or the Company held by Persons other than the Company or a Restricted Subsidiary or (ii) any Restricted Subsidiary (other than Preferred Stock that is not Voting Stock) held by any Affiliate of the Company (other than a Restricted Subsidiary), (3) purchase, repurchase, redeem, retire, defease or otherwise acquire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations of the Company or any Note Guarantor (other than the purchase, repurchase redemption, retirement, defeasance or other acquisition for value of Subordinated Obligations acquired in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition), or (4) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, payment, purchase, redemption, repurchase, defeasance, retirement, or other acquisition or Investment being herein referred to as a "Restricted Payment") if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (A) a Default will have occurred and be continuing (or would result therefrom); (B) the Company could not Incur at least $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "-- Limitation on Indebtedness"; or (C) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination will be conclusive and evidenced by a 91 resolution of the Board of Directors) declared or made subsequent to the Closing Date would exceed the sum, without duplication, of: (i) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Closing Date occurs to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income will be a deficit, minus 100% of such deficit); (ii) the aggregate Net Cash Proceeds received by the Company from the issue or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Closing Date (other than an issuance or sale to (x) a Subsidiary of the Company or (y) an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries); (iii) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by or with a Subsidiary of the Company) subsequent to the Closing Date of any Indebtedness of the Company or its Restricted Subsidiaries issued after the Closing Date which is convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company or a Note Guarantor (less the amount of any cash or the Fair Market Value of other property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); (iv) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (x) payments of dividends, repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (y) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investment") not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary; and (v) $5.0 million. (b) The provisions of the foregoing paragraph (a) will not prohibit: (1) any purchase, repurchase, redemption, retirement or other acquisition for value of Capital Stock of the Company or Subordinated Obligations of the Company or any Note Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries); provided, however, that: (A) such purchase, repurchase, redemption, retirement or other acquisition for value will be excluded in the calculation of the amount of Restricted Payments, and (B) the Net Cash Proceeds from such sale applied in the manner set forth in this clause (1) will be excluded from the calculation of amounts under clause (4)(C)(ii) of paragraph (a) above; 92 (2) any prepayment, repayment, retirement, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Subordinated Obligations of the Company or a Note Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company or a Note Guarantor that is permitted to be Incurred pursuant to the covenant described under "--Limitation on Indebtedness"; provided, however, that such prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value will be excluded in the calculation of the amount of Restricted Payments; (3) any prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Subordinated Obligations from Net Available Cash to the extent permitted by the covenant described under "--Limitation on Sales of Assets and Subsidiary Stock"; provided, however, that such prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value will be excluded in the calculation of the amount of Restricted Payments; (4) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividends would have complied with this covenant; provided, however, that such dividends will be included in the calculation of the amount of Restricted Payments; (5) any purchase, repurchase, redemption, retirement or other acquisition for value of shares of, or options to purchase shares of, Capital Stock (other than Disqualified Stock) of Holdings, Parent, the Company or any of its Subsidiaries from employees, former employees, officers, former officers, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, officers, former officers, directors or former directors), pursuant to the terms of agreements (including employment agreements) or plans (or amendments thereto) approved by the board of directors of the Company, Parent or Holdings under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock; provided, however, that the aggregate amount of such purchases, repurchases, redemptions, retirements and other acquisitions for value, together with the aggregate amount of payments made under clause (6)(C) of this paragraph (b), shall not exceed in any calendar year the sum of (x) $2.0 million and (y) the cash proceeds received in such calendar year by the Company or any Restricted Subsidiary from the sale of Capital Stock (other than Disqualified Stock) of Holdings, Parent or the Company to employees, officers or directors of the Company, provided that such cash proceeds will not increase the amounts available for Restricted Payments under clause (4)(C)(ii) of paragraph (a) above; provided further, however, that such purchases, repurchases, redemptions, retirements and other acquisitions for value shall be excluded in the calculation of the amount of Restricted Payments; or (6) any payment of dividends, other distributions or other amounts (including in the form of loans or advances) by the Company for the purposes set forth in clauses (A) through (C) below; provided, however, that such dividends, distributions or other amounts set forth in clauses (A) through (C) shall be excluded in the calculation of the amount of Restricted Payments for the purposes of paragraph (a) above: (A) to Parent or Holdings in amounts equal to the amounts required for Parent or Holdings to pay franchise taxes and other fees required to maintain its corporate existence and provide for other operating costs in an aggregate amount of up to $350,000 per fiscal year; (B) to Parent or Holdings in amounts equal to amounts required for Parent or Holdings to pay federal, state and local income taxes to the extent such income taxes are attributable to the income of the Company and its Restricted Subsidiaries (and, to the extent of amounts actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries); and 93 (C) to Parent or Holdings in amounts equal to amounts expended by Parent or Holdings for any purchase, repurchase, redemption, retirement or other acquisition for value of shares of, or options to purchase shares of, Capital Stock (other than Disqualified Stock) of Parent or Holdings from employees, former employees, officers, former officers, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, officers, former officers, directors or former directors), pursuant to the terms of agreements (including employment agreements) or plans (or amendments thereto) approved by the board of directors of Parent or Holdings under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock; provided, however, that the aggregate amount of such purchases, repurchases, redemptions, retirements and other acquisitions for value, together with the aggregate amount of payments made under clause (5) of this paragraph (b), shall not exceed in any calendar year the sum of (x) $2.0 million and (y) the cash proceeds received in such calendar year by the Company or any Restricted Subsidiary from the sale of Capital Stock (other than Disqualified Stock) of Holdings, Parent or the Company to employees, officers or directors of the Company (provided that such cash proceeds will not increase the amounts available for Restricted Payments under clause (4)(C)(ii) of paragraph (a) above). Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the Company; (2) make any loans or advances to the Company; or (3) transfer any of its property or assets to the Company, except: (A) any encumbrance or restriction pursuant to applicable law or an agreement in effect at or entered into on the Closing Date; (B) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary prior to the date on which such Restricted Subsidiary was acquired by the Company or a Restricted Subsidiary (other than Indebtedness Incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company or a Restricted Subsidiary) and outstanding on such date; (C) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (A) or (B) of this covenant or this clause (3)(C) or contained in any amendment to an agreement referred to in clause (A) or (B) of this covenant or this clause (3)(C); provided, however, that the encumbrances and restrictions contained in any such Refinancing agreement or amendment are no less favorable to the Holders in any material respect than the encumbrances and restrictions contained in such predecessor agreements; (D) in the case of clause (3), any encumbrance or restriction 94 (i) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or (ii) contained in security agreements securing Indebtedness of the Company or a Restricted Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject to such security agreements; (E) with respect to a Restricted Subsidiary, any restriction imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and (F) any encumbrance or restriction existing or created pursuant to Indebtedness permitted to be Incurred by a Restricted Subsidiary subsequent to the Closing Date pursuant to the covenant described under "--Limitations on Indebtedness"; provided, however, that any such encumbrance or restrictions are reasonable and customary with respect to the type of Indebtedness being Incurred (under the relevant circumstances). Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will not, and will not permit any Restricted Subsidiary to, make any Asset Disposition unless: (1) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the Fair Market Value of the shares and assets subject to such Asset Disposition, (2) except in the case of a Permitted Asset Swap, at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash, and (3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) first, to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, purchase, repurchase, redeem, retire, defease or otherwise acquire for value Senior Indebtedness of the Company or Indebtedness of a Restricted Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company (other than an Affiliate of CCP which is a lender in the ordinary course of business) and other than obligations in respect of Disqualified Stock) within 180 days after the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of Net Available Cash after application in accordance with clause (A), to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within 180 days from the later of such Asset Disposition or the receipt of such Net Available Cash; (C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to make an Offer (as defined in paragraph (b) of this covenant below) to purchase notes pursuant to and subject to the conditions set forth in paragraph (b) of this covenant; provided, however, that if the Company elects (or is required by the terms of any other Senior Subordinated Indebtedness), such Offer may be made ratably to purchase the notes and other Senior Subordinated Indebtedness of the Company; and 95 (D) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), for any general corporate purpose permitted by the terms of the indenture; provided, however, that in connection with any final prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Indebtedness pursuant to clause (A), (C) or (D) above, the Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid, purchased, repurchased, redeemed, retired, defeased or otherwise acquired for value. Pending final application of any Net Available Cash in accordance with the foregoing, the Company or a Restricted Subsidiary may use such Net Available Cash to temporarily reduce (and, within such 180-day period, reborrow) Indebtedness or invest such Net Available Cash in Temporary Cash Equivalents. Notwithstanding the foregoing provisions of this covenant, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions that is not applied in accordance with this covenant exceeds $7.5 million. For the purposes of this covenant, the following are deemed to be cash: -- the assumption of Indebtedness of the Company (other than obligations in respect of Disqualified Stock of the Company) or any Restricted Subsidiary (other than obligations in respect of Disqualified Stock and Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor) and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition, and -- securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. (b) In the event of an Asset Disposition that requires the purchase of notes pursuant to clause (a)(3)(C) of this covenant, the Company will be required (i) to purchase notes tendered pursuant to an offer by the Company for the notes (the "Offer") at a purchase price of 100% of their principal amount plus accrued and unpaid interest and liquidated damages thereon, if any, to the date of purchase (subject to the right of Holders of record on the relevant date to receive interest due on the relevant interest payment date) in accordance with the procedures (including prorating in the event of oversubscription), set forth in the indenture and (ii) to purchase other Senior Subordinated Indebtedness of the Company on the terms and to the extent contemplated thereby (provided that in no event shall the Company offer to purchase such other Senior Subordinated Indebtedness of the Company at a purchase price in excess of 100% of its principal amount (without premium), plus accrued and unpaid interest thereon, unless an equal premium is offered to Holders in the Offer). If the aggregate purchase price of notes (and other Senior Subordinated Indebtedness) tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the notes (and other Senior Subordinated Indebtedness), the Company will apply the remaining Net Available Cash in accordance with clause (a)(3)(D) of this covenant. The Company will not be required to make an Offer for notes (and other Senior Subordinated Indebtedness) pursuant to this covenant if the Net Available Cash available therefor (after application of the proceeds as provided in clauses (a)(3)(A) and (B)) is less than $5.0 million for any particular Asset Disposition (which lesser amount will be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). (c) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of 96 notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. Limitation on Transactions with Affiliates. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction or series of related transactions (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless such Affiliate Transaction is on terms: (1) that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate, (2) that, in the event such Affiliate Transaction involves an aggregate amount in excess of $1.0 million, (A) are set forth in writing, and (B) have been approved by a majority of the members of the Board of Directors having no personal stake in such Affiliate Transaction and, (3) that, in the event such Affiliate Transaction involves an amount in excess of $10.0 million, have been determined by a nationally recognized appraisal or investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. (b) The provisions of the foregoing paragraph (a) will not prohibit: (1) any Restricted Payment permitted to be paid pursuant to the covenant described under "Limitation on Restricted Payments," (2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors, (3) the grant of stock options or similar rights to employees and directors of the Company pursuant to plans approved by the Board of Directors, (4) loans or advances to employees in the ordinary course of business in accordance with past practices of the Company or any Restricted Subsidiary, but in any event not to exceed $2.0 million in the aggregate outstanding at any one time, (5) the payment of reasonable fees to directors of the Company and its Subsidiaries who are not employees of the Company or its Subsidiaries, (6) any transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries, or (7) the performance of any agreement as in effect as of the Closing Date (including the Tax Sharing Agreement, dated July 21, 1998, and the Amended and Restated Management Services Agreement, dated October 1, 1998) or any amendment or replacement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders of the notes in any material respect than the original agreement as in effect as of the Closing Date. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries. The Company will not sell or otherwise dispose of any shares of Capital Stock (other than Preferred Stock that is not Voting Stock) of a Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly or 97 indirectly, to issue or sell or otherwise dispose of any shares of its Capital Stock (other than Preferred Stock that is not Voting Stock) except: (1) to the Company or a Wholly Owned Subsidiary; (2) if, immediately after giving effect to such issuance, sale or other disposition, neither the Company nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary, or (3) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect thereto would have been permitted to be made under the covenant described under "Limitation on Restricted Payments" if made on the date of such issuance, sale or other disposition ( and such Investment shall be deemed to be an Investment made for purposes of such covenant). The proceeds of any sale of such Capital Stock subject to and permitted hereby will be treated as Net Available Cash from an Asset Disposition and must be applied in accordance with the terms of the covenant described under "Limitation on Sales of Assets and Subsidiary Stock." SEC Reports. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC (if it will accept such filing) and provide the Trustee and Holders and prospective Holders (upon request) within 15 days after it files them with the SEC, copies of its annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act. In addition, following a Public Equity Offering, the Company shall furnish to the Trustee and the Holders, promptly upon their becoming available, copies of the annual report to shareholders and any other information provided by the Company, Holdings or Parent to its public shareholders generally. The Company also will comply with the other provisions of Section 314(a) of the TIA. Future Note Guarantors. The Company will cause (1) each Domestic Subsidiary and (2) each Foreign Subsidiary that Guarantees any Indebtedness (other than Indebtedness of a Restricted Subsidiary that is not a Note Guarantor) to become a Note Guarantor, and if applicable, execute and deliver to the Trustee a supplemental indenture in the form set forth in the indenture pursuant to which such Subsidiary will Guarantee payment of the notes. Each Note Guarantee will be limited to an amount not to exceed the maximum amount that can be Guaranteed by that Note Guarantor, without rendering the Note Guarantee, as it relates to such Note Guarantor voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Limitation on Lines of Business. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business, other than a Permitted Business. Merger and Consolidation The Company will not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless: (1) the resulting, surviving or transferee Person (the "Successor Company") will be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) will expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the notes and the indenture; (2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of 98 such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (3) immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness under paragraph (a) of the covenant described under "Limitation on Indebtedness"; (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the indenture; and (5) the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee to the effect that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such transaction and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such transaction had not occurred. The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under the indenture, but the predecessor Company in the case of a conveyance, transfer or lease of all or substantially all its assets will not be released from the obligation to pay the principal of and interest on the notes. In addition, subject to certain exceptions, the Company will not permit any Note Guarantor to consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets to any Person unless: (1) the resulting, surviving or transferee Person (the "Successor Guarantor") will be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia (unless the Successor Guarantor is a Foreign Subsidiary), and such Person (if not a Note Guarantor) will expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Note Guarantor under its Note Guarantee; (2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Guarantor or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Guarantor or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; and (3) the Company will have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the indenture. Notwithstanding the foregoing: (A) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company and (B) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction to realize tax or other benefits. Defaults Each of the following is an Event of Default: (1) a default in any payment of interest on any note when due and payable or in any payment of liquidated damages whether or not prohibited by the provisions described under "Ranking" above, continued for 30 days; 99 (2) a default in the payment of principal of any note when due and payable at its Stated Maturity, upon required redemption or repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions described under "Ranking" above; (3) the failure by the Company or any Subsidiary to comply with its obligations under the covenant described under "Merger and Consolidation" above; (4) the failure by the Company or any Subsidiary to comply for 30 days after receipt of notice with any of its obligations under the covenants described under "Change of Control" or "Certain Covenants" above (in each case, other than a failure to purchase notes); (5) the failure by the Company or any Subsidiary to comply for 60 days after receipt of notice with its other agreements contained in the notes or the indenture; (6) the failure by the Company or any Restricted Subsidiary to pay any Indebtedness within any applicable grace period after final maturity (which has not subsequently been paid) or the acceleration (which has not been rescinded) of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $10.0 million or its foreign currency equivalent (the "cross acceleration provision") and such failure continues for 10 days after receipt of the notice specified in the indenture; (7) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary (the "bankruptcy provisions"); (8) the rendering of any judgment or decree for the payment of money (other than judgments or decrees which are covered by enforceable insurance policies or indemnifications issued by or entered into with solvent Persons) in excess of $10.0 million or its foreign currency equivalent is rendered against the Company or a Restricted Subsidiary if: (A) an enforcement proceeding thereon is commenced by any creditor and is not stayed or dismissed within 10 days, or (B) such judgment or decree remains outstanding for a period of 60 days following such judgment and is not discharged, waived or stayed (the "judgment default provision"); or (9) any Note Guarantee ceases to be in full force and effect (except as contemplated by the terms thereof) or any Note Guarantor or Person acting by or on behalf of such Note Guarantor denies or disaffirms such Note Guarantor's obligations under the indenture or any Note Guarantee and such Default continues for 10 days after receipt of the notice specified in the indenture. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. However, a default under clauses (4), (5), (6) or (9) will not constitute an Event of Default until the Trustee notifies the Company or the Holders of at least 25% in principal amount of the outstanding notes notify the Company and the Trustee of the default and the Company or the Note Guarantor, as applicable, does not cure such default within the time specified in clauses (4), (5), (6) or (9) hereof after receipt of such notice. If an Event of Default (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the outstanding notes by notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the 100 notes to be due and payable. Upon such a declaration, such principal and interest will be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of and interest on all the notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding notes may rescind any such acceleration with respect to the notes and its consequences. Subject to the provisions of the indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the indenture or the notes unless: (1) such Holder has previously given the Trustee notice that an Event of Default is continuing; (2) Holders of at least 25% in principal amount of the outstanding notes have requested the Trustee in writing to pursue the remedy; (3) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the outstanding notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding notes will be given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. If a Default occurs and is continuing and is known to a Responsible Officer of the Trustee, the Trustee must mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium (if any) or interest on any note (including payments pursuant to the redemption provisions of such note), the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Holders. In addition, the Company will be required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company will also be required to deliver to a Responsible Officer of the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Events of Default, their status and what action the Company is taking or proposes to take in respect thereof. 101 Amendments and Waivers Subject to certain exceptions, the indenture or the notes may be amended with the written consent of the Holders of a majority in principal amount of the notes then outstanding and any past default or compliance with any provisions may be waived with the consent of the Holders of a majority in principal amount of the notes then outstanding. However, without the consent of each Holder of an outstanding note affected, no amendment may, among other things: (1) reduce the amount of notes whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest or any liquidated damages on any note; (3) reduce the principal of or extend the Stated Maturity of any note; (4) reduce the premium payable upon the redemption of any note or accelerate the time at which any note may be redeemed as described under "Optional Redemption" above; (5) make any note payable in money other than that stated in the note; (6) make any change to the subordination provisions of the indenture that adversely affects the rights of any Holder; (7) impair the right of any Holder to receive payment of principal of, and interest or any liquidated damages on, such Holder's notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's notes; (8) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions; or (9) modify the Note Guarantees in any manner adverse to the Holders in a material respect. Without the consent of any Holder, the Company and Trustee may amend the indenture to: -- cure any ambiguity, omission, defect or inconsistency; -- provide for the assumption by a successor corporation of the obligations of the Company under the indenture; -- provide for uncertificated notes in addition to or in place of certificated notes (provided, however, that the uncertificated notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated notes are described in Section 163(f)(2)(B) of the Code); -- make any change in the subordination provisions of the indenture that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company (or any representative thereof) under such subordination provisions; -- add additional Guarantees with respect to the notes; -- secure the notes; -- add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company; -- make any change that does not adversely affect the rights of any Holder in a material respect, subject to the provisions of the indenture; -- provide for the issuance of the new notes; or -- comply with any requirement of the SEC in connection with the qualification of the indenture under the TIA. 102 However, no amendment may be made to the subordination provisions of the indenture that adversely affects the rights of any holder of Senior Indebtedness of the Company then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. The consent of the Holders will not be necessary to approve the particular form of any proposed amendment. It will be sufficient if such consent approves the substance of the proposed amendment. After an amendment becomes effective, the Company is required to mail to Holders a notice briefly describing such amendment. However, the failure to give such notice to all Holders, or any defect therein, will not impair or affect the validity of the amendment. Transfer and Exchange A Holder will be able to transfer or exchange notes. Upon any transfer or exchange, the registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes required by law or permitted by the indenture. The Company will not be required to transfer or exchange any note selected for redemption or to transfer or exchange any note for a period of 15 days prior to a selection of notes to be redeemed. The notes will be issued in registered form and the Holder will be treated as the owner of such note for all purposes. Defeasance The Company may at any time terminate all its obligations under the notes and the indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the notes, to replace mutilated, destroyed, lost or stolen notes and to maintain a registrar and paying agent in respect of the notes. In addition, the Company may at any time terminate: (1) its obligations under the covenants described under "Certain Covenants" and "Change of Control"; and (2) the operation of the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries and the judgment default provision described under "Defaults" above and the limitations contained in clause (3) under the first paragraph of "Merger and Consolidation" above ("covenant defeasance"). In the event that the Company exercises its legal defeasance option or its covenant defeasance option, each Note Guarantor will be released from all of its obligations with respect to its Note Guarantee. The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the notes may not be accelerated because of an Event of Default specified in clause (4), (6), (7) (with respect only to Significant Subsidiaries) or (8) under "Defaults" above or because of the failure of the Company to comply with clause (3) under the first paragraph of "Merger and Consolidation" above. In order to exercise either defeasance option, the Company must irrevocably deposit in trust (the "defeasance trust") with the Trustee money in an amount sufficient or U.S. Government Obligations, the principal of and interest on which will be sufficient, or a combination thereof sufficient, to pay the 103 of principal, premium (if any) and interest on, and liquidated damages, if any, in respect of the notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel reasonably acceptable to the Trustee to the effect that Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable federal income tax law). Concerning the Trustee The Bank of New York is the Trustee under the indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the notes. Governing Law The indenture and the notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. Certain Definitions "Acquisition Term Loan Facility" means the facility referred to as the Acquisition Facility in the Credit Agreement. "Additional Assets" means: (1) any property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary in a Permitted Business; (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that: any such Restricted Subsidiary described in clauses (2) or (3) above is primarily engaged in a Permitted Business. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the provisions described under "--Certain Covenants--Limitation on Transactions with Affiliates" and "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of Parent, Holdings or the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation, or similar transaction (each referred to for the purposes of this definition as a "disposition"), of: 104 (1) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary); (2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary; or (3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary other than, in the case of (1), (2) and (3) above, (A) disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (B) for purposes of the provisions described under "Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a disposition subject to the covenant described under "Certain Covenants--Limitation on Restricted Payments," (C) a disposition of assets with a Fair Market Value of less than $500,000, and (D) a transfer of real property to a state, county, local or municipal governmental agency in exchange for the granting of a permit or the taking of other regulatory action by such governmental agency that enhances the value of mining properties owned by the Company or a Restricted Subsidiary, provided that the Board of Directors has determined in good faith that such exchange is in the best interest of the Company. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing: (1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (2) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable under or in respect of the Credit Agreement and any Refinancing Indebtedness with respect thereto, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of the Board of Directors of the Company. "Business Day" means each day which is not a Legal Holiday. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. 105 "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty. "Closing Date" means October 1, 1999. "Code" means the Internal Revenue Code of 1986, as amended. "Commodity Agreement" means any agreement designed to hedge against fluctuations in commodity prices, including natural gas prices, entered into in the ordinary course of business. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (1) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination to (2) Consolidated Interest Expense for such four fiscal quarters; provided, however, that: (A) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period; (B) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness; (C) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the 106 Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (D) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and (E) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (C) or (D) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets or other Investment, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company and shall comply with the requirements of Rule 11-02 of Regulation S-X promulgated by the SEC. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its Consolidated Restricted Subsidiaries, plus, to the extent Incurred by the Company and its Consolidated Restricted Subsidiaries in such period but not included in such interest expense, without duplication: (1) interest expense attributable to Capitalized Lease Obligations and the interest expense attributable to leases constituting part of a Sale/Leaseback Transaction; (2) amortization of debt discount (but not debt issuance costs); (3) capitalized interest; (4) non-cash interest expense; (5) commissions, discounts and other fees and charges attributable to letters of credit and bankers' acceptance financing; (6) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Restricted Subsidiary; (7) net costs associated with Hedging Obligations; 107 (8) dividends in respect of all Disqualified Stock of the Company and all Preferred Stock of any Restricted Subsidiary, to the extent held by Persons other than the Company or another Restricted Subsidiary; (9) interest Incurred in connection with investments in discontinued operations; and (10) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. "Consolidated Leverage Ratio" as of any date of determination means the ratio of (1) Indebtedness of the Company and its Consolidated Restricted Subsidiaries as of the end of the most recent fiscal quarter ending at least 45 days prior to the date of such determination to (2) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination; provided, however, that: (A) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination, Indebtedness and EBITDA for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period; (B) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Leverage Ratio, Indebtedness and EBITDA for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness; (C) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Indebtedness shall be reduced by any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition (or, if the Capital Stock of any Restricted Subsidiary is sold, the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (D) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any 108 acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, Indebtedness and EBITDA for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and (E) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (C) or (D) above if made by the Company or a Restricted Subsidiary during such period, Indebtedness and EBITDA for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets or other Investment, the amount of income or earnings relating thereto and the amount of any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company and shall comply with the requirements of Rule 11-02 of Regulation S-X promulgated by the SEC. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). "Consolidated Net Income" means, for any period, the net income of the Company and its Consolidated Subsidiaries for such period; provided, however, that there shall not be included in such Consolidated Net Income: (1) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that (A) subject to the limitations contained in clause (4) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution made to a Restricted Subsidiary, to the limitations contained in clause (3) below), and (B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income; (2) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (3) any net income (or loss) of any Restricted Subsidiary to the extent such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (4) any gain or loss realized upon the sale or other disposition of any asset of the Company or its Consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person; 109 (5) any extraordinary gain or loss; and (6) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purpose of the covenant described under "Certain Covenants--Limitation on Restricted Payments" only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(4)(C)(iv) thereof. "Consolidation" means the consolidation of the amounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; provided, however, that "Consolidation" will not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will be accounted for as an investment. The term "Consolidated" has a correlative meaning. "Credit Agreement" means the credit agreement dated as of the Closing Date among the Company, as borrower, Parent, as parent guarantor, George F. Pettinos (Canada) Limited, as Canadian borrower, Banque Nationale de Paris, as agent, and the financial institutions and other institutional lenders named therein, as the same may be amended, restated, supplemented, waived, replaced, refinanced, restructured or otherwise modified from time to time, in each case, whether or not upon termination, whether with the original financial institutions, other institutional lenders or agents, and whether with one or more credit agreements with the Company or one or more Restricted Subsidiaries as borrowers. "Currency Agreement" means with respect to any Person any foreign exchange contract, currency swap agreements or other similar agreement or arrangement to which such Person is a party or of which it is a beneficiary. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Indebtedness" of the Company means (1) the Bank Indebtedness and Indebtedness in respect of Hedging Obligations, and (2) any other Senior Indebtedness of the Company that, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to at least $25 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the indenture. "Designated Senior Indebtedness" of a Note Guarantor has a correlative meaning. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event: (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (2) is convertible or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary; provided, however, that any such conversion or exchange shall be deemed an Incurrence of Indebtedness or Disqualified Stock, as applicable); or 110 (3) is redeemable at the option of the holder thereof, in whole or in part, in the case of each of clauses (1), (2) and (3), on or prior to the first anniversary of the Stated Maturity of the notes; provided, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable in a material respect to the holders of such Capital Stock than the provisions of the covenants described under "Change of Control" and "Limitation on Sales of Assets and Subsidiary Stock." "Domestic Subsidiary" means any Restricted Subsidiary of the Company other than a Foreign Subsidiary. "EBITDA" for any period means the Consolidated Net Income for such period, plus, without duplication, the following to the extent deducted in calculating such Consolidated Net Income: (1) income tax expense of the Company and its Consolidated Restricted Subsidiaries; (2) Consolidated Interest Expense; (3) depreciation expense of the Company and its Consolidated Restricted Subsidiaries; (4) amortization expense of the Company and its Consolidated Restricted Subsidiaries (excluding amortization expense attributable to a prepaid cash item that was paid in a prior period); (5) depletion expense of the Company and its Consolidated Restricted Subsidiaries; and (6) all other non-cash charges of the Company and its Consolidated Restricted Subsidiaries (excluding any such non-cash charge to the extent it represents an accrual of or reserve for cash expenditures in any future period) less all non-cash items of income of the Company and its Restricted Subsidiary, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation, amortization and depletion and non-cash charges of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, with respect to any asset or property, the price which could be negotiated in an arm's length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. For purposes of the indenture, Fair Market Value will be determined in good faith by the Board of Directors, whose determination will be conclusive and evidenced by a resolution of the Board of Directors. 111 "Foreign Subsidiary" means any Restricted Subsidiary of the Company that is not organized under the laws of the United States of America or any State thereof or the District of Columbia. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including those set forth in: (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants; (2) statements and pronouncements of the Financial Accounting Standards Board; (3) such other statements by such other entities as are approved by a significant segment of the accounting profession; and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. All ratios and computations based on GAAP contained in the indenture shall be computed in conformity with GAAP. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or- pay, or to maintain financial statement conditions or otherwise); or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement, Currency Agreement or Commodity Agreement. "Holder" means the Person in whose name a note is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or redemption, repayment or repurchase obligation in respect of Preferred Stock or Disqualified Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall not be deemed the Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person on any date of determination, without duplication: (1) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money; 112 (2) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto); (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than twelve months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; (5) all Capitalized Lease Obligations and all Attributable Debt of such Person; (6) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (7) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of (A) the Fair Market Value of such asset at such date of determination, and (B) the amount of such Indebtedness of such other Persons; (8) Hedging Obligations of such Person; and (9) all obligations of the type referred to in clauses (1) through (8) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee. The amount of Indebtedness (other than Hedging Obligations) of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. The amount of Indebtedness in respect of Hedging Obligations shall be determined in accordance with GAAP. Notwithstanding the foregoing, for the purposes of the definition of Consolidated Leverage Ratio, Indebtedness shall not include any obligations in respect of undrawn letters of credit or any Hedging Obligations. "Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For 113 purposes of the definition of "Unrestricted Subsidiary" and the covenant described under "Certain Covenants--Limitation on Restricted Payments": (1) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to: (A) the Company's "Investment" in such Subsidiary at the time of such redesignation less (B) the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and (2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer. "Legal Holiday" means a Saturday, Sunday or other day on which banking institutions are not required by law or regulation to be open in the State of New York. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of: (1) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition; (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition; (3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition; and (4) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. 114 "Note Guarantee" means each Guarantee of the obligations with respect to the notes issued by a Person pursuant to the terms of the indenture. "Note Guarantor" means any Person that has issued a Note Guarantee. "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officer" of a Note Guarantor has a correlative meaning. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company, a Note Guarantor or the Trustee. "Permitted Asset Swap" means any one or more transactions in which the Company or any Restricted Subsidiary exchanges assets for consideration consisting of (i) Capital Stock in or assets of a Person engaged in a Permitted Business and (ii) any cash, provided that such cash will be considered Net Available Cash from an Asset Disposition. "Permitted Business" means any business engaged in by the Company or any Restricted Subsidiary on the Closing Date and any Related Business. "Permitted Holders" means (i) Chase Capital Partners, its Affiliates and their respective directors and officers, (ii) D. George Harris & Associates, LLC and individuals who are equity owners, directors or employees of DGHA, the Company, Holdings or Parent (or the estate or any beneficiary of any such individual or any immediate family member of any such individual or any trust established for the benefit of any such immediate family member) and (iii) any Person acting in the capacity of an underwriter in connection with a public or private offering of the Company's, Parent's or Holdings' Capital Stock. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Permitted Business; (2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Permitted Business; (3) Temporary Cash Investments; (4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (5) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (6) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary and not exceeding $1.0 million in the aggregate outstanding at any one time; 115 (7) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (8) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition that was made pursuant to and in compliance with the covenant described under "Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock"; (9) Investments the payment for which consists of (i) Capital Stock (other than Disqualified Stock) or the cash proceeds from the sale of Capital Stock (other than Disqualified Stock), in each case of the Company or (ii) the proceeds of cash capital contributions to the Company; provided, however, that such cash proceeds from sales of Capital Stock or cash capital contributions will not increase the amount available for Restricted Payments under clause (4)(C) of the first paragraph of the "-- Limitation on Restricted Payments" covenant; (10) Loans to DGHA pursuant to the Amended and Restated Management Services Agreement, dated October 1, 1998, or any amendment or replacement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders of the notes in any material respect than the agreement as in effect as of the Closing Date; (11) Investments in the ordinary course of business in an insurer required as a condition to the provision by such insurer of insurance coverage; and (12) any Person having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (12) that are at the time outstanding, not to exceed the greater of 3.0% of Total Assets or $15.0 million at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value). "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "principal" of a note means the principal of the note plus the premium, if any, payable on the note which is due or overdue or is to become due at the relevant time. "Public Equity Offering" means an underwritten primary public offering of common stock of the Company, Parent or Holdings, as applicable, pursuant to an effective registration statement under the Securities Act. "Public Market" means any time after: (1) a Public Equity Offering has been consummated; and (2) at least 15% of the total issued and outstanding common stock of the Company, Parent or Holdings (as applicable) has been distributed by means of an effective registration statement under the Securities Act. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. 116 "Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) any Indebtedness of the Company or any Restricted Subsidiary existing on the Closing Date or Incurred in compliance with the indenture (including Indebtedness of the Company or any Restricted Subsidiary that Refinances Refinancing Indebtedness); provided, however, that: (1) the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced; (2) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced; (3) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being Refinanced plus any reasonable premiums required to be paid with respect to the Indebtedness being Refinanced; and (4) if the Indebtedness being Refinanced is subordinated in right of payment to the notes, such Refinancing Indebtedness is subordinated in right of payment to the notes at least to the same extent as the Indebtedness being Refinanced; provided further, however, that (x) Refinancing Indebtedness shall not include: (A) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor that Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary, and (y) Refinancing Indebtedness referred to in the definition of "Bank Indebtedness" or in respect of the Acquisition Term Loan Facility shall not be subject to clauses (1), (2) or (3) of this definition. "Related Business" means any business related, ancillary or complementary to the businesses of the Company and the Restricted Subsidiaries on the Closing Date. "Representative" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness. "Responsible Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of the indenture. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "SEC" means the Securities and Exchange Commission. 117 "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. Secured Indebtedness" of a Note Guarantor has a correlative meaning. "Senior Subordinated Indebtedness" of the Company means the notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank equally with the notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of a Note Guarantor has a correlative meaning. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Closing Date or thereafter Incurred) that is subordinate or junior in right of payment to the notes pursuant to a written agreement. "Subordinated Obligation" of a Note Guarantor has a correlative meaning. "Subsidiary" of any Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by: (1) such Person; (2) such Person and one or more Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person. "Temporary Cash Investments" means any of the following: (1) any investment in direct obligations of the United States of America or any agency thereof or obligations Guaranteed by the United States of America or any agency thereof; (2) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits aggregating in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose long-term debt is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act); (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above; (4) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by 118 the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. ("S&P"); and (5) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's Investors Service, Inc. "TIA" means the Trust indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the Closing Date. "Total Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company. "Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services. "Trustee" means the party named as such in the indenture until a successor replaces it and, thereafter, means the successor. "Unrestricted Subsidiary" means: (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either: (A) the Subsidiary to be so designated has total Consolidated assets of $1,000 or less; or (B) if such Subsidiary has Consolidated assets greater than $1,000, then such designation would be permitted under the covenant entitled "Limitation on Restricted Payments." The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that (x) immediately after giving effect to such designation no Default shall have occurred and be continuing and (y) at the time of such designation the Company or a Restricted Subsidiary could have Incurred all of the outstanding Indebtedness of such Subsidiary and its Subsidiaries under the covenant described under "--Certain Covenants--Limitation on Indebtedness." Any such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of 119 the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the related corporation, partnership or Person. "Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all the Voting Stock of which (other than directors' qualifying shares) is owned by the Company and/or another Wholly Owned Subsidiary. 120 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT The issuer, the initial purchasers of the old notes and the note guarantors entered into the exchange and registration rights agreement on October 1, 1999. Pursuant to the exchange and registration rights agreement, the issuer and the note guarantors agreed to: --file with the Securities and Exchange Commission on or prior to 135 days after the date of issuance of the old notes a registration statement on Form S-1 or Form S-4, if the use of that form is then available, relating to a registered exchange offer for the old notes under the Securities Act of 1933 and --use their reasonable best efforts to cause the exchange offer registration statement to be declared effective under the Securities Act of 1933 within 195 days after the date of issuance of the old notes. As soon as practicable after the effectiveness of the exchange offer registration statement, the issuer will offer to the holders of transfer restricted securities (as defined below) who are not prohibited by any law or policy of the Securities and Exchange Commission from participating in the exchange offer the opportunity to exchange their transfer restricted securities for a second series of notes, the new notes, that are identical in all material respects to the old notes (except that the new notes will not contain any transfer restrictions) and that would be registered under the Securities Act of 1933. The issuer and the note guarantors will keep the exchange offer open for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the exchange offer is mailed to the holders of the old notes. If --because of any change in law or applicable interpretations thereof by the staff of the Securities and Exchange Commission, the issuer is not permitted to effect the exchange offer as contemplated hereby, --any old notes validly tendered pursuant to the exchange offer are not exchanged for new notes within 240 days after the date of issuance of the old notes, --the initial purchasers so request with respect to old notes not eligible to be exchanged for new notes in the exchange offer, --any applicable law or interpretations do not permit any holder of old notes to participate in the exchange offer, --any holder of old notes that participates in the exchange offer does not receive freely transferable exchange notes in exchange for tendered old notes or --the issuer so elects, then the issuer and the note guarantors will file with the Securities and Exchange Commission a shelf registration statement to cover resales of transfer restricted securities by those holders who satisfy certain conditions relating to the provision of information in connection with the shelf registration statement. For purposes of the foregoing, "transfer restricted securities" means each old note until (1) the date on which that old note has been exchanged for a freely transferable new note in the exchange offer, (2) the date on which that old note has been effectively registered under the Securities Act of 1933 and disposed of in accordance with the shelf registration statement or (3) the date on which that old note is distributed to the public pursuant to Rule 144 under the Securities Act of 1933 or is salable pursuant to Rule 144(k) under the Securities Act of 1933. 121 The issuer and the note guarantors will use their reasonable best efforts to have the exchange offer registration statement or, if applicable, the shelf registration statement declared effective by the Securities and Exchange Commission as promptly as practicable after the filing thereof. Unless the exchange offer would not be permitted by a policy of the Securities and Exchange Commission, the issuer will commence the exchange offer and will use its reasonable best efforts to consummate the exchange offer as promptly as practicable, but in any event prior to 240 days after the date of issuance of the old notes. If applicable, the issuer and the note guarantors will use their reasonable best efforts to keep the shelf registration statement effective for a period ending the earlier of two years after the date of issuance of the old notes and the date all transfer restricted securities become eligible for resale without volume restrictions pursuant to Rule 144 under the Securities Act of 1933. If (1) the applicable registration statement is not filed with the Securities and Exchange Commission on or prior to 135 days after the date of issuance of the old notes (or in the case of a shelf registration statement required to be filed in response to --the request of an initial purchaser made with respect to old notes not eligible to be exchanged for new notes in the exchange offer and received later than 120 days after the date of issuance of the old notes (a "Late IP Request"), on or prior to 165 days after the date of issuance of the old notes, or --a change in law or the applicable interpretations of the Securities and Exchange Commission's staff, if later, within 45 days after publication of the change in law or interpretations); (2) the exchange offer registration statement or the shelf registration statement, as the case may be, is not declared effective within 195 days after the date of issuance of the old notes (or in the case of a shelf registration statement required to be filed in response to --a Late IP Request, within 240 days after the date of issuance of the old notes, or --a change in law or the applicable interpretations of the Securities and Exchange Commission's staff, if later, within 45 days after publication of the change in law or interpretations); (3) the exchange offer is not consummated on or prior to 240 days after the date of issuance of the old notes; or (4) any required shelf registration statement is filed and declared effective within 195 days after the date of issuance of the old notes (or in the case of a shelf registration statement required to be filed in response to --a Late IP Request, within 240 days after the date of issuance of the old notes, or --a change in law or the applicable interpretations of the Securities and Exchange Commission's staff, if later, within 45 days after publication of the change in law or interpretations) but shall thereafter cease to be effective (at any time that the issuer and the note guarantors are obligated to maintain the effectiveness thereof) without being succeeded within 45 days by an additional registration statement (or post-effective amendment to the shelf registration statement) filed and declared effective (each such event referred to in clauses (1) through (4), a "registration default"), the issuer and the note guarantors will be obligated to pay liquidated damages to each holder of transfer restricted securities, during the period of one or more such registration defaults, in an 122 amount equal to $0.192 per week per $1,000 principal amount of the old notes constituting transfer restricted securities held by that holder until the applicable registration statement is filed, the exchange offer registration statement is declared effective and the exchange offer is consummated or the shelf registration statement is declared effective or again becomes effective, as the case may be. All accrued liquidated damages shall be paid to holders in the same manner as interest payments on the old notes on semi-annual payment dates which correspond to interest payment dates for the old notes. Following the cure of all registration defaults, the accrual of liquidated damages will cease. The exchange and registration rights agreement also provides that the issuer and the note guarantors --shall make available for a period of up to 180 days after the consummation of the exchange offer a prospectus meeting the requirements of the Securities Act of 1933 to any broker-dealer for use in connection with any resale of any those exchange notes and --shall pay all expenses incident to the exchange offer and will jointly and severally indemnify certain holders of the notes (including any broker-dealer) against certain liabilities, including liabilities under the Securities Act of 1933. A broker-dealer which delivers such a prospectus to purchasers in connection with those resales will be subject to certain of the civil liability provisions under the Securities Act of 1933 and will be bound by the provisions of the exchange and registration rights agreement (including certain indemnification rights and obligations). The foregoing description of the exchange and registration rights agreement is a summary only, does not purport to be complete and is qualified in its entirety by reference to all provisions of the exchange and registration rights agreement, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part. 123 CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES The following is a discussion of the material United States federal income and estate tax consequences of participating in the exchange offer and owning and disposing of new notes and, insofar as it relates to matters of law or legal conclusions, constitutes the opinion of Winthrop, Stimson, Putnam & Roberts. Except where noted, this discussion deals only with old notes acquired upon original issuance, and new notes issued in exchange therefor, in each case held as capital assets. It does not address all aspects of United States federal income or estate taxation that may be relevant to particular holders in light of their circumstances or status, nor does it address any United States tax consequences to holders that may be subject to special tax rules, such as financial institutions, insurance companies, dealers in securities or currencies, tax-exempt organizations, holders of 10% or more of our voting stock, persons that hold old notes, or that will hold new notes, as part of a straddle, hedge, conversion or constructive sale transaction, persons who mark to market their securities, or persons who have a functional currency other than the United States dollar. In addition, this discussion does not address any aspect of state, local or foreign taxation. This discussion is based upon current law. Changes in the law may change the tax treatment of the old notes or the new notes. As used in this discussion, the term "United States Holder" means a beneficial owner of an old note or a new note that is, for United States federal income tax purposes: . a citizen or resident of the United States, . a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States or any State of the United States or the District of Columbia, . an estate the income of which is subject to United States federal income tax regardless of its source, or . a trust the administration of which is subject to the primary supervision of a court in the United States and for which one or more United States persons have the authority to control all substantial decisions. If a partnership holds old notes or new notes, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Partners of partnerships holding old notes or new notes should consult their tax advisors. As used in this discussion, the term "Non- United States Holder" means a beneficial owner of an old note or a new note that is not a United States Holder. You should consult with your own tax advisor concerning the United States federal, state and local, as well as foreign, tax consequences to you, in light of your particular situation, of participating in the exchange offer and owning and disposing of new notes. The Exchange Offer An exchange of old notes for new notes pursuant to the exchange offer will not be a taxable event for United States federal income tax purposes. Accordingly, a holder will not recognize gain or loss upon receipt of a new note in exchange for an old note, the new note will have the same issue price as the old note in exchange for which it was issued, and a holder will have the same adjusted tax basis and holding period in the new note as it had in the old note immediately before the exchange. 124 Payments of Interest Stated interest on a new note will be taxable to a United States Holder as ordinary income at the time it is received or accrued in accordance with the United States Holder's regular method of accounting for United States federal income tax purposes. A Non-United States Holder generally will not be subject to United States federal income or withholding tax on interest paid on a new note, provided that the Non-United States Holder: . is not a controlled foreign corporation related to us through stock ownership, . does not conduct a trade or business in the United States with respect to which the interest is effectively connected, and . provides the correct certification of Non-United States Holder status, which may generally be satisfied by providing an IRS Form W-8 or W-8BEN certifying that the beneficial owner is not a United States person and providing the name and address of the beneficial owner. Market Discount If a United States Holder purchased an old note for less than its stated redemption price at maturity, the difference will be treated as "market discount" for United States federal income tax purposes, unless the difference is less than a specified de minimis amount. Under the market discount rules, the United States Holder will be required to treat any gain on the sale, exchange, redemption or other disposition of the new note received in exchange for the old note as ordinary income to the extent of the market discount that has not previously been included in income and that is treated as having accrued on the old note or the new note at the time of the disposition. In addition, the United States Holder may be required to defer, until the maturity or earlier disposition of the new note, the deduction of all or a portion of the interest expense on any indebtedness incurred or continued to purchase or carry the old note or new note. Any market discount will be considered to accrue ratably during the period from the date of acquisition of the old note to the maturity date of the new note unless the United States Holder elects to accrue under a constant yield method. A United States Holder may elect to include market discount in income currently as it accrues (either ratably or under a constant yield method), in which case the rule described above regarding deferral of interest deductions will not apply. This election to include market discount in income currently, once made, applies to all market discount obligations held or subsequently acquired by the United States Holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the Internal Revenue Service ("IRS"). Amortizable Bond Premium A United States Holder that purchased an old note for an amount greater than its stated redemption price at maturity will be considered to have purchased the old note at a "premium." A United States Holder generally may elect to amortize the premium over the remaining term of the new note received in exchange for the old note under a constant yield method. The amount amortized in any year will be treated as a reduction of the United States Holder's interest income from the new note. Bond premium on a new note held by a United States Holder that does not make such an election will decrease the gain or increase the loss otherwise recognized on disposition of the new note. The election to amortize premium on a constant yield method, once made, applies to all debt obligations held or subsequently acquired by the United States Holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS. 125 Sale, Exchange or Other Disposition of a New Note Upon the sale, exchange, retirement or other taxable disposition of a new note, a United States Holder will recognize gain or loss equal to the difference between the amount realized on such disposition (less any accrued but unpaid interest, which will be taxable as ordinary income) and the United States Holder's adjusted tax basis in the new note. Except as described above with respect to market discount, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the old note and the new note have, in the aggregate, been held for more than one year. Generally, for noncorporate United States Holders, long-term capital gains are subject to United States federal income taxation at reduced rates. The deductibility of capital losses is subject to limitations. A United States Holders' adjusted tax basis in a new note received in exchange for an old note will, in general, be the cost of the old note to the United States Holder, increased by any market discount previously included in income and reduced by any amortized premium. A Non-United States Holder generally will not be subject to United States federal income or withholding tax with respect to gain realized from a sale, exchange, redemption or other taxable disposition of a new note. Under certain circumstances, a Non-United States Holder may be subject to United States federal income tax on gain realized with respect to a new note, even if no withholding of taxes is required. This may occur, for example, if the Non- United States Holder is: . engaged in a trade or business in the United States and the gain on a new note is effectively connected with the conduct of that trade or business, or . an individual present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met. Estate Taxes If interest on a new note is exempt from United States federal withholding tax under the rules described above under "Payments of Interest," the new note will not be included, for United States federal estate tax purposes, in the estate of a deceased individual holder of a new note who is not a United States citizen or resident for United States federal estate tax purposes. Information Reporting and Backup Withholding A United States Holder may be subject to backup withholding at a rate of 31% on, and to information reporting requirements with respect to, payments of principal of and interest on, and the proceeds of disposition of, a new note. Backup withholding will apply if (i) the United States Holder fails to furnish its taxpayer identification number ("TIN"), which, for an individual, is the individual's social security number, (ii) the United States Holder furnishes an incorrect TIN, (iii) the Company is notified by the IRS that the United States Holder has failed properly to report payments of interest or dividends or (iv) under certain circumstances, the United States Holder fails to certify, under penalty of perjury, that it has furnished a correct TIN and has not been notified by the IRS that it is subject to backup withholding for failure to report interest and dividend payments. Backup withholding and information reporting will not apply with respect to payments made to certain exempt recipients, such as corporations and tax-exempt organizations. The amount of any backup withholding from a payment to a United States Holder will be allowed as a credit against the holder's United States federal income tax liability and may entitle the holder to a refund, provided the required information is furnished to the IRS. United States Holders should consult their tax advisors regarding their qualification for exemption from backup withholding and the procedure for obtaining an exemption, if applicable. Information reporting and backup withholding generally do not apply to payments of interest to a Non-United States Holder if the certification described above under "Payments of Interest" is received, provided the payor does not have actual knowledge that the holder is a United States person. Payments of principal and interest made to the beneficial owner of a new note by or through 126 the foreign office of a custodian, nominee or other agent acting on behalf of the beneficial owner, and payment of the proceeds of a sale, exchange or other disposition of a new note by the foreign office of a broker, generally will not be subject to backup withholding. However, if the custodian, nominee, other agent or broker is a United States person, a controlled foreign corporation for United States federal income tax purposes, or a foreign person 50% or more of whose gross income is effectively connected with a United States trade or business for a specified three-year period, information reporting will be required with respect to these payments unless the custodian, nominee, other agent or broker has in its records documentary evidence that the beneficial owner is not a United States person and certain conditions are met or the beneficial owner otherwise establishes an exemption. Payments by a United States office of a custodian, nominee, other agent or broker are subject to both backup withholding and information reporting unless the beneficial owner certifies as to its Non-United States Holder status under penalties of perjury or otherwise establishes an exemption. Income tax regulations that are generally effective for payments made after December 31, 2000, subject to certain transition rules, modify in some respects the backup withholding and information reporting rules. In general, these regulations do not significantly alter the substantive requirements of these rules, but unify current procedures and forms and clarify reliance standards. You should consult your own tax advisor regarding these regulations. 127 BOOK-ENTRY; DELIVERY AND FORM The new notes will initially be represented by one permanent global note in definitive, fully registered book-entry form, without interest coupons that will be deposited with, or on behalf of, DTC and registered in the name of DTC or its nominee, on behalf of the acquirers of new notes represented thereby for credit to the respective accounts of the acquirers, or to such other accounts as they may direct, at DTC, or Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System, or Clearstream Banking, societe anonyme. See "The Exchange Offer--Book-Entry Transfer." Except as set forth below, the global notes may be transferred, in whole and not in part, solely to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may not be exchanged for notes in physical, certificated form except in the limited circumstances described below. All interests in the global notes, including those held through Euroclear or Clearstream, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of those systems. Certain Book-Entry Procedures for the Global Notes The descriptions of the operations and procedures of DTC, Euroclear and Clearstream set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to change by them from time to time. We do not take any responsibility for these operations or procedures, and investors are urged to contact the relevant system or its participants directly to discuss these matters. DTC has advised us that it is (1) a limited purpose trust company organized under the laws of the State of New York, (2) a "banking organization" within the meaning of the New York Banking Law, (3) a member of the Federal Reserve System, (4) a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and (5) a "clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitates the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC's participants include securities brokers and dealers, banks and trust companies, clearing corporations and certain other organizations. Indirect access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Investors who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants. We expect that pursuant to procedures established by DTC ownership of the new notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of participants) and the records of participants and the indirect participants (with respect to the interests of persons other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of those securities in definitive form. Accordingly, the ability to transfer interests in the new 128 notes represented by a global note to those persons may be limited. In addition, because DTC can act only on behalf of its participants, who in turn act on behalf of persons who hold interests through participants, the ability of a person having an interest in new notes represented by a global note to pledge or transfer that interest to persons or entities that do not participate in DTC's system, or to otherwise take actions in respect of that interest, may be affected by the lack of a physical definitive security in respect of that interest. So long as DTC or its nominee is the registered owner of a global note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the new notes represented by the global note for all purposes under the indenture. Except as provided below, owners of beneficial interests in a global note: --will not be entitled to have new notes represented by that global note registered in their names, --will not receive or be entitled to receive physical delivery of certificated new notes, and --will not be considered the owners or holders thereof under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee thereunder. Accordingly, each holder owning a beneficial interest in a global note must rely on the procedures of DTC and, if that holder is not a participant or an indirect participant, on the procedures of the participant through which that holder owns its interest, to exercise any rights of a holder of notes under the indenture or that global note. We understand that under existing industry practice, in the event that we request any action of holders of notes, or a holder that is an owner of a beneficial interest in a global note desires to take any action that DTC, as the holder of that global note, is entitled to take, DTC would authorize the participants to take such action and the participants would authorize holders owning through those participants to take such action or would otherwise act upon the instruction of those holders. Neither we nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to those new notes. Payments with respect to the principal of, and premium, if any, and interest on, any new notes represented by a global note registered in the name of DTC or its nominee on the applicable record date will be payable by the trustee to or at the direction of DTC or its nominee in its capacity as the registered holder of the global note representing the new notes under the indenture. Under the terms of the indenture, we and the trustee may treat the persons in whose names the new notes, including the global notes, are registered as the owners thereof for the purpose of receiving payment thereon and for any and all other purposes whatsoever. Accordingly, neither we nor the trustee has or will have any responsibility or liability for the payment of those amounts to owners of beneficial interests in a global note (including principal, premium, if any, liquidated damages, if any, and interest). Payments by the participants and the indirect participants to the owners of beneficial interests in a global note will be governed by standing instructions and customary industry practice and will be the responsibility of the participants or the indirect participants and DTC. Transfers between participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures. Cross-market transfers between the participants in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or 129 Clearstream, as the case may be, by the counterpart in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant global notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream. Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a global note from a participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. Cash received in Euroclear or Clearstream as a result of sales of interests in a global note by or through a Euroclear or Clearstream participant to a participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTC's settlement date. Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the global notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform these procedures, and the procedures may be discontinued at any time. Neither we nor the trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Certificated Notes If: --we notify the trustee in writing that DTC is no longer willing or able to act as a depositary or DTC ceases to be registered as a clearing agency under the Securities Exchange Act of 1934 and a successor depositary is not appointed within 90 days of that notice or cessation; --an Event of Default has occurred and is continuing; or --we, at our option, notify the trustee in writing that we elect to cause the issuance of notes in definitive form under the indenture, then, upon surrender by DTC of the global notes, certificated notes will be issued to each person that DTC identifies as the beneficial owner of the notes represented by the global notes. Upon any such issuance, the trustee is required to register those certificated notes in the name of that person or those persons (or the nominee of any thereof) and cause the same to be delivered thereto. Neither we nor the trustee shall be liable for any delay by DTC or any participant or indirect participant in identifying the beneficial owners of the related notes and each such person may conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the notes to be issued). 130 PLAN OF DISTRIBUTION Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act of 1933 in connection with any resale of those new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes only where those old notes were acquired as a result of market-making or other trading activities. The issuer and the note guarantors have agreed that, for a period of 180 days from the date on which the exchange offer is consummated, they will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with those resales. The issuer will not receive any proceeds from any sales of new notes by broker-dealers. New notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new notes or a combination of such methods of resale, at prices related to such prevailing market prices or at negotiated prices. Those resales may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of those new notes. Any broker-dealer that resells new notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of those new notes may be deemed to be an "underwriter" within the meaning of the Securities Act of 1933 and any profit on any such resale of new notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act of 1933. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933. For a period of up to 180 days from the date on which the exchange offer is consummated, the issuer and the note guarantors will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests those documents in the letter of transmittal. The issuer and the note guarantors have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for holders of the notes) other than commissions or concessions of any broker-dealers and will indemnify the holders of the notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act of 1933. LEGAL MATTERS The validity of the new notes will be passed upon for us by Winthrop, Stimson, Putnam & Roberts, New York, New York. 131 EXPERTS The consolidated financial statements for the Company at December 31, 1998 and 1999 and for each of the three years in the period ended December 31, 1999 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated financial statements for Better Materials at December 13, 1998 and January 3, 1998 and for the period ended December 13, 1998 and for the fiscal years ended January 3, 1998 and December 28, 1996 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The combined financial statements for Commercial Stone Company and CATS as of March 31, 1999 and 1998 and for each of the three years in the period ended March 31, 1999 included in this prospectus have been so included in reliance on the report of Schneider Downs & Co., Inc., independent accountants, given on the authority of said firm as experts in auditing and accounting. 132 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Better Minerals & Aggregates Company and Subsidiaries (formerly USS Intermediate Holdco, Inc.) Consolidated Financial Statements At December 31, 1998 and 1999 and for each of the three years in the period ended December 31, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) Report of Independent Accountants....................................... F-2 Consolidated Balance Sheets at December 31, 1998 and 1999............... F-3 Consolidated Statement of Operations for the years ended December 31, 1997, 1998 and 1999.................................................... F-4 Consolidated Statement of Stockholder's Equity for the years ended December 31, 1997, 1998 and 1999....................................... F-5 Consolidated Statement of Cash Flows for the years ended December 31, 1997, 1998 and 1999.................................................... F-6 Notes to Consolidated Financial Statements.............................. F-7 BETTER MATERIALS CORPORATION Report of Independent Accountants....................................... F-29 Consolidated Balance Sheets at December 13, 1998 and January 3, 1998.... F-30 Consolidated Statements of Income for the period ended December 13, 1998 and for the fiscal years ended January 3, 1998 and December 28, 1996....... F-31 Consolidated Statements of Shareholders' Equity for the period ended December 13, 1998 and for the fiscal years ended January 3, 1998 and December 28, 1996...................................................... F-32 Consolidated Statements of Cash Flows for the period ended December 13, 1998, and for the fiscal years ended January 3, 1998 and December 28, 1996....... F-33 Notes to Consolidated Financial Statements.............................. F-34 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. (COMBINED) Independent Auditors' Report............................................ F-42 Combined Statement of Operations for the years ended March 31, 1999, 1998 and 1997.......................................................... F-43 Combined Balance Sheets as of March 31, 1999 and 1998................... F-44 Combined Statement of Changes in Owners' Equity for the years ended March 31, 1999, 1998 and 1997.......................................... F-45 Combined Statements of Cash Flow for the years ended March 31, 1999, 1998 and 1997.......................................................... F-46 Notes to Combined Financial Statements.................................. F-47 Condensed Combined Balance Sheets as of September 30, 1999 (unaudited).. F-54 Condensed Combined Statements of Operations for the (unaudited) six months ended September 30, 1999 and 1998............................... F-55 Condensed Combined Statements of Changes in Owners' Equity for the (unaudited) six months ended September 30, 1999 and 1998............... F-56 Condensed Combined Statements of Cash Flow for the (unaudited) six months ended September 30, 1999 and 1998............................... F-57 Notes to Condensed Combined Financial Statements for the (unaudited) six months ended September 30, 1999 and 1998............................... F-58
F-1 Report of Independent Accountants To the Board of Directors and Stockholder of Better Minerals & Aggregates Company: (formerly USS Intermediate Holdco, Inc.) In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholder's equity and cash flows present fairly, in all material respects, the financial position of Better Minerals & Aggregates Company (formerly USS Intermediate Holdco, Inc.) (the "Company") at December 31, 1998 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. 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 of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP March 9, 2000 New York, New York F-2 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
December 31, ------------------ 1998 1999 -------- -------- ASSETS Current: Cash and cash equivalents................................ $ 2,222 $ 13,573 Accounts receivable: Trade, less allowance for doubtful accounts of $1,060 and $1,278............................................ 28,964 41,658 Other.................................................. 1,382 1,060 Due from parent........................................ -- 834 Inventories.............................................. 15,844 23,058 Prepaid expenses and other current assets................ 1,378 2,018 Income tax deposit....................................... 486 1,056 Deferred income taxes.................................... 6,167 8,148 -------- -------- Total current assets................................. 56,443 91,405 Property, plant and equipment: Mining property.......................................... 81,890 263,083 Land..................................................... 22,475 28,086 Land improvements........................................ 3,501 5,005 Buildings................................................ 33,961 37,143 Machinery and equipment.................................. 88,833 143,082 Furniture and fixtures................................... 645 1,331 Construction-in-progress................................. 3,770 4,387 -------- -------- 235,075 482,117 Accumulated depletion, depreciation and amortization...... (37,198) (59,248) -------- -------- Property, plant and equipment, net................... 197,877 422,869 Other noncurrent: -- Goodwill and non compete agreements, net................. 12,725 19,907 Debt issuance costs...................................... 4,355 14,601 Other noncurrent assets.................................. 3,278 2,821 -------- -------- Total other noncurrent............................... 20,358 37,329 -------- -------- Total assets......................................... $274,678 $551,603 ======== ======== LIABILITIES Current: Book overdraft........................................... $ 6,254 $ 5,026 Accounts payable......................................... 13,772 16,845 Accrued liabilities...................................... 9,649 13,053 Due to parent............................................ 1,054 -- Payable to related party................................. -- 898 Accrued interest......................................... 676 7,829 Current portion of long-term debt........................ 5,530 2,039 -------- -------- Total current liabilities............................ 36,935 45,690 Noncurrent liabilities: USS Holdings, Inc. Series A warrants outstanding......... 455 -- USS Holdings, Inc. Series B warrants outstanding......... 3,325 -- Deferred income taxes.................................... 42,792 117,637 Long-term debt, net of current portion................... 131,918 285,466 Other noncurrent liabilities............................. 35,857 38,475 -------- -------- Total noncurrent liabilities......................... 214,347 441,578 Commitments and contingencies STOCKHOLDER'S EQUITY Common stock, par value $.01, authorized 5,000 shares, issued 100 shares........................................ -- -- Additional paid-in capital................................ 41,491 81,377 Retained deficit.......................................... (18,011) (17,012) Accumulated other comprehensive (loss).................... (84) (30) -------- -------- Total stockholder's equity........................... 23,396 64,335 -------- -------- Total liabilities and stockholder's equity........... $274,678 $551,603 ======== ========
The accompanying notes are an integral part of these financial statements. F-3 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands)
Years Ended December 31, ----------------------------- 1997 1998 1999 -------- --------- -------- Net sales...................................... $128,512 $ 142,294 $209,075 Cost of goods sold............................. 88,097 98,478 140,244 Depreciation, depletion and amortization....... 17,886 19,888 28,481 Selling, general and administrative............ 14,345 16,930 21,843 Incentive stock compensation expense (Note 15)........................................... -- 14,227 -- -------- --------- -------- Operating income (loss)...................... 8,184 (7,229) 18,507 Interest expense............................... 10,513 10,269 19,590 Accretion of preferred stock warrants.......... 1,374 1,254 56 Other income net, including interest income.... (1,742) (1,881) (2,171) -------- --------- -------- (Loss) income before income taxes............ (1,961) (16,871) 1,032 Provision (Benefit) for income taxes........... (2,239) (2,204) (2,714) -------- --------- -------- Net income (loss) before extraordinary loss.. 278 (14,667) 3,746 Extraordinary loss (less applicable income taxes of $0, $713 and $1,752) (Note 7)........ -- (2,102) (2,747) -------- --------- -------- Net income (loss)............................ $ 278 $ (16,769) $ 999 ======== ========= ========
The accompanying notes are an integral part of these financial statements. F-4 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (Dollars in thousands)
Accumulated Other Comprehensive Income --------------------------- Additional Foreign Minimum Total Common Paid-In Retained Currency Pension Stockholder's Stock Capital Deficit Translation Liability Total Equity ------ ---------- -------- ----------- --------- ----- ------------- Balance, December 31, 1996................... $ $24,275 $ (1,520) $ $ $ $ 22,755 Net income.............. 278 278 Accretion of mandatory redeemable preferred stock.................. (847) (847) Retirement of mandatory redeemable preferred stock.................. 3,836 3,836 ---- ------- -------- ----- ---- ---- -------- Balance, December 31, 1997................... 27,264 (1,242) 26,022 Comprehensive income, net of income taxes: Net (loss)............. (16,769) (16,769) Foreign currency translation........... (44) (44) (44) Minimum pension liability............. (40) (40) (40) -------- Total comprehensive (loss).............. (16,853) Issuance of incentive stock.................. 14,227 14,227 ---- ------- -------- ----- ---- ---- -------- Balance, December 31, 1998................... 41,491 (18,011) (44) (40) (84) 23,396 Comprehensive income, net of income taxes: Net income............. 999 999 Foreign currency translation........... 14 14 14 Minimum pension liability............. 40 40 40 -------- Total comprehensive income.............. 1,053 Capital contributed by parent................. 39,886 39,886 ---- ------- -------- ----- ---- ---- -------- Balance, December 31, 1999................... $ $81,377 $(17,012) $ (30) $-- $(30) $ 64,335 ==== ======= ======== ===== ==== ==== ========
The accompanying notes are an integral part of these financial statements. F-5 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Years Ended December 31, ------------------------------ 1997 1998 1999 -------- --------- --------- Cash flows from operating activities: Net income (loss)............................. $ 278 $ (16,769) $ 999 Adjustments to reconcile net income (loss) to cash flows from operations: Depreciation.................................. 11,688 13,012 17,950 Depletion..................................... 929 1,108 4,111 Non compete agreements amortization........... 5,000 5,593 5,713 Accretion of preferred stock warrants......... 1,374 1,254 56 Debt issuance amortization.................... 1,540 1,237 1,148 Extraordinary loss............................ -- 2,815 4,499 Incentive stock compensation.................. -- 14,227 -- Deferred income taxes......................... (3,363) (3,380) (6,962) Disposal of property, plant and equipment loss (gain).................................. 10 (208) (165) Other......................................... 2,634 1,712 1,806 Changes in current assets and liabilities, net of the effects from acquired companies: Trade receivables............................ (3,136) 1,429 (360) Non-trade receivables........................ 548 (949) 563 Receivable from parent....................... 218 922 (838) Payable to related party..................... -- -- 898 Inventories.................................. 348 (256) (1,250) Prepaid expenses and other current assets.... 161 (103) (668) Accounts payable and accrued liabilities..... (2,075) (3,618) (4,565) Accrued interest............................. (153) (753) 7,153 Income taxes................................. -- (1,921) (569) -------- --------- --------- Net cash provided by operating activities... 16,001 15,352 29,519 Cash flows from investing activities: Capital expenditures.......................... (5,537) (9,399) (14,572) Proceeds from sale of property, plant and equipment.................................... 289 362 1,310 Purchase of non compete agreements............ -- (2,796) -- Purchases of businesses, net of cash ac- quired....................................... -- (54,752) (172,379) -------- --------- --------- Net cash used for investing activities...... (5,248) (66,585) (185,641) Cash flows from financing activities: Change in book overdraft...................... 682 3,930 (1,402) Issuance of long-term debt.................... -- 136,382 325,006 Repayment of long-term debt................... (6,987) (84,370) (169,205) Change in Working Capital Facility............ -- -- (6,100) Principal payments on capital lease obliga- tions........................................ -- (24) (44) Prepayment penalties.......................... -- (1,255) -- Financing fees................................ -- (1,550) (15,796) Redemption of mandatory redeemable preferred stock........................................ (5,000) -- -- Capital contributed by parent................. -- -- 35,000 -------- --------- --------- Net cash (used for) provided by financing activities................................. (11,305) 53,113 167,459 Effect of exchange rate on cash................ -- (60) 14 -------- --------- --------- Net (decrease) increase in cash............. (552) 1,820 11,351 Cash and cash equivalents, beginning of peri- od............................................ 954 402 2,222 -------- --------- --------- Cash and cash equivalents, ending of period.... $ 402 $ 2,222 $ 13,573 ======== ========= ========= Schedule of noncash investing and financing ac- tivities: Redemption of Mandatory Redeemable Series C Preferred Stock of Holdings.................. $ 3,836 $ -- $ -- ======== ========= ========= Assets acquired by assuming notes payable and capital lease obligations.................... $ 1,111 $ 1,058 $ -- ======== ========= ========= Forgiveness of Series A and B Preferred Stock warrants of Holdings......................... $ -- $ -- $ 3,836 ======== ========= ========= Forgiveness of payable to parent.............. $ -- $ -- $ 1,050 ======== ========= ========= Cash paid during the year for: Interest...................................... $ 8,731 $ 9,269 $ 10,925 ======== ========= ========= Income taxes.................................. $ 1,175 $ 2,393 $ 3,232 ======== ========= =========
The accompanying notes are an integral part of these financial statements. F-6 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization Better Minerals & Aggregates Company (formerly USS Intermediate Holdco, Inc.) (the "Company"), an indirect wholly owned subsidiary of USS Holdings, Inc. ("Holdings") was organized in January 1996. BMAC Holdings, Inc. ("BMAC Holdings"), a wholly owned subsidiary of Holdings, is the direct parent of the Company. On February 9, 1996, the Company purchased from U.S. Borax Inc. ("Borax"), an indirect wholly owned subsidiary of the RTZ Corporation PLC, 100% of the common stock of U.S. Silica Company ("U.S. Silica"). On December 14, 1998 and July 24, 1998, U.S. Silica acquired Better Materials Corporation and George F. Pettinos, Inc., respectively (Note 3). On April 8, 1999, U.S. Silica acquired the assets of five New Jersey-based operations owned by Unimin Corporation (Note 3). On October 1, 1999, the Company acquired Commercial Stone Co., Inc. and Commercial Aggregates Transportation and Sales, L.P. and their related quarry properties (Note 3). Commercial Stone Co., Inc. and Commercial Aggregates Transportation and Sales, L.P. and their related quarry properties are collectively referred to in the notes to the financial statements as "Commercial Stone." The Company and its subsidiaries are collectively referred to as the "Company" in the accompanying financial statements and footnotes. 2. Summary of Significant Accounting Policies a. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. b. Reclassifications Certain prior years' amounts have been reclassified to conform with the current year's presentation. c. Use of Estimates and Assumptions The preparation of financial statements in conformity with 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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. d. Cash and Cash Equivalents All highly liquid investments with a maturity of three months or less are considered cash equivalents. e. Inventories Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out and average cost methods. F-7 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) f. Revenue Recognition Revenue is recorded when legal title passes at the time of shipment to the customer. g. Deferred Financing Costs Deferred financing costs consist of loan origination costs, which are being amortized over the term of the related debt principal. Amortization included in interest expense for each of the three years ended December 31, 1997, 1998 and 1999 totaled approximately $1.3 million, $1.0 million and $1.1 million, respectively. h. Depreciable Properties Depreciable properties, mining properties and mineral deposits acquired in connection with the acquisitions of U.S. Silica, George F. Pettinos, Inc., Better Materials Corporation, the Morie Assets and Commercial Stone are recorded at fair market value as of the date of acquisition. Additions and improvements occuring through the normal course of business are capitalized at cost. Upon retirement or disposal of assets, other than those of U.S. Silica acquired on February 9, 1996, the cost and accumulated depreciation or amortization are eliminated from the accounts and any gain or loss is reflected in the statement of operations. Group asset accounting is utilized for the U.S. Silica assets acquired on February 9, 1996. Gains and losses on normal retirements or dispositions of these assets are excluded from net income and proceeds for dispositions are recorded as a reduction of the acquired cost. Expenditures for normal repairs and maintenance are expensed as incurred. Construction-in-progress is primarily comprised of machinery and equipment which has not yet been placed in service. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 15 years. Depletion and amortization of mineral deposits are provided as the minerals are extracted, based on units of production and engineering estimates of total reserves. i. Mine Exploration and Development Costs to develop new mining properties are deferred and amortized based on units of production. j. Mine Reclamation Costs The estimated net future costs of dismantling, restoring and reclaiming operating mines and related mine sites, in accordance with federal, state and local regulatory requirements, are accrued during operations. The provision is made based upon units of production and estimatable minable reserves as of the balance sheet date. The effect of changes in estimated costs, production, and minable reserves is recognized on a prospective basis. k. Intangible Assets The Company's intangible assets include goodwill and non-compete agreements. At December 31, 1999, the net book value of goodwill associated with the acquisitions of Commercial Stone and F-8 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) the Morie Assets approximated $12.8 million. Goodwill is amortized on a straight-line basis over fifteen years. On February 9, 1996, U.S. Silica signed a five-year non-compete agreement with RTZ America, Inc., an affiliate of Borax. During 1998, U.S. Silica entered into additional non-compete agreements with the sellers of Nicks Silica Company and George F. Pettinos, Inc. At December 31, 1998 and 1999, the aggregate net book value of these non-compete agreements approximated $12.7 million and $7.1 million, respectively. The costs of these agreements are being amortized on a straight-line basis over the terms of the agreements, which range from three to five years. The Company periodically evaluates the recoverability of its goodwill and measures any impairment by comparison to estimated undiscounted cash flows from future operations. l. Income Taxes The Company accounts for income taxes pursuant to the provisions under Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based upon the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the expenses are expected to reverse. The Company is included in the consolidated federal tax return of Holdings. The tax provision (benefit) included in the accompanying financial statements has been computed on a separate return basis. m. Concentration of Credit Risk The five largest customers accounted for approximately 30% of net product sales and one customer accounted for more than 10% of net product sales of the Company for each of the two years in the period ended December 31, 1998. The Company's five largest customers accounted for approximately 20% of net product sales for the year ended December 31, 1999. Management believes it maintains adequate reserves for potential credit losses; ongoing credit evaluations are performed and collateral is generally not required. n. Financial Instruments The Company uses interest rate swap and cap agreements to manage interest costs and the risk associated with changing interest rates. Amounts to be paid or received under interest rate swap agreements are accrued as interest rates change and are recognized over the life of the swap agreements as an adjustment to interest expense. The Company's practice is to not hold or issue derivative financial instruments for trading or speculative purposes. When entered into, these financial instruments are designated as hedges of underlying exposures, associated with the Company's long-term debt, and are monitored to determine if they remain effective hedges. The fair value of the interest rate agreements and changes in these fair values as a result of changes in market interest rates are not recognized in the consolidated financial statements. o. Environmental Costs Environmental costs, other than qualifying capital expenditures, are accrued at the time the exposure becomes known and costs can be reasonably estimated. Costs are accrued based upon F-9 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) management's estimates of all direct costs, after taking into account expected reimbursement by third parties (primarily the sellers of acquired businesses), and are reviewed by outside consultants. Environmental costs are charged to expense unless a settlement with an indemnifying party has been reached. p. Comprehensive Income The Company adopted SFAS No. 130 "Reporting of Comprehensive Income" in 1998. Comprehensive income is defined as the change in equity from transactions and other events from nonowner sources and consists of net income and other comprehensive income. SFAS No. 130 requires foreign currency translation adjustments and minimum pension liability adjustments to be included in other comprehensive income. The Company had no items of other comprehensive income in periods prior to January 1, 1998. q. Impact of Recent Accounting Standards In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", was issued. SFAS No. 133 requires that all derivatives be recognized as either assets or liabilities in the statement of financial position and measured at fair value. SFAS No. 133, as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133, an amendment of FASB Statement No. 133", is effective for fiscal years beginning after June 15, 2000. The Company has not yet determined the impact that adoption or subsequent application of SFAS No. 133 will have on its financial position or results of operations. 3. Acquisitions On October 1, 1999, the Company acquired Commercial Stone for total consideration of $139.0 million in cash, $8.0 million of which was placed in escrow to satisfy any future indemnity claims the Company may have against the sellers. The Company financed the acquisition through the issuance of $150.0 million Senior Subordinated Notes and the refinancing of its existing Senior Debt by entering into new Senior Secured Credit Facilities (Note 6). The acquisition was accounted for as a purchase and the purchase price was allocated to the assets acquired and liabilities assumed based on fair values at the date of acquisition. Approximately $175.9 million, inclusive of deferred income taxes of $76.0 million, has been allocated to mineral reserves and is being amortized based on production. The allocation of the purchase price was as follows:
(In thousands) -------------- Working capital, other than cash........................... $ 7,443 Property, plant and equipment.............................. 27,207 Goodwill................................................... 7,403 Mineral reserves........................................... 175,856 Other assets............................................... 1,739 Other liabilities.......................................... (818) Deferred income taxes...................................... (79,830) -------- Purchase price, net of cash received..................... $139,000 ========
F-10 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) On April 8, 1999, U.S. Silica acquired the assets of five New Jersey-based operations formerly owned by the Morie Company and owned at the time by Unimin Corporation (the "Morie Assets") for total consideration of $33.4 million. Also on April 8, 1999, U.S. Silica amended its $155.0 million Credit Agreement to add a $35.0 million dollar Senior Term C Facility (Note 6). The purchase price was financed with proceeds from the addition of the Senior Term C Facility. The acquisition was accounted for as a purchase and the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. Approximately $11.1 million has been allocated to mineral reserves and is being amortized based on production. The allocation of the purchase price was as follows:
(In thousands) -------------- Working capital, other than cash........................... $ 1,569 Property, plant and equipment.............................. 15,102 Goodwill................................................... 5,844 Mineral reserves........................................... 11,053 Other liabilities.......................................... (308) Deferred income taxes...................................... 120 ------- Purchase price, net of cash received..................... $33,380 =======
On December 14, 1998, BMC Acquisition Company, a wholly owned subsidiary of U.S. Silica, acquired the stock of Better Materials Corporation, for total consideration of $40.6 million. Immediately upon closing, BMC Acquisition Corporation merged with and into Better Materials Corporation, with Better Materials Corporation as the surviving corporation. The purchase price was financed with cash and available borrowings under U.S. Silica's $155.0 million Credit Agreement's Acquisition and Working Capital Facilities (Note 6). The acquisition was accounted for as a purchase and the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired of approximately $43.3 million, inclusive of deferred income taxes of $20.1 million, has been allocated to mineral reserves and is being amortized based on production. The allocation of the purchase price was as follows:
(In thousands) -------------- Working capital, other than cash........................... $ 708 Property, plant and equipment.............................. 17,206 Mineral reserves........................................... 43,266 Other liabilities.......................................... (2,445) Deferred income taxes...................................... (20,331) -------- Purchase price, net of cash received..................... $ 38,404 ========
On July 24, 1998, GFP Acquisition Corp., a wholly owned subsidiary of U.S. Silica, acquired George F. Pettinos, Inc. for total consideration of $14.9 million including a covenant not to compete for $1.1 million. Immediately upon closing, GFP Acquisition Corp. merged with and into George F. Pettinos, Inc., with George F. Pettinos, Inc. as the surviving corporation. The purchase price was financed with proceeds from U.S. Silica's $155.0 million Credit Agreement (Note 6). The acquisition was accounted for as a purchase and the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The excess of the purchase F-11 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) price over the fair value of the net assets acquired of approximately $14.5 million, inclusive of deferred income taxes of $5.3 million, has been allocated to mineral reserves and is being amortized based on production. The allocation of the purchase price was as follows:
(In thousands) -------------- Working capital, other than cash........................... $ 1,162 Property, plant and equipment.............................. 3,234 Mineral reserves........................................... 14,531 Other assets............................................... 601 Other liabilities.......................................... (1,252) Deferred income taxes...................................... (5,490) ------- Purchase price, net of cash received..................... $12,786 =======
On January 16, 1998, U.S. Silica acquired certain assets of Nicks Silica Company for total consideration of approximately $5.8 million including a covenant not to compete for $1.3 million and a consulting agreement for $417,000. The purchase price was financed with both cash and notes payable to the sellers. The excess of the purchase price over the fair value of the assets acquired of $607,000 has been allocated to mineral reserves and is being amortized based on production. The following unaudited proforma consolidated results of operations have been prepared as if the acquisitions of Better Materials Corporation and George F. Pettinos, Inc. had occurred as of the beginning of 1997, and reflect proforma adjustments for the excess of the purchase price over the fair value of the net assets acquired, interest expense and tax expense:
For the Year Ended December 31, 1997 ------------------------------ Company Acquisitions Total -------- ------------ -------- (In thousands) Net sales.................................. $128,512 $ 39,602 $168,114 ======== ======== ======== Net income (loss) before extraordinary loss...................................... $ 278 $ (1,388) $ (1,110) ======== ======== ======== Net income (loss).......................... $ 278 $ (1,388) $ (1,110) ======== ======== ========
The following unaudited proforma consolidated results of operations have been prepared as if the acquisitions of Commercial Stone, the Morie Assets, Better Materials Corporation and George F. Pettinos, Inc. had occurred as of the beginning of the periods presented, and reflect proforma adjustments for the excess of the purchase price over the fair value of the net assets acquired, salaries, mining royalties, interest expense and tax expense (the proforma effects of the acquisition of Nicks Silica Company has been excluded due to immateriality):
For the Year Ended December 31, 1998 ------------------------------------------------ Commercial Company Stone Acquisitions (2) Total --------- ---------- ---------------- --------- (In thousands) Net sales................... $ 142,294 $ 41,953 $52,240 $ 236,487 ========= ======== ======= ========= Net income (loss) before extraordinary loss......... $ (14,667) $ (6,016) $ 512 $ (20,171) ========= ======== ======= ========= Net income (loss) (1)....... $ (16,769) $ (6,016) $ 512 $ (22,273) ========= ======== ======= =========
F-12 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Year Ended December 31, 1999 ------------------------------------ Commercial Morie Company Stone Assets Total -------- ---------- ------ -------- (In thousands) Net sales............................... $209,075 $ 35,430 $3,548 $248,053 ======== ======== ====== ======== Net income (loss) before extraordinary loss................................... $ 3,746 $ (4,212) $ (557) $ (1,023) ======== ======== ====== ======== Net income (loss) (1)................... $ 999 $ (4,212) $ (557) $ (3,770) ======== ======== ====== ========
- -------- (1) The Company recorded after-tax charges of $2.1 million and $2.7 million associated with the early extinguishment of U.S. Silica's Senior and Subordinated Debt during 1998 and 1999, respectively. These after-tax charges are reflected within the Company's historical results of operations. (2) Amounts include the Morie Assets, Better Materials Corporation and George F. Pettinos, Inc. The proforma consolidated results do not purport to be indicative of results that would have occurred had the acquisitions been in effect for the periods presented, nor do they purport to be indicative of the results that will be obtained in the future. 4. Inventories At December 31, 1998 and 1999, inventory consisted of the following:
1998 1999 ------- ------- (In thousands) Supplies (net of $222 and $38 obsolescence reserve)..... $ 8,112 $11,171 Raw materials and work in process....................... 2,804 6,165 Finished goods.......................................... 4,928 5,722 ------- ------- $15,844 $23,058 ======= =======
5. Lease Commitments The Company is obligated under certain operating leases for railroad cars (which principally expire during 2000), mining property, mining/processing equipment, office space and transportation and other equipment. Certain of these agreements include options to purchase the equipment for fair market value at the end of the original lease term. Future minimum annual commitments under such leases at December 31, 1999 are as follows:
Year Ending December 31, ------------------------ (In thousands) 2000.................................... $1,913 2001.................................... 1,266 2002.................................... 452 2003.................................... 233 2004.................................... 136 Thereafter.............................. 132 ------ $4,132 ======
F-13 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Rental expense for operating leases for each of the three years ended December 31, 1997, 1998 and 1999 totaled approximately $461,000, $942,000 and $2.0 million, respectfully. In general, the above leases include renewal options and provide that the Company pay for all utilities, insurance, taxes and maintenance. 6. Long-Term Debt At December 31, 1998 and 1999, long-term debt consisted of the following:
1998 1999 (In thousands) -------- -------- Senior Secured Credit Facilities Tranche A Term Loan Facility (final maturity September 30, 2005)..................................................... $ -- $ 39,057 Tranche B Term Loan Facility (final maturity September 30, 2007)..................................................... -- 94,750 Canadian Term Facility (final maturity September 30, 2005)..................................................... -- 2,043 Senior Subordinated Notes (final maturity September 15, 2009)....................................................... -- 150,000 Senior Debt Senior Term A Facility (final maturity June 30, 2004)...... 30,000 -- Senior Term B Facility (final maturity June 30, 2006)...... 66,800 -- Canadian Facility (final maturity June 30, 2006)........... 3,134 -- Acquisition Facility (final maturity June 30, 2004)........ 30,000 -- Working Capital Facility (final maturity June 30, 2004).... 6,100 -- Secured Note (due December 31, 2001)......................... 203 141 Mortgage Notes 0% Note, imputed at 9.75% (due June 30, 1999).............. 143 -- 0% Note, imputed at 10.0% (due January 16, 2008)........... 1,068 1,162 8.5% Note (due July 1, 2003)............................... -- 65 7.0% Note (due July 31, 2004).............................. -- 287 -------- -------- 137,448 287,505 Less, current portion...................................... 5,530 2,039 -------- -------- $131,918 $285,466 ======== ========
At December 31, 1999, contractual maturities of long-term debt are as follows:
(In thousands) -------------- 2000.................................................... $ 2,039 2001.................................................... 9,389 2002.................................................... 11,038 2003.................................................... 11,039 2004.................................................... 11,185 Thereafter.............................................. 242,815 -------- $287,505 ========
F-14 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Debt Agreements On September 30, 1999, the Company entered into a new $230.0 million Credit Agreement (the "Agreement"), which consists of a $50.0 million revolving credit facility (the "Revolving Credit Facility"), a $45.0 million Tranche A Term Loan Facility ("Term A Loan"), a $95.0 million Tranche B Term Loan Facility ("Term B Loan") and a $40.0 million term loan acquisition facility (the "Acquisition Term Loan Facility"). The Term A Loan included a tranche of loans denominated in Canadian dollars ("Canadian Term Facility") equal to $2.0 million, which was borrowed by George F. Pettinos (Canada) Limited, an indirect wholly owned subsidiary of the Company. The Revolving Credit Facility, Term A Loan, Term B Loan, Acquisition Term Loan Facility and the Canadian Term Facility are collectively referred to in the notes to the financial statements as the "Senior Secured Credit Facilities." In addition, on October 1, 1999 the Company issued $150.0 million of Senior Subordinated Notes. Pursuant to an Exchange and Registration Rights Agreement, the Company has agreed to file with the Securities and Exchange Commission a registration statement which would allow for the exchange of the Company's Senior Subordinated Notes for registered notes having substantially the same terms. The proceeds from the Senior Secured Credit Facilities and the Senior Subordinated Notes were primarily used to pay off the outstanding Senior Debt and to finance the acquisition of Commercial Stone. Under the Agreement, the Company has available, until September 30, 2005, the Revolving Credit Facility, which provides for the borrowings of up to $50.0 million with a sublimit of $12.0 million for letters of credit and a sublimit of $3.0 million for swingline loans. The borrowing capacity of the Revolving Credit Facility is reduced by outstanding letters of credit and swingline loans. At December 31, 1999, outstanding letters of credit totaled $9.2 million. There were no borrowings under the Revolving Credit Facility or the swingline loans at December 31, 1999. In addition, there were no borrowings under the Acquisition Term Loan Facility at December 31, 1999. Except for the Canadian Term Facility, borrowings under the Senior Secured Credit Facilities bear variable interest at the Company's option at either (1) the bank's base rate plus a margin percentage, ranging from 1.00% to 2.50% or (2) the London Interbank Offered Rate ("LIBOR") plus a margin percentage, ranging from 2.00% to 3.50%. Borrowings under the Canadian Term Facility bear interest at a bank's base rate plus a margin percentage ranging from 1.50% to 2.50%. Commitment fees, ranging from .375% to .75%, on the average daily unused Revolving Credit Facility and the unused Acquisition Term Loan Facility are payable quarterly. Letter of credit fees are also payable quarterly based upon the average daily balance of all letters of credit outstanding. The Senior Subordinated Notes bear interest at a rate of 13% per annum, payable semi- annually. The obligations of the Company under the Senior Secured Credit Facilities are unconditionally and irrevocably guaranteed, jointly and severally, by BMAC Holdings and each of the Company's direct or indirect domestic subsidiaries. BMAC Holdings has no operations or assets other than its investment in its subsidiaries. In addition, the Senior Secured Credit Facilities are secured by a first priority pledge of (i) all the capital stock of BMAC Holdings, the Company, each of the Company's direct or indirect domestic subsidiaries and 65% of the capital stock of each direct foreign subsidiary of the Company or any of its domestic subsidiaries and (ii) substantially all of the tangible and intangible assets held by BMAC Holdings, the Company and each of the Company's direct or indirect domestic subsidiaries. The Canadian Term Facility is collateralized by substantially all of the assets of George F. Pettinos (Canada) Limited. F-15 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Agreement described above contains various restrictive covenants that, among other things, limits the ability of BMAC Holdings to engage in certain transactions with affiliates, incur additional indebtedness, repay other indebtedness or amend other debt instruments, create liens on assets, make investments or acquisitions, engage in mergers or consolidations, dispose of assets, or pay dividends. In addition, the Agreement requires BMAC Holdings to maintain certain financial convenants, including a leverage ratio, an interest coverage ratio and a capital expenditures covenant. Covenants associated with the Senior Subordinated Notes are generally less restrictive than those of the Senior Secured Credit Facilities. BMAC Holdings and the Company were in compliance with all financial covenants at December 31, 1999. The obligation of the Company under the Senior Subordinated Notes is unconditionally and irrevocably guaranteed, jointly and severally, on an unsecured senior subordinated basis to the Company's Senior Secured Credit Facilities, by each of the Company's domestic subsidiaries. The Senior Subordinated Notes are not guaranteed by the Company's two Canadian subsidiaries. On July 21, 1998, U.S. Silica entered into a $155.0 million Credit Agreement, which consisted of a $30.0 million Senior Secured Term Loan ("Senior Term A"), a $66.8 million Senior Secured Term Loan ("Senior Term B"), a $30.0 million Acquisition Facility, a $25.0 million Working Capital Facility and a $3.2 million Canadian Facility. The proceeds from this agreement were primarily used to satisfy the existing Senior and Subordinated Debt and to finance the acquisition of George F. Pettinos, Inc. Outstanding letters of credit and borrowings under the Working Capital Facility approximated $5.4 million and $6.1 million, respectively, at December 31, 1998. On April 8, 1999, U.S. Silica amended the $155.0 million Credit Agreement to add a $35.0 million Senior Secured Term Loan ("Senior Term C"). The proceeds from the Senior Term C Facility were primarily used to finance the acquisition of the Morie Assets during April 1999. At December 31, 1998 and 1999, the carrying value approximated the fair value of the Company's long-term debt. Warrants Warrants to purchase 41,667 shares of Series A Preferred Stock ("Series A warrants") and 83,334 shares of Series B Preferred Stock ("Series B warrants") of the Company's ultimate parent, Holdings, were issued to holders of Subordinated Debt as part of a Note Purchase Agreement dated February 9, 1996. The Series A warrants and Series B warrants are exercisable at any time until December 19, 2005 at an exercise price of $.01 per share or less as defined by the warrant issuance agreement. The holder of the warrants has the right to require Holdings to purchase any and all of the warrants and shares subject to the warrants at fair value in cash after December 19, 2001 and prior to a "liquidity event" which is defined as the sale or liquidation of Holdings or the consummation of a public offering. Holdings may call all of the outstanding warrants and shares subject to warrants after December 19, 2002, subject to approval of the holders of the senior debt. Fair value is defined as the liquidation preference value of $7.78 per share (plus all accrued and unpaid dividends thereon) for the Series A warrants and the common equity value per share as determined by the Board of Directors for the Series B warrants. The accretion of the Series A warrants and the Series B warrants to fair value is accounted for by charges to earnings. The holders of the Series A warrants and the F-16 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Series B warrants are entitled to dividends as if they had held underlying shares from February 9, 1996. Effective December 31, 1999, Holdings agreed to forgive the Company and its subsidiaries for the obligation associated with the Series A warrants and the Series B warrants. The forgiveness of the obligation resulted in a credit to additional paid-in capital of approximately $3.8 million during the year ended December 31, 1999. 7. Extraordinary Items The Company recorded an extraordinary after-tax charge of $2.1 million during the year ended December 31, 1998 in connection with the early extinguishment of U.S. Silica's Subordinated Debt. The extraordinary loss of $2.8 million (before an income tax benefit of $713,000) consisted of the Subordinated Debt's discount, prepayment penalties and the write-off of related unamortized debt issuance costs of approximately $983,000, $1.3 million and $577,000, respectively. During the year ended December 31, 1999, the Company recorded an extraordinary after-tax charge of $2.7 million in connection with the early extinguishment of U.S. Silica's outstanding Senior Debt under its $155.0 million Credit Agreement. The extraordinary loss of $4.5 million (before an income tax benefit of $1.8 million) consisted of the write-off of related unamortized debt issuance costs. 8. Financial Instruments Interest rate swap and cap agreements are utilized in the normal course of business to manage the Company's interest costs and the risk associated with changing interest rates. Interest rate swap agreements are used to exchange the difference between fixed and variable-rate interest amounts calculated by reference to an agreed-upon notional principal amount. In addition, the Company utilizes interest rate cap agreements to limit the impact of increases in interest rates on its floating rate debt. Interest rate cap agreements entitle the Company to receive from the counterparties the amounts, if any, by which the selected market interest rates exceed the strike rates stated per the agreements. The Company does not use derivative financial instruments for trading or speculative purposes. By their nature, all such instruments involve risk, including the possibility that a loss may occur from the failure of another party to perform according to the terms of a contract (credit risk) or the possibility that future changes in market price may make a financial instrument less valuable or more onerous (market risk). As is customary for these types of instruments, the Company does not require collateral or other security from other parties to these instruments. In management's opinion there is no significant risk of loss in the event of nonperformance of the counterparties to these financial instruments. The fair value of the interest rate agreements represents the estimated receipts or payments that would be required to settle the agreements at year- end. Quoted market prices were used to estimate the fair values of the interest rate swap and cap agreements. The notional amount represents agreed upon amounts on which calculations of dollars to be exchanged are based. They do not represent amounts exchanged by the parties and, therefore, are not a measure of the Company's exposure. The Company's credit exposure is limited to the fair value of the contracts with a positive fair value plus interest receivable, if any, at the reporting date. F-17 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 December 31, 1999 --------------------------- -------------------------- Contract/ Contract/ Maturity Notional Carrying Fair Notional Carrying Fair Date Amount Amount Value Amount Amount Value -------- --------- -------- ------ --------- -------- ----- (In thousands) Derivatives Interest rate swap agreements.. 1999 $55,000 $ 11 $ (32) 2001 $30,000(1) $ -- $ (509) $30,000(1) $ -- $389 Interest rate cap agreements... 2001 $30,000(2) $ -- $ (49) $30,000(2) $ -- $ 83 2002 $21,000(2) $ 99 $256
- -------- (1) Agreement effectively exchanges the LIBOR floating interest rate for a fixed interest rate of 5.74%. (2) Agreement limits the LIBOR floating interest rate to 6.50%. 9. Mandatory Redeemable Preferred Stock At December 31, 1998 and 1999, there were no shares of Preferred Stock authorized, issued or outstanding. In connection with the acquisition of U.S. Silica, Mandatory Redeemable Series C Preferred Stock of Holdings was issued to Borax. The Company issued Mandatory Redeemable Preferred Stock in exchange for Holdings' Mandatory Redeemable Preferred Stock, the terms of which were identical. The Preferred Stock was mandatorily redeemable at $1,000.00 per share on February 9, 2006 and had an optional redemption value of $500.00 per share at issuance which accreted at a rate of 7.18% per annum. The Preferred Stock issued by the Company was accounted for at its fair market value at the time of issuance which was determined to be $7.3 million. The difference between the fair market value and the mandatory redemption value of $10.0 million was accreted ratably over a ten year period by charges to additional paid-in capital for the period beginning February 9, 1996. On December 18, 1997, the Company redeemed the Preferred Stock for $5.0 million. As consideration, the Company agreed to release Borax from certain indemnifications pursuant to the Stock Purchase Agreement between Borax and the Company by waiving all claims and releasing Borax from all obligations arising out of certain environmental and product liability matters (each, as defined) and indemnifying and holding harmless Borax in respect of all claims arising out of such products liability matters. The excess of the carrying value of the Preferred Stock over the redemption payment was credited to additional paid-in capital. 10. Commitments and Contingencies The Company and its subsidiaries are involved in legal proceedings, claims and litigation arising in the ordinary course of business. Management believes, through discussions with counsel that its liability arising from or the resolution of these legal proceedings, claims and litigation, in the aggregate will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. U.S. Silica is self-insured for product liability insurance as it relates to occupational disease. In addition, U.S. Silica is self-insured for health care costs and, in some states, workers' compensation. The Company provides for estimated future losses based on reported cases and past claim history. Management believes that the provision for estimated future losses is adequate. F-18 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Certain product liability claims related to occupational disease are indemnified by ITT Corporation under an agreement whereby claims presented with an exposure period prior to September 12, 1985 are shared ratably based on the claimant's total exposure period. The indemnity is subject to a cumulative annual deductible and expires September 12, 2005. 11. Income Taxes The provision (benefit) for income taxes consisted of the following for each of the three years in the period ended December 31, 1999:
1997 1998 1999 (In thousands) -------- -------- -------- Current: Federal..................................... $ 1,730 $ 375 $ -- State....................................... 6 39 378 Foreign..................................... -- 23 180 -------- -------- -------- 1,736 437 558 Deferred: Federal..................................... (3,638) (2,819) (4,307) State....................................... (337) (439) (642) Foreign..................................... -- (96) (75) -------- -------- -------- (3,975) (3,354) (5,024) -------- -------- -------- Tax effect of extraordinary items............. -- 713 1,752 -------- -------- -------- Benefit for income taxes.................... $ (2,239) $ (2,204) $ (2,714) ======== ======== ========
F-19 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Under SFAS No. 109, deferred tax assets and liabilities are recognized for the estimated future tax effects, based on enacted tax laws, of temporary differences between the values of assets and liabilities recorded for financial reporting and for tax purposes and of net operating loss and other carryforwards. The tax effects of the types of temporary differences and carryforwards that gave rise to deferred tax assets and liabilities at December 31, 1998 and 1999, consisted of the following:
1998 1999 -------- --------- (In thousands) Gross deferred tax liabilities Land and mineral property basis difference.............. $(36,927) $(116,743) Fixed assets and depreciation........................... (26,969) (31,971) Restricted stock vesting................................ (371) (525) Debt fee amortization................................... (815) -- Other................................................... (3,280) (7,025) -------- --------- Total deferred tax liabilities...................... (68,362) (156,264) -------- --------- Gross deferred tax assets Royalty................................................. -- 2,025 Post retirement benefit costs........................... 8,208 8,100 Reserves for self-insurance............................. 2,729 2,652 Plant closure liability................................. 2,334 2,762 State deferred tax...................................... 2,832 9,369 Covenants not to compete................................ 4,087 5,618 Alternative minimum tax................................. 3,397 5,483 Reserves for vacation................................... 790 910 Pensions................................................ 1,695 2,100 Inventories............................................. 422 535 Net operating loss carryforward......................... 2,695 4,605 Bad debts............................................... 450 496 Reclamation............................................. 851 1,032 Other................................................... 1,247 1,088 -------- --------- Total deferred tax assets........................... 31,737 46,775 -------- --------- Net deferred tax liabilities........................ (36,625) (109,489) Less net current deferred tax assets.................. (6,167) (8,148) -------- --------- Net long-term deferred tax liabilities.................. $(42,792) $(117,637) ======== =========
At December 31, 1998 and 1999, the Company had a federal net operating loss carryforward ("NOL") of $5.9 million and $11.1 million, respectively, which begins to expire in 2011. The Company believes that it is more likely than not that the NOL carryforward will be utilized prior to its expiration. The NOL carryforward and existing deductible temporary differences are offset by existing taxable temporary differences reversing within the carryforward period. In addition, the Company has an alternative minimum tax credit carryforward at December 31, 1998 and 1999, of approximately $3.4 million and $5.5 million, respectively. The credit carryforward may be carried forward indefinitely to offset any excess of regular tax liability over alternative minimum tax liability subject to certain limitations. This alternative minimum tax credit carryforward has been reflected as a reduction of net noncurrent deferred income tax liabilities for financial reporting purposes. F-20 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The effective income tax rate on pretax earnings before extraordinary items differed from the U.S. federal statutory rate for each of the three years in the period ended December 31, 1999 for the following reasons:
1997 1998 1999 ----- ----- ------ Provision computed at U.S. federal statutory rate.... 35.0% 35.0% 35.0% Increase (decrease) resulting from: Percentage depletion............................... 77.7 9.6 (253.7) Disallowed interest expense........................ (6.5) (.4) -- Restricted stock vesting........................... -- (29.5) -- Accretion of preferred stock warrants.............. (24.5) (2.6) 1.9 Prior year tax return reconciliation............... 27.1 -- (61.2) State income taxes, net of federal benefit......... 8.3 1.2 5.4 Other, net......................................... (2.9) (.2) 9.6 ----- ----- ------ Provision for income taxes....................... 114.2% 13.1% (263.0)% ===== ===== ======
12. Pension and Postretirement Benefits The Company maintains a number of single-employer noncontributory defined benefit pension plans covering substantially all employees. The plans provide benefits based on each covered employee's years of qualifying service. The Company's funding policy is to contribute amounts within the range of the minimum required and maximum deductible contributions for each plan consistent with a goal of appropriate minimization of the unfunded projected benefit obligation. The majority of the Company's pension plans use a benefit level per year of service (hourly) with one plan using final average pay method (salaried). All Company plans use the projected unit credit cost method to determine the actuarial valuation. In addition, the Company provides defined benefit postretirement healthcare and life insurance benefits to substantially all employees. Covered employees become eligible for these benefits at retirement after meeting minimum age and service requirements. The projected future cost of providing postretirement benefits, such as healthcare and life insurance, is recognized as an expense as employees render services. The Company contributes to a Voluntary Employees' Beneficiary Association trust that will be used to partially fund health care benefits for future retirees. Benefits are funded to the extent contributions are tax deductible, which under current legislation is limited. In general, retiree health benefits are paid as covered expenses are incurred. F-21 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Net pension and postretirement cost consisted of the following for each of the three years in the period ended December 31, 1999:
Pension Benefits Postretirement Benefits ------------------------- -------------------------- 1997 1998 1999 1997 1998 1999 ------- ------- ------- -------- ------- ------- (In thousands) Service cost--benefits earned during the period...... $ 961 $ 920 $ 1,040 $ 162 $ 128 $ 144 Interest cost........... 3,636 3,791 3,886 1,073 958 946 Expected return on plan assets................. (3,548) (3,585) (3,739) (15) (18) (19) Net amortization and deferral............... 8 109 235 (447) (551) (449) ------- ------- ------- -------- ------- ------- Net pension and postretirement cost.. $ 1,057 $ 1,235 $ 1,422 $ 773 $ 517 $ 622 ======= ======= ======= ======== ======= =======
The changes in benefit obligations and plan assets, as well as the funded status of the Company's pension and postretirement plans at December 31, 1998 and 1999 were as follows:
Pension Benefits Postretirement Benefits ------------------ ------------------------ 1998 1999 1998 1999 -------- -------- ----------- ----------- (In thousands) Benefit obligation at January 1.............................. $ 51,857 $ 56,697 $ 15,280 $ 14,683 Service cost.................. 800 1,040 128 144 Interest cost................. 3,654 3,886 958 946 Actuarial..................... 2,877 (5,664) (1,016) (1,716) Acquisitions.................. 2,231 3,039 -- -- Benefits paid................. (4,722) (3,636) (859) (1,097) Other......................... -- 278 192 213 -------- -------- ----------- ----------- Benefit obligation at December 31............................. 56,697 55,640 14,683 13,173 -------- -------- ----------- ----------- Fair value of plan assets at January 1...................... 53,618 56,078 235 236 Actual return on plan assets.. 5,807 8,991 1 (38) Acquisitions.................. 1,335 4,871 -- -- Employer contributions........ 40 407 667 884 Benefits paid................. (4,722) (3,636) (859) (1,097) Other......................... -- -- 192 213 -------- -------- ----------- ----------- Fair value of plan assets at December 31.................... 56,078 66,711 236 198 -------- -------- ----------- ----------- Plan assets in excess (less than) benefit obligations at December 31............................. (619) 11,071 (14,447) (12,975) Unrecognized net loss (gain).. (3,393) (14,486) (5,575) (6,785) Unrecognized prior service cost......................... 536 763 -- -- -------- -------- ----------- ----------- Accrued benefit cost recognized in the Company's consolidated balance sheet before additional pension liability.................... (3,476) (2,652) (20,022) (19,760) -------- -------- ----------- ----------- Adjustment to recognize minimum pension liability.............. (212) -- -- -- -------- -------- ----------- ----------- Net accrued benefit cost recognized in the Company's consolidated balance sheet...................... $ (3,688) $ (2,652) $ (20,022) $ (19,760) ======== ======== =========== ===========
F-22 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In prior years, certain of the Company's pension plans were underfunded. At December 31, 1998, the projected benefit obligation of the underfunded plans was $17.9 million, the total fair value of assets was $14.7 million, and the accumulated benefit obligation was $17.3 million. At December 31, 1998, the accrued benefit cost recognized in the Company's consolidated balance sheet for these plans was $3.4 million. Effective December 31, 1999, the Company merged a number of these plans which eliminated their underfunded status. The adjustment to recognize the minimum pension liability on the Company's consolidated balance sheet of $212,000 at December 31, 1998 provides financial statement recognition to the unfunded status of the pension plans. The pension liability adjustment has been recorded as a long-term liability offset by an intangible asset, reduction to stockholder's equity and deferred taxes of $146,000, $40,000 and $26,000, respectively, at December 31, 1998. The following weighted-average assumptions were used to determine the Company's obligations under the plans:
Pension Postretirement Benefits Benefits ---------- ---------------- 1998 1999 1998 1999 ---- ---- ------- ------- Discount rate..................................... 6.75% 7.75% 6.75% 7.75% Long-term rate of compensation increase........... 3.50% 3.50% -- -- Long-term rate of return on plan assets........... 8.00% 8.00% 8.00% 8.00% Health care cost trend rate....................... -- -- 6.50% 6.00%
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 6.50% in 1998, 6.00% in 1999 and 6.00% in 2000, gradually declining to 3.00% by the year 2014 and remaining at that level thereafter. A one-percentage-point increase in the assumed health care cost trend rates for each year would increase the accumulated postretirement benefit obligation at December 31, 1999 and net postretirement health care cost (service cost and interest cost) for the year then ended by approximately $1.4 million and $134,000, respectively. A one-percentage-point decrease in the assumed health care cost trend rates for each year would decrease the accumulated postretirement benefit obligation at December 31, 1999 and net postretirement health care cost (service cost and interest cost) for the year then ended by approximately $1.1 million and $111,000, respectively. Certain hourly employees are covered under a multi-employer defined benefit pension plan. The pension cost recognized for these plans for each of the three years ended December 31, 1997, 1998 and 1999 totaled approximately $142,000, $147,000, and $176,000, respectively. The Company also sponsors a defined contribution plan covering certain employees. The Company contributes to the plan in two ways. For certain employees not covered by the defined benefit plan, the Company makes a contribution equal to 4% of their salary. The Company also contributes an employee match which can range from 25 to 100 cents, based on financial performance, for each dollar contributed by an employee, up to 8% of their earnings. Contributions for each of the three years ended December 31, 1997, 1998 and 1999 totaled approximately $470,000, $678,000 and $746,000, respectively. The Company also sponsors a defined contribution thrift plan for hourly employees to which employees may contribute up to 15% of their earnings. There is no contributing match for the thrift plan. F-23 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 13. Related Party Transactions Pursuant to an agreement between the Company and principals of D. George Harris & Associates, LLC ("DGH&A"), who are also stockholders of the Company's ultimate parent, DGH&A provides certain management advisory services to the Company. The Company paid approximately $500,000, $583,000 and $877,000 to DGH&A for each of the three years ended December 31, 1997, 1998 and 1999, respectively, associated with these management services. The agreement also provides that the Company will pay DGH&A an acquisition fee in the event of a business acquisition by the Company. The Company paid approximately $325,000 for services in connection with the acquisition of the Morie Assets during 1999. In addition, approximately $600,000 was paid to DGH&A during 1998 associated with the Better Materials Corporation and George F. Pettinos, Inc. acquisitions. The management advisory services and acquisition fees have been charged to selling, general and administrative expense during each of the respective periods noted above. Prior to the acquisition of Commercial Stone, certain operations of DGH&A were conducted as a subsidiary of the Company. Subsequent to the acquisition, the DGH&A operations have been handled separately from the Company. The Company does not have an ownership interest in DGH&A. Consequently, the DGH&A acquisition fee of approximately $1,387,000 associated with the acquisition of Commercial Stone was capitalized and allocated to mineral reserves as part of the purchase price. The agreement also provides that, at DGH&A's request, U.S. Silica provide DGH&A with an interest-free loan not to exceed $1.0 million annually. At December 31, 1999, a loan receivable to DGH&A of $1.0 million is currently outstanding. The loan is guaranteed by certain principals of DGH&A. In addition, a payable of approximately $898,000 to DGH&A, principally related to the Company's unpaid portion of the acquisition fee, existed at December 31, 1999. On occasion, the Company and its parent make non-interest bearing cash advances to each other. At December 31, 1998, the Company had a payable to its parent of approximately $1.1 million. At December 31, 1999, the Company had a receivable from its parent of approximately $834,000. 14. Silica Mining Lease On July 18, 1997, the Company settled a dispute concerning royalties related to a silica-mining lease. The terms in the agreement provided that U.S. Silica pay the lessor approximately $1.1 million in cash and property for retroactive royalties and legal fees. This amount was charged to cost of goods sold in 1997. The agreement further stipulates that future royalties be determined as a percentage of gross sales from the leased property. The lease, along with renewals, covers a period of thirty-six years. 15. Incentive Stock Compensation Under the terms of a repurchase agreement between Holdings and holders of Holdings' Class A Common Stock (the "Class A Holders"), the Class A Holders were required to sell some or all of their Class A Common Stock to Holdings at par value if the holders of Holdings' Series A and Series B Preferred Stock did not achieve a specified internal rate of return upon the occurrence of certain liquidity events as described in the Stockholders Agreement. In 1998, Holdings agreed to waive the repurchase requirements associated with the Class A Common Stock, which effectively gave the Class A Holders the right to put the Class A Common Stock back to Holdings for fair value F-24 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) consideration subject to certain conditions. This resulted in a $14.2 million one time, non-cash charge to the Company's operations, which was the difference between the fair market value of the Class A Common Stock and its par value at the time the repurchase agreement was waived. 16. Segment Information The Company operates in the industrial minerals and aggregates business segments, principally in the United States, and conducts limited operations in Canada. Industrial minerals includes the mining, processing and marketing of industrial minerals, principally silica, to a wide variety of end use markets, including foundry, glass, chemicals, fillers and extenders (primarily used in paints and coatings), building materials, ceramics, and oil and gas. Aggregates includes the mining, processing and marketing of high quality crushed stone, construction sand and gravel. The Company's customers use its aggregates for road construction and maintenance, other infrastructure projects and residential and commercial construction and to produce hot mixed asphalt and concrete products. The Company also uses its aggregate to produce hot mixed asphalt at production facilities the Company owns or operates. The industrial minerals and aggregates business segments constitute the reportable segments of the Company. The Company's management reviews operating company income to evaluate segment performance and allocate resources. General corporate expense (income), interest expense, the accretion of preferred stock warrants, other income (net of interest income) and the provision (benefit) for income taxes are not included in segment operating income since they are excluded from the measure of segment profitability reviewed by the Company's management. The Company's assets are managed based on segment and accordingly, asset information is reported for the commercial aggregates and industrial minerals segments. Corporate assets consist primarily of cash and cash equivalents, debt issuance costs and equipment. The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies. F-25 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Reportable segment information for each of the two years in the period ended December 31, 1999 was as follows:
1998 1999 -------- -------- (In thousands) Net sales: Aggregates................ $ 3,497 $ 49,907 Industrial Minerals....... 138,797 159,168 -------- -------- Total net sales......... $142,294 $209,075 ======== ======== Operating company income (loss): Aggregates................ $ (288) $ 6,610 Industrial Minerals....... (7,287) 12,476 -------- -------- Total operating company income (loss).......... (7,575) 19,086 General corporate (ex- pense) income............ 346 (579) -------- -------- Total operating income (loss)................. $ (7,229) $ 18,507 ======== ======== Depreciation, depletion and amortization expense: Aggregates................ $ 309 $ 6,328 Industrial Minerals....... 19,579 22,152 Corporate................. -- 1 -------- -------- Total depreciation, de- pletion and amortiza- tion expense........... $ 19,888 $ 28,481 ======== ======== Capital expenditures: Aggregates................ $ 517 $ 3,282 Industrial Minerals....... 8,882 11,120 Corporate................. -- 170 -------- -------- Total capital expendi- tures.................. $ 9,399 $ 14,572 ======== ========
Reportable segment information at December 31, 1998 and 1999 was as follows:
1998 1999 -------- -------- (In thousands) Assets: Aggregates................................................. $ 86,928 $323,470 Industrial Minerals........................................ 187,574 201,390 Corporate.................................................. 176 29,169 Elimination of intersegment receivables.................... -- (2,426) -------- -------- Total assets............................................. $274,678 $551,603 ======== ========
In December 1998, U.S. Silica acquired Better Materials Corporation. Prior to this acquisition, the Company conducted business solely in the "Industrial Minerals" segment. Accordingly, reportable segment information at December 31, 1997 and for the year then ended has not been presented. F-26 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 17. Guarantor Financial Data Except for the Company's two Canadian subsidiaries, each of the Company's subsidiaries have fully and unconditionally guaranteed the Company's Senior Subordinated Notes and Senior Secured Credit Facilities on a joint and several basis. Presented below is summarized combined financial information of the Company (on a stand-alone basis), the guarantor subsidiaries and nonguarantor subsidiaries at December 31, 1998 and 1999 and for the two years then ended.
Company Combined Combined Stand- Guarantor Nonguarantor Consolidation alone Subsidiaries Subsidiaries Adjustments Total -------- ------------ ------------ ------------- -------- (In thousands) At December 31, 1998 Current assets.......... $ 1 $ 50,412 $6,030 $ -- $ 56,443 Non-current assets...... -- 215,542 2,693 -- 218,235 Current liabilities..... 3 35,191 1,741 -- 36,935 Non-current liabilities............ -- 210,880 3,467 -- 214,347 Investments in subsidiaries........... 23,398 3,515 -- (26,913) -- Company Combined Combined Stand- Guarantor Nonguarantor Consolidation alone Subsidiaries Subsidiaries Adjustments Total -------- ------------ ------------ ------------- -------- (In thousands) At December 31, 1999 Current assets.......... $ 13,773 $ 89,538 $4,992 $ (16,898) $ 91,405 Non-current assets...... 115,116 444,314 2,468 (101,700) 460,198 Current liabilities..... 25,995 34,702 1,891 (16,898) 45,690 Non-current liabilities............ 282,604 258,656 2,018 (101,700) 441,578 Investments in subsidiaries........... 248,799 3,551 -- (252,350) -- Company Combined Combined Stand- Guarantor Nonguarantor Consolidation alone Subsidiaries Subsidiaries Adjustments Total -------- ------------ ------------ ------------- -------- (In thousands) For the Year Ended December 31, 1998 Net sales............... $ -- $138,758 $3,617 $ (81) $142,294 Cost of goods sold...... -- 95,461 3,098 (81) 98,478 Operating (loss) income................. (1) (7,110) (118) -- (7,229) Net (loss) income before extraordinary loss..... (14,667) (14,666) (17) 14,683 (14,667) Net (loss) income....... (16,769) (16,768) (17) 16,785 (16,769) Company Combined Combined Stand- Guarantor Nonguarantor Consolidation alone Subsidiaries Subsidiaries Adjustments Total -------- ------------ ------------ ------------- -------- (In thousands) For the Year Ended December 31, 1999 Net sales............... $ -- $200,460 $8,927 $ (312) $209,075 Cost of goods sold...... -- 133,138 7,418 (312) 140,244 Operating (loss) income................. (110) 23,277 94 (4,754) 18,507 Net income (loss) before extraordinary loss..... 5,753 14,315 48 (16,370) 3,746 Net income (loss)....... 5,753 11,568 22 (16,344) 999
Amounts are not intended to report results as if the subsidiaries were separate stand-alone entities. Comparative information for the year ended December 31, 1997 has not been presented because the nonguarantor subsidiary in that year was nonoperating and the assets and results of operations were immaterial. F-27 BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES (formerly USS Intermediate Holdco, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 18. Subsequent Event On February 29, 2000, the Company completed the sale of the stock of its Canadian subsidiary, George F. Pettinos (Canada) Limited for $3.2 million. The proceeds from the sale were used to retire the Canadian Term Facility (Note 6) and for general corporate uses. F-28 REPORT OF INDEPENDENT ACCOUNTANTS Better Materials Corporation Penns Park, Pennsylvania In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Better Materials Corporation and Subsidiaries at December 13, 1998 and January 3, 1998, and the results of their operations and their cash flows for the period ended December 13, 1998 and fiscal years ended January 3, 1998 and December 28, 1996, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audits 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania August 25, 1999 F-29 BETTER MATERIALS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS at December 13, 1998 and January 3, 1998
December January 3, 13, 1998 1998 ----------- ----------- ASSETS Cash and cash equivalents............................. $ 2,185,967 $ 803,366 Accounts receivable, less allowance for doubtful accounts of approximately $489,000 and $300,000, respectively......................................... 5,419,458 3,589,049 Other receivables..................................... 87,807 37,817 Inventories: Stone............................................... 897,671 979,224 Parts............................................... 408,092 409,512 Refundable income taxes............................... -- 286,157 Prepaid expenses...................................... 243,546 79,639 Deferred income taxes................................. 780,089 135,860 ----------- ----------- Total current assets.............................. 10,022,630 6,320,624 Property, plant and equipment, net of accumulated depreciation, depletion and amortization............. 10,609,154 9,124,424 Assets held for sale.................................. 800,000 800,000 Deferred income taxes................................. 138,439 64,140 Notes receivable...................................... -- 69,338 ----------- ----------- Total assets...................................... $21,570,223 $16,378,526 =========== =========== LIABILITIES Current installments of long-term debt................ $ 1,073,099 $ 1,149,289 Accounts payable...................................... 1,814,325 1,375,020 Other accrued expenses................................ 1,445,917 1,270,846 Income taxes payable.................................. 658,563 -- Accrued pension cost.................................. 214,330 235,561 ----------- ----------- Total current liabilities......................... 5,206,234 4,030,716 Accrued pension cost, net of current portion.......... 807,423 799,943 Long-term debt, net of current portion................ 3,637,231 3,357,809 ----------- ----------- Total liabilities................................. 9,650,888 8,188,468 ----------- ----------- Contingencies (Note 7) SHAREHOLDERS' EQUITY Class A common stock--voting; $.10 par value; authorized 100,000 shares; issued 44,024 shares...... 4,403 4,403 Class B common stock--nonvoting; $.10 par value; authorized 300,000 shares; issued 116,308 shares..... 11,631 11,631 Capital in excess of par.............................. 5,986 5,986 Retained earnings..................................... 12,430,733 8,701,456 ----------- ----------- 12,452,753 8,723,476 ----------- ----------- Less treasury stock at cost: Class A common stock--1,200 shares.................. 45,980 45,980 Class B common stock--13,498 shares................. 487,438 487,438 ----------- ----------- 533,418 533,418 ----------- ----------- Total shareholders' equity........................ 11,919,335 8,190,058 ----------- ----------- Total liabilities and shareholders' equity........ $21,570,223 $16,378,526 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. F-30 BETTER MATERIALS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME for the period ended December 13, 1998, and for the fiscal years ended January 3, 1998 and December 28, 1996
December December 13, January 3, 28, 1998 1998 1996 ----------- ----------- ----------- Sales of crushed stone and asphalt...... $26,255,889 $24,692,001 $21,617,034 ----------- ----------- ----------- Costs and expenses: Cost of sales and operating expenses.. 17,326,039 17,499,281 14,712,929 Depreciation, depletion and amortization......................... 1,148,284 1,046,207 1,056,549 Selling, general and administrative expenses............................. 3,286,985 4,394,304 4,136,824 ----------- ----------- ----------- 21,761,308 22,939,792 19,906,302 ----------- ----------- ----------- Income before interest expense, other (income) expense, net and income taxes.................................. 4,494,581 1,752,209 1,710,732 Interest expense........................ 629,955 514,862 464,984 Other (income) expense, net............. (51,288) 10,963 30,296 ----------- ----------- ----------- Income before income taxes.............. 3,915,914 1,226,384 1,215,452 Income tax provision (benefit).......... 186,637 267,971 (343,400) ----------- ----------- ----------- Net income.............................. $ 3,729,277 $ 958,413 $ 1,558,852 =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. F-31 BETTER MATERIALS CORPORATION AND SUBSCRIBERS CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY for the period ended December 13, 1998 and fiscal years ended January 3, 1998 and December 28, 1996
Common Stock Treasury Stock ----------------------------- ------------------------------------ Capital in Excess of Retained Class B Class A Class B Par Value Earnings Class A ------- Shares Amount Shares Amount Shares Amount Shares Amount ------ ------ ------- ------- ---------- ----------- ------ -------- Balances, December 30, 1995................... 44,024 $4,403 116,308 $11,631 $5,986 $ 6,184,191 (1,200) $(45,980) (13,498) $(487,438) Net income.............. 1,558,852 ----------- Balances, December 28, 1996................... 44,024 4,403 116,308 11,631 5,986 7,743,043 (1,200) (45,980) (13,498) (487, 438) Net income.............. 958,413 ----------- Balances, January 3, 1998................... 44,024 4,403 116,308 11,631 5,986 8,701,456 (1,200) (45,980) (13,498) (487, 438) Net income.............. 3,729,277 ----------- Balances, December 13, 1998................... 44,024 $4,403 116,308 $11,631 $5,986 $12,430,733 (1,200) $(45,980) (13,498) $(487,438) ====== ====== ======= ======= ====== =========== ====== ======== ======= =========
The accompanying notes are integral part of the consolidated financial statements. F-32 BETTER MATERIALS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the period ended December 13, 1998, and for the fiscal years ended January 3, 1998 and December 28, 1996
December 13, January 3, December 28, 1998 1998 1996 ------------ ----------- ------------ Cash flows from operating activities: Net income............................. $ 3,729,277 $ 958,413 $ 1,558,852 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization......................... 1,148,284 1,046,207 1,085,582 Provision for bad debts on accounts receivable........................... 90,000 169,160 79,400 Deferred income taxes................. (718,528) 200,000 (400,000) (Gain) loss on fixed assets........... (98,344) 14,602 (188,563) Changes in operating assets and liabilities: Accounts receivable.................. (1,920,409) 488,517 (1,841,903) Inventories.......................... 82,973 1,135,726 287,744 Prepaid expenses and refundable income taxes........................ 122,250 (2,271) 10,273 Accounts payable..................... 439,305 (150,113) (52,550) Income taxes payable................. 658,563 (884,277) 601,014 Other accrued expenses and accrued pension costs....................... 161,320 (235,089) 387,554 ----------- ----------- ----------- Net cash provided by operating activities......................... 3,694,691 2,740,875 1,527,403 ----------- ----------- ----------- Cash flows from investing activities: Purchase of property, plant and equipment............................. (2,725,420) (4,393,316) (691,244) Proceeds from sales of property, plant and equipment......................... 190,750 56,634 377,300 Payments received on notes and other receivable............................ 19,348 52,490 152,178 ----------- ----------- ----------- Net cash used in investing activities......................... (2,515,322) (4,284,192) (161,766) ----------- ----------- ----------- Cash flows from financing activities: Proceeds from term loan................ 1,300,000 1,800,000 -- Payments on long-term debt and term loans................................. (1,096,768) (1,232,763) (960,445) ----------- ----------- ----------- Net cash provided by (used in) financing activities............... 203,232 567,237 (960,445) ----------- ----------- ----------- Net increase (decrease) in cash......... 1,382,601 (976,080) 405,192 Cash at beginning of year............... 803,366 1,779,446 1,374,254 ----------- ----------- ----------- Cash at end of year..................... $ 2,185,967 $ 803,366 $ 1,779,446 =========== =========== =========== Supplemental disclosure of cash flow information: Cash paid for the year: Income taxes, net..................... $ 273 $ 410,629 $ 90,641 =========== =========== =========== Interest.............................. $ 482,298 $ 486,500 $ 464,110 =========== =========== =========== Nonmonetary transactions: Exchange of similar assets............ -- -- $ 26,465 =========== =========== =========== Property, plant and equipment acquisitions remaining in accounts payable...................... -- $ 453,373 -- =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. F-33 BETTER MATERIALS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Operations and Summary of Significant Accounting Policies Description of Operations The Company produces crushed stone and bituminous asphalt material, used in the production of concrete and asphalt products, construction and maintenance of highways and other infrastructure projects, and for commercial and residential construction. Sales of the Company's materials are limited up to a 100 mile area due to inherently high transportation costs associated with the industry. Principles of Consolidation The consolidated financial statements include the accounts of Better Materials Corporation (Company) and its wholly-owned subsidiaries, Bucks County Crushed Stone Co., Inc. (BCCS), BMC Trucking Company (BMCT), Industrial Trucking Service Corporation (ITSC), Chippewa Farms Corporation (CFC), Quarry Food, Inc., Shore Fast Line, Inc. (SFL) and Shore Stone Company, Inc. (SSC). In addition, Hi-Way Maintenance & Supply Co., Inc. (HMS) is a subsidiary of BCCS. All significant intercompany accounts and transactions have been eliminated in consolidation. Fiscal Year and Sale of the Business The Company's fiscal year ends on the Saturday nearest to December 31. Fiscal year 1997 ended January 3, 1998 and was comprised of 53 weeks; fiscal year 1996 ended December 28, 1996 and was comprised of 52 weeks. On December 14, 1998, all of the common stock of the Company and its wholly-owned subsidiaries, BCCS, BMCT, CFC and SSC was sold to U.S. Silica Company; such stock comprised principally all of the assets of the Company, accordingly, the Company's financial position and results of operations for 1998 are presented for the period January 4, 1998 through December 13, 1998. The stock of ITSC, Quarry Food, Inc., SFL and HMS was sold to a former shareholder. Accordingly, all liabilities and any contingent liabilities were assumed by the former shareholder. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates relate primarily to assets held for sale, allowance for uncollectable accounts receivable, valuation allowance on net deferred tax assets and depreciation, depletion and amortization. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. Inventories Inventories are valued at the lower of cost or market. Cost of parts is determined by the first-in, first-out method. Cost of stone inventory is determined principally by the average-cost method. F-34 BETTER MATERIALS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Property, Plant and Equipment Property, plant and equipment is carried at cost. Maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, any gain or loss is recognized currently. Depreciation, Amortization and Depletion Provisions for depreciation and amortization are being made over the estimated lives of the respective assets or lease terms, if shorter, using the straight-line method for financial statement purposes and accelerated methods for income tax purposes. Depletion of stone deposits is provided based upon the tonnage of rock quarried in relation to the estimated total tonnage available. Income Taxes The Company and its subsidiaries file a consolidated federal income tax return. The Company provides for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of assets and liabilities. Under SFAS No. 109, deferred tax assets and liabilities are based on the tax rates and laws enacted as of the balance sheet date. The effects of future changes in tax laws or rates are not anticipated. Pension Plan The Company and its wholly-owned subsidiaries sponsor two noncontributory defined benefit pension plans. The Industrial Trucking Service Corporation Plan (ITSC Plan) covers union employees, and the Better Materials Corporation Pension Plan (BMC Plan) covers substantially all employees other than those covered by the ITSC Plan. Under the BMC Plan pension expense is determined and funded on the basis of accepted actuarial methods. Under the ITSC Plan, contributions are based on hours worked by, or gross wages paid to, covered employees. The Company has no prior service liability under the ITSC Plan. Concentration of Credit Risk The Company grants credit to its customers which are primarily construction companies located in Pennsylvania and New Jersey. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for potential credit losses, which, when realized, have been within the range of management's expectations. The Company primarily invests its excess cash in interest bearing instruments with a major commercial bank. Cash available in these accounts may at times exceed FDIC levels. The Company performs periodic evaluations of the relative credit standing of the financial institution. F-35 BETTER MATERIALS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 2. Property, Plant and Equipment Property, plant and equipment consisted of the following categories:
December 13, January 3, 1998 1998 ------------ ------------ Buildings................................... $ 2,499,083 $ 2,499,082 Quarry equipment............................ 16,099,322 10,190,701 Construction-in-progress.................... -- 3,593,285 Transportation and garage equipment......... 1,078,586 1,427,376 Furniture, fixtures and other equipment..... 569,879 557,329 Land improvements........................... 1,406,099 1,342,835 ------------ ------------ 21,652,969 19,610,608 Less accumulated depreciation and amortization............................... (13,173,979) (12,655,162) ------------ ------------ 8,478,990 6,955,446 Land, including stone deposits, net of depletion.................................. 2,130,164 2,168,978 ------------ ------------ $ 10,609,154 $ 9,124,424 ============ ============
3. Debt Long-term debt consisted of the following:
December 13, January 3, 1998 1998 ------------ ---------- Term loan(a).................................... $1,481,758 $1,889,242 Bullet term loan(a)............................. 497,620 667,856 Loan payable to former shareholder for non- compete agreement(b)........................... -- 150,000 Equipment term loan(c).......................... 2,730,952 1,800,000 ---------- ---------- 4,710,330 4,507,098 Less installments due within one year........... 1,073,099 1,149,289 ---------- ---------- $3,637,231 $3,357,809 ========== ==========
- -------- (a) On March 1, 1998, the Company entered into a third amended loan and security agreement with a bank, which includes a revolving credit facility, a term loan, a bullet term loan and a line of credit facility. The revolving credit loan expired on February 28, 1999 and provides for maximum borrowing of $3,500,000, less any outstanding letter of credit commitments (at December 13, 1998, the Company was contingently liable, in the amount of $242,840, under standby letters of credit) with interest at the prime rate or at prime minus 1/4% to plus 1/2% depending on the Company's leverage ratio at the end of each quarter. In addition, the Company may otherwise elect to pay interest at adjusted LIBOR plus 2 1/2%. The choice of interest rates is determined by whether the Borrower has made an option to make an election to change to LIBOR. Borrowings are limited to an amount equal to the sum of 85% of eligible accounts receivable plus the lesser of $1,000,000 or 50% of finished stone inventory for eligible months. There were no amounts outstanding under the revolving credit loan at December 13, 1998 and January 3, 1998. F-36 BETTER MATERIALS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The term loan is repayable in equal monthly installments of $37,044 until maturity on March 31, 2002. At December 13, 1998, the outstanding principal balance bears interest at a fixed rate of 8.35%. The bullet term loan, or second term loan, is repayable from the net proceeds from asset sales of the Company's discontinued operations. This loan bears interest at a fixed rate of 8.35%. Pending receipts of net proceeds from asset sales, the unpaid balance of the bullet term loan is payable as a term loan with a seven-year amortization period, repayable in equal monthly installments of $15,476, starting November 1, 1996, with a balloon payment on November 1, 2001. The principal balance outstanding as of December 13, 1998 was $497,620. The line of credit facility allows the Company to borrow up to $500,000 for capitalized expenditures. Each borrowing is payable in equal monthly installments not to exceed sixty months from the funding date. Each advance under the line bears interest at a fixed rate or a floating rate based on the bank's prime rate plus 0% to 3/4% depending upon the Company's leverage ratio at the end of each quarter. There were no amounts outstanding under the line of credit facility at December 13, 1998 and January 3, 1998. The borrowings under the agreement are collateralized by substantially all assets of the Company. In addition, the agreement contains, among other provisions, requirements for maintaining and meeting certain financial covenants. The two most restrictive covenants require the ratio of total liabilities to tangible net worth not to exceed 2.00 to 1; secondly, the ratio of cash flow to the sum of fixed obligations cannot be less than 1.20 to 1 measured quarterly based upon a rolling four-quarter basis. (b) On April 22, 1991, a payment in respect to a covenant not to compete was made for $150,000 with the balance of $750,000 payable over the next five years in equal installments. A revised agreement was entered into in 1994 which called for the remaining payments to be paid annually beginning April 22, 1996. (c) In May 1997, the Company entered into an equipment loan agreement which provides for borrowings up to $4,000,000, at an interest rate equal to the bank's prime rate or at prime plus 0% to 3/4% depending on the Company's leverage ratio at the end of each calendar quarter (7.75% and 8.5% at December 13, 1998 and January 3, 1998, respectively). On March 1, 1998, the Company converted the amount outstanding on the equipment loan to a term loan with a seven-year amortization period, repayable in equal monthly installments of $36,905, starting on March 1, 1998, with a balloon payment on March 1, 2003. Amounts payable on the long-term debt under renegotiated terms during each of the five years 1999 through 2003 are $1,073,099, $1,073,098, $1,013,580, $591,031 and $959,522, respectively. All bank debt, except the outstanding letter of credit commitments, was paid off on December 14, 1998 with proceeds from the sale of the Company and subsidiaries (see Note 10). 4. Leases The Company leases certain quarry equipment and office equipment under operating lease arrangements which expire between 1999 and 2002. Certain of the agreements include options to purchase the equipment for the fair market value at the end of the original lease terms. Total rent expense under these leases was $549,831 for the period ended December 13, 1998, and $585,408 and $656,897 for fiscal years ended January 3, 1998 and December 26, 1996, respectively. F-37 BETTER MATERIALS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) At December 13, 1998, annual future minimum lease payments under operating leases were as follows:
Operating Minimum lease payments Leases ---------------------- --------- December 14, 1998 through December 31, 1998..................... $ 24,460 1999.......................................................... 268,917 2000.......................................................... 60,933 2001.......................................................... 36,420 2002.......................................................... 30,161 -------- Total minimum lease payments.................................... $420,891 ========
5. Income Taxes The components of the net deferred tax asset at December 13, 1998 and January 3, 1998 are as follows:
1998 1997 ---- ---- Deferred tax asset: Current: Allowance for doubtful accounts.................. $ 197,390 $ 170,686 Inventory........................................ 80,804 127,818 Accrued expenses................................. 490,069 590,734 Net operating loss carryforwards................. 11,826 76,957 --------- --------- 780,089 966,195 Valuation allowance.............................. -- (830,335) --------- --------- Net current deferred tax assets................ $ 780,089 $ 135,860 ========= ========= Long-term: Pension costs.................................... 326,199 392,506 Alternative minimum tax credits.................. 270,215 134,918 Net operating loss carryforwards, net of current portion......................................... 14,451 208,257 Depreciable and depletable assets................ (469,426) (279,576) --------- --------- 141,439 456,105 Valuation allowance.............................. (3,000) (391,965) --------- --------- Net long-term deferred tax assets.............. $ 138,439 $ 64,140 ========= =========
Realization of the net deferred tax asset is dependent on generating sufficient taxable income prior to expiration of net operating loss carryforwards. Based on estimated future taxable income, management has estimated the net deferred tax assets that are more likely than not to be realized. The change in the valuation allowance in 1998 is primarily the result of the realization of deferred tax assets in 1998 and the change in the anticipated utilization of net operating loss carryforwards to offset future estimated taxable income. F-38 BETTER MATERIALS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The components of the provision (benefit) for income taxes are as follows:
January December 13, 3, December 28, 1998 1998 1996 ------------ -------- ------------ Current provision (benefit): Federal.............................. $ 698,897 $ 98,314 $ 18,100 State................................ 206,268 (30,343) 38,500 Deferred expense (benefit)............. (718,528) 200,000 (400,000) --------- -------- --------- $ 186,637 $267,971 $(343,400) ========= ======== =========
Reconciliation of the provision (benefit) for income taxes at the U.S. Federal statutory rate to the effective rate are as follows:
December 13, January 3, December 28, 1998 1998 1996 ------------ ---------- ------------ Federal statutory tax rate.......... 34.0% 34.0% 34.0% Percentage depletion................ (6.3) (14.7) (13.4) State income taxes, net of federal tax benefit........................ 3.5 (1.3) 1.6 Adjustment to valuation allowance... (31.5) 5.5 (42.0) Nondeductible items and other....... 5.1 (0.3) 2.9 ----- ----- ----- Effective tax rate.................. 4.8% 23.2% (16.9)% ===== ===== =====
At December 13, 1998, the Company has approximately $270,000 of alternative minimum tax credits. The Company has net operating loss carryforwards for New Jersey income tax purposes of approximately $437,950 which are available to offset future taxable income through 2003. 6. Pension Plan Costs The following items are the components of the net pension cost:
1998 1997 1996 --------- --------- -------- Service cost............................... $ 111,472 $ 85,859 $ 95,119 Interest cost.............................. 117,170 103,890 121,826 Actual return on plan assets............... (134,924) (108,382) (64,861) Net amortization and deferral.............. 125,683 96,466 29,587 --------- --------- -------- Net pension cost........................... $ 219,401 $ 177,833 $181,671 ========= ========= ========
F-39 BETTER MATERIALS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The funded status of the plans at December 13, 1998 and January 3, 1998 is shown in the table below:
1998 1997 ----------- ----------- Actuarial present value of benefit obligation: Vested....................................... $(1,604,047) $(1,400,057) Nonvested.................................... (9,639) (8,005) ----------- ----------- Accumulated benefit obligation................. (1,613,686) (1,408,062) Projected future salary increases.............. (617,181) (553,400) ----------- ----------- Projected benefit obligation................... (2,230,867) (1,961,462) Fair value of plan assets...................... 1,335,212 1,069,178 ----------- ----------- Plan assets less than projected benefit obligation.................................... (895,655) (892,284) Unrecognized transition amount................. 362,538 434,846 Unrecognized net gain.......................... (488,636) (578,066) ----------- ----------- Accrued pension cost....................... $(1,021,753) $(1,035,504) =========== ===========
Assets of the plans are primarily invested in money funds, bonds, certificates of deposit and stocks. Assumptions used in calculating the actuarial present value of the projected benefit obligations as of December 13, 1998 and January 3, 1998 and the net periodic pension costs for the period ended December 13, 1998 and fiscal years ended January 3, 1998 and December 28, 1996 were as follows:
1998 1997 1996 --------- ---- ---- Discount rate....................................... 6.50-6.75% 7.0% 7.0% Rate of increase in future compensation levels...... 3.50 5.0 5.0 Expected long-term rate of return on assets......... 7.50-8.00 8.0 8.0
In addition to the defined benefit plan described above, the Company also sponsors a qualified defined contribution 401(k) plan to all full-time nonunion employees. Participants may make voluntary contributions to the plan up to 15% of their compensation. The Company's contribution is determined by the Executive Committee based upon assessment of the Company's fiscal year's profitability as related to pre-established financial objectives. There were no Company contributions made to the plan in 1998, 1997 and 1996. 7. Contingencies On March 4, 1985, the Company and a subsidiary company received two Directives and Notices of Violation (Directives) from the State of New Jersey relating to two former waste disposal sites in Woodland Township, New Jersey. The Directives indicate that the Company and its subsidiary and other respondents were in violation of the Spill Compensation and Control Act. In connection with this matter, certain companies filed a complaint against the Company, its subsidiary and at least 50 unnamed defendants. The complaint alleges that plaintiffs have incurred substantial costs in connection with the remediation or cleanup of the sites and seeks damages equal to past response costs and all future response costs to be incurred by plaintiffs. This lawsuit has been settled pursuant to a Settlement Agreement dated as of December 21, 1994. As part of the Settlement Agreement, plaintiffs released the Company and its subsidiaries, with F-40 BETTER MATERIALS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) the sole exception of ITSC, from all claims which were or could have been asserted by plaintiffs in this lawsuit. Pursuant to the Settlement Agreement, ITSC entered into a Consent Judgment on January 11, 1995 in favor of plaintiffs for approximately $20 million plus 40% of any amounts that plaintiffs may incur from and after July 24, 1994 for response costs or other damages related to or in connection with the Woodland Sites. However, with respect to such Consent Judgment, plaintiffs agreed not to seek to recover against any assets, properties or rights of ITSC other than against amounts, if any, recovered by ITSC as indemnity in litigation filed by it and the Company against certain of their insurance carriers. ITSC is required to vigorously prosecute the litigation against the insurance carriers and ITSC, first, and the Company, secondarily, are required to pay all attorneys' fees and costs in this litigation up to an aggregate total not to exceed $1.5 million. The Company and ITSC have spent and charged to expense $1,275,399 towards the $1.5 million aggregate cap through 1998. In addition, the Company has estimated additional costs of $224,601 and has accrued that amount as of December 13, 1998 ($401,268 as of January 3, 1998). The ultimate cost, however, will depend on how the litigation progresses. The Company and ITSC are also seeking recovery from the insurance carriers of past and future legal costs associated with this case. To date, the Company and ITSC have settled with two insurance carriers for $4,371,000. Of this amount $3,786,900 was remitted to the plaintiffs and $584,100 was retained by the Company and its subsidiary for past legal costs as well as any potential future costs or claims. Management believes, based in part on discussions with legal counsel, that the ultimate outcome will not have a material adverse impact on the Company's financial condition or future results of operations or cash flows. 8. Receivables From Related Parties Included in other receivables are receivables from shareholder in the amount of $57,067 in 1998. Included in notes receivable are receivables from shareholders in the amount of $69,338 in 1997. The notes are uncollateralized and are payable on demand. 9. Subsequent Event On December 14, 1998 all of the common stock of the Company was sold to U.S. Silica Company, which included the following wholly-owned subsidiaries: Bucks County Crushed Stone Company; BMC Trucking Company; Chippewa Farms Corporation and Shore Stone Company. Also, on the same date the stock of Industrial Trucking Service Corporation; Quarry Food, Inc.; Shore Fast Line, Inc.; and Hi-Way Maintenance & Supply Company, Inc. was sold to a former shareholder. Accordingly, all liabilities and any contingent liabilities were assumed by the former shareholder. F-41 INDEPENDENT AUDITORS' REPORT Board of Directors Commercial Stone Co., Inc. Connellsville, Pennsylvania We have audited the accompanying combined balance sheets of Commercial Stone Co., Inc. and Commercial Aggregates Transportation & Sales, L.P. (the Companies) as of March 31, 1999 and 1998, and the related combined statements of operations, changes in owners' equity and cash flows for the years ended March 31, 1999, 1998 and 1997 that appear in this Registration Statement. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the combined 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 combined financial statements referred to above present fairly, in all material respects, the combined financial position of Commercial Stone Co., Inc. and Commercial Aggregates Transportation & Sales, L.P. as of March 31, 1999 and 1998 and the results of their operations and their cash flows for the years ended March 31, 1999, 1998 and 1997 in conformity with generally accepted accounting principles. /s/ Schneider Downs & Co., Inc. Pittsburgh, Pennsylvania September 8, 1999 F-42 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. COMBINED STATEMENTS OF OPERATIONS
Years Ended March 31 ------------------------------------- 1999 1998 1997 ----------- ----------- ----------- SALES................................... $41,953,242 $37,753,036 $26,718,926 COSTS AND EXPENSES Costs of goods sold and operating expenses............................. 25,500,999 24,909,817 17,965,563 Depreciation, depletion and amortization......................... 3,220,522 2,817,324 2,598,544 General and administrative expenses... 3,239,303 2,838,887 2,273,349 ----------- ----------- ----------- 31,960,824 30,566,028 22,837,456 ----------- ----------- ----------- Income From Operations................ 9,992,418 7,187,008 3,881,470 OTHER INCOME, NET....................... 474,543 587,247 493,300 INTEREST EXPENSE........................ (247,172) (248,342) (256,147) ----------- ----------- ----------- 227,371 338,905 237,153 ----------- ----------- ----------- Net Income............................ $10,219,789 $ 7,525,913 $ 4,118,623 =========== =========== ===========
See notes to the combined financial statements. F-43 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. COMBINED BALANCE SHEETS
March 31 ------------------------ 1999 1998 ------------ ----------- ASSETS CURRENT ASSETS Cash and cash equivalents........................... $ 9,038,795 $ 5,259,985 Accounts receivable................................. 3,545,356 3,467,325 Inventory........................................... 2,659,150 2,626,731 Prepaid expenses.................................... 202,869 258,041 ------------ ----------- Total Current Assets.............................. 15,446,170 11,612,082 OTHER ASSETS.......................................... 3,764,586 1,532,851 PROPERTY, PLANT AND EQUIPMENT, NET.................... 18,353,306 19,072,992 ------------ ----------- $ 37,564,062 $32,217,925 ============ =========== LIABILITIES CURRENT LIABILITIES Payments due within one year on long-term debt...... $ 15,609 $ 14,341 Accounts payable.................................... 1,840,494 3,352,773 Accrued liabilities: Federal tax deposit payable....................... 1,216,108 -- Other............................................. 464,348 600,673 ------------ ----------- 1,680,456 600,673 ------------ ----------- Total Current Liabilities......................... 3,536,559 3,967,787 LONG-TERM DEBT........................................ 4,060,902 4,076,510 ACCRUED RECLAMATION COSTS............................. 508,866 485,527 COMMITMENTS AND CONTINGENCIES......................... -- -- OWNERS' EQUITY COMMON STOCK Class A Voting--Par value $5 per share, authorized, issued and outstanding 1,200 shares................ 6,000 6,000 Class B Nonvoting--Par value $5 per share, authorized, issued and outstanding 22,800 shares... 114,000 114,000 ------------ ----------- 120,000 120,000 RETAINED EARNINGS AND PARTNERS' CAPITAL............... 29,337,735 23,568,101 ------------ ----------- 29,457,735 23,688,101 ------------ ----------- $37,564,062 $32,217,925 ============ ===========
See notes to the combined financial statements. F-44 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY FOR THE YEARS ENDED MARCH 31, 1999, 1998 AND 1997
Retained Earnings Common CATS and Combined Stock Common Retained Partners' Partners' Owners' Shares(1) Stock(1) Earnings(1) Capital(2) Capital Equity --------- -------- ----------- ---------- ----------- ----------- BALANCE--March 31, 1996................... 24,000 $120,000 $24,608,152 $ 369,614 $24,977,766 $25,097,766 Shareholder and partner distributions......... -- -- (4,793,364) (777,153) (5,570,517) (5,570,517) Net income............. -- -- 3,567,830 550,793 4,118,623 4,118,623 ------ -------- ----------- --------- ----------- ----------- BALANCE--March 31, 1997................... 24,000 120,000 23,382,618 143,254 23,525,872 23,645,872 Shareholder and partner distributions......... -- -- (7,047,592) (436,092) (7,483,684) (7,483,684) Net income............. -- -- 6,870,744 655,169 7,525,913 7,525,913 ------ -------- ----------- --------- ----------- ----------- BALANCE--March 31, 1998................... 24,000 120,000 23,205,770 362,331 23,568,101 23,688,101 Shareholder and partner distributions......... -- -- (3,788,192) (661,963) (4,450,155) (4,450,155) Net income............. -- -- 9,480,076 739,713 10,219,789 10,219,789 ------ -------- ----------- --------- ----------- ----------- BALANCE--March 31, 1999................... 24,000 $120,000 $28,897,654 $ 440,081 $29,337,735 $29,457,735 ====== ======== =========== ========= =========== ===========
- -------- (1) Commercial Stone Co., Inc. (2) Commercial Aggregates Transportation & Sales, L.P. See notes to the combined financial statements. F-45 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. COMBINED STATEMENTS OF CASH FLOWS
Years Ended March 31 ------------------------------------- 1999 1998 1997 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income............................ $10,219,789 $ 7,525,913 $ 4,118,623 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization....................... 3,220,522 2,817,324 2,598,544 Changes in assets and liabilities: Accounts receivable................. 181,613 1,054,624 1,174,456 Inventory........................... (32,419) 7,822 381,343 Prepaid expenses and other assets... (1,475,829) (141,832) (235,362) Accounts payable.................... (305,279) 201,682 (11,969) Accrued liabilities................. 829,184 133,840 (130,113) Other............................... 9,000 1,000 -- ----------- ----------- ----------- Net Cash Provided By Operating Activities....................... 12,646,581 11,600,373 7,895,522 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment, net....................... (3,703,276) (4,341,631) (3,315,802) Issuance of notes receivable.......... (700,000) (925,000) -- ----------- ----------- ----------- Net Cash Used In Investing Activities....................... (4,403,276) (5,266,631) (3,315,802) CASH FLOWS FROM FINANCING ACTIVITIES Distributions to stockholders and partners............................. (4,450,155) (7,483,684) (5,570,517) Payments on long-term debt............ (14,340) (13,176) (12,104) ----------- ----------- ----------- Net Cash Used In Financing Activities....................... (4,464,495) (7,496,860) (5,582,621) ----------- ----------- ----------- Net Increase (Decrease) In Cash and Cash Equivalents............. 3,778,810 (1,163,118) (1,002,901) CASH AND CASH EQUIVALENTS Beginning of year..................... 5,259,985 6,423,103 7,426,004 ----------- ----------- ----------- End of year........................... $ 9,038,795 $ 5,259,985 $ 6,423,103 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for interest............................. $ 247,172 $ 248,342 $ 256,147 =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION Included in accounts payable at March 31, 1999, 1998 and 1997 are amounts for the purchase of property, plant and equipment paid in the subsequent period. These balances are $642,000, $1,849,000 and $886,000, respectively. See notes to the combined financial statements. F-46 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. NOTES TO COMBINED FINANCIAL STATEMENTS MARCH 31, 1999, 1998 AND 1997 1. Organization The combined financial statements consist of Commercial Stone Co., Inc. (CSC) and Commercial Aggregates Transportation & Sales, L.P. (CATS) (collectively referred to as "the Companies"). These two companies are affiliated through ownership. The combined financial statements are being prepared pursuant to a purchase agreement dated August 26, 1999 by and among U.S. Silica Company as buyer and the owners of the Companies as sellers. CSC operates two stone quarries (mines) and three asphalt plants in Southwestern Pennsylvania. The asphalt plants operate under the trade name of Commercial Asphalt Products. CATS is a transportation and sales company whose revenues are generated through contracts with independent haulers of aggregates. CATS contracts for a portion of CSC's hauling services between CSC's quarries and asphalt plants as well as for certain CSC customer shipments. 2. Summary of Significant Accounting Policies A summary of significant accounting policies applied by management in the preparation of the accompanying financial statements follows. Principles of Combination--The combined financial statements include the results of operations and financial position of CSC and CATS. The CATS results of operations and financial position are presented on a calendar year basis and include the twelve months ended December 31, 1998, 1997 and 1996. No significant transactions have occurred with CATS during the three-month period ended March 31, 1999 that would require disclosure within these combined financial statements. All intercompany transactions have been eliminated. Management Estimates--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents--The Companies consider all highly liquid debt instruments with purchased maturities of three months or less to be cash equivalents. The Companies maintain, at several financial institutions, cash and cash equivalents that exceed federally insured amounts at times. Inventory--Inventory is stated at the lower of cost, determined on the first-in, first-out (FIFO) method, or market. Property, Plant and Equipment--Property, plant and equipment are stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the assets. Depletion is provided for mineral deposits on the units-of-production method. Repairs and maintenance, which do not extend the lives of the applicable assets, are charged to expense as incurred. Profit or loss resulting from the retirement or other disposition of assets is included in income. Accrued Reclamation Costs--Reclamation costs are expensed over the productive life of the mines on the units-of-production method. F-47 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) MARCH 31, 1999, 1998 AND 1997 Revenue Recognition--The Companies generally recognize revenue upon shipment of aggregates to customers or performance of services. Income Taxes--CSC has elected to be taxed as an S Corporation for federal and state tax purposes under the provisions of the Internal Revenue Code and the Commonwealth of Pennsylvania, respectively. CATS is taxed as a limited partnership. Under both of these provisions, the Companies do not pay corporate net income taxes on their taxable income. Instead, the stockholders and partners of each company reflect their proportionate share of the taxable income on their personal income tax returns. It is the Companies' policy to make stockholder and partnership distributions necessary to satisfy the stockholders' and partners' income tax obligations in relation to their proportionate share of the Companies' taxable income. In order to retain the CSC's fiscal year-end of March 31, CSC makes federal tax deposits as required by Section 444 of the Internal Revenue Code. At March 31, 1999 and 1998, other assets included approximately $1,792,000 and $576,000 in connection with these deposits. The Companies combined book basis of assets and liabilities exceeds the tax basis by approximately $5,460,000 and $5,146,000 at March 31, 1999 and 1998, respectively. 3. Inventory Inventory consists of the following:
March 31 --------------------- 1999 1998 ---------- ---------- Mining division stone............................. $1,715,432 $1,957,177 Asphalt division stone............................ 763,936 634,979 Materials brokerage............................... 108,181 -- Cold patch asphalt................................ 71,601 34,575 ---------- ---------- $2,659,150 $2,626,731 ========== ==========
4. Property, Plant and Equipment Property, plant and equipment consists of the following:
March 31 ----------------------- 1999 1998 ----------- ----------- Machinery and equipment......................... $36,046,837 $34,566,360 Office equipment................................ 611,081 568,084 Light trucks and automobiles.................... 626,390 602,662 Buildings and improvements...................... 2,771,627 2,451,368 Land and mineral deposits....................... 1,713,365 1,638,782 ----------- ----------- 41,769,300 39,827,256 Less--Accumulated depreciation, amortization and depletion...................................... 23,568,722 21,367,396 ----------- ----------- 18,200,578 18,459,860 Construction in progress........................ 152,728 613,132 ----------- ----------- $18,353,306 $19,072,992 =========== ===========
F-48 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) MARCH 31, 1999, 1998 AND 1997 5. Long-Term Debt Long-term debt consists of the following:
March 31 --------------------- 1999 1998 ---------- ---------- Note payable to Dell H. Shearer Marital Trust, due August 15, 2001 (see Note 6)...................... $4,000,000 $4,000,000 Mortgage payable to an individual, payable in monthly installments of $1,793, including interest at 8.5%, collateralized by real property in Washington County, Pennsylvania................... 76,511 90,851 ---------- ---------- 4,076,511 4,090,851 Less--Payments due within one year................. 15,609 14,341 ---------- ---------- $4,060,902 $4,076,510 ========== ==========
6. Related Party Transactions All of the parties mentioned below are related through common ownership. Related party transactions arise between the various entities in the ordinary course of business and are summarized as follows: CSC has a note receivable from Three Rivers Marine & Rail Terminals, L.P. (TRM & RT). The balance outstanding is $1,625,000 and $925,000 at March 31, 1999 and 1998, respectively. There are no fixed repayment terms until maturity in June 2000. Interest at 6% is payable monthly and aggregated $81,000 and $14,000 for the years ended March 31, 1999 and 1998, respectively. There was no balance outstanding during the year ended March 31, 1997. CSC has a note payable to Dell H. Shearer Marital Trust, which has no fixed repayment terms until maturity in August 2001. Interest at 6% is payable monthly and aggregated $240,000 for the three years ended March 31, 1999, 1998 and 1997, respectively. CSC leases the right to mine certain mineral deposits from a related Trust and pays royalties based on units of production. CSC paid royalties of approximately $462,000, $484,000 and $316,000 to the Trust for the three years ended March 31, 1999, 1998 and 1997, respectively. 7. Employee Benefit Plans CSC provides retirement benefits to its union employees under a multi- employer pension plan. Contributions are based on an amount for each hour worked. During the three years ended March 31, 1999, 1998 and 1997, CSC contributed approximately $304,000, $244,000 and $185,000, respectively. CSC also maintains a noncontributory, defined benefit pension plan covering all eligible nonunion employees. Benefits under the Plan are actuarially computed and include a provision for past service costs. CSC makes contributions to the Plan equal to the amounts accrued for pension expense when F-49 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) MARCH 31, 1999, 1998 AND 1997 required. Plan assets consist of corporate equity securities and various corporate and government debt obligations. The Plan was overfunded for the three years ended March 31, 1999, 1998 and 1997; thus, CSC did not make any contribution to the Plan. The following sets forth the change in benefit obligation, change in plan assets, funded status, combined Balance Sheets presentation, net periodic pension benefit cost and the relevant assumptions for the Company's defined benefit pension plan at March 31:
March 31 ------------------------ 1999 1998 ----------- ----------- Change in Benefit Obligation: Benefit obligation at beginning of year...... $ 1,784,449 $ 1,600,900 Service cost................................. 200,515 147,095 Interest cost................................ 144,941 114,708 Liability loss (gain)........................ 307,100 (50,887) Benefits paid................................ (25,491) (27,367) ----------- ----------- Benefit Obligation at End of Year............ $ 2,411,514 $ 1,784,449 =========== =========== Change in Plan Assets: Fair value of plan assets at beginning of year........................................ $ 3,661,318 $ 2,910,207 Benefits paid................................ (25,491) (27,367) Investment return............................ 524,822 778,478 ----------- ----------- Fair Value of Plan Assets at End of Year..... $ 4,160,649 $ 3,661,318 =========== =========== Funded Status: Funded status................................ $ 1,749,135 $ 1,876,868 Unrecognized gain............................ (1,067,535) (1,135,035) Prior service costs not yet recognized....... (275,279) (293,631) Unrecognized net transition obligation....... (301,525) (322,509) ----------- ----------- Prepaid Pension Cost......................... $ 104,796 $ 125,693 =========== =========== Amounts Recognized in Combined Balance Sheets: Prepaid Benefit Cost......................... $ 104,796 $ 125,693 =========== ===========
F-50 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) MARCH 31, 1999, 1998 AND 1997
March 31 ------------------------------- 1999 1998 1997 --------- --------- --------- Net periodic pension benefit cost: Service cost............................ $ 200,515 $ 147,095 $ 142,730 Interest cost........................... 144,941 114,708 102,400 Expected return on assets............... (255,602) (217,155) (195,825) Transition asset recognition............ (20,983) (20,983) (20,983) Prior service cost amortization......... (18,352) (18,352) (18,352) Net gain recognition.................... (29,622) (16,822) (8,483) --------- --------- --------- Net periodic pension cost (income)........ $ 20,897 $ (11,509) $ 1,487 ========= ========= ========= Weighted-average assumptions: Discount rate........................... 7.0% 7.5% 7.5% Expected return on plan assets.......... 7.0% 7.5% 7.5% Rate of compensation increase........... 5.0% 5.0% 5.0%
F-51 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) MARCH 31, 1999, 1998 AND 1997 8. Segment Information The Companies have defined their segments into two main areas: quarries and asphalt. These segments are organized under the supervision of the Companies' executive management team and are evaluated based on the following information presented: customer sales, inter-segment sales, depreciation, depletion and amortization expense and gross profit. All inter-segment transactions are eliminated to arrive at the combined Companies' total. The quarries segment operates two stone quarries that mine stone used in the asphalt and construction businesses. The asphalt segment operates three asphalt plants in Southwestern Pennsylvania under the trade name of Commercial Asphalt Products. The asphalt segment purchases the majority of its stone from the quarries segment. The Companies grant credit to their customers, the majority of whom are in the construction industry in Southwestern Pennsylvania. Credit is generally granted on open account. As permitted by Statement of Financial Accounting Standards No. 131 "Disclosure About Segments of an Enterprise and Related Information," certain information not routinely used in the management of these segments by executive management has been excluded.
Quarries Asphalt Other Eliminations Total ----------- ----------- ---------- ------------ ----------- 1999 Segment Information By Group Customer sales.................. $22,254,871 $23,338,127 $1,771,174 $(5,410,930) $41,953,242 Inter-segment sales..... 5,068,815 -- 342,115 (5,410,930) -- Depreciation, depletion and amortization expense................ 2,188,858 1,009,745 21,919 -- 3,220,522 Gross profit............ 6,948,878 5,197,318 1,129,688 (39,603) 13,236,281 1998 Segment Information by Group Customer sales.................. $19,966,871 $22,149,911 $ 973,305 $(5,337,051) $37,753,036 Inter-segment sales..... 4,957,859 -- 379,192 (5,337,051) -- Depreciation, depletion and amortization expense................ 2,389,335 423,429 4,560 -- 2,817,324 Gross profit............ 5,522,104 3,728,662 783,563 (3,874) 10,030,455 1997 Segment Information by Group Customer sales.................. $16,767,307 $13,265,181 $ 783,057 $(4,096,619) $26,718,926 Inter-segment sales..... 3,784,403 -- 312,216 (4,096,619) -- Depreciation, depletion and amortization expense................ 1,966,319 627,665 4,560 -- 2,598,544 Gross profit............ 4,636,516 844,879 663,427 14,557 6,159,379
9. Commitments Subsequent to March 31, 1999, CSC purchased approximately 228 acres of land and related mineral deposits for approximately $1,645,000. In September 1998, CSC entered into a 25-year lease for the right to mine certain mineral deposits. The guaranteed minimum annual rent is $20,000 and is payable on July 1 of each year. The lease requires CSC to pay a royalty on the average selling price of all extracted minerals from the leased property. The guaranteed minimum rent shall be credited and applied to any royalties due under this agreement. CSC incurred expenses of $10,000 relating to this lease for the year ended March 31, 1999. F-52 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) MARCH 31, 1999, 1998 AND 1997 In November 1998, CSC entered into a contract totaling $509,000 for expansion of an asphalt plant. CSC has paid a $100,000 deposit on the contract, which was classified as construction in progress. Management anticipates completion of the contract during the fiscal year ending March 31, 2000. 10. Contingency In November 1998, CSC filed petitions with the Pennsylvania Commonwealth Court seeking review of a Board of Finance and Revenue decision denying CSC's refund of capital stock tax paid for the years ended March 31, 1993, 1994 and 1995. It is CSC's position that it was entitled to claim a manufacturing exemption from Pennsylvania capital stock tax for each of these years. In addition, the Commonwealth of Pennsylvania has issued a settlement notice for the years ended March 31, 1996 and 1997, claiming that CSC is not entitled to the manufacturing exemption claimed for these tax years. CSC is contesting these settlement notices. The capital stock tax issue for the years ended March 31, 1998 and 1999 remains unsettled. In connection with the petitions filed in November 1998, CSC is claiming refunds of previously paid taxes approximating $536,000. CSC intends to vigorously pursue its position with the Commonwealth of Pennsylvania. However, were CSC's position not to be upheld, CSC would not receive any refund and would be required to pay to the Commonwealth of Pennsylvania an additional $623,000 of capital stock tax for the years ended March 31, 1996, 1997, 1998 and 1999 plus any accrued interest. None of these amounts have been recorded in the financial statements, as it is management's position that CSC's claim for a manufacturing exemption will be upheld. F-53 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. CONDENSED COMBINED BALANCE SHEETS
September 30, 1999 ------------- ASSETS (Unaudited) CURRENT ASSETS Cash and cash equivalents...................................... $ 598,459 Accounts receivable............................................ 12,396,068 Inventory...................................................... 1,836,231 Prepaid expenses............................................... 161,481 ----------- Total Current Assets......................................... 14,992,239 OTHER ASSETS..................................................... 1,808,275 PROPERTY, PLANT AND EQUIPMENT, NET............................... 19,835,798 ----------- $36,636,312 =========== LIABILITIES CURRENT LIABILITIES Payments due within one year on long-term debt................. $ 66,154 Accounts payable............................................... 3,233,418 Accrued liabilities............................................ 1,823,735 ----------- Total Current Liabilities.................................... 5,123,307 LONG-TERM DEBT................................................... 289,717 ACCRUED RECLAMATION COSTS........................................ 528,666 COMMITMENTS AND CONTINGENCIES.................................... -- OWNERS' EQUITY COMMON STOCK Class A Voting--Par value $5 per share, authorized, issued and outstanding 1,200 shares.................................. 6,000 Class B Nonvoting--Par value $5 per share, authorized, issued and outstanding 22,800 shares................................. 114,000 ----------- RETAINED EARNINGS AND PARTNERS' CAPITAL.......................... 30,574,622 ----------- 30,694,622 ----------- $36,636,312 ===========
See notes to the condensed combined financial statements. F-54 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. CONDENSED COMBINED STATEMENTS OF OPERATIONS
Six Months Ended June 30 ------------------------ 1999 1998 ----------- ----------- (Unaudited) (Unaudited) SALES................................................. $32,326,503 $27,161,450 COSTS AND EXPENSES Costs of goods sold and operating expenses.......... 19,204,294 14,352,208 Depreciation, depletion and amortization............ 1,563,574 1,575,748 General and administrative expenses................. 2,141,127 1,604,589 ----------- ----------- 22,908,995 17,532,545 ----------- ----------- Income From Operations................................ 9,417,508 9,628,905 OTHER INCOME, NET..................................... 332,060 194,097 INTEREST EXPENSE...................................... (123,118) (123,738) ----------- ----------- 208,942 70,359 ----------- ----------- Net Income............................................ $ 9,626,450 $ 9,699,264 =========== ===========
See notes to the condensed combined financial statements. F-55 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. CONDENSED COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY (Unaudited)
Retained Common Earnings and Combined Stock Common Retained Partners' Partners' Owners' Shares(1) Stock(1) Earnings(1) Capital(2) Capital Equity --------- -------- ----------- ---------- ------------ ----------- BALANCE--March 31, 1999................... 24,000 $120,000 $28,897,654 $ 440,081 $29,337,735 $29,457,735 Shareholder and partner distributions.......... -- -- (8,131,439) (258,124) (8,389,563) (8,389,563) Net income.............. -- -- 9,322,712 303,738 9,626,450 9,626,450 ------ -------- ----------- --------- ----------- ----------- BALANCE--September 30, 1999................... 24,000 $120,000 $30,088,927 $ 485,695 $30,574,622 $30,694,622 ====== ======== =========== ========= =========== =========== BALANCE--March 31, 1998................... 24,000 $120,000 $23,205,770 $ 362,331 $23,568,101 $23,688,101 Shareholder and partner distributions.......... -- -- (1,559,196) (218,675) (1,777,871) (1,777,871) Net income.............. -- -- 9,391,828 307,436 9,699,264 9,699,264 ------ -------- ----------- --------- ----------- ----------- BALANCE--September 30, 1998................... 24,000 $120,000 $31,038,402 $ 451,092 $31,489,494 $31,609,494 ====== ======== =========== ========= =========== ===========
- -------- (1) Commercial Stone Co., Inc. (2) Commercial Aggregates Transportation & Sales, L.P. See notes to the condensed combined financial statements. F-56 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. CONDENSED COMBINED STATEMENTS OF CASH FLOWS
Six Months Ended September 30 ------------------------- 1999 1998 ------------ ----------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income........................................ $ 9,626,450 $ 9,699,264 Adjustments to reconcile net income to net cash used in operating activities: Depreciation, amortization and depletion.......... 1,563,574 1,575,748 Changes in assets and liabilities: Receivables..................................... (8,850,712) (7,108,996) Inventory....................................... 822,919 31,090 Prepaid expenses and other assets............... 1,997,699 (298,900) Accounts payable................................ 1,392,924 (365,605) Accrued expenses................................ (344,921) 420,412 ------------ ----------- Net Cash Provided By Operating Activities..... 6,207,933 3,953,013 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment, net.... (2,766,066) (1,634,482) ------------ ----------- Net Cash Used In Investing Activities......... (2,766,066) (1,634,482) CASH FLOWS FROM FINANCING ACTIVITIES Distributions to stockholders..................... (7,881,563) (1,777,871) Payments on long-term debt........................ (4,000,640) (7,019) ------------ ----------- Net Cash Used In Financing Activities......... (11,882,203) (1,784,890) ------------ ----------- Net (Decrease) Increase In Cash and Cash Equivalents.................................. (8,440,336) 533,641 CASH AND CASH EQUIVALENTS Beginning of period............................... 9,038,795 5,259,985 ------------ ----------- End of period..................................... $ 598,459 $ 5,793,626 ============ =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for interest............ $ 123,000 $ 124,000 ============ ===========
Supplemental disclosures of noncash information included in accrued liabilities at September 30, 1999 are shareholder distributions of $508,000. The Company purchased land and incurred debt of approximately $280,000 during the six months ended September 30, 1999. See notes to the condensed combined financial statements. F-57 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (Unaudited) 1. Summary of Significant Accounting Policies A summary of significant accounting policies applied by management in the preparation of the accompanying condensed combined financial statements follows. Interim Accounting--Commercial Stone Co., Inc. (CSC) and Commercial Aggregates Transportation & Sales, L.P. (the Companies) combined financial statements for the fiscal year ended March 31, 1999 includes additional information about the Companies, their operations and their combined financial statements, and contains a summary of significant accounting polices followed by the Companies in preparation of their combined financial statements and should be read in conjunction with these condensed combined financial statements. These policies were also followed in preparing these condensed combined financial statements. In the opinion of management, all adjustments which are of a normal and recurring nature necessary for a fair statement of the results of operations of these interim periods have been included. Net income for the six months ended September 30, 1999 is not necessarily indicative of the results to be expected for the full fiscal year. 2. Related Party Transactions During the six months ended September 30, 1999, CSC repaid a $4.0 million note payable to Dell H. Shearer Marital Trust. Additionally, during the six months ended September 30, 1999, Three Rivers Marine & Rail Terminals, L.P. paid a note receivable of $1,625,000 in full to CSC. 3. Inventory Inventory consists of the following:
September 30, 1999 ------------- Mining division stone.................................... $1,207,332 Asphalt division stone................................... 494,446 Materials brokerage...................................... 72,494 Cild patch asphalt....................................... 61,959 ---------- $1,836,231 ==========
4. Property, Plant and Equipment Property, plant and equipment consists of the following:
September 30, 1999 ----------- Machinery and equipment..................................... $36,534,528 Office equipment............................................ 585,288 Light trucks and automobiles................................ 455,796 Buildings and improvements.................................. 2,796,505 Land and mineral deposits................................... 3,458,741 Construction in progress.................................... 60,000
F-58 COMMERCIAL STONE CO., INC. AND COMMERCIAL AGGREGATES TRANSPORTATION & SALES, L.P. NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS--(Continued) FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (Unaudited)
September 30, 1999 ----------- 43,890,858 Less--Accumulated depreciation, amortization and deletion................................................ 24,055,060 ----------- $19,835,798 ===========
5. Contingency In November 1998, CSC filed petitions with the Pennsylvania Commonwealth Court seeking review of a Board of Finance and Revenue decision denying CSC's refund of capital stock tax paid for the years ended March 31, 1993, 1994 and 1995. It is CSC's position that it was entitled to claim a manufacturing exemption from Pennsylvania capital stock tax for each of these years. In addition, the Commonwealth of Pennsylvania has issued a settlement notice for the years ended March 31, 1996 and 1997, claiming that CSC is not entitled to the manufacturing exemption claimed for these tax years. CSC is contesting these settlement notices. The capital stock tax issue for the years ended March 31, 1998 and 1999 remains unsettled. In connection with the petitions filed in November 1998, CSC is claiming refunds of previously paid taxes approximating $536,000. CSC intends to vigorously pursue its position with the Commonwealth of Pennsylvania. However, were CSC's position not to be upheld, CSC would not receive any refund and would be required to pay to the Commonwealth of Pennsylvania an additional $623,000 of capital stock tax for the years ended March 31, 1996, 1997, 1998 and 1999 plus any accrued interest. None of these amounts have been recorded in the financial statements, as it is management's position that CSC's claim for a manufacturing exemption will be upheld. 6. Subsequent Events On October 1, 1999, the Companies were purchased, along with a related party that owned the mineral rights, by Better Minerals & Aggregates Company. Pursuant to the acquisition, the mineral rights were recorded as assets by Better Minerals & Aggregates Company and property, plant and equipment were adjusted to their fair value. Additionally, the Companies' tax statuses of S Corporation and limited partnership, respectively, were changed to a C Corporation. F-59 ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may + +not sell these securities until the registration statement filed with the + +Securities and Exchange Commission is effective. This prospectus is not an + +offer to sell these securities and it is not soliciting an offer to buy these + +securities in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ [ALTERNATIVE FRONT COVER FOR MARKET-MAKING PROSPECTUS] SUBJECT TO COMPLETION, DATED MARCH 15, 2000 Prospectus Better Minerals & Aggregates Company 13% Senior Subordinated Notes due 2009 We issued the 13% Senior Subordinated Notes due 2009, which have been registered under the Securities Act of 1933, in exchange for our 13% Senior Subordinated Notes due 2009 in our exchange offer. Maturity Change of Control - --The new notes will mature on September 15, 2009. --If we experience a change of control, we must offer to purchase the new notes at 101% of the principal amount, plus accrued and unpaid interest. Interest - --Interest on the new notes will be payable on March 15 and September 15 of each year. Security and Ranking Redemption --The new notes will not be secured by any collateral. - --We may redeem some or all --The new notes will be of the new notes at any subordinated to all of our time after September 15, senior debt, will rank 2004. equally with all of our - --We may also redeem up to other senior subordinated 35% of the new notes prior debt and will rank senior to September 15, 2002 with to all of our subordinated the net proceeds of certain debt. equity issuances. - --The redemption prices are Guarantees described on page 74. --If we fail to make payments on the new notes, our guarantor subsidiaries must make them instead. These guarantees will be senior subordinated obligations of our guarantor subsidiaries. Not all of our subsidiaries will be guaranteeing the new notes. ----------------------------------------- We prepared this prospectus for use by Chase Securities Inc. ("CSI") in connection with offers and sales related to market-making transactions in the new notes. CSI may act as principal or agent in these transactions. These sales will be made at prices related to prevailing market prices at the time of sale at prices related thereto or at negotiated prices. We will not receive any of the proceeds of these sales. ----------------------------------------- YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 16 OF THIS PROSPECTUS IN EVALUATING AN INVESTMENT IN THE NEW NOTES. ----------------------------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. ----------------------------------------- Chase Securities Inc. ----------------------------------------- The date of this prospectus is , 2000. $150,000,000 Better Minerals & Aggregates Company Offer To Exchange All Outstanding 13% Senior Subordinated Notes due 2009 for 13% Senior Subordinated Notes due 2009, Which Have Been Registered Under the Securities Act of 1933 [ALTERNATIVE SECTION FOR MARKET-MAKING PROSPECTUS] You Cannot Be Sure that an Active Trading Market Will Develop for the New Notes We do not intend to apply for a listing of the new notes on a securities exchange of any automated dealer quotation system. We have been advised by CSI that as of the date of this prospectus CSI intends to make a market in the new notes. CSI is not obligated to do so, however, and any market-making activities with respect to the new notes may be discontinued at any time without notice. In addition, such market-making activity will be subject to limits imposed by the Securities Act and the Exchange Act. Because CSI is our affiliate, CSI is required to deliver a current "market-making" prospectus and otherwise comply with the registration requirements of the Securities Act in any secondary market sale of the new notes. Accordingly, the ability of CSI to make a market in the new notes may, in part, depend on our ability to maintain a current market-making prospectus. The liquidity of the trading market in the new notes, and the market price quoted for the new notes, may be adversely affected by changes in the overall market for high yield securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, you cannot be sure that an active trading market will develop for the new notes. [ALTERNATIVE SECTION FOR MARKET-MAKING PROSPECTUS] USE OF PROCEEDS This prospectus is delivered in connection with the sale of the new notes by CSI in market-making transactions. We will not receive any of the proceeds from these transactions. [ALTERNATIVE SECTION FOR MARKET-MAKING PROSPECTUS] PLAN OF DISTRIBUTION This prospectus has been prepared for use by CSI in connection with offers and sales of the new notes in market-making transactions effected from time to time. CSI may act as a principal or agent in these transactions, including as agent for the counterparty when acting as principal or as agent for both parties, and may receive compensation in the form of discounts and commissions, including from both counterparties when it acts as agent for both. These sales will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices. The issuer will not receive any of the proceeds of these sales. The issuer has agreed to indemnify CSI against certain liabilities, including liabilities under the Securities Act, and to contribute payments which CSI might be required to make in respect thereof. See "Security Ownership of Certain Beneficial Owners and Management" for the ownership percentages of certain classes of securities of USS Holdings, of affiliates of CSI and for a summary of the stockholders agreement governing the exercise of voting rights with respect to election of directors and certain other material events. CSI has informed the issuer that it does not intend to confirm sales of the new notes to any accounts over which it exercises discretionary authority without the prior specific written approval of these transactions by the customer The issuer has been advised by CSI that, subject to applicable laws and regulations, CSI currently intends to make a market in the new notes following completion of the exchange offer. However, CSI is not obligated to do so and any such market-making may be interrupted or discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. There can be no assurance that an active trading market will develop or be sustained. See "Risk Factors-- Trading Market for the New Notes." A-2 [Alternative back cover for market-making prospectus] $150,000,000 Better Minerals & Aggregates Company 13% Senior Subordinated Notes due 2009 Chase Securities Inc. PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Our Amended and Restated Certificate of Incorporation provides for indemnification of our directors, officers, employees and agents to the full extent authorized or permitted by law. Section 145 of the Delaware General Corporation Law ("DGCL") empowers a Delaware corporation to indemnify any person who was or is, or is threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation) by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, such person had no reasonable cause to believe his conduct was unlawful. A Delaware corporation may indemnify such persons against expenses (including attorneys' fees) in actions brought by or in the right of the corporation to procure a judgment in its favor under the same conditions, except that no indemnification is permitted in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the Court of Chancery or other such court shall deem proper. To the extent such person has been successful on the merits or otherwise in defense of any action referred to above, or in defense of any claim, issue or matter therein, the corporation must indemnify such person against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. The indemnification and advancement of expenses provided for in, or granted pursuant to, Section 145 is not exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. Section 145 also provides that a corporation may maintain insurance against liabilities for which indemnification is not expressly provided by the statute. In addition, Article Sixth of our Amended and Restated Certificate of Incorporation, as permitted by Section 102(b)(7) of the DGCL, states: "The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, by reason of the fact that he, or the person whose legal representative he is, (1) is or was a stockholder, director, officer, employee or agent of the Corporation (including the incorporator thereof), or (2) is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (3) is or was a director, officer or employee of the Corporation serving at the request of the Corporation as a fiduciary of an employee benefit plan or trust maintained for the benefit of employees of the II-1 Corporation or employees of any such other enterprise, partnership, joint venture, trust, or other enterprise, against judgments, fines, penalties, amounts paid in settlement, and expenses, including attorneys' fees, actually and reasonably incurred by him and the person whose legal representative he is, in connection with such action, suit or proceeding, or any appeal therein, to the fullest extent permitted by law. Expenses which may be indemnifiable under this Article SIXTH in defending an action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors upon agreement by or on behalf of the stockholder, director, officer, employee or agent, or his legal representative, to repay such amount if he is later found not entitled to be indemnified by the Corporation as authorized in this Article SIXTH. The Corporation shall not indemnify any stockholder, director, officer, employee or agent against judgments, fines, amounts paid in settlement and expenses, including attorneys' fees, to an extent greater than that authorized by this Article SIXTH, but the Corporation may procure insurance providing greater indemnification and may share the premium cost with any stockholder, director, officer, employee or agent on such basis as may be agreed upon." As limited by Section 102(b)(7) of the DGCL, this provision cannot, however, have the effect of indemnifying any of our directors in the case of liability (i) for a breach of the director's duty of loyalty, (ii) for acts of omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock purchases or redemptions as provided in Section 174 of the DGCL or (iv) for any transactions for which the director derived an improper personal benefit. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits
Exhibit Number Description -------- ----------- 2.1 Purchase Agreement dated as of August 26, 1999 by and among U.S. Silica Company and Joseph H. Shearer, R. Scott Shearer, CATS, Inc., JHS Partnership, RSS Partnership and The Dell H. Shearer Grandchildren's Trust. 2.1.1 Amendment No. 1 to Purchase Agreement dated as of October 1, 1999 among U.S. Silica Company and Joseph H. Shearer, R. Scott Shearer, CATS, Inc., JHS Partnership, RSS Partnership and The Dell H. Shearer Grandchildren's Trust. 3.1 Amended and Restated Certificate of Incorporation of Better Minerals and Aggregates Company (formerly USS Intermediate Holdco, Inc.) dated as of February 9, 1996. 3.1.1 Certificate of Amendment of The Restated Certificate of Incorporation of Better Minerals and Aggregates Company (formerly USS Intermediate Holdco, Inc.) dated September 30, 1999. 3.2 By-laws of Better Minerals and Aggregates Company (formerly USS Intermediate Holdco, Inc.). 3.3 Certificate of Incorporation of U.S. Silica Company (formerly ITT- PGS, Inc.) dated June 3, 1968. 3.3.1 Certificate of Amendment of Certificate of Incorporation of U.S. Silica Company (formerly ITT-PGS, Inc.) dated June 20, 1968. 3.3.2 Certificate of Amendment of Certificate of Incorporation of U.S. Silica Company (formerly ITT-PGS, Inc.) dated December 15, 1986.
II-2
Exhibit Number Description -------- ----------- 3.3.3 Certificate of Ownership and Merger Merging U.S. Silica Company (OSC) into U.S. Silica Company dated December 17, 1987. 3.3.4 Certificate of Ownership and Merger Merging Each of Louisiana Industrial Sand Transportation Company, Texas Industrial Minerals Transportation Company, U.S. Silica Co. of California, U.S. Silica Co. of Connecticut, U.S. Silica Co. of Illinois, U.S. Silica Co. of Louisiana, U.S. Silica Co. of Michigan and U.S. Silica Co. of Texas into U.S. Silica Company dated December 17, 1987. 3.3.5 Certificate of Ownership and Merger Merging Warrior Sand and Gravel Company, Inc. into U.S. Silica Company dated December 9, 1988. 3.3.6 Certificate of Ownership and Merger Merging USS Acquisitions, Inc. into U.S. Silica Company dated February 9, 1996. 3.4 By-laws of U.S. Silica Company (formerly ITT-PGS, Inc.). 3.5 Restated Articles of Incorporation and Articles of Amendment of Better Materials Corporation dated December 3, 1990. 3.5.1 Articles of Merger of Better Materials Corporation dated December 14, 1998. 3.6 Amended and Restated By-laws of Better Materials Corporation. 3.7 Certificate of Incorporation of BMC Trucking, Inc. dated November 30, 1998. 3.8 By-laws of BMC Trucking, Inc. 3.9 Restated Articles of Incorporation and Articles of Amendment of Bucks County Crushed Stone Company dated December 21, 1990. 3.10 Amended and Restated By-laws of Bucks County Crushed Stone Company. 3.11 Certificate of Incorporation of Chippewa Farms Corporation dated January 16, 1981. 3.12 Amended and Restated By-laws of Chippewa Farms Corporation. 3.13 Certificate of Incorporation of Shore Stone Company, Inc. dated May 6, 1983. 3.13.1 Certificate of Amendment to the Certificate of Incorporation of Shore Stone Company, Inc. dated November 28, 1990. 3.14 Amended and Restated By-laws of Shore Stone Company, Inc. 3.15 Certificate of Incorporation of Pennsylvania Glass Sand Corporation (formerly Morgan National Silica Co.) dated October 24, 1986. 3.15.1 Certificate of Amendment of Certificate of Incorporation of Pennsylvania Glass Sand Corporation (formerly Morgan National Silica Co.) dated December 15, 1986. 3.16 By-laws of Pennsylvania Glass Sand Corporation (formerly Morgan National Silica Co.). 3.17 Amended and Restated Certificate of Incorporation of George F. Pettinos, Inc. dated July 31, 1998. 3.18 By-laws of George F. Pettinos, Inc. 3.19 Certificate of Incorporation of Ottawa Silica Company (formerly LaSalle National Silica Co.) dated October 24, 1986. 3.19.1 Certificate of Amendment of Certificate of Incorporation of Ottawa Silica Company (formerly LaSalle National Silica Co.) dated December 15, 1986.
II-3
Exhibit Number Description -------- ----------- 3.20 By-laws of Ottawa Silica Company (formerly LaSalle National Silica Co.). 3.21 Articles of Incorporation of The Fulton Land and Timber Company dated April 13, 1942. 3.22 Amended and Restated By-laws of Fulton Land and Timber Company. 3.23 Certificate of Incorporation of Ellen Jay, Inc. dated March 1, 1974. 3.24 Amended and Restated By-laws of Ellen Jay, Inc. 3.25 Certificate of Formation of Stone Materials Company, LLC dated September 24, 1999. 3.26 Limited Liability Company Operating Agreement of Stone Materials Company, LLC dated as of September 30, 1999. 3.27 Articles of Incorporation of Commercial Stone Co., Inc. dated January 27, 1972. 3.27.1 Certificate of Amendment of Commercial Stone Co., Inc. dated December 29, 1983. 3.27.2 Statement of Change of Registered Office of Commercial Stone Co., Inc. dated February 9, 1984. 3.27.3 Certificate of Amendment of Commercial Stone Co., Inc. dated December 24, 1986. 3.28 By-laws of Commercial Stone Co., Inc. 3.29 Certificate of Formation of Commercial Aggregates Transportation and Sales, LLC dated September 27, 1999. 3.29.1 Contribution Agreement dated as of October 1, 1999 between Stone Materials Company, LLC and Commercial Stone Co., Inc. 3.30 Limited Liability Company Operating Agreement of Commercial Aggregates Transportation and Sales, LLC dated as of September 30, 1999. 4.1 Indenture, dated as of October 1, 1999, among the Better Minerals and Aggregates Company, the subsidiary guarantors named therein and The Bank of New York, as trustee (including the forms of the Better Minerals and Aggregates Company's 13% Senior Subordinated Notes due 2009 attached thereto as exhibits). 4.2 Exchange and Registration Rights Agreement, dated October 1, 1999, among the Better Minerals and Aggregates Company, the subsidiary guarantors named therein, Chase Securities Inc. and BNP Capital Markets, LLC. 5.1 Opinion of Winthrop, Stimson, Putnam & Roberts regarding the legality of the securities. 8.1 Opinion of Winthrop, Stimson, Putnam & Roberts regarding tax matters. 10.1 The Stockholders Agreement, dated as of February 9, 1996, among USS Holdings, Inc. and the stockholders of the USS Holdings, Inc. 10.1.1 Amendment No. 1 to Stockholders Agreement dated as of October 15, 1996. 10.1.2 Amendment No. 2 to Stockholders Agreement dated as of October 6, 1998. 10.2 Amended and Restated Management Services Agreement, dated October 1, 1998, among USS Intermediate Holdco, Inc. (now Better Minerals and Aggregates Company), USS Holdings, Inc., BMAC Holdings and DGHA. 10.2.1 Assignment and Assumption Agreement dated as of September 30, 1999.
II-4
Exhibit Number Description -------- ----------- 10.3 Amended and Restated Tax Sharing Agreement, dated as of October 1, 1999, among USS Intermediate Holdco, Inc. (now Better Minerals and Aggregates Company), its domestic subsidiaries, and USS Holdings, Inc. 10.4 Credit Agreement, dated as of September 30, 1999, among Better Minerals and Aggregates Company, BMAC Holdings, Inc., George F. Pettinos (Canada) Limited, Banque Nationale de Paris, and the financial institutions and other institutional lenders named therein. 10.5 Security Agreement, dated September 30, 1999, among Better Minerals and Aggregates Company, the subsidiary guarantors named therein and Banque Nationale de Paris. 10.6 Intellectual Property Security Agreement, dated September 30, 1999, among Better Minerals and Aggregates Company, the subsidiary guarantors named therein and Banque Nationale de Paris. 10.7 Parent Guarantor Security Agreement, dated September 30, 1999, between BMAC Holdings, Inc. and Banque Nationale de Paris. 10.8 Canadian Security Agreement, dated September 30, 1999, between George F. Pettinos (Canada) Limited and Banque Nationale de Paris. 10.9 Parent Guaranty, dated September 30, 1999, between BMAC Holdings, Inc. and Banque Nationale de Paris. 10.10* Subsidiary Guaranty, dated September 30, 1999, between each of the subsidiary guarantors named therein and Banque Nationale de Paris. 10.11* Equity Rights Agreement, dated as of October 1, 1999, between USS Holdings, Inc., and the purchasers listed on Schedule I thereto. 10.12 Equity Rights Agreement, dated as of December 19, 1996, between USS Holdings, Inc., and the investors listed on Schedule I thereto. 12.1 Statement regarding ratio of earnings to fixed charges. 21.1 Subsidiaries of Better Minerals and Aggregates Company. 23.1 Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibits 5.1 and 8.1 to this Registration Statement). 23.2 Consent of PricewaterhouseCoopers LLP. 23.3 Consent of Schneider Downs & Co., Inc. Powers-of-Attorney (contained on the signature page of this 24.1 Registration Statement). Statement of Eligibility and Qualification on Form T-1 of The Bank of 25.1 New York, as Trustee under the Indenture. 27.1 Financial Data Schedule. 99.1 Form of Letter of Transmittal. 99.2 Form of Letter to Clients. 99.3 Form of Letter to Registered Holders and DTC Participants. 99.4 Form of Notice of Guaranteed Delivery.
- -------- * To be filed by amendment. (b)Financial Statement Schedules REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Better Minerals & Aggregates Company (formerly USS Intermediate Holdco, Inc.): Our audits of the consolidated financial statements referred to in our report dated March 9, 2000 appearing in the Registration Statement on Form S-4 also included an audit of the financial II-5 statement schedule listed in [Item 21(b)] of this Registration Statement on Form S-4. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP New York, New York March 9, 2000 Schedule II--Valuation and Qualifying Accounts BETTER MINERALS & AGGREGATES COMPANY (formerly USS Intermediate Holdings, Inc.) VALUATION AND QUALIFYING ACCOUNTS For The Years December 31, 1997, 1998 and 1999 (In Thousands)
Additions -------------------- Balance at Charged to Charge to Balance at Beginning Costs and Other End of Description of Period Expenses Accounts Deductions Period - ----------- ---------- ---------- --------- ---------- ---------- Allowance for Doubtful Accounts 1997...................... $ 629 $170 -- $(377) $ 422 1998...................... $ 422 $151 $515 $ (28) $1,060 1999...................... $1,060 $224 $100 $(106) $1,278
ITEM 22. UNDERTAKINGS. (a) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the Corporation Law, the Certificate of Incorporation and By-laws, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of that issue. (b) The undersigned Registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (c) The undersigned Registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. Better Minerals & Aggregates Company /s/ John A. Ulizio By: ________________________________ Name: John A. Ulizio Title: Vice President, General Counsel and Assistant Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of BETTER MINERALS & AGGREGATES COMPANY, do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable BETTER MINERALS & AGGREGATES COMPANY to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Richard E. Goodell Chief Executive Officer ___________________________________________ (Principal Executive Richard E. Goodell Officer) and Director /s/ Gary E. Bockrath Chief Financial Officer ___________________________________________ (Principal Financial Gary E. Bockrath Officer and Principal Accounting Officer) Director ___________________________________________ D. George Harris
II-7
Signature Title Date --------- ----- ---- /s/ Anthony J. Petrocelli Director ___________________________________________ Anthony J. Petrocelli /s/ Richard J. Donahue Director ___________________________________________ Richard J. Donahue /s/ Arnold Chavkin Director ___________________________________________ Arnold Chavkin Director ___________________________________________ Ruth Dreessen /s/ Timothy J. Walsh Director ___________________________________________ Timothy J. Walsh
II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. U.S. SILICA COMPANY By: /s/ John A. Ulizio ---------------------------------- Name: John A. Ulizio Title: Senior Vice President, General Counsel and Assistant Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of U.S. SILICA COMPANY, do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable U.S. SILICA COMPANY to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Gary E. Bockrath Senior Vice President ___________________________________________ (Principal Financial Gary E. Bockrath Officer and Principal Accounting Officer) and Director /s/ Richard J. Donahue Director ___________________________________________ Richard J. Donahue /s/ Richard E. Goodell Director ___________________________________________ Richard E. Goodell /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio
II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 9th day of March, 2000. Better Materials Corporation /s/ John A. Ulizio By: ---------------------------------- Name:John A. Ulizio Title:Vice President and Assistant Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of BETTER MATERIALS CORPORATION, do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable BETTER MATERIALS CORPORATION to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Brian Hessenthaler Senior Vice President and Chief March 9, 2000 ___________________________________________ Financial Officer (Principal Brian Hessenthaler Accounting Officer) /s/ Gary E. Bockrath Vice President and Assistant ___________________________________________ Treasurer (Principal Financial Gary E. Bockrath Officer) /s/ Richard E. Goodell Director ___________________________________________ Richard E. Goodell /s/ Richard J. Donahue Director ___________________________________________ Richard J. Donahue /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio /s/ Craig S. Cinalli Director March 9, 2000 ___________________________________________ Craig S. Cinalli
II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 9th day of March, 2000. BMC Trucking, Inc. /s/ John A. Ulizio By: ---------------------------------- Name:John A. Ulizio Title:Vice President and Assistant Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of BMC TRUCKING, INC., do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable BMC TRUCKING, INC. to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Brian Hessenthaler Senior Vice President and Chief March 9, 2000 ___________________________________________ Financial Officer (Principal Brian Hessenthaler Accounting Officer) /s/ Gary E. Bockrath Vice President and Assistant ___________________________________________ Treasurer (Principal Financial Gary E. Bockrath Officer) /s/ Richard E. Goodell Director ___________________________________________ Richard E. Goodell /s/ Richard J. Donahue Director ___________________________________________ Richard J. Donahue /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio /s/ Craig S. Cinalli Director March 9, 2000 ___________________________________________ Craig S. Cinalli
II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 9th day of March, 2000. Bucks County Crushed Stone Company /s/ John A. Ulizio By: ---------------------------------- Name:John A. Ulizio Title:Vice President and Assistant Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of BUCKS COUNTY CRUSHED STONE COMPANY, do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable BUCKS COUNTY CRUSHED STONE COMPANY to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Brian Hessenthaler Vice President of Finance March 9, 2000 ___________________________________________ and Treasurer (Principal Brian Hessenthaler Accounting Officer) /s/ Gary E. Bockrath Vice President and ___________________________________________ Assistant Treasurer Gary E. Bockrath (Principal Financial Officer) /s/ Richard E. Goodell Director ___________________________________________ Richard E. Goodell /s/ Richard J. Donahue Director ___________________________________________ Richard J. Donahue /s/ Craig S. Cinalli Director March 9, 2000 ___________________________________________ Craig S. Cinalli /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio
II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the 9th day of March, 2000. Chippewa Farms Corporation /s/ John A. Ulizio By: ---------------------------------- Name:John A. Ulizio Title:Vice President and Assistant Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of CHIPPEWA FARMS CORPORATION, do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable CHIPPEWA FARMS CORPORATION to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Brian Hessenthaler Vice President of Finance March 9, 2000 ___________________________________________ and Treasurer (Principal Brian Hessenthaler Accounting Officer) /s/ Gary E. Bockrath Vice President and ___________________________________________ Assistant Treasurer Gary E. Bockrath (Principal Financial Officer) /s/ Richard E. Goodell Director ___________________________________________ Richard E. Goodell /s/ Richard J. Donahue Director ___________________________________________ Richard J. Donahue /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio /s/ Craig S. Cinalli Director March 9, 2000 ___________________________________________ Craig S. Cinalli
II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. Commercial Aggregates Transportation and Sales, LLC By: Commercial Stone Co., Inc., as Sole Member and Sole Manager /s/ John A. Ulizio By: ---------------------------------- Name:John A. Ulizio Title: Vice President and Assistant Secretary II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. Commercial Stone Co., Inc. /s/ John A. Ulizio By: ---------------------------------- Name: John A. Ulizio Title:Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of COMMERCIAL STONE CO., INC., do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable COMMERCIAL STONE CO., INC. to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Richard E. Goodell Chief Executive Officer ___________________________________________ (Principal Executive Richard E. Goodell Officer) and Director /s/ Gary E. Bockrath Executive Vice President, ___________________________________________ Treasurer (Principal Gary E. Bockrath Financial Officer and Principal Accounting Officer) and Director /s/ Richard J. Donahue Director ___________________________________________ Richard J. Donahue /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio
II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. Ellen Jay, Inc. /s/ John A. Ulizio By: _________________________________ Name: John A. Ulizio Title: Vice President and Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of ELLEN JAY, INC., do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable ELLEN JAY, INC. to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Richard J. Donahue President (Principal ___________________________________________ Executive Officer) Richard J. Donahue /s/ Richard J. Nick Treasurer (Principal ___________________________________________ Financial Officer and Richard J. Nick Principal Accounting Officer) /s/ Gary E. Bockrath Director ___________________________________________ Gary E. Bockrath /s/ Richard E. Goodell Director ___________________________________________ Richard E. Goodell /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio
II-16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. The Fulton Land and Timber Company /s/ John A. Ulizio By: _________________________________ Name: John A. Ulizio Title: Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of THE FULTON LAND AND TIMBER COMPANY, do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable THE FULTON LAND AND TIMBER COMPANY to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Richard E. Goodell President (Principal ___________________________________________ Executive Officer) and Richard E. Goodell Director /s/ Gary E. Bockrath Treasurer (Principal ___________________________________________ Financial Officer and Gary E. Bockrath Principal Accounting Officer) and Director /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio
II-17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. George F. Pettinos, Inc. /s/ John A. Ulizio By:__________________________________ Name: John A. Ulizio Title: Vice President and Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of GEORGE F. PETTINOS, INC., do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable GEORGE F. PETTINOS, INC. to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Richard E. Goodell President (Principal ___________________________________________ Executive Officer) and Richard E. Goodell Director /s/ Gary E. Bockrath Vice President and ___________________________________________ Treasurer (Principal Gary E. Bockrath Financial Officer and Principal Accounting Officer) /s/ Richard J. Nick Director ___________________________________________ Richard J. Nick /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio
II-18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. Ottawa Silica Company /s/ John A. Ulizio By: ---------------------------------- Name: John A. Ulizio Title:Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of OTTAWA SILICA COMPANY, do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable OTTAWA SILICA COMPANY to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Richard E. Goodell President (Principal Executive ___________________________________________ Officer) and Director Richard E. Goodell /s/ Gary E. Bockrath Treasurer (Principal Financial ___________________________________________ Officer and Principal Accounting Gary E. Bockrath Officer) and Director /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio
II-19 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. Pennsylvania Glass Sand Corporation /s/ John A. Ulizio By: ---------------------------------- Name: John A. Ulizio Title:Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of PENNSYLVANIA GLASS SAND CORPORATION, do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable PENNSYLVANIA GLASS SAND CORPORATION to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- President (Principal Executive ___________________________________________ Officer) D. George Harris /s/ Richard J. Nick Treasurer (Principal Financial ___________________________________________ Officer and Principal Accounting Richard J. Nick Officer) /s/ Richard E. Goodell Director ___________________________________________ Richard E. Goodell /s/ Gary E. Bockrath Director ___________________________________________ Gary E. Bockrath /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio
II-20 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. Shore Stone Company, Inc. /s/ John A. Ulizio By: ---------------------------------- Name: John A. Ulizio Title:Vice President and Assistant Secretary POWER OF ATTORNEY We, the undersigned members of the Board of Directors and officers of SHORE STONE COMPANY, INC., do hereby constitute and appoint John A. Ulizio and Donald G. Kilpatrick, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable SHORE STONE COMPANY, INC. to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Brian Hessenthaler Vice President of Finance March 9, 2000 ___________________________________________ and Treasurer (Principal Brian Hessenthaler Accounting Officer) /s/ Gary E. Bockrath Vice President and ___________________________________________ Assistant Treasurer Gary E. Bockrath (Principal Financial Officer) /s/ Craig S. Cinalli Director March 9, 2000 ___________________________________________ Craig S. Cinalli /s/ Richard E. Goodell Director ___________________________________________ Richard E. Goodell /s/ Richard J. Donahue Director ___________________________________________ Richard J. Donahue /s/ John A. Ulizio Director ___________________________________________ John A. Ulizio
II-21 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on the day of March, 2000. Stone Materials Company, LLC By: Better Minerals & Aggregates Company, as Sole Member and Sole Manager /s/ John A. Ulizio By: ---------------------------------- Name: John A. Ulizio Title: Vice President, General Counsel and Assistant Secretary II-22 INDEX TO EXHIBITS
Exhibit Number Description -------- ----------- 2.1 Purchase Agreement dated as of August 26, 1999 by and among U.S. Silica Company and Joseph H. Shearer, R. Scott Shearer, CATS, Inc., JHS Partnership, RSS Partnership and The Dell H. Shearer Grandchildren's Trust. 2.1.1 Amendment No. 1 to Purchase Agreement dated as of October 1, 1999 among U.S. Silica Company and Joseph H. Shearer, R. Scott Shearer, CATS, Inc., JHS Partnership, RSS Partnership and The Dell H. Shearer Grandchildren's Trust. 3.1 Amended and Restated Certificate of Incorporation of Better Minerals and Aggregates Company (formerly USS Intermediate Holdco, Inc.) dated as of February 9, 1996. 3.1.1 Certificate of Amendment of The Restated Certificate of Incorporation of Better Minerals and Aggregates Company (formerly USS Intermediate Holdco, Inc.) dated September 30, 1999. 3.2 By-laws of Better Minerals and Aggregates Company (formerly USS Intermediate Holdco, Inc.). 3.3 Certificate of Incorporation of U.S. Silica Company (formerly ITT- PGS, Inc.) dated June 3, 1968. 3.3.1 Certificate of Amendment of Certificate of Incorporation of U.S. Silica Company (formerly ITT-PGS, Inc.) dated June 20, 1968. 3.3.2 Certificate of Amendment of Certificate of Incorporation of U.S. Silica Company (formerly ITT-PGS, Inc.) dated December 15, 1986. 3.3.3 Certificate of Ownership and Merger Merging U.S. Silica Company (OSC) into U.S. Silica Company dated December 17, 1987. 3.3.4 Certificate of Ownership and Merger Merging Each of Louisiana Industrial Sand Transportation Company, Texas Industrial Minerals Transportation Company, U.S. Silica Co. of California, U.S. Silica Co. of Connecticut, U.S. Silica Co. of Illinois, U.S. Silica Co. of Louisiana, U.S. Silica Co. of Michigan and U.S. Silica Co. of Texas into U.S. Silica Company dated December 17, 1987. 3.3.5 Certificate of Ownership and Merger Merging Warrior Sand and Gravel Company, Inc. into U.S. Silica Company dated December 9, 1988. 3.3.6 Certificate of Ownership and Merger Merging USS Acquisitions, Inc. into U.S. Silica Company dated February 9, 1996. 3.4 By-laws of U.S. Silica Company (formerly ITT-PGS, Inc.). 3.5 Restated Articles of Incorporation and Articles of Amendment of Better Materials Corporation dated December 3, 1990. 3.5.1 Articles of Merger of Better Materials Corporation dated December 14, 1998. 3.6 Amended and Restated By-laws of Better Materials Corporation. 3.7 Certificate of Incorporation of BMC Trucking, Inc. dated November 30, 1998. 3.8 By-laws of BMC Trucking, Inc. 3.9 Restated Articles of Incorporation and Articles of Amendment of Bucks County Crushed Stone Company dated December 21, 1990. 3.10 Amended and Restated By-laws of Bucks County Crushed Stone Company.
1
Exhibit Number Description -------- ----------- 3.11 Certificate of Incorporation of Chippewa Farms Corporation dated January 16, 1981. 3.12 Amended and Restated By-laws of Chippewa Farms Corporation. 3.13 Certificate of Incorporation of Shore Stone Company, Inc. dated May 6, 1983. 3.13.1 Certificate of Amendment to the Certificate of Incorporation of Shore Stone Company, Inc. dated November 28, 1990. 3.14 Amended and Restated By-laws of Shore Stone Company, Inc. 3.15 Certificate of Incorporation of Pennsylvania Glass Sand Corporation (formerly Morgan National Silica Co.) dated October 24, 1986. 3.15.1 Certificate of Amendment of Certificate of Incorporation of Pennsylvania Glass Sand Corporation (formerly Morgan National Silica Co.) dated December 15, 1986. 3.16 By-laws of Pennsylvania Glass Sand Corporation (formerly Morgan National Silica Co.). 3.17 Amended and Restated Certificate of Incorporation of George F. Pettinos, Inc. dated July 31, 1998. 3.18 By-laws of George F. Pettinos, Inc. 3.19 Certificate of Incorporation of Ottawa Silica Company (formerly LaSalle National Silica Co.) dated October 24, 1986. 3.19.1 Certificate of Amendment of Certificate of Incorporation of Ottawa Silica Company (formerly LaSalle National Silica Co.) dated December 15, 1986. 3.20 By-laws of Ottawa Silica Company (formerly LaSalle National Silica Co.). 3.21 Articles of Incorporation of The Fulton Land and Timber Company dated April 13, 1942. 3.22 Amended and Restated By-laws of Fulton Land and Timber Company. 3.23 Certificate of Incorporation of Ellen Jay, Inc. dated March 1, 1974. 3.24 Amended and Restated By-laws of Ellen Jay, Inc. 3.25 Certificate of Formation of Stone Materials Company, LLC dated September 24, 1999. 3.26 Limited Liability Company Operating Agreement of Stone Materials Company, LLC dated as of September 30, 1999. 3.27 Articles of Incorporation of Commercial Stone Co., Inc. dated January 27, 1972. 3.27.1 Certificate of Amendment of Commercial Stone Co., Inc. dated December 29, 1983. 3.27.2 Statement of Change of Registered Office of Commercial Stone Co., Inc. dated February 9, 1984. 3.27.3 Certificate of Amendment of Commercial Stone Co., Inc. dated December 24, 1986. 3.28 By-laws of Commercial Stone Co., Inc. 3.29 Certificate of Formation of Commercial Aggregates Transportation and Sales, LLC dated September 27, 1999. 3.29.1 Contribution Agreement dated as of October 1, 1999 between Stone Materials Company, LLC and Commercial Stone Co., Inc. 3.30 Limited Liability Company Operating Agreement of Commercial Aggregates Transportation and Sales, LLC dated as of September 30, 1999.
2
Exhibit Number Description -------- ----------- 4.1 Indenture, dated as of October 1, 1999, among the Better Minerals and Aggregates Company, the subsidiary guarantors named therein and The Bank of New York, as trustee (including the forms of the Better Minerals and Aggregates Company's 13% Senior Subordinated Notes due 2009 attached thereto as exhibits). 4.2 Exchange and Registration Rights Agreement, dated October 1, 1999, among the Better Minerals and Aggregates Company, the subsidiary guarantors named therein, Chase Securities Inc. and BNP Capital Markets, LLC. 5.1 Opinion of Winthrop, Stimson, Putnam & Roberts regarding the legality of the securities. 8.1 Opinion of Winthrop, Stimson, Putnam & Roberts regarding tax matters. 10.1 The Stockholders Agreement, dated as of February 9, 1996, among USS Holdings, Inc. and the stockholders of the USS Holdings, Inc. 10.1.1 Amendment No. 1 to Stockholders Agreement dated as of October 15, 1996. 10.1.2 Amendment No. 2 to Stockholders Agreement dated as of October 6, 1998. 10.2 Amended and Restated Management Services Agreement, dated October 1, 1998, among USS Intermediate Holdco, Inc. (now Better Minerals and Aggregates Company), USS Holdings, Inc., BMAC Holdings and DGHA. 10.2.1 Assignment and Assumption Agreement dated as of September 30, 1999. 10.3 Amended and Restated Tax Sharing Agreement, dated as of October 1, 1999, among USS Intermediate Holdco, Inc. (now Better Minerals and Aggregates Company), its domestic subsidiaries, and USS Holdings, Inc. 10.4 Credit Agreement, dated as of September 30, 1999, among Better Minerals and Aggregates Company, BMAC Holdings, Inc., George F. Pettinos (Canada) Limited, Banque Nationale de Paris, and the financial institutions and other institutional lenders named therein. 10.5 Security Agreement, dated September 30, 1999, among Better Minerals and Aggregates Company, the subsidiary guarantors named therein and Banque Nationale de Paris. 10.6 Intellectual Property Security Agreement, dated September 30, 1999, among Better Minerals and Aggregates Company, the subsidiary guarantors named therein and Banque Nationale de Paris. 10.7 Parent Guarantor Security Agreement, dated September 30, 1999, between BMAC Holdings, Inc. and Banque Nationale de Paris. 10.8 Canadian Security Agreement, dated September 30, 1999, between George F. Pettinos (Canada) Limited and Banque Nationale de Paris. 10.9 Parent Guaranty, dated September 30, 1999, between BMAC Holdings, Inc. and Banque Nationale de Paris. 10.10 Subsidiary Guaranty, dated September 30, 1999, between each of the subsidiary guarantors named therein and Banque Nationale de Paris. 10.11* Equity Rights Agreement, dated as of October 1, 1999, between USS Holdings, Inc., and the purchasers listed on the Schedule I thereto. 10.12* Equity Rights Agreement, dated as of December 19, 1996, between USS Holdings, Inc. and the investors listed on the Schedule I thereto. 12.1 Statement regarding ratio of earnings to fixed charges. 21.1 Subsidiaries of Better Minerals and Aggregates Company. 23.1 Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibits 5.1 and 8.1 to this Registration Statement).
3
Exhibit Number Description -------- ----------- 23.2 Consent of PricewaterhouseCoopers LLP. 23.3 Consent of Schneider Downs & Co., Inc. 24.1 Powers-of-Attorney (contained on the signature page of this Registration Statement). 25.1 Statement of Eligibility and Qualification on Form T-1 of The Bank of New York, as Trustee under the Indenture. 27.1 Financial Data Schedule. 99.1 Form of Letter of Transmittal. 99.2 Form of Letter to Clients. 99.3 Form of Letter to Registered Holders and DTC Participants. 99.4 Form of Notice of Guaranteed Delivery.
- -------- * To be filed by amendment. 4 EX-2.1 2 PURCHASE AGREEMENT EXHIBIT 2.1 EXECUTION COPY PURCHASE AGREEMENT dated as of August 26, 1999 by and among U.S. SILICA COMPANY as Buyer, and JOSEPH H. SHEARER, R. SCOTT SHEARER, CATS, INC., JHS PARTNERSHIP, RSS PARTNERSHIP and THE DELL H. SHEARER GRANDCHILDREN'S TRUST as Sellers. TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS................................................................. 1 ARTICLE II SALE AND TRANSFER OF SHARES AND PARTNERSHIP INTERESTS; CLOSING 2.1 Acquisition.......................................................................................... 4 2.2 Payment of Purchase Price............................................................................ 5 2.3 Closing.............................................................................................. 6 2.4 Closing Obligations.................................................................................. 6 2.5 Letters of Credit.................................................................................... 7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS 3.1 Organization and Good Standing....................................................................... 8 3.2 Authority; No Conflict............................................................................... 8 3.3 Capitalization....................................................................................... 9 3.4 Financial Statements................................................................................. 9 3.5 Personal Property.................................................................................... 10 3.6 Real Property Interests.............................................................................. 10 3.7 Taxes................................................................................................ 12 3.8 Employee Benefits.................................................................................... 13 3.9 Compliance with Law.................................................................................. 15 3.10 Legal Proceedings; Orders............................................................................ 15 3.11 Absence of Certain Changes and Events................................................................ 16 3.12 Contracts............................................................................................ 17 3.13 Insurance............................................................................................ 18 3.14 Environmental Matters................................................................................ 18 3.15 Labor Relations...................................................................................... 20 3.16 Intellectual Property................................................................................ 21 3.17 Year 2000 Compliance................................................................................. 21 3.18 Absence of Undisclosed Liabilities................................................................... 21 3.19 Accounts Receivable.................................................................................. 22 3.20 Reserves............................................................................................. 22 3.21 Operating Permits.................................................................................... 22 3.22 Directors and Officers............................................................................... 22
i 3.23 Customers and Suppliers.............................................................................. 22 3.24 Qualification of Product............................................................................. 23 3.25 Rich Hill Quarry..................................................................................... 23 3.26 Belle Vernon Quarry.................................................................................. 23 3.27 Silicosis............................................................................................ 23 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 4.1 Organization and Good Standing....................................................................... 24 4.2 Authority; No Conflict............................................................................... 24 4.3 Investment Intent.................................................................................... 24 4.4 Certain Proceedings.................................................................................. 24 4.5 Financing............................................................................................ 24 ARTICLE V COVENANTS OF SELLERS PRIOR TO CLOSING DATE 5.1 Access and Investigations............................................................................ 25 5.2 Operation of the Businesses of the Acquired Companies................................................ 25 5.3 Negative Covenants................................................................................... 26 5.4 Required Approvals................................................................................... 27 5.5 No Negotiation....................................................................................... 27 5.6 Reasonable Efforts................................................................................... 27 5.7 Bonuses.............................................................................................. 27 5.8 Guarantees........................................................................................... 27 ARTICLE VI COVENANTS OF BUYER PRIOR TO CLOSING DATE 6.1 Approvals of Governmental Bodies..................................................................... 28 6.2 Request for Early Termination........................................................................ 28 6.3 Reasonable Efforts................................................................................... 28 6.4 Buyer Surveys........................................................................................ 28 ARTICLE VII CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE 7.1 Accuracy of Representations.......................................................................... 28 7.2 Sellers' Performance................................................................................. 29 7.3 Opinion of Counsel................................................................................... 29 7.4 No Proceedings....................................................................................... 29
ii 7.5 Payment of Indebtedness; Releases.................................................................... 29 7.6 HSR Act Approval..................................................................................... 29 7.7 Delivery of Documents................................................................................ 29 7.8 Agreement Regarding Three Rivers..................................................................... 30 7.9 Agreement Regarding Molly Slag Operations............................................................ 30 7.10 Financial Markets.................................................................................... 30 7.11 Audited Financial Statements......................................................................... 30 7.12 Real Estate Matters.................................................................................. 30 ARTICLE VIII CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE 8.1 Accuracy of Representations.......................................................................... 31 8.2 Buyer's Performance.................................................................................. 31 8.3 Opinion of Counsel................................................................................... 31 8.4 No Injunction........................................................................................ 31 8.5 HSR Act Approval..................................................................................... 31 8.6 Agreement Regarding Three Rivers..................................................................... 31 8.7 Agreement Regarding Molly Slag Operations............................................................ 32 8.8 Delivery of Documents................................................................................ 32 ARTICLE IX CERTAIN POST-CLOSING COVENANTS 9.1 Non-competition...................................................................................... 32 9.2 Confidentiality...................................................................................... 33 9.3 Termination of Commercial's S Corporation Status and Taxable Year.................................... 33 9.4 Certain Tax Assets and Liabilities................................................................... 33 ARTICLE X TERMINATION 10.1 Termination Events................................................................................... 34 10.2 Effect of Termination................................................................................ 35 ARTICLE XI INDEMNIFICATION; REMEDIES 11.1 Survival............................................................................................. 35 11.2 Indemnification and Payment of Damages by Sellers.................................................... 35 11.3 Indemnification and Payment of Damages by Buyer...................................................... 36 11.4 Time Limitations..................................................................................... 37
iii 11.5 Limitations on Indemnification....................................................................... 37 11.6 Investigation; Waiver................................................................................ 38 11.7 Procedures for Indemnification -- Third Party Claims................................................. 39 11.8 Procedure for Indemnification -- Other Claims........................................................ 39 11.9 Cooperation in Connection with Proceedings........................................................... 39 11.10 Closing Escrow Amount................................................................................ 40 ARTICLE XII GENERAL PROVISIONS 12.1 Public Announcements................................................................................. 40 12.2 Confidentiality...................................................................................... 40 12.3 Notices.............................................................................................. 40 12.4 Jurisdiction; Service of Process..................................................................... 42 12.5 Further Assurances; Tax Returns...................................................................... 42 12.6 Waiver............................................................................................... 42 12.7 Entire Agreement and Modification.................................................................... 42 12.8 Assignments, Successors, and No Third-Party Rights................................................... 43 12.9 Severability......................................................................................... 43 12.10 Article and Section Headings; Construction........................................................... 43 12.11 Time of Essence...................................................................................... 43 12.12 Governing Law........................................................................................ 44 12.13 Counterparts......................................................................................... 44 12.14 Sellers' Knowledge................................................................................... 44 12.15 Retention of Records and Access to Information....................................................... 44 12.16 Transaction Fees and Expenses........................................................................ 44
EXHIBITS 2.1(a) Form of Closing Escrow Agreement 2.4(a)(iv) Form of Consultant Agreement 2.4(b)(i) Seller's Accounts 2.5 Form of Letter of Credit 4.5 Letter Regarding Financing 7.3 Opinion of Sellers' Counsel 7.8 Summary of River Transport Agreement 7.9 Summary of Molybdenum Slag Agreement 8.3 Opinion of Buyer's Counsel 10.1(e) Form Extension Deposit Escrow Agreement SCHEDULES 2.1(f), Part I Distributed Assets 2.1(f), Part II Indebtedness 3.1 Organization and Good Standing iv 3.3 Capitalization 3.5 Personal Property 3.6(a) Properties 3.6(c)(ii) Real Estate Permits 3.6(c)(iv) Conditions of Properties 3.6(d) Restrictions on Properties 3.7 Taxes 3.8 Employee Benefits 3.10 Legal Proceedings 3.11 Absence of Certain Changes 3.12 Contracts 3.13 Insurance 3.14 Environmental Matters 3.15 Labor Relations 3.16 Intellectual Property 3.18 Undisclosed Liabilities 3.20 Reserves 3.21 Operating Permits 3.22 Warranties 3.23 Directors and Officers 3.24 Customers and Suppliers 5.7 Bonuses 5.8 Guarantees 9.1 Counties v PURCHASE AGREEMENT This PURCHASE AGREEMENT (this "Agreement") is made as of the 26/th/ day of --------- August, 1999, by and among U.S. SILICA COMPANY, a Delaware corporation ("Buyer"), and JOSEPH H. SHEARER and R. SCOTT SHEARER (collectively, the ----- ("Shareholders"), and CATS, INC., a Pennsylvania corporation, the JHS FAMILY ------------- PARTNERSHIP, a Pennsylvania limited partnership, and the RSS FAMILY PARTNERSHIP, a Pennsylvania limited partnership (collectively, the "Partnership Sellers") and ------------------- THE DELL H. SHEARER GRANDCHILDREN'S TRUST, a Pennsylvania trust (the "Trust ----- Seller"). - ------ The Shareholders, the Partnership Sellers and the Trust Seller are hereinafter referred to collectively as the "Sellers." ------- RECITALS The Shareholders desire to sell, and Buyer desires to purchase, all of the shares of the capital stock ("Capital Stock") of Commercial Stone Co., Inc., a ------------- Pennsylvania corporation ("Commercial"), for the consideration and on the terms ---------- set forth in this Agreement. The Partnership Sellers desire to sell, and Buyer desires to purchase, all of the partnership interests ("Partnership Interests") of Commercial Aggregates --------------------- Transportation and Sales, L.P., a Pennsylvania limited partnership ("CATS"), for ---- the consideration and on the terms set forth in this Agreement. The Trust Seller desires to sell, and Buyer desires to purchase, all of the Properties (as defined herein) and other interests (including without limitation, all Real Estate Permits and Environmental Permits, if any, held by the Trust Seller in relation to such Properties) that are owned by the Trust Seller and used in the operation of the businesses of the Acquired Companies (the "Trust Property"). -------------- The parties, intending to be legally bound, agree as follows: ARTICLE I DEFINITIONS ----------- In addition to words and terms defined elsewhere in this Agreement, for purposes of this Agreement, the following terms have the meanings specified or referred to in this Article 1: "Acquired Companies" -- Commercial Stone Co., Inc., a Pennsylvania ------------------ corporation, and Commercial Aggregates Transportation and Sales, L.P., a Pennsylvania limited partnership, collectively. "Business Day" -- any day other than a Saturday, Sunday, or public holiday ------------ under the laws of the Commonwealth of Pennsylvania. "Buyer" -- U.S. Silica Company. ----- "Buyer's Advisors" -- as defined in Section 5.1. ---------------- "Cap" -- as defined in Section 11.5(a). --- "Closing" -- as defined in Section 2.3. ------- "Closing Date" -- the date and time as of which the Closing actually takes ------------ place. "Code" -- the United States Internal Revenue Code of 1986, as amended. ---- "Consent" -- any approval, consent, ratification, waiver, notice or other ------- authorization. "Contemplated Transactions" -- as defined in Section 2.1(e). ------------------------- "Damages" -- as defined in Section 11.2. ------- "Encumbrance" -- any mortgage, easement, right of way, charge, claim, ----------- community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction or adverse claim of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership, or any other encumbrance or exception to title of any kind. "Environmental Laws" -- shall mean, without limitation, the Comprehensive ------------------ Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 46 - -- --- U.S.C. Sections 11001 et seq., the Resource Conservation and Recovery Act, 42 ------ U.S.C. Sections 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. ------ Sections 2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, ------ 7 U.S.C. Sections 136 et seq., the Clean Air Act, 42 U.S.C. Sections 7401 et -- --- -- seq., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. - --- Sections 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. Sections 300f et ------ -- seq., the Occupational Safety and Health Act, 29 U.S.C. Sections 641 et seq., - --- ------ the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq., as ------ any of the above statutes have been from time to time in effect, all rules and regulations promulgated pursuant to any of the above statutes, and any other current foreign, federal, state or local law, statute, ordinance, rule or regulation governing environmental matters, as the same have been from time to time in effect, including any common law cause of action providing any right or remedy relating to environmental matters, and all applicable judicial and administrative decisions, orders, and decrees relating to environmental matters. "ERISA" -- the Employee Retirement Income Security Act of 1974 or any ----- successor law, and regulations and rules issued pursuant to that Act or any successor law. "ERISA Affiliate" -- each business or entity which is a member of a --------------- "controlled group of corporations," under "common control" or an "affiliated service group" with an Acquired Company within the meaning of Section 414(b), (c) or (m) of the Code or required to be aggregated with an Acquired Company under Section 414(o) of the Code, or is under "common control" with an Acquired Company within the meaning of Section 4001(a)(14) of ERISA. 2 "GAAP" -- generally accepted United States accounting principles, as in ---- effect from time to time. "Governmental Body" -- any: ----------------- (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); or (d) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature. "HSR Act" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as ------- amended, or any successor law, and regulations and rules issued pursuant to that Act or any successor law. "Indebtedness" -- all indebtedness of the Acquired Companies other than ------------ ordinary course payables and wages and salaries. "Indemnified Person" -- either a Buyer Indemnified Person or a Seller ------------------ Indemnified Person. "Intellectual Property Assets" -- as defined in Section 3.16. ---------------------------- "IRS" -- the Internal Revenue Service. --- "Legal Requirement" -- any federal, state, local, municipal, foreign, ----------------- international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, court order, consent, decree, regulation, license, permit, statute, or treaty. "Material Adverse Effect" -- an event, circumstance or condition which is ----------------------- reasonably likely to have an adverse effect on (a) the assets, business, financial condition, results of operations or prospects of the Acquired Companies taken as a whole, or (b) the ability of any Seller to perform any of its material obligations under this Agreement or which threatens materially or is reasonably likely to impede any Seller's ability to consummate the Contemplated Transactions. "Multiemployer Plan" -- a multiemployer plan within the meaning of Section ------------------ 4001(a)(3) of ERISA. "Order" -- any award, decision, injunction, judgment, order, ruling, ----- subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other governmental body or by any arbitrator. 3 "Organizational Documents" -- (a) the articles or certificate of ------------------------ incorporation and the bylaws of a corporation; (b) the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (d) the certificate of organization and limited liability company agreement of a limited liability company; (e) the trust agreement or similar document of a trust; and (f) any amendment to any of the foregoing. "PBGC" -- the Pension Benefit Guaranty Corporation. ---- "Person" -- any individual, corporation (including any non-profit ------ corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body. "Plan" -- as defined in Section 3.8. ---- "Representative" -- with respect to a particular Person, any director, -------------- officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants and financial advisors. "Regulated Materials" -- any pollutants, contaminants, toxic or hazardous ------------------- or extremely hazardous substances, materials, wastes, constituents, compounds, chemicals, natural or man-made elements or forces (including, without limitation, petroleum or any by-products or fractions thereof, any form of natural gas, Bevill Amendment materials, lead, asbestos and asbestos-containing materials, building construction materials and debris, polychlorinated biphenyls ("PCBs") and PCB-containing equipment, radon and other radioactive elements, ionizing radiation, electromagnetic field radiation and other non-ionizing radiation, sonic forces and other natural forces, infectious, carcinogenic, mutagenic, or etiologic agents, pesticides, defoliants, explosives, flammables, corrosives and urea formaldehyde foam insulation) that are regulated by any Environmental Laws. "S Corp Tax Deposit" -- means the amount of $1,792,432 deposited with the ------------------ Internal Revenue Service in connection with the adoption by Commercial of a non- standard fiscal year. "Securities Act" -- the Securities Act of 1933 or any successor law, and -------------- regulations and rules issued pursuant to that Act or any successor law. "Taxes" -- as defined in Section 3.7. ----- "Year-End Balance Sheets" -- defined in Section 3.4. ----------------------- ARTICLE II SALE AND TRANSFER OF SHARES AND PARTNERSHIP INTERESTS; CLOSING -------------------------------------------------------------- 2.1 Acquisition. ----------- Subject to the terms and conditions of this Agreement, at the Closing: 4 (a) The Buyer shall deliver to Sellers the aggregate amount of $138,700,000 (as adjusted pursuant to Section 2.2 below, the "Purchase Price"), less the -------------- amount of $8,000,000 (the "Closing Escrow Amount"), which shall be deposited by --------------------- the Buyer with an escrow agent (the "Closing Escrow Agent") to be held in escrow -------------------- by such agent pursuant to the terms of an escrow agreement, substantially in the form of Exhibit 2.1(a) attached hereto (the "Closing Escrow Agreement"). The ------------------------ Closing Escrow Amount shall be used to satisfy claims for Damages to which any Buyer Indemnified Person shall be entitled pursuant to Article XI of this Agreement. (b) The Shareholders shall issue, sell and deliver to Buyer, and Buyer shall purchase and accept from the Shareholders, all of the shares of Capital Stock (the "Acquired Shares"), free and clear of all Encumbrances. --------------- (c) The Partnership Sellers shall issue, sell and deliver to Buyer, and Buyer shall purchase and accept from the Partnership Sellers, all of the Partnership Interests (the "Acquired Interests"), free and clear of all ------------------ Encumbrances. The Trust Seller shall sell and transfer to the Buyer the Trust Property. (d) Collectively, the sale and delivery of the Acquired Shares and Acquired Interests are referred to as the "Acquisition." ----------- (e) The Acquisition and the other transactions contemplated hereby (including, without limitation, the transfer of the Trust Property by the Trust Seller) are collectively referred to herein as the "Contemplated Transactions." ------------------------- (f) Prior to the Closing Date, Sellers will cause the assets listed on Part I of Schedule 2.1(f) to be distributed by Commercial to the Sellers. Sellers shall be responsible for satisfying all Indebtedness of the Acquired Companies outstanding at the time of Closing, other than the Indebtedness listed on Part II of Schedule 2.1(f). If at any time Buyer ceases to use the name "Commercial Stone" in connection with its business, it shall convey to Sellers, for the sum of $10.00, the right to use such name as a corporate name solely so that Sellers may continue to purchase Pennsylvania State University football tickets in such name. (g) The Sellers and the Buyer agree that, subject to adjustment under Section 2.2(b) of this Agreement (which shall be ratable as between the Acquired Shares and the Acquired Interests), the Aggregate Purchase Price shall be allocated $121,200,000 to the Acquired Shares, $7,500,000 to the Acquired Interests and $10,000,000 to the Trust Property being transferred hereunder by the Trust Seller. (h) Real estate transfer taxes payable in connection with the transfer of the Trust Property by the Trust Seller will be split equally by the Trust Seller and Buyer. Real estate transfer taxes, if any, with respect to the remaining Properties will be split equally by the Shareholders and Buyer. 2.2 Payment of Purchase Price. (a) The Purchase Price, less the Closing ------------------------- Escrow Amount, will be payable at the Closing by wire transfer as specified in Section 2.4(b). Prior to the Closing, the parties hereto shall provide all necessary information as to the accounts to which such payments shall be made. The Closing Escrow Amount shall be deposited with the Closing Escrow Agent pursuant to the Closing Escrow Agreement. 5 (b) Not later than 30 Business Days after the Closing Date, Buyer shall deliver to the Sellers unaudited statements of Commercial's Closing Date Net Working Capital (as herein defined) prepared by Buyer (which date of such delivery is hereinafter referred to as the "Delivery Date"). The statement of ------------- Closing Date Net Working Capital shall be prepared from the books and records of Commercial in accordance with GAAP applied on a basis consistent with the Commercial Year-End Balance Sheets referred to in Section 3.4 hereof (except for the omission of certain footnotes and other presentation items required by GAAP with respect to annual financial statements or annual accounts and subject to other normal year-end adjustments). The statement of Closing Date Net Working Capital shall be subject to verification by Sellers not later than 20 Business Days after the Delivery Date. In the event that the Closing Date Net Working Capital is less than the Benchmark Net Working Capital (as hereinafter defined), Sellers shall pay to Buyer in cash or other immediately available funds the amount by which the Closing Date Net Working Capital is less than the Benchmark Net Working Capital. In the event the Closing Date Net Working Capital is greater than the Benchmark Net Working Capital, Buyer shall pay to Sellers in cash or other immediately available funds the amount by which the Closing Date Net Working Capital exceeds the Benchmark Net Working Capital. As used herein, "Closing Date Net Working Capital" means the (i) sum of Commercial's current -------------------------------- assets (excluding cash and cash equivalents) less (ii) the sum of Commercial's ---- current liabilities (excluding short term debt and the current portion of long term debt), each as determined as of the Closing Date in accordance with GAAP applied on a basis consistent with the Commercial Year End Balance Sheets referred to in Section 3.4 hereof. "Benchmark Net Working Capital" means ----------------------------- $9,250,000. In the event that Buyer and Sellers cannot agree as to the amount of the Closing Date Net Working Capital within 10 days following the verification period, either party may refer the matter to the Pittsburgh office of Ernst and Young L.L.P., and such firm shall be responsible for determining the amounts of the Closing Date Net Working Capital for purposes of this Section 2.2; provided, however, that the amount not in dispute, if any, shall be paid in cash or other immediately available funds as set forth above. The cost of such determination by such independent certified public accountants shall be borne one-half by Buyer and one-half by Sellers. Any adjustments to the Purchase Price required by this Section 2.2(b) will be allocated to the Shareholders pro rata in accordance with their respective ownership interests. 2.3 Closing. The consummation of the Contemplated Transactions (the ------- "Closing") will take place at such location as the parties may agree. It is the ------- intent of the parties to close the Contemplated Transactions as promptly as possible; accordingly, the parties will use all commercially reasonable and diligent best efforts to satisfy the conditions of this Agreement on or before September 30, 1999. Consistent with the foregoing and subject to the provisions of Section 10.1, the parties shall cause the Closing to occur on the earlier of (i) the date that is three (3) business days following the satisfaction of all of the conditions set forth in Articles VII and VIII, and (ii) September 30, 1999 (the "Deadline Date"). ------------- 2.4 Closing Obligations. At the Closing: ------------------- (a) Sellers will deliver to Buyer: (i) certificates representing the Acquired Shares, duly endorsed (or accompanied by duly executed stock powers), for transfer to Buyer; 6 (ii) certificates representing the Acquired Interests, duly endorsed, for transfer to Buyer; (iii) certificates executed by Sellers to the effect that that each of the conditions precedent to the obligation of Buyer to close set forth in Sections 7.1 and 7.2 hereof have been fulfilled; (iv) consultant agreements with Commercial in the form of Exhibit 2.4(a)(iv), executed by Joseph H. Shearer and R. Scott Shearer; (v) a certificate from each landlord under a Real Property Lease (as defined herein) who is unaffiliated with the Acquired Companies and the Sellers, dated no earlier than September 1, 1999, certifying (i) that the applicable lease with respect to each of the leased Properties is in good standing and full force and effect in accordance with its terms and has not been modified (except for modifications set forth therein), amended or assigned, (ii) the date(s) to which rent and other charges thereunder have been paid, (iii) that there is no default thereunder by either party thereto, (iv) that all work required to be done under the applicable lease on the part of the tenant has been completed to the satisfaction of the landlord, and (v) such further matters as may be reasonably requested by the Buyer; provided, however, that Sellers may elect, instead of furnishing -------- ------- such certificates at Closing, to indemnify Buyer for any Damages (subject to the Cap) resulting from Sellers' failure to furnish such certificates, such indemnity to continue until such certificates are provided ; and (vi) all such documentation as is necessary to transfer ownership of the Trust Property being transferred hereunder by the Trust Seller, as the Buyer shall reasonably request. (b) Buyer will deliver to Sellers: (i) by wire transfer to an account specified by each Seller the amounts listed on Exhibit 2.4(b)(i); and (ii) a certificate executed by Buyer to the effect that each of the conditions precedent to the obligation of Sellers to close set forth in Sections 8.1 and 8.2 hereof have been fulfilled. 2.5 Letters of Credit. (a) Not later than 5:00 p.m., Pittsburgh time, on ----------------- August 31, 1999, Buyer shall deliver to Sellers a letter of credit from Banque Nationale de Paris, New York Branch, in the face amount of $7,000,000. The letter of credit shall be substantially in the form attached hereto as Exhibit 2.5 and shall provide for payment of the full face amount thereof to Lion Abstract Limited Partnership, as escrow agent, in the event that (i) Buyer does not consummate the Acquisition due only to failure of the condition set forth in Section 7.10 hereof, or (ii) the Acquisition does not occur due to a breach by Buyer of its obligations under this Agreement. If Sellers elect to draw on the letter of credit and receive the proceeds thereof pursuant to the foregoing clause (ii), they covenant that they will not sue Buyer to recover damages for such breach nor in connection with any other matter in relation to this Agreement or the Contemplated Transactions. In the event of a dispute as to whether Sellers are entitled to be 7 paid the proceeds of the letter of credit, Buyer shall bear the burden of proof, i.e., Buyer must establish by a preponderance of evidence that its failure to - --- consummate the Acquisition was not due to an event described in clause (i) or (ii) of the immediately preceding sentence. (b) At the Closing, Buyer shall deliver to Sellers a letter of credit from Banque Nationale De Paris, New York Branch, in the face amount of the S Corp Tax Deposit. The letter of credit shall be in form and substance reasonably satisfactory to Sellers and shall provide for payment to Lion Abstract Limited Partnership, as escrow agent, in the event that Sellers certify that they have a reasonable good faith belief that the S Corp Tax Deposit has been received by Buyer or offset by the Internal Revenue Service to satisfy federal tax liabilities of Commercial for periods commencing on or after the Closing Date, and that in either case Buyer has not paid to Sellers the full amount of the S Corp Tax Deposit. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS ----------------------------------------- Sellers severally (and not jointly) make the following representations and warranties to Buyer, as of the date hereof and as of the Closing Date: 3.1 Organization and Good Standing. (a) Schedule 3.1 contains a complete ------------------------------ and accurate list for each Acquired Company of its name, its jurisdiction of incorporation or formation, other jurisdictions in which it is authorized to do business, and its capitalization (including the identity of each stockholder or partner and the number of shares or interests held by each). Each Acquired Company is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation or formation, with full power and authority to conduct its business as it is now being conducted and to own or use the properties and assets that it purports to own or use. Each Acquired Company is in good standing in each foreign jurisdiction listed on Schedule 3.1 in which such Acquired Company is authorized to do business as a foreign corporation and such jurisdictions are the only jurisdictions where the nature of each such Acquired Company's business and assets require such authorization. (b) Sellers have delivered to Buyer copies of the Organizational Documents of each Acquired Company and each Seller, as currently in effect. 3.2 Authority; No Conflict. (a) Each Seller has full capacity, right, ---------------------- power and authority to execute and deliver this Agreement and to consummate the Contemplated Transactions. This Agreement constitutes the legal, valid, and binding obligation of Sellers, enforceable against Sellers in accordance with its terms. (b) The execution, delivery and performance of this Agreement by Sellers and the consummation of the Contemplated Transactions (i) have been authorized by all necessary corporate, partnership and other action on the part of Sellers, and (ii) will not (w) conflict with the terms, conditions or provisions of the Organizational Documents of any Seller or any Acquired Company (x) violate any provision of law or any Order to which any Seller or any Acquired Company or any of their respective assets is subject or require the consent of any Person, (y) result in a breach or violation of any of the terms of, or constitute a default by any 8 Seller or Acquired Company under, any indenture, mortgage, loan agreement, lease or other agreement or instrument to which any Seller or any Acquired Company is a party or by which it or any of its assets is bound, or (z) result in the creation or imposition of any Encumbrance upon the Acquired Shares or the Acquired Interests or the assets of any Acquired Company or the Properties, except to the extent such conflict, violation, breach or creation would not have a Material Adverse Effect. 3.3 Capitalization. (a) The authorized equity securities of Commercial -------------- consist of two classes of common stock. There are 1200 shares of Class A voting stock, $5.00 par value, all of which are issued and outstanding. There are 22,800 shares of Class B non-voting stock, $5.00 par value, all of which are issued and outstanding. All of the outstanding stock of Commercial is owned by the Shareholders as set forth on Schedule 3.3, free and clear of all Encumbrances, other than restrictions imposed by the buy/sell agreement between the Shareholders. All such stock has been duly authorized and validly issued and is fully paid and nonassessable. Neither Acquired Company owns, or has any contract or other arrangement to acquire, any equity securities or other securities of any Person (other than another Acquired Company) or any direct or indirect equity or ownership interest in any other business. (b) The entire partnership ownership of CATS consists of a 1% general partner interest held by CATS, Inc., a Pennsylvania corporation, a 49.5% limited partner interest held by the JHS Family Partnership, and a 49.5% limited partner interest held by the RSS Family Partnership. (c) There are no preemptive rights, whether at law or otherwise, to purchase any of the securities of either Acquired Company and there are no outstanding options, warrants, "phantom" stock plans, subscriptions, agreements, plans or other commitments pursuant to which either Acquired Company is or may become obligated to sell or issue any shares of its capital stock or partnership interests (as the case may be) or any other debt or equity security, and there are no outstanding securities convertible into shares of such capital stock or partnership interests (as the case may be) or any other debt or equity security, except rights of the Shareholders under their buy/sell agreement. 3.4 Financial Statements. Sellers have delivered to Buyer: (a) the audited -------------------- balance sheets of Commercial as of March 31, 1999 and unaudited balance sheets as of March 31, 1998 and 1997, (including the notes thereto, the "Commercial ---------- Year-End Balance Sheets"), together with the related statements of operations - ----------------------- and retained earnings and statements of cash flows for the year then ended, and (b) the unaudited balance sheet of CATS as of December 31, 1998, 1997 and 1996 (the "CATS Year-End Balance Sheets"), together with the related statements of ---------------------------- operations and statements of changes in partners' capital for the year then ended, accompanied in the case of the March 31, 1999 financial statements of Commercial, by the opinion of Schneider Downs, certified public accountants (the Commercial Year-End Balance Sheets and the CATS Year-End Balance Sheets shall be referred to collectively herein as the "Year-End Balance Sheets"). Sellers have ----------------------- also delivered the balance sheets of the Acquired Companies as at June 30, 1999, together with the related statements of operations and retained earnings for the three months (in the case of Commercial), and six months (in the case of CATS) then ended (the "Interim Financial Statements"). All of the financial statements ---------------------------- of the Acquired Companies referred to above (i) are in accordance with the books and records of the Acquired Companies, 9 (ii) are true correct and complete, and (iii) fairly present in all material respects the financial condition and the results of operations, changes in stockholders' equity, partnership accounts and cash flow of the Acquired Companies, as the case may be, as of the respective dates of and for the periods referred to therein, all in conformity with GAAP (except in the case of the Interim Financial Statements for the omission of certain footnotes and other presentation items required by GAAP with respect to annual financial statements or annual accounts and subject to other normal year-end adjustments). Such financial statements reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the notes to such financial statements. 3.5 Personal Property. Except as set forth on Schedule 3.5 and except for ----------------- liens for Taxes not yet due and payable, with respect to the material tangible personal property used by the Acquired Companies in the operation of their respective businesses (collectively, the "Personal Property"), the Acquired ----------------- Companies, have good and valid title to all of their items of owned Personal Property, and valid leasehold interests in all of their items of leased Personal Property. The Personal Property is in the possession or control of the Acquired Companies and no other Person has a right to possession or claims possession of all or any part of such Personal Property, except for the rights of lessors of leased assets under their respective contracts and leases. 3.6 Real Property Interests. (a) Schedule 3.6(a) contains a true and ----------------------- complete list of each and every parcel of real property now owned ("Owned ----- Property"), each and every parcel of real property, or interest therein, now - -------- held under lease (including without limitation the Trust Property and all mineral leases) ("Leased Property"), every parcel of real property used by or --------------- necessary for the conduct of the business of the Acquired Companies, or held under option or agreement to purchase, by any of the Acquired Companies (individually, a "Property" and collectively, the "Properties"), the record -------- ---------- title holder thereof and the legal description and location thereof. The Acquired Companies neither own nor lease any real property or interest therein other than the Properties. Sellers have furnished or made available to Buyer true, correct and complete copies of all (i) title reports, (ii) surveys, (iii) deeds, title holding or trust agreements under which any of the Properties have been conveyed to the Acquired Companies or the Trust Seller, and (iv) all leases, subleases or other agreements under which the Acquired Companies use or occupy or have the right to use or occupy, any Properties, including all amendments and assignments thereof (collectively, "Real Property Leases"), in -------------------- the possession of Sellers or the Acquired Companies with respect to each of the Properties. Except as set forth on Schedule 3.6(a), each of the Acquired Companies or the Trust Seller, respectively, (a) owns and has good and marketable fee simple title to the Owned Properties, together with all buildings, improvements, appurtenant rights, privileges and easements located thereon or appurtenant thereto, and (b) has good and valid title to, and is lawfully seized and possessed of, the leasehold estates in all Leased Properties, in each case free and clear of all Encumbrances which would materially interfere with the present use of the Properties or which would have a Material Adverse Effect, except general and special real estate taxes and assessments which may be a lien but are not yet due and payable. (b) Each Real Property Lease is valid and binding in all material respects upon the Acquired Companies and the Trust Seller, and, to the knowledge of the Sellers, each other party thereto, and is in full force and effect. All rent and other sums and charges payable by the 10 Acquired Companies as tenant thereunder are current. The Acquired Companies and the Trust Seller have complied in all material respects with the terms of each Real Property Lease and no termination event or condition or uncured default exists under any Real Property Lease. No event has occurred and no condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default or termination event or condition. (c) With respect to each of the Properties and the buildings, structures, improvements and fixtures thereon: (i) Sellers and the Acquired Companies are in compliance with all zoning laws, deed restrictions and building codes applicable to the Properties, non-compliance with which would materially interfere with the present use of the Properties or which would have a Material Adverse Effect; (ii) Sellers have all permits, licenses and approvals with respect to the ownership and the current use and occupancy of its respective Properties the lack of which would materially interfere with the present use of the Properties or which would have a Material Adverse Effect (individually, "Real Estate Permit" and collectively, "Real Estate ------------------ ----------- Permits"). All Real Estate Permits are set forth on Schedule 3.6(c)(ii) and are in full force and effect. The current use and occupancy of each of the Properties do not Violate any of such Real Estate Permits, and no proceeding is pending or, to the knowledge of Sellers, threatened, to revoke, suspend, modify or limit any of the Real Estate Permits. No Permit will be subject to revocation, suspension, modification or limitation as a result of this Agreement or the consummation of the Contemplated Transactions; (iii) neither Sellers nor the Acquired Companies have received any notice of any federal, state or local plans to restrict or change access from any highway or road system in the vicinity of any of the Properties to any of the Properties, or of any pending or threatened condemnation of any of the Properties or any part thereof, or of any plans for improvements which might result in a special assessment against any of the Properties; (iv) Except as disclosed on Schedule 3.6(c)(iv,) there are no defects with respect to any of the buildings, structures, improvements and fixtures at any of the Properties which would impair the day-to-day use of any such buildings, structures, improvements or fixtures or which would subject the Acquired Companies or the Sellers to any material liability under applicable law; (v) Sellers and the Acquired Companies have good and valid rights of ingress and egress to and from all Properties from and to the public street systems for all usual street, road and utility purposes and other purposes necessary or incidental to the business of the Acquired Companies; and (vi) All facilities located on the Properties are supplied with utilities and other services necessary for the operation of such facilities as presently operated. 11 (d) Except as disclosed on Schedule 3.6(d), there are no restrictions of any nature on the ability of Sellers or the Acquired Companies to assign and transfer its interest in the Properties or Real Property Leases, as the case may be, to the Buyer (or its nominee) either by the terms of each of such Real Property Leases or by operation of law and there are no consents of third parties necessary for such assignment or transfer. (e) Each Seller is a "United States person" as that term is defined -------------------- in Section 7701(a)(30) of the Code. 3.7 Taxes. (a) Except as set forth on Schedule 3.7(a), (i) the Acquired ----- Companies and the Trust Seller have timely filed, in accordance with applicable law, all material reports and returns relating to all taxes (including, without limitation, all income, excise, property, sales and franchise taxes) and similar assessments, customs, duties, charges and fees (including interest, penalties and additions to such taxes, assessments, customs, duties, charges and fees and any interest in respect of such penalties and additions) imposed by the United States or any state, local or foreign government or taxing authority ("Taxes") ----- required to be filed by them, which returns and reports are true, correct and complete in all material respects, and have paid all Taxes that have become due, whether or not shown as due on such returns and reports, (ii) all Taxes that either of the Acquired Companies or the Trust Seller is required to withhold or deduct and pay over to a government or taxing authority have been so withheld or deducted and paid over to the extent due and payable, (iii) no notices respecting asserted or assessed and unresolved material deficiencies for any Tax have been received by any Acquired Company or the Trust Seller for any tax periods, (iv) there is no investigation by any tax agency or authority presently pending or, to the knowledge of Sellers, threatened with respect to an Acquired Company or the Trust Seller or the Properties, and neither any Acquired Company nor the Trust Seller is a party to any action or proceeding by any Governmental Body for the assessment or collection of Taxes, nor has any such event been asserted or threatened. Neither any Seller nor Commercial has filed any consent of the type described under Section 341(f) of the Code. The federal income tax returns of Commercial and CATS as required for the taxable years ending March 31, 1999, and December 31, 1998, respectively, have been timely filed and Sellers have furnished or made available to Buyer a true and complete copy thereof of each such return. The unpaid Taxes of each Acquired Company did not, as of the dates of the Year-End Balance Sheets, exceed the respective accruals and reserves (other than accruals and reserves for deferred Taxes) for such Taxes set forth on the Year-End Balance Sheets. There are no liens in respect of unpaid Taxes on any of the assets of either of the Acquired Companies or the Properties except for Taxes not yet due. (b) Except as set forth in Schedule 3.7(b), neither of the Acquired Companies is currently pursuing an appeal of any Tax imposed against an Acquired Company. (c) Commercial is, and has been at all times since April 1987 an "S - corporation" within the meaning of Code Section 1361(a). A valid election under - ----------- Code Section 1362 (and a comparable election under state or local law in each jurisdiction in which Commercial is required to file Tax returns and reports that provides for such an election) has been in effect with respect to Commercial at all times since April 1987. Each Shareholder has filed in a timely fashion with each of the IRS and any other applicable state taxing authority a consent to such S corporation elections with respect to Commercial. Commercial has not been, and will not be, subject to Tax 12 under Code Section 1374 or 1375 (or any comparable provision of state or local law) for any period prior to Closing. 3.8 Employee Benefits. (a) Except as set forth in Schedule 3.8, no ----------------- Acquired Company has with respect to its current or former employees sponsored, maintained or contributed to any "employee benefit plan" within the meaning of --------------------- Section 3(3) of ERISA, or any bonus, deferred compensation, incentive compensation, severance or termination pay, change in control, stock purchase or stock option plan, agreement or arrangement, or any other material employee benefit or fringe benefit arrangement, whether formal or informal, and whether legally binding or not, other than a Multiemployer Plan (collectively, "Plans" ----- and individually, a "Plan"). ---- (b) Except as otherwise set forth in Schedule 3.8, Sellers have delivered to Buyer: (i) complete copies of all plan documents which set forth the terms of each of the Plans and where applicable, complete copies of any related trusts and insurance contracts; (ii) a general description of any of the Plans with respect to which no formal plan document has been adopted; (iii) where applicable, the most recent Form 5500, as filed with the IRS together with all attachments thereto, relating to the Plans; and (iv) where applicable, the most recent IRS determination letter with respect to each Plan. (c) Each of the Plans which is intended to conform to the requirements of the Code and ERISA has been administered in compliance in all material respects with the applicable requirements of the Code and ERISA and with the Plan terms. There is no accrued liability, contingent or otherwise, relating to any Plan that would have a Material Adverse Effect, other than as reflected in the most recent Year-End Balance Sheets, and there are no actions, suits, arbitrations, or proceedings pending (or to the best knowledge of Sellers, threatened) against any Plan, against the assets of any of the trusts under any Plan or the plan sponsor or the plan administrator, or against any fiduciary of any Plan with respect to the operation of such plans which would have a Material Adverse Effect (other than routine benefit claims). Except as set forth on Schedule 3.8, each Plan intended to qualify under the Code has, since 1993, received at least one favorable determination letter as to its qualification under the Code, and nothing has occurred, whether by action or failure to act, that would cause the loss of such qualification or result in material costs to any Acquired Company under the IRS' Employee Plans Compliance Resolution System. Neither Sellers, the Acquired Companies nor, to the best knowledge of Sellers, any other party has, with respect to any Plan, engaged in a non-exempt prohibited transaction within the meaning of Section 4975 of the Code or Section 406 of ERISA. No event has occurred and no condition exists that would subject any Acquired Company to any material fine under Section 502(c) of ERISA. (d) Except as set forth on Schedule 3.8, no Acquired Company maintains or contributes to any plan which provides, or has any liability to provide, life insurance, medical, severance or other employee welfare benefits to any employee upon his retirement or termination of employment, except as may be required by Section 4980B of the Code. (e) Except as set forth in Schedule 3.8, the execution of, and performance of the transactions contemplated in, this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) (i) constitute an event under any plan or other employee benefit 13 arrangement or any employee agreement, trust or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee, or (ii) result in the triggering or imposition of any restrictions or limitations on the right of any Acquired Company or the Buyer to amend or terminate any plan and receive the full amount of any excess assets remaining or resulting from such amendment or termination, subject to applicable taxes, and no payment or benefit which will or may be made by any Acquired Company, the Buyer or any of their respective affiliates with respect to any employee will be characterized as an "excess parachute payment," ------------------------ within the meaning of Section 280G(b)(1) of the Code. (f) With respect to each Plan that is subject to Title IV of ERISA or to the minimum funding requirements of Section 412 of the Code, the following is true: (i) all contributions required to be made under Code Section 412 (whether or not waived) have been made when due, and all premium payments to the PBGC have been made when due; (ii) there is no event or condition existing (other than the Contemplated Transactions) which could be deemed a "reportable event" ---------------- within the meaning of Section 4043 of ERISA with respect to which the notice requirement has not been waived, and no condition exists which would subject the Company or any Subsidiary to a fine under Section 4071 of ERISA; (iii) no amendment has occurred which has required or could require any Acquired Company to provide security to such Plan under Section 401(a)(29) of the Code; (iv) no documentation or other information has been or is currently required to be provided to the PBGC pursuant to Section 4010 of ERISA, and no participant notices have been or are currently required pursuant to Section 4011 of ERISA; (v) as of the most recent valuation date, the fair market value of The Plan's assets exceeded the "projected benefit obligation" for such plan within the ---------------------------- meaning of Paragraph 17 of FASB 87; (vi) there are no contributing sponsors of such Plan who are not ERISA Affiliates of an Acquired Company; and (vii) no transaction has occurred and no condition exists with respect to such Plan that has subjected or will likely subject any Acquired Company to liability under Section 4069 of ERISA. (g) Except as set forth in Schedule 3.8, no Acquired Company has ever been a party to, or been required to contribute to, a Multiemployer Plan. With respect to any Multiemployer Plan disclosed in Schedule 3.8, (i) all contributions required by the terms of such Multiemployer Plan or any collective bargaining agreement have been made when due; (ii) to the knowledge of Sellers, no Acquired Company would be subject to any withdrawal liability under Part 1 of Subtitle E of Title IV of ERISA if, as of the date hereof, the Acquired Company were to engage in a "complete withdrawal" (as defined in ERISA Section 4203) or ------------------- a "partial withdrawal" (as defined in ERISA Section 4205) from such ------------------ Multiemployer Plan, (iii) no Acquired Company has received notice that such Multiemployer Plan is in reorganization (as defined in Section 4242 of ERISA) or is insolvent (as defined in Section 4245 of ERISA), and (iv) no transaction has occurred and no condition exists that has subjected or will likely subject any Acquired Company to liability under Section 4212(c) of ERISA. Except as set forth on Schedule 3.8, for each such Multiemployer Plan, Sellers have delivered to Buyer (i) complete copies of the plan document and trust agreement, (ii) the most recent Form 5500, as filed with the IRS, together with all attachments thereto, and (iii) the most recent estimate of withdrawal liability that would be incurred by any Acquired Company if it were to completely withdraw from the Multiemployer Plan in 1998. 14 (h) Other than the Plans and Multiemployer Plans set forth in Schedule 3.8, no ERISA Affiliate of an Acquired Company has ever sponsored, maintained or contributed to a plan subject to Title IV of ERISA or to Section 412 of the Code. 3.9 Compliance with Law. Except as set forth on Schedule 3.9, for matters ------------------- pertaining to employee benefits (which are provided for in Section 3.8) and for environmental matters (which are provided for in Section 3.14), the operations of each of the Acquired Companies are and have been conducted in accordance with all applicable laws, regulations and other requirements of all U.S. and foreign national Governmental Bodies, and of all states, municipalities and other political subdivisions and agencies thereof, having jurisdiction over the business of the Acquired Companies, except for deviations from such laws arising from the operations of the Acquired Companies which, individually or in the aggregate would not have a Material Adverse Effect. 3.10 Legal Proceedings; Orders. Except as set forth in Schedule 3.10 ------------------------- hereto, there are no claims, actions, suits, proceedings or investigations pending or, to the knowledge of Sellers, threatened against any Seller, any Acquired Company or with respect to the Contemplated Transactions or as to which any such Person is a party or their properties are subject. To the knowledge of the Sellers, there exist no set of facts or circumstances that could reasonably give rise to any such claims, actions, suits, proceedings or investigations. No Acquired Company is in violation of any term of any Order outstanding against it, except where such violation would not have a Material Adverse Effect. 3.11 Absence of Certain Changes and Events. Except as set forth in ------------------------------------- Schedule 3.11, since the dates of the respective most recent Year-End Balance Sheets, the Acquired Companies have conducted their businesses only in the ordinary course of business and there has not been any: (a) change in Commercial's authorized or issued capital stock; grant of any stock option or right to purchase shares of capital stock; issuance of any security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement, or other acquisition of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of capital stack; (b) amendment to the Organizational Documents of any Acquired Company; (c) payment or increase by any Acquired Company of any bonuses, salaries, or other compensation to any stockholder, partner, trustee, director, officer, or manager or entry into any employment, severance, or similar contract or agreement with any director, officer, or manager; (d) adoption of, or increase in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any officer or manager of any Acquired Company; (e) change in the accounting methods used by any Acquired Company; (f) Material Adverse Effect; 15 (g) making of or changes to any material Tax election, or compromise of any material liability for Taxes; (h) sale, transfer, pledge or other disposition of any of the assets of either Acquired Company having an aggregate value of $200,000 or more (except sales of inventory in the ordinary course of business) and the assets listed on Part I of Schedule 2.1(f); (i) entering into, amendment, termination, waiver or cancellation of any agreement requiring the expenditure of $250,000 or more per year, or any termination, amendment, waiver or cancellation of any material right or claim of any Acquired Company under any such agreement; (j) material change in policies, operations or practices of either Acquired Company with respect to selling methods, returns, discounts or other non-price terms of sale; (k) any commitment to purchase or pay for equipment after the date hereof, (l) any capital appropriation or expenditure or commitment therefor on behalf of either Acquired Company in excess of $1,500,000 individually or $2,000,000 in the aggregate or any write-down or write-up of the value of any inventory or equipment of either of the Acquired Companies; (m) any purchase contracts or commitments which are in excess of the requirements of the respective businesses of the Acquired Companies or at prices higher than current market prices; or (n) any commitment, whether legally binding or otherwise, to do any of the foregoing. 3.12 Contracts. (a) Schedule 3.12 contains a complete and accurate list, --------- and Sellers have delivered to Buyer true and complete copies, of: (i) each contract or agreement that involves performance of services or delivery of goods or materials by one or more Acquired Company of an amount or value in excess of $250,000, or purchase orders with an amount or value in excess of $250,000; (ii) each contract or agreement that involves performance of services or delivery of goods or materials to one or more Acquired Company of an amount or value in excess of $250,000 with respect to fixed obligations and $500,000 with respect to purchase orders; (iii) each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other contract or agreement affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any Personal Property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments of less than $50,000 per annum) or Properties; 16 (iv) each material licensing agreement or other contract or agreement with respect to patents, trademarks, copyrights, or other intellectual property; (v) each joint venture, partnership, and other contract or agreement (however named) involving a sharing of profits, losses, costs, or liabilities by any Acquired Company with any other Person and each agreement with respect to guarantees of the obligations of a third party and agreements to indemnify third parties; (vi) each agreement containing non-competition or other limitations restricting the conduct of the business of any Acquired Company; (vii) each agreement between any Acquired Company and any of their respective affiliates; (viii) indentures, mortgages, deeds of trust, promissory notes, loan agreements, capital leases, security agreements or other agreements or commitments for the borrowing of money, or the deferred purchase price of assets, or which otherwise evidence Indebtedness of either Acquired Company or which create an Encumbrance on any of its assets or the Trust Property; and (ix) each other agreement not of the type referred to above that is otherwise material to the Acquired Companies, other than contracts with individual truckers (none of which represents more than ten percent (10%) of the total truck units of CATS). (b) Each Acquired Company has in all material respects performed all of its obligations required to be performed by it to the date hereof, and is not in default or alleged to be in default in any material respect, under any agreement listed on Schedule 3.12, and there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default. To the knowledge of the Sellers, no other party to any such agreement is in default in any respect of any of its obligations thereunder. Each of the agreements listed on Schedule 3.12 is valid and in full force and effect and enforceable against the parties thereto in accordance with their respective terms. 3.13 Insurance. Schedule 3.13 hereto sets forth a complete and accurate --------- list and description, including but not limited to deductibles thereunder, of all policies of fire, liability, product liability, workmen's compensation, health and other forms of insurance in effect with respect to the Acquired Companies. Sellers have furnished to Buyer true and correct copies of all such policies. No Acquired Company has received notice of default under or cancellation of any such policies and all such policies are valid and in full force and effect. All premiums due thereon covering all periods up to and including the Closing Date have been paid. Schedule 3.13 sets forth a list of all claims in excess of $200,000 individually against either Acquired Company (including, without limitation, products liability claims) and whether or not covered by insurance that have been asserted in writing since January 1, 1994. 3.14 Environmental Matters. Except as set forth in Schedule 3.14: --------------------- (a) Each Acquired Company and the Trust Seller has obtained, and has made all appropriate filings for issuance or renewal of, all registrations, permits, licenses and other 17 authorizations ("Environmental Permits") which: (i) are required to be obtained --------------------- by any such Acquired Company or the Trust Seller under all Environmental Laws or (ii) relate to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of Regulated Materials, except for those Environmental Permits, the absence of which will not have a Material Adverse Effect. (b) Except for such non-compliance which would not have a Material Adverse Effect, and to the knowledge of Sellers, each Acquired Company and the Trust Seller (and each property owned, leased or operated by any of the Acquired Companies) at all times has been and is in compliance with: (i) all Environmental Permits; (ii) all other, limitations, restrictions, conditions, standards, prohibitions, requirements and obligations contained in any of the Environmental Laws as applicable to such Acquired Company or the Trust Seller (or each property owned, leased or operated by any of the Acquired Companies); and (iii) all plans, orders, decrees, judgments, injunctions, notices or demand letters applicable to such Acquired Company or the Trust Seller (or each property owned, leased or operated by any of the Acquired Companies) and issued, entered, promulgated or approved under any of the Environmental Laws. (c) No Acquired Company has, and the Trust Seller has not, received any notice that any past or present conditions, circumstances, activities, practices, incidents or actions of any Acquired Company or the Trust Seller relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of any Regulated Material or relating to any emission, discharge, release or threatened release into the environment of any Regulated Material: (i) may interfere with or prevent compliance or continued compliance by any Acquired Company or any Seller with any of the Environmental Laws or any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder; (ii) may give rise to any common law or legal liability; or (iii) may otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation, unless the alleged violation or noncompliance with any Environmental Laws which forms the basis of any notice described above in this Section 3.14, if uncured or unsettled, would have a Material Adverse Effect. (d) There is no civil, criminal or administrative action, suit, demand, claim, hearing, notice or demand letter, notice of violation, investigation or proceeding pending or, to the knowledge of the Sellers, threatened against any Acquired Company or any Seller relating in any way to the disposal of any Regulated Material at any location or to any violation of any of the Environmental Laws or any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder. (e) To the knowledge of the Sellers, there has been no release, spill, discharge, deposit, storage, burial or dumping (collectively "Release") ------- of any Regulated Material in or on any properties currently or formerly owned, leased or operated by any Acquired Company which would have a Material Adverse Effect. All underground and above-ground storage tanks located on any property now or formerly owned, leased or operated by each Acquired Company have been used, maintained and, if applicable, removed, in material compliance with all applicable Legal Requirements. 18 (f) To the knowledge of the Sellers, no property now or previously owned, operated or leased by any Acquired Company is listed or is proposed for listing on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, as amended, or the Comprehensive Environmental Response, Compensation and Liability Information System List or on any similar state or foreign list of sites requiring investigation or cleanup; no clean-up of Regulated Material has occurred on any such property which could result in the creation of any lien on such property, and no lien has been filed against any Personal Property or any Properties under any Environmental Law. (g) Each Acquired Company and each Seller has heretofore delivered to Buyer true and complete copies of all environmental studies made in the last five years relating to any Acquired Company or the Properties or any other property or facility previously owned, operated or leased by any Acquired Company and all environmental studies in Sellers' possession with respect to asphalt plants owned, operated or leased by any Acquired Company. (h) No Acquired Company and no Seller has entered into any agreement that may require it to pay to, reimburse, guarantee, pledge, defend, indemnify or hold harmless any person for or against any environmental liability or costs. (i) Neither the Property nor any other current or former real property interest of any Acquired Company contains any: (a) underground storage tanks; (b) asbestos; (c) equipment using PCBs; (d) underground injection wells; or (e) septic tanks in which process wastewater or any Regulated Materials have been disposed. 3.15 Labor Relations. (a) No Acquired Company has experienced any material --------------- labor disputes, or any material work stoppage due to labor disagreements and, to the knowledge of the Sellers, no material labor disputes or material work stoppages are threatened. No Acquired Company has received a notice that there is any unfair labor practice, charge or complaint against any Acquired Company pending or threatened before the National Labor Relations Board or any comparable state agency or authority. There is no labor strike, dispute, slowdown or stoppage actually pending or, to Sellers' knowledge, threatened against or affecting an Acquired Company. No question concerning representation has been raised or, to Sellers' knowledge, is threatened respecting the employees of the Acquired Companies. No material labor grievance is pending or, to Sellers' knowledge, threatened against any Acquired Company. (b) Except as otherwise set forth in Schedule 3.15, Sellers have delivered to Buyer complete copies of all collective bargaining agreements or similar agreements with any labor organization, or any work rules or practices agreed to with any labor organization or employee association applicable to the employees of the Acquired Companies. To the knowledge of the Sellers, there are no current union organizing activities among the employees of the Acquired Companies. The execution of this Agreement and the consummation of the transaction contemplated hereby shall not result in a breach or other violation of any collective bargaining agreement to which either Acquired Company is a party. (c) Sellers have provided to Buyer the names, titles and current rates of compensation (whether in the form of salaries, bonuses, commissions or other supplemental compensation now or hereafter payable) of the ten most highly-compensated non-unionized 19 employees of the Acquired Companies, together with a list of any employment, severance or other compensation contracts and agreements relating to any such employees. Sellers have also provided to Buyer true, correct and complete copies of all written personnel policies, rules or procedures applicable to employees of the Acquired Companies. There are no material complaints, charges, arbitrations, controversies, grievances, lawsuits or other proceedings pending or, to the knowledge of Sellers, threatened in any forum against any Acquired Company alleging breach of any express or implied contract of employment, any law or regulation governing employment or the termination thereof or other discriminatory, wrongful or tortuous, conduct in connection with the employment relationship. Since the enactment of the Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act"), neither Acquired Company has -------- effectuated (A) a "plant closing" (as defined in the WARN Act) affecting any ------------- site of employment or one or more facilities or operating units within any site of employment or facility of any Acquired Company, or (B) a "mass layoff" (as ----------- defined in the WARN Act) affecting any site of employment or facility of any Acquired Company; nor has either Acquired Company engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state or local law. Except as set forth on Schedule 3.15, none of the employees of either Acquired Company have suffered an "Employment Loss" as --------------- defined in the Warn Act since July 1, 1999. 3.16 Intellectual Property. Schedule 3.16 contains a complete and accurate --------------------- list and summary description of all material patents, trademarks, tradenames, service marks, copyrights, software, trade secrets, and know-how, owned, used or licensed by any Acquired Company (the "Intellectual Property Assets"). Except as ---------------------------- set forth on Schedule 3.16, the Intellectual Property Assets are owned free and clear of all material Encumbrances. No Acquired Company unlawfully or wrongfully uses any Intellectual Property Asset, or infringes upon the rights of third parties through its use of the Intellectual Property Assets. No Acquired Company is in default under, or has received any notice of any claim of infringement or any other claim or proceeding relating to any Intellectual Property Asset. 3.17 Year 2000 Compliance. All of the material computer systems of the -------------------- Acquired Companies are in the final stages of the process to make such systems Year 2000 Compliant and such systems are scheduled and will be Year 2000 Compliant by October 1999 in all material respects. Each of the Acquired Companies has inquired of, or been advised by, its principal suppliers of their Year 2000 compliant status. The Sellers have not received notice that any customers or suppliers expect that their business with the Acquired Companies will be materially adversely effected by the failure of such suppliers to be Year 2000 Compliant on a timely basis. The term "Year 2000 Compliant," with respect to a computer system or ------------------- software program, means that such computer system or program: (i) is capable of recognizing, processing, managing, representing, interpreting and manipulating correctly date-related data for dates earlier and later than January 1, 2000; (ii) has the ability to provide date recognition for any data element without limitation; (iii) has the ability to function automatically into and beyond the year 2000 without human intervention and without any change in operations associated with the advent of the year 2000; (iv) has the ability to interpret data, dates and time correctly into and beyond the year 2000; (v) has the ability not to produce noncompliance in existing data, nor otherwise corrupt such data, into and beyond the year 2000; (vi) has the ability to process 20 correctly after January 1, 2000, data containing dates before that date; and (vii) has the ability to recognize all "leap year" dates, including February 29, 2000. 3.18 Absence of Undisclosed Liabilities. Except as disclosed on Schedule ---------------------------------- 3.18, or elsewhere in this Agreement or any schedule hereto, to the knowledge of the Sellers, neither Acquired Company has any liabilities or obligations of any nature, known or unknown, fixed or contingent, matured or unmatured, other than those (a) reflected in the Interim Financial Statements, or (b) incurred in the ordinary course of business since the date of the Interim Financial Statements, consistent (in amount and kind) with past practice or (c) liabilities which would not individually or in the aggregate have a Material Adverse Effect. 3.19 Accounts Receivable. The Sellers have delivered to the Buyer a true ------------------- and correct list and aging of all unpaid accounts receivable owing to each Acquired Company as of June 30, 1999. All accounts receivable of the Acquired Companies constitute legal, valid, binding and enforceable claims with respect to which the rendition of services or the sale of goods has been completed in bona fide transactions in the ordinary course of business. An adequate reserve for doubtful accounts for the each Acquired Company has been established and such reserve is consistent with both the operation of the Acquired Company in the ordinary course of business and past practice. 3.20 Reserves. To the knowledge of the Sellers, the description of the -------- aggregate reserves detailed in Schedule 3.20, including the location of the reserves with respect to the Properties, is accurate in all material respects. Schedule 3.20 also indicates for which reserves the Acquired Companies have obtained the governmental licenses, permits, approvals and other authorizations necessary for mining. The Sellers have no knowledge of any facts or circumstances that would contradict or otherwise raise doubt as to the accuracy of the information contained in Schedule 3.20 in any material respect. 3.21 Operating Permits. Set forth on Schedule 3.21 hereto is a list of all ----------------- governmental licenses, permits, approvals, certificates of inspection and other authorizations, filings and registrations that are necessary for the Acquired Companies to own and operate their respective businesses as presently conducted or presently proposed to be conducted (collectively, the "Operating Permits"). ----------------- Except as set forth on Schedule 3.21 hereto, all such Operating Permits have been duly and lawfully secured or made by the Acquired Companies and are in full force and effect. There is no proceeding pending, or, to the Sellers' knowledge, threatened or probable of assertion, to revoke or limit any such Operating Permit. None of the Contemplated Transactions will terminate, violate or limit the effectiveness of any such Operating Permit. With respect to renewal of Operating Permits, each Acquired Company has made, in a timely manner, all filings, reports, notices and other communications with the appropriate governmental body, and has otherwise taken, in a timely manner, all other action, known or anticipated to be required to be taken by each such Acquired Company, reasonably necessary to secure the renewal of the respective Operating Permits prior to the date of their respective expirations. The Acquired Companies are in compliance with the Operating Permits except where noncompliance would not have a Material Adverse Effect. 3.22 Directors and Officers. Set forth on Schedule 3.22 is a true and ---------------------- correct list of the names and titles of each director and officer of each Acquired Company. 21 3.23 Customers and Suppliers. Set forth on Schedule 3.23 hereto contains, ----------------------- with respect to the calendar years ended December 31, 1998 and 1997, a true and complete list of (i) the twenty (20) largest customers (in dollar volume) of each Acquired Company, and (ii) the five (5) largest suppliers (in dollar volume) to each Acquired Company. To the knowledge of the Sellers, no such supplier, customer or creditor indicated on Schedule 3.23 hereto has or intends or has threatened, or reasonably could be expected, to terminate or modify any of its relationships with either Acquired Company. 3.24 Qualification of Product. To the Sellers' knowledge, the asphalt, ------------------------ stone and other products currently produced by Commercial meet the specifications and qualifications established by the Strategic Highway Research Program for use in "Superpave" in the regions where the Acquired Companies currently operate. To the Sellers' knowledge, the aggregate mined and produced by Commercial meets the specifications established by Penn DOT-Bulletin 14 as "Class E Aggregate." 3.25 Rich Hill Quarry. To the Sellers' knowledge, the building of an ---------------- underground mine at the Rich Hill Quarry will not materially interrupt, or otherwise have a material adverse effect on, the operations of the Rich Hill Quarry, as such operations are currently being, and are currently contemplated to be, conducted. 3.26 Belle Vernon Quarry. Sellers have provided to the Buyer a true and ------------------- correct copy of the lease (the "Belle Lease") for the land upon which the Belle ----------- Vernon Quarry (the "Belle Quarry") is located and a true and correct copy of the ------------ reclamation plan (the "Reclamation Plan") concerning the Belle Quarry (the Belle ---------------- Lease together with the Reclamation Plan to be hereinafter referred to as the "Belle Quarry Documents"). The Sellers have performed in all material respects ---------------------- all of their obligations required to be performed by them to the date hereof under the Belle Quarry Documents, and are not in default or alleged to be in default in any material respect, under the Belle Quarry Documents, and there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default. To the knowledge of the Sellers, no other party to the Belle Quarry Documents is in default in any respect of any of its obligations thereunder. There exist no liabilities or obligations of any nature with respect to the Belle Lease, other than those disclosed and reflected in the Interim Financial Statements and there exist no liabilities or obligations of any nature with respect to the Reclamation Plan, which liabilities or obligations are to be fulfilled or performed subsequent to the Closing Date. The operations of the Acquired Companies that were and that are currently being conducted at the Belle Quarry were and are currently being conducted in accordance with all applicable Legal Requirements. 3.27 Silicosis. In the most recent chest x-rays performed on the employees --------- of the Acquired Companies pursuant to the Acquired Companies' medical surveillance program, no employee of the Acquired Companies (i) had a chest x- ray read by a NIOSH certified "B" reader as a profusion of greater than or equal to 1/0, or (ii) was diagnosed with silicosis. 22 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- Buyer represents and warrants to Sellers, as of the date hereof and as of the Closing Date, as follows: 4.1 Organization and Good Standing. Buyer is a corporation duly organized, ------------------------------ validly existing, and in good standing under the laws of the State of Delaware. 4.2 Authority; No Conflict. (a) The Buyer has full corporate power and ---------------------- authority to execute and deliver this Agreement and to consummate the Contemplated Transactions. This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. (b) The execution, delivery and performance of this Agreement by Buyer and the consummation of the Contemplated Transactions (i) have been authorized by all necessary corporate action on the part of Buyer, and (ii) will not (w) conflict with the terms, conditions or provisions of the Organizational Documents of Buyer, (x) violate any provision of law or any Order to which Buyer is subject, (y) result in a breach or violation of any of the terms of, or constitute a default by Buyer under, any material indenture, mortgage, loan agreement, lease or other agreement or instrument to which Buyer is a party or by which it is bound. Except as set forth on Schedule 4.2, Buyer will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 4.3 Investment Intent. Buyer is acquiring the Acquired Shares for its own ----------------- account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act. 4.4 Certain Proceedings. There is no Proceeding pending that has been ------------------- commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To Buyer's knowledge, no such proceeding has been threatened. 4.5 Financing. Attached hereto as Exhibit 4.5 is a true and correct copy --------- of the Buyer's commitment letter from The Chase Manhattan Bank and Chase Securities Inc. with respect to the Buyer's financing in connection with the Contemplated Transactions. As of the date hereof, such letter has not been withdrawn. ARTICLE V COVENANTS OF SELLERS PRIOR TO CLOSING DATE ------------------------------------------ 5.1 Access and Investigations. Between the date of this Agreement and the ------------------------- Closing Date, Sellers will (a) afford Buyer and its Representatives (collectively, "Buyer's Advisors") access, during normal business hours and with ---------------- reasonable prior notice, to each Acquired 23 Company's personnel, properties, contracts, books and records, and other documents and data, (b) furnish Buyer and Buyer's Advisors with copies of all such contracts, books and records, and other existing documents and data as Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with such additional financial, operating, and other data and information as Buyer may reasonably request. 5.2 Operation of the Businesses of the Acquired Companies. Between the ----------------------------------------------------- date of this Agreement and the Closing Date, Sellers will cause each Acquired Company to: (a) conduct its business only in the ordinary course of business, consistent with past practice; (b) use reasonable efforts to preserve intact its current business organization, keep available the services of its current officers and employees, and maintain its relations and good will with its suppliers, customers, landlords, creditors, employees, agents, and others having business relationships with it; (c) maintain its corporate or partnership existence in good standing; (d) comply in all respects with all applicable Legal Requirements; (e) maintain its insurance coverages; (f) pay all Taxes, charges and assessments when due, subject to any valid objection or contest of such amounts asserted in good faith and adequately reserved against; (g) make all debt service payments when contractually due and payable; (h) pay all accounts payable and other current liabilities when due; (i) maintain the Plans; (j) maintain its property, plant and equipment in good operating condition in accordance with industry standards taking into account the age thereof; (k) make capital expenditures in the ordinary course and consistent with past practice; and (l) maintain its books and records of account in the usual, regular and ordinary manner. 5.3 Negative Covenants. Except as otherwise expressly permitted by this ------------------ Agreement, between the date of this Agreement and the Closing Date, Sellers will not, without the prior consent of Buyer, permit any Acquired Company to: (a) take any affirmative action, or fail to take any reasonable action within their reasonable control, as a result of which any of the changes or events listed in Section 3.11 is likely to occur; 24 (b) acquire, sell, lease or dispose of any assets (except necessary equipment, raw materials and inventory in the ordinary course of business) which are material to the Acquired Company or enter into any commitment to do any of the foregoing or enter into any material commitment or transaction; (c) except in the ordinary course of business consistent with past practice (i) create, incur, assume or prepay any indebtedness for borrowed money (including obligations in respect of capital leases) except for short-term debt in the ordinary course of business consistent with past practice, (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person or (iii) make any loans, advances or capital contributions to, or investments in, or enter into any "keep well" arrangements or other agreement to maintain the financial condition of, any other Person; (d) acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the stock or assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof, (e) institute, settle or compromise any claim, action, suit, or proceeding pending or threatened by or against it involving amounts in excess of $200,000, at law or in equity or before any Governmental Body; (f) knowingly take any action that would knowingly render any representation, warranty, covenant or agreement of any Acquired Company in this Agreement inaccurate or breached as of the Closing Date; (g) take any action, or permit any Acquired Company to take any action, to encourage any of the personnel of either Acquired Company to leave their positions with the Acquired Companies, other than Scott Turer and Rick Young if such individuals are not offered satisfactory employment by Buyer; (h) agree, whether in writing or otherwise, to do any of the foregoing; or (i) effectuate either a "plant closing" or a "mass layoff" (each as ------------- ----------- defined in the WARN Act), or any similar action under applicable state or local law requiring notice to employees in the event of a plant closing or layoff. 5.4 Required Approvals. As promptly as practicable after the date of this ------------------ Agreement, Sellers will make all filings required by Legal Requirements to be made by them in order to consummate the Contemplated Transactions, including any HSR filings. Between the date of this Agreement and the Closing Date, Sellers will cooperate with Buyer with respect to all filings that Buyer elects to make or is required by Legal Requirements to make in connection with the Contemplated Transactions. 5.5 No Negotiation. Until such time, if any, as this Agreement is -------------- terminated pursuant to Article X, Sellers will not directly or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to, or consider the merits of any unsolicited inquiries or proposals from, any Person (other than Buyer) relating to 25 any transaction involving the sale of the business or all or substantially all the assets of any Acquired Company, any of the capital stock of Commercial, any of the partnership interests of CATS, or any merger, consolidation, business combination, or similar transaction involving any Acquired Company. 5.6 Reasonable Efforts. Between the date of this Agreement and the Closing ------------------ Date, Sellers will use all reasonable efforts to cause the conditions in Article VII and Article VIII to be satisfied (including, without limitation, providing such information and access to employees and properties as Buyer shall reasonably request with respect to the consummation of the financing contemplated by Section 4.5 hereof and the delivery of the financial statements referred to in Section 7.13 hereof). 5.7 Bonuses. Buyer will pay or will cause Commercial to pay at Closing ------- bonuses to employees of Commercial Stone in an aggregate amount of $1,320,000. Schedule 5.7 identifies such employees and the amount to be paid to each. Buyer may condition such bonuses on the employees' willingness to continue his or her employment with Commercial Stone for up to six months after the Closing Date. 5.8 Guarantees. Buyer shall use its commercially reasonable efforts to ---------- effect the release of Sellers at Closing or as promptly thereafter as practicable from all guarantees, indemnities, suretyships, and similar arrangements issued or made by Sellers to third parties for the benefit of the Acquired Companies or the Properties being conveyed by the Trust Sellers, a partial listing of which is listed on Schedule 5.8 hereto (the "Guarantees"). To ---------- the knowledge of Sellers, no facts or circumstances exist under which any of the Sellers is presently or, with the passage of time will be, obligated to perform under any such Guarantees. ARTICLE VI COVENANTS OF BUYER PRIOR TO CLOSING DATE ---------------------------------------- 6.1 Approvals of Governmental Bodies. As promptly as practicable after -------------------------------- the date of this Agreement, Buyer will make all filings required by Legal Requirements to be made by Buyer to consummate the transactions contemplated by the Transaction Documents, including all filings under the HSR Act. All applicable filing or transaction fees under such Legal Requirements, including HSR filings shall be paid by Buyer. Between the date of this Agreement and the Closing Date, Buyer will cooperate with Sellers with respect to all filings that Sellers are required by Legal Requirements to make in connection with the Contemplated Transactions, and cooperate with Sellers in obtaining all consents that may be required in connection with the consummation of the Contemplated Transactions. 6.2 Request for Early Termination. Upon the execution of definitive ----------------------------- purchase agreement, the Buyer will promptly prepare and file a request for early termination in accordance with the HSR Act. 6.3 Reasonable Efforts. Buyer will use all reasonable efforts to cause the ------------------ conditions in Articles VIII to be satisfied. 26 6.4 Buyer Surveys. Buyer shall use its commercial best efforts to obtain ------------- a survey of each of the four sites commonly referred to as Rich Hill, Springfield Pike, Dunningsville Asphalt and Adamsburg Asphalt, as deemed reasonably necessary or advisable by the Buyer (collectively, "Buyer Surveys"), ------------- certified to the Buyer, the Acquired Companies, Buyer's lender and Lawyer's Title Insurance Corporation (the "Title Company"). ------------- The Sellers shall and shall cause the Trust Seller and the Acquired Companies to assist Buyer as Buyer shall reasonably request in obtaining the Buyer Surveys, including, without limitation, involving all documentation and information reasonably requested and providing full access to the Properties to Buyer and its agents for such purpose. ARTICLE VII CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE --------------------------------------------------- Buyer's obligation to consummate the Contemplated Transactions is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part): 7.1 Accuracy of Representations. All of Sellers' representations and --------------------------- warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been true and correct in all material respects as of the date of this Agreement, and must be true and correct in all material respects as of the Closing Date as if made on the Closing Date. 7.2 Sellers' Performance. All of the covenants and obligations that -------------------- Sellers are required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been duly performed and complied with in all material respects. 7.3 Opinion of Counsel. There shall have been delivered to Buyer an ------------------ an opinion, dated the Closing Date, of Reed Smith Shaw & McClay, counsel to Sellers, in the form of Exhibit 7.3 hereto. 7.4 No Proceedings. No suit, action, proceeding or investigation shall -------------- have been commenced or threatened by any Governmental Body on any grounds to restrain, enjoin or hinder the Contemplated Transactions, to obtain substantial damages in respect thereof, or involving a claim that consummation thereof would result in the violation of any law or Order, or which would otherwise have a Material Adverse Effect if adversely decided. No suit or proceeding shall have been commenced by any other Person, (a) that could reasonably be expected to have the effect of preventing or materially diminishing the value to Buyer of the Contemplated Transactions, (b) that would prevent or materially delay the Contemplated Transactions, or (c) that could reasonably be expected to have the effect, if adversely decided, of materially restricting or interfering with the business or operations of either of the Acquired Companies after Closing or would otherwise have a Material Adverse Effect. 27 7.5 Payment of Indebtedness; Releases. The Indebtedness of the Acquired --------------------------------- Companies (other than the Indebtedness listed on Part 11 of Schedule 2.1(f)) shall have been repaid and the Buyer shall have received satisfactory evidence thereof and there shall have been executed and delivered all required releases of liens, termination statements and satisfaction pieces with respect to Indebtedness of any Acquired Company being repaid on the Closing Date. 7.6 HSR Act Approval. The waiting periods applicable to the consummation ---------------- of the Contemplated Transactions under the HSR Act shall have expired or been terminated. 7.7 Delivery of Documents. The Sellers shall have delivered to the Buyer --------------------- Buyer the documents referenced in Section 2.4(a). 7.8 Agreement Regarding Three Rivers. Commercial shall have entered into -------------------------------- an agreement with an affiliate of Seller regarding trucking services substantially on the terms set forth on Exhibit 7.8 hereto. 7.9 Agreement Regarding Molly Slag Operations. Commercial shall have ----------------------------------------- entered into an agreement with an affiliate of Seller regarding the disposal of molybdenum slag substantially on the terms set forth on Exhibit 7.9 hereto. 7.10 Financial Markets. Buyer shall not have received from The Chase ----------------- Manhattan Bank and Chase Securities, Inc. written notice to the effect that in their reasonable judgment there has occurred and there was continuing a material disruption of or a material adverse change in financial, banking or capital market (including, without limitation, high-yield market) conditions such that the funding contemplated by the commitment letter and term sheet attached hereto as Exhibit 4.5 was not made available to the Buyer. 7.11 Audited Financial Statements. On or prior to September 10, 1999, Buyer ---------------------------- shall have received (a) audited balance sheets and related statements of income, stockholders' equity and cash flows of each of the Acquired Companies for the three fiscal years ended prior to the Closing Date and (b) unaudited balance sheets and related statements of income, stockholders' equity and cash flows of each of the Acquired Companies for the fiscal quarters ending after the most recent fiscal year that precedes the Closing Date up to the latest fiscal quarter ending at least 30 days prior to the Closing Date (and, to the extent available, for each month preceding the Closing Date since the last such quarter), which audited and unaudited financial statements shall be in form and scope reasonably satisfactory to Buyer. Should the condition set forth in this Section 7.11 not be satisfied on or before September 10, 1999 and Buyer shall have failed to terminate this Agreement as provided in Section 10.1(c)(iii), then such condition shall be deemed waived by Buyer. 7.12 Real Estate Matters. (a) Seller shall have executed and delivered to ------------------- Buyer standard affidavits (and applicable supporting documentation) and/or indemnification agreements, as the Title Company may reasonably require in order to, with respect to each of the owner's and lender's title insurance policies on each of the parcels of Owned Real Property and Leased Property that (a) omit all exceptions with regard to (x) claims of mechanics, materialmen or laborers and others entitled to claim a lien for work, services or materials furnished, (y) rights of parties in possession, and (z) the nonpayment of corporate taxes, (b) issue non-imputation 28 endorsements, and (c) confirm that the owner of record of each parcel of Owned Property is Commercial. (b) The Buyer Surveys shall not disclose any easements, discrepancies or conflicts in boundary lines, shortages in area or encroachments that would have a Material Adverse Effect. (c) Notwithstanding anything in this Agreement to the contrary, Buyer agrees as follows with respect to Sections 7.12(a) and (b) above: (i) Buyer will use its best efforts to complete such matters prior to September 30, 1999 and (ii) Buyer will not seek to impose any obligation on the part of Seller to pay any money or enter into any guaranty or other noncustomary indemnification obligation. ARTICLE VIII CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE ---------------------------------------------------- Sellers' obligation to consummate the Contemplated Transactions is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Sellers, in whole or in part): 8.1 Accuracy of Representations. All of Buyer's representations and --------------------------- warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been true and correct in all material respects as of the date of this Agreement, and must be true and correct in all material respects as of the Closing Date as if made on the Closing Date. 8.2 Buyer's Performance. All of the covenants and obligations that Buyer ------------------- is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been duly performed and complied with in all material respects. 8.3 Opinion of Counsel. There shall have been delivered to Sellers an ------------------ opinion, dated the Closing Date, of Winthrop, Stimson, Putnam & Roberts counsel to Buyer, in the form of Exhibit 8.3 hereto. 8.4 No Injunction. There must not be in effect any Legal Requirement or ------------- any injunction or other Order that (a) prohibits the sale of the Shares or Partnership Interests by Sellers to Buyer, and (b) has been adopted or issued, or has otherwise become effective, since the date of this Agreement. 8.5 HSR Act Approval. The waiting periods applicable to the consummation ---------------- of the Contemplated Transactions under the HSR Act shall have expired or been terminated. 8.6 Agreement Regarding Three Rivers. Commercial shall have entered into -------------------------------- an agreement with an affiliate of Seller regarding trucking services substantially on the terms set forth on Exhibit 7.8 hereto. 29 8.7 Agreement Regarding Molly Slag Operations. Commercial shall have ----------------------------------------- entered into an agreement with an affiliate of Seller regarding the disposal of molybdenum slag substantially on the terms set forth on Exhibit 7.9 hereto. 8.8 Delivery of Documents. The Buyer shall have delivered to the Sellers --------------------- the documents referenced in Section 2.4(b). ARTICLE IX CERTAIN POST-CLOSING COVENANTS ------------------------------ 9.1 Non-competition. As an inducement for Buyer to enter into the Purchase --------------- Agreement, Sellers agree that, for a period of four (4) years after the Closing: (a) Sellers will not, nor shall they permit the Dell Shearer Marital Trust to, directly or indirectly, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, or control of, be employed by or associated with any business whose products or activities compete in whole or in part with the current products or activities of the Acquired Companies, in any of the counties listed on Schedule 9.1 within the states of Pennsylvania, Ohio, West Virginia, New York and Maryland; provided, that Sellers may purchase or otherwise acquire up to (but not more than) five percent of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934. Sellers agree that this covenant is reasonable with respect to its duration, geographical area, and scope. (b) Sellers will not, directly or indirectly, either for themselves or any other Person, (i) induce or attempt to induce any employee of an Acquired Company to leave the employ of such Acquired Company, (ii) employ, or otherwise engage as an employee, independent contractor, or otherwise, any employee of an Acquired Company, (iii) employ, or otherwise engage as an employee either of Scott Turer or Rick Young for six months following the Closing or, if earlier, until such time as the employment of Scott Turer or Rick Young, as the case may be, has been terminated by the Acquired Companies, or (iv) induce or attempt to induce any customer, supplier, licensee, or business relation of an Acquired Company to cease doing business with such Acquired Company. This covenant shall not prohibit Sellers from hiring any former employees of an Acquired Company (except for Scott Turer and Rick Young) sixty (60) days following termination of employment with such Acquired Company for any reason so long as Sellers did not induce such employee to quit. A general solicitation of employment, such as a newspaper advertisement, that is not directed towards employees of the Acquired Companies will not be deemed to be a violation of this covenant. (c) Sellers will not, directly or indirectly, either for themselves or any other Person, solicit the business of any Person known to Sellers to be a customer of an Acquired Company, whether or not Sellers had personal contact with such Person, with respect to products or activities which compete with the products or activities of an Acquired Company. 30 (d) The activities described in Exhibits 7.8 and 7.9 will not be violative of Sellers' non-compete obligations. 9.2 Confidentiality. Each of Sellers agrees for itself and their --------------- respective Representatives and affiliates (and all such parties' respective successors, assigns and Representatives) that from and after the Closing Date, all Confidential or Proprietary Business Information (as defined below) which is known to such parties shall be kept confidential by such parties. Each Seller further agrees for itself and their respective Representatives and affiliates (and all such parties' respective successors, assigns and Representatives) that no such party will use (whether or not for monetary gain) or disclose to any other party such Confidential or Proprietary Business Information. As used herein, "Confidential or Proprietary Business Information" means all information related to the businesses of the Acquired Companies which is known by any Seller, or any of their affiliates or Representatives, other than such information which (A) is, or becomes, generally available to the public other than as a result of a breach of this Section 9.2 by any Seller, or any of or Representative thereof, (B) is hereafter available on a non-confidential basis to the party to whom such information was disclosed from a source that was, to the knowledge of the receiving party, entitled to disclose the same or (C) is compelled by law or a court order or decree to be disclosed by the party to whom such information was disclosed; provided that, in the case of clause (C) the receiving party shall use their reasonable efforts (at the expense of the Buyer) to obtain a protective order or other reliable assurance that confidential treatment will be accorded any such Confidential or Proprietary Business Information which is compelled to be disclosed. 9.3 Termination of Commercial's S Corporation Status and Taxable Year. The ----------------------------------------------------------------- Contemplated Transactions will cause Commercial to terminate its status as an S corporation. Pursuant to Code Section 1362(e)(1), Commercial shall have two short taxable years for the year that includes the Closing Date: an "S short year" beginning April 1 of such year and ending the day before the Closing Date and a "C short year" beginning on the Closing Date and ending on the next succeeding close of Buyer's consolidated return taxable year. Accordingly, Buyer shall allocate Tax items to Commercial's S short year and C short year pursuant to normal Tax accounting rules (the "closing of the books method") on a basis consistent with past accounting practice. 9.4 Certain Tax Assets and Liabilities. Notwithstanding anything to the ---------------------------------- contrary contained or implied in this Agreement, the Buyer and the Sellers agree that: (i) Buyer shall cause Commercial to promptly pay to Joseph H. Shearer and R. Scott Shearer, on behalf of the Sellers, an amount equal to any refund received after the Closing by Commercial as a refund of capital stock Taxes previously paid by Commercial for the years ended March 31, 1993, 1994 and 1995 as a result of the petition filed by Commercial with the Pennsylvania Commonwealth Court seeking review of a Board of Finance and Revenue Decision denying Commercial's claim for such refund, net of any tax cost incurred by Commercial as a result of the receipt thereof; (ii) Sellers shall promptly pay in full when due, and shall indemnify and hold the Buyer Indemnified Parties harmless from and against any and all Damages (determined as provided in Section 11.5(c)) incurred by the Buyer Indemnified Parties in connection with, all capital stock Taxes determined by the Commonwealth of Pennsylvania to be owed by Commercial for the years ended March 31, 1996, 1997, 1998 and 1999 (including, without limitation, all interest thereon and penalties with respect thereto or subsequently refunded for the years ended March 31, 1996, 31 1997, 1998 and 1999); and (iii) Buyer also shall cause Commercial to promptly pay to Joseph H. Shearer and R. Scott Shearer, on behalf of the Shareholders, an amount equal to any refund received after the Closing by Commercial of the real estate taxes imposed upon certain of Commercial's properties located in Fayette County, Pennsylvania (Tax Parcel 04-38-0001-368.18 acres in Bullskin Township; Tax Parcel 04-36-0102-106.4 acres in Bullskin Township; and Tax Parcel 06-15- 0064-278.7 acres in Connellsville Township) as a result of appeals previously filed by Commercial, net of any tax cost incurred by Commercial as a result of the receipt thereof. ARTICLE X TERMINATION ----------- 10.1 Termination Events. This Agreement may, by notice given prior to or at ------------------ the Closing, be terminated: (a) by Buyer if a material breach of any provision of this Agreement has been committed by Sellers and such breach has not been waived by Buyer or cured by Sellers; (b) by Sellers if a material breach of any provision of this Agreement has been committed by Buyer and such breach has not been waived by Sellers or cured by Buyer; (c) (i) by Buyer if any of the conditions in Article VII has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Buyer to comply with its obligations under this Agreement) and Buyer has not waived such condition on or before the Closing Date; (ii) by Sellers, if any of the conditions in Article VIII has not been satisfied of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Sellers to comply with their obligations under this Agreement) and Sellers have not waived such condition on or before the Closing Date; or (iii) on September 10, 1999, by Buyer if the condition set forth in Section 7.11 has not been satisfied (other than through the failure of Buyer to comply with its obligations under this Agreement); (d) by mutual consent of Buyer and Sellers; (e) by either Buyer or Sellers if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before the Deadline Date. However, Buyer may, at its election, on or after September 25, 1999, extend the Deadline Date to not later than November 1, 1999 (the "Extension") by delivering notice thereof at any time to the Sellers; provided, however, that upon the later to occur of (i) September 30, 1999 and (ii) the date upon which all of the conditions precedent to the Buyer's obligation to close set forth in Article VII hereof (disregarding Section 7.10) (collectively, the "Buyer's Conditions") have been fulfilled (or Sellers are able and willing to fulfill them and have tendered performance on their part to Buyer), the Extension shall terminate unless, within five (5) business days thereafter, Buyer either deposits $7 million (the "Extension Deposit") into escrow with an escrow agent reasonably satisfactory to Sellers and Buyer pursuant to an escrow agreement in the form of Exhibit 10.1(e) attached hereto, or 32 delivers a letter of credit (the "Extension LOC") to the Sellers in the face amount of $7 million payable to the Sellers as provided in (f) below. The Sellers may, at their option, cause the Extension of the Deadline Date by delivering notice thereof at any time to the Buyer; or (f) by either Buyer or Sellers if the Closing has not occurred by November 15, 1999. (g) If (i) the Extension Deposit has been paid or the Extension LOC has been delivered by the Buyer, (ii) the Closing does not occur on or prior to the last day of the Extension, and (iii) as of the last day of the Extension all of the Buyer's Conditions remain fulfilled, then the Sellers shall be entitled to payment of the Extension Deposit or payment under the Extension LOC and to retain such amount. In all other events, the Buyer shall be entitled to payment of and to retain the Extension Deposit or to cancel the Extension LOC. 10.2 Effect of Termination. Each party's right of termination under --------------------- Section 10.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 10.1, all further obligations of the parties under this Agreement will terminate, except that the obligations in Article XI and Sections 12.1, 12.2 and 12.3 will survive. ARTICLE XI INDEMNIFICATION; REMEDIES ------------------------- 11.1 Survival. Subject to Section 11.4, all representations, warranties, -------- covenants, and obligations in this Agreement (including the Schedules hereto), and any other certificate or document delivered pursuant to this Agreement will survive the Closing. 11.2 Indemnification and Payment of Damages by Sellers. Subject to Sections ------------------------------------------------- 11.4-11.10 hereof, Sellers, jointly and severally with respect to Damages to the extent of the Closing Escrow Amount, and severally with respect to all other Damages, will indemnify and hold harmless Buyer, and Buyer's Representatives, stockholders, controlling Persons, and affiliates (including, without limitation, the Acquired Companies) (collectively, the "Buyer Indemnified Persons") for, and will pay to such Buyer Indemnified Persons the amount of, any loss, liability, claim, damage or expense (including costs of investigation and defense and reasonable attorneys' fees), whether or not involving a third-party claim (collectively, "Damages"), arising, directly or indirectly, from or in connection with: (a) any breach of any representation or warranty made by any Seller in this Agreement or in any certificate or other document delivered by any such Seller to Buyer pursuant to this Agreement; (b) any breach by any Seller of any covenant or obligation of any such Seller in this Agreement or in any certificate or other document delivered by any such Seller to Buyer pursuant to this Agreement; and 33 (c) any and all Taxes measured or measurable, in whole or in part, by income (net or gross), revenue, profit or other similar basis imposed on any Seller or any affiliate of any Seller (including, without limitation, either of the Acquired Companies ) for, or relating to, all periods ending on or before the Closing Date, including, without limitation, any Taxes resulting from any distribution by Commercial contemplated in Section 2.1(f) of this Agreement and any liability to any third party under any Tax sharing or similar agreement or arrangement, whether or not written; and (d) the Release on or prior to the Closing Date of Regulated Materials on, beneath or adjacent to the William/Walker Property and the Wilson/Walker Property referred to on Schedule 3.14 hereto (together, the "Walker Property"), including, without limitation, with respect to the remediation thereof and the installation of pollution control equipment or other equipment to bring such Property into compliance with Environmental Law; provided that any such remediation or installation must be performed under the direction and control of Sellers, subject to Buyer's approval which will not be unreasonably withheld or delayed. Notwithstanding anything in this Agreement to the contrary, the Trust Seller shall be solely liable for Damages to the Buyer Indemnified Persons resulting from any (i) breach of representation or warranty by the Trust Seller, (ii) breach of any covenant or obligation by the Trust Seller, or (iii) any Tax referred to in Section 11.2(c) relating to the Trust Seller. The Shareholders and the Partnership Sellers hereby guaranty and act as sureties for any such Damages. The Buyer Indemnified Persons shall not be required to exhaust their remedies against the Trust Seller prior to collecting pursuant to such guaranty and suretyship. The Trust Seller shall not be liable for (w) breach of representation or warranty by the other Sellers, (x) breach of any covenant or obligation by the other Sellers, (y) any Tax referred to in Section 11.2(c) relating to the other Sellers, or (z) the matters referred to in Section 11.2(d). For the avoidance of doubt, any obligations or liabilities of Sellers which are several, rather than joint, pursuant to the terms of this Agreement shall be apportioned among the Sellers pro rata in accordance with their respective shares of the Purchase Price. 11.3 Indemnification and Payment of Damages by Buyer. Buyer will indemnify ----------------------------------------------- and hold harmless Sellers and Sellers' Representatives (collectively, the "Seller Indemnified Persons") and will pay to such Seller Indemnified Persons the amount of any Damages arising, directly or indirectly, from or in connection with: (a) any breach of any representation or warranty made by Buyer in this Agreement or in any certificate or other document delivered by Buyer to the Sellers pursuant to this Agreement; (b) any breach by Buyer of any covenant or obligation of Buyer in this Agreement or in any certificate or other document delivered by Buyer to the Sellers pursuant to this Agreement; and (c) the Guarantees. 11.4 Time Limitations. (a) If the Closing occurs, Sellers will not have any ---------------- liability (for indemnification or otherwise) with respect to any representation or warranty made by Sellers 34 hereunder, unless within 18 months of the Closing Date Buyer notifies Sellers of a claim specifying the factual basis of that claim in reasonable detail to the extent then known by Buyer; provided, however, that Sellers shall continue to have liability (for indemnification and otherwise) indefinitely, with respect to the representations and warranties of the Sellers contained in Sections 3.1, 3.2 and 3.3 of this Agreement. (b) If the Closing occurs, Buyer will have no liability (for indemnification or otherwise) with respect to any representation or warranty made by Buyer hereunder, unless within 18 months of the Closing Date Sellers notify Buyer of a claim specifying the factual basis of that claim in reasonable detail to the extent then known by Sellers. (c) If the Closing occurs, Sellers will have no liability (for indemnification or otherwise) with respect to the matters referenced in Section 11.2(d) unless within five years of the Closing Date Buyer notifies Sellers of a claim specifying the factual basis of that claim in reasonable detail to the extent then known by Buyer. 11.5 Limitations on Indemnification. (a) Sellers will have no liability ------------------------------ (for indemnification or otherwise) with respect to matters described in Section 11.2(a) for the first $2,000,000 of Damages in the aggregate, which amount shall constitute a deductible (the "General Deductible"). In addition, if a representation or warranty is not breached due to the presence therein of the phrase "Material Adverse Effect", such representation and warranty shall be deemed to be breached, but Damages to the Buyer Indemnified Persons resulting from such deemed breaches shall also be subject to an additional deductible of $3,000,000 in the aggregate (the "MAE Deductible", and together with the General Deductible, the "Deductibles"). Accordingly: (i) Damages resulting from breaches of representations that are not qualified by "Material Adverse Effect" or from breaches of representations, which breaches have a Material Adverse Effect shall not be recoverable by Buyer Indemnified Persons until, and then only to the extent (subject to the Cap), the General Deductible is exceeded; and (ii) Damages as to which the MAE Deductible applies shall count first against the MAE Deductible and then against the General Deductible (to the extent remaining), and shall then be recoverable to the extent in excess of the combined amount of the General Deductible and the MAE Deductible (i.e., a maximum of $5,000,000), subject to the Cap. In no event shall Sellers collectively be liable hereunder for Damages described in Section 11.2(a) in an aggregate amount more than $8,000,000 (the "Cap") after giving effect to the Deductibles; provided, that, neither the Deductibles nor the Cap shall apply with respect to claims made pursuant to Section 11.2(a) that relate to breaches of Sections 3.1, 3.2, and 3.3. (b) Sellers will have no liability (for indemnification or otherwise) with respect to matters described in Section 11.2(d) for the first $250,000 of Damages in the aggregate, which amount shall constitute a deductible with respect to such matters. Sellers shall be responsible for the next $250,000 of such Damages. Thereafter, Buyer shall have the option of retaining the 35 Walker Property and releasing Sellers from any further indemnification liability with respect thereto. If Buyer does not elect such option, then Sellers can elect to (i) purchase the Walker Property from Buyer for an amount equal to the price for which it was originally purchased by Commercial, or (ii) continue to control and be responsible for the environmental remediation of the Walker Property at Sellers' expense. (c) The amount of any payment or reimbursement of Damages by the indemnifying party shall be: (i) net of the present value of any tax benefits to the Indemnified Person by reason of the facts and circumstances giving rise to the indemnifying party's liability (after taking into consideration the tax effect of the receipt by the Indemnified Person of the indemnification payment); and (ii) net of any insurance proceeds actually received by the Indemnified Person in connection with the facts giving rise to the right of indemnification (after giving effect to an increase in the Indemnified Person's cost of insurance as a result thereof). The parties agree to use commercially reasonable efforts to make claims on and pursue recovery with respect to all insurance on account of such matters. (d) No indemnifying party hereunder shall be liable for the payment of special or consequential Damages or Damages for lost profits that have been suffered directly by an Indemnified Person; however, if special or consequential Damages or Damages for lost profits have been asserted by a third party against an Indemnified Person, the indemnifying party shall otherwise be liable therefore under the provisions of this Article XI. (e) Buyer hereby waives any right it may have to file a claim for reimbursement or indemnity against Sellers under the terms of this Agreement concerning any matter to which it is ultimately determined that Buyer (i) had actual knowledge prior to the Closing of facts which clearly and obviously constitute a breach by Sellers of a representation or warranty made under this Agreement, (ii) has an actual understanding prior to the Closing that such facts constitute a breach of representation or warranty and (iii) fails to disclose such knowledge to Sellers prior to Closing. 11.6 Investigation; Waiver. Buyer acknowledges that, except for the --------------------- representations and warranties of Sellers contained in or made pursuant to Article III hereof, or in any certificate or schedule delivered pursuant to this Agreement, neither the Sellers nor their respective Representatives: (i) will be deemed to have made any representations, warranties or assurances of any kind, and (ii) will have any liability or obligation to Buyer in respect of any oral or written statement or assurance made to Buyer in connection with the Contemplated Transactions including, but not limited to, any information provided in any offering material prepared by Sellers' Representatives. 11.7 Procedures for Indemnification -- Third Party Claims. (a) Promptly ---------------------------------------------------- after receipt by an Indemnified Person under Section 11.2 or 11.3 of notice of the commencement of any claim, action or proceeding (including, without limitation, any notice relating to a tax audit) against it, or the assertion of any claim by a third Person which the Indemnified Person has reason to believe may result in a claim for indemnification hereunder (collectively, "Proceedings"), such Indemnified Person will give notice to the indemnifying party of such Proceeding, but the failure to notify the indemnifying party will not relieve the indemnifying party of any liability that it may have to any Indemnified Person, except to the extent that the 36 indemnifying party demonstrates that the defense of such action is prejudiced by the Indemnified Person's failure to give such notice. (b) Subject to the immediately succeeding sentence, the indemnifying party will be entitled to control any Proceeding for which indemnification is sought hereunder. If the indemnifying party, within a reasonable time after notice of any claim (but in no event to exceed twenty days), fails to take control of such Proceeding, the Indemnified Person will (upon further notice to the indemnifying party) have the right to undertake the defense, compromise or settlement in connection with such Proceeding on behalf of and for the account and risk of the indemnifying party. The party who is not undertaking the defense in connection with a Proceeding, may, at its sole expense, participate in (but not control) such defense. (c) Anything in this Section 11.7 to the contrary notwithstanding, the party who is undertaking the defense in connection with a Proceeding shall not, without the written consent of the other party, which consent shall not be unreasonably withheld or delayed, settle or compromise any claim or consent to the entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff of an unconditional release from liability of the non-controlling party in respect of such claim. 11.8 Procedure for Indemnification -- Other Claims. A claim for --------------------------------------------- indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought. 11.9 Cooperation in Connection with Proceedings. The parties hereto agree ------------------------------------------ to cooperate with each other and to provide each other with all information and documentation reasonably necessary to permit the defense in connection with any and all Proceedings (including, without limitation tax audits) and to promptly provide each other party with any and all notices that may be received by any of them that could reasonably be expected to result in a claim for indemnification under this Article XI. 11.10 Closing Escrow Amount. Buyer acknowledges and agrees that it shall be --------------------- obligated to satisfy any Damages to which it is entitled under this Article XI from the Closing Escrow Amount prior to proceeding against any other assets of the Sellers; provided, however, that with respect to any Damages as to which the Cap and the Deductibles do not apply, the Buyer shall not be obligated to first satisfy such Damages from the Closing Escrow Amount and, with respect to such Damages, in no way shall Buyer's recourse against the Sellers be limited by the existence or amount of the Closing Escrow Amount. ARTICLE XII GENERAL PROVISIONS ------------------ 12.1 Public Announcements. Any public announcement or similar publicity -------------------- with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as Buyer and Sellers mutually shall determine, other than customary post-Closing "tombstone" and similar announcements. Unless consented to by Buyer or Sellers, as the case may be, in advance or required by Legal Requirements, prior to the Closing Sellers and 37 Buyer shall keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any third party. For the avoidance of doubt, the parties acknowledge and agree that this Agreement and the Contemplated Transactions shall be described and disclosed in a publicly available document in connection with the offering of securities by the Buyer, provided that with respect to any such offering prior to Closing, Buyer shall use reasonable commercial efforts to keep information concerning Commercial, or CATS or the Contemplated Transactions from being disseminated other than to a limited number of "qualified institutional buyers" (as defined in Rule 144A under the Securities Act of 1933, as amended). 12.2 Confidentiality. Until such time as a closing shall have occurred --------------- hereunder, Buyer and Sellers shall comply with all of the terms and conditions of that certain Confidentiality Agreement dated May 11, 1999 by and among US Bancorp Piper Jaffray and the Buyer. From and after the Closing Date, the provisions of Section 9.2 shall govern the obligations of the parties hereto with respect to confidentiality. 12.3 Notices. All notices, consents, waivers, and other communications ------- under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered or certified mail, return receipt requested,-or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Sellers: Commercial Stone Co. Inc. Attn: Scott Turer 2200 Springfield Pike Connellsville, PA 15425 Joseph H. Shearer c/o Commercial Stone 2200 Springfield Pike Connellsville, PA 15425 R. Scott Shearer c/o Commercial Stone 2200 Springfield Pike Connellsville, PA 15425 With a copy to: Reed Smith Shaw & McClay LLP 435 Sixth Avenue Pittsburgh, PA 15219 Attention: David L. DeNinno 38 Buyer: U.S. Silica Company P.O. Box 187 Berkeley Springs, WV 25411 Attention: President With a copy to: D. George Harris & Associates, Inc. 399 Park Avenue, Thirty-second Floor New York, New York 10022 Attention: Donald G. Kilpatrick With a copy to: Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, New York 10004-1490 Attention: Kenneth E. Adelsberg 12.4 Jurisdiction; Service of Process. Each party irrevocably submits to -------------------------------- the exclusive jurisdiction of (a) the Court of Common Pleas of Westmoreland County, Pennsylvania, and (b) the United States District Court for the Western District of Pennsylvania, for the purposes of any suit, action or other proceeding arising out of this Agreement, any Ancillary Agreement or any transaction contemplated hereby or thereby. Each party agrees to commence any such action, suit or proceeding either in the United States District Court for the Western District of Pennsylvania or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Court of Common Pleas of Westmoreland County, Pennsylvania. Each party further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in Pennsylvania with respect to any matters to which it has submitted to jurisdiction in this Section 12.4. Each party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, any Ancillary Agreement or the Contemplated Transactions and thereby in (i) the Court of Common Pleas of Westmoreland County, Pennsylvania, or (ii) the United States District Court for the Western District of Pennsylvania, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 12.5 Further Assurances; Tax Returns. The parties agree (a) to furnish upon ------------------------------- request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. The parties further agree to cooperate with each other and to provide each other with all information and documentation reasonably necessary (i) to permit the preparation and 39 filing of all federal, state, local, and other Tax returns and Tax elections with respect to the Acquired Companies and (ii) to facilitate the timely refund of the S-Corp Tax Deposit. 12.6 Waiver. The rights and remedies of the parties to this Agreement are ------ cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. 12.7 Entire Agreement and Modification. This Agreement supersedes all --------------------------------- prior agreements, understandings, negotiations and discussions, whether oral or written, between the parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be modified except by a written agreement executed by the party to be charged with the modification. 12.8 Assignments, Successors, and No Third-Party Rights. Neither party may -------------------------------------------------- assign any of its rights or obligations under this Agreement without the prior written consent of the other parties, except that Buyer may assign its rights and obligations under this Agreement to one or more of its affiliates, for so long as such entity remains an affiliate thereof, and Buyer or such affiliate(s) may assign or grant a security interest in, all of its rights and/or obligations under this Agreement (i) for collateral security purposes, to the Buyer's lenders and/or investors as security for Buyer's or any such affiliate's obligations to such lenders or investors (and such lenders or investors may exercise remedies with respect to such assignment or security interest), and (ii) at any time after the Closing, to a purchaser in connection with a sale of the Acquired Companies or a sale of a substantial component of the Acquired Companies. Notwithstanding the assignment of rights and obligations under this Agreement pursuant to the provisions stated hereinabove, it is understood and agreed that the assignor shall remain responsible for its obligations under this Agreement and, in the case of a partial assignment, shall be the only party entitled to enforce the rights and remedies which would otherwise be available to an assignee of the Agreement. No such assignment shall in any way limit or restrict the assignor's rights and remedies. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and permitted assigns. 12.9 Severability. If any provision of this Agreement is held invalid or ------------ unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 12.10 Article and Section Headings; Construction. The headings of Sections ------------------------------------------ in this Agreement are provided for convenience only and will not affect its construction or 40 interpretation. All references to "Article," "Articles,", "Section" or "Sections" refer to the corresponding Article, Articles, Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 12.11 Time of Essence. With regard to all dates and time periods set forth --------------- or referred to in this Agreement, time is of the essence. 12.12 Governing Law. This Agreement will be governed by the laws of the ------------- Commonwealth of Pennsylvania without regard to conflicts of laws principles. 12.13 Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 12.14 Sellers' Knowledge. As used in this Agreement, the term, "knowledge ------------------ of Sellers" or words of similar import mean the actual knowledge by Joseph H. Shearer, R. Scott Shearer or Scott Turer of a fact, or the knowledge that Joseph H. Shearer or R. Scott Shearer could reasonably be expected to have based upon reasonable investigation and inquiry. 12.15 Retention of Records and Access to Information. For a period of ten ---------------------------------------------- (10) years after the Closing Date, the Buyer shall retain and preserve all business, accounting, tax and other records of the Acquired Companies. Prior to the destruction of any such records, Buyer shall notify Sellers, in writing, of Buyer's intention to destroy the records and deliver to Sellers, at Sellers' expense, all such records requested by Sellers. From and after the Closing date, Buyer shall afford to Sellers access to said records. Any such access shall be (i) scheduled and provided on a reasonable basis taking into account the business requirements of the Buyer; and (ii) for any legal purpose, including, without limitation, obtaining information necessary in conjunction with the preparation of tax returns, preparing for a tax audit or other government investigation or defending against a claim, complaint or action by Buyer or a third party against Sellers. 12.16 Transaction Fees and Expenses. Each of the parties to this Agreement ----------------------------- shall bear the fees and expenses incurred by it in connection with the Contemplated Transactions, including, without limitation, brokers and finders fees and expenses. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. Buyer: US SILICA COMPANY Sellers: By:/s/ SHAREHOLDERS: --------------------- /s/ Joseph H. Shearer ----------------------------------------- Joseph H. Shearer 41 /s/ R. Scott Shearer ----------------------------------------- R. Scott Shearer COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, L.P. By: CATS, Inc., General Partner: By: /s/ --------------------------------------- Title: Pres. ----------------------------------- By: JHS Family Partnership By: /s/ -------------------------------------- General Partner By: RSS Family Partnership By: /s/ ------------------------------------- General Partner By: The Dell H. Shearer Granchildren's Trust By: /s/ ------------------------------------- Co-Trustee By: /s/ ------------------------------------- Co-Trustee 42 Exhibit 2.1(a) FORM OF CLOSING ESCROW AGREEMENT -------------------------------- This ESCROW AGREEMENT (this "Agreement"), dated as of this ____ day of --------- __________ 1999 is made and entered into by and among MELLON BANK, N.A. (the "Escrow Agent"), U.S. SILICA COMPANY, a Delaware corporation ("Buyer"), and ----- JOSEPH H. SHEARER and R. SCOTT SHEARER (collectively, the "Shareholders"), and ------------ CATS, INC., a Pennsylvania corporation, the JHS FAMILY PARTNERSHIP, a Pennsylvania limited partnership, and the RSS FAMILY PARTNERSHIP, a Pennsylvania limited partnership (collectively, the "Partnership Sellers") and THE DELL H. ------------------- SHEARER GRANDCHILDREN'S TRUST, a Pennsylvania trust (the "Trust Seller"; the ------------ Shareholders, the Partnership Sellers and the Trust Sellers being hereinafter collectively referred to as the "Sellers" and each, individually, as a "Seller") ------- ------ pursuant to the terms of that certain Purchase Agreement dated as of the date hereof (the "Purchase Agreement") by and among the Buyer and the Sellers. ------------------ In consideration of the mutual premises, obligations and agreements contained herein, the parties, intending to be legally bound, do hereby agree as follows: 1. The Escrow Agent acknowledges receipt of the sum of Eight Million Dollars ($8,000,000.00) deposited by the Buyer (together with any interest earned thereon and any interest earned on any reinvested funds, the "Closing ------- Escrow Amount") and hereby accepts its appointment and agrees to act as Escrow - ------------- Agent and to hold the Closing Escrow Amount and to disburse the Closing Escrow Amount under the terms and conditions of this Agreement. The Escrow Agent undertakes to perform only such duties as are expressly set forth herein. 2. (a) If, on the Release Date (as hereinafter defined), the Escrow Agent shall not, have received a Buyer Demand (as hereinafter defined), the Escrow Agent shall disburse to [NAME], as agent for the Sellers (the "Seller ------ Agent"), the Closing Escrow Amount on the Release Date. For purposes of this - ----- Agreement, the term "Release Date" shall mean the [second business day following ------------ the eighteenth (18th) month from the date hereof]. (b) If, at any time after the date hereof up to and including the Release Date, the Buyer shall file with the Escrow Agent a written and dated demand (the "Buyer Demand") for the payment to the Buyer of all or a portion of ------------ the Closing Escrow Amount stating (i) that the Buyer is entitled to all or a portion of such Closing Escrow Amount in satisfaction of a claim for indemnification pursuant to Article 11 of the Purchase Agreement, which claim shall be deemed to be against each of the Sellers, jointly and severally, unless specifically stated otherwise, and (ii) that the Buyer has contemporaneously delivered a copy of the Buyer Demand to the Seller Agent, the Escrow Agent shall disburse to the Buyer the requested funds from the Closing Escrow Amount on the fifteenth (15th) business day following the date of the Buyer Demand unless the Seller Agent delivers an objection in writing (the "Seller Objection") to the ---------------- Escrow Agent (with a copy to the Buyer) prior to the close of business on the tenth (10th) business day following the date of the Buyer Demand to the effect that the Buyer is not so entitled, in which case no disbursement shall be made by the Escrow Agent from the Closing Escrow Amount pursuant to the Buyer Demand except in accordance with the terms and conditions hereof. The Escrow Agent agrees to provide the Seller Agent with a copy of any Buyer Demand and to provide the Buyer with a copy of any Seller Objection, in each case within two business days after receipt by the Escrow Agent thereof. (c) At any time after the date of the Closing, the Escrow Agent may be advised in writing by the Buyer and the Seller Agent to pay all or a portion of the Closing Escrow Amount pursuant to a joint written instruction (the "Joint ----- Instruction"), in which case the Escrow Agent shall pay the Closing Escrow - ----------- Amount, or portion thereof, in accordance with the terms and in the manner set forth in such Joint Instruction. (d) If the Buyer and the Seller Agent are unable to resolve any disagreement with respect to their rights to the payment of all or a portion of the Closing Escrow Amount pursuant to this Section 2 within twenty (20) business days after the date of a Seller Objection, the dispute shall be settled as provided in Section 4 hereof. (e) The Escrow Agent shall hold the Closing Escrow Amount until it is required to disburse it pursuant to this Section 2 or as provided in Sections 3(c) or 4 hereof. Upon delivery of the entire Closing Escrow Amount by the Escrow Agent pursuant to this Section 2 or as provided in Sections 3(c) or 4 hereof, this Escrow Agreement shall terminate. The date upon which such termination occurs shall be the "Termination Date." ---------------- (f) The Seller Agent and the Buyer each agree that they will give to each other the copies of any Buyer Demand or Seller Objection, as the case may be, concurrently with the delivery thereof to the Escrow Agent. (g) If any of the Closing Escrow Amount is withheld pursuant to the terms of paragraph (b) of this Section 2, the parties agree to provide the Escrow Agent with a Joint Instruction upon the resolution of any claim which caused the withholding of funds and upon receipt of such Joint Instruction, the Escrow Agent shall release such funds in accordance with such Joint Instruction. 3. (a) Pending disbursement of funds held by it hereunder, the Escrow Agent shall keep the Closing Escrow Amount invested in FDIC insured certificates of deposit, obligations of the United States federal government (or any agency thereof) or money market accounts of the Escrow Agent at market rates, maturing in each case in ninety (90) days or less (each a "Permitted Investment"). The -------------------- Seller Agent shall direct the Escrow Agent as to which Permitted Investment(s) the Escrowed Amount shall be invested. (b) Any interest earned on the originally deposited Closing Escrow Amount, as well as any interest earned on any reinvested funds, shall be held by the Escrow Agent as, and shall be deemed to be, part of the Closing Escrow Amount and shall be disbursed pursuant to the terms of Sections 2, 3(c) and 4 hereof. (c) Except as provided below in this subparagraph (c), the [Buyer] shall be responsible for any federal, state or local taxes and any other assessments which may be imposed and payable with respect to the earnings on the Closing Escrow Amount (collectively, "Taxes"). To cover the payment by [Buyer] ----- of such Taxes, the Escrow Agent shall, not later than 30 days after the end of each calendar year during the term of this Agreement, disburse to the [Buyer] an amount of cash equal to (i) the earnings on the Closing Escrow Amount for such calendar year 2 multiplied by (ii) 45%. With respect to any earnings on the Closing Escrow Amount as to which Taxes have not yet been paid as of the Termination Date, such earnings shall be treated as taxable income to the party or parties to whom such amounts are distributed and such party or parties shall be solely responsible for any Taxes which may be imposed on such amounts. The Escrow Agent shall deliver to the Buyer and each of the Sellers such forms as may be required by law reporting such earnings as income of the Buyer or the Sellers, as the case may be. 4. (a) Any controversy or claim arising out of or relating to this Agreement or the rights of the Buyer or the Sellers to the payment of all or a portion of the Closing Escrow Amount shall be settled in accordance with Section 12.4 of the Purchase Agreement. The Escrow Agent shall not be a party to any such proceedings. (b) Any portion of the Closing Escrow Amount being held pending resolution of controversies or claims may also be disbursed in accordance with the terms of a Joint Instruction. 5. (a) This Agreement expressly sets forth all the duties of the Escrow Agent with respect to any and all matters pertinent hereto. No implied duties or obligations shall be read into this Agreement against the Escrow Agent. The Escrow Agent shall not be bound by the provisions of any agreement among the other parties hereto except this Agreement. (b) The Escrow Agent shall not be liable, except for its own gross negligence or willful misconduct. The Sellers and the Buyer, jointly and severally, shall indemnify and hold harmless the Escrow Agent (and any successor Escrow Agent) from and against any and all losses, liabilities, claims, actions, damages and expenses, including reasonable attorneys' fees and disbursements, actually and reasonably incurred without gross negligence or bad faith on the part of the Escrow Agent, arising out of and in connection with this Agreement. Without limiting the foregoing, the Escrow Agent shall in no event be liable in connection with its investment or reinvestment of any cash held by it hereunder in good faith, in accordance with the terms hereof, including, without limitation, any liability for any delays (not resulting from its own gross negligence or willful misconduct) in the investment or reinvestment of the Closing Escrow Amount, or any loss of interest incident to any such delays. (c) The Escrow Agent shall be entitled to rely in good faith upon any order, judgment, certification, demand, notice, instrument, arbitration award or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of the service thereof. The Escrow Agent may act in reliance upon any instrument or signature believed by it in good faith to be genuine and may assume that any person purporting to give notice or receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so. (d) The Escrow Agent may act pursuant to the advice of counsel with respect to any matter relating to this Agreement and shall not be liable for any action taken or omitted in good faith in accordance with such advice. 3 (e) The Escrow Agent does not have any interest in the Closing Escrow Amount but is serving as escrow holder only and having only possession thereof. Any payments of income from the Closing Escrow Amount shall be subject to applicable withholding regulations then in force with respect to United States taxes. The Sellers and the Buyer will provide the Escrow Agent with appropriate W-9 forms for tax identification number certification. This paragraph and paragraph (b) of this Section 5 shall survive notwithstanding termination of this Agreement or the resignation of the Escrow Agent. (f) The Escrow Agent shall not be called upon to advise any party as to the wisdom in taking or refraining from taking any action with respect to any amounts deposited hereunder. (g) The Escrow Agent (and any successor Escrow Agent) may at any time resign as such by delivering the Closing Escrow Amount to any successor Escrow Agent jointly designated by the Seller Agent and the Buyer in writing, or to any court of competent jurisdiction, whereupon the Escrow Agent shall be discharged of and from any and all further obligations arising in connection with this Agreement. The resignation of the Escrow Agent will take effect on the earlier of (i) the appointment of a successor (including by a court of competent jurisdiction) or (ii) the day which is thirty (30) days after the date of delivery of its written notice of resignation to the other parties hereto. If at that time the Escrow Agent has not received a designation of a successor Escrow Agent, the Escrow Agent's sole responsibility after that time shall be to safekeep the Closing Escrow Amount until receipt of a designation of successor Escrow Agent pursuant to a Joint Instruction or a final order of a court of competent jurisdiction. (h) The Escrow Agent shall have no responsibility for the contents of any writing of any third party contemplated herein as a means to resolve disputes and may rely in good faith without any liability upon the contents thereof. (i) In the event of any disagreement between the Sellers and the Buyer resulting in adverse claims or demands being made in connection with the Closing Escrow Amount, or in the event that the Escrow Agent in good faith is in doubt as to what action it should take hereunder, the Escrow Agent shall be entitled to retain the Closing Escrow Amount until the Escrow Agent shall have received (i) a Joint Instruction directing delivery of the Closing Escrow Amount; or (ii) a final non-appealable order of a court of competent jurisdiction directing the delivery of the Closing Escrow Amount. (j) [The Escrow Agent to be paid from interest in account.] 6. Each Seller hereby appoints [NAME] as the Seller Agent, and [NAME] hereby accepts such appointment, to act as such Seller's exclusive agent and attorney-in-fact to act on its behalf in connection with, and to facilitate the consummation of, the transactions contemplated by this Agreement. The Seller Agent shall take, and each Seller agrees that the Seller Agent is irrevocably authorized and empowered in the name and on behalf of each Seller to take, any and all actions which the Seller Agent deems necessary or appropriate under this Agreement to be taken for and on behalf of each Seller, as fully as if such party was acting on his own behalf, which shall include, without limitation, the power and authority to (i) accept notices hereunder on behalf of the Sellers, to issue or determine not to issue, as the case may be, Seller Objections 4 in response to Buyer Demands, (ii) agree to such amendments or modifications to this Agreement as the Seller Agent, in his sole discretion, determines to be desirable, (iii) execute and deliver such waivers and consents in connection with this Agreement as the Seller Agent, in his sole discretion, may deem necessary or desirable, (iii) collect and receive all moneys and other proceeds and property payable to the Sellers pursuant to the terms of this Agreement; (iv) enforce and protect the rights and interests of the Sellers or to refrain from enforcing any right of the Seller, as the case may be, (v) settle or compromise any claims asserted under this Agreement; and (vi) file and prosecute appeals from any decision, judgment or award rendered in any such action, proceeding or investigation as the Seller Agent, in his sole discretion, may deem necessary or desirable. 7. Neither party may assign any of its rights or obligations under this Agreement without the prior written consent of the other parties, except as provided in Section 5 with respect to a resignation by the Escrow Agent and except that Buyer may assign its rights and obligations under this Agreement to one or more of its affiliates, for so long as such entity remains an affiliate thereof, and Buyer or such affiliate(s) may assign or grant a security interest in, all of its rights and/or obligations under this Agreement (i) for collateral security purposes, to the Buyer's lenders and/or investors as security for Buyer's or any such affiliate's obligations to such lenders or investors (and such lenders or investors may exercise remedies with respect to such assignment or security interest), and (ii) to a purchaser in connection with a sale of the Acquired Companies (as defined in the Purchase Agreement) or a sale of a substantial component of the Acquired Companies. Notwithstanding the assignment of rights and obligations under this Agreement pursuant to the provisions stated hereinabove, it is understood and agreed that the assignor shall remain responsible for its obligations under this Agreement and, in the case of a partial assignment, shall be the only party entitled to enforce the rights and remedies which would otherwise be available to an assignee of the Agreement. No such assignment shall in any way limit or restrict the assignor's rights and remedies. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and permitted assigns. This Agreement will be governed by the laws of the Commonwealth of Pennsylvania without regard to conflicts of laws principles. 8. This Agreement may not be modified except by a written agreement executed by the party to be charged with the modification. 9. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered or certified mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): 5 To the Escrow Agent: [To be provided] To the Sellers or the Seller Agent: [To be provided] With a copy to: Reed Smith Shaw & McClay LLP 435 Sixth Avenue Pittsburgh, PA 15219 Attention: David L. DeNinno Telecopier No.: 412-288-3063 To the Buyer: U.S. Silica Company P.O. Box 187 Berkeley Springs WV 25411 Attention: President Telecopier No.: 304-258-3500 With a copy to: D. George Harris & Associates, Inc. 399 Park Avenue, Thirty-second Floor New York, New York 10022 Attention: Donald G. Kilpatrick Telecopier No.: 212-207-6470 With a copy to: Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, New York 10004-1490 Attention: Kenneth E. Adelsberg Telecopier No.: 212-858-1500 10. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 11. The term "business day" as used in this Agreement shall mean any day other than a Saturday, Sunday, or public holiday under the laws of the Commonwealth of Pennsylvania. 6 12. THE BUYER, THE SELLERS AND THE ESCROW AGENT SPECIFICALLY WAIVE THE RIGHT TO TRIAL BY JURY IN RESOLVING ANY CLAIM OR COUNTERCLAIM RELATED TO THIS AGREEMENT. The Buyer and the Sellers agree that any legal action or proceeding brought against the Escrow Agent, or to which the Escrow Agent is joined, relating to this Agreement or the Escrow Agent's performance hereunder, shall be brought exclusively in any state or federal court sitting in Pennsylvania, and the Buyer and the Sellers each waive, to the fullest extent permitted by law, (a) any objection that any of them may respectively, now or hereafter, have to the laying of the venue of any such action or proceeding brought in any such court, and (b) any claim that any such action or proceeding brought in any such court has been brought in an inconvenient forum. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. [THE ESCROW AGENT] By:_____________________________________ Name: Title: U.S. SILICA COMPANY By:_____________________________________ Name: Title: Sellers: SHAREHOLDERS: ________________________________________ Joseph H. Shearer ________________________________________ R. Scott Shearer 7 COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, L.P. By: CATS, Inc., General Partner: By:_____________________________________ Title: By: JHS Family Partnership By:_____________________________________ General Partner By: RSS Family Partnership By:_____________________________________ General Partner By: The Dell H. Shearer Granchildren's Trust By:_____________________________________ Co-Trustee By:_____________________________________ Co-Trustee SELLER AGENT: ________________________________________ [NAME] 8 Exhibit 2.4(a)(iv) FORM OF CONSULTING AGREEMENT THIS AGREEMENT is entered into as of ____________, 1999, between Commercial Stone Co., Inc., a Pennsylvania corporation (the "Company"), and [Joseph H. Shearer/R. Scott Shearer], a resident of the State of Pennsylvania ("Shearer"). WHEREAS, pursuant to a Purchase Agreement (the "Purchase Agreement") dated as of ___________, 1999, U.S. Silica Company, a Delaware corporation ("U.S. Silica"), has purchased all of the issued and outstanding shares of common stock of the Company, including, without limitation, those owned by Shearer; and WHEREAS, Shearer has extensive contacts, relationships and expertise in the aggregates and asphalt businesses, which relationships and expertise are of significant benefit to the Company in both the transition of the business to the ownership of U.S. Silica and in the continued success of the aggregates and asphalt businesses of the Company; and WHEREAS, each of U.S. Silica and Shearer desires that Shearer continue his involvement with the business of the Company and to contribute to its continued success; and WHEREAS, U.S. Silica and the Company desire that the Company engage Shearer in a consulting role to advise the Company in his areas of expertise, and Shearer desires to perform certain services as requested by the Company. NOW, THEREFORE, in consideration of the mutual premises and covenants herein contained, the parties, intending to be legally bound, agree as follows: 1. Consulting Services. Subject to the terms and conditions stated ------------------- herein, the Company agrees to engage Shearer during the Term (as defined herein) to perform, as a consultant of the Company, such services as may be reasonably requested of Shearer from time to time by the Board of Directors (the "Board") or the President of the Company (the "President"), as the Board's designee, and Shearer accepts such engagement. Such consulting services will be primarily related to facilitating the transition of the ownership of the business of the Company to U.S. Silica, in maintaining and acquiring business relationships and in assisting with the day-today operations of the Company. Shearer agrees to perform his duties in a diligent, trustworthy and efficient manner. Shearer shall provide consulting services to the Company on a full time basis during the Term, consistent with past practice (including vacation practices). 2. Term. The term of Shearer's engagement by the Company hereunder shall ---- commence as of the date hereof and shall continue through the close of business on May 1, 2000, unless his engagement is sooner terminated as provided herein (the "Term"). 3. Compensation. (a) During the Term, the Company shall compensate ------------ Shearer at the rate of [CURRENT ANNUAL SALARY] per year, payable monthly in arrears commencing on _____________, 1999 and thereafter on the first day of each month during the Term, for the performance of consulting services hereunder (the "Consulting Fee"). The payment of the Consulting Fee and the provision to Shearer the medical and life insurance benefits as provided in paragraph 5 below shall be the only compensation paid by the Company to Shearer for the performance of services hereunder. (b) If this Agreement is terminated by the Company without Cause (as defined below) or by Shearer for Good Reason (as defined below), the Company shall continue to pay Shearer, his legal representative, or his estate, for the remainder of the Term, in accordance with subsection (a) above. (c) If this Agreement is terminated by the Company for Cause, by Shearer without Good Reason or as a result of the death or disability of Shearer, the Company shall pay to Shearer and Shearer shall be entitled only to that amount of the Consulting Fee that has been earned but not yet paid as of the date of such termination as well as any unpaid business expenses owed to Shearer pursuant to paragraph four (4) of this Agreement. For purposes hereof "disability" shall mean any mental or physical disability of Shearer, which, in the reasonable judgment of the Company, prevents Shearer from performing his duties hereunder for an aggregate of two (2) months during the Term. 4. Business Expenses. The Company will reimburse Shearer for all ----------------- reasonable out-of-pocket business expenses (including travel expenses incurred travelling to and from Connellsville or other locations requested by the Company, in each case, while on vacation) incurred by Shearer in performing his duties hereunder during the Term; provided, that, Shearer shall promptly submit such documentation therefor as may be requested by the Company, all in accordance with the reimbursement policies of the Company then in effect. 5. Health and Life Insurance. During the Term hereof, the Company will ------------------------- maintain, at the Company's expense, the existing health insurance coverage for Shearer and Shearer's dependents and the existing life insurance coverage on Shearer, all under the Company's existing plans. 6. Termination. (a) This Agreement may be terminated by either party, ----------- with or without Cause, effective upon contemporaneous written or oral notice to the other party. (b) For purposes of this Agreement: "Cause" shall mean (i) any act of personal dishonesty of Shearer at the expense of the Company; (ii) willful and continued refusal to carry out a lawful and express directive from the Board or the President after having had a reasonable time to do so; (iii) conviction of a felony involving moral turpitude; (iv) failure by Shearer to perform specific duties requested hereunder, which failure is not remedied in a reasonable period of time after receipt of written notice from the Board or the President or (v) material breach by Shearer of any provision of this Agreement; and "Good Reason" shall mean a material breach by the Company of any provision of this Agreement. 7. Nondisclosure of Confidential Information. The provisions of Section ----------------------------------------- 9.2 of the Purchase Agreement are incorporated by reference herein as though fully set forth herein and Shearer hereby agrees to comply with the obligations of the Sellers as set forth therein. 2 8. Independent Contractor. (a) In the performance of the services to be ---------------------- provided hereunder, Shearer shall act solely as an independent contractor, and nothing herein contained or implied will at any time be construed so as to create the relationship of employer and employee, partnership, principal and agent, or joint venturer as between the Company and/or any of its affiliates, on the one hand, and Shearer, on the other. Shearer shall have no authority to bind the Company and/or any of its affiliates in any way and shall not represent to any person that he has such authority. (b) All taxes applicable to any amounts paid by the Company to Shearer under this Agreement shall be paid by Shearer, and the Company shall not withhold or pay any amount for federal, state or municipal income tax, social security, unemployment or worker's compensation. Upon request by the Company, Shearer will provide documentation evidencing compliance with all applicable federal, state and municipal income tax and/or self-employment tax laws in regard to amounts received under this Agreement. 9. Severability, Invalidity or Unenforceability. If any provision of -------------------------------------------- this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 10. Notices. All notices, consents, waivers, and other communications ------- under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered or certified mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): If to Shearer: [Joseph H./R. Scott] Shearer ____________________________ ____________________________ ____________________________ Telecopier No.: If to the Company: c/o U.S. Silica Company P.O. Box 187 Berkeley Springs WV 25411 Attention: President Telecopier No.: 304-258-3500 With a copy to: 3 D. George Harris & Associates, Inc. 399 Park Avenue, Thirty-second Floor New York, New York 10022 Attention: Donald G. Kilpatrick Telecopier No.: 212-207-6426 With a copy to: Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, New York 10004-1490 Attention: Kenneth E. Adelsberg Telecopier No.: 212-858-1500 11. Miscellaneous. (a) The rights and remedies of the parties to this ------------- Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. (b) The parties hereto agree that the obligations of Sections 7 through 11, inclusive, will survive the termination of this Agreement for any reason. (c) Buyer may assign its rights and obligations under this Agreement to one or more of its affiliates, for so long as such entity remains an affiliate thereof. Notwithstanding the assignment of rights and obligations under this Agreement pursuant to the provisions stated hereinabove, it is understood and agreed that the assignor shall remain responsible for its obligations under this Agreement and, in the case of a partial assignment, shall be the only party entitled to enforce the rights and remedies which would otherwise be available to an assignee of the Agreement. No such assignment shall in any way limit or restrict the assignor's rights and remedies and no such assignment shall materially change the nature or scope of Shearer's duties from those reasonably expected to be performed for the Company as it exists at the time of this Agreement. The consulting services to be performed by Shearer under this Agreement are personal in nature to the Company, and, therefore, Shearer may not assign his rights under this Agreement. Any attempted assignment by Shearer will be void and of no force or effect. Subject to the preceding sentences, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and permitted assigns. (d) This Agreement may not be modified except by a written agreement executed by the party to be charged with the modification. 4 (e) This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. (f) This Agreement supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, between the parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. (g) This Agreement will be governed by the laws of the Commonwealth of Pennsylvania without regard to conflicts of laws principles. Section 12.4 of the Purchase Agreement with respect to jurisdiction and service of process is incorporated herein by reference as though fully set forth in its entirety herein. IN ANY ACTION OR PROCEEDING BROUGHT BEFORE ANY COURT RELATING TO THIS AGREEMENT, THE COMPANY AND SHEARER SPECIFICALLY WAIVE ANY RIGHT TO A TRIAL BY JURY. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written. COMMERCIAL STONE CO., INC. By:____________________________ Name: Title: _______________________________ [JOSEPH H./R. SCOTT] SHEARER 5 Exhibit 2.4(b)(i) AMOUNTS See wire transfer instructions (to be provided). Exhibit 3.20 AGGREGATE RESERVES See Schedule 3.20. Exhibit _____ August 11, 1999 U.S. Silica Company Route 522 North P.O. Box 187 Berkeley Springs, WV 25411 Attention of Richard E. Goodell Gary E. Bockrath Project Rock $250,000,000 Senior Secured Credit Facilities $150,000,000 Senior Subordinated Facility Commitment Letter ----------------------------------------------- Ladies and Gentlemen: You have advised The Chase Manhattan Bank ("Chase"), Chase Securities Inc. ----- ("CSI"), Banque Nationale de Paris ("BNP") and BNP Capital Markets, LLC --- --- ("BNPCM") that (a) pursuant to a Purchase Agreement to be entered into among (i) ----- U.S. Silica Company, a Delaware corporation (the "Borrower"), in which Chase -------- Capital Partners and D. George Harris & Associates Company, Inc. (together, the "Sponsors") together own a majority indirect equity interest, and (ii) CATS, -------- Inc., a Pennsylvania corporation, JHS Family Partnership, a Pennsylvania limited partnership, RSS Family Partnership, a Pennsylvania limited Partnership, the Dell H. Shearer Grandchildren's Trust, Joseph H. Shearer and R. Scott Shearer (collectively, the "Sellers"), the Borrower will effect the Acquisitions (such ------- term and each other capitalized term used but not defined herein having the meanings assigned to them in the Term Sheets (as defined below)) and (b) the Borrower will repay the Existing Indebtedness. You have further advised Chase, CSI, BNPCM and BNP that, in connection with the Transactions, (a) the Borrower will obtain the Senior Facilities (as defined in the Summary of Principal Terms and Conditions attached hereto as Exhibit A (the "Senior Facilities Term ---------------------- Sheet")) and (b) the Borrower will either (i) issue not less than $150,000,000 - ----- in aggregate principal amount of its senior subordinated notes (the "Senior ------ Subordinated Notes") in a public offering or in a Rule 144A or other private - ------------------ placement or (ii) if the Borrower is unable to issue the Senior Subordinated Notes on or prior to the Closing Date, borrow not less than $150,000,000 in senior subordinated loans from one or more lenders under the Senior Subordinated Facility (as defined in the Summary of Principal Terms and Conditions attached hereto as Exhibit B (the "Senior Subordinated Facility Term Sheet" and, together --------------------------------------- with the Senior Facilities Term Sheet, the "Term Sheets")). The Senior Facilities and the Senior Subordinated Facility are ----------- collectively referred to herein as the "Facilities". ---------- In connection with the Transactions, (a) Chase is pleased to advise you of (i) its commitment to provide $150,000,000 of the Senior Facilities, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Senior Facilities Term Sheet, and (ii) its commitment to provide $100,000,000 of the Senior Subordinated Facility, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and the Senior Subordinated Facility Term Sheet, and (b) BNP is pleased to advise you of (i) its commitment to provide $100,000,000 of the Senior Facilities, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Senior Facilities Term Sheet, and (ii) its commitment to provide $50,000,000 of the Senior Subordinated Facility, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Senior Subordinated Facility Term Sheet. You hereby appoint CSI to act, and CSI hereby agrees to act, as sole and exclusive advisor, book manager, lead arranger, syndication agent and documentation agent for the Senior Facilities and the Senior Subordinated Facility, on the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Term Sheets. It is understood and agreed that (a) BNP will act as sole and exclusive administrative agent and collateral agent for the Facilities and after the Closing Date will, in such capacities, perform the duties customarily associated with such roles and (b) no additional agents, co-agents, book managers, arrangers or co-arrangers will be appointed and no other titles awarded in connection with the Facilities without the approval of Chase and CSI. Chase and BNP reserve the right, prior to or after the execution of definitive documentation for the Facilities, to syndicate all or a portion of their commitments hereunder to one or more financial institutions, reasonably acceptable to you and CSI, that will become parties to such definitive documentation pursuant to syndication to be managed by CSI (the financial institutions becoming parties to such definitive documentation being collectively referred to as the "Lenders"). It is understood and agreed that ------- pursuant to the syndication of the Senior Facilities, (a) until the amount of Chase's commitment in respect of the Senior Facilities has been reduced to $100,000,000 all commitments to the Senior Facilities received from other Lenders will reduce Chase's commitment in respect of the Senior Facilities and (b) after the amount of Chase's commitment in respect of the Senior Facilities has been reduced to $100,000,000, all commitments to the Senior Facilities received from other Lenders will reduce Chase's and BNP's commitments in respect of the Senior Facilities in equal amounts. It is further understood and agreed that pursuant to the syndication of the Senior Subordinated Facility, (a) until the amount of Chase's commitment in respect of the Senior Subordinated Facility has been reduced to $50,000,000, all commitments to the Senior Subordinated Facility received from other Lenders will reduce Chase's commitment in respect of the Senior Subordinated Facility and (b) after the amount of Chase's commitment in respect of the Senior Subordinated Facility has been reduced to $50,000,000, all commitments to the Senior Subordinated Facility received from other Lenders will reduce Chase's and BNP's commitments in respect of the Senior Subordinated Facility in equal amounts. It is also understood and agreed that, until CSI notifies BNP that the syndications of the Facilities have been completed, BNP will not assign any portion of its commitments or loans in respect of the Facilities other than pursuant 2 to the syndications to be managed by CSI pursuant to this Commitment Letter. You understand that CSI intends to commence syndication efforts promptly, and you agree actively to assist CSI in completing timely and orderly syndications satisfactory to CSI. Such assistance shall include (a) your using commercially reasonable efforts to ensure that the syndication efforts benefit materially from your existing lending relationships and the existing lending relationships of the Sponsors, Holdings and the Targets, (b) direct contact during the syndication between senior management, representatives and advisors of the Sponsors, Holdings, the Targets and you, on the one hand, and the proposed Lenders, on the other hand, (c) assistance (including the use of commercially reasonable efforts to cause the Sponsors, Holdings, the Targets, the Sellers and your and their respective affiliates and advisors to assist) in the preparation of a Confidential Information Memorandum for each of the Facilities and other marketing materials to be used in connection with the syndications and (d) the hosting, with CSI, of one or more meetings of prospective Lenders. Chase and CSI shall be entitled, after consultation with you, to change the pricing, terms and structure of the Facilities if the syndications have not been completed and if Chase and CSI determine that such changes are advisable in order to ensure a successful syndication of any of the Facilities, provided that -------- (a) the aggregate amount of the Facilities remains unchanged and (b) the interest rate on each of the Facilities and the commitment fees will not increase by more than 75 basis points per annum. It is understood and agreed that CSI will, after consultation with you, manage all aspects of the syndications, including selection of Lenders from a list of Lenders reasonably acceptable to you, determination of when CSI will approach potential Lenders and the time of acceptance of the Lenders, any naming rights and the final allocations of the commitments among the Lenders. It is also understood and agreed that the amount and distribution of fees among the Lenders will be at CSI's discretion. To assist CSI in its syndication efforts, you agree promptly to prepare and provide (and to use commercially reasonable efforts to cause the Sellers and the Targets to provide) to CSI and Chase all information with respect to Holdings and its subsidiaries, the Acquired Businesses and their subsidiaries, the Transactions and the other transactions contemplated hereby, including all financial information and projections (the "Projections"), as CSI or Chase may reasonably request in connection with the - ------------ arrangement and syndication of the Facilities. You hereby represent and covenant that (a) all information other than the Projections (the "Information") ----------- that has been or will be made available to Chase or CSI by or on behalf of you or any of your authorized representatives, when taken as a whole, is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to Chase or CSI by or on behalf of you or any of your authorized representatives have been or will be prepared in good faith based upon assumptions that are believed by you to be reasonable at the time made and at the time the related Projections are made available to Chase or CSI, it being understood the Projections do not constitute a guarantee of actual performance. You agree that if, at any time from and including the date hereof until the closing of the Facilities, any of the representations in the preceding sentence would be incorrect if the Information and Projections were being furnished, and such representations were being made, at such time, then you will promptly supplement the Information and the Projections, to the extent 3 of information known to you, so that such representations will be correct under those circumstances. In arranging the Facilities, including the syndication of the Facilities, Chase and CSI will be entitled to use and rely primarily on the Information and the Projections without responsibility for independent verification thereof. As consideration for Chase's and BNP's commitments hereunder and CSI's agreement to structure, arrange and syndicate the Facilities and to provide advisory services in connection therewith, you agree to pay to Chase and BNP, the fees as set forth in the Terms Sheets and in the Fee Letter dated the date hereof and delivered herewith with respect to the Facilities (the "Fee Letter"). ---------- Once paid, such fees shall not be refundable under any circumstances. Chase's and BNP's commitments hereunder are subject to (a) Chase's completion of, and satisfaction in all respects with, its ongoing due diligence investigation of the Acquired Businesses and their subsidiaries with respect to legal matters (including but not limited to tax, environmental and employee benefit matters), (b) Chase's not having discovered or otherwise becoming aware of information not previously disclosed to Chase that is materially inconsistent with information provided to Chase prior to the date hereof with respect to the business, results of operations, assets, financial condition or prospects of Holdings and its subsidiaries or the Acquired Businesses and their subsidiaries, (c) there not having occurred any event, condition or circumstance that has had or is reasonably likely to have a material adverse effect on the business, results of operations, assets or financial condition of (i) Holdings and its subsidiaries since December 31, 1998, or (ii) the Acquired Businesses and their subsidiaries since March 31, 1999, in each case taken as a whole, (d) there not having occurred and being continuing a material disruption of or material adverse change in financial, banking or capital market (including, without limitation, high-yield market) conditions that, in Chase's reasonable judgment, could materially impair the syndication of any Facility or the issuance of the Senior Subordinated Notes, (e) the negotiation, execution and delivery of definitive documentation (similar to the Existing Credit Agreement and documents related thereto (subject to such additions, deletions and other modifications as are reasonably requested by Chase and CSI, including to reflect the Transactions and the changes in the credit profile and capital structure of Holdings and its subsidiaries after giving effect to the Transactions), and not inconsistent with the terms set forth herein, including but not limited to the terms set forth in the Term Sheets) with respect to the Facilities satisfactory to Chase and its counsel and (f) the other conditions set forth in the Term Sheets. Those matters that are not covered by or made clear under the provisions hereof and of the Term Sheets are subject to the approval and agreement of Chase, CSI and you. You agree that, in the event loans are made under the Senior Subordinated Facility, you will cause to be deposited into escrow on the Closing Date the Warrants referred to in the Warrant Letter of even date herewith among Chase, BNP, BNPCM, CSI and you (the "Warrant Letter"). -------------- You agree to engage one or more investment banks (collectively, the "Investment Bank") reasonably satisfactory to the Lenders to publicly sell or - ---------------- privately place unsecured debt securities of the Borrower (the "Securities") ---------- that will provide gross proceeds in an amount equal to the proposed amount of the Senior Subordinated Facility or, once the Senior Subordinated Facility has been funded, in an amount sufficient to repay all or any portion of the principal amount then 4 outstanding under the Senior Subordinated Facility. You further agree, subject to the remainder of this paragraph, to take actions reasonably necessary or desirable so that the Investment Bank can publicly sell or privately place the Securities. Upon notice by the Investment Bank (a "Securities Demand") that in ----------------- its opinion market conditions are such that the conditions specified in clauses (i) and (iii) of the following proviso can be satisfied, at any time and from time to time prior to the first anniversary of the Closing Date if all loans under the Senior Subordinated Facility shall not have been made or repaid in full, the Borrower will cause the issuance and sale of Securities upon such terms and conditions as specified in the Securities Demand (it being understood that there may be more than one Securities Demand), provided that (i) the -------- interest rate (whether floating or fixed) shall be determined by the Investment Bank in light of the then-prevailing market conditions but in no event shall the effective yield (excluding any effective yield on the Warrants) on the Securities exceed the greater of (x) 15.0% per annum and (y) the Treasury Rate (as such term is defined in the Senior Subordinated Facility Term Sheet) plus 900 basis points; (ii) the Investment Bank and the Borrower shall determine whether the Securities shall be issued through a public offering or a private placement; (iii) the maturity of any Securities shall not be earlier than the date that is ten years after the Closing Date; (iv) the Securities shall be issued pursuant to an indenture or other governing document in the form negotiated by the Borrower and the Investment Bank, which shall contain such terms, conditions and covenants as are typical and customary for similar financings and as are reasonably satisfactory in all respects to the Investment Bank and its counsel and the Borrower and its counsel; and (v) all other arrangements with respect to the Securities shall be reasonably satisfactory in all respects to the Investment Bank and the Borrower in light of the then- prevailing market conditions. By executing this Commitment Letter, you agree (a) to indemnify and hold harmless CSI, Chase, BNP, BNPCM and their respective officers, directors, employees, affiliates, agents and controlling persons from and against any and all losses, claims, damages, liabilities and expenses, joint or several, to which any such persons may become subject arising out of or in connection with any claim, litigation, investigation or proceeding relating to this Commitment Letter, the Fee Letter, the Warrant Letter, the Term Sheets, the Transactions, the Facilities or any related transaction, regardless of whether any of such indemnified parties is a party thereto, and to reimburse each of such indemnified parties upon demand for any reasonable legal or other expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any indemnified party, - -------- apply to losses, claims, damages, liabilities or related expenses to the extent they are found in a final judgment of a court to have resulted from the willful misconduct or gross negligence of such indemnified party, and (b) to reimburse CSI, Chase, BNPCM and BNP from time to time, upon presentation of a summary statement, for all reasonable out-of-pocket expenses (including but not limited to reasonable out-of-pocket expenses of Chase's due diligence investigation, reasonable consultants' fees, syndication expenses, travel expenses and reasonable fees, disbursements and other charges of counsel) incurred in connection with the Facilities and the preparation of this Commitment Letter, the Term Sheets, the Fee Letter, the Warrant Letter, the definitive documentation for the Facilities and any security arrangements in connection therewith. Notwithstanding any other provision of this Commitment Letter, no indemnified party shall be liable for any damages arising from the use by others of information or other materials obtained through electronic, telecommunications or other information transmission systems (other than damages to the extent they are found in a final judgment of a court to have resulted from the 5 willful misconduct or gross negligence of such indemnified party) or for any special, indirect, consequential or punitive damages in connection with its activities related to the Facilities. Your indemnification and reimbursement obligations under this paragraph with respect to any of the Facilities shall be superseded by your indemnification and reimbursement obligations under the definitive documentation for such Facility upon execution of such documentation. You acknowledge that Chase, BNP, BNPCM and CSI may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the transactions described herein and otherwise. Neither Chase, BNP, BNPCM nor CSI will use confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or its other relationships with you in connection with the performance by Chase, BNP, BNPCM or CSI of services for other companies, and neither Chase, BNP, BNPCM nor CSI will furnish any such information to other companies. You also acknowledge that neither Chase, BNP, BNPCM nor CSI has any obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained by Chase, BNP, BNPCM or CSI from other companies. This Commitment Letter and Chase's and BNP's commitments hereunder shall not be assignable by you without the prior written consent of Chase and BNP, and any attempted assignment without such consent shall be void. This Commitment Letter may not be amended or any provisions hereof waived or modified except by an instrument in writing signed by Chase, BNP, BNPCM, CSI and you. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Commitment Letter. This Commitment Letter is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. You agree that you will not disclose this Commitment Letter, the Term Sheets, the Fee Letter, the Warrant Letter, the contents of any of the foregoing or the activities of Chase, BNP, BNPCM or CSI pursuant hereto or thereto to any person without the prior written approval of Chase, except that you may disclose (a) this Commitment Letter, the Term Sheets, the Fee Letter, the Warrant Letter and the contents hereof and thereof (i) to the Sponsors and your and their respective officers, employees, attorneys, accountants and advisors on a confidential and need-to-know basis and (ii) as required by applicable law or compulsory legal process and (b) this Commitment Letter, the Term Sheets, the Warrant Letter and the contents hereof and thereof (but not the Fee Letter or the contents thereof) to the Sellers, the Targets and their respective attorneys, accountants and advisors, in each case in connection with the Transactions and on a confidential and need-to-know basis. Please indicate your acceptance of the terms hereof and of the Fee Letter, the Advisory and Arrangement Letter dated the date hereof and delivered herewith, the Warrant Letter, the Sponsor Letter dated the date hereof among the Sponsors, CSI and Chase and the Engagement Letter dated the date hereof between CSI, BNPCM and you (collectively, the "Financing --------- 6 Documents") by signing in the appropriate space below and in each other - --------- Financing Document and returning to Chase the enclosed duplicate originals (or facsimiles) of each Financing Document not later than 2:00 p.m., New York City time, on August 12, 1999. Chase's and BNP's commitments hereunder will expire at such time in the event that Chase has not received such executed duplicate originals (or facsimiles) in accordance with the immediately preceding sentence. In the event that the initial borrowing in respect of the Senior Facilities does not occur on or before October 31, 1999, then this Commitment Letter and Chase's and BNP's commitments hereunder shall automatically terminate unless Chase, BNP, BNPCM and CSI shall, in their reasonable discretion, agree to an extension. The compensation, reimbursement, indemnification and confidentiality provisions contained herein and in the Fee Letter shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or Chase's and BNP's commitments hereunder. Chase, BNP, BNPCM and CSI are pleased to have been given the opportunity to assist you in connection with the financing for the Transactions. Very truly yours, THE CHASE MANHATTAN BANK By /s/ D. Davey ----------------------- Name: D. Davey Title: V.P. CHASE SECURITIES INC. By /s/ J. Blumin ----------------------- Name: J. Blumin Title: Vice President BANQUE NATIONALE DE PARIS By_______________________ Name: Title: By_______________________ Name: Title: 7 BNP CAPITAL MARKETS, LLC By_______________________ Name: Title: By_______________________ Name: Title: 8 Chase, BNP, BNPCM and CSI are pleased to have been given the opportunity to assist you in connection with the financing for the Transactions. Very truly yours, THE CHASE MANHATTAN BANK By_______________________ Name: Title: CHASE SECURITIES INC. By_______________________ Name: Title: BANQUE NATIONALE DE PARIS By /s/ Richard Cushing ----------------------- Name: Title: Director By /s/ Paul Barnes ----------------------- Name: Paul Barnes Title: AVP BNP CAPITAL MARKETS, LLC By /s/ Richard Cushing ----------------------- Name: Title: Director By /s/ Paul Barnes ----------------------- Name: Paul Barnes Title: AVP 9 Accepted and agreed to as of the date first above written. U.S. SILICA COMPANY By /s/ ------------------------- Name: Title: 10 CONFIDENTIAL EXHIBIT A August 11, 1999 Project Rock $250,000,000 Senior Secured Credit Facilities Summary of Principal Terms and Conditions ----------------------------------------- Borrower: U.S. Silica Company, a Delaware corporation (the - -------- "Borrower") that is a direct, wholly owned -------- subsidiary of USS Intermediate Holdco, Inc., a Delaware corporation ("Holdings"), in which Chase -------- Capital Partners and D. George Harris & Associates Company, Inc. (together, the "Sponsors") together -------- own a majority indirect equity interest. Acquisitions and Other Pursuant to a Purchase Agreement (the "Purchase - ---------------------- -------- Transactions: Agreement") to be entered into among (a) CATS, - ------------ --------- Inc., a Pennsylvania corporation, JHS Family Partnership, a Pennsylvania limited partnership, RSS Family Partnership, a Pennsylvania limited partnership, the Dell H. Shearer Grandchildren's Trust, Joseph H. Shearer and R. Scott Shearer (collectively, the "Sellers") and (b) the ------- Borrower, the Borrower will acquire (the "Acquisitions") from the Sellers (i) all the ------------ outstanding capital stock of Commercial Stone Co. Inc., a Pennsylvania corporation ("CSC"), (ii) all --- the outstanding partnership interests in Commercial Aggregates Transportation and Sales, L.P., a Pennsylvania limited partnership ("CATS"), ---- and (iii) certain real property (collectively with CSC and CATS, the "Acquired Businesses") specified ------------------- in the Purchase Agreement, for cash consideration payable to the Sellers (the "Purchase Price") in -------------- the aggregate amount of $140,000,000 (subject to adjustment as provided in the Purchase Agreement). In connection with the Acquisitions, (a) the Borrower will obtain the senior secured credit facilities (collectively, the "Senior Facilities") ----------------- described below under the caption "Senior ------ Facilities", (b) the Borrower will either (i) ---------- issue not less than $150,000,000 in aggregate principal amount of its senior subordinated notes (the "Senior Subordinated Notes") in a public ------------------------- offering or in a Rule 144A or other private placement or (ii) if the Borrower is unable to issue the Senior Subordinated Notes prior to the date on which the Acquisitions are consummated (the "Closing Date"), borrow not less ------------ than $150,000,000 in senior subordinated loans from one or more lenders under a new senior subordinated credit facility (the "Senior ------ Subordinated Facility" and, collectively with the --------------------- Senior Facilities, the "Facilities"), (c) all ---------- existing indebtedness of the Borrower and its subsidiaries (other than (i) certain indebtedness of the Borrower incurred in connection with the acquisition of certain assets of Nicks Silica Company in an aggregate principal amount not to exceed $1,600,000, (i) certain capital leases in an aggregate principal amount not to exceed $200,000 (together, the "Rolled Debt") and (iii) ----------- certain other limited indebtedness to be agreed upon) in an aggregate principal amount not to exceed $167,200,000 (the "Existing Indebtedness") --------------------- will be repaid in full and (d) fees and expenses incurred in connection with the Transactions (as defined below) in the aggregate amount not to exceed $13,700,000 will be paid (the "Transaction ----------- Costs"). The transactions described in this ----- paragraph, together with the Acquisitions, are collectively referred to herein as the "Transactions." ------------ Book Manager, Syndication Chase Securities Inc. will act as sole and - ------------------------- exclusive book manager, syndication agent, lead Agent and Lead Arranger: documentation agent for the Senior Facilities (the - ----------------------- "Arranger"), will perform the duties customarily -------- associated with such roles and will manage the syndication of the Senior Facilities to a syndicate of financial institutions reasonably satisfactory to the Arranger and the Borrower (the "Lenders"). ------- Administrative Agent: Banque Nationale de Paris ("BNP") will act as sole - -------------------- --- and exclusive administrative agent and collateral agent (collectively, the "Agent") for the Lender, ----- and after the Closing Date will perform the duties customarily associated with such roles. Senior Facilities: (A) Three Senior Secured Term Loan Facilities in an - ----------------- aggregate principal amount of up to $200,000,000 consisting of (a) a Tranche A Term Loan Facility in an aggregate principal amount of up to $50,000,000 (the "Tranche A Facility"), (b) a ------------------ Tranche B Term Loan Facility in an aggregate principal amount of up 2 to $110,000,000 (the "Tranche B Facility") and (c) ------------------ a Delayed Draw Term Loan Acquisition Facility in an aggregate principal amount of up to $40,000,000 (the "Acquisition Facility" and, collectively with -------------------- the Tranche A Facility and the Tranche B Facility, the "Term Facilities"). --------------- (B) A Senior Secured Revolving Credit Facility in an aggregate principal amount of up to $50,000,000 (the "Revolving Facility"), of which an amount to ------------------ be agreed upon will be available in the form of letters of credit. In connection with the Revolving Facility, BNP will make available to the Borrower a swingline facility under which the Borrower may make short- term borrowings of up to an amount to be agreed upon. Any such swingline loans will reduce availability under the Revolving Facility on a dollar-for-dollar basis. Each Lender under the Revolving Facility will, promptly upon request by BNP, fund to BNP its pro rata share of any swingline borrowings. Purpose: (A) The proceeds of the Tranche A Facility and the - ------- Tranche B Facility will be used, together with (a) the net proceeds of the issuance of the Senior Subordinated Notes or the borrowings under the Senior Subordinated Facility, as applicable, and (b) a portion of the Closing Date Loan (as defined below) in an amount equal to approximately $10,900,000, solely (I) to pay the Purchase Price to the Sellers in accordance with the Purchase Agreement, (ii) to repay the Existing Indebtedness and (iii) to pay the Transactions Costs. The estimated sources and uses of the funds necessary to consummate the Transactions and the other transactions contemplated hereby are set forth on Annex II hereto. (B) The proceeds of loans under the Acquisition Facility will be used by the Borrower for Permitted Acquisitions (to be defined). (C) The proceeds of loans under the Revolving Facility (other than a portion of the Closing Date Loan in an amount equal to approximately $10,900,000) will be used by the Borrower for general corporate purposes, including, without limitation, working capital and 3 capital expenditures, but excluding Permitted Acquisitions. (D) Letters of credit will be used by the Borrower for general corporate purposes. Availability: (A) The full amount of the Tranche A Facility and the - ------------ Tranche B Facility must be drawn in a single drawing on the Closing Date. Amounts borrowed under the Tranche A Facility and the Tranche B Facility that are repaid or prepaid may not be reborrowed. (B) Loans under the Acquisition Facility will be available after the Closing Date and prior to the date that is three years after the Closing Date (the "Acquisition Facility Availability Period"), ---------------------------------------- the minimum principal amounts to be agreed upon, subject to conditions to be agreed upon and pursuant to procedures to be agreed upon, provided that the Borrower will not be permitted -------- to make more than three borrowings under the Acquisition Facility after the Closing Date, and provided further, that no borrowing under the -------- ------- Acquisition Facility will be permitted if at the time of such borrowing the Borrower's Leverage Ratio (to be defined) calculated on a pro forma basis to give effect to such borrowing and the Permitted Acquisition for which such borrowing is made would be greater than 5.25 to 1.0. Amounts repaid under the Acquisition Facility may not be reborrowed. No loans will be made under the Acquisition Facility on the Closing Date. (C) Loans under the Revolving Facility will be available after the Closing Date and at any time prior to the final maturity of the Revolving Facility, in minimum principal amounts to be agreed upon. Amounts repaid under the Revolving Facility may be reborrowed. A loan of up to $11,900,000 (the "Closing Date Loan") will be ----------------- made under the Revolving Facility on the Closing Date. Interest Rates and Fees: As set forth on Annex I hereto. - ----------------------- Default Rate: The applicable interest rate plus 2% per annum. - ------------ Letters of Credit: Letters of credit under the Revolving Facility - ----------------- will be issued by BNP or one of its affiliates (the "Issuing ------- 4 Bank"). Each letter of credit shall expire not ---- later than the earlier of (a) 12 months after its date of issuance and (b) the fifth business day prior to the final maturity of the Revolving Facility. Drawings under any letter of credit shall be reimbursed by the Borrower on the same business day. To the extent that the Borrower does not reimburse the Issuing Bank on the same business day, the Lenders under the Revolving Facility shall be irrevocably obliged to reimburse the Issuing Bank pro rata based upon their respective Revolving Facility commitments. The issuance of all letters of credit shall be subject to the customary procedures of the Issuing Bank. Final Maturity: (A) The Tranche A Facility will mature on the date - -------------- that is six years after the Closing Date. Loans under the Tranche A Facility will amortize in quarterly installments under a schedule to be agreed upon. (B) The Tranche B Facility will mature on the date that is eight years after the Closing Date. Loans under the Tranche B Facility will amortize under a schedule to be agreed upon providing for nominal quarterly installments for the first six years of the Tranche B Facility and quarterly installments in amounts to be agreed upon during the remaining term of the Tranche B Facility. (C) The Acquisition Facility will mature on the date that is six years after the Closing Date. Loans under the Acquisition Facility will amortize in quarterly installments under a schedule to be agreed upon. The first such installment will be payable on the last day of the first fiscal quarter after the last day of the Acquisition Facility Availability Period. (D) The Revolving Facility will mature on the date that is six years after the Closing Date. Guarantees: All obligations of the Borrower under the Senior - ---------- Facilities and under any interest protection or other hedging arrangements entered into with a Lender (or any affiliate thereof) will be unconditionally guaranteed (the "Guarantees") ---------- by Holdings and each 5 existing and subsequently acquired or organized domestic (and, to the extent no adverse tax consequences to the Borrower would result therefrom, foreign) subsidiary of the Borrower. Any guarantees to be issued in respect of the Senior Subordinated Notes or the Senior Subordinated Facility shall be junior to the obligations under the Guarantees. Security: The Senior Facilities, the Guarantees and any - -------- interest protection and other hedging arrangements entered into with a Lender (or any affiliate thereof) will be secured by all the assets (subject to customary exceptions to be agreed upon) of Holdings, the Borrower and each existing and subsequently acquired or organized domestic (and, to the extent no adverse tax consequences to the Borrower would result therefrom, foreign) subsidiary of the Borrower (collectively, the "Collateral"), including but ---------- not limited to (a) a first-priority pledge of all the capital stock of the Borrower, (b) a first- priority pledge of all the capital stock, membership interests and partnership interests held by Holdings, the Borrower or any domestic (or, subject to the foregoing limitation, foreign) subsidiary of the Borrower of each existing and subsequently acquired or organized subsidiary of the Borrower (which pledge, in the case of any foreign subsidiary, shall be limited to 65% of the capital stock, membership interests or partnership interests of such foreign subsidiary to the extent the pledge of any greater percentage would result in adverse tax consequences to the Borrower) and (c) perfected first-priority security interests in, and mortgages on, substantially all tangible and intangible assets of Holdings, the Borrower and each existing or subsequently acquired or organized domestic (or, subject to the foregoing limitation, foreign) subsidiary of the Borrower (including but not limited to accounts receivable, inventory, trademarks, other intellectual property, licensing agreements, real property, leasehold mortgages (to be agreed upon), cash and proceeds of the foregoing), subject in each case to customary exceptions to be agreed upon. On or prior to the Closing Date, the Agent shall have received reasonably satisfactory title insurance policies, current certified surveys, evidence of zoning and other legal compliance, 6 certificates of occupancy and other permits (including such endorsements as the Agent may require), legal opinions and other customary documentation, in each case reasonably required by the Agent with respect to all real property of Holdings and its subsidiaries subject to mortgages. All the above-described pledges, security interests and mortgages shall be created on terms, and pursuant to documentation, reasonably satisfactory to the Lenders, and none of the Collateral shall be subject to any other pledges, security interests or mortgages (subject to limited exceptions to be agreed upon.) Mandatory Prepayments: Loans under the Term Facilities shall be prepaid - --------------------- with (a) 75% of Excess Cash Flow (to be defined), provided that such percentage shall be reduced to -------- 50% upon satisfaction of certain financial criteria to be agreed upon, (b) 100% of the net cash proceeds of all asset sales or other dispositions of property by Holdings and its subsidiaries (including insurance and condemnation proceeds in excess of an agreed-upon amount), subject to limited exceptions to be agreed upon, (c) 100% of the net cash proceeds of issuances of debt obligations of Holdings and its subsidiaries (other than (i) the proceeds of any Senior Subordinated Notes issued after the Closing Date to the extent that such proceeds are applied to the payment of loans under the Senior Subordinated Facility and (ii) the proceeds from the issuance of any debt permitted to be incurred under the covenant limiting the incurrence of debt by Holdings or its subsidiaries) and (d) 100% of the net cash proceeds of issuances of equity of Holdings and its subsidiaries, subject to limited exceptions to be agreed upon (including issuances in connection with capital contributions applied to finance Permitted Acquisitions or to repay the Senior Subordinated Facility). The above-described mandatory prepayments shall be allocated among the Term Facilities pro rata (based on the then-outstanding principal amount of the loans under each Term Facility), subject to the provisions set forth below under the caption "Special Application Provisions". Within ------------------------------ each Term Facility, 7 mandatory prepayments shall be applied pro rata to the remaining amortization payments under such Term Facility. Special Application Holders of loans under the Tranche B Facility - ------------------- may, so long as loans are outstanding under the Provisions: Tranche A Facility or the Acquisition Facility, - ---------- decline to accept any mandatory prepayment described above and, under such circumstances, all amounts that would otherwise be used to prepay loans under the Tranche B Facility shall be used to prepay loans under the Tranche A Facility and the Acquisition Facility. Such mandatory prepayments shall be allocated between the Tranche A Facility and the Acquisition Facility pro rata (based on the then-outstanding principal amount of the loans under each such Term Facility) and applied with respect to each such Term Facility in the manner described above under the caption "Mandatory Prepayments". --------------------- Voluntary Prepayments/ Voluntary prepayments of borrowings under the - ---------------------- Senior Facilities, and voluntary reductions of Reductions in Commitments: the unutilized portion of the Acquisition - ------------------------- Facility and Revolving Facility commitments, will be permitted at any time, in minimum principal amounts to be agreed upon, without premium or penalty, subject to reimbursement of the Lenders' redeployment costs in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period. All voluntary prepayments of loans under the Term Facilities shall be allocated pro rata among the Term Facilities (based on the then-outstanding principal amount of the loans under each Term Facility). Within each Term Facility, voluntary prepayments shall be applied pro rata to the remaining amortization payments under such Term Facility. Representations and Usual for facilities and transactions of this - ------------------- type (including customary exceptions and Warranties: "materiality" thresholds) and similar to the - ---------- representations and warranties contained in the Credit Agreement dated as of July 21, 1998, among the Borrower, George F. Pettinos (Canada) Limited, the lenders party thereto and Banque Nationale de Paris (as amended, the "Existing -------- Credit Agreement", subject to such ---------------- 8 additions, deletions and other modifications as are reasonably requested by the Arranger, including to reflect the Transactions and the changes in the credit profile and capital structure of Holdings and its subsidiaries after giving effect to the Transactions, and others to be reasonably specified by the Arranger, including, without limitation, accuracy of financial statements; no material adverse change, absence of litigation, administrative proceedings or governmental or judicial action; no violation of agreements or instruments; compliance with laws, rules and regulations (including ERISA, margin regulations and environmental laws); payment of taxes; ownership of properties; inapplicability of the Investment Company Act; solvency; effectiveness of regulatory and third- party approvals; labor matters; environmental matters; accuracy of information; "year 2000" matters; and validity, priority and perfection of security interests in the Collateral. Conditions Precedent to Usual for facilities and transactions of this - ----------------------- type and similar to the conditions precedent in Initial Borrowing: the Existing Credit Agreement (subject to such - ----------------- additions, deletions and other modifications as are reasonably requested by the Arranger, including to reflect the Transactions and the changes in the credit profile and capital structure of Holdings and its subsidiaries after giving effect to the Transactions), including delivery of satisfactory legal opinions; evidence of authority; absence of any event, condition or circumstance that has had or is reasonably likely to have a material adverse effect on the business, operations, properties, assets, liabilities or financial condition of Holdings and its subsidiaries since December 31, 1998, or the Acquired Businesses and their subsidiaries since March 31, 1999, in each case taken as a whole; payment of fees and expenses; and obtaining of reasonably satisfactory insurance. The initial borrowing under the Senior Facilities will also be subject to the applicable conditions precedent set forth on Annex III hereto. Affirmative Covenants: Usual for facilities and transactions of this - --------------------- type (including customary exceptions and "materiality" thresholds) and similar to the affirmative covenants in the Existing Credit Agreement (subject to such 9 additions, deletions and other modifications as are reasonably requested by the Arranger, including to reflect the Transactions and the changes in the credit profile and capital structure of Holdings and its subsidiaries after giving effect to the Transactions) and others to be reasonably specified by the Arranger (to be applicable to Holdings and its subsidiaries), including, without limitation, maintenance of corporate existence and rights; performance of obligations, delivery of audited annual consolidated financial statements for Holdings and unaudited quarterly and monthly consolidated financial statements for Holdings and other financial information, delivery of notices of default, litigation and material adverse change; maintenance of properties in good working order; maintenance of satisfactory insurance; compliance with laws; inspection of books and properties; further assurances; and payment of taxes. The Borrower will also be required to maintain appropriate interest protection hedging arrangements with one or more Lenders (or affiliates thereof) on terms reasonably satisfactory to the Arranger. Negative Covenants: Usual for facilities and transactions of this type - ------------------ (including customary exceptions and "materiality" thresholds) and similar to the negative covenants in the Existing Credit Agreement (subject to such additions, deletions and other modifications as are reasonably requested by the Arranger, including to reflect the Transactions and the changes in the credit profile and capital structure of Holdings and its subsidiaries after giving effect to the Transactions) and others to be reasonably specified by the Arranger (to be applicable to Holdings and its subsidiaries), including, without limitation, limitations on dividends and distributions; limitations on redemptions and repurchases of membership and partnership interests and capital stock (subject to limited exceptions to be agreed upon); prohibition of prepayments, redemptions and repurchases of debt (other than loans under the Senior Facilities and other than the prepayment of loans under the Senior Subordinated Facility with the proceeds of any Senior Subordinated Notes issued after the Closing Date, which Senior Subordinated Notes shall have terms 10 and conditions reasonably satisfactory to the Lenders); limitations on liens and sale-leaseback transactions; limitations on loans and investments; limitations on debt, including limitations on hedging arrangements; limitations on capital expenditures; limitations on mergers, acquisitions and asset sales; limitations on transactions with affiliates; limitations on changes in business conducted by Holdings and its subsidiaries; and limitations on amendments of debt and certain other material agreements to be agreed upon. The Borrower and its subsidiaries will be permitted to consummate Permitted Acquisitions. Each Permitted Acquisition will satisfy criteria to be agreed upon by the Arranger and the Borrower and set forth in the definitive credit agreement with respect to the Senior Facilities (the "Credit ------ Agreement"). --------- Selected Financial Usual for facilities and transactions of this type, - ------------------ including, without limitation, (a) a minimum Covenants: interest coverage ratio and (b) a maximum leverage - --------- ratio, in each case with definitions and levels to be agreed upon. Events of Default: Usual for facilities and transactions of this type - ----------------- (including customary grace periods and "materiality" thresholds) and similar to the Events of Default in the Existing Credit Agreement (subject to such additions, deletions and other modifications as are reasonably requested by the Arranger, including to reflect the Transactions and the changes in the credit profile and capital structure of Holdings and its subsidiaries after giving effect to the Transactions) and others to be reasonably specified by the Arranger, including, without limitation, nonpayment of principal or interest, violation of covenants, incorrectness of representations and warranties in any material respect, cross default and cross acceleration, bankruptcy, material judgments, ERISA, actual or asserted invalidity of security documents and Change in Control (to be defined). Voting: Amendments and waivers of the Credit Agreement and - ------ the other definitive credit documentation will require the approval of Lenders holding more than 11 50% of the aggregate amount of the loans and commitments under the Senior Facilities, except that (a) the consent of each Lender adversely affected thereby shall be required with respect to, among other things, (i) increases in commitments, (ii) reductions of principal, interest or fees, (iii) extensions of final maturity and (iv) releases of all or substantially all the Collateral (other than in connection with any sale of Collateral permitted by the Credit Agreement) and (b) the consent of Lenders holding more than 50% of the aggregate amount of the loans and commitments of each adversely affected tranche of the Term Facilities shall be required with respect to any amendment that changes the effective allocation among the Term Facilities of any voluntary or mandatory prepayments of loans under the Term Facilities (or the application of such prepayments to the remaining amortization payments under the Term Facilities). Cost and Yield Protection: Usual for facilities and transactions of this type. - -------------------------- Assignments and The Lenders will be permitted to assign loans and - --------------- commitments to other Lenders (or their affiliates) Participations: or to any Federal Reserve Bank without restriction, - -------------- or to other financial institutions with the consent of the Borrower and the Agent, in each case not to be unreasonably withheld. Each assignment (except to other Lenders or their affiliates) will be in an amount not less than the lesser of (a) $5,000,000 and (b) the entire remaining principal amount of loans or commitments, as applicable, of the assigning Lender. The Agent will receive a processing and recordation fee to be agreed upon, payable by the assignor and/or the assignee, with each assignment. Assignments will be by novation and will not be required to be pro rata among the Senior Facilities. The Lenders will be permitted to participate in loans and commitments without restriction to other financial institutions. Voting rights of participants shall be limited to matters in respect of (a) increases in commitments, (b) reductions of principal, interest or fees, (c) extensions of final maturity and (d) releases of all or substantially all the Collateral (other than in connection with any sale of Collateral permitted by the Credit Agreement). 12 Expenses and All reasonable out-of-pocket expenses (including, - ------------ without limitation, reasonable expenses incurred in Indemnification: connection with due diligence) of the Arranger and - --------------- the Agent associated with the syndication of the Senior Facilities and with the preparation, execution and delivery, administration, waiver or modification and enforcement of the Credit Agreement and the other documentation contemplated hereby and thereby (including the reasonable fees, disbursements and other charges of counsel) are to be paid by the Borrower. In addition, all reasonable out-of-pocket expenses of the Lenders for enforcement costs and documentary taxes associated with the Senior Facilities are to be paid by the Borrower. The Borrower will indemnify the Arranger, the Agent and the other Lenders and hold them harmless from and against all costs, expenses (including reasonable fees, disbursements and other charges of counsel) and liabilities of the Arranger, the Agent and the other Lenders arising out of or relating to any claim or any litigation or other proceedings (regardless of whether the Arranger, the Agent or any other Lender is a party thereto) that relate to the proposed transactions, including the financing contemplated hereby, the Acquisitions and the other Transactions, provided that none of the Arranger, the Agent or any other Lender will be indemnified for its gross negligence or willful misconduct. The indemnities in this paragraph will be subject to modifications to be agreed upon. Governing Law and Forum: New York. - ----------------------- Counsel to Arranger: Cravath, Swaine & Moore. - ------------------- 13 ANNEX I Interest Rates: The interest rates under the Senior Facilities - -------------- will be, at the option of the Borrower, as follows: Tranche A Facility ------------------ Adjusted LIBOR plus 3.00% or ABR plus 2.00%, in each case subject to one or more step-downs to be agreed upon based on the Borrower's Consolidated Leverage Ratio (to be defined). Tranche B Facility ------------------ Adjust LIBOR plus 3.50% or ABR plus 2.50%. Acquisition Facility -------------------- Adjust LIBOR plus 3.00% or ABR plus 2.00%, in each case subject to step-downs to be agreed upon based on the Borrower's Consolidated Leverage Ratio. Revolving Facility ------------------ Adjusted LIBOR plus 3.00% or ABR plus 2.00%, in each case subject to step-downs to be agreed upon based on the Borrower's Consolidated Leverage Ratio. All Senior Facilities --------------------- The Borrower may elect interest periods of 1, 2, 3 or 6 months for Adjusted LIBOR borrowings. Calculation of interest shall be on the basis of accrual days elapsed in a year of 360 days (or 365 or 366 days, as the case may be, in the case of ABR loans based on the Prime Rate) and interest shall be payable at the end of each interest period and, in any event, at least every 3 months or 90 days, as the case may be. ABR is the Alternate Base Rate, which is the highest of The Chase Manhattan Bank's Prime Rate and the Federal Funds Effective Rate plus 1/2 of 1%. Adjusted LIBOR will at all times include statutory reserves. Letter of Credit Fee: A per annum fee equal to the spread over Adjusted - -------------------- LIBOR under the Revolving Facility will accrue on the aggregate face amount of outstanding letters of credit under the Revolving Facility, payable in arrears at the end of each quarter and upon the termination of the Revolving Facility, in each case for the actual number of days elapsed over a 360-day year. Such fees shall be distributed to the Lenders participating in the Revolving Facility pro rata in accordance with the amount of each such Lender's Revolving Facility commitment. In addition, the Borrower shall pay to the Issuing Bank, for its own account, (a) a fronting fee of 1/4 of 1% per annum on the aggregate face amount of outstanding letters of credit, payable in arrears at the end of each quarter and upon the termination of the Revolving Facility, in each case for the actual number of days elapsed over a 360-day year, and (b) customary issuance and administration fees. Acquisition Facility 3/4 of 1% per annum on the undrawn portion of the - -------------------- commitments in respect of the Acquisition Facility Commitment Fees: (a) commencing to accrue with respect to each - --------------- Lender's commitment on the Closing Date, payable quarterly in arrears after the Closing Date and (b) subject to step-downs to be agreed upon based on the Borrower's Consolidated Leverage Ratio. Revolving Facility 1/2 of 1% per annum on the undrawn portion of the - ------------------ commitments in respect of the Revolving Facility Commitment Fees: (a) commencing to accrue with respect to each - --------------- Lender's commitment on the Closing Date, payable quarterly in arrears after the Closing Date, and (b) subject to step-downs to be agreed upon based on the Borrower's Consolidated Leverage Ratio. Other: The annual interest rates in effect in respect of - ----- each of the Senior Facilities will be permanently reduced by 25 basis points if prior to the Closing Date the Senior Facilities shall be rated Ba3 by Moody's Investors Service, Inc. and BB- by Standard and Poor's Ratings Group. 2 ANNEX II Estimated Sources and Uses of Funds (in millions of dollars) For Consolidated Entity
Uses of Funds Sources of Funds - ------------- ---------------- Purchase Price $140.0 Closing Date Loan $ 11.9* Repay Existing Indebtedness 167.2 Tranche A Facility 50.0 Cash 1.0 Tranche B Facility 110.0 Acquisition Facility 0.0** Rolled Debt 1.8 Rolled Debt 1.8 Transaction Costs 13.7 Senior Subordinated ------ Notes/Facility 150.0 ------- Total Uses $323.7 Total Sources $ 323.7 ====== =======
______________________ * Represents drawn portion of $50,000,000 Revolving Facility. ** Represents drawn portion of $40,000,000 Acquisition Facility. ANNEX III Project Rock $250,000,000 Senior Secured Credit Facilities and $150,000,000 Senior Subordinated Credit Facility Summary of Additional Conditions Precedent ------------------------------------------ Except as otherwise set forth below, the initial borrowing under each of the Facilities shall be subject to the following conditions precedent: 1. The terms of the Purchase Agreements shall be satisfactory in all material respects to the Arranger, and the Acquisitions and the other Transactions shall be consummated simultaneously with the closing under the Senior Facilities in accordance with applicable law, the Purchase Agreements (including all Exhibits thereto) and all other related documentation (in each case without giving effect to any amendment or waiver not approved by the Arranger) and on terms substantially consistent with those set forth in this Summary of Principal Terms and Conditions, and the Arranger shall be satisfied that the Transaction Costs shall not exceed $13,700,000. 2. With respect to the Senior Facilities, the Borrower shall have received not less than $150,000,000 in gross cash proceeds from either (a) the issuance of the Senior Subordinated Notes in a public offering or in a Rule 144A or other private placement to one or more holders satisfactory to the Arranger or (b) the borrowings under the Senior Subordinated Facility. The terms and conditions of the Senior Subordinated Notes or the Senior Subordinated Facility, as applicable (in each case including but not limited to terms and conditions relating to the interest rate, fees, amortization, maturity, subordination, covenants, events of default and remedies) shall be satisfactory in all respects to the Arranger (it being agreed that such terms of the Senior Subordinated Facility to the extent described in Exhibit B to the Commitment Letter to which this Annex III is attached (the "Commitment Letter") are satisfactory). ----------------- 3. After giving effect to the Transactions and the other transactions contemplated hereby, Holdings and its subsidiaries shall have outstanding no indebtedness or preferred membership or partnership interests or preferred stock other than (a) the loans and other extensions of credit under the Senior Facilities, (b) the Senior Subordinated Notes or loans under the Senior Subordinated Facility, (c) the Rolled Debt (the terms of which shall be reasonably satisfactory to the Arranger) and (d) other limited indebtedness to be agreed upon. 4. The Lenders shall be reasonably satisfied as to the amount and nature of any environmental and employee health and safety exposures to which the Acquired Businesses may be subject after giving effect to the Transactions, and with the plans of Holdings and its subsidiaries with respect thereto, and the Lenders shall have received environmental assessments (including Phase I reports) with respect to the properties of the Acquired Businesses satisfactory to the Arranger from an environmental consulting firm satisfactory to the Arranger. 5. The Lenders shall have received a certificate of a financial officer of the Borrower with respect to the pro forma Consolidated EBITDA (to be defined) of the Borrower (after giving effect to the Acquisitions) for the twelve month period ending June 30, 1999, and such pro forma Consolidated EBITDA shall not be less than $60,300,000. 6. The Lenders shall have received a certificate of a financial officer of the Borrower with respect to the ratio of Total Debt (to be defined) as of June 30, 1999, to the pro forma Consolidated EBITDA (to be defined) of the Borrower (after giving effect to the Acquisitions) for the twelve month period ending on such date, and such ratio shall not exceed 5.5 to 1.0. 7. The Lenders shall have received (a) a consolidated pro forma balance sheet and related statements of income, stockholders' equity and cash flows of Holdings and its subsidiaries as of and for each fiscal quarter of Holdings ending after December 31, 1998, and prior to the Closing Date for which internal financial statements are available (and, to the extent available, for each month preceding the Closing Date since the last such quarter), after giving effect to the Transactions and (b) an analysis of the adjustments necessary to reconcile the entries in such pro forma financial statements to those unaudited financial statements delivered for Holdings and its subsidiaries for each such fiscal quarter and month pursuant to paragraph 12 below. 8. CSI shall have received (a) audited consolidated and consolidating balance sheets and related statements of income, stockholders' equity and cash flows of each of the Borrower and its subsidiaries and the Acquired Businesses and their subsidiaries for the three fiscal years ended prior to the Closing Date and (b) unaudited consolidated and consolidating balance sheets and related statements of income, stockholders' equity and cash flows of each of the Borrower and its subsidiaries and the Acquired Businesses and their subsidiaries for the fiscal quarters, if any, ending after the most recent fiscal year that precedes the Closing Date (and, to the extent available, for each month preceding the Closing Date since the last such quarter), which audited and unaudited financial statements (i) shall be in form and scope satisfactory to CSI and (ii) shall not be materially inconsistent with the financial statements previously provided to CSI or the projections provided to CSI pursuant to paragraph 9 below. 9. CSI shall have received management's consolidated and consolidating financial projections for the Borrower and its subsidiaries for the period of ten years following the Closing Date, detailed on a quarter-by-quarter basis for fiscal years 1999 and 2000, which projections shall reflect the Transactions and the other transactions contemplated hereby and include the written assumptions upon which such projections are based, and such projections shall be reasonably satisfactory in all respects to CSI. Such projections shall be substantially similar in form to the projections received by CSI prior to the date of the Commitment Letter. 10. With respect to the Senior Subordinated Facility, the Borrower shall have received not less than $171,900,000 (excluding undrawn commitments) in gross cash proceeds from borrowings under the Senior Facilities. The terms and conditions of the Senior Facilities (including but not limited to terms and conditions relating to interest rates, fees, amortization, maturity, covenants, events of default and remedies) shall be reasonably satisfactory in all respects to the agent under the Senior Subordinated Facility (it being agreed that such terms of the Senior Facilities to the extent described in Exhibit A to the Commitment Letter are satisfactory). 2 11. With respect to the Senior Subordinated Facility, CSI shall have received, not later than 30 days prior to the Closing Date, a complete printed preliminary prospectus or preliminary offering memorandum or preliminary private placement memorandum that is suitable for use in a customary "high-yield road show" relating to the Senior Subordinated Notes and contains all financial statements and other data to be included therein (including all audited financial statements, all unaudited financial statements (which shall have been reviewed by the independent accountants for the Borrower as provided in Statement on Auditing Standards No. 71) and all appropriate pro forma financial statements prepared in accordance with, or reconciled to, generally accepted accounting principles in the United States and prepared in accordance with Regulation S-X under the Securities Act of 1933, as amended) and all other data (including selected financial data) that the Securities and Exchange Commission would require in a registered offering of the Senior Subordinated Notes or that would be necessary for CSI to receive a customary "comfort" (including "negative assurance" comfort) from independent accountants in connection with the offering of the Senior Subordinated Notes. 12. With respect to the Senior Subordinated Facility, CSI shall have been afforded a period of at least 30 days following receipt of the material described in the immediately preceding paragraph to seek to place the Senior Subordinated Notes with qualified purchasers thereof an CSI shall have marketed the Senior Subordinated Notes in a manner customary for high-yield offerings of this type (including completing a traditional "high-yield road show") for at least 15 days (or such shorter period if acceptable to CSI) following September 6, 1999, and prior to the Closing Date. 3 CONFIDENTIAL EXHIBIT B August 11, 1999 Project Rock $150,000,000 Senior Subordinated Facility Summary of Principal Terms and Conditions ----------------------------------------- Initial Borrower Loans: The Lenders (as defined below) will make - ----------------------- loans (the "Initial Borrower Loans") to ---------------------- the Borrower (as defined below) on the Closing Date (as defined below) in an aggregate principal amount not to exceed $150,000,000. The Chase Manhattan Bank ("Chase"), Banque Nationale de Paris ----- ("BNP") and each assignee of any portion --- of the Initial Borrower Loans or of Chase's or BNP's commitments to make the Initial Borrower Loans are collectively referred to herein as the "Lenders". ------- Borrower: U.S. Silica Company, a Delaware - -------- corporation (the "Borrower") that is a -------- direct, wholly owned subsidiary of USS Intermediate Holdco, Inc., a Delaware corporation ("Holdings"), in which Chase -------- Capital Partners and D. George Harris & Associates Company, Inc. (together, the "Sponsors") together own a majority -------- indirect equity interest. Guarantees: The obligations of the Borrower in - ---------- respect of the Initial Borrower Loans will be unconditionally and irrevocably guaranteed on a senior subordinated basis by each guarantor, if any, of the Senior Facilities (as defined below). Guarantees will be released in a manner consistent with the Senior Facilities. Agents: Chase will act as sole and exclusive - ------ syndication agent and documentation agent (the "Syndication Agent"). BNP will act as ----------------- sole and exclusive administrative agent for the Lenders (the "Administrative -------------- Agent" and, together with the Syndication ----- Agent, the "Agents"), and after the ------ Closing Date (as defined below) will perform the duties customarily associated with such roles. Arranger: Chase Securities Inc. ("CSI") - -------- --- Lenders: A syndicate of banking and financial - ------- institutions arranged by CSI and reasonably acceptable to the Borrower and CSI. Acquisition and Other Transactions: Pursuant to a Purchase Agreement (the - ---------------------------------- "Purchase Agreement") to be entered into ------------------ among (a) CATS, Inc., a Pennsylvania corporation, JHS Family Partnership, a Pennsylvania limited partnership, RSS Family Partnership, a Pennsylvania limited partnership, the Dell H. Shearer Grandchildren's Trust, Joseph H. Shearer and R. Scott Shearer (collectively, the "Sellers") and (b) the ------- Borrower, the Borrower will acquire (the "Acquisitions") from the Sellers (i) all ------------ the outstanding capital stock of Commercial Stone Co. Inc., a Pennsylvania corporation ("CSC"), (ii) all the --- outstanding partnership interests in Commercial Aggregates Transportation and Sales, L.P., a property (collectively with CSC and CATS, the "Acquired Businesses") ------------------- specified in the Purchase Agreement, for cash consideration payable to the Sellers (the "Purchase Price") in the aggregate -------------- amount of $140,000,000 (subject to adjustment as provided in the Purchase Agreement). In connection with the Acquisitions, (a) the Borrower will obtain the senior secured credit facilities (collectively, the "Senior Facilities") described below ----------------- under the caption "Senior Facilities", (b) the Borrower will either (i) issue of less than $150,000,000 in aggregate principal amount of its senior subordinated notes (the "Senior Subordinated Notes") in a ------------------------- public offering or in a Rule 144A or other private placement or (ii) if the Borrower is unable to issue the Senior Subordinated Notes prior to the date on which the Acquisitions are consummated (the "Closing ------- Date"), borrow not less than $150,000,000 ---- in senior subordinated loans from one or more lenders under a new senior subordinated credit facility (the "Senior ------ Subordinated Facility") and, collectively --------------------- with the Senior Facilities, the "Facilities"), (c) all existing ---------- indebtedness of the Borrower and its subsidiaries (other than (i) certain indebtedness of the Borrower incurred in connection with the acquisition of certain assets of Nicks Silica Company in an aggregate amount not to exceed $1,600,000, (ii) certain capital leases in an aggregate principal amount not to exceed $200,000 and (iii) certain other limited indebtedness to be agreed upon) in an aggregate principal amount not to exceed $167,300,000 (the "Existing Indebtedness") --------------------- will be repaid in full and (d) fees and expenses incurred in connection with the Transactions (as defined below) in an aggregate amount not to exceed $13,700,000 will be paid (the "Transaction Costs"). ----------------- The transactions described in this paragraph, together with the Acquisitions, are collectively referred to herein as the "Transactions". ------------ 2 Use of Proceeds: The proceeds of the Initial Borrower - --------------- Loans will be used, together with the net proceeds of the Tranche A Facility, the Tranche B Facility (as each such term is defined in Exhibit A to the Commitment Letter to which this Exhibit B is attached) and a portion of the Closing Date Loan (as such term is defined in Exhibit A to the Commitment Letter to which this Exhibit B is attached) in an amount equal to approximately $10,900,000, solely (i) to pay the Purchase Price to the Sellers in accordance with the Purchase Agreement, (ii) to repay the Existing Indebtedness and (iii) to pay the Transaction Costs. The estimated sources and uses of the funds necessary to consummate the Transactions and the other transactions contemplated hereby are set forth in Annex II of Exhibit A to the Commitment Letter to which this Exhibit B is attached. Funding: The Lenders will make the Initial - ------- Borrower Loans simultaneously with (a) the consummation of the Transactions and (b) the initial funding under the Senior Facilities. Maturity/Exchange: All the Initial Borrower Loans will - ----------------- mature on the date that is one year following the Closing Date (the "Maturity -------- Date"). If any Initial Borrower Loan has ---- not been previously repaid in full on or prior to the Maturity Date, the Lender in respect of such Initial Borrower Loan thereafter will have the option at any time or from time to time to receive Borrower Exchange Notes (the "Borrower -------- Exchange Notes") in exchange for such -------------- Initial Borrower Loan having the terms set forth in the term sheet attached hereto as Annex I; provided, however, that a Lender -------- ------- may not elect to exchange only a portion of its outstanding Initial Borrower Loans for Borrower Exchange Notes unless such Lender intends at the time of such partial exchange of Initial Borrower Loans promptly to sell the Borrower Exchange Notes received in such exchange. If any Lender does not exchange its Initial Borrower Loans for Borrower Exchange Notes on the Maturity Date, such Lender shall be required to extend the maturity of such Initial Borrower Loans to another date selected by such Lender. If, at such extended maturity, such Lender does not exchange its Initial Borrower Loans, such Lender shall be required again to extend the maturity of such Initial Borrower Loans to another date selected by such Lender (provided that such Lender shall not be required to extend the maturity of such Initial Borrower Loans beyond the 3 tenth anniversary of the Closing Date (the "Final Maturity Date")), and this sentence ------------------- shall apply to each extended maturity of such Initial Borrower Loans prior to the Final Maturity Date. The Initial Borrower Loans and the Borrower Exchange Notes shall be pari ---- passu for all purposes. ----- Interest: Prior to the Maturity Date, the Initial - -------- Borrower Loans will accrue interest at a rate per annum equal to three-month Adjusted LIBOR ("Adjusted LIBOR") plus a -------------- spread (the "Spread"). The Spread will ------ initially be 600 basis points. If the Initial Borrower Loans are not repaid in whole within six months following the Closing Date, the Spread will increase by 100 basis points at the end of such six- month period and shall increase by an additional 50 basis points at the end of each three-month period thereafter until the Maturity Date. Notwithstanding the foregoing, (a) the interest rate in effect at any time prior to the Maturity Date shall not exceed 18.0% per annum, (b) the interest rate in effect at any time prior to the Maturity Date shall not be less than 11.0% per annum and (c) to the extent the interest payable prior to the Maturity Date on any Initial Borrower Loan exceeds a rate of 15.0% per annum, the Borrower may, at its option, cause such excess interest to be paid by adding such excess interest to the principal amount of such Initial Borrower Loan. In no event shall the interest rate on the Initial Borrower Loans exceed the highest lawful rate permitted under applicable law. Following the Maturity Date, all outstanding Initial Borrower Loans will accrue interest at the rate provided for the Borrower Exchange Notes in Annex I hereto, subject to the absolute and cash caps applicable to the Borrower Exchange Notes. Calculation of interest shall be on the basis of actual days elapsed in a year of 360 days (or 365 days or 366 days, as the case may be, in the case of Initial Borrower Loans based on the Prime Rate (as defined below)). Adjusted LIBOR will at all times include statutory reserves. In the event that Adjusted LIBOR cannot be determined, or any Lender is unable to maintain a loan accruing interest at 4 Adjusted LIBOR, the affected Initial Borrower Loans will accrue interest until the Maturity Date, or until such earlier time as Adjusted LIBOR can be determined, at the "Alternate Base Rate", which will ------------------- be the higher of (a) Chase's Prime Rate (the "Prime Rate") and (b) the Federal ---------- Funds Effective Rate plus 1/2 of 1%, plus in each case the Spread less 100 basis points. Interest will be payable in arrears (a) for Initial Borrower Loans accruing interest at a rate based on Adjusted LIBOR, at the end of each Adjusted LIBOR Period and on the Maturity Date, (b) for Initial Borrower Loans accruing interest at the Alternate Base Rate, at the end of each fiscal quarter of the Borrower following the Closing Date and on the Maturity Date and (c) the Initial Borrower Loans outstanding after the Maturity Date, at the end of each fiscal quarter of the Borrower following the Maturity Date. Senior Facilities: The Borrower will obtain the $250,000,000 - ----------------- senior secured credit facilities (the "Senior Facilities") as described in ----------------- Exhibit A to the Commitment Letter to which this Exhibit B is attached. Subordination: The Initial Borrower Loans will be - ------------- subordinated to the Senior Facilities and other senior indebtedness of the Borrower on terms customary for senior subordinated facilities and transactions of this type. Mandatory Redemption: The Borrower will be required to prepay - -------------------- Initial Borrower Loans (and, if issued, Borrower Exchange Notes, to the extend required by the terms of such Borrower Exchange Notes) on a pro rata basis --- ---- subject, in certain circumstances, to the call protection provisions of any Fixed Rate Borrower Exchange Notes (as described in Annex I hereto), at par plus accrued and unpaid interest (or, in the case of Fixed Rate Borrower Exchange Notes, at par plus accrued and unpaid interest plus any applicable premiums), from the net proceeds (after deduction of, among other things, amounts required to repay the Senior Facilities) from the incurrence of any debt or the issuance of any equity or from certain asset sales, subject in each case, to limited exceptions to be agreed upon. Optional Prepayment: The Initial Borrower Loans may be - ------------------- prepaid, in whole or in part, at the option of the Borrower, at any time upon ten days' prior notice, at par plus accrued and unpaid interest, subject to reimbursement of the Lenders' actual redeployment costs in the case of a prepayment of Adjusted 5 LIBOR borrowings other than on the last day of the relevant interest period. Documentation: Usual for facilities and transactions of - ------------- this type and satisfactory to CSI. Representations and Warranties: Usual for facilities and transactions of - ------------------------------ this type (including customary exceptions and "materiality" thresholds) and others to be reasonably specified by CSI, including, without limitation, accuracy of financial statements; no material adverse change; absence of litigation; no violation of agreements or instruments; compliance with laws (including ERISA, margin regulations and environmental laws); payment of taxes; ownership of properties; inapplicability of the Investment Company Act; solvency; effectiveness of regulatory approvals; labor matters; environmental matters; "year 2000" matters; and accuracy of information. Conditions Precedent: Usual for facilities and transactions of - -------------------- this type, including delivery of satisfactory legal opinions; evidence of authority; absence of any event, condition or circumstance that has had or is reasonably likely to have a material adverse effect on the business, operations, properties, assets, liabilities or financial condition of Holdings and its subsidiaries since December 31, 1998, or the Acquired Businesses and their subsidiaries since March 31, 1999, in each case taken as a whole; payment of fees and expenses; and obtaining of reasonably satisfactory insurance. Borrowings under the Senior Subordinated Facility will also be subject to the applicable conditions precedent set forth on Annex III to Exhibit A to the Commitment Letter to which this Exhibit B is attached. Notes: The Borrower will use commercially - ----- reasonable efforts to refinance the Initial Borrower Loans as promptly as practicable after the Closing Date with an issue of approximately $150,000,000 aggregate principal amount of senior subordinated notes. Covenants: Usual for facilities and transactions of - --------- its type (including customary exceptions and "materiality" thresholds) and others to be reasonably specified by CSI, including (should CSI reasonably deem it necessary) certain financial covenants, including maintenance covenants, to be mutually agreed upon by the Borrower and CSI. 6 The affirmative covenants shall in any vent include delivery of financial projections of the Borrower and its subsidiaries updated quarterly in a form substantially similar to that described in Annex III to Exhibit A to the Commitment Letter to which this Exhibit B is attached. Following the Maturity Date, all covenants in respect of any outstanding Initial Borrower Loans will be substantially identical to the covenants in respect of the Borrower Exchange Notes. Events of Default: Usual for facilities and transactions of - ----------------- this type (including customary grace periods and "materiality" thresholds) and others to be reasonably specified by CSI. Following the Maturity Date, the events of default relevant to the Initial Borrower Loans will be substantially identical to the events of default in respect of the Borrower Exchange Notes. Cost and Yield Usual for facilities and transactions of - -------------- Protection: this type. - ----------- Assignment and Participation: The Lender will have the absolute and - ---------------------------- unconditional right to assign Initial Borrower Loans and commitments without the consent of the Borrower, after consultation with the Borrower. Each assignment (except to other Lenders or their affiliates) will be in an amount such that the gross proceeds to the assigning lender shall not be less than $250,000. The Administrative Agent will receive a processing and recordation fee to be agreed upon, payable by the assignor and/or the assignee, with each assignment. Assignments will be by novation which will release the obligation of the assigning Lender. BNP will act as Administrative Agent for all assignees (if any) holding the Initial Borrower Loans from time to time. Lenders will be permitted to participate their Initial Borrower Loans, to other financial institutions without restriction, other than customary voting limitations. Participations will have the same benefits as the selling Lenders would have (and will be limited to the amount of such benefits) with regard to yield protection and increased costs. Voting: Amendments and waivers of the - ------ documentation for the Initial Borrower Loans and the other definitive credit documentation related thereto will require the approval of 7 Lenders holding more than 50% of the outstanding Initial Borrower Loans, except that the consent of each affected Lender will be required for (a) reductions of principal, interest rates or Spread, (b) except as provided under the caption "Maturity/Exchange", extensions of the Maturity Date, (c) additional restrictions on the right to exchange Initial Borrower Loans for Borrower Exchange Notes or any amendment of the rate of such exchange or (d) any amendment to the Borrower Exchange Notes that requires (or would, if any Borrower Exchange Notes were outstanding, require) the approval of all holders of Borrower Exchange Notes. Expenses and Indemnification: All reasonable out-of-pocket expenses - ---------------------------- (including but not limited to reasonable expenses incurred in connection with due diligence) of the Agents and CSI associated with the preparation, execution and delivery, administration, waiver or modification and enforcement of the Senior Subordinated Facility and the other documentation contemplated hereby and thereby (including the reasonable fees, disbursements and other charges of counsel) are to be paid by the Borrower. In addition, all reasonable out-of-pocket expenses of the Lenders for enforcement costs and documentary taxes associated with the facility are to be paid by the Borrower. The Borrower will indemnify the Lenders and CSI, and their respective officers, directors, employees, affiliates, agents and controlling persons, and hold them harmless from and against all costs, expenses (including but not limited to reasonable fees and out-of-pocket charges and disbursements of counsel) and liabilities of any such Lender or CSI arising out of or relating to any claim or any litigation or other proceeding (regardless of whether any such Lender or CSI is a party thereto) that relate to the proposed transactions, including but not limited to the Transactions or any transactions connected therewith; provided, however, that no such person will be indemnified for costs, expenses or liabilities arising from such person's gross negligence or wilful misconduct. The indemnities in this paragraph will be subject to modifications to be agreed upon. Governing Law and Forum: New York. - ----------------------- Counsel for CSI and the Lenders: Cravath, Swaine & Moore. - ------------------------------- 8 Exhibit 7.4 Form of Opinion of Seller's Counsel 1. Each Acquired Company is validly existing, and in good standing under the laws of its jurisdiction of incorporation or formation, with full power and authority to conduct its business as it is now being conducted and to own or use the properties and assets that it purports to own or use. 2. Each Seller has full capacity, right, power and authority to execute and deliver the Purchase Agreement and to consummate the Contemplated Transactions. The Purchase Agreement constitutes the legal, valid and binding obligation of Sellers, enforceable against Sellers in accordance with its terms [INSERT BANKRUPTCY EXCEPTION]. 3. The execution, delivery and performance of the Purchase Agreement by Sellers and the consummation of the Contemplated Transactions (i) have been authorized by all necessary corporate, partnership, trust and other action on the part of Sellers and (ii) will not (w) conflict with the terms, conditions or provisions of the Organizational Documents of any Seller or any Acquired Company (x) violate any provision of law or any Order to which any Seller or any Acquired Company or any of their respective assets is subject or require the consent of any Person, (y) to our knowledge, result in a breach or violation of any of the terms of, or constitute a default by any Seller or Acquired Company under any indenture, mortgage, loan agreement, lease or other agreement or instrument to which any Seller or any Acquired Company is a party or by which it or any of its assets is bound, or (z) to our knowledge, result in the creation or imposition of any Encumbrance upon the Acquired Shares or the Acquired Interests or the assets of any Acquired Company or the Properties, except to the extent such conflict, violation, breach or creation would not have a Material Adverse Effect. **Allow Buyer's lenders to rely on opinion. Exhibit 7.9 1. Three Rivers Marine and Rail Terminals, L.P. ("Three Rivers") shall ------------ have the right to purchase from Commercial, for internal consumption or resale of up to 3,000 tons per month (or such greater amount as the parties may agree) crushed stone products (1B, 2B, 1A, 3's, 4's, 2A, 2RC Pocono and 3's Pocono and 4's Pocono) for a price of $[4.00] per ton [IS THIS THE CURRENT PRICE?] for the first year after closing, increased by 3% in each year thereafter and actual costs of hauling services for a period of four (4) years from the Closing Date. The hauling charge contemplates delivery to the site of Three Rivers at Gibsonton, Rostraver Township, Pennsylvania. The sales conducted by Three Rivers, if any, shall not be construed to be in violation of any covenant not to compete made in connection with the transaction contemplated by the Purchase Agreement. 2. Three Rivers shall have the right to purchase from Commercial, for internal consumption, asphalt products from any of the existing asphalt plants (Adamsburg, Springfield Pike or Dunningsville), at a price that shall not exceed the actual cost of the asphalt products (actual costs to include overhead) and the actual costs of hauling services. The actual costs of asphalt products shall be as set forth on the cost records of Commercial and the costs of hauling services shall be the actual costs incurred by Commercial for hauling services. Three Rivers shall attempt to order such asphalt products in non-peak time periods. Commercial shall make reasonable efforts to accommodate Three Rivers preferred delivery schedule. The right shall continue for a period of four (4) years from the Closing Date. 3. Commercial shall continue to provide accounting, bookkeeping, payroll and administrative services to Three Rivers in continuation of the services presently provided and for the charges that are presently in effect; that is, a charge of 2% of gross revenue up to a maximum charge of $[3,000.00] a month [IS THIS THE CURRENT ARRANGEMENT?]. This obligation shall continue for a period of two (2) years following the Closing Date. 4. Three Rivers shall provide CATS with the first call to provide trucking services for the business of Three Rivers. The rates for such services shall be the standard rates charged by CATS to its prime customers and the obligation to make first call shall continue so long as CATS provides adequate and complete service to Three Rivers. If service is not acceptable, Three Rivers will provide written notice thereof to a designated executive in Connellsville with a copy to the CEO of USS Holdings, Inc. If the problem is not promptly remedied or if three such notices are delivered in any period of three consecutive months, Three Rivers reserves the right to purchase and operate its own trucks and trailers. The term of the Agreement shall be four (4) years from the date of closing. CATS shall consent to Three Rivers providing hauling services to Commercial under the Agreement contemplated herein on terms substantially similar to those of independent truckers for Commercial in the year before the date of closing (e.g., Mikel, Rathway Trucking, Arsenberger Trucking). 5. In the event that Three Rivers exercises its right to purchase its own trucks and trailers pursuant to Paragraph 4, Commercial shall use, on a first call basis on each working day as its business requires, tri-axle dump trucks and trailers supplied by Three Rivers or supplied on behalf of Three Rivers. The dispatchers of trucks for Commercial shall exhaust up to twenty (20) tri-axle dump trucks or trailers that may be available from Three Rivers before securing the services of other truckers. However, Commercial shall not be required to use Three Rivers' trucks and trailers in January and February of each year. Three Rivers shall not be obligated to supply tri-axle dump trucks or trailers if those tri-axle dump trucks or trailers are otherwise obligated for the business of Three Rivers and shall promptly notify Commercial if any trucks are not available to be scheduled for use on any given day. The price to be paid for the services shall be the price charged for similar services by CATS. This Agreement shall be in force and effect for a period of four (4) years from the date of closing. 6. Commercial and Three Rivers shall agree to the designation of the Gibsonton facility of Three Rivers, located at Gibsonton, Rostraver Township, Pennsylvania, as the exclusive transloading facility for imported aggregates (aggregates that are not produced at the quarries of Commercial) that are transported by barge or rail for unloading and all other products for use at the facilities of Commercial transported by barge or rail and Three Rivers shall agree to provide the services necessary therefor. In the event that Commercial produces products for shipment by barge, it shall ship such products exclusively from the Gibsonton Facility of Three Rivers. The prices to be charged to Commercial by Three Rivers shall be the lowest regularly established charges for the applicable function as determined from time to time by Three Rivers. This exclusive transloading facility designation shall be in effect for a period of five (5) years from the date of closing. 7. The waiver with respect to any covenant not to compete shall be effective regardless of whether same is referenced in the covenant not to compete and the provisions of this Agreement shall prevail in the event of a conflict with any covenant not to compete executed in connection with the transaction contemplated by the Purchase Agreement. 8. The owners of Three Rivers shall give Commercial a right of first refusal should they elect to sell Three Rivers or if Three Rivers decides to sell its terminal property. The right of first refusal shall apply to the whole business or a part thereof, whichever is being sold by Three Rivers. The right of first refusal shall not apply to transfers by the existing owners to members of their immediate families or to corporations or other entities controlled by the existing owners or members of their immediate families or to trusts. This agreement shall be in force and effect for a period of four (4) years from the date of closing. 9. If Three Rivers expands its terminal or acquires one or more additional terminals, the parties will negotiate in good faith to adjust the foregoing provisions appropriately. 2 Exhibit 7.10 1. With respect to the slag produced as a result of the molybdenum recovery process conducted by Gibsonton Industries, L.P. ("Gibsonton") at the --------- Langeloth facility under existing contract with Langeloth, Commercial shall have exclusive rights to market slag and to purchase the slag for its internal use or resale. Commercial shall have no rights with respect to molybdenum recoverable from the slag. Commercial shall pay the price provided in the prevailing agreement with Gibsonton. Gibsonton shall have the right to sell the slag not marketed by Commercial, it being understood that the owner requires the depletion of the slag piles at the Langeloth site and that those sales shall not be construed to be in violation of any covenant not to compete made in connection with the transaction contemplated by the Purchase Agreement. For those sales conducted by Commercial, the sales shall take into account and shall incorporate the limitations of use for those products and shall inform any of its customers by appropriate notice of those limitations. The rights shall continue for a period equal to the shorter of four (4) years from the Closing Date or the termination of Gibsonton's rights with Langeloth. 2. The waiver with respect to any covenant not to compete shall be effective regardless of whether same is referenced in the covenant not to compete and the provisions of this Agreement shall prevail in the event of a conflict with any covenant not to compete executed in connection with the transaction contemplated by the Purchase Agreement. Exhibit 8.3 Form of Opinion of Buyer's Counsel 1. Buyer is a corporation validly existing and in good standing under the laws of the State of Delaware. 2. The Buyer has full corporate power and authority to execute and deliver the Purchase Agreement and to consummate the Contemplated Transactions. The Purchase Agreement constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms [INSERT BANKRUPTCY EXCEPTION]. 3. The execution, delivery and performance of the Purchase Agreement by Buyer and the consummation of the Contemplated Transactions (i) have been authorized by all necessary corporate action on the part of Buyer and (ii) will not (w) conflict with the terms, conditions or provisions of the Organizational Documents of Buyer, (x) violate any provision of law or, to our knowledge, any Order to which Buyer is subject, (y) to our knowledge, result in a breach or violation of any of the terms of, or constitute a default by Buyer under, any material indenture, mortgage, loan agreement, lease or other agreement or instrument to which Buyer is a party or by which it is bound. Exhibit 7.13 BARGAIN AND SALE DEED Exhibit 10.1(e) FORM OF EXTENSION ESCROW AGREEMENT This ESCROW AGREEMENT (this "Agreement"), dated as of this _____ day of --------- _____________, 1999 is made and entered into by and among MELLON BANK, N.A. (the "Escrow Agent"), U.S. SILICA COMPANY, a Delaware corporation ("Buyer"), and ------------ ----- JOSEPH H. SHEARER and R. SCOTT SHEARER (collectively, the "Shareholders"), and ------------ CATS, INC., a Pennsylvania corporation, the JHS FAMILY PARTNERSHIP, a Pennsylvania limited partnership, and the RSS FAMILY PARTNERSHIP, a Pennsylvania limited partnership (collectively, the "Partnership Sellers") and THE DELL H. ------------------- SHEARER GRANDCHILDREN'S TRUST, a Pennsylvania trust (the "Trust Seller"; the ------------ Shareholders, the Partnership Sellers and the Trust Sellers being hereinafter collectively referred to as the "Sellers" and each, individually, as a "Seller") ------- ------ pursuant to the terms of that certain Purchase Agreement dated as of _____________, 1999 (the "Purchase Agreement") by and among the Buyer and the ------------------ Sellers. In consideration of the mutual premises, obligations and agreements contained herein, the parties, intending to be legally bound, do hereby agree as follows: 1. The Escrow Agent acknowledges receipt of the sum of Seven Million Dollars ($7,000,000.00) deposited by the Buyer (together with any interest earned thereon and any interest earned on any reinvested funds, the "Extension --------- Escrow Amount") and hereby accepts its appointment and agrees to act as Escrow - ------------- Agent and to hold the Extension Escrow Amount and to disburse the Extension Escrow Amount under the terms and conditions of this Agreement. The Escrow Agent undertakes to perform only such duties as are expressly set forth herein. 2. (a) If, on or prior to the Release Date (as hereinafter defined), the Escrow Agent shall not have received a Seller Demand (as hereinafter defined), the Escrow Agent shall disburse to the Buyer the Extension Escrow Amount five business days following the Release Date. For purposes of this Agreement, the term "Release Date" shall ------------ mean the earlier of the date of the closing under the Purchase Agreement (of which the Escrow Agent shall be notified in writing by the Buyer and the Seller Agent as provided below), or [____________, 1999] [THREE DAYS AFTER THE LAST DAY OF THE EXTENSION] (the "Extension Date"). The Buyer and the Seller Agent agree, -------------- no later than the day immediately following the date of the closing under the Purchase Agreement, to notify the Escrow Agent in writing of such closing date. (b) If, after the Extension Date, the Seller Agent shall file with the Escrow Agent a written and dated demand (the "Seller Demand") for the payment to ------------- the Seller Agent of all or a portion of the Extension Escrow Amount stating (i) that the Sellers are entitled to all or a portion of such Extension Escrow Amount pursuant to Article X of the Purchase Agreement and (ii) that the Seller Agent has contemporaneously delivered a copy of the Seller Demand to the Buyer, the Escrow Agent shall disburse to the Seller Agent the requested funds from the Extension Escrow Amount on the tenth (10th) business day following the date of the Seller Demand unless the Buyer delivers an objection in writing (the "Buyer ----- Objection") to the Escrow Agent (with a copy to the Seller Agent) prior to the - --------- close of business on the tenth (10th) business day following the date of the Seller Demand to the effect that the Seller Agent is not so entitled, in which case no disbursement shall be made by the Escrow Agent from the Extension Escrow Amount pursuant to the Seller Demand except in accordance with the terms and conditions hereof. The Escrow Agent agrees to provide the Buyer with a copy of any Seller Demand and to provide the Seller Agent with a copy of any Buyer Objection, in each case within two business days after receipt by the Escrow Agent thereof. 2 (c) At any time after the date hereof, the Escrow Agent may be advised in writing by the Buyer and the Seller Agent to pay all or a portion of the Extension Escrow Amount pursuant to a joint written instruction (the "Joint ----- Instruction"), in which case the Escrow Agent shall pay the Extension Escrow - ----------- Amount, or portion thereof, in accordance with the terms and in the manner set forth in such Joint Instruction. (d) If the Buyer and the Seller Agent are unable to resolve any disagreement with respect to their rights to the payment of all or a portion of the Extension Escrow Amount pursuant to this Section 2 within twenty (20) business days after the date of a Buyer Objection, the dispute shall be settled as provided in Section 4 hereof. (e) The Escrow Agent shall hold the Extension Escrow Amount until it is required to disburse it pursuant to this Section 2 or as provided in Section 3(c) or 4 hereof. Upon delivery of the entire Extension Escrow Amount by the Escrow Agent pursuant to this Section 2 or as provided in Section 3(c) or 4 hereof, this Escrow Agreement shall terminate. The date upon which such termination occurs shall be the "Termination Date." ---------------- (f) The Seller Agent and the Buyer each agree that they will give to each other the copies of any Seller Demand or Buyer Objection, as the case may be, concurrently with the delivery thereof to the Escrow Agent. (g) If any of the Extension Escrow Amount is withheld pursuant to the terms of paragraph (b) of this Section 2, the parties agree to provide the Escrow Agent with a Joint Instruction upon the resolution of any claim which caused the withholding of funds and upon receipt of such Joint Instruction, the Escrow Agent shall release such funds in accordance with such Joint Instruction. 3 3. (a) Pending disbursement of funds held by it hereunder, the Escrow Agent shall keep the Extension Escrow Amount invested in FDIC insured certificates of deposit, obligations of the United States federal government (or any agency thereof) or money market accounts of the Escrow Agent at market rates, maturing in each case in ninety (90) days or less (each a "Permitted --------- Investment"). The Buyer shall direct the Escrow Agent as to which Permitted - ---------- Investment(s) the Escrowed Amount shall be invested. (b) Any interest earned on the originally deposited Extension Escrow Amount, as well as any interest earned on any reinvested funds, shall be held by the Escrow Agent as, and shall be deemed to be, part of the Extension Escrow Amount and shall be disbursed pursuant to the terms of Sections 2, 3(c) and 4 hereof. (c) Except as provided below in this subparagraph (c), the [Buyer] shall be responsible for any federal, state or local taxes and any other assessments which may be imposed and payable with respect to the earnings on the Extension Escrow Amount (collectively, "Taxes"). To cover the payment by [Buyer] ----- of such Taxes, the Escrow Agent shall, not later than 30 days after the end of each calendar year during the term of this Agreement, if applicable, disburse to the [Buyer] an amount of cash equal to (i) the earnings on the Extension Escrow Amount for such calendar year multiplied by (ii) 45%. With respect to any earnings on the Extension Escrow Amount as to which Taxes have not yet been paid as of the Termination Date, such earnings shall be treated as taxable income to the party or parties to whom such amounts are distributed and such party or parties shall be solely responsible for any Taxes which may be imposed on such amounts. The Escrow Agent shall deliver to the Buyer and each of the Sellers such forms as may be required by law reporting such earnings as income of the Buyer or the Sellers, as the case may be. 4 4. (a) Any controversy or claim arising out of or relating to this Agreement or the rights of the Buyer or the Sellers to the payment of all or a portion of the Extension Escrow Amount shall be settled in accordance with Section 12.4 of the Purchase Agreement. The Escrow Agent shall not be a party to any such proceedings. (b) Any portion of the Extension Escrow Amount being held pending resolution of controversies or claims may also be disbursed in accordance with the terms of a Joint Instruction. 5. (a) This Agreement expressly sets forth all the duties of the Escrow Agent with respect to any and all matters pertinent hereto. No implied duties or obligations shall be read into this Agreement against the Escrow Agent. The Escrow Agent shall not be bound by the provisions of any agreement among the other parties hereto except this Agreement. (b) The Escrow Agent shall not be liable, except for its own gross negligence or willful misconduct. The Sellers and the Buyer, jointly and severally, shall indemnify and hold harmless the Escrow Agent (and any successor Escrow Agent) from and against any and all losses, liabilities, claims, actions, damages and expenses, including reasonable attorneys' fees and disbursements, actually and reasonably incurred without gross negligence or bad faith on the part of the Escrow Agent, arising out of and in connection with this Agreement. Without limiting the foregoing, the Escrow Agent shall in no event be liable in connection with its investment or reinvestment of any cash held by it hereunder in good faith, in accordance with the terms hereof, including, without limitation, any liability for any delays (not resulting from its own gross negligence or willful misconduct) in the investment or reinvestment of the Extension Escrow Amount, or any loss of interest incident to any such delays. 5 (c) The Escrow Agent shall be entitled to rely in good faith upon any order, judgment, certification, demand, notice, instrument, arbitration award or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of the service thereof. The Escrow Agent may act in reliance upon any instrument or signature believed by it in good faith to be genuine and may assume that any person purporting to give notice or receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so. (d) The Escrow Agent may act pursuant to the advice of counsel with respect to any matter relating to this Agreement and shall not be liable for any action taken or omitted in good faith in accordance with such advice. (e) The Escrow Agent does not have any interest in the Extension Escrow Amount but is serving as escrow holder only and having only possession thereof. Any payments of income from the Extension Escrow Amount shall be subject to applicable withholding regulations then in force with respect to United States taxes. The Sellers and the Buyer will provide the Escrow Agent with appropriate W-9 forms for tax identification number certification. This paragraph and paragraph (b) of this Section 5 shall survive notwithstanding termination of this Agreement or the resignation of the Escrow Agent. (f) The Escrow Agent shall not be called upon to advise any party as to the wisdom in taking or refraining from taking any action with respect to any amounts deposited hereunder. (g) The Escrow Agent (and any successor Escrow Agent) may at any time resign as such by delivering the Extension Escrow Amount to any successor Escrow Agent jointly 6 designated by the Seller Agent and the Buyer in writing, or to any court of competent jurisdiction, whereupon the Escrow Agent shall be discharged of and from any and all further obligations arising in connection with this Agreement. The resignation of the Escrow Agent will take effect on the earlier of (i) the appointment of a successor (including by a court of competent jurisdiction) or (ii) the day which is thirty (30) days after the date of delivery of its written notice of resignation to the other parties hereto. If at that time the Escrow Agent has not received a designation of a successor Escrow Agent, the Escrow Agent's sole responsibility after that time shall be to safekeep the Extension Escrow Amount until receipt of a designation of successor Escrow Agent pursuant to a Joint Instruction or a final order of a court of competent jurisdiction. (h) The Escrow Agent shall have no responsibility for the contents of any writing of any third party contemplated herein as a means to resolve disputes and may rely in good faith without any liability upon the contents thereof. (i) In the event of any disagreement between the Sellers and the Buyer resulting in adverse claims or demands being made in connection with the Extension Escrow Amount, or in the event that the Escrow Agent in good faith is in doubt as to what action it should take hereunder, the Escrow Agent shall be entitled to retain the Extension Escrow Amount until the Escrow Agent shall have received (i) a Joint Instruction directing delivery of the Extension Escrow Amount; or (ii) a final non-appealable order of a court of competent jurisdiction directing the delivery of the Extension Escrow Amount. (j) [Escrow Agent to be paid from interest earned in account.] 6. Each Seller hereby appoints [NAME] as the Seller Agent, and [NAME] hereby accepts such appointment, to act as such Seller's exclusive agent and attorney-in-fact to act on its behalf in connection with, and to facilitate the consummation of, the transactions contemplated by this Agreement. The Seller Agent shall take, and each Seller agrees that the Seller Agent is irrevocably authorized and empowered in the name and on behalf of each Seller to take, any and all actions which the Seller Agent deems necessary or appropriate under this Agreement to be taken for and on behalf of each Seller, as fully as if such party was acting on his own behalf, which shall include, without limitation, the power and authority to (i) accept notices hereunder on behalf of the Sellers, to issue or determine not to issue, as the case may be, Seller Demands, (ii) agree to such amendments or modifications to this Agreement as the Seller Agent, in his sole discretion, determines to be desirable, (iii) execute and deliver such waivers and consents in connection with this Agreement as the Seller Agent, in his sole discretion, may deem necessary or desirable, (iii) collect and receive all moneys and other proceeds and property payable to the Sellers pursuant to the terms of this Agreement; (iv) enforce and protect the rights and interests of the Sellers or to refrain from enforcing any right of the Seller, as the case may be, (v) settle or compromise any claims asserted under this Agreement; and (vi) file and prosecute appeals from any decision, judgment or award rendered in any such action, proceeding or investigation as the Seller Agent, in his sole discretion, may deem necessary or desirable. 7. Neither party may assign any of its rights or obligations under this Agreement without the prior written consent of the other parties, except as provided in Section 5 with respect to a resignation by the Escrow Agent and except that Buyer may assign its rights and obligations under this Agreement to one or more of its affiliates, for so long as such entity remains an affiliate thereof, and Buyer or such affiliate(s) may assign or grant a security interest in, all of its rights and/or obligations under this Agreement (i) for collateral security purposes, to the Buyer's lenders and/or investors as security for Buyer's or any such affiliate's obligations to such lenders or investors (and such lenders or investors may exercise remedies with respect to 8 such assignment or security interest), and (ii) to a purchaser in connection with a sale of the Acquired Companies (as defined in the Purchase Agreement) or a sale of a substantial component of the Acquired Companies. Notwithstanding the assignment of rights and obligations under this Agreement pursuant to the provisions stated hereinabove, it is understood and agreed that the assignor shall remain responsible for its obligations under this Agreement and, in the case of a partial assignment, shall be the only party entitled to enforce the rights and remedies which would otherwise be available to an assignee of the Agreement. No such assignment shall in any way limit or restrict the assignor's rights and remedies. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and permitted assigns. This Agreement will be governed by the laws of the Commonwealth of Pennsylvania without regard to conflicts of laws principles. 8. This Agreement may not be modified except by a written agreement executed by the party to be charged with the modification. 9. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by -------- registered or certified mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service 9 (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): To the Escrow Agent: [To be provided] To the Sellers or the Seller Agent: [To be provided] With a copy to: Reed Smith Shaw & McClay LLP 435 Sixth Avenue Pittsburgh, PA 15219 Attention: David L. DeNinno Telecopier No.: 412-288-3063 To the Buyer: U.S. Silica Company P.O. Box 187 Berkeley Springs VN 25411 Attention: President Telecopier No.: 304-258-3500 With a copy to: D. George Harris & Associates, Inc. 399 Park Avenue, Thirty-second Floor New York, New York 10022 Attention: Donald G. Kilpatrick Telecopier No.: 212-207-6470 With a copy to: Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, New York 10004-1490 Attention: Kenneth E. Adelsberg Telecopier No.: 212-858-1500 10 10. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 11. The term "business day" as used in this Agreement shall mean any day ------------ other than a Saturday, Sunday, or public holiday under the laws of the Commonwealth of Pennsylvania. 12. THE BUYER, THE SELLERS AND THE ESCROW AGENT SPECIFICALLY WAIVE THE RIGHT TO TRIAL BY JURY IN RESOLVING ANY CLAIM OR COUNTERCLAIM RELATED TO THIS AGREEMENT. The Buyer and the Sellers agree that any legal action or proceeding brought against the Escrow Agent, or to which the Escrow Agent is joined, relating to this Agreement or the Escrow Agent's performance hereunder, shall be brought exclusively in any state or federal court sitting in Pennsylvania, and the Buyer and the Sellers each waive, to the fullest extent permitted by law, (a) any objection that any of them may respectively, now or hereafter, have to the laying of the venue of any such action or proceeding brought in any such court, and (b) any claim that any such action or proceeding brought in any such court has been brought in an inconvenient forum. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. [THE ESCROW AGENT] By: _______________________________ Name: Title: U.S. SILICA COMPANY By: _______________________________ Name: Title: 11 Sellers: SHAREHOLDERS: _______________________________________ Joseph H. Shearer _______________________________________ R. Scott Shearer COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, L.P. By: CATS, Inc., General Partner: By: __________________________________ Title: By: JHS Family Partnership By: __________________________________ General Partner By: RSS Family Partnership By: __________________________________ General Partner By: The Dell H. Shearer Granchildren's Trust By: __________________________________ Co-Trustee By: __________________________________ Co-Trustee SELLER AGENT: ____________ [NAME] 12 EX-2.1.1 3 AMENDMENT NO. 1 TO PURCHASE AGREEMENT EXHIBIT 2.1.1 AMENDMENT NO. 1 TO PURCHASE AGREEMENT THIS AMENDMENT NO. 1 TO THE PURCHASE AGREEMENT is made as of this 1st day of October, 1999, among U.S. Silica Company, a Delaware Corporation; Joseph H. Shearer; R. Scott Shearer; CATS, Inc., a Pennsylvania corporation; the JHS Family Partnership, a Pennsylvania limited partnership; the RSS Family Partnership, a Pennsylvania limited partnership; and the Dell H. Shearer Grandchildren's Trust, a Pennsylvania Trust. WHEREAS, the parties previously entered into a Purchase Agreement dated as of August 26, 1999 ("Purchase Agreement") and now desire to amend the Purchase Agreement in certain respects as set forth herein; NOW THEREFORE, in consideration of this premise and intending to be legally bound hereby, the parties hereto agree as follows: 1. The term "Sellers" shall be deleted and replaced with the term "Shareholders" in Section 2.5(b) of the Purchase Agreement. 2. The following two new paragraphs shall be added to Section 2.5(b) of the Purchase Agreement: Buyer agrees that if and when Commercial or Buyer receives all or any portion of the S Corp Tax Deposit, Buyer shall or shall cause Commercial to pay to the Shareholders the full amount so received within three business days after receipt thereof. If (i) Commercial or Buyer receives notification that the IRS has offset the full amount of the S Corp Tax Deposit, or (ii) the amount so received by Commercial or the Buyer and paid to the Shareholders is not equal to the full amount of the S Corp Tax Deposit, because such full amount has been offset by the IRS, and, in either case, such offset is in respect of Tax Liabilities of Commercial or the Buyer related to any period beginning on or after the Closing Date (a "Buyer Caused Offset"), then the Buyer shall also pay to the Shareholders the amount of such Buyer Caused Offset. If, however, any such offset is in respect of Tax liabilities of Commercial or the Shareholders related to any period occurring prior to the Closing Date, then the Buyer shall only be responsible for paying to the Shareholders such amount that has been actually received by Commercial or Buyer (plus the amount of any Buyer Caused Offset, if any). Upon payment by the Buyer or Commercial to the Shareholders of the amounts required by this Section 2.5(b), the Buyer and the Shareholders shall (i) execute and deliver to Lion Abstract Limited Partnership a joint written instruction stating that the Escrow Agreement for the S Corp Tax Deposit is terminated, effective immediately and (ii) execute and deliver a joint written instruction to Banque Nationale De Paris, New York Branch instructing Banque Nationale De Paris, New York Branch to immediately cancel the letter of credit for the S Corp Tax Deposit, provided the letter of credit in respect of the S Corp Tax Deposit has not terminated in accordance with its terms. 3. The parties agree that the information and documents referenced in clauses (a) and (b) of the first sentence of Section 12.5 of the Purchase Agreement shall include, without limitation, all that necessary or desirable in determining the boundaries of the Property. 4. The Sellers agree that $4,000,000 of the Aggregate Purchase Price owed to Joseph H. Shearer as a Seller of the Acquired Shares and $4,000,000 of the Aggregate Purchase Price owed to R. Scott Shearer a Seller of the Acquired Shares shall be used to fund the Closing Escrow Amount. 5. This Amendment may be executed in one or more counterparts, all of which together shall be deemed to be one and the same instrument binding upon the parties hereto. 6. This Amendment shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Pennsylvania. 7. This Amendment shall be binding upon the parties hereto and their respective heirs, personal representatives, successors and assigns. 8. Except as specifically amended by this Amendment, the Purchase Agreement and the provisions thereof shall continue in full force and effect without modification. 9. Capitalized terms not defined herein shall have the meaning assigned to them in the Purchase Agreement. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. Buyer: US SILICA COMPANY Sellers: By: /s/ SHAREHOLDERS: ------------------ /s/ Joseph H. Shearer --------------------------- Joseph H. Shearer /s/ R. Scott Shearer --------------------------- R. Scott Shearer 2 COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, L.P. By: CATS, Inc., General Partner By: /s/ --------------------------------- Title: Pres. ------------------------------ By: JHS Family Partnership By: /s/ --------------------------------- General Partner By: RSS Family Partnership By: /s/ --------------------------------- General Partner By: The Dell H. Shearer Grandchildren's Trust By: /s/ --------------------------------- Co-Trustee By: /s/ --------------------------------- Co-Trustee 3 EX-3.1 4 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION -of- USS INTERMEDIATE HOLDCO, INC. _______________________________ Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware _______________________________ USS Intermediate Holdco, Inc., hereinafter called the "Corporation", a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that: FIRST: The Corporation's original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on January 9, 1996. SECOND: This Amended and Restated Certificate of Incorporation restates, integrates and amends the Certificate of Incorporation and has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware. THIRD: The text of the Certificate of Incorporation of the Corporation is hereby amended and restated to read in its entirety as follows: ARTICLE FIRST ------------- The name of the Corporation is USS INTERMEDIATE HOLDCO, INC. (hereinafter sometimes called the "Corporation"). ARTICLE SECOND -------------- The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE THIRD ------------- The nature of the business or purposes to be conducted or promoted are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE FOURTH -------------- The total number of shares of stock which the Corporation shall have authority to issue is 25,000 shares, consisting of (i) 20,000 shares of preferred stock, par value $.01 per share ("Preferred Stock") and (ii) 5,000 shares of common stock, par value $.01 per share ("Common Stock"). A. PREFERRED STOCK Part 1. Ranking. The Preferred Stock shall, with respect to amounts ------- payable on redemption and distributions upon the liquidation, winding-up and dissolution of the Corporation, rank senior to all classes of common stock of the Corporation and to each other class of capital stock or series of preferred stock of the Corporation (the "Junior Securities"). The Corporation may not issue any new class or series of preferred securities or other capital stock ranking senior to or on a parity with the Preferred Stock as to dividends, distributions, 2 amounts payable on redemption and distributions upon the liquidation, winding-up and dissolution of the Corporation without the approval of the holders of at least 66% of the shares of the Preferred Stock then outstanding, voting or consenting, as the case may be, separately as one class, except that without the approval of the holders of the Preferred Stock, the Corporation may issue shares of preferred securities or other capital stock the proceeds of which are used to redeem or repurchase all shares of the Preferred Stock then outstanding. Part 2. Dividends. The Preferred Stock shall not accrue dividends --------- prior to the Mandatory Redemption Date, following which they shall accrue dividends at the rate of nine percent (9%) of their liquidation preference per annum, from the Mandatory Redemption Date until the date sufficient funds are made available for their redemption. Such dividends, if any, shall be payable in cash on redemption. Part 3. Mandatory Redemption. The Preferred Stock shall be subject --------------------- to mandatory redemption (subject to the legal availability of funds therefor) in whole or in part at such time as USS Holdings, Inc. ("Holdings") redeems any or all of the outstanding shares of the Series C Preferred Stock, par value $.01 per share, of Holdings ("Holdings Preferred Stock"). Upon any such redemption of shares of Holdings Preferred Stock, the Corporation shall be required to redeem the number of shares of Preferred Stock equal to the number of shares of Holdings Preferred Stock so redeemed at a redemption price equal to the redemption price paid by Holdings with respect to such redemption of Holdings Preferred Stock (after giving effect to all applicable provisions of the Stock Purchase Agreement). The Corporation shall be obligated to redeem Preferred Stock only to the extent permitted under the General Corporation Law of the State of Delaware. 3 Part 4. Liquidation. Upon any voluntary or involuntary liquidation, ----------- dissolution or winding-up of the Corporation, the holders of the Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution, $1,000.00 plus all accumulated and unpaid dividends from the Mandatory Redemption Date to the dates sufficient funds are made available for redemption (or if such event occurs prior to the Mandatory Redemption Date, the Discounted Liquidation Preference) per share before any distribution is made on any Junior Securities, including, without limitation, common stock of the Corporation. After payment of the full amount of the liquidation preference to which they are entitled, the holders of the Preferred Stock will not be entitled to any further participation in any distribution of assets of the Corporation. However, neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more corporations shall be deemed to be a liquidation, dissolution or winding-up of the Corporation. B. COMMON STOCK Part 1. Voting Rights. ------------- 1A. Generally. Except as specifically required under the General --------- Corporation Law of the State of Delaware, the holders of Common Stock will be entitled to one vote per share and shall vote as one class on all matters to be voted on by the Corporation's stockholders. 1B. Election of Directors. The number of directors which shall --------------------- constitute the Board of Directors shall not be less than three nor more than nine which exact number shall be established in the By-laws of the Corporation and shall initially be three. 4 Part 2. Dividends. When and as dividends are declared thereon, the --------- holders of Common Stock then outstanding shall be entitled to share equally and ratably, on a share for share basis, in such dividends. Part 3. Liquidation. After any payments required to be made to the ----------- holders of the Preferred Stock then outstanding, the holders of Common Stock then outstanding shall be entitled to receive equally and ratably, on a share- for-share basis, all assets of the Corporation to be distributed upon any liquidation, dissolution or winding up of the Corporation. C. ISSUANCE OF STOCK Except as otherwise provided in this Certificate of Incorporation, the Board of Directors shall have authority to authorize the issuance, from time to time, without any vote or other action by the stockholders, of any or all shares of stock of the Corporation of any class or series at any time authorized, and any securities convertible into or exchangeable for any such shares, and any options, rights or warrants to purchase or acquire any such shares, in each case to such persons and on such terms (including as a dividend or distribution on or with respect to, or in connection with a split or combination of, the outstanding shares of stock of the same or any other class or series) as the Board of Directors from time to time in its discretion lawfully may determine. Shares so issued shall be fully paid stock, and the holders of such stock shall not be liable to any further call or assessment thereon. D. DEFINITIONS For purposes of this Amended and Restated Certificate of Incorporation: "Closing" has the meaning ascribed thereto in the Stock Purchase Agreement. 5 "Discounted Liquidation Preference" means the liquidation preference discounted from the Mandatory Redemption Date to the date of determination at the rate of 7.18% compounded annually. "Mandatory Redemption Date" means the tenth anniversary of the Closing. "Stock Purchase Agreement" means the Stock Purchase Agreement dated as of October 23, 1995 and amended as of January 29, 1996 between U.S. Borax Inc. and USS Holdings, Inc., as the same may be amended from time to time. ARTICLE FIFTH ------------- The following additional provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for the creation, definition, limitation and regulation of the powers of the Corporation, the directors and the stockholders: 1. Election of directors need not be by written ballot. The Board of Directors shall have power to make, alter, amend and repeal the By-Laws of the Corporation and to fix the compensation of directors for services in any capacity. 2. Any corporate action, with respect to which the vote of the stockholders at a meeting thereof is required or permitted by any provision of the General Corporation Law of the State of Delaware or of the Certificate of Incorporation or the By-Laws of the Corporation, is authorized to be taken and may be taken without that vote and meeting, and that vote and meeting may be dispensed with, with the written consent of the holders of a majority (or, if with respect to a particular corporate action where the General Corporation Law of the State of Delaware or the Certificate of Incorporation or the By-Laws of the Corporation specifies a greater percentage, by the holders of that greater percentage) of the stock that would have been 6 entitled to vote upon that action if a meeting were held. Prompt notice shall be given to all stockholders of the taking of any corporate action pursuant to the provisions of this paragraph 2 unless that action has been consented to in writing by the holders of all of the stock that would have been entitled to vote upon that action if a meeting were held. 3. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or amendment of this Article, insofar as it would in any way enlarge the liability of any director of the Corporation, shall be ineffective with respect to any acts or omissions occurring prior to the date of such repeal or amendment. ARTICLE SIXTH ------------- The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, by reason of the fact that he, or the person whose legal representative he is, (1) is or was a stockholder, director, officer, employee or agent of the Corporation (including the incorporator thereof), or (2) is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (3) is or was a director, officer or employee of the 7 Corporation serving at the request of the Corporation as a fiduciary of an employee benefit plan or trust maintained for the benefit of employees of the Corporation or employees of any such other enterprise, partnership, joint venture, trust, or other enterprise, against judgments, fines, penalties, amounts paid in settlement, and expenses, including attorneys' fees, actually and reasonably incurred by him and the person whose legal representative he is, in connection with such action, suit or proceeding, or any appeal therein, to the fullest extent permitted by law. Expenses which may be indemnifiable under this Article SIXTH in defending an action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors upon agreement by or on behalf of the stockholder, director, officer, employee or agent, or his legal representative, to repay such amount if he is later found not entitled to be indemnified by the Corporation as authorized in this Article SIXTH. The Corporation shall not indemnify any stockholder, director, officer, employee or agent against judgments, fines, amounts paid in settlement and expenses, including attorneys' fees, to an extent greater than that authorized by this Article SIXTH, but the Corporation may procure insurance providing greater indemnification and may share the premium cost with any stockholder, director, officer, employee or agent on such basis as may be agreed upon. 8 IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by Anthony J. Petrocelli, its Vice Chairman, and attested by Donald G. Kilpatrick, its Secretary, as of the 9th day of February, 1996. USS INTERMEDIATE HOLDCO, INC. By: /s/ Richard J. Nick ------------------- Richard J. Nick Vice President ATTEST: By: /s/ Donald G. Kilpatrick ------------------------ Donald G. Kilpatrick Secretary 9 EX-3.1.1 5 CERTIFICATE OF AMENDMENT EXHIBIT 3.1.1 CERTIFICATE OF AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION OF USS INTERMEDIATE HOLDCO, INC. Pursuant to Section 242 of the General Corporation Law of the State of Delaware USS Intermediate Holdco, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify as follows: FIRST: The name of the Corporation is USS Intermediate Holdco, Inc. SECOND: The Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on January 9, 1996. THIRD: Resolutions setting forth a proposed amendment to the Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and directing that said amendment be considered by the stockholders of the Corporation entitled to vote thereon were duly adopted by the Board of Directors of the Corporation. FOURTH: Thereafter, said amendment was approved in accordance with Section 228 of the General Corporation Law of the State of Delaware by written consent of all the stockholders of the Corporation entitled to vote thereon. FIFTH: The Certificate of Incorporation is hereby amended to change the name of the Corporation. Article "FIRST" of the Certificate of Incorporation shall be deleted, and substituting in lieu thereof the following new Article "FIRST": "FIRST: The name of the corporation is Better Minerals & Aggregates Company (hereinafter sometimes called the "Corporation")." SIXTH: Said amendment was duly adopted in accordance with the provisions of Section 242 and of Section 245 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, this certificate has been subscribed by the undersigned who affirms that the statements made herein are true under the penalties of perjury. Dated: _________ ___, 1999 ________________________ Name: Title: 2 EX-3.2 6 BY-LAWS OF BETTER MINERALS & AGGREGATES COMPANY EXHIBIT 3.2 BY-LAWS of USS INTERMEDIATE HOLDCO, INC. (herein called the "Corporation") ________________________ ARTICLE I STOCKHOLDERS ------------ Section 1.01 Annual Meeting. The Board of Directors by resolution shall -------------- designate the time, place and date (which shall be, in the case of the first annual meeting, not more than 13 months after the organization of the Corporation and, in the case of all other annual meetings, not more than 13 months after the date of the last annual meeting) of the annual meeting of the stockholders for the election of directors and the transaction of such other business as may come before it. Section 1.02 Special Meeting. Special meetings of the stockholders, for --------------- any purpose or purposes, may be called at any time by the Chairman, the Vice- Chairman, the President, any Vice-President, the Treasurer, the Secretary or the Assistant Secretary by resolution of the Board of Directors. Special meetings of stockholders shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Section 1.03 Notice of Meetings of Stockholders. Whenever stockholders are ---------------------------------- required or permitted to take any action at a meeting, written notice of the meeting shall be given (unless that notice shall be waived or unless the meeting is to be dispensed with in accordance with the provisions of the General Corporation Law of the State of Delaware and Article FIFTH of the Certificate of Incorporation of the Corporation) which shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given, personally or by mail, not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.04 Quorum. At all meetings of the stockholders, the holders of ------ one-third of the stock issued and outstanding and entitled to vote thereat, present in person or by proxy, shall constitute a quorum for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders. The stockholders present may adjourn the meeting despite the absence of a quorum and at any such adjourned meeting at which the requisite amount of voting stock shall be represented, 2 the Corporation may transact any business which might have been transacted at the original meeting had a quorum been there present. Section 1.05 Method of Voting. The vote upon any question before the ---------------- meeting need not be by ballot. All elections and all other questions shall be decided by a plurality of the votes cast, at a meeting at which a quorum is present, except as expressly provided otherwise by the General Corporation Law of the State of Delaware or the Certificate of Incorporation. Section 1.06 Voting Rights of Stockholders and Proxies. Each stockholder ----------------------------------------- of record entitled to vote in accordance with the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of stock entitled to vote standing in his name on the books of the Corporation, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 1.07 Ownership of Its Own Stock. Shares of its own capital stock -------------------------- belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Nothing in this section shall be construed as limiting the right of any corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.08 Voting by Fiduciaries and Pledgors. Persons holding stock in ---------------------------------- a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. 3 If shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation is given written notice to the contrary and is furnished with a copy of the instrument or other appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (1) If only one votes, his act binds all; (2) If more than one vote, the act of the majority so voting binds all; (3) If more than one vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to the Court of Chancery or such other court as may have jurisdiction to appoint an additional person to act with the persons so voting the shares, which shall then be voted as determined by a majority of such persons and the person appointed by the Court. If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of this subsection shall be a majority or even-split in interest. Section 1.09 Fixing Date for Determination of Stockholders of Record. In ------------------------------------------------------- order to determine the stockholders (i) entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or (ii) entitled to express consent to corporate action in writing without a meeting, or (iii) entitled to receive payment of any dividend or other distribution or allotment of any rights, or (iv) entitled to exercise any rights in respect of any change, conversion or exchange of stock, or (v) for the purpose of any other lawful action, the Board of Directors may 4 fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed by the Board of Directors, the record date shall be determined in accordance with the provisions of the General Corporation Law of the State of Delaware. Section 1.10 List of Stockholders. The officer who has charge of the stock -------------------- ledger of the Corporation shall prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held (which place shall be specified in the notice of the meeting or, if not so specified, at the place where said meeting is to be held), and the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who may be present. Upon the willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. Section 1.11 Stockholder's Right of Inspection. Stockholders of record, in --------------------------------- person or by attorney or other agent, shall have the right, upon written demand under oath stating the purpose thereof, during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall 5 be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in this State or at its principal place of business. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 1.10 or the books of the Corporation, or to vote in person or by proxy at any meeting of the stockholders. Section 1.12 Consent in Lieu of Meeting. Any corporate action, with -------------------------- respect to which the vote of the stockholders at a meeting thereof is required or permitted by any provision of the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company, or these By-Laws, may be taken without that vote and meeting, and that vote and meeting may be dispensed with, if that corporate action has been consented to in writing by the holders of a majority (or, if with respect to a particular corporate action the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company or these By-Laws specifies a greater percentage, by the holders of that percentage) of the stock that would have been entitled to vote upon that action if a meeting were held. Prompt notice shall be given to all stockholders of the taking of any corporate action pursuant to the provisions of that paragraph unless that action has been consented to in writing by the holders of all of the stock that would have been entitled to vote upon that action if a meeting were held. 6 ARTICLE II DIRECTORS --------- Section 2.01 Management of Business. The business of the Corporation shall ---------------------- be managed by its Board of Directors. The Board of Directors, in addition to the powers and authority expressly conferred upon it herein, by statute, by the Certificate of Incorporation of the Corporation or otherwise, is hereby empowered to exercise all such powers as may be exercised by the Corporation, except as expressly provided otherwise by the statutes of the State of Delaware, by the Certificate of Incorporation of the Corporation or by these By-Laws. Without prejudice to the generality of the foregoing, the Board of Directors, by resolution or resolutions, may create and issue, whether or not in connection with the issue and sale of any shares of stock or other securities of the Corporation, rights or options entitling the holders thereof to purchase from the Corporation any shares of its capital stock of any class or classes or any other securities of the Corporation, such rights or options to be evidenced by or in such instrument or instruments as shall be approved by the Board of Directors. The terms upon which, including the time or times, which may be limited or unlimited in duration, at or within which, and the price or prices at which, any such rights or options may be issued and any such shares or other securities may be purchased from the Corporation upon the exercise of any such right or option shall be such as shall be fixed and stated in the resolution or resolutions adopted by the Board of Directors providing for the creation and issue of such rights or options, and, in every case, set forth or incorporated by reference in the instrument or instruments evidencing such rights or options. In the absence of actual fraud in the transaction, the judgment of the directors as to the consideration for the issuance of such rights or options and the sufficiency 7 thereof shall be conclusive. In case the shares of stock of the Corporation to be issued upon the exercise of such rights or options shall be shares having a par value, the price or prices so to be received therefor shall not be less than the par value thereof. In case the shares of stock so to be issued shall be shares of stock without par value, the consideration therefor shall be determined in the manner provided in Section 153 of the General Corporation Law of the State of Delaware. Section 2.02 Qualifications and Number of Directors. Directors need not be -------------------------------------- stockholders. The number of directors which shall constitute the whole Board shall be not less than three nor more than eleven. Section 2.03 Election and Term. The directors shall be elected at the ----------------- annual meeting of the stockholders, and each director shall be elected to hold office until his successor shall be elected and qualified, or until his earlier resignation or removal. Section 2.04 Resignations. Any director of the Corporation may resign at ------------ any time by giving written notice to the Corporation. Such resignation shall take effect at the time specified therein, if any, or if no time is specified therein, then upon receipt of such notice by the Corporation; and, unless otherwise provided therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.05 Vacancies and Newly Created Directorships. Vacancies and ----------------------------------------- newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until their successors shall be elected and qualified, or until their earlier resignation or removal. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the 8 vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as herein provided in the filling of other vacancies. Section 2.06 Quorum of Directors. At all meetings of the Board of ------------------- Directors, a majority of the entire Board shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as provided in Section 2.05 hereof. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting of the directors to another time and place. Notice of any adjournment need not be given if such time and place are announced at the meeting. Section 2.07 Annual Meeting. The newly elected Board of Directors shall -------------- meet immediately following the adjournment of the annual meeting of stockholders in each year at the same place, within or without the State of Delaware, and no notice of such meeting shall be necessary. Section 2.08 Regular Meetings. Regular meetings of the Board of Directors ---------------- may be held at such time and place, within or without the State of Delaware, as shall from time to time be fixed by the Board and no notice thereof shall be necessary. Section 2.09 Special Meetings. Special meetings may be called at any time ---------------- by the Chairman or by any two members of the Board of Directors. Special meetings shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Special meetings of the Board of Directors shall be held upon notice to the directors or waiver thereof. 9 Unless waived, notice of each special meeting of the directors, stating the time and place of the meeting, shall be given to each director by delivered letter, by telegram or by personal communication either over the telephone or otherwise, in each such case not later than the second day prior to the meeting, or by mailed letter deposited in the United States mail with postage thereon prepaid not later than the seventh day prior to the meeting. Notices of special meetings of the Board of Directors and waivers thereof need not state the purpose or purposes of the meeting. Section 2.10 Action Without a Meeting. 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 all members of the Board or committee, as the case may be, consent thereto in a writing or writings and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 2.11 Compensation. Directors shall receive such fixed sums and ------------ expenses of attendance for attendance at each meeting of the Board or of any committee and/or such salary as may be determined from time to time by the Board of Directors; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE III OFFICERS -------- Section 3.01 Number. The officers of the Corporation shall be chosen by ------ the Board of Directors. The officers shall be a Chairman, a Vice-Chairman, a President, a Secretary and a Treasurer, and such number of Vice-Presidents, Assistant Secretaries and Assistant Treasurers, 10 and such other officers, if any, as the Board may from time to time determine. The Board may choose such other agents as it shall deem necessary. Any number of offices may be held by the same person. Section 3.02 Terms of Office. Each officer shall hold his office until his --------------- successor is chosen and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Section 3.03 Removal. Any officer may be removed from office at any time ------- by the Board of Directors with or without cause. Section 3.04 Authority. The Secretary shall record all of the proceedings --------- of the meetings of the stockholders and directors in a book to be kept for that purpose, and shall have the authority, perform the duties and exercise the powers in the management of the Corporation usually incident to the office held by him, and/or such other authority, duties and powers as may be assigned to him from time to time by the Board of Directors, the Chairman, the Vice-Chairman or the President. The other officers, and agents, if any, shall have the authority, perform the duties and exercise the powers in the management of the Corporation usually incident to the offices held by them, respectively, and/or such other authority, duties and powers as may be assigned to them from time to time by the Board of Directors or (except in the case of the Chairman, the Vice-Chairman or the President, as appropriate) by the Chairman, the Vice-Chairman or the President. Section 3.05 Voting Securities Owned by the Corporation. Powers of ------------------------------------------ attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman, the Vice-Chairman, the President or any Vice-President and any such officer may, 11 in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. ARTICLE IV CAPITAL STOCK ------------- Section 4.01 Stock Certificates. Every holder of stock in the Corporation ------------------ shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman or Vice-Chairman of the Board of Directors, or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by him in the Corporation. Where such 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, the signatures of the officers of the Corporation may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of issue. Section 4.02 Transfers. Stock of the Corporation shall be transferable in --------- the manner prescribed by the laws of the State of Delaware. 12 Section 4.03 Registered Holders. Prior to due presentment for registration ------------------ of transfer of any security of the Corporation in registered form, the Corporation shall treat the registered owner as the person exclusively entitled to vote, to receive notifications and to otherwise exercise all the rights and powers of an owner, and shall not be bound to recognize any equitable or other claim to, or interest in, any security, whether or not the Corporation shall have notice thereof, except as otherwise provided by the laws of the State of Delaware. Section 4.04 New Certificates. The Corporation shall issue a new ---------------- certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, if the owner: (1) so requests before the Corporation has notice that the shares of stock represented by that certificate have been acquired by a bona fide purchaser; (2) files with the Corporation a bond sufficient (in the judgment of the directors) to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or theft of that certificate or the issuance of a new certificate; and (3) satisfies any other requirements imposed by the directors that are reasonable under the circumstances. A new certificate may be issued without requiring any bond when, in the judgment of the directors, it is proper so to do. ARTICLE V INDEMNIFICATION --------------- Section 5.01 The Corporation shall indemnify its officers, directors, employees and agents to the fullest extent permitted by the General Corporation Law of Delaware and Article SEVEN of the Certificate of Incorporation of the Corporation. 13 ARTICLE VI MISCELLANEOUS ------------- Section 6.01 Offices. The registered office of the Corporation in the ------- State of Delaware shall be at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The Corporation may also have offices at other places within and/or without the State of Delaware. Section 6.02 Seal. The corporate seal shall have inscribed thereon the ---- name of the Corporation, the year of its incorporation, and the words "Corporate Seal Delaware." Section 6.03 Checks. All checks or demands for money shall be signed by ------ such person or persons as the Board of Directors may from time to time determine. Section 6.04 Fiscal Year. The fiscal year shall begin on the first day of ----------- January in each year and shall end on the thirty-first day of December of each year. Section 6.05 Waivers of Notice; Dispensing with Notice. Whenever any ----------------------------------------- notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Corporation, or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of 14 objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Whenever any notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Corporation, or of these By-Laws, to any person with whom communication is made unlawful by any law of the United States of America, or by any rule, regulation, proclamation or executive order issued under any such law, then the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person; and any action or meeting which shall be taken or held without notice to any such person or without giving or without applying for a license or permit to give any such notice to any such person with whom communication is made unlawful as aforesaid, shall have the same force and effect as if such notice had been given as provided under the provisions of the General Corporation Law of the State of Delaware, or under the provisions of the Certificate of Incorporation of the Corporation or of these By-Laws. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any of the other sections of this title, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. Section 6.06 Loans to and Guarantees of Obligations of Employees and ------------------------------------------------------- Officers. The Corporation may lend money to or guaranty any obligation of, or - -------- otherwise assist any officer or other employee of the Corporation or of a subsidiary, including any officer or employee who is a director of the Corporation or a subsidiary, whenever, in the judgment of the Board of Directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or 15 secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this Section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any other statute. Section 6.07 Amendment of By-Laws. These By-Laws may be altered, amended -------------------- or repealed at any meeting of the Board of Directors. Section 6.08 Section Headings. The headings of the Articles and Sections ---------------- of these By-Laws, have been inserted for convenience of reference only and shall not be deemed to be a part of these By-Laws. 16 EX-3.3 7 CERTIFICATE OF INCORPORATION OF U.S. SILICA CO. EXHIBIT 3.3 CERTIFICATE OF INCORPORATION OF ITT - PGS, INC. I, the undersigned, in order to form a corporation for the purposes hereinafter stated, under and pursuant to the provisions of the General Corporation Law of the State of Delaware, being Title 8 Chapter 1 of the Delaware Code of 1953, and the Acts amendatory thereof and supplementary thereto, do hereby certify an follows: FIRST: The name or the corporation Is ITT - PGS, INC. (hereinafter called ----- the "Corporation"). SECOND: The location of the registered office or the Corporation in the ------ State of Delaware is 100 West Tenth Street, in the City or Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or ----- activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of stock which the Corporation shall ------ have authority to issue is one hundred shares or common stock of the par value or $100 per share. FIFTH: The name and address of the Incorporator is as follows: ----- Name Address ---- ------- Thomas Motley, Jr. 425 East 86th Street New York, New York 10028 SIXTH: The powers of the incorporator shall terminate upon the filing of ----- this Certificate of Incorporation. The names and addresses of the persons who are to serve as directors of the Corporation until the first annual meeting or stockholders or until their successors are elected and qualify are set forth below in accordance with Section 102(a)(6) of the General Corporation Law of Delaware: Name Address ---- ------- Thomas Motley, Jr. 425 East 86th Street New York, New York 10028 Edwin C. Cohen 132 State Street Brooklyn Heights, New York 11201 John I. Brokaw 150 East 61st Street New York, New York 10022 SEVENTH: In furtherance and not in limitation of the powers conferred by ------- law, the Board of Directors of the Corporation is expressly authorized: (a) To make, alter, amend or repeal the By-Laws of the Corporation. (b) To direct and determine the use and disposition of net profits or net assets in excess of capital; to set apart out of any of the funds or the Corporation available for dividends a reserve or reserves for any proper purpose; and to abolish any such reserve in the manner in which it was created. (c) To establish bonus, profit-sharing, stock option, retirement or other types of incentive or compensation plans for the employees (including officers and directors) of the Corporation and to fix the amount of the profits to be distributed or shared and to determine the persons to participate in any such plans and the amounts of their respective participations. (d) From time to time to determine whether and to what extent, and at what time find places and under what conditions and regulations, the accounts and books of the Corporation (other than the stock ledger), or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document or the Corporation, except as conferred by statute or authorized by the Board of Directors or by a resolution or the stockholders. (e) To authorize, and cause to be executed, mortgages and liens upon the real and personal property of the Corporation. EIGHTH: Whenever the vote of stockholders at a meeting thereof is required ------ or permitted to be taken for or in connection with any corporate action by any provision of the General Corporation Law of Delaware, the meeting and vote of stockholders may be dispensed 2 with if the holders of stock having not less than the minimum percentage of the vote required by statute for the proposed corporate action shall consent in writing to such corporate action being taken, provided that prompt notice must be given to all stockholders of the taking of such corporate action without a meeting and by less than unanimous written consent. NINTH: The Corporation reserves the right to amend, alter, change or ----- repeal any provision contained In this Certificate of Incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders and directors are subject to this reserved power. IN WITNESS WHEREOF, I have hereunto set my hand and seal, the 29th day of May, 1968. /s/ Thomas Motley Jr. (SEAL) ---------------------- 3 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this 29th day of May, 1968, there personally came before me Thomas Motley, Jr., the person who executed the foregoing certificate, known to me personally to be such, and he duly executed said certificate before me and acknowledged that it was his act and deed and that the facts stated therein are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. /s/ Herbert W. Brauer -------------------------------- (Notary Seal) EX-3.3.1 8 CERTIFICATE OF AMENDMENT DATED JUNE 20, 1968 Exhibit 3.3.1 ITT-PGS, INC. _____________________________ CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION _____________________________ ITT-PGS, INC., a Delaware corporation (the "Corporation"), the Certificate of Incorporation of which was filed in the office of the Secretary of State of Delaware on June 3, 1968 and recorded on June 3, 1968 in the office of the Recorder of Deeds, County of New Castle, State of Delaware, DOES HEREBY CERTIFY: FIRST: Each of the members of the Board of Directors of the Corporation duly consented on June 19, 1968 to the adoption of resolutions declaring advisable the adoption of an amendment, as hereinafter set forth, to the Certificate of Incorporation of the Corporation and providing for obtaining the consent of the holder of all of the issued and outstanding capital stock of the Corporation to the adoption of such amendment. SECOND: Pursuant to such resolutions of the Board of Directors of the Corporation, and in lieu of a meeting and vote of the stockholders of the Corporation, the holder of all of the issued and outstanding capital stock of the Corporation duly consented on June 19, 1968 to the adoption of such amendment. THIRD: There has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware an amendment to the Certificate of Incorporation of the Corporation amending Article First thereof to read as follows: `FIRST: The name of the corporation is ----- PENNSYLVANIA GLASS SAND CORPORATION (hereinafter called the "Corporation").' IN WITNESS WHEREOF, ITT-PGS, INC. has caused its corporate seal to be hereunto affixed and this certificate to be signed by John I. Brokaw, its President, and attested by Thomas Motley, Jr., its Secretary, this 19th day of June, 1968. ITT-PGS, INC. By: /s/ John I. Brokaw ---------------------------- John I. Brokaw, President ATTEST: /s/ Thomas Motley, Jr. - ----------------------------------- Thomas Motley, Jr., Secretary 2 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) BE IT REMEMBERED that on this 19/th/ day of June, 1968, personally came before me, a Notary Public in and for the County and State aforesaid, JOHN I. BROKAW, President of ITT-PGS, INC., a corporation of the State of Delaware, the corporation described in and which executed the foregoing certificate, known to me personally to be such, and be duly executed said certificate before me and acknowledged the said certificate to be his act and deed and the act and deed of said corporation, and that the facts stated therein are true and that the seal affixed to said certificate and attested by the Secretary of said corporation is the corporate seal of said corporation. IN WITNESS WHEREOF I have hereunto set my hand and seal of office the day and year aforesaid. /s/ Herbert W. Brauer -------------------------- (Notary Seal) EX-3.3.2 9 CERTIFICATE OF AMENDMENT DATED DECEMBER 15, 1986 Exhibit 3.3.2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION **************************** Pennsylvania Glass Sand Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, at a meeting duly held, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of PENNSYLVANIA GLASS SAND CORPORATION be amended by changing Article First thereof to read as follows: "FIRST: The name of the Corporation is U.S. SILICA COMPANY (hereinafter called the Corporation)." SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions of section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of sections 242 and 228, of the General Corporation Law of the State of Delaware. FOURTH: That this Certificate of Amendment of the Certificate of Incorporation shall be effective on December 31, 1986. IN WITNESS WHEREOF, said Pennsylvania Glass Sand Corporation has caused this certificate to be signed by Richard E. Goodell, its President, and attested by Charles V. Bush, its Secretary this 20/th/ day of October, 1986. PENNSYLVANIA GLASS SAND CORPORATION By /s/ Richard E. Goodell ----------------------------- President (Corporate Seal) ATTEST: By: /s/ Charles V. Bush -------------------------- Secretary 2 STATE OF WEST VIRGINIA ) ) ss.: COUNTY OF MORGAN ) BE IT REMEMBERED that on this 21/st/ day of October, 1986, personally came before me, a Notary Public in and for the County and State aforesaid, Richard E. Goodell, President of Pennsylvania Glass Sand Corporation, a corporation of the State of Delaware, the corporation described in and which executed the foregoing certificate, known to me personally to be such, and he duly executed said certificate before me and acknowledged the said certificate to be his act and deed and the act and deed of said corporation, and that the facts stated therein are true and that the seal affixed to said certificate and attested by the Secretary of said corporation is the corporate seal of said corporation. IN WITNESS WHEREOF I have hereunto set my hand and seal of office the day and year aforesaid. /s/ Mary E. Phillips ---------------------------- (Notary Seal) EX-3.3.3 10 CERTIFICATE OF OWNERSHIP DATED DECEMBER 17, 1987 Exhibit 3.3.3 CERTIFICATE OF OWNERSHIP AND MERGER MERGING U.S. SILICA COMPANY (OSC) INTO U.S. SILICA COMPANY (Pursuant to Section 253 of the General Corporation Law of the State of Delaware) U.S. Silica Company, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of each class of the capital stock of U.S. Silica Company (OSC), a Delaware corporation. THIRD: That the Corporation, by the following resolutions of its Board of Directors, duly adopted on the 10/th/ day of December, 1987, determined to merge into itself U.S. Silica Company (OSC) on the conditions set forth in such resolutions: NOW, THEREFORE, BE IT RESOLVED, that this corporation merge U.S. Silica Company (OSC), its wholly-owned subsidiary corporation, into itself and assume all of U.S. Silica Company (OSC)'s obligations and liabilities pursuant to Section 253 and 259 of the Delaware General Corporation Law; RESOLVED FURTHER, that the merger of U.S. Silica Company (OSC) with and into this corporation is intended to qualify as a complete liquidation of U.S. Silica (OSC) under Section 332 of the Internal Revenue Code of 1986, as amended; RESOLVED FURTHER, that the merger, this corporation's participation therein and the manner of carrying such merger into effect, including, without limitation, the Certificate of Ownership and Merger (the "Certificate") and the terms and conditions contained therein, be, and hereby are, approved; RESOLVED FURTHER, that the officers of this corporation be, and each of them hereby is, authorized and directed to execute the Certificate for, and in the name and on behalf of, this corporation substantially in the form presented at this meeting with such change(s) as the officer or officers executing the Certificate deem necessary or appropriate, the execution thereof by such officer or officers to be conclusive evidence of the due approval thereof on the part of this corporation; and RESOLVED FURTHER, that the merger of U.S. Silica Company (OSC) with and into this corporation shall become effective as of 10:00 P.M., Eastern Standard Time on December 31, 1987. FOURTH: That this certificate and the merger of U.S. Silica Company (OSC) with and into Corporation shall become effective as of 10:00 P.M. Eastern Standard Time on December 31, 1987. IN WITNESS WHEREOF, said U.S. Silica Company has caused its corporate seal to be affixed hereon and this certificate to be signed by Richard E. Goodell, its President, and Charles V. Bush, its Secretary, this 14/th/ day of December, 1987. U.S. SILICA COMPANY By: /s/ Richard E. Goodell --------------------------- Richard E. Goodell, President ATTEST: [SEAL] By: /s/ Charles V. Bush -------------------------- Charles V. Bush, Secretary 2 EX-3.3.4 11 CERTIFICATE OF OWNERSHIP AND MERGER DATED DECEMBER 17, 1987 Exhibit 3.3.4 CERTIFICATE OF OWNERSHIP AND MERGER MERGING EACH OF LOUISIANA INDUSTRIAL SAND TRANSPORTATION COMPANY, TEXAS INDUSTRIAL MINERALS TRANSPORTATION COMPANY, U.S. SILICA CO. OF CALIFORNIA, U.S. SILICA CO. OF CONNECTICUT, U.S. SILICA CO. OF ILLINOIS, U.S. SILICA CO. OF LOUISIANA, U.S. SILICA CO. OF MICHIGAN AND U.S. SILICA CO. OF TEXAS INTO U.S. SILICA COMPANY (Pursuant To Section 253 Of The General Corporation Law of the State of Delaware) U.S. Silica Company, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of each class of the capital stock of each of Louisiana Industrial Sand Transportation Company, a Louisiana corporation, Texas Industrial Minerals Transportation Company, a Texas corporation, U.S. Silica Co. of California, a California corporation, U.S. Silica Co. of Connecticut, a Connecticut corporation, U.S. Silica Co. of Illinois, an Illinois corporation, U.S. Silica Co. of Louisiana, a Louisiana Corporation, U.S. Silica Co. of Michigan, a Michigan corporation, and U.S. Silica Co. of Texas, a Texas corporation. THIRD: That the Corporation, by the following resolutions of its Board of Directors, duly adopted on the 10/th/ day of December, 1987, determined to merge ------ into itself each of Louisiana Industrial Sand Transportation Company, Texas Industrial Minerals Transportation Company, U.S. Silica Co. of California, U.S. Silica Co. of Illinois, U.S. Silica Co. of Connecticut, U.S. Silica Co. of Michigan and U.S. Silica Co. of Texas on the conditions set forth in such resolutions: NOW, THEREFORE, BE IT, RESOLVED, that this corporation merge each of Louisiana Industrial Sand Transportation Company, Texas Industrial Minerals Transportation Company, U.S. Silica Co. of California, U.S. Silica Co. of Connecticut, U.S. Silica Co. of Illinois, U.S. Silica Co. of Louisiana, U.S. Silica Co. of Michigan, and U.S. Silica Co. of Texas, (collectively "the wholly- owned subsidiaries") with and into itself and assume all the liabilities and obligations of each of the wholly-owned subsidiaries pursuant to Sections 253 and 259 of the Delaware General Corporation Law; RESOLVED FURTHER, that the mergers of each of the wholly-owned subsidiaries with and into this corporation is intended to qualify as a complete liquidation of each of the wholly-owned subsidiaries under Section 332 of the Internal Revenue Code of 1986, as amended; RESOLVED FURTHER, that the mergers, this corporation's participation therein and the manner of carrying such mergers into effect, including, without limitation, the Certificate of Ownership and Merger (the "Certificate") and the terms and conditions contained therein, be, and hereby are, approved; RESOLVED FURTHER, that the officers of this corporation be, and each of them hereby is, authorized and directed to execute the Certificate for, and in the name and on behalf of, this corporation substantially in the form presented at this meeting with such change(s) as the officer or officers executing this Certificate deem necessary or appropriate, the execution thereof by such officer or officers to be conclusive evidence of the due approval thereof on the part of this corporation; and RESOLVED FURTHER, that the mergers of each of the wholly-owned subsidiaries with and into this corporation shall become effective as of 10:30 p.m. Eastern Standard Time on December 31, 1987. FOURTH: That this certificate and the mergers of each of Louisiana Industrial Sand Transportation Company, Texas Industrial Minerals Transportation Company, U.S. Silica Co. of California, U.S. Silica Co. of Connecticut, U.S. Silica Co. of Michigan, and U.S. Silica Co. of Texas with and into the Corporation shall become effective as of 10:30 P.M., Eastern Standard Time on December 31, 1987. IN WITNESS WHEREOF, said U.S. Silica Company has caused its corporate seal to be affixed hereon and this certificate to be signed by Richard E. Goodell, its President, and Charles V. Bush, its Secretary, this 14/th/ day of December, 1987. U.S. SILICA COMPANY By: /s/ Richard E. Goodell --------------------------- Richard E. Goodell, President ATTEST: [SEAL] By: /s/ Charles V. Bush ------------------------- Charles V. Bush, Secretary 2 EX-3.3.5 12 CERTIFICATE OF OWNERSHIP DATED DECEMBER 9, 1988 Exhibit 3.3.5 CERTIFICATE OF OWNERSHIP AND MERGER MERGING WARRIOR SAND AND GRAVEL COMPANY, INC. INTO U.S. SILICA COMPANY (PURSUANT TO SECTION 253 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE AND SECTIONS 86 AND 88 OF THE ALABAMA BUSINESS CORPORATION ACT) U.S. Silica Company, a Delaware corporation ("the Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of each class of the capital stock of Warrior Sand and Gravel Company, Inc., an Alabama corporation. THIRD: That Warrior Sand and Gravel Company, Inc. is incorporated pursuant to the Business Corporation Act of the State of Alabama. FOURTH: That the Corporation, by the following resolutions of its Board of Directors, duly approved on the fourth day of October, 1988, determined to merge into itself Warrior Sand and Gravel Company, Inc. on the conditions set forth it such resolutions: NOW, THEREFORE, BE IT RESOLVED, that this Corporation merge Warrior Sand and Gravel Company, Inc., an Alabama corporation ("the wholly-owned subsidiary"), with and into itself thereby to be vested with all the assets and to assume all the liabilities and obligations of the wholly-owned subsidiary pursuant to Sections 253 and 259 of the Delaware General Corporation Law; RESOLVED FURTHER, that the merger of the wholly-owned subsidiary with and into this Corporation is intended to qualify as a complete liquidation of the wholly-owned subsidiary under Section 332 of the Internal Revenue Code of 1986, as amended; RESOLVED FURTHER, that the merger, this Corporation's participation therein, and the manner of carrying such merger into effect, including, without limitation, the Certificate of Ownership and Merger (the "Certificate") and the terms and conditions contained therein, be, and hereby are, approved; RESOLVED FURTHER, that the officers of this Corporation be, and each of them hereby is, authorized and directed to execute the Certificate for, and in the name and on behalf of, this Corporation substantially in the form presented at this meeting with such change(s) as the officer or officers executing this Certificate deem necessary or appropriate, the execution thereof by such officer or officers to be conclusive evidence of the due approval thereof on the part of this Corporation; RESOLVED FURTHER, that the merger of the wholly owned subsidiary with and into this Corporation, shall become effective as of 11:59 p.m. Eastern Standard Time on December 31, 1988. FIFTH: That Warrior Sand and Gravel Company, Inc., by the following resolutions of its Board of Directors, duly approved on the 17th day of October, 1988, approve the merger of Warrior Sand and Gravel Company, Inc. with and into the Corporation on the conditions set forth in such resolutions: NOW, THEREFORE, BE IT RESOLVED, that this Corporation merge with and into U. S. Silica Company, pursuant to Sections 86 and 88 of the Alabama Business Corporation Act and Sections 253 and 259 of the Delaware General Corporation Law; RESOLVED FURTHER, that the merger of this Corporation with and into U. S. Silica Company is intended to qualify as a complete liquidation of the wholly-owned subsidiary under Section 332 of the Internal Revenue Code of 1986, as amended; RESOLVED FURTHER, that the merger, this Corporation's participation therein and the manner of carrying such merger into effect, including, without limitation, the Certificate of Ownership and Merger, (the "Certificate") and the terms and conditions contained therein, be, and hereby are, approved; RESOLVED FURTHER, that the officers of this Corporation be, and each of them hereby is, authorized and directed to execute the Certificate for, and in the name and on behalf of, this Corporation substantially in the form presented at this meeting with such change(s) as the officer or officers executing the Certificate deem necessary or appropriate, the execution thereof by such officer of officers to be conclusive evidence of the due approval thereof on the part of this Corporation. SIXTH: That this merger has been approved by the Board of Directors of the Corporation and the Board of Directors of Warrior Sand and Gravel Company, Inc., in compliance with the applicable law of the States of Delaware and Alabama. SEVENTH: That the merger of Warrior Sand and Gravel Company, Inc. with and into U. S. Silica Company is permitted by Section 253 of the General Corporation Law of the State of Delaware and Sections 86 and 88 of the Alabama Business Corporation Act. EIGHTH: That this certificate and the merger of Warrior Sand and Gravel Company, Inc. with and into the Corporation shall become effective as of 11:59 p.m. Eastern Standard Time on December 31, 1988. NINTH: That upon this certificate and the merger becoming effective, the Corporation shall be the surviving Corporation of the merger and the name of the Corporation shall remain U. S. Silica Company. TENTH: That to comply with Section 119 of the Alabama Business Corporation Act, the name of the Corporation for use in the State of Alabama shall be "U. S. Silica Company, Inc." 2 ELEVENTH: That this certificate shall remain on file at the office of the Corporation at Route 522 North, Berkeley Springs, WV 25411, telephone: (304) 258-2500, and a copy hereof may be obtained on written or oral request of any shareholder of Warrior Sand and Gravel Company, Inc. without cost. TWELFTH: That the Corporation agrees that it may be served with process in the State of Alabama in any proceeding for enforcement of any obligation of Warrior Sand and Gravel Company, Inc., and that the Corporation irrevocably appoints the Secretary of State of Alabama as its agent to accept service of process in an action for the enforcement of payment of any such obligation, and in any proceedings for the enforcement of the rights of a dissenting stockholder of Warrior Sand and Gravel Company, Inc. against the Corporation. THIRTEENTH: That the address to which a copy of the process may be mailed by the Secretary of State of Alabama is as follows: U. S. Silica Company Route 522 North P. O. Box 187 Berkeley Springs, WV 25411 Attention: Corporate Secretary 3 IN WITNESS WHEREOF, said U. S. Silica Company has caused its corporate seal to be impressed hereon and this certificate to be signed by its duly authorized officers on this 1st day of December, 1988. U.S. SILICA COMPANY By: /s/ Richard E. Goodell --------------------------- Richard E. Goodell President (Corporate Seal) Attest: /s/ Charles V. Bush ----------------------- Charles V. Bush Secretary IN ACKNOWLEDGEMENT WHEREOF, the said Warrior Sand and Gravel Company, Inc. has caused its corporate seal to be impressed hereon and this certificate to be signed by its duly authorized officers on this 1st, day of December 1988. WARRIOR SAND AND GRAVEL COMPANY, INC. By: /s/ Richard E. Goodell --------------------------- Richard E. Goodell President (Corporate Seal) Attest: /s/ Charles V. Bush ------------------------ Charles V. Bush Secretary 4 EX-3.3.6 13 CERTIFICATE OF OWNERSHIP DATED FEBRUARY 9, 1996 Exhibit 3.3.6 CERTIFICATE OF OWNERSHIP AND MERGER MERGING USS ACQUISITION, INC. INTO U. S. SILICA COMPANY Pursuant to Section 253 of the General Corporation Law of the State of Delaware * * * * * USS ACQUISITION, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: That the Corporation was incorporated on the 27th day of April, 1994 as Sol Sal, Inc., pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of common stock of U. S. SILICA COMPANY, a corporation incorporated on the 3rd day of June, 1968, as ITT - PGS, INC., pursuant to the General Corporation Law of the State of Delaware (the "Subsidiary"). THIRD: That the Board of Directors of the Corporation, by resolutions duly adopted by the unanimous written consent of the Board of Directors pursuant to Section 141(f) of the General Corporation Law of the State of Delaware on February 9, 1996, and attached hereto as Exhibit A, determined to merge the --------- Corporation with and into the Subsidiary. FOURTH: That the sole stockholder of the Corporation did on February 9, 1996, by unanimous written consent pursuant to Section 228 of the General Corporation Law of the State of Delaware, approve the merger of the Corporation with and into the Subsidiary. FIFTH: That the Subsidiary is to be the surviving corporation of the merger (the "Surviving Corporation"). SIXTH: That the Certificate of Incorporation of the Surviving Corporation shall be amended to be and read in its entirety as set forth on Exhibit B --------- attached hereto. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by its Vice Chairman and attested by its Secretary, this 9th day of February, 1996. USS ACQUISITION, INC. By: /s/ Richard J. Nick ------------------------ Richard J. Nick Vice President ATTEST: By: /s/ Donald G. Kilpatrick ----------------------------- Donald G. Kilpatrick Secretary 2 Exhibit A to the Certificate of Ownership and Merger ----------------------------------- Resolutions of the Board of Directors adopted as of February 9, 1996 ------------------------------ RESOLVED, that upon consummation of the purchase by the Corporation of all of the issued and outstanding shares of capital stock of Silica, the Corporation shall merge (the "Merger") with and into Silica, with Silica as the surviving corporation of the Merger (the "Surviving Corporation"), as contemplated by the Certificate of Ownership and Merger of the Corporation; and be it further RESOLVED, that upon the effectiveness of the Merger, each issued and outstanding share of Common Stock, par value $.01 per share, of the Corporation shall, automatically and without any further action, be converted into and become (i) one (1) fully paid and nonassessable share of Common Stock, par value $.01 per share, of the Surviving Corporation and (ii) two hundred (200) fully paid and nonassessable shares of Preferred Stock, par value $.01 per share, of the Surviving Corporation; Exhibit B to the Certificate of Ownership and Merger ----------------------------------- CERTIFICATE OF INCORPORATION -of- U. S. SILICA COMPANY -oo0oo- FIRST: The name of the Corporation is U. S. SILICA COMPANY (hereinafter sometimes called the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 25,000 shares, consisting of (i) 20,000 shares of preferred stock, par value $.01 per share ("Preferred Stock") and (ii) 5,000 shares of common stock, par value $.01 per share ("Common Stock"). A. PREFERRED STOCK Part 1. Ranking. The Preferred Stock shall, with respect to amounts ------- payable on redemption and distributions upon the liquidation, winding-up and dissolution of the Corporation, rank senior to all classes of common stock of the Corporation and to each other class of capital stock or series of preferred stock of the Corporation (the "Junior Securities"). The Corporation may not issue any new class or series of preferred securities or other capital stock ranking senior to or on a parity with the Preferred Stock as to dividends, distributions, amounts payable on redemption and distributions upon the liquidation, winding-up and dissolution of the Corporation without the approval of the holders of at least 66K% of the shares of the Preferred Stock then outstanding, voting or consenting, as the case may be, separately as one class, except that without the approval of the holders of the Preferred Stock, the Corporation may issue shares of preferred securities or other capital stock the proceeds of which are used to redeem or repurchase all shares of the Preferred Stock then outstanding. Part 2. Dividends. The Preferred Stock shall not accrue dividends prior --------- to the Mandatory Redemption Date, following which they shall accrue dividends at the rate of nine percent (9%) of their liquidation preference per annum, from the Mandatory Redemption Date until the date sufficient funds are made available for their redemption. Such dividends, if any, shall be payable in cash on redemption. Part 3. Mandatory Redemption. The Preferred Stock shall be subject to --------------------- mandatory redemption (subject to the legal availability of funds therefor) in whole or in part at such time as USS Intermediate Holdco, Inc. ("Holdco") redeems any or all of the outstanding shares of the Preferred Stock, par value $.01 per share, of Holdco ("Holdco Preferred Stock"). Upon any such redemption of shares of Holdco Preferred Stock, the Corporation shall be required to redeem the number of shares of Preferred Stock equal to the number of shares of Holdco Preferred Stock so redeemed at a redemption price equal to the redemption price paid by Holdco with respect to such redemption of Holdco Preferred Stock (after giving effect to all applicable provisions of the 2 Stock Purchase Agreement). The Corporation shall be obligated to redeem Preferred Stock only to the extent permitted under the General Corporation Law of the State of Delaware. Part 4. Liquidation. Upon any voluntary or involuntary liquidation, ----------- dissolution or winding-up of the Corporation, the holders of the Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution, $1,000.00 plus all accumulated and unpaid dividends from the Mandatory Redemption Date to the dates sufficient funds are made available for redemption (or if such event occurs prior to the Mandatory Redemption Date, the Discounted Liquidation Preference) per share before any distribution is made on any Junior Securities, including, without limitation, common stock of the Corporation. After payment of the full amount of the liquidation preference to which they are entitled, the holders of the Preferred Stock will not be entitled to any further participation in any distribution of assets of the Corporation. However, neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more corporations shall be deemed to be a liquidation, dissolution or winding-up of the Corporation. B. COMMON STOCK Part 1. Voting Rights. ------------- 1A. Generally. Except as specifically required under the General --------- Corporation Law of the State of Delaware, the holders of Common Stock will be entitled to one vote per share and shall vote as one class on all matters to be voted on by the Corporation's stockholders. 1B. Election of Directors. The number of directors which shall constitute --------------------- the Board of Directors shall not be less than three nor more than nine which exact number shall be established in the By-laws of the Corporation and shall initially be three. 3 Part 2. Dividends. When and as dividends are declared thereon, the --------- holders of Common Stock then outstanding shall be entitled to share equally and ratably, on a share for share basis, in such dividends. Part 3. Liquidation. After any payments required to be made to the ----------- holders of the Preferred Stock then outstanding, the holders of Common Stock then outstanding shall be entitled to receive equally and ratably, on a share- for-share basis, all assets of the Corporation to be distributed upon any liquidation, dissolution or winding up of the Corporation. C. ISSUANCE OF STOCK Except as otherwise provided in this Certificate of Incorporation, the Board of Directors shall have authority to authorize the issuance, from time to time, without any vote or other action by the stockholders, of any or all shares of stock of the Corporation of any class or series at any time authorized, and any securities convertible into or exchangeable for any such shares, and any options, rights or warrants to purchase or acquire any such shares, in each case to such persons and on such terms (including as a dividend or distribution on or with respect to, or in connection with a split or combination of, the outstanding shares of stock of the same or any other class or series) as the Board of Directors from time to time in its discretion lawfully may determine. Shares so issued shall be fully paid stock, and the holders of such stock shall not be liable to any further call or assessment thereon. D. DEFINITIONS For purposes of this Certificate of Incorporation: "Closing" has the meaning ascribed thereto in the Stock Purchase Agreement. 4 "Discounted Liquidation Preference" means the liquidation preference discounted from the Mandatory Redemption Date to the date of determination at the rate of 7.18% compounded annually. "Mandatory Redemption Date" means the tenth anniversary of the Closing. "Stock Purchase Agreement" means the Stock Purchase Agreement dated as of October 23, 1995 and amended as of January 29, 1996 between U.S. Borax Inc. and USS Holdings, Inc., as the same may be amended from time to time. FIFTH: The following additional provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for the creation, definition, limitation and regulation of the powers of the Corporation, the directors and the stockholders: 1. Election of directors need not be by written ballot. The Board of Directors shall have power to make, alter, amend and repeal the By-Laws of the Corporation and to fix the compensation of directors for services in any capacity. 2. Any corporate action, with respect to which the vote of the stockholders at a meeting thereof is required or permitted by any provision of the General Corporation Law of the State of Delaware or of the Certificate of Incorporation or the By-Laws of the Corporation, is authorized to be taken and may be taken without that vote and meeting, and that vote and meeting may be dispensed with, with the written consent of the holders of a majority (or, if with respect to a particular corporate action where the General Corporation Law of the State of Delaware or the Certificate of Incorporation or the By-Laws of the Corporation specifies a greater percentage, by the holders of that greater percentage) of the stock that would have been entitled to vote upon that action if a meeting were held. Prompt notice shall be given to all stockholders of the taking of any corporate action pursuant to the provisions of this paragraph 2 unless that action has been 5 consented to in writing by the holders of all of the stock that would have been entitled to vote upon that action if a meeting were held. 3. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or amendment of this Article, insofar as it would in any way enlarge the liability of any director of the Corporation, shall be ineffective with respect to any acts or omissions occurring prior to the date of such repeal or amendment. SIXTH: The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, by reason of the fact that he, or the person whose legal representative he is, (1) is or was a stockholder, director, officer, employee or agent of the Corporation (including the incorporator thereof), or (2) is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (3) is or was a director, officer or employee of the Corporation serving at the request of the Corporation as a fiduciary of an employee benefit plan or trust maintained for the benefit of employees of the Corporation or employees of any such other enterprise, partnership, joint venture, trust, or other enterprise, against judgments, fines, penalties, amounts paid in settlement, and expenses, including attorneys' fees, actually and 6 reasonably incurred by him and the person whose legal representative he is, in connection with such action, suit or proceeding, or any appeal therein, to the fullest extent permitted by law. Expenses which may be indemnifiable under this Article SIXTH in defending an action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors upon agreement by or on behalf of the stockholder, director, officer, employee or agent, or his legal representative, to repay such amount if he is later found not entitled to be indemnified by the Corporation as authorized in this Article SIXTH. The Corporation shall not indemnify any stockholder, director, officer, employee or agent against judgments, fines, amounts paid in settlement and expenses, including attorneys' fees, to an extent greater than that authorized by this Article SIXTH, but the Corporation may procure insurance providing greater indemnification and may share the premium cost with any stockholder, director, officer, employee or agent on such basis as may be agreed upon. 7 EX-3.4 14 BY-LAWS OF U.S. SILICA COMPANY EXHIBIT 3.4 BY-LAWS of U. S. SILICA COMPANY (herein called the "Corporation") ------------------------------ ARTICLE I STOCKHOLDERS ------------ Section 1.01 Annual Meeting. The Board of Directors by resolution shall -------------- designate the time, place and date (which shall be, in the case of the first annual meeting, not more than 13 months after the organization of the Corporation and, in the case of all other annual meetings, not more than 13 months after the date of the last annual meeting) of the annual meeting of the stockholders for the election of directors and the transaction of such other business as may come before it. Section 1.02 Special Meeting. Special meetings of the stockholders, for --------------- any purpose or purposes, may be called at any time by the Chairman, the Vice- Chairman, the President, any Vice-President, the Treasurer, the Secretary or the Assistant Secretary by resolution of the Board of Directors. Special meetings of stockholders shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Section 1.03 Notice of Meetings of Stockholders. Whenever stockholders are ---------------------------------- required or permitted to take any action at a meeting, written notice of the meeting shall be given (unless that notice shall be waived or unless the meeting is to be dispensed with in accordance with the provisions of the General Corporation Law of the State of Delaware and Article FIFTH of the Certificate of Incorporation of the Corporation) which shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given, personally or by mail, not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.04 Quorum. At all meetings of the stockholders, the holders of ------ one-third of the stock issued and outstanding and entitled to vote thereat, present in person or by proxy, shall constitute a quorum for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders. The stockholders present may adjourn the meeting despite the absence of a quorum and at any such adjourned meeting at which the requisite amount of voting stock shall be represented, 2 the Corporation may transact any business which might have been transacted at the original meeting had a quorum been there present. Section 1.05 Method of Voting. The vote upon any question before the ---------------- meeting need not be by ballot. All elections and all other questions shall be decided by a plurality of the votes cast, at a meeting at which a quorum is present, except as expressly provided otherwise by the General Corporation Law of the State of Delaware or the Certificate of Incorporation. Section 1.06 Voting Rights of Stockholders and Proxies. Each stockholder ----------------------------------------- of record entitled to vote in accordance with the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of stock entitled to vote standing in his name on the books of the Corporation, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 1.07 Ownership of Its Own Stock. Shares of its own capital stock -------------------------- belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted as limiting the right of any corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.08 Voting by Fiduciaries and Pledgors. Persons holding stock in ---------------------------------- a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. 3 If shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation is given written notice to the contrary and is furnished with a copy of the instrument or other appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (1) If only one votes, his act binds all; (2) If more than one vote, the act of the majority so voting binds all; (3) If more than one vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to the Court of Chancery or such other court as may have jurisdiction to appoint an additional person to act with the persons so voting the shares, which shall then be voted as determined by a majority of such persons and the person appointed by the Court. If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of this subsection shall be a majority or even-split in interest. Section 1.09 Fixing Date for Determination of Stockholders of Record. In ------------------------------------------------------- order to determine the stockholders (i) entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or (ii) entitled to express consent to corporate action in writing without a meeting, or (iii) entitled to receive payment of any dividend or other distribution or allotment of any rights, or (iv) entitled to exercise any rights in respect of any change, conversion or exchange of stock, or (v) for the purpose of any other lawful action, the Board of Directors may 4 fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed by the Board of Directors, the record date shall be determined in accordance with the provisions of the General Corporation Law of the State of Delaware. Section 1.10 List of Stockholders. The officer who has charge of the stock -------------------- ledger of the Corporation shall prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held (which place shall be specified in the notice of the meeting or, if not so specified, at the place where said meeting is to be held), and the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who may be present. Upon the willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. Section 1.11 Stockholder's Right of Inspection. Stockholders of record, in --------------------------------- person or by attorney or other agent, shall have the right, upon written demand under oath stating the purpose thereof, during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall 5 be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in this State or at its principal place of business. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 1.10 or the books of the Corporation, or to vote in person or by proxy at any meeting of the stockholders. Section 1.12 Consent in Lieu of Meeting. Any corporate action, with -------------------------- respect to which the vote of the stockholders at a meeting thereof is required or permitted by any provision of the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company, or these By-Laws, may be taken without that vote and meeting, and that vote and meeting may be dispensed with, if that corporate action has been consented to in writing by the holders of a majority (or, if with respect to a particular corporate action the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company or these By-Laws specifies a greater percentage, by the holders of that percentage) of the stock that would have been entitled to vote upon that action if a meeting were held. Prompt notice shall be given to all stockholders of the taking of any corporate action pursuant to the provisions of that paragraph unless that action has been consented to in writing by the holders of all of the stock that would have been entitled to vote upon that action if a meeting were held. 6 ARTICLE II DIRECTORS --------- Section 2.01 Management of Business. The business of the Corporation shall ---------------------- be managed by its Board of Directors. The Board of Directors, in addition to the powers and authority expressly conferred upon it herein, by statute, by the Certificate of Incorporation of the Corporation or otherwise, is hereby empowered to exercise all such powers as may be exercised by the Corporation, except as expressly provided otherwise by the statutes of the State of Delaware, by the Certificate of Incorporation of the Corporation or by these By-Laws. Without prejudice to the generality of the foregoing, the Board of Directors, by resolution or resolutions, may create and issue, whether or not in connection with the issue and sale of any shares of stock or other securities of the Corporation, rights or options entitling the holders thereof to purchase from the Corporation any shares of its capital stock of any class or classes or any other securities of the Corporation, such rights or options to be evidenced by or in such instrument or instruments as shall be approved by the Board of Directors. The terms upon which, including the time or times, which may be limited or unlimited in duration, at or within which, and the price or prices at which, any such rights or options may be issued and any such shares or other securities may be purchased from the Corporation upon the exercise of any such right or option shall be such as shall be fixed and stated in the resolution or resolutions adopted by the Board of Directors providing for the creation and issue of such rights or options, and, in every case, set forth or incorporated by reference in the instrument or instruments evidencing such rights or options. In the absence of actual fraud in the transaction, the judgment of the directors as to the consideration for the issuance of such rights or options and the sufficiency 7 thereof shall be conclusive. In case the shares of stock of the Corporation to be issued upon the exercise of such rights or options shall be shares having a par value, the price or prices so to be received therefor shall not be less than the par value thereof. In case the shares of stock so to be issued shall be shares of stock without par value, the consideration therefor shall be determined in the manner provided in Section 153 of the General Corporation Law of the State of Delaware. Section 2.02 Qualifications and Number of Directors. Directors need not be -------------------------------------- stockholders. The number of directors which shall constitute the whole Board shall be not less than three nor more than eleven. Section 2.03 Election and Term. The directors shall be elected at the ----------------- annual meeting of the stockholders, and each director shall be elected to hold office until his successor shall be elected and qualified, or until his earlier resignation or removal. Section 2.04 Resignations. Any director of the Corporation may resign at ------------ any time by giving written notice to the Corporation. Such resignation shall take effect at the time specified therein, if any, or if no time is specified therein, then upon receipt of such notice by the Corporation; and, unless otherwise provided therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.05 Vacancies and Newly Created Directorships. Vacancies and ----------------------------------------- newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until their successors shall be elected and qualified, or until their earlier resignation or removal. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the 8 vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as herein provided in the filling of other vacancies. Section 2.06 Quorum of Directors. At all meetings of the Board of ------------------- Directors, a majority of the entire Board shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as provided in Section 2.05 hereof. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting of the directors to another time and place. Notice of any adjournment need not be given if such time and place are announced at the meeting. Section 2.07 Annual Meeting. The newly elected Board of Directors -------------- shall meet immediately following the adjournment of the annual meeting of stockholders in each year at the same place, within or without the State of Delaware, and no notice of such meeting shall be necessary. Section 2.08 Regular Meetings. Regular meetings of the Board of ---------------- Directors may be held at such time and place, within or without the State of Delaware, as shall from time to time be fixed by the Board and no notice thereof shall be necessary. Section 2.09 Special Meetings. Special meetings may be called at any time ---------------- by the Chairman or by any two members of the Board of Directors. Special meetings shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Special meetings of the Board of Directors shall be held upon notice to the directors or waiver thereof. 9 Unless waived, notice of each special meeting of the directors, stating the time and place of the meeting, shall be given to each director by delivered letter, by telegram or by personal communication either over the telephone or otherwise, in each such case not later than the second day prior to the meeting, or by mailed letter deposited in the United States mail with postage thereon prepaid not later than the seventh day prior to the meeting. Notices of special meetings of the Board of Directors and waivers thereof need not state the purpose or purposes of the meeting. Section 2.10 Action Without a Meeting. 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 all members of the Board or committee, as the case may be, consent thereto in a writing or writings and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 2.11 Compensation. Directors shall receive such fixed sums and ------------ expenses of attendance for attendance at each meeting of the Board or of any committee and/or such salary as may be determined from time to time by the Board of Directors; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE III OFFICERS -------- Section 3.01 Number. The officers of the Corporation shall be chosen ------ by the Board of Directors. The officers shall be a Chairman, a Vice-Chairman, a President, a Secretary and a Treasurer, and such number of Vice-Presidents, Assistant Secretaries and Assistant Treasurers, 10 and such other officers, if any, as the Board may from time to time determine. The Board may choose such other agents as it shall deem necessary. Any number of offices may be held by the same person. Section 3.02 Terms of Office. Each officer shall hold his office --------------- until his successor is chosen and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Section 3.03 Removal. Any officer may be removed from office at any ------- time by the Board of Directors with or without cause. Section 3.04 Authority. The Secretary shall record all of the --------- proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose, and shall have the authority, perform the duties and exercise the powers in the management of the Corporation usually incident to the office held by him, and/or such other authority, duties and powers as may be assigned to him from time to time by the Board of Directors, the Chairman, the Vice-Chairman or the President. The other officers, and agents, if any, shall have the authority, perform the duties and exercise the powers in the management of the Corporation usually incident to the offices held by them, respectively, and/or such other authority, duties and powers as may be assigned to them from time to time by the Board of Directors or (except in the case of the Chairman, the Vice-Chairman or the President, as appropriate) by the Chairman, the Vice- Chairman or the President. Section 3.05 Voting Securities Owned by the Corporation. Powers of ------------------------------------------ attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman, the Vice-Chairman, the President or any Vice-President and any such officer may, 11 in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. ARTICLE IV CAPITAL STOCK ------------- Section 4.01 Stock Certificates. Every holder of stock in the Corporation ------------------ shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman or Vice-Chairman of the Board of Directors, or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by him in the Corporation. Where such 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, the signatures of the officers of the Corporation may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of issue. Section 4.02 Transfers. Stock of the Corporation shall be transferable --------- in the manner prescribed by the laws of the State of Delaware. 12 Section 4.03 Registered Holders. Prior to due presentment for registration ------------------ of transfer of any security of the Corporation in registered form, the Corporation shall treat the registered owner as the person exclusively entitled to vote, to receive notifications and to otherwise exercise all the rights and powers of an owner, and shall not be bound to recognize any equitable or other claim to, or interest in, any security, whether or not the Corporation shall have notice thereof, except as otherwise provided by the laws of the State of Delaware. Section 4.04 New Certificates. The Corporation shall issue a new ---------------- certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, if the owner: (1) so requests before the Corporation has notice that the shares of stock represented by that certificate have been acquired by a bona fide purchaser; (2) files with the Corporation a bond sufficient (in the judgment of the directors) to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or theft of that certificate or the issuance of a new certificate; and (3) satisfies any other requirements imposed by the directors that are reasonable under the circumstances. A new certificate may be issued without requiring any bond when, in the judgment of the directors, it is proper so to do. ARTICLE V INDEMNIFICATION --------------- Section 5.01 The Corporation shall indemnify its officers, directors, employees and agents to the fullest extent permitted by the General Corporation Law of Delaware and Article SEVEN of the Certificate of Incorporation of the Corporation. 13 ARTICLE VI MISCELLANEOUS ------------- Section 6.01 Offices. The registered office of the Corporation in ------- the State of Delaware shall be at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The Corporation may also have offices at other places within and/or without the State of Delaware. Section 6.02 Seal. The corporate seal shall have inscribed thereon the ---- name of the Corporation, the year of its incorporation, and the words "Corporate Seal Delaware." Section 6.03 Checks. All checks or demands for money shall be signed by ------ such person or persons as the Board of Directors may from time to time determine. Section 6.04 Fiscal Year. The fiscal year shall begin on the first day ----------- of January in each year and shall end on the thirty-first day of December of each year. Section 6.05 Waivers of Notice; Dispensing with Notice. Whenever any ----------------------------------------- notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Corporation, or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of 14 objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Whenever any notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Corporation, or of these By-Laws, to any person with whom communication is made unlawful by any law of the United States of America, or by any rule, regulation, proclamation or executive order issued under any such law, then the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person; and any action or meeting which shall be taken or held without notice to any such person or without giving or without applying for a license or permit to give any such notice to any such person with whom communication is made unlawful as aforesaid, shall have the same force and effect as if such notice had been given as provided under the provisions of the General Corporation Law of the State of Delaware, or under the provisions of the Certificate of Incorporation of the Corporation or of these By-Laws. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any of the other sections of this title, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. Section 6.06 Loans to and Guarantees of Obligations of Employees and ------------------------------------------------------- Officers. The Corporation may lend money to or guaranty any obligation of, - -------- or otherwise assist any officer or other employee of the Corporation or of a subsidiary, including any officer or employee who is a director of the Corporation or a subsidiary, whenever, in the judgment of the Board of Directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or 15 secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this Section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any other statute. Section 6.07 Amendment of By-Laws. These By-Laws may be altered, amended -------------------- or repealed at any meeting of the Board of Directors. Section 6.08 Section Headings. The headings of the Articles and Sections ---------------- of these By-Laws, have been inserted for convenience of reference only and shall not be deemed to be a part of these By-Laws. 16 EX-3.5 15 RESTATED ARTICLES OF INCORPORATION EXHIBIT 3.5 Microfilm Number 9062 589 Filed with the Department of State on -------------- ---------- Entry Number /s/ Christopher A. Lewis ------------------ ----------------------------------------------- Secretary of the Commonwealth ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION DSCB: 15-1915 (Rev 89) In compliance with the requirements of 15 Pa.C.S. (ss) 1915 (relating to articles of amendment), the undersigned business corporation, desiring to amend its Articles, hereby states that: 1. The name of the corporation is: Better Materials Corporation -------------------------------------- --------------------------------------------------------------------- 2. The (a) address of this corporation's current registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department): (a) Swamp Road Penns Park PA 18943 Bucks --------------------------------------------------------------------- Number and Street City State Zip County (b) c/o: ----------------------------------------------------------------- Name of Commercial Registered Office Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. 3. The statute by or under which it was incorporated is: Act of May 5, ---------------- 1933 (P.L. 364, No. 106) ------------------------ 4. The original date of its incorporation is: January 6, 1959 --------------------------- 5. (Check, and if appropriate complete, one of the following): X The amendment shall be effective upon filing these Articles of --- Amendment in the Department of State. The amendment shall be effective on: at --- ------------ -------------- Date Hour 6. (Check one of the following): The amendment was adopted by the shareholders pursuant to 15 --- Pa.C.S. (ss) 1914(a) and (b). X The amendment was adopted by the board of directors pursuant to --- 15 Pa.C.S. (ss) 1914(c). 7. (Check, and if appropriate complete, one of the following): The amendment adopted by the corporation, set forth in full, is --- as follows: X The amendment adopted by the corporation is set forth in full in --- Exhibit A, attached hereto and made a part hereof. 8. (Check if the amendment restated the Articles): X The restated Articles of Incorporation supersede the original --- Articles and all amendments thereto. IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof this 29 day of November , 1990 - ---- ----------------------------------- -- BETTER MATERIALS CORPORATION ---------------------------------------------------------- (Name of Corporation) BY: /s/ ------------------------------------------------------- (Signature) TITLE: Chairman of the Board and Chief Executive Officer ---------------------------------------------------- 2 Exhibit A --------- RESOLVED, that the Articles of Incorporation of the corporation be and they are hereby restated as set forth in full below: RESTATED ARTICLES OF INCORPORATION OF BETTER MATERIALS CORPORATION 1. The name of the corporation is Better Materials Corporation. 2. The address of this corporation's registered office in this Commonwealth is Swamp Road, Penns Park, Bucks County, Pennsylvania 18943. 3. The corporation is incorporated under the provisions of the Business Corporation Law of 1988. 4. The aggregate number of shares which the corporation shall have authority to issue is 400,000 shares, consisting of 100,000 shares of Class A (Voting) Common Stock, par value $.10 per share, and 300,000 shares of Class B (Non-Voting) Common Stock, par value $.10 per share. All voting rights in the corporation shall be vested exclusively in the holders of the Class A (Voting) Common Stock and, except as otherwise required by law, no holder of Class B (Non-Voting) Common Stock shall have any right by reason thereof to notice of, or to vote at, any meeting of shareholders of the corporation called for the election of directors or for any other purpose, or to express consent or dissent in writing to any plan, proposal, act, transaction or other corporate action to be approved, effected or validated by the shareholders of the corporation. 5. The shareholders of the corporation shall not have the right to cumulate their votes for the election of directors of the corporation. 6. These Articles of Incorporation may be amended in the manner at the time prescribed by statute, and all rights conferred upon the shareholders herein are granted subject to this reservation. EX-3.5.1 16 ARTICLES OF MERGER DATED DECEMBER 14, 1998 Exhibit 3.5.1 Microfilm Number Filed with the Department of State on Dec. 14, 1998 ----------- -------------- Entry Number /s/ --------------- --------------------------------------------------- Acting Secretary of the Commonwealth Secretary of the Commonwealth ARTICLES OF MERGER-DOMESTIC BUSINESS CORPORATION DSCB: 15-1926 (Rev 90) In compliance with the requirements of 15 Pa.C.S. (ss) 1926 (relating to articles of merger or consolidation), the undersigned business corporations, desiring to effect a merger, hereby state that: 1. The name of the corporation surviving the merger is: Better Materials ----------------- Corporation -------------------- 2. (Check and complete one of the following): X The surviving corporation is a domestic business corporation --- and the (a) address of its current registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department): (a) Swamp Road Penns Park PA 18943 Bucks ----------------------------------------------------------------- Number and Street City State Zip County (b) c/o: ------------------------------------------------------------- Name of Commercial Registered Office Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. The surviving corporation is a qualified foreign business ------ corporation incorporated under the laws of and the (a) ---------- address of its current registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department): (a) ------------------------------------------------------------------ Number and Street City State Zip County (b)c/o: -------------------------------------------------------------- Name of Commercial Registered Office Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. The surviving corporation is a nonqualified foreign business ----- corporation incorporated under the laws of and the address ---------- of its principal office under the laws of such domiciliary jurisdiction is: --------------------------------------------------------------------- Number and Street City State Zip County 3. The name and address of the registered office in this Commonwealth or name of its commercial registered office provider and the county of venue of each other domestic business corporation and qualified foreign business corporation which is a party to the plan of merger are as follows:
Name of Corporation Address of Registered Office or County Name of Commercial Registered Office Provider BMC Acquisition Company N. Front and Market Streets, P.O. Box 1181, Harrisburg, PA 17108 ----------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------
4. (Check, and if appropriate complete, one of the following): X The plan of merger shall be effective upon filing these Articles --- of Merger in the Department of State. The plan of merger shall be effective on: at --- ----------- ---------- Date Hour 5. The manner in which the plan of merger was adopted by each domestic corporation is as follows:
Name of Corporation Manner of Adoption Better Materials Corporation Adopted by the shareholders and approved by the directors pursuant to 15 Pa.C.S. (ss) 1924(a) -------------------------------------------------------------------------------------------------------------------------- BMC Acquisition Company Adopted by the shareholders and approved by the directors pursuant to 15 Pa.C.S. (ss) 1924(a) --------------------------------------------------------------------------------------------------------------------------
6. [SECTION STRUCK OUT] 7. (Check, and if appropriate complete, one of the following): The plan of merger is set forth in full in Exhibit A attached --- hereto and made a part hereof. X Pursuant to 15 Pa.C.S. (ss) 1901 (relating to omission of --- certain provisions from filed plans) the provisions, if any, of the plan of merger that amend or constitute the operative Articles of Incorporation of the surviving corporation as in effect subsequent to the effective date of the plan are set forth in full in Exhibit A attached hereto and made a part hereof. The full text of the plan of merger is on file at the principal place of business of the surviving corporation, the address of which is: Swamp Road Penns Park Pennsylvania 18943 Bucks ----------------------------------------------------------------------- Number and Street City State Zip County IN TESTIMONY WHEREOF, the undersigned corporation or each undersigned corporation has caused these Articles of Merger to be signed by a duly authorized officer thereof this 14th day of December, 1998. - --------------------------------- ---------------------------------- BMC Acquisition Company Better Materials Corporation BY: /s/ BY: ------------------------------ ------------------------------ (Signature) (Signature) TITLE: Vice President TITLE: President ------------------------ -------------- 2 EX-3.6 17 AMENDED AND RESTATED BY-LAWS OF BETTER MATERIALS EXHIBIT 3.6 AMENDED AND RESTATED BY-LAWS OF BETTER MATERIALS CORPORATION ________________ (A PENNSYLVANIA CORPORATION) ARTICLE I OFFICES AND FISCAL YEAR ----------------------- Section 1.01 Registered Office. The registered office of the corporation ----------------- in the Commonwealth of Pennsylvania shall be as stated in the Articles of Incorporation (the "articles") or at such other location to which the registered office shall be changed by action of the board of directors. Section 1.02 Other Offices. The corporation may also have offices at such ------------- other places within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or the business of the corporation may require. Section 1.03 Fiscal Year. The fiscal year of the corporation shall end on ----------- the Saturday in December or January that is closest to December 31 in each year unless otherwise fixed by the board of directors. ARTICLE II NOTICE--WAIVERS--MEETINGS GENERALLY ----------------------------------- Section 2.01 Manner of Giving Notice. (a) General Rule. Whenever written ----------------------- ------------ notice is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by facsimile transmission to the address (or to the telex, TWX, facsimile or telephone number) of the person appearing on the books of the corporation or, in the case of directors, supplied by the director to the corporation for the purpose of notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in the case of facsimile transmission when received. A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of the Business Corporation Law, the articles or these bylaws. (b) Adjourned Shareholder Meetings. When a meeting of shareholders is ------------------------------ adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board fixes a new record date for the adjourned meeting in which event notice shall be given in accordance with Section 2.03. Section 2.02 Notice of Meetings of Board of Directors. Notice of a regular ---------------------------------------- meeting of the board of directors need not be given. Notice of every special meeting of the board of directors shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone, telex, TWX or facsimile transmission) or 48 hours (in the case of notice by telegraph, courier service or express mail) or five days (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time and place of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board need be specified in a notice of the meeting. Section 2.03 Notice of Meetings of Shareholders. (a) General Rule. Written ---------------------------------- ------------ notice of every meeting of the shareholders shall be given by, or at the direction of, the secretary or other authorized person to each shareholder of record entitled to vote at the meeting at least (1) ten days prior to the day named for a meeting (and, in case of a meeting called to consider a merger, consolidation, share exchange or division, to each shareholder of record not entitled to vote at the meeting) called to consider a fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day named for the meeting in any other case. If the secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so. In the case of a special meeting of shareholders, the notice shall specify the general nature of the business to be transacted. (b) Notice of Action by Shareholders an Bylaws. In the case of a ------------------------------------------ meeting of shareholders that has as one of its purposes action on the bylaws, written notice shall be given to each shareholder that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment or repeal of the bylaws. There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby. Section 2.04 Waiver of Notice. (a) Written Waiver. Whenever any written ---------------- -------------- notice is required to be given under the provisions of the Business Corporation Law, the articles or these by-laws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as provided in the next sentence, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted at such meeting. (b) Waiver by Attendance. Attendance of a person at any meeting shall -------------------- constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 2.05 Modification of Proposal Contained in Notice. Whenever the -------------------------------------------- language of a proposed resolution is included in a written notice of a meeting required to be given under the provisions of the Business Corporation Law or the articles or these bylaws, the meeting 2 considering the resolution may without further notice adopt it with such clarifying or other amendments as do not enlarge its original purpose. Section 2.06 Exception to Requirement of Notice. (a) General Rule. ---------------------------------- ------------ Whenever any notice or communication is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws or by the terms of any agreement or other instrument or as a condition precedent to taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required. (b) Shareholders Without Forwarding Addresses. Notice or other ----------------------------------------- communications need not be sent to any shareholder with whom the corporation has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the corporation with a current address. Whenever the shareholder provides the corporation with a current address, the corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders. Section 2.07 Use of Conference Telephone and Similar Equipment. Any ------------------------------------------------- director may participate in any meeting of the board of directors, and the board of directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more persons may participate in a meeting of the shareholders of the corporation by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at the meeting. ARTICLE III SHAREHOLDERS ------------ Section 3.01 Place of Meeting. All meetings of the shareholders of the ---------------- corporation shall be held at the registered office of the corporation or such other place as may be designated by the board of directors in the notice of a meeting. Section 3.02 Annual Meeting. The board of directors may fix and designate -------------- the date and time of the annual meeting of the shareholders, but if no such date and time is fixed and designated by the board, the meeting for any calendar year shall be held on the second Monday of May in such year, if not a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on the next succeeding business day, not a Saturday, at 10:00 o'clock A.M., and at said meeting the shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. If the annual meeting shall not have been called and held within six months after the designated time, any shareholder may call the meeting at any time thereafter. Section 3.03 Special Meetings. (a) Call of Special Meetings. Special ---------------- meetings of the shareholders may be called at any time: 3 (i) by the chairman of the board; (ii) by the board of directors; or (iii) unless otherwise provided in the articles, by shareholders entitled to cast at least 20% of the votes that all shareholders are entitled to cast at the particular meeting. (b) Fixing of Time for Meeting. At any time, upon written request, of -------------------------- any person who has called a special meeting, it shall be the duty of the secretary to fix the time of the meeting which shall be held not more than 60 days after the receipt of the request. If the secretary neglects or refuses to fix the time of the meeting, the person or persons calling the meeting may do so. Section 3.04 Quorum and Adjournment. (a) General Rule. A meeting of ---------------------- ------------ shareholders of the corporation duly called shall not be organized for the transaction of business unless a quorum is present. The presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted, upon at the meeting shall constitute a quorum, for the purposes of consideration and action on the matter. Shares of the corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be counted in determining the total number of outstanding shares for quorum purposes at any given time. (b) Withdrawal of a Quorum. The shareholders present at a duly ---------------------- organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. (c) Adjournments Generally. Any regular or special meeting of the ---------------------- shareholders, including one at which directors are to be elected and one which cannot be organized because a quorum has not attended may be adjourned for such period and to such place as the shareholders present and entitled to vote shall direct. (d) Electing Directors at Adjourned Meeting. Those shareholders --------------------------------------- entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of electing directors. (e) Other Action in Absence of Quorum. Those shareholders entitled to --------------------------------- vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. Section 3.05 Action by Shareholders. Except as otherwise provided in the ---------------------- Business Corporation Law or the articles or these bylaws, whenever any corporate action is to be taken by vote of the shareholders of the corporation, it shall be authorized by a majority of the votes cast at a duly organized meeting of shareholders by the holders of shares entitled to vote thereon. 4 Section 3.06 Organization. At every meeting of the shareholders, the ------------ chairman of the board, if there be one, or, in the case of vacancy in office or absence of the chairman of the board, one of the following persons present in the order stated: the president, the vice presidents in their order of rank and seniority, or a person chosen by vote of the shareholders present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of both the secretary and assistant secretaries, a person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 3.07 Voting Rights of Shareholders. Unless otherwise provided in ----------------------------- the articles, every shareholder of the corporation shall be entitled to one vote for every share standing in the name of the shareholder on the books of the corporation. Section 3.08 Voting and Other Action by Proxy. (a) General Rule. (i) Every -------------------------------- ------------ shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person to act for the shareholder by proxy. (ii) The presence of, or vote or other action at a meeting of shareholders, or the expression of consent or dissent to corporate action in writing, by a proxy of a shareholder shall constitute the presence of, or vote or action by, or written consent or dissent of, the shareholder. (iii) Where two or more proxies of a shareholder are present, the corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons. (b) Minimum Requirements. Every proxy shall be executed in writing by -------------------- the shareholder or by the duly authorized attorney-in-fact of the shareholder and filed with the secretary of the corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the secretary of the corporation. An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the secretary of the corporation. (c) Expenses. The corporation shall pay the reasonable expenses of -------- solicitation of votes, proxies or consents of shareholders by or on behalf of the board of directors or its nominees for election to the board, including solicitation by professional proxy solicitors and otherwise. Section 3.09 Voting by Fiduciaries and Pledgees. Shares of the corporation ---------------------------------- standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A 5 shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee. Section 3.10 Voting by Joint Holders of Shares. (a) General Rule. Where --------------------------------- ------------ shares of the corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise: (i) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the corporation shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and (ii) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves. (b) Exception. If there has been filed with the secretary of the --------- corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the document latest in date of operative effect so filed, and only these persons, shall be entitled to vote the shares but only in accordance therewith. Section 3.11 Voting by Corporations. (a) Voting by Corporate Shareholders. ---------------------- -------------------------------- Any corporation that is a shareholder of this corporation may vote at meetings of shareholders of this corporation, or consent or dissent to corporate action in writing, by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the board of directors of the other corporation or a provision of its articles or bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the secretary of this corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares. (b) Controlled Shares. Shares of this corporation owned, directly or ----------------- indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares for voting purposes at any given time. Section 3.12 Determination of Shareholders of Record. (a) Fixing Record --------------------------------------- ------------- Date. The board of directors may fix a time prior to the date of any meeting of - ---- shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 90 days prior to the date of the meeting of shareholders. Only shareholders of record an the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the corporation after any record date fixed as provided in this subsection. The board of directors may similarly fix a record date for the determination of shareholders of record for any other purpose. When a determination of 6 shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the board fixes a new record date for the adjourned meeting. (b) Determination When a Record Date is Not Fixed. If a record date --------------------------------------------- is not fixed: (i) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day an which notice is given or, if notice is waived, at the close of business an the day immediately preceding the day on which the meeting is held. (ii) The record date for determining shareholders entitled to express consent or dissent to corporate action in writing without a meeting, when prior action by the board of directors is not necessary, shall be the close of business on the day on which the first written consent or dissent is filed with the secretary of the corporation. (iii) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. (c) Certification by Nominee. The board of directors may adopt a ------------------------ procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons. Upon receipt by the corporation of a certification complying with the procedure the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. Section 3.13 Voting Lists. (a) General Rule. The officer or agent having ------------ ------------ charge of the transfer books for shares of the corporation shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof. (b) Effect of List. Failure to comply with the requirements of this -------------- section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. The original share register or transfer book, or a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of shareholders. Section 3.14 Judges of Election. (a) Appointment. In advance of any ------------------ ----------- meeting of shareholders of the corporation, the board of directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder 7 shall, appoint judges of election at the meeting. The number of judges shall be one or three. A person who is a candidate for an office to be filled at the meeting shall not act as a judge. (b) Vacancies. In case any person appointed as a judge fails to --------- appear or fails or refuses to act, the vacancy may be filled by appointment made by the board of directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof. (c) Duties. The judges of election shall determine the number of ------ shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with nominations by shareholders or the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. if there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. (d) Report. On request of the presiding officer of the meeting or of ------ any shareholder, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein. Section 3.15 Consent of Shareholders in Lieu of Meeting. (a) Unanimous ------------------------------------------ --------- Written Consent. Any action require or permitted to be taken at a meeting of the - --------------- shareholders or of a class of shareholders may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the shareholders who would be entitled to vote at a meeting for such purpose shall be filed with the secretary of the corporation. (b) Partial Written Consent. Any action required or permitted to be ----------------------- taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting upon the written consent of shareholders who would have been entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. The consents shall be filed with the secretary of the corporation. The action shall not become effective until after at least ten days' written notice of the action has been given to each shareholder entitled to vote thereon who has not consented thereto. Section 3.16 Minors as Securityholders. The corporation may treat a minor ------------------------- who holds shares or obligations of the corporation as having capacity to receive and to empower others to receive dividends, interest, principal and other payments or distributions, to vote or express consent or dissent, and to make elections and exercise rights relating to such shares or obligations unless, in the case of payments or distributions on shares, the corporate officer responsible for maintaining the list of shareholders or the transfer agent of the corporation or, in the case of payments or distributions on obligations, the treasurer or paying officer or agent has received written notice that the holder is a minor. 8 ARTICLE IV BOARD OF DIRECTORS ------------------ Section 4.01 Powers; Personal Liability. (a) General Rule. Unless -------------------------- ------------ otherwise provided by statute, all powers vested by law in the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors. (b) Personal Liability of Directors. (i) A director shall not be ------------------------------- personally liable, as such, for monetary damages for any action taken, or any failure to take any action, unless: (A) the director has breached or failed to perform the duties of his or her office under Section 1721 of the Business Corporation Law (or any successor provision); and (B) the breach or failure to perform constitutes self dealing, willful misconduct or recklessness. (ii) The provisions of paragraph (1) shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, state or federal law. (c) Notation of Dissent. A director who is present at a meeting of ------------------- the board of directors, or of a committee of the board, at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files a written dissent to the action with the secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the secretary of the corporation immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action. Nothing in this section shall bar a director from asserting that minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the secretary, in writing, of the asserted omission or inaccuracy. Section 4.02 Qualifications and Selection of Directors. (a) ------------------------------------------ Qualifications. Each director of the corporation shall be a natural person of - -------------- full age who need not be a resident of the Commonwealth of Pennsylvania or a shareholder of the corporation. (b) Power to Select Directors. Except as otherwise provided in these ------------------------- bylaws, directors of the corporation shall be elected by the shareholders. (c) Nomination of Candidates. Upon the demand of any shareholder at ------------------------ any meeting of shareholders for the election of directors the chairman of the meeting shall call for and shall afford a reasonable opportunity for the making of nominations for the office of director. If the board of directors is classified with respect to the power to elect directors or with respect to the terms of directors and if, due to a vacancy or vacancies, or otherwise, directors of than one class are to be elected, each class of directors to be elected at the meeting shall be nominated and 9 elected separately. Any shareholder may nominate as many persons for the office of director as there are positions to be filled. If nominations for the office of director have been called for as provided in this section only candidates who have been so nominated shall be eligible for election. (d) Election of Directors. In elections for directors, voting need --------------------- not be by ballot, except upon demand made by a shareholder entitled to vote at the election and before the voting begins. The candidates receiving the highest number of votes from each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the class or group of classes shall be elected. If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election. (e) Cumulative Voting. Unless the articles provide for straight ----------------- voting, in each election of directors every shareholder entitled to vote shall have the right to multiply the number of votes to which the shareholder may be entitled by the total number of directors to be elected in the same election by the holders of the class or classes of shares of which his or her shares are a part and the shareholder may cast the whole number of his or her votes for one candidate or may distribute them among too or more candidates. If cumulative voting is applicable to the election, the chairman of the meeting may, and upon the request of any shareholder shall, instruct the judges of election that, if a ballot cast in the election of directors so directs, the judges shall cumulate the total votes cast by such ballot in such manner as may be required in order to elect the maximum number of nominees for which such ballot casts votes in the order of priority specified in such ballot, taking into account the total votes cast in the election of directors by each other ballot. Section 4.03 Number and Term of Office. (a) Number. The board of directors ------------------------- shall consist of such number of directors, not less than three nor more than eleven. (b) Term of Office. Each director shall hold office until his -------------- successor shall have been elected and qualified or until his or her earlier death, resignation or removal. A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director. (c) Resignation. Any director may resign at any time upon written ----------- notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation. Section 4.04 Vacancies. (a) General Rule. Vacancies in the board of --------- ------------ directors, including vacancies resulting from an increase in the number of directors, may be filled by a majority vote of the remaining members of the board though less than a quorum, or by a sole remaining director, and each person so selected shall be a director to serve until the next selection of the class for which such director has been chosen, and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. (b) Action by Resigned Directors. When one or more directors resign ---------------------------- from the board effective at a future date, the directors then in office, including those who have so 10 resigned, shall have power by the applicable vote to fill the vacancies, the vote thereon to take effect when the resignations become effective. Section 4.05 Removal of Directors. (a) Removal by the Shareholders. The -------------------- --------------------------- entire board of directors, or any class of the board, or any individual director may be removed from office by vote of the shareholders entitled to vote thereon without assigning any cause. In case the board or a class of the board or any one or more directors are so removed, new directors may be elected at the same meeting. (b) Removal by the Board. The board of directors may declare vacant -------------------- the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if, within 60 days after notice of his or her selection, the director does not accept the office either in writing or by attending a meeting of the board of directors. Section 4.06 Place of Meetings. Meetings of the board of directors may be ----------------- held at such place within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or as may be designated in the notice of the meeting. Section 4.07 Organization of Meetings. At every meeting of the board of ------------------------ directors, the chairman of the board, if there be one, or, in the case of a vacancy in the office or absence of the chairman of the board, one of the following officers present in the order stated: the president, the vice presidents in their order of rank and seniority, or a person chosen by a majority of the directors present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of the secretary and the assistant secretaries, any person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 4.08 Regular Meetings. Regular meetings of the board of directors ---------------- shall be held at such time and place as shall be designated from time to time by resolution of the board of directors. Section 4.09 Special Meetings. Special meetings of the board of directors ---------------- shall be held whenever called by the chairman or by two or more of the directors. Section 4.10 Quorum of and Action by Directors. (a) General Rule. A --------------------------------- ------------ majority of the directors in office of the corporation shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the board of directors. (b) Action by Written Consent. Any action required or permitted to be ------------------------- taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the secretary of the corporation. Section 4.11 Executive and Other Committees. (a) Establishment and Powers. ------------------------------ ------------------------ The board of directors may, by resolution adopted by a majority of the directors in office, establish one or more committees to consist of one or more directors of the corporation. Any committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all 11 of the powers and authority of the board of directors except that a committee shall not have any power or authority as to the following: (i) The submission to shareholders of any action requiring approval of shareholders under the Business corporation Law. (ii) The creation or filling of vacancies in the board of directors. (iii) The adoption, amendment or repeal of these bylaws. (iv) The amendment or repeal of any resolution of the board that by its terms is amendable or repealable only by the board. (v) Action on matters committed by a resolution of the board of directors to another committee of the board. (b) Alternate Committee Members. The board may designate one or more --------------------------- directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. In the absence or disqualification of a member and alternate member or members of a committee the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member. (c) Term. Each committee of the board shall serve at the pleasure of ---- the board. (d) Committee Procedures. The term "board of directors" or "board," -------------------- when used in any provision of these bylaws relating to the organization or procedures of or the manner of taking action by the board of directors, shall be construed to include and refer to any executive or other committee of the board. Section 4.12 Compensation. The board of directors shall have the authority ------------ to fix the compensation of directors for their services as directors and a director may be a salaried officer of the corporation. ARTICLE V OFFICERS -------- Section 5.01 Officers Generally. (a) Number, Qualifications and ------------------ -------------------------- Designation. The officers of the corporation shall be a chairman of the board, a - ------------ president, one or more vice presidents, a secretary, a treasurer, and such other officers as may be elected in accordance with the provisions of Section 5.03. Officers may but need not be directors or shareholders of the corporation. The president and secretary shall be natural persons of full age. The treasurer may be a corporation, but if a natural person shall be of full age. Any number of offices may be held by the same person. 12 (b) Bonding. The corporation may secure the fidelity of any or all of ------- its officers by bond or otherwise. (c) Standard of Care. Except as otherwise provided in the articles, ---------------- an officer shall perform his or her duties as an officer in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so perform his or her duties shall not be liable by reason of having been an officer of the corporation. Section 5.02 Election, Term of Office and Resignations. (a) Election and ----------------------------------------- ------------ Term of Office. The officers of the corporation, except those elected by - --------------- delegated authority pursuant to Section 5.03, shall be elected annually by the board of directors, and each such officer shall hold office for a term of one year and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. (b) Resignations. Any officer may resign at any time upon written ------------ notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as may be specified in the notice of resignation. Section 5.03 Subordinate Officers, Committees and Agents. The board of ------------------------------------------- directors may from time to time elect such other officers and appoint such committees, employees or other agents as the business of the corporation may require, including one or more assistant secretaries, and one or more assistant treasurers, each of whom shall hold office for such periods have such authority, and perform such duties as are provided in these bylaws, or as the board of directors may from time to time determine. The board of directors may delegate to any officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. Section 5.04 Removal of Officers and Agents. Any officer or agent of the ------------------------------ corporation may be removed by the board of directors with or without cause. The removal shall be without prejudice to the contract rights, if any, of any person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 5.05 Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification, or any other cause, may be filled by the board of directors or by the officer or committee to which the power to fill such office has been delegated pursuant to Section 5.03, as the case may be, and if the office is one for which these bylaws prescribe a term, shall be filled for the unexpired portion of the term. Section 5.06 Authority. All officers of the corporation, as between --------- themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided by or pursuant to resolutions or orders of the board of directors or, in the absence of controlling provisions in the resolutions or orders of the board of directors, as may be determined by or pursuant to these bylaws. 13 Section 5.07 The Chairman of the Board. The chairman of the board shall be ------------------------- the chief executive officer of the corporation and, subject to the control of the board of directors, shall have general charge and control of all its business and affairs and shall have all powers and shall perform all duties incident to the office of chairman of the board. The chairman of the board, or, in the absence of the chairman, the president, shall preside at all meetings of the shareholders and (if a director) of the board of directors. Section 5.08 The President. The president shall be the chief operating ------------- officer of the corporation and shall have general supervision over the operations of the corporation, subject however, to the control of the board of directors and the chairman of the board. In the absence of the chairman of the board, the president shall preside at all meetings of the shareholders and (if a director) of the board of directors, and shall perform such other duties as from time to time may be assigned by the board of directors or the chairman of the board. Section 5.09 The Vice Presidents. The vice presidents shall perform the ------------------- duties of the President in the absence of the president and such other duties as may from time to time be assigned to them by the board of directors or the chairman of the board. Section 5.10 The Secretary. The secretary or an assistant secretary shall ------------- attend all meetings of the shareholders and of the board of directors and all committees thereof and shall record all the votes of the shareholders and of the directors and the minutes of the meetings of the shareholders and of the board of directors and of committees of the board in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the corporation as required by law; shall be the custodian of the seal of the corporation and see that it is affixed to all documents to be executed on behalf of the corporation under its seal; and, in general, shall perform all duties incident to the office of secretary, and such other duties as may from time to time be assigned by the board of directors or the chairman of the board. Section 5.11 The Treasurer. The treasurer or an assistant treasurer shall ------------- have or provide for the custody of the funds or other property of the corporation; shall collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the corporation; shall deposit all funds in his or her custody as treasurer in such banks or other places of deposit as the board of directors may from time to time designate; shall, whenever so required by the board of directors, render an account showing all transactions as treasurer, and the financial condition of the corporation; and, in general, shall discharge such other duties as may from time to time be assigned by the board of directors or the chairman of the board. Section 5.12 Salaries. The salaries of the officers elected by the board -------- of directors shall be fixed from time to time by the board of directors or by such officer as may be designated by resolution of the board. The salaries or other compensation of any other officers, employees and other agents shall be fixed from time to time by the officer or committee to which the power to elect such officers or to retain or appoint such employees or other agents has been delegated pursuant to Section 5.03. No officer shall be prevented from receiving such salary or other compensation by reason of the fact that the officer is also a director of the corporation. 14 ARTICLE VI CERTIFICATES OF STOCK, TRANSFER, ETC. ------------------------------------- Section 6.01 Share Certificates. (a) Form of Certificates. Certificates ------------------ -------------------- for shares of the corporation shall be in such form as approved by the board of directors, and shall state that the corporation is incorporated under the laws of the Commonwealth of Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents. If the corporation is authorized to issue shares of more than one class or series, certificates for shares of the corporation shall set forth upon the face or back of the certificate (or shall state on the face or back of the certificate that the corporation will furnish to any shareholder upon request and without charge), a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the board of directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the classes and series of shares of the corporation. (b) Share Register. The share register or transfer books and blank -------------- share certificates shall be kept by the secretary or by any transfer agent or registrar designated by the board of directors for that purpose. Section 6.02 Issuance. The share certificates of the corporation shall be -------- numbered and registered in the share register or transfer books of the corporation as they are issued. They shall be executed in such manner as the board of directors shall determine. Section 6.03 Transfer. Transfers of shares shall be made an the share -------- register or transfer books of the corporation upon surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S. (S)(S) 8101 et seq., and -- --- its amendments and supplements. Section 6.04 Record Holder of Shares. The corporation shall be entitled to ----------------------- treat the person in whose name any share or shares of the corporation stand on the books of the corporation as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person. Section 6.05 Lost, Destroyed or Mutilated Certificates. The holder of any ----------------------------------------- shares of the corporation shall immediately notify the corporation of any loss, destruction or mutilation of the certificate therefor, and the board of directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, if the board of directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct. ARTICLE VII 15 INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER AUTHORIZED REPRESENTATIVES --------------------------------------------------------------------------- Section 7.01 Scope of Indemnification. (a) General Rule. The corporation ------------------------ ------------ shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise by reason of the fact that such person is or was serving in an indemnified capacity, including, without limitation, liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict or products liability, except: (i) where such indemnification is expressly prohibited by applicable law; (ii) where the conduct of the indemnified representative has been finally determined pursuant to Section 7.06 or otherwise: (A) to constitute willful misconduct or recklessness within the meaning of 15 Pa.C.S. (S)(S) 513(b) and 1746(b) and 42 Pa.C.S. (S) 8365(b) or any superseding provision of law sufficient in the circumstances to bar indemnification against liabilities arising from the conduct; or (B) to be based upon or attributable to the receipt by the indemnified representative from the corporation of a personal benefit to which the indemnified representative is not legally entitled; or (iii) to the extent such indemnification has been finally determined in a final adjudication pursuant to Section 7.06 to be otherwise unlawful. (b) Partial Payment. If an indemnified representative is entitled to --------------- indemnification in respect of a portion, but not all, of any liabilities to which such person may be subject, the corporation shall indemnify such indemnified representative to the maximum extent for such portion of the liabilities. (c) Presumption. The termination of a proceeding by judgment, order, ----------- settlement or conviction or upon a plea of nolo contendere or its equivalent ---- ---------- shall not of itself create a presumption that the indemnified representative is not entitled to indemnification. (d) Definitions. For purposes of this Article: ----------- (i) "indemnified capacity" means any and all past, present and future service by an indemnified representative in one or more capacities as a director, officer, employee or agent of the corporation, or, at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise; (ii) "indemnified representative" means any and all directors and officers of the corporation and any other person designated as an indemnified representative by the board of directors of the corporation (which may, but need not, include any person 16 serving at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise); (iii) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, attorneys' fees and disbursements); and (iv) "proceeding" means any threatened, pending or completed action, suit, appeal or other proceeding of any nature, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation, a class of its security holders or otherwise. Section 7.02 Proceedings Initiated by Indemnified Representatives. ---------------------------------------------------- Notwithstanding any other provision of this Article, the corporation shall not indemnify under this Article an indemnified representative for any liability incurred in a proceeding initiated (which shall not be deemed to include counter claims or affirmative defenses) or participated in as an intervenor or amicus ------ curiae by the person seeking indemnification unless such initiation of or - ------ participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This section does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under Section 7.06 or otherwise successfully prosecuting or defending the rights of an indemnified representative granted by or pursuant to this Article. Section 7.03 Advancing Expenses. The corporation shall pay the expenses ------------------ (including attorneys' fees and disbursements) incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 7.01 or the initiation of or participation in which is authorized pursuant to Section 7.02 upon receipt of an undertaking by or on behalf of the indemnified representative to repay the amount if it is ultimately determined pursuant to Section 7.06 that such person is not entitled to be indemnified by the corporation pursuant to this Article. The financial ability of an indemnified representative to repay an advance shall not be a prerequisite to the making of such advance. Section 7.04 Securing of Indemnification Obligations. To further effect, --------------------------------------- satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self- insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the board of directors shall deem appropriate. Absent fraud, the determination of the board of directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability. 17 Section 7.05 Payment of Indemnification. An indemnified representative -------------------------- shall be entitled to indemnification within 30 days after a written request for indemnification has been delivered to the secretary of the corporation. Section 7.06 Arbitration. (a) General Rule. Any dispute related to the ----------- ------------ right to indemnification, contribution or advancement of expenses as provided under this Article, except with respect to indemnification for liabilities arising under the Securities Act of 1933 that the corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the metropolitan area in which the principal executive offices of the corporation are located at the time, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the corporation, the second of whom shall be selected by the indemnified representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, and if one of the parties fails or refuses to select an arbitrator or the arbitrators selected by the corporation and the indemnified representative cannot agree on the selection of the third arbitrator within 30 days after such time as the corporation and the indemnified representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction in such metropolitan area. (b) Burden of Proof. The party or parties challenging the right of an --------------- indemnified representative to the benefits of this Article shall have the burden of proof. (c) Expenses. The corporation shall reimburse an indemnified -------- representative for the expenses (including attorneys' fees and disbursements) incurred in successfully prosecuting or defending such arbitration. (d) Effect. Any award entered by the arbitrators shall be final, ------ binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent. jurisdiction, except that the corporation shall be entitled to interpose as a defense in any such judicial enforcement proceeding any prior final judicial determination adverse to the indemnified representative under Section 7.01(a)(2) in a proceeding not directly involving indemnification under this Article. This arbitration provision shall be specifically enforceable. Section 7.07 Contribution. If the indemnification provided for in this ------------ Article or otherwise is unavailable for any reason in respect of any liability or portion thereof, the corporation shall contribute to the liabilities to which the indemnified representative may be subject in such proportion as is appropriate to reflect the intent of this Article or otherwise. Section 7.08 Mandatory Indemnification of Directors, Officers, etc. To the ----------------------------------------------------- extent that an authorized representative of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1741 or 1742 of the Business Corporation Law or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith. 18 Section 7.09 Contract Rights; Amendment or Reveal. All rights under this ------------------------------------ Article shall be deemed a contract between the corporation and the indemnified representative pursuant to which the corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing. Section 7.10 Scope of Article. The rights granted by this Article shall ---------------- not be deemed exclusive of any other rights to which those seeking indemnification, contribution or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an indemnified capacity and as to action in any other capacity. The indemnification, contribution and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. Section 7.11 Reliance on Provisions. Each person who shall act as an ---------------------- indemnified representative of the corporation shall be deemed to be doing so in reliance upon the rights of indemnification, contribution and advancement of expenses provided by this Article. Section 7.12 Interpretation. The provisions of this Article are intended -------------- to constitute bylaws authorized by 15 Pa.C.S. (S)(S) 513 and 1746 and 42 Pa.C.S. (S) 8365. ARTICLE VIII MISCELLANEOUS ------------- Section 8.01 Corporate Seal. The corporation shall have a corporate seal -------------- in the form of a circle containing the name of the corporation, the year of incorporation and such other details as may be approved by the board of directors. The affixation of the corporate seal shall not be necessary to the valid execution, assignment or endorsement by the corporation of any instrument or other document. Section 8.02 Checks. All checks, notes, bills of exchange or other similar ------ orders in writing shall be signed by such one or more officers or employees as the board of directors or any person authorized by resolution of the board of directors may from time to time designate. Section 8.03 Contracts. Except as otherwise provided in the Business --------- Corporation Law in the case of transactions that require action by the shareholders, the board of directors may authorize any officer or agent to enter into any contract or to execute or deliver any instrument on behalf of the corporation, and such authority may be general or confined to specific instances. Section 8.04 Interested Directors or Officers; Quorum. (a) General Rule. A ---------------------------------------- ------------ contract or transaction between the corporation and one or more of its directors or officers or between the corporation and another corporation, partnership, joint venture, trust or other enterprise in which one or more of its directors or officers are directors or officers or have a financial or other interest, shall not be void or voidable solely for that reason, or solely because the director or 19 officer is present at or participates in the meeting of the board of directors that authorizes the contract or transaction, or solely because his, her or their votes are counted for that purpose, if: (i) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and the board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum: (ii) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or (iii) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors or the shareholders. (b) Quorum. Common or interested directors may be counted in ------ determining the presence of a quorum at a meeting of the board which authorizes a contract or transaction specified in subsection (a). Section 8.05 Deposits. All funds of the corporation shall be deposited -------- from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees as the board of directors shall from time to time determine. Section 8.06 Corporate Records. (a) Required Records. The corporation ----------------- ---------------- shall keep complete and accurate books and records of account, minutes of the proceedings of the incorporators, shareholders and directors and a share register giving the names and addresses of all shareholders and the number and class of shares held by each. The share register shall be kept at either the registered office of the corporation in the Commonwealth of Pennsylvania or at its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time. (b) Right of Inspection. Every shareholder shall, upon written ------------------- verified demand stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books and records of account, and records of the proceedings of the incorporators, shareholders and directors to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to the interest of the person as a shareholder. In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand shall be accompanied by a verified power of attorney or other writing that authorizes the attorney or other agent to so act on behalf of the shareholder. The demand shall be directed to the corporation at its registered office in the Commonwealth of Pennsylvania or at its principal place of business wherever situated. Section 8.07 Financial Reports. Unless otherwise agreed between the ----------------- corporation and a shareholder, the corporation shall furnish to its shareholders annual financial statements, 20 including at least a balance sheet as of the end of each fiscal year and a statement of income and expenses for the fiscal year. The financial statements shall be prepared an the basis of generally accepted accounting principles, if the corporation prepares financial statements for the fiscal year on that basis for any purposes and may be consolidated statements of the corporation and one or more of its subsidiaries. The financial statements shall be mailed by the corporation to each of its shareholders entitled thereto within 120 days after the close of each fiscal year and, after the mailing and upon written request, shall be mailed by the corporation to any shareholder or beneficial owner entitled thereto to whom a copy of the most recent annual financial statements has not previously been mailed. Statements that are audited or reviewed by a public accountant shall be accompanied by the report of the accountant; in other cases, each copy shall be accompanied by a statement of the person in charge of the financial records of the corporation: (i) Stating his or her reasonable belief as to whether or not the financial statements were prepared in accordance with generally accepted accounting principles and, if not, describing the basis of presentation. (ii) Describing any material respects in which the financial statements were not prepared on a basis consistent with those prepared for the previous year. Section 8.08 Amendment of Bylaws. These bylaws may be amended or repealed, ------------------- or new bylaws may be adopted, either (i) by vote of the shareholders at any duly organized annual or special meeting of shareholders, or (ii) with respect to those matters that are not by statute committed expressly to the shareholders and regardless of whether the shareholders have previously adopted or approved the bylaw being amended or repealed, by vote of a majority of the board of directors of the corporation in office at any regular or special meeting of directors. Any change in these bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change. See Section 2.03 (b) (relating to notice of action by shareholders on bylaws). 21 EX-3.7 18 CERTIFICATE OF INCORPORATION OF BMC TRUCKING EXHIBIT 3.7 CERTIFICATE OF INCORPORATION -of- BMC TRUCKING, INC. -oo0oo- First: The name of the Corporation is BMC Trucking, Inc. (hereinafter sometimes called the "Corporation"). Second: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. Third: The nature of the business or purposes to be conducted or promoted are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. Fourth: The total number of shares of stock which the Corporation shall have authority to issue is 1,000 and the par value of each of such shares is $0.01. Fifth: The name and mailing address of the incorporator is as follows: Tanya R. Sripanich Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, New York 10004-1490 Sixth: The following additional provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for the creation, definition, limitation and regulation of the powers of the Corporation, the directors and the stockholders: 1. Election of directors need not be by written ballot. The Board of Directors shall have power to make, alter, amend and repeal the By-Laws of the Corporation and to fix the compensation of directors for services in any capacity. 2. Any director may be removed at any time, with or without cause, upon the affirmative vote of the holders of a majority of the stock of the Corporation at that time having voting power for the election of directors; provided, however, that no director who shall have been elected by the holders of a separate class of stock shall be removed under the provisions of this subdivision except upon the affirmative vote of the holders of a majority of the class whose holders elected him, if such holders are then entitled to vote for the election of directors. 3. Any corporate action, with respect to which the vote of the stockholders at a meeting thereof is required or permitted by any provision of the General Corporation Law of the State of Delaware or of the Certificate of Incorporation or the By-Laws of the Corporation, is authorized to be taken and may be taken without that vote and meeting, and that vote and meeting may be dispensed with, with the written consent of the holders of a majority (or, if with respect to a particular corporate action where the General Corporation Law of the State of Delaware or the Certificate of Incorporation or the By-Laws of the Corporation specifies a greater percentage, by the holders of that greater percentage) of the stock that would have been entitled to vote upon that action if a meeting were held. Prompt notice shall be given to all stockholders of the taking of any corporate action pursuant to the provisions of this paragraph 3 2 unless that action has been consented to in writing by the holders of all of the stock that would have been entitled to vote upon that action if a meeting were held. 4. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Seventh: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under (S)291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under (S)279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be 3 binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. IN WITNESS WHEREOF, I, the undersigned, being the incorporator named above, have hereunto set my hand and seal this 30/th/ day of November 1998. /s/ ----------------------------- Sole Incorporator 4 EX-3.8 19 BY-LAWS OF BMC TRUCKING, INC. EXHIBIT 3.8 BY-LAWS of BMC TRUCKING, INC. _____________________ (herein called the "Company") ARTICLE I --------- Stockholders ------------ Section 1.01. Annual Meeting. The Board of Directors by resolution shall ------------ -------------- designate the time, place and date (which shall be, in the case of the first annual meeting, not more than 13 months after the organization of the Company and, in the case of all other annual meetings, not more than 13 months after the date of the last annual meeting) of the annual meeting of the stockholders for the election of directors and the transaction of such other business as may come before it. Section 1.02. Special Meetings. Special meetings of the stockholders, for ------------ ---------------- any purpose or purposes, may be called at any time by the Chairman, the Vice- Chairman, the President, any Vice-President, the Treasurer, the Secretary or the Assistant Secretary, by resolution of the Board of Directors or upon written request by the holders of one-third of the outstanding shares. Special meetings of stockholders shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Section 1.03. Notice of Meetings of Stockholders. Whenever stockholders ------------ ----------------------------------- are required or permitted to take any action at a meeting, written notice of the meeting shall be given (unless that notice shall be waived or unless the meeting is to be dispensed with in accordance with the provisions of the General Corporation Law of the State of Delaware and the Certificate of Incorporation of the Company and Section 1.12 hereof) which shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given, personally or by mail, not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Company. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.04. Quorum. At all meetings of the stockholders, the holders of ------------ ------ one-third of the stock issued and outstanding and entitled to vote thereat, present in person or by proxy, shall constitute a quorum for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders. 2 The stockholders present may adjourn the meeting despite the absence of a quorum and at any such adjourned meeting at which the requisite amount of voting stock shall be represented, the Company may transact any business which might have been transacted at the original meeting had a quorum been there present. Section 1.05. Method of Voting. The vote upon any question before the ------------ ---------------- meeting need not be by ballot. All elections and all other questions shall be decided by a plurality of the votes cast, at a meeting at which a quorum is present, except as expressly provided otherwise by the General Corporation Law of the State of Delaware or the Certificate of Incorporation. Section 1.06. Voting Rights of Stockholders and Proxies. Each stockholder ------------ ----------------------------------------- of record entitled to vote in accordance with the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of stock entitled to vote standing in his name on the books of the Company, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 1.07. Ownership of its Own Stock. Shares of its own capital stock ------------ -------------------------- belonging to the Company or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Company, shall neither be entitled to vote nor be counted for quorum purposes. Nothing in this section shall be construed as limiting the right of any corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.08. Voting by Fiduciaries and Pledgors. Persons holding stock ------------ ---------------------------------- in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be 3 entitled to vote, unless in the transfer by the pledgor on the books of the Company he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Section 1.09. Fixing Date for Determination of Stockholders of Record. In ------------ ------------------------------------------------------- order to determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed by the Board of Directors, the record date shall be determined in accordance with the provisions of the General Corporation Law of the State of Delaware. Section 1.10. List of Stockholders. The officer who has charge of the ------------ -------------------- stock ledger of the Company shall prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held (which place shall be specified in the notice of the meeting or, if not so specified, at the place where said meeting is to be held), and the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who may be present. Upon the 4 willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. Section 1.11. Stockholder's Right of Inspection. Stockholders of record, ------------ --------------------------------- in person or by attorney or other agent, shall have the right, upon written demand under oath stating the purpose thereof, during the usual hours for business to inspect for any proper purpose the Company's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Company at its registered office in this State or at its principal place of business. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 1.10 or the books of the Company, or to vote in person or by proxy at any meeting of the stockholders. Section 1.12. Consent in Lieu of Meeting. Any corporate action, with ------------ -------------------------- respect to which the vote of the stockholders at a meeting thereof is required or permitted by any provision of the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company, or these By-Laws, may be taken without that vote and meeting, and that vote and meeting may be dispensed with, if that corporate action has been consented to in writing by the holders of a majority (or, if with respect to a particular corporate action the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company or these By-Laws 5 specifies a greater percentage, by the holders of that percentage) of the stock that would have been entitled to vote upon that action if a meeting were held. Prompt notice shall be given to all stockholders of the taking of any corporate action pursuant to the provisions of that paragraph unless that action has been consented to in writing by the holders of all of the stock that would have been entitled to vote upon that action if a meeting were held. ARTICLE II ---------- Directors --------- Section 2.01. Management of Business. The business of the Company shall ------------ ---------------------- be managed by its Board of Directors. The Board of Directors, in addition to the powers and authority expressly conferred upon it herein, by statute, by the Certificate of Incorporation of the Company or otherwise, is hereby empowered to exercise all such powers as may be exercised by the Company, except as expressly provided otherwise by the statutes of the State of Delaware, by the Certificate of Incorporation of the Company or by these By-Laws. Without prejudice to the generality of the foregoing, the Board of Directors, by resolution or resolutions, may create and issue, whether or not in connection with the issue and sale of any shares of stock or other securities of the Company, rights or options entitling the holders thereof to purchase from the Company any shares of its capital stock of any class or classes or any other securities of the Company, such rights or options to be evidenced by or in such instrument or instruments as shall be approved by the Board of Directors. The terms upon which, including the 6 time or times, which may be limited or unlimited in duration, at or within which, and the price or prices at which, any such rights or options may be issued and any such shares or other securities may be purchased from the Company upon the exercise of any such right or option shall be such as shall be fixed and stated in the resolution or resolutions adopted by the Board of Directors providing for the creation and issue of such rights or options, and, in every case, set forth or incorporated by reference in the instrument or instruments evidencing such rights or options. In the absence of actual fraud in the transaction, the judgment of the directors as to the consideration for the issuance of such rights or options and the sufficiency thereof shall be conclusive. In case the shares of stock of the Company to be issued upon the exercise of such rights or options shall be shares having a par value, the price or prices so to be received therefor shall not be less than the par value thereof. In case the shares of stock so to be issued shall be shares of stock without par value, the consideration therefor shall be determined in the manner provided in Section 153 of the General Corporation Law of the State of Delaware. Section 2.02. Qualifications and Number of Directors. Directors need not ------------ -------------------------------------- be stockholders. The number of directors which shall constitute the whole Board shall be not less than three nor more than eleven. Section 2.03. Election and Term. The directors shall be elected at the ------------ ----------------- annual meeting of the stockholders, and each director shall be elected to hold office until his successor shall be elected and qualified, or until his earlier resignation or removal. Section 2.04. Resignations. Any director of the Company may resign at any ------------ ------------ time by giving written notice to the Company. Such resignation shall take effect at the time specified therein, if any, or if no time is specified therein, then upon receipt of such notice by the 7 Company; and, unless otherwise provided therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.05. Vacancies and Newly Created Directorships. Vacancies and ------------ ----------------------------------------- newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until their successors shall be elected and qualified, or until their earlier resignation or removal. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as herein provided in the filling of other vacancies. Section 2.06. Quorum of Directors. At all meetings of the Board of ------------ ------------------- Directors, one-third of the entire Board shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as provided in Sections 2.05 and 2.12 hereof. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting of the directors to another time and place. Notice of any adjournment need not be given if such time and place are announced at the meeting. Section 2.07. Annual Meeting. The newly elected Board of Directors shall ------------ -------------- meet immediately following the adjournment of the annual meeting of stockholders in each year at the same place, within or without the State of Delaware, and no notice of such meeting shall be necessary. 8 Section 2.08. Regular Meetings. Regular meetings of the Board of ------------ ---------------- Directors may be held at such time and place, within or without the State of Delaware, as shall from time to time be fixed by the Board and no notice thereof shall be necessary. Section 2.09. Special Meetings. Special meetings may be called at any ------------ ---------------- time by the President, the Secretary or by resolution of any two Directors. Special meetings shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Special meetings of the Board of Directors shall be held upon notice to the directors or waiver thereof. Unless waived, notice of each special meeting of the directors, stating the time and place of the meeting, shall be given to each director by delivered letter, by telegram or by personal communication either over the telephone or otherwise, in each such case not later than the second day prior to the meeting, or by mailed letter deposited in the United States mail with postage thereon prepaid not later than the seventh day prior to the meeting. Notices of special meetings of the Board of Directors and waivers thereof need not state the purpose or purposes of the meeting. Section 2.10. Action Without a Meeting. 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 all members of the Board or committee, as the case may be, consent thereto in a writing or writings and the writing or writings are filed with the minutes of proceedings of the Board or committee. 9 Section 2.11. Compensation. Directors shall receive any such fixed sums ------------ ------------ and expenses of attendance for attendance at each meeting of the Board or of any committee and/or any such salary as may be determined from time to time by the Board of Directors; provided that nothing herein contained shall be construed to preclude any director from serving the Company in any other capacity and receiving compensation therefor. Section 2.12. Executive Committee. The Board of Directors may, by ------------ ------------------- resolution or resolutions, passed by a majority of the whole Board, designate an Executive Committee (and may discontinue the same at any time) to consist of three or more of the directors of the Company. The members shall be appointed by the Board and shall hold office at the pleasure of the Board. The Board may designate one or more directors as alternate members of the Committee, who may replace an absent or disqualified member at any meeting of the Committee. The Executive Committee shall have and may exercise all the powers of the Board of Directors (when the Board is not in session) in the management of the business and affairs of the Company (and may authorize the seal of the Company to be affixed to all papers which may require it), except that the Executive Committee shall have no power (a) to elect directors; (b) to alter, amend or repeal these By-Laws or any resolution or resolutions of the directors designating an Executive Committee; (c) to declare any dividend or make any other distribution to the stockholders of the Company; or (d) to appoint any member of the Executive Committee. Regular meetings of the Executive Committee may be held at such time and place, within or without the State of Delaware, as shall from time to time be fixed by the Executive Committee and no notice thereof shall be necessary. Special meetings may be called at any time by any officer of the Company or any member of the Committee. Special meetings shall be held at such place, within or without the State of Delaware, as shall be fixed by the person calling the meeting 10 and stated in the notice or waiver of the meeting. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business and the act of a majority present at which there is a quorum shall be the act of the Executive Committee. Notice of each special meeting of the Executive Committee shall be given (or waived) in the same manner as notice of a directors' meeting. ARTICLE III ----------- Officers -------- Section 3.01. Number. The officers of the Company shall be chosen by the ------------ ------ Board of Directors. The officers shall be a President and/or Chairman, a Secretary and a Treasurer, and such number of Vice-Presidents, Assistant Secretaries and Assistant Treasurers, and such other officers, if any, as the Board may from time to time determine. The Board may choose such other agents as it shall deem necessary. Any number of offices may be held by the same person. Section 3.02. Terms of Office. Each officer shall hold his office until ------------ --------------- his successor is chosen and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Company. Section 3.03. Removal. Any officer may be removed from office at any time ------------ ------- by the Board of Directors with or without cause. Section 3.04. Authority. The Secretary shall record all of the ------------ --------- proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose, and shall have the authority, perform the duties and exercise the powers in the management of the Company 11 usually incident to the office held by him, and/or such other authority, duties and powers as may be assigned to him from time to time by the Board of Directors, the Chairman, the Vice-Chairman or the President. The other officers, and agents, if any, shall have the authority, perform the duties and exercise the powers in the management of the Company usually incident to the offices held by them, respectively, and/or such other authority, duties and powers as may be assigned to them from time to time by the Board of Directors or (except in the case of the Chairman, the Vice-Chairman or the President) by the Chairman, the Vice President or the President. Section 3.05. Voting Securities Owned by the Company. Powers of attorney, ------------ -------------------------------------- proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Company may be executed in the name of and on behalf of the Company by the Chairman, the Vice Chairman, the President or any Vice- President and any such officer may, in the name of and on behalf of the Company, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Company may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Company might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. ARTICLE IV ---------- Capital Stock ------------- Section 4.01. Stock Certificates. Every holder of stock in the Company ------------ ------------------ shall be entitled to have a certificate signed by, or in the name of the Company by, the Chairman, or Vice 12 Chairman of the Board of Directors or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Company, certifying the number of shares owned by him in the Company. Where such certificate is signed (1) by a transfer agent other than the Company or its employee, or (2) by a registrar other than the Company or its employee, the signatures of the officers of the Company may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Company with the same effect as if he were such officer at the date of issue. Section 4.02. Transfers. Stock of the Company shall be transferable in ------------ --------- the manner prescribed by the laws of the State of Delaware. Section 4.03. Registered Holders. Prior to due presentment for ------------ ------------------ registration of transfer of any security of the Company in registered form, the Company shall treat the registered owner as the person exclusively entitled to vote, to receive notifications and to otherwise exercise all the rights and powers of an owner, and shall not be bound to recognize any equitable or other claim to, or interest in, any security, whether or not the Company shall have notice thereof, except as otherwise provided by the laws of the State of Delaware. 13 Section 4.04. New Certificates. The Company shall issue a new certificate ------------ ---------------- of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, if the owner: (1) so requests before the Company has notice that the shares of stock represented by that certificate have been acquired by a bona fide purchaser; (2) files with the Company a bond sufficient (in the judgment of the directors) to indemnify the Company against any claim that may be made against it on account of the alleged loss or theft of that certificate or the issuance of a new certificate; and (3) satisfies any other requirements imposed by the directors that are reasonable under the circumstances. A new certificate may be issued without requiring any bond when, in the judgment of the directors, it is proper so to do. ARTICLE V --------- INDEMNIFICATION --------------- Section 5.01. The Company shall indemnify its officers, directors, ------------ employees and agents to the fullest extent permitted by the General Corporation Law of Delaware and the relevant provision in the Certificate of Incorporation of the Corporation, if applicable. ARTICLE VI ---------- Miscellaneous ------------- Section 6.01. Offices. The registered office of the Company in the State ------------ ------- of Delaware shall be as stated in the Certificate of Incorporation or at such other location to which the registered office shall be changed by action of the board of directors The Company may also have offices at other places within and/or without the State of Delaware. 14 Section 6.02. Seal. The corporate seal shall have inscribed thereon the ------------ ---- name of the Company, the year of its incorporation and the words "Corporate Seal Delaware." Section 6.03. Checks. All checks or demands for money shall be signed by ------------ ------ such person or persons as the Board of Directors may from time to time determine. Section 6.04. Fiscal Year. The fiscal year shall begin the first day of ------------ ----------- January in each year and shall end on the thirty-first day of December of such year. Section 6.05. Waivers of Notice; Dispensing with Notice. Whenever any ------------ ----------------------------------------- notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Corporation, or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Whenever any notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Company, or of these By-Laws, to any person with whom communication is made unlawful by any law of the United States of America, or by any rule, regulation, proclamation or executive order issued 15 under any such law, then the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person; and any action or meeting which shall be taken or held without notice to any such person or without giving or without applying for a license or permit to give any such notice to any such person with whom communication is made unlawful as aforesaid, shall have the same force and effect as if such notice had been given as provided under the provisions of the General Corporation Law of the State of Delaware, or under the provisions of the Certificate of Incorporation of the Company or of these By-Laws. In the event that the action taken by the Company is such as to require the filing of a certificate under any of the other sections of this title, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. Section 6.06. Loans to and Guarantees of Obligations of Employees and ------------ ------------------------------------------------------- Officers. The Company may lend money to or guaranty any obligation of, or - -------- otherwise assist any officer or other employee of the Company or of a subsidiary, including any officer or employee who is a director of the Company or a subsidiary, whenever, in the judgment of the Board of Directors, such loan, guaranty or assistance may reasonably be expected to benefit the Company. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Company. Nothing in this Section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Company at common law or under any other statute. Section 6.07. Amendment of By-Laws. These By-Laws may be altered, amended ------------ -------------------- or repealed at any meeting of the Board of Directors. 16 Section 6.08. Section Headings and Statutory References. The headings of ------------ ----------------------------------------- the Articles and Sections of these By-Laws, have been inserted for convenience of reference only and shall not be deemed to be a part of these By-Laws. 17 EX-3.9 20 RESTATED ARTICLES OF INCORPORATION EXHIBIT 3.9 ARTICLES OF AMENDMENT - DOMESTIC BUSINESS CORPORATION DSCB:15-1915 (Rev 89) In compliance with the requirements of 15 Pa.C.S. (S) 1915 (relating to articles of amendment), the undersigned business corporation, desiring to amend its Articles, hereby states that: 1. The name of the corporation is: Bucks County Crushed Stone Company -------------------------------------------- ___________________________________________________________________________ 2. The (a) address of this corporation's current registered office in this Commonwealth or (b) the name of its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department): (a) Ottsville R.D. Ottsville PA 18942 Bucks --------------------------------------------------------------------------- Number and Street City State Zip County (b) c/c:_______________________________________________________________________ Name of Commercial Registered Office Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. 3. The statute by or under which it was incorporated is: Act of May 5, 1933 ---------------------- (P.L. 364, No. 106) ------------------- 4. The original date of its incorporation is: February 25, 1955 -------------------------------- 5. (Check, and if appropriate complete, one of the following): X The amendment shall be effective upon filing these Articles of ----- Amendment in the Department of State. _____ The amendment shall be effective on: _____________ at _____ _________ Date Hour 6. (Check one of the following): _____ The amendment was adopted by the shareholders pursuant to 15 Pa.C.S. (S) 1914(a) and (b). X The amendment was adopted by the board of directors pursuant to 15 ----- Pa.C.S. (S) 1914 (c). 7. (Check, and if appropriate complete, one of the following): _____ The amendment adopted by the corporation, set forth in full, is as follows: X The amendment adopted by corporation is set forth in full in Exhibit ----- A, attached hereto and made a part hereof. 8. (Check if the amendment restates the Articles): X The restated Articles of Incorporation supersede the original ----- Articles and all amendments thereto. IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof this ________ day of ______________________, 19____. BUCKS COUNTY CRUSHED STONE COMPANY -------------------------------------------------------- (Name of Corporation) BY: /s/ ---------------------------------------------------- (Signature) TITLE: Chairman of the Board and Chief Executive Officer -------------------------------------------------- Exhibit A --------- RESOLVED, that the Articles of Incorporation of the corporation be and they are hereby restated as set forth in full below RESTATED ARTICLES OF INCORPORATION OF BUCKS COUNTY CRUSHED STONE COMPANY 1. The name of the corporation is Bucks County Crushed Stone Company. 2. The address of this corporation's registered office in this Commonwealth is Ottsville R.D., County of Bucks. 3. The corporation is incorporated under the provisions of the Business Corporation Law of 1988. 4. The aggregate number of shares which the corporation shall have authority to issue is 300 Common shares and the par value of each Common share is $100. 5. These Articles of Incorporation may be amended in the manner at the time prescribed by statute, and all rights conferred upon the shareholders herein are granted subject to this reservation. EX-3.10 21 AMENDED AND RESTATED BY-LAWS OF BUCKS COUNTY EXHIBIT 3.10 AMENDED AND RESTATED BY-LAWS OF BUCKS COUNTY CRUSHED STONE COMPANY, INC. ________________ (A PENNSYLVANIA CORPORATION) ARTICLE I OFFICES AND FISCAL YEAR ----------------------- Section 1.01 Registered Office. The registered office of the corporation ----------------- in the Commonwealth of Pennsylvania shall be as stated in the Articles of Incorporation (the "articles") or at such other location to which the registered office shall be changed by action of the board of directors. Section 1.02 Other Offices. The corporation may also have offices at such ------------- other places within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or the business of the corporation may require. Section 1.03 Fiscal Year. The fiscal year of the corporation shall end on ----------- the Saturday in December or January that is closest to December 31 in each year unless otherwise fixed by the board of directors. ARTICLE II NOTICE--WAIVERS--MEETINGS GENERALLY ----------------------------------- Section 2.01 Manner of Giving Notice. (a) General Rule. Whenever ----------------------- ------------ written notice is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by facsimile transmission to the address (or to the telex, TWX, facsimile or telephone number) of the person appearing on the books of the corporation or, in the case of directors, supplied by the director to the corporation for the purpose of notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in the case of facsimile transmission when received. A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of the Business Corporation Law, the articles or these bylaws. (b) Adjourned Shareholder Meetings. When a meeting of shareholders is ------------------------------ adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board fixes a new record date for the adjourned meeting in which event notice shall be given in accordance with Section 2.03. Section 2.02 Notice of Meetings of Board of Directors. Notice of a ---------------------------------------- regular meeting of the board of directors need not be given. Notice of every special meeting of the board of directors shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone, telex, TWX or facsimile transmission) or 48 hours (in the case of notice by telegraph, courier service or express mail) or five days (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time and place of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board need be specified in a notice of the meeting. Section 2.03 Notice of Meetings of Shareholders. (a) General Rule. ---------------------------------- ------------ Written notice of every meeting of the shareholders shall be given by, or at the direction of, the secretary or other authorized person to each shareholder of record entitled to vote at the meeting at least (1) ten days prior to the day named for a meeting (and, in case of a meeting called to consider a merger, consolidation, share exchange or division, to each shareholder of record not entitled to vote at the meeting) called to consider a fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day named for the meeting in any other case. If the secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so. In the case of a special meeting of shareholders, the notice shall specify the general nature of the business to be transacted. (b) Notice of Action by Shareholders an Bylaws. In the case of a ------------------------------------------ meeting of shareholders that has as one of its purposes action on the bylaws, written notice shall be given to each shareholder that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment or repeal of the bylaws. There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby. Section 2.04 Waiver of Notice. (a) Written Waiver. Whenever any written ---------------- -------------- notice is required to be given under the provisions of the Business Corporation Law, the articles or these by-laws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as provided in the next sentence, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted at such meeting. (b) Waiver by Attendance. Attendance of a person at any meeting -------------------- shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 2.05 Modification of Proposal Contained in Notice. Whenever the -------------------------------------------- language of a proposed resolution is included in a written notice of a meeting required to be given under the provisions of the Business Corporation Law or the articles or these bylaws, the meeting 2 considering the resolution may without further notice adopt it with such clarifying or other amendments as do not enlarge its original purpose. Section 2.06 Exception to Requirement of Notice. (a) General Rule. ---------------------------------- ------------ Whenever any notice or communication is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws or by the terms of any agreement or other instrument or as a condition precedent to taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required. (b) Shareholders Without Forwarding Addresses. Notice or other ----------------------------------------- communications need not be sent to any shareholder with whom the corporation has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the corporation with a current address. Whenever the shareholder provides the corporation with a current address, the corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders. Section 2.07 Use of Conference Telephone and Similar Equipment. Any ------------------------------------------------- director may participate in any meeting of the board of directors, and the board of directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more persons may participate in a meeting of the shareholders of the corporation by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at the meeting. ARTICLE III SHAREHOLDERS ------------ Section 3.01 Place of Meeting. All meetings of the shareholders of the ---------------- corporation shall be held at the registered office of the corporation or such other place as may be designated by the board of directors in the notice of a meeting. Section 3.02 Annual Meeting. The board of directors may fix and designate -------------- the date and time of the annual meeting of the shareholders, but if no such date and time is fixed and designated by the board, the meeting for any calendar year shall be held on the second Monday of May in such year, if not a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on the next succeeding business day, not a Saturday, at 10:00 o'clock A.M., and at said meeting the shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. If the annual meeting shall not have been called and held within six months after the designated time, any shareholder may call the meeting at any time thereafter. Section 3.03 Special Meetings. (a) Call of Special Meetings. Special ---------------- ------------------------ meetings of the shareholders may be called at any time: 3 (i) by the chairman of the board; (ii) by the board of directors; or (iii) unless otherwise provided in the articles, by shareholders entitled to cast at least 20% of the votes that all shareholders are entitled to cast at the particular meeting. (b) Fixing of Time for Meeting. At any time, upon written request, -------------------------- of any person who has called a special meeting, it shall be the duty of the secretary to fix the time of the meeting which shall be held not more than 60 days after the receipt of the request. If the secretary neglects or refuses to fix the time of the meeting, the person or persons calling the meeting may do so. Section 3.04 Quorum and Adjournment. (a) General Rule. A meeting of ---------------------- ------------ shareholders of the corporation duly called shall not be organized for the transaction of business unless a quorum is present. The presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted, upon at the meeting shall constitute a quorum, for the purposes of consideration and action on the matter. Shares of the corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be counted in determining the total number of outstanding shares for quorum purposes at any given time. (b) Withdrawal of a Quorum. The shareholders present at a duly ---------------------- organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. (c) Adjournments Generally. Any regular or special meeting of the ---------------------- shareholders, including one at which directors are to be elected and one which cannot be organized because a quorum has not attended may be adjourned for such period and to such place as the shareholders present and entitled to vote shall direct. (d) Electing Directors at Adjourned Meeting. Those shareholders --------------------------------------- entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of electing directors. (e) Other Action in Absence of Quorum. Those shareholders entitled to --------------------------------- vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. Section 3.05 Action by Shareholders. Except as otherwise provided in the ---------------------- Business Corporation Law or the articles or these bylaws, whenever any corporate action is to be taken by vote of the shareholders of the corporation, it shall be authorized by a majority of the votes cast at a duly organized meeting of shareholders by the holders of shares entitled to vote thereon. 4 Section 3.06 Organization. At every meeting of the shareholders, the ------------ chairman of the board, if there be one, or, in the case of vacancy in office or absence of the chairman of the board, one of the following persons present in the order stated: the president, the vice presidents in their order of rank and seniority, or a person chosen by vote of the shareholders present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of both the secretary and assistant secretaries, a person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 3.07 Voting Rights of Shareholders. Unless otherwise provided in ----------------------------- the articles, every shareholder of the corporation shall be entitled to one vote for every share standing in the name of the shareholder on the books of the corporation. Section 3.08 Voting and Other Action by Proxy. (a) General Rule. (i) -------------------------------- ------------ Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person to act for the shareholder by proxy. (ii) The presence of, or vote or other action at a meeting of shareholders, or the expression of consent or dissent to corporate action in writing, by a proxy of a shareholder shall constitute the presence of, or vote or action by, or written consent or dissent of, the shareholder. (iii) Where two or more proxies of a shareholder are present, the corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons. (b) Minimum Requirements. Every proxy shall be executed in writing -------------------- by the shareholder or by the duly authorized attorney-in-fact of the shareholder and filed with the secretary of the corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the secretary of the corporation. An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the secretary of the corporation. (c) Expenses. The corporation shall pay the reasonable expenses of -------- solicitation of votes, proxies or consents of shareholders by or on behalf of the board of directors or its nominees for election to the board, including solicitation by professional proxy solicitors and otherwise. Section 3.09 Voting by Fiduciaries and Pledgees. Shares of the corporation ---------------------------------- standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A 5 shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee. Section 3.10 Voting by Joint Holders of Shares. (a) General Rule. Where --------------------------------- ------------ shares of the corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise: (i) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the corporation shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and (ii) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves. (b) Exception. If there has been filed with the secretary of the --------- corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the document latest in date of operative effect so filed, and only these persons, shall be entitled to vote the shares but only in accordance therewith. Section 3.11 Voting by Corporations. (a) Voting by Corporate ---------------------- ------------------- Shareholders. Any corporation that is a shareholder of this corporation may - ------------ vote at meetings of shareholders of this corporation, or consent or dissent to corporate action in writing, by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the board of directors of the other corporation or a provision of its articles or bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the secretary of this corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares. (b) Controlled Shares. Shares of this corporation owned, directly or ----------------- indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares for voting purposes at any given time. Section 3.12 Determination of Shareholders of Record. (a) Fixing Record --------------------------------------- ------------- Date. The board of directors may fix a time prior to the date of any meeting - ---- of shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 90 days prior to the date of the meeting of shareholders. Only shareholders of record an the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the corporation after any record date fixed as provided in this subsection. The board of directors may similarly fix a record date for the determination of shareholders of record for any other purpose. When a determination of 6 shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the board fixes a new record date for the adjourned meeting. (b) Determination When a Record Date is Not Fixed. If a record date --------------------------------------------- is not fixed: (i) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day an which notice is given or, if notice is waived, at the close of business an the day immediately preceding the day on which the meeting is held. (ii) The record date for determining shareholders entitled to express consent or dissent to corporate action in writing without a meeting, when prior action by the board of directors is not necessary, shall be the close of business on the day on which the first written consent or dissent is filed with the secretary of the corporation. (iii) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. (c) Certification by Nominee. The board of directors may adopt a ------------------------ procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons. Upon receipt by the corporation of a certification complying with the procedure the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. Section 3.13 Voting Lists. (a) General Rule. The officer or agent having ------------ ------------ charge of the transfer books for shares of the corporation shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof. (b) Effect of List. Failure to comply with the requirements of this -------------- section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. The original share register or transfer book, or a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of shareholders. Section 3.14 Judges of Election. (a) Appointment. In advance of any ------------------ ----------- meeting of shareholders of the corporation, the board of directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder 7 shall, appoint judges of election at the meeting. The number of judges shall be one or three. A person who is a candidate for an office to be filled at the meeting shall not act as a judge. (b) Vacancies. In case any person appointed as a judge fails to --------- appear or fails or refuses to act, the vacancy may be filled by appointment made by the board of directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof. (c) Duties. The judges of election shall determine the number of ------ shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with nominations by shareholders or the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. if there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. (d) Report. On request of the presiding officer of the meeting or of ------ any shareholder, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein. Section 3.15 Consent of Shareholders in Lieu of Meeting. (a) Unanimous ------------------------------------------ --------- Written Consent. Any action require or permitted to be taken at a meeting of the - --------------- shareholders or of a class of shareholders may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the shareholders who would be entitled to vote at a meeting for such purpose shall be filed with the secretary of the corporation. (b) Partial Written Consent. Any action required or permitted to be ----------------------- taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting upon the written consent of shareholders who would have been entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. The consents shall be filed with the secretary of the corporation. The action shall not become effective until after at least ten days' written notice of the action has been given to each shareholder entitled to vote thereon who has not consented thereto. Section 3.16 Minors as Securityholders. The corporation may treat a minor ------------------------- who holds shares or obligations of the corporation as having capacity to receive and to empower others to receive dividends, interest, principal and other payments or distributions, to vote or express consent or dissent, and to make elections and exercise rights relating to such shares or obligations unless, in the case of payments or distributions on shares, the corporate officer responsible for maintaining the list of shareholders or the transfer agent of the corporation or, in the case of payments or distributions on obligations, the treasurer or paying officer or agent has received written notice that the holder is a minor. 8 ARTICLE IV BOARD OF DIRECTORS ------------------ Section 4.01 Powers; Personal Liability. (a) General Rule. Unless -------------------------- ------------ otherwise provided by statute, all powers vested by law in the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors. (b) Personal Liability of Directors. (i) A director shall not be ------------------------------- personally liable, as such, for monetary damages for any action taken, or any failure to take any action, unless: (A) the director has breached or failed to perform the duties of his or her office under Section 1721 of the Business Corporation Law (or any successor provision); and (B) the breach or failure to perform constitutes self dealing, willful misconduct or recklessness. (ii) The provisions of paragraph (1) shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, state or federal law. (c) Notation of Dissent. A director who is present at a meeting of ------------------- the board of directors, or of a committee of the board, at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files a written dissent to the action with the secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the secretary of the corporation immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action. Nothing in this section shall bar a director from asserting that minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the secretary, in writing, of the asserted omission or inaccuracy. Section 4.02 Qualifications and Selection of Directors. (a) ----------------------------------------- Qualifications. Each director of the corporation shall be a natural person of - -------------- full age who need not be a resident of the Commonwealth of Pennsylvania or a shareholder of the corporation. (b) Power to Select Directors. Except as otherwise provided in these ------------------------- bylaws, directors of the corporation shall be elected by the shareholders. (c) Nomination of Candidates. Upon the demand of any shareholder at ------------------------ any meeting of shareholders for the election of directors the chairman of the meeting shall call for and shall afford a reasonable opportunity for the making of nominations for the office of director. If the board of directors is classified with respect to the power to elect directors or with respect to the terms of directors and if, due to a vacancy or vacancies, or otherwise, directors of than one class are to be elected, each class of directors to be elected at the meeting shall be nominated and 9 elected separately. Any shareholder may nominate as many persons for the office of director as there are positions to be filled. If nominations for the office of director have been called for as provided in this section only candidates who have been so nominated shall be eligible for election. (d) Election of Directors. In elections for directors, voting need --------------------- not be by ballot, except upon demand made by a shareholder entitled to vote at the election and before the voting begins. The candidates receiving the highest number of votes from each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the class or group of classes shall be elected. If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election. (e) Cumulative Voting. Unless the articles provide for straight ----------------- voting, in each election of directors every shareholder entitled to vote shall have the right to multiply the number of votes to which the shareholder may be entitled by the total number of directors to be elected in the same election by the holders of the class or classes of shares of which his or her shares are a part and the shareholder may cast the whole number of his or her votes for one candidate or may distribute them among too or more candidates. If cumulative voting is applicable to the election, the chairman of the meeting may, and upon the request of any shareholder shall, instruct the judges of election that, if a ballot cast in the election of directors so directs, the judges shall cumulate the total votes cast by such ballot in such manner as may be required in order to elect the maximum number of nominees for which such ballot casts votes in the order of priority specified in such ballot, taking into account the total votes cast in the election of directors by each other ballot. Section 4.03 Number and Term of Office. (a) Number. The board of ------------------------- ------ directors shall consist of such number of directors, not less than three nor more than eleven. (b) Term of Office. Each director shall hold office until his -------------- successor shall have been elected and qualified or until his or her earlier death, resignation or removal. A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director. (c) Resignation. Any director may resign at any time upon written ----------- notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation. Section 4.04 Vacancies. (a) General Rule. Vacancies in the board of --------- ------------ directors, including vacancies resulting from an increase in the number of directors, may be filled by a majority vote of the remaining members of the board though less than a quorum, or by a sole remaining director, and each person so selected shall be a director to serve until the next selection of the class for which such director has been chosen, and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. (b) Action by Resigned Directors. When one or more directors resign ---------------------------- from the board effective at a future date, the directors then in office, including those who have so 10 resigned, shall have power by the applicable vote to fill the vacancies, the vote thereon to take effect when the resignations become effective. Section 4.05 Removal of Directors. (a) Removal by the Shareholders. -------------------- --------------------------- The entire board of directors, or any class of the board, or any individual director may be removed from office by vote of the shareholders entitled to vote thereon without assigning any cause. In case the board or a class of the board or any one or more directors are so removed, new directors may be elected at the same meeting. (b) Removal by the Board. The board of directors may declare vacant -------------------- the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if, within 60 days after notice of his or her selection, the director does not accept the office either in writing or by attending a meeting of the board of directors. Section 4.06 Place of Meetings. Meetings of the board of directors may ----------------- be held at such place within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or as may be designated in the notice of the meeting. Section 4.07 Organization of Meetings. At every meeting of the board of ------------------------ directors, the chairman of the board, if there be one, or, in the case of a vacancy in the office or absence of the chairman of the board, one of the following officers present in the order stated: the president, the vice presidents in their order of rank and seniority, or a person chosen by a majority of the directors present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of the secretary and the assistant secretaries, any person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 4.08 Regular Meetings. Regular meetings of the board of directors ---------------- shall be held at such time and place as shall be designated from time to time by resolution of the board of directors. Section 4.09 Special Meetings. Special meetings of the board of directors ---------------- shall be held whenever called by the chairman or by two or more of the directors. Section 4.10 Quorum of and Action by Directors. (a) General Rule. A --------------------------------- ------------ majority of the directors in office of the corporation shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the board of directors. (b) Action by Written Consent. Any action required or permitted to ------------------------- be taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the secretary of the corporation. Section 4.11 Executive and Other Committees. (a) Establishment and Powers. ------------------------------ ------------------------ The board of directors may, by resolution adopted by a majority of the directors in office, establish one or more committees to consist of one or more directors of the corporation. Any committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all 11 of the powers and authority of the board of directors except that a committee shall not have any power or authority as to the following: (i) The submission to shareholders of any action requiring approval of shareholders under the Business corporation Law. (ii) The creation or filling of vacancies in the board of directors. (iii) The adoption, amendment or repeal of these bylaws. (iv) The amendment or repeal of any resolution of the board that by its terms is amendable or repealable only by the board. (v) Action on matters committed by a resolution of the board of directors to another committee of the board. (b) Alternate Committee Members. The board may designate one or more --------------------------- directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. In the absence or disqualification of a member and alternate member or members of a committee the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member. (c) Term. Each committee of the board shall serve at the pleasure ---- of the board. (d) Committee Procedures. The term "board of directors" or "board," -------------------- when used in any provision of these bylaws relating to the organization or procedures of or the manner of taking action by the board of directors, shall be construed to include and refer to any executive or other committee of the board. Section 4.12 Compensation. The board of directors shall have the authority ------------ to fix the compensation of directors for their services as directors and a director may be a salaried officer of the corporation. ARTICLE V OFFICERS -------- Section 5.01 Officers Generally. (a) Number, Qualifications and ------------------ -------------------------- Designation. The officers of the corporation shall be a chairman of the board, a - ----------- president, one or more vice presidents, a secretary, a treasurer, and such other officers as may be elected in accordance with the provisions of Section 5.03. Officers may but need not be directors or shareholders of the corporation. The president and secretary shall be natural persons of full age. The treasurer may be a corporation, but if a natural person shall be of full age. Any number of offices may be held by the same person. 12 (b) Bonding. The corporation may secure the fidelity of any or all of ------- its officers by bond or otherwise. (c) Standard of Care. Except as otherwise provided in the articles, ---------------- an officer shall perform his or her duties as an officer in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so perform his or her duties shall not be liable by reason of having been an officer of the corporation. Section 5.02 Election, Term of Office and Resignations. (a) Election and ----------------------------------------- ------------ Term of Office. The officers of the corporation, except those elected by - -------------- delegated authority pursuant to Section 5.03, shall be elected annually by the board of directors, and each such officer shall hold office for a term of one year and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. (b) Resignations. Any officer may resign at any time upon written ------------ notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as may be specified in the notice of resignation. Section 5.03 Subordinate Officers, Committees and Agents. The board of ------------------------------------------- directors may from time to time elect such other officers and appoint such committees, employees or other agents as the business of the corporation may require, including one or more assistant secretaries, and one or more assistant treasurers, each of whom shall hold office for such periods have such authority, and perform such duties as are provided in these bylaws, or as the board of directors may from time to time determine. The board of directors may delegate to any officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. Section 5.04 Removal of Officers and Agents. Any officer or agent of the ------------------------------ corporation may be removed by the board of directors with or without cause. The removal shall be without prejudice to the contract rights, if any, of any person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 5.05 Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification, or any other cause, may be filled by the board of directors or by the officer or committee to which the power to fill such office has been delegated pursuant to Section 5.03, as the case may be, and if the office is one for which these bylaws prescribe a term, shall be filled for the unexpired portion of the term. Section 5.06 Authority. All officers of the corporation, as between --------- themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided by or pursuant to resolutions or orders of the board of directors or, in the absence of controlling provisions in the resolutions or orders of the board of directors, as may be determined by or pursuant to these bylaws. 13 Section 5.07 The Chairman of the Board. The chairman of the board shall ------------------------- be the chief executive officer of the corporation and, subject to the control of the board of directors, shall have general charge and control of all its business and affairs and shall have all powers and shall perform all duties incident to the office of chairman of the board. The chairman of the board, or, in the absence of the chairman, the president, shall preside at all meetings of the shareholders and (if a director) of the board of directors. Section 5.08 The President. The president shall be the chief operating ------------- officer of the corporation and shall have general supervision over the operations of the corporation, subject however, to the control of the board of directors and the chairman of the board. In the absence of the chairman of the board, the president shall preside at all meetings of the shareholders and (if a director) of the board of directors, and shall perform such other duties as from time to time may be assigned by the board of directors or the chairman of the board. Section 5.09 The Vice Presidents. The vice presidents shall perform the ------------------- duties of the President in the absence of the president and such other duties as may from time to time be assigned to them by the board of directors or the chairman of the board. Section 5.10 The Secretary. The secretary or an assistant secretary shall ------------- attend all meetings of the shareholders and of the board of directors and all committees thereof and shall record all the votes of the shareholders and of the directors and the minutes of the meetings of the shareholders and of the board of directors and of committees of the board in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the corporation as required by law; shall be the custodian of the seal of the corporation and see that it is affixed to all documents to be executed on behalf of the corporation under its seal; and, in general, shall perform all duties incident to the office of secretary, and such other duties as may from time to time be assigned by the board of directors or the chairman of the board. Section 5.11 The Treasurer. The treasurer or an assistant treasurer shall ------------- have or provide for the custody of the funds or other property of the corporation; shall collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the corporation; shall deposit all funds in his or her custody as treasurer in such banks or other places of deposit as the board of directors may from time to time designate; shall, whenever so required by the board of directors, render an account showing all transactions as treasurer, and the financial condition of the corporation; and, in general, shall discharge such other duties as may from time to time be assigned by the board of directors or the chairman of the board. Section 5.12 Salaries. The salaries of the officers elected by the board -------- of directors shall be fixed from time to time by the board of directors or by such officer as may be designated by resolution of the board. The salaries or other compensation of any other officers, employees and other agents shall be fixed from time to time by the officer or committee to which the power to elect such officers or to retain or appoint such employees or other agents has been delegated pursuant to Section 5.03. No officer shall be prevented from receiving such salary or other compensation by reason of the fact that the officer is also a director of the corporation. 14 ARTICLE VI CERTIFICATES OF STOCK, TRANSFER, ETC. ------------------------------------- Section 6.01 Share Certificates. (a) Form of Certificates. Certificates ------------------ -------------------- for shares of the corporation shall be in such form as approved by the board of directors, and shall state that the corporation is incorporated under the laws of the Commonwealth of Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents. If the corporation is authorized to issue shares of more than one class or series, certificates for shares of the corporation shall set forth upon the face or back of the certificate (or shall state on the face or back of the certificate that the corporation will furnish to any shareholder upon request and without charge), a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the board of directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the classes and series of shares of the corporation. (b) Share Register. The share register or transfer books and blank -------------- share certificates shall be kept by the secretary or by any transfer agent or registrar designated by the board of directors for that purpose. Section 6.02 Issuance. The share certificates of the corporation shall be -------- numbered and registered in the share register or transfer books of the corporation as they are issued. They shall be executed in such manner as the board of directors shall determine. Section 6.03 Transfer. Transfers of shares shall be made an the share -------- register or transfer books of the corporation upon surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S. (S)(S) 8101 et seq., and -- --- its amendments and supplements. Section 6.04 Record Holder of Shares. The corporation shall be entitled to ----------------------- treat the person in whose name any share or shares of the corporation stand on the books of the corporation as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person. Section 6.05 Lost, Destroyed or Mutilated Certificates. The holder of any ----------------------------------------- shares of the corporation shall immediately notify the corporation of any loss, destruction or mutilation of the certificate therefor, and the board of directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, if the board of directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct. ARTICLE VII 15 INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER AUTHORIZED REPRESENTATIVES --------------------------------------------------------------------------- Section 7.01 Scope of Indemnification. (a) General Rule. The corporation ------------------------ ------------ shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise by reason of the fact that such person is or was serving in an indemnified capacity, including, without limitation, liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict or products liability, except: (i) where such indemnification is expressly prohibited by applicable law; (ii) where the conduct of the indemnified representative has been finally determined pursuant to Section 7.06 or otherwise: (A) to constitute willful misconduct or recklessness within the meaning of 15 Pa.C.S. (S)(S) 513(b) and 1746(b) and 42 Pa.C.S. (S) 8365(b) or any superseding provision of law sufficient in the circumstances to bar indemnification against liabilities arising from the conduct; or (B) to be based upon or attributable to the receipt by the indemnified representative from the corporation of a personal benefit to which the indemnified representative is not legally entitled; or (iii) to the extent such indemnification has been finally determined in a final adjudication pursuant to Section 7.06 to be otherwise unlawful. (b) Partial Payment. If an indemnified representative is entitled to --------------- indemnification in respect of a portion, but not all, of any liabilities to which such person may be subject, the corporation shall indemnify such indemnified representative to the maximum extent for such portion of the liabilities. (c) Presumption. The termination of a proceeding by judgment, order, ----------- settlement or conviction or upon a plea of nolo contendere or its equivalent ---- ---------- shall not of itself create a presumption that the indemnified representative is not entitled to indemnification. (d) Definitions. For purposes of this Article: ----------- (i) "indemnified capacity" means any and all past, present and future service by an indemnified representative in one or more capacities as a director, officer, employee or agent of the corporation, or, at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise; (ii) "indemnified representative" means any and all directors and officers of the corporation and any other person designated as an indemnified representative by the board of directors of the corporation (which may, but need not, include any person 16 serving at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise); (iii) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, attorneys' fees and disbursements); and (iv) "proceeding" means any threatened, pending or completed action, suit, appeal or other proceeding of any nature, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation, a class of its security holders or otherwise. Section 7.02 Proceedings Initiated by Indemnified Representatives. ---------------------------------------------------- Notwithstanding any other provision of this Article, the corporation shall not indemnify under this Article an indemnified representative for any liability incurred in a proceeding initiated (which shall not be deemed to include counter claims or affirmative defenses) or participated in as an intervenor or amicus ------ curiae by the person seeking indemnification unless such initiation of or - ------ participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This section does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under Section 7.06 or otherwise successfully prosecuting or defending the rights of an indemnified representative granted by or pursuant to this Article. Section 7.03 Advancing Expenses. The corporation shall pay the expenses ------------------ (including attorneys' fees and disbursements) incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 7.01 or the initiation of or participation in which is authorized pursuant to Section 7.02 upon receipt of an undertaking by or on behalf of the indemnified representative to repay the amount if it is ultimately determined pursuant to Section 7.06 that such person is not entitled to be indemnified by the corporation pursuant to this Article. The financial ability of an indemnified representative to repay an advance shall not be a prerequisite to the making of such advance. Section 7.04 Securing of Indemnification Obligations. To further effect, --------------------------------------- satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self- insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the board of directors shall deem appropriate. Absent fraud, the determination of the board of directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability. 17 Section 7.05 Payment of Indemnification. An indemnified representative -------------------------- shall be entitled to indemnification within 30 days after a written request for indemnification has been delivered to the secretary of the corporation. Section 7.06 Arbitration. (a) General Rule. Any dispute related to the ----------- ------------ right to indemnification, contribution or advancement of expenses as provided under this Article, except with respect to indemnification for liabilities arising under the Securities Act of 1933 that the corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the metropolitan area in which the principal executive offices of the corporation are located at the time, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the corporation, the second of whom shall be selected by the indemnified representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, and if one of the parties fails or refuses to select an arbitrator or the arbitrators selected by the corporation and the indemnified representative cannot agree on the selection of the third arbitrator within 30 days after such time as the corporation and the indemnified representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction in such metropolitan area. (b) Burden of Proof. The party or parties challenging the right of an --------------- indemnified representative to the benefits of this Article shall have the burden of proof. (c) Expenses. The corporation shall reimburse an indemnified -------- representative for the expenses (including attorneys' fees and disbursements) incurred in successfully prosecuting or defending such arbitration. (d) Effect. Any award entered by the arbitrators shall be final, -------- binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent. jurisdiction, except that the corporation shall be entitled to interpose as a defense in any such judicial enforcement proceeding any prior final judicial determination adverse to the indemnified representative under Section 7.01(a)(2) in a proceeding not directly involving indemnification under this Article. This arbitration provision shall be specifically enforceable. Section 7.07 Contribution. If the indemnification provided for in this ------------ Article or otherwise is unavailable for any reason in respect of any liability or portion thereof, the corporation shall contribute to the liabilities to which the indemnified representative may be subject in such proportion as is appropriate to reflect the intent of this Article or otherwise. Section 7.08 Mandatory Indemnification of Directors, Officers, etc. To the ----------------------------------------------------- extent that an authorized representative of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1741 or 1742 of the Business Corporation Law or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith. 18 Section 7.09 Contract Rights; Amendment or Reveal. All rights under this ------------------------------------ Article shall be deemed a contract between the corporation and the indemnified representative pursuant to which the corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing. Section 7.10 Scope of Article. The rights granted by this Article shall ---------------- not be deemed exclusive of any other rights to which those seeking indemnification, contribution or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an indemnified capacity and as to action in any other capacity. The indemnification, contribution and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. Section 7.11 Reliance on Provisions. Each person who shall act as an ---------------------- indemnified representative of the corporation shall be deemed to be doing so in reliance upon the rights of indemnification, contribution and advancement of expenses provided by this Article. Section 7.12 Interpretation. The provisions of this Article are intended -------------- to constitute bylaws authorized by 15 Pa.C.S. (S)(S) 513 and 1746 and 42 Pa.C.S. (S) 8365. ARTICLE VIII MISCELLANEOUS ------------- Section 8.01 Corporate Seal. The corporation shall have a corporate seal -------------- in the form of a circle containing the name of the corporation, the year of incorporation and such other details as may be approved by the board of directors. The affixation of the corporate seal shall not be necessary to the valid execution, assignment or endorsement by the corporation of any instrument or other document. Section 8.02 Checks. All checks, notes, bills of exchange or other similar ------ orders in writing shall be signed by such one or more officers or employees as the board of directors or any person authorized by resolution of the board of directors may from time to time designate . Section 8.03 Contracts. Except as otherwise provided in the Business --------- Corporation Law in the case of transactions that require action by the shareholders, the board of directors may authorize any officer or agent to enter into any contract or to execute or deliver any instrument on behalf of the corporation, and such authority may be general or confined to specific instances. Section 8.04 Interested Directors or Officers; Quorum. (a) General Rule. ---------------------------------------- ------------ A contract or transaction between the corporation and one or more of its directors or officers or between the corporation and another corporation, partnership, joint venture, trust or other enterprise in which one or more of its directors or officers are directors or officers or have a financial or other interest, shall not be void or voidable solely for that reason, or solely because the director or 19 officer is present at or participates in the meeting of the board of directors that authorizes the contract or transaction, or solely because his, her or their votes are counted for that purpose, if: (i) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and the board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum: (ii) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or (iii) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors or the shareholders. (b) Quorum. Common or interested directors may be counted in ------ determining the presence of a quorum at a meeting of the board which authorizes a contract or transaction specified in subsection (a). Section 8.05 Deposits. All funds of the corporation shall be deposited -------- from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees as the board of directors shall from time to time determine. Section 8.06 Corporate Records. (a) Required Records. The corporation ----------------- ---------------- shall keep complete and accurate books and records of account, minutes of the proceedings of the incorporators, shareholders and directors and a share register giving the names and addresses of all shareholders and the number and class of shares held by each. The share register shall be kept at either the registered office of the corporation in the Commonwealth of Pennsylvania or at its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time. (b) Right of Inspection. Every shareholder shall, upon written ------------------- verified demand stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books and records of account, and records of the proceedings of the incorporators, shareholders and directors to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to the interest of the person as a shareholder. In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand shall be accompanied by a verified power of attorney or other writing that authorizes the attorney or other agent to so act on behalf of the shareholder. The demand shall be directed to the corporation at its registered office in the Commonwealth of Pennsylvania or at its principal place of business wherever situated. Section 8.07 Financial Reports. Unless otherwise agreed between the ----------------- corporation and a shareholder, the corporation shall furnish to its shareholders annual financial statements, 20 including at least a balance sheet as of the end of each fiscal year and a statement of income and expenses for the fiscal year. The financial statements shall be prepared an the basis of generally accepted accounting principles, if the corporation prepares financial statements for the fiscal year on that basis for any purposes and may be consolidated statements of the corporation and one or more of its subsidiaries. The financial statements shall be mailed by the corporation to each of its shareholders entitled thereto within 120 days after the close of each fiscal year and, after the mailing and upon written request, shall be mailed by the corporation to any shareholder or beneficial owner entitled thereto to whom a copy of the most recent annual financial statements has not previously been mailed. Statements that are audited or reviewed by a public accountant shall be accompanied by the report of the accountant; in other cases, each copy shall be accompanied by a statement of the person in charge of the financial records of the corporation: (i) Stating his or her reasonable belief as to whether or not the financial statements were prepared in accordance with generally accepted accounting principles and, if not, describing the basis of presentation. (ii) Describing any material respects in which the financial statements were not prepared on a basis consistent with those prepared for the previous year. Section 8.08 Amendment of Bylaws. These bylaws may be amended or repealed, ------------------- or new bylaws may be adopted, either (i) by vote of the shareholders at any duly organized annual or special meeting of shareholders, or (ii) with respect to those matters that are not by statute committed expressly to the shareholders and regardless of whether the shareholders have previously adopted or approved the bylaw being amended or repealed, by vote of a majority of the board of directors of the corporation in office at any regular or special meeting of directors. Any change in these bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change. See Section 2.03 (b) (relating to notice of action by shareholders on bylaws). 21 EX-3.11 22 CERTIFICATE OF INCORPORATION OF CHIPPEWA FARMS EXHIBIT 3.11 8107 668 -------- (Line for Numbering) 723963 COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE CORPORATION BUREAU In compliance with the requirements of section 204 of the Business Corporation Law, act of May 5, 1933 (P.L. 364) (15 P.S. (S)1204) the undersigned, desiring to be incorporated as a business corporation, hereby certifies (certify) that: 1. The name of the corporation is: CHIPPEWA FARMS CORPORATION - -------------------------------------------------------------------------------- 2. The location and post office address of the initial registered office of the corporation in this Commonwealth is: Second Street Pike, - -------------------------------------------------------------------------------- (NUMBER) (STREET) Penns Park Pennsylvania 18943 - -------------------------------------------------------------------------------- (CITY) (ZIP CODE) 3. The corporation is incorporated under the Business Corporation Law of the Commonwealth of Pennsylvania for the following purpose or purposes: To own and lease agricultural land, to raise feed grains and other crops and also livestock and any other agricultural animals and to engage in and do any lawful act concerning any lawful business for which corporations may be incorporated under the said Pennsylvania Business Corporation Law, as amended. 4. The term for which the corporation is to exist is: Perpetual ----------------------- 5. The aggregate number of shares which the corporation shall have authority to issue is: 1,000 shares of common stock having no par value and having a stated value applicable thereto of $1.00 per share. 6. The name(s) and post office address(es) of each incorporator(s) and the numbers and class of shares subscribed by such incorporation (is) (are)
NAME ADDRESS NUMBER AND CLASS OF SHARES Better Materials Corporation 1,000 - ------------------------------ ------------------------------ --------------------------- Second Street Pike - ------------------------------ ------------------------------ --------------------------- Penns Park, Pa. 18943 - ------------------------------ ------------------------------ ---------------------------
IN TESTIMONY WHEREOF, the incorporator(s) has (have) signed and sealed these Articles of Incorporation this 9th day of January, 1981. Attest: /s/ (SEAL) Better Materials Corporation (SEAL) ------------- ----------------------------- (SEAL) By: /s/ (SEAL) -------------------------- Vice President INSTRUCTIONS FOR COMPLETION OF FORM: A. For general instructions relating to the incorporation of business corporations see 19 Pa. Code Ch. 35 (relating to business corporations generally). These instructions relate to such matters as corporate name, stated purposes, term of existence, authorized share structure and related authority of the board of directors, inclusion of names of first directors in the Articles of Incorporation, optional provisions on cumulative voting for election of directors, etc. B. One of more corporations or natural persons of full age may incorporate a business corporation. C. Optional provisions required or authorized by law may be added as paragraphs 7, 8, 9 . . . etc. D. The following shall accompany this form: (1) Three copies of Form DSCB:BCL-206 (Registry Statement Domestic or Foreign Business Corporation). (2) Any necessary copies of Form DSCB:17.2 (Consent to Appropriation of Name) or Form DSCB:17.3 (Consent to Use of Similar Name). (3) Any necessary governmental approvals. E. BCL (S) 205 (15 Pa. (S) 1205) requires that the incorporators shall advertise their intention to file or the corporation shall advertise the filing of articles of incorporation. Proofs of publication of such advertising should not be delivered to the Department, but should be filed with the minutes of the corporation. 2 Commonwealth of Pennsylvania Department of State CERTIFICATE OF INCORPORATION Office of the Secretary of the Commonwealth To All to Whom These Presents Shall Come, Greeting: Whereas, under the provisions of the Law of the Commonwealth, the Secretary of the Commonwealth is authorized and required to issue a "Certificate of Incorporation" evidencing the incorporation of an entity. Whereas, the stipulations and conditions of the Law have been fully complied with by CHIPPEWA FARMS CORPORATION Therefore, know ye, that subject to the Constitution of this Commonwealth, and under the authority of the Laws thereof, I do by these presents, which I have caused to be sealed with the Great Seal of the Commonwealth, declare and certify the creation, erection and incorporation of the above in deed and in law by the name chosen hereinbefore specified. Such corporation shall have and enjoy and shall be subject to all the powers, duties, requirements and restrictions, specified and enjoined in and by the applicable laws of this Commonwealth. Given under my Hand and the Great Seal of the Commonwealth, at the City of Harrisburg, this 16th day of January, in the year of our Lord one thousand nine hundred and eighty-one and of the Commonwealth the two hundred fifth. /s/ William R. Davis -------------------------------------- Secretary of the Commonwealth EX-3.12 23 AMENDED AND RESTATED BY-LAWS OF CHIPPEWA FARMS EXHIBIT 3.12 ------------ AMENDED AND RESTATED BY-LAWS OF CHIPPEWA FARMS CORPORATION ________________ (A PENNSYLVANIA CORPORATION) ARTICLE I OFFICES AND FISCAL YEAR ----------------------- Section 1.01 Registered Office. The registered office of the corporation ----------------- in the Commonwealth of Pennsylvania shall be as stated in the Articles of Incorporation (the "articles") or at such other location to which the registered office shall be changed by action of the board of directors. Section 1.02 Other Offices. The corporation may also have offices at such ------------- other places within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or the business of the corporation may require. Section 1.03 Fiscal Year. The fiscal year of the corporation shall end on ----------- the Saturday in December or January that is closest to December 31 in each year unless otherwise fixed by the board of directors. ARTICLE II NOTICE--WAIVERS--MEETINGS GENERALLY ----------------------------------- Section 2.01 Manner of Giving Notice. (a) General Rule. Whenever written ----------------------- ------------ notice is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by facsimile transmission to the address (or to the telex, TWX, facsimile or telephone number) of the person appearing on the books of the corporation or, in the case of directors, supplied by the director to the corporation for the purpose of notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in the case of facsimile transmission when received. A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of the Business Corporation Law, the articles or these bylaws. (b) Adjourned Shareholder Meetings. When a meeting of shareholders is ------------------------------ adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board fixes a new record date for the adjourned meeting in which event notice shall be given in accordance with Section 2.03. Section 2.02 Notice of Meetings of Board of Directors. Notice of a ---------------------------------------- regular meeting of the board of directors need not be given. Notice of every special meeting of the board of directors shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone, telex, TWX or facsimile transmission) or 48 hours (in the case of notice by telegraph, courier service or express mail) or five days (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time and place of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board need be specified in a notice of the meeting. Section 2.03 Notice of Meetings of Shareholders. (a) General Rule. ---------------------------------- ------------ Written notice of every meeting of the shareholders shall be given by, or at the direction of, the secretary or other authorized person to each shareholder of record entitled to vote at the meeting at least (1) ten days prior to the day named for a meeting (and, in case of a meeting called to consider a merger, consolidation, share exchange or division, to each shareholder of record not entitled to vote at the meeting) called to consider a fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day named for the meeting in any other case. If the secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so. In the case of a special meeting of shareholders, the notice shall specify the general nature of the business to be transacted. (b) Notice of Action by Shareholders an Bylaws. In the case of a ------------------------------------------ meeting of shareholders that has as one of its purposes action on the bylaws, written notice shall be given to each shareholder that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment or repeal of the bylaws. There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby. Section 2.04 Waiver of Notice. (a) Written Waiver. Whenever any written ---------------- -------------- notice is required to be given under the provisions of the Business Corporation Law, the articles or these by-laws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as provided in the next sentence, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted at such meeting. (b) Waiver by Attendance. Attendance of a person at any meeting shall -------------------- constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 2.05 Modification of Proposal Contained in Notice. Whenever the -------------------------------------------- language of a proposed resolution is included in a written notice of a meeting required to be given under the provisions of the Business Corporation Law or the articles or these bylaws, the meeting 2 considering the resolution may without further notice adopt it with such clarifying or other amendments as do not enlarge its original purpose. Section 2.06 Exception to Requirement of Notice. (a) General Rule. ---------------------------------- ------------ Whenever any notice or communication is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws or by the terms of any agreement or other instrument or as a condition precedent to taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required. (b) Shareholders Without Forwarding Addresses. Notice or other ----------------------------------------- communications need not be sent to any shareholder with whom the corporation has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the corporation with a current address. Whenever the shareholder provides the corporation with a current address, the corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders. Section 2.07 Use of Conference Telephone and Similar Equipment. Any ------------------------------------------------- director may participate in any meeting of the board of directors, and the board of directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more persons may participate in a meeting of the shareholders of the corporation by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at the meeting. ARTICLE III SHAREHOLDERS ------------ Section 3.01 Place of Meeting. All meetings of the shareholders of the ---------------- corporation shall be held at the registered office of the corporation or such other place as may be designated by the board of directors in the notice of a meeting. Section 3.02 Annual Meeting. The board of directors may fix and designate -------------- the date and time of the annual meeting of the shareholders, but if no such date and time is fixed and designated by the board, the meeting for any calendar year shall be held on the second Monday of May in such year, if not a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on the next succeeding business day, not a Saturday, at 10:00 o'clock A.M., and at said meeting the shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. If the annual meeting shall not have been called and held within six months after the designated time, any shareholder may call the meeting at any time thereafter. Section 3.03 Special Meetings. (a) Call of Special Meetings. Special ---------------- ------------------------ meetings of the shareholders may be called at any time: 3 (i) by the chairman of the board; (ii) by the board of directors; or (iii) unless otherwise provided in the articles, by shareholders entitled to cast at least 20% of the votes that all shareholders are entitled to cast at the particular meeting. (b) Fixing of Time for Meeting. At any time, upon written request, of -------------------------- any person who has called a special meeting, it shall be the duty of the secretary to fix the time of the meeting which shall be held not more than 60 days after the receipt of the request. If the secretary neglects or refuses to fix the time of the meeting, the person or persons calling the meeting may do so. Section 3.04 Quorum and Adjournment. (a) General Rule. A meeting of ---------------------- ------------ shareholders of the corporation duly called shall not be organized for the transaction of business unless a quorum is present. The presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted, upon at the meeting shall constitute a quorum, for the purposes of consideration and action on the matter. Shares of the corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be counted in determining the total number of outstanding shares for quorum purposes at any given time. (b) Withdrawal of a Quorum. The shareholders present at a duly ---------------------- organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. (c) Adjournments Generally. Any regular or special meeting of the ---------------------- shareholders, including one at which directors are to be elected and one which cannot be organized because a quorum has not attended may be adjourned for such period and to such place as the shareholders present and entitled to vote shall direct. (d) Electing Directors at Adjourned Meeting. Those shareholders --------------------------------------- entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of electing directors. (e) Other Action in Absence of Quorum. Those shareholders entitled to --------------------------------- vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. Section 3.05 Action by Shareholders. Except as otherwise provided in the ---------------------- Business Corporation Law or the articles or these bylaws, whenever any corporate action is to be taken by vote of the shareholders of the corporation, it shall be authorized by a majority of the votes cast at a duly organized meeting of shareholders by the holders of shares entitled to vote thereon. 4 Section 3.06 Organization. At every meeting of the shareholders, the ------------ chairman of the board, if there be one, or, in the case of vacancy in office or absence of the chairman of the board, one of the following persons present in the order stated: the president, the vice presidents in their order of rank and seniority, or a person chosen by vote of the shareholders present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of both the secretary and assistant secretaries, a person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 3.07 Voting Rights of Shareholders. Unless otherwise provided in ----------------------------- the articles, every shareholder of the corporation shall be entitled to one vote for every share standing in the name of the shareholder on the books of the corporation. Section 3.08 Voting and Other Action by Proxy. (a) General Rule. (i) -------------------------------- ------------ Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person to act for the shareholder by proxy. (ii) The presence of, or vote or other action at a meeting of shareholders, or the expression of consent or dissent to corporate action in writing, by a proxy of a shareholder shall constitute the presence of, or vote or action by, or written consent or dissent of, the shareholder. (iii) Where two or more proxies of a shareholder are present, the corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons. (b) Minimum Requirements. Every proxy shall be executed in writing by -------------------- the shareholder or by the duly authorized attorney-in-fact of the shareholder and filed with the secretary of the corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the secretary of the corporation. An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the secretary of the corporation. (c) Expenses. The corporation shall pay the reasonable expenses of -------- solicitation of votes, proxies or consents of shareholders by or on behalf of the board of directors or its nominees for election to the board, including solicitation by professional proxy solicitors and otherwise. Section 3.09 Voting by Fiduciaries and Pledgees. Shares of the ---------------------------------- corporation standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A 5 shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee. Section 3.10 Voting by Joint Holders of Shares. (a) General Rule. Where --------------------------------- ------------ shares of the corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise: (i) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the corporation shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and (ii) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves. (b) Exception. If there has been filed with the secretary of the --------- corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the document latest in date of operative effect so filed, and only these persons, shall be entitled to vote the shares but only in accordance therewith. Section 3.11 Voting by Corporations. (a) Voting by Corporate ---------------------- ------------------- Shareholders. Any corporation that is a shareholder of this corporation may - ------------ vote at meetings of shareholders of this corporation, or consent or dissent to corporate action in writing, by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the board of directors of the other corporation or a provision of its articles or bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the secretary of this corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares. (b) Controlled Shares. Shares of this corporation owned, directly or ----------------- indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares for voting purposes at any given time. Section 3.12 Determination of Shareholders of Record. (a) Fixing --------------------------------------- ------- Record Date. The board of directors may fix a time prior to the date of any - ----------- meeting of shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 90 days prior to the date of the meeting of shareholders. Only shareholders of record an the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the corporation after any record date fixed as provided in this subsection. The board of directors may similarly fix a record date for the determination of shareholders of record for any other purpose. When a determination of 6 shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the board fixes a new record date for the adjourned meeting. (b) Determination When a Record Date is Not Fixed. If a record date --------------------------------------------- is not fixed: (i) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day an which notice is given or, if notice is waived, at the close of business an the day immediately preceding the day on which the meeting is held. (ii) The record date for determining shareholders entitled to express consent or dissent to corporate action in writing without a meeting, when prior action by the board of directors is not necessary, shall be the close of business on the day on which the first written consent or dissent is filed with the secretary of the corporation. (iii) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. (c) Certification by Nominee. The board of directors may adopt a ------------------------ procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons.. Upon receipt by the corporation of a certification complying with the procedure the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. Section 3.13 Voting Lists. (a) General Rule. The officer or agent having ------------ ------------ charge of the transfer books for shares of the corporation shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof. (b) Effect of List. Failure to comply with the requirements of this -------------- section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. The original share register or transfer book, or a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of shareholders. Section 3.14 Judges of Election. (a) Appointment. In advance of any ------------------ ----------- meeting of shareholders of the corporation, the board of directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder 7 shall, appoint judges of election at the meeting. The number of judges shall be one or three. A person who is a candidate for an office to be filled at the meeting shall not act as a judge. (b) Vacancies. In case any person appointed as a judge fails to --------- appear or fails or refuses to act, the vacancy may be filled by appointment made by the board of directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof. (c) Duties. The judges of election shall determine the number of ------ shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with nominations by shareholders or the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. if there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. (d) Report. On request of the presiding officer of the meeting or of ------ any shareholder, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein. Section 3.15 Consent of Shareholders in Lieu of Meeting. (a) Unanimous ------------------------------------------ --------- Written Consent. Any action require or permitted to be taken at a meeting of the - --------------- shareholders or of a class of shareholders may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the shareholders who would be entitled to vote at a meeting for such purpose shall be filed with the secretary of the corporation. (b) Partial Written Consent. Any action required or permitted to be ----------------------- taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting upon the written consent of shareholders who would have been entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. The consents shall be filed with the secretary of the corporation. The action shall not become effective until after at least ten days' written notice of the action has been given to each shareholder entitled to vote thereon who has not consented thereto. Section 3.16 Minors as Securityholders. The corporation may treat a minor ------------------------- who holds shares or obligations of the corporation as having capacity to receive and to empower others to receive dividends, interest, principal and other payments or distributions, to vote or express consent or dissent, and to make elections and exercise rights relating to such shares or obligations unless, in the case of payments or distributions on shares, the corporate officer responsible for maintaining the list of shareholders or the transfer agent of the corporation or, in the case of payments or distributions on obligations, the treasurer or paying officer or agent has received written notice that the holder is a minor. 8 ARTICLE IV BOARD OF DIRECTORS ------------------ Section 4.01 Powers; Personal Liability. (a) General Rule. Unless -------------------------- ------------ otherwise provided by statute, all powers vested by law in the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors. (b) Personal Liability of Directors. (i) A director shall not be ------------------------------- personally liable, as such, for monetary damages for any action taken, or any failure to take any action, unless: (A) the director has breached or failed to perform the duties of his or her office under Section 1721 of the Business Corporation Law (or any successor provision); and (B) the breach or failure to perform constitutes self dealing, willful misconduct or recklessness. (ii) The provisions of paragraph (1) shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, state or federal law. (c) Notation of Dissent. A director who is present at a meeting of ------------------- the board of directors, or of a committee of the board, at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files a written dissent to the action with the secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the secretary of the corporation immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action. Nothing in this section shall bar a director from asserting that minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the secretary, in writing, of the asserted omission or inaccuracy. Section 4.02 Qualifications and Selection of Directors. (a) ----------------------------------------- Qualifications. Each director of the corporation shall be a natural person of - -------------- full age who need not be a resident of the Commonwealth of Pennsylvania or a shareholder of the corporation. (b) Power to Select Directors. Except as otherwise provided in these ------------------------- bylaws, directors of the corporation shall be elected by the shareholders. (c) Nomination of Candidates. Upon the demand of any shareholder at ------------------------ any meeting of shareholders for the election of directors the chairman of the meeting shall call for and shall afford a reasonable opportunity for the making of nominations for the office of director. If the board of directors is classified with respect to the power to elect directors or with respect to the terms of directors and if, due to a vacancy or vacancies, or otherwise, directors of than one class are to be elected, each class of directors to be elected at the meeting shall be nominated and 9 elected separately. Any shareholder may nominate as many persons for the office of director as there are positions to be filled. If nominations for the office of director have been called for as provided in this section only candidates who have been so nominated shall be eligible for election. (d) Election of Directors. In elections for directors, voting need --------------------- not be by ballot, except upon demand made by a shareholder entitled to vote at the election and before the voting begins. The candidates receiving the highest number of votes from each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the class or group of classes shall be elected. If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election. (e) Cumulative Voting. Unless the articles provide for straight ----------------- voting, in each election of directors every shareholder entitled to vote shall have the right to multiply the number of votes to which the shareholder may be entitled by the total number of directors to be elected in the same election by the holders of the class or classes of shares of which his or her shares are a part and the shareholder may cast the whole number of his or her votes for one candidate or may distribute them among too or more candidates. If cumulative voting is applicable to the election, the chairman of the meeting may, and upon the request of any shareholder shall, instruct the judges of election that, if a ballot cast in the election of directors so directs, the judges shall cumulate the total votes cast by such ballot in such manner as may be required in order to elect the maximum number of nominees for which such ballot casts votes in the order of priority specified in such ballot, taking into account the total votes cast in the election of directors by each other ballot. Section 4.03 Number and Term of Office. (a) Number. The board of ------------------------- ------ directors shall consist of such number of directors, not less than three nor more than eleven. (b) Term of Office. Each director shall hold office until his -------------- successor shall have been elected and qualified or until his or her earlier death, resignation or removal. A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director. (c) Resignation. Any director may resign at any time upon written ----------- notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation. Section 4.04 Vacancies. (a) General Rule. Vacancies in the board of --------- ------------ directors, including vacancies resulting from an increase in the number of directors, may be filled by a majority vote of the remaining members of the board though less than a quorum, or by a sole remaining director, and each person so selected shall be a director to serve until the next selection of the class for which such director has been chosen, and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. (b) Action by Resigned Directors. When one or more directors resign ---------------------------- from the board effective at a future date, the directors then in office, including those who have so 10 resigned, shall have power by the applicable vote to fill the vacancies, the vote thereon to take effect when the resignations become effective. Section 4.05 Removal of Directors. (a) Removal by the Shareholders. The -------------------- --------------------------- entire board of directors, or any class of the board, or any individual director may be removed from office by vote of the shareholders entitled to vote thereon without assigning any cause. In case the board or a class of the board or any one or more directors are so removed, new directors may be elected at the same meeting. (b) Removal by the Board. The board of directors may declare vacant -------------------- the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if, within 60 days after notice of his or her selection, the director does not accept the office either in writing or by attending a meeting of the board of directors. Section 4.06 Place of Meetings. Meetings of the board of directors may be ----------------- held at such place within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or as may be designated in the notice of the meeting. Section 4.07 Organization of Meetings. At every meeting of the board of ------------------------ directors, the chairman of the board, if there be one, or, in the case of a vacancy in the office or absence of the chairman of the board, one of the following officers present in the order stated: the president, the vice presidents in their order of rank and seniority, or a person chosen by a majority of the directors present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of the secretary and the assistant secretaries, any person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 4.08 Regular Meetings. Regular meetings of the board of directors ---------------- shall be held at such time and place as shall be designated from time to time by resolution of the board of directors. Section 4.09 Special Meetings. Special meetings of the board of directors ---------------- shall be held whenever called by the chairman or by two or more of the directors. Section 4.10 Quorum of and Action by Directors. (a) General Rule. A --------------------------------- ------------ majority of the directors in office of the corporation shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the board of directors. (b) Action by Written Consent. Any action required or permitted to be ------------------------- taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the secretary of the corporation. Section 4.11 Executive and Other Committees. (a) Establishment and Powers. ------------------------------ The board of directors may, by resolution adopted by a majority of the directors in office, establish one or more committees to consist of one or more directors of the corporation. Any committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all 11 of the powers and authority of the board of directors except that a committee shall not have any power or authority as to the following: (i) The submission to shareholders of any action requiring approval of shareholders under the Business corporation Law. (ii) The creation or filling of vacancies in the board of directors. (iii) The adoption, amendment or repeal of these bylaws. (iv) The amendment or repeal of any resolution of the board that by its terms is amendable or repealable only by the board. (v) Action on matters committed by a resolution of the board of directors to another committee of the board. (b) Alternate Committee Members. The board may designate one or more --------------------------- directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. In the absence or disqualification of a member and alternate member or members of a committee the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member. (c) Term. Each committee of the board shall serve at the pleasure of ---- the board. (d) Committee Procedures. The term "board of directors" or "board," -------------------- when used in any provision of these bylaws relating to the organization or procedures of or the manner of taking action by the board of directors, shall be construed to include and refer to any executive or other committee of the board. Section 4.12 Compensation. The board of directors shall have the authority ------------ to fix the compensation of directors for their services as directors and a director may be a salaried officer of the corporation. ARTICLE V OFFICERS -------- Section 5.01 Officers Generally. (a) Number, Qualifications and ------------------ -------------------------- Designation. The officers of the corporation shall be a chairman of the board, a - ----------- president, one or more vice presidents, a secretary, a treasurer, and such other officers as may be elected in accordance with the provisions of Section 5.03. Officers may but need not be directors or shareholders of the corporation. The president and secretary shall be natural persons of full age. The treasurer may be a corporation, but if a natural person shall be of full age. Any number of offices may be held by the same person. 12 (b) Bonding. The corporation may secure the fidelity of any or all of ------- its officers by bond or otherwise. (c) Standard of Care. Except as otherwise provided in the articles, ---------------- an officer shall perform his or her duties as an officer in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so perform his or her duties shall not be liable by reason of having been an officer of the corporation. Section 5.02 Election, Term of Office and Resignations. (a) Election and ----------------------------------------- ------------ Term of Office. The officers of the corporation, except those elected by - -------------- delegated authority pursuant to Section 5.03, shall be elected annually by the board of directors, and each such officer shall hold office for a term of one year and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. (b) Resignations. Any officer may resign at any time upon written ------------ notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as may be specified in the notice of resignation. Section 5.03 Subordinate Officers, Committees and Agents. The board of ------------------------------------------- directors may from time to time elect such other officers and appoint such committees, employees or other agents as the business of the corporation may require, including one or more assistant secretaries, and one or more assistant treasurers, each of whom shall hold office for such periods have such authority, and perform such duties as are provided in these bylaws, or as the board of directors may from time to time determine. The board of directors may delegate to any officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. Section 5.04 Removal of Officers and Agents. Any officer or agent of the ------------------------------ corporation may be removed by the board of directors with or without cause. The removal shall be without prejudice to the contract rights, if any, of any person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 5.05 Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification, or any other cause, may be filled by the board of directors or by the officer or committee to which the power to fill such office has been delegated pursuant to Section 5.03, as the case may be, and if the office is one for which these bylaws prescribe a term, shall be filled for the unexpired portion of the term. Section 5.06 Authority. All officers of the corporation, as between --------- themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided by or pursuant to resolutions or orders of the board of directors or, in the absence of controlling provisions in the resolutions or orders of the board of directors, as may be determined by or pursuant to these bylaws. 13 Section 5.07 The Chairman of the Board. The chairman of the board shall be ------------------------- the chief executive officer of the corporation and, subject to the control of the board of directors, shall have general charge and control of all its business and affairs and shall have all powers and shall perform all duties incident to the office of chairman of the board. The chairman of the board, or, in the absence of the chairman, the president, shall preside at all meetings of the shareholders and (if a director) of the board of directors. Section 5.08 The President. The president shall be the chief operating ------------- officer of the corporation and shall have general supervision over the operations of the corporation, subject however, to the control of the board of directors and the chairman of the board. In the absence of the chairman of the board, the president shall preside at all meetings of the shareholders and (if a director) of the board of directors, and shall perform such other duties as from time to time may be assigned by the board of directors or the chairman of the board. Section 5.09 The Vice Presidents. The vice presidents shall perform the ------------------- duties of the President in the absence of the president and such other duties as may from time to time be assigned to them by the board of directors or the chairman of the board. Section 5.10 The Secretary. The secretary or an assistant secretary shall ------------- attend all meetings of the shareholders and of the board of directors and all committees thereof and shall record all the votes of the shareholders and of the directors and the minutes of the meetings of the shareholders and of the board of directors and of committees of the board in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the corporation as required by law; shall be the custodian of the seal of the corporation and see that it is affixed to all documents to be executed on behalf of the corporation under its seal; and, in general, shall perform all duties incident to the office of secretary, and such other duties as may from time to time be assigned by the board of directors or the chairman of the board. Section 5.11 The Treasurer. The treasurer or an assistant treasurer shall ------------- have or provide for the custody of the funds or other property of the corporation; shall collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the corporation; shall deposit all funds in his or her custody as treasurer in such banks or other places of deposit as the board of directors may from time to time designate; shall, whenever so required by the board of directors, render an account showing all transactions as treasurer, and the financial condition of the corporation; and, in general, shall discharge such other duties as may from time to time be assigned by the board of directors or the chairman of the board. Section 5.12 Salaries. The salaries of the officers elected by the board -------- of directors shall be fixed from time to time by the board of directors or by such officer as may be designated by resolution of the board. The salaries or other compensation of any other officers, employees and other agents shall be fixed from time to time by the officer or committee to which the power to elect such officers or to retain or appoint such employees or other agents has been delegated pursuant to Section 5.03. No officer shall be prevented from receiving such salary or other compensation by reason of the fact that the officer is also a director of the corporation. 14 ARTICLE VI CERTIFICATES OF STOCK, TRANSFER, ETC. ------------------------------------- Section 6.01 Share Certificates. (a) Form of Certificates. Certificates ------------------ -------------------- for shares of the corporation shall be in such form as approved by the board of directors, and shall state that the corporation is incorporated under the laws of the Commonwealth of Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents. If the corporation is authorized to issue shares of more than one class or series, certificates for shares of the corporation shall set forth upon the face or back of the certificate (or shall state on the face or back of the certificate that the corporation will furnish to any shareholder upon request and without charge), a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the board of directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the classes and series of shares of the corporation. (b) Share Register. The share register or transfer books and blank -------------- share certificates shall be kept by the secretary or by any transfer agent or registrar designated by the board of directors for that purpose. Section 6.02 Issuance. The share certificates of the corporation shall be -------- numbered and registered in the share register or transfer books of the corporation as they are issued. They shall be executed in such manner as the board of directors shall determine. Section 6.03 Transfer. Transfers of shares shall be made an the share -------- register or transfer books of the corporation under surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S. (S)(S) 8101 et seq., and -- --- its amendments and supplements. Section 6.04 Record Holder of Shares. The corporation shall be entitled to ----------------------- treat the person in whose name any share or shares of the corporation stand on the books of the corporation as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person. Section 6.05 Lost, Destroyed or Mutilated Certificates. The holder of any ----------------------------------------- shares of the corporation shall immediately notify the corporation of any loss, destruction or mutilation of the certificate therefor, and the board of directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, if the board of directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct. ARTICLE VII 15 INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER AUTHORIZED REPRESENTATIVES --------------------------------------------------------------------------- Section 7.01 Scope of Indemnification. (a) General Rule. The corporation ------------------------ ------------ shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise by reason of the fact that such person is or was serving in an indemnified capacity, including, without limitation, liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict or products liability, except: (i) where such indemnification is expressly prohibited by applicable law; (ii) where the conduct of the indemnified representative has been finally determined pursuant to Section 7.06 or otherwise: (A) to constitute willful misconduct or recklessness within the meaning of 15 Pa.C.S. (S)(S) 513(b) and 1746(b) and 42 Pa.C.S. (S) 8365(b) or any superseding provision of law sufficient in the circumstances to bar indemnification against liabilities arising from the conduct; or (B) to be based upon or attributable to the receipt by the indemnified representative from the corporation of a personal benefit to which the indemnified representative is not legally entitled; or (iii) to the extent such indemnification has been finally determined in a final adjudication pursuant to Section 7.06 to be otherwise unlawful. (b) Partial Payment. If an indemnified representative is entitled to --------------- indemnification in respect of a portion, but not all, of any liabilities to which such person may be subject, the corporation shall indemnify such indemnified representative to the maximum extent for such portion of the liabilities. (c) Presumption. The termination of a proceeding by judgment, order, ----------- settlement or conviction or upon a plea of nolo contendere or its equivalent ---- ---------- shall not of itself create a presumption that the indemnified representative is not entitled to indemnification. (d) Definitions. For purposes of this Article: ----------- (i) "indemnified capacity" means any and all past, present and future service by an indemnified representative in one or more capacities as a director, officer, employee or agent of the corporation, or, at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise; (ii) "indemnified representative" means any and all directors and officers of the corporation and any other person designated as an indemnified representative by the board of directors of the corporation (which may, but need not, include any person 16 serving at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise); (iii) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, attorneys' fees and disbursements); and (iv) "proceeding" means any threatened, pending or completed action, suit, appeal or other proceeding of any nature, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation, a class of its security holders or otherwise. Section 7.02 Proceedings Initiated by Indemnified Representatives. ---------------------------------------------------- Notwithstanding any other provision of this Article, the corporation shall not indemnify under this Article an indemnified representative for any liability incurred in a proceeding initiated (which shall not be deemed to include counter claims or affirmative defenses) or participated in as an intervenor or amicus ------ curiae by the person seeking indemnification unless such initiation of or - ------ participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This section does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under Section 7.06 or otherwise successfully prosecuting or defending the rights of an indemnified representative granted by or pursuant to this Article. Section 7.03 Advancing Expenses. The corporation shall pay the expenses ------------------ (including attorneys' fees and disbursements) incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 7.01 or the initiation of or participation in which is authorized pursuant to Section 7.02 upon receipt of an undertaking by or on behalf of the indemnified representative to repay the amount if it is ultimately determined pursuant to Section 7.06 that such person is not entitled to be indemnified by the corporation pursuant to this Article. The financial ability of an indemnified representative to repay an advance shall not be a prerequisite to the making of such advance. Section 7.04 Securing of Indemnification Obligations. To further effect, --------------------------------------- satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self- insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the board of directors shall deem appropriate. Absent fraud, the determination of the board of directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability. 17 Section 7.05 Payment of Indemnification. An indemnified representative -------------------------- shall be entitled to indemnification within 30 days after a written request for indemnification has been delivered to the secretary of the corporation. Section 7.06 Arbitration. (a) General Rule. Any dispute related to the ----------- ------------ right to indemnification, contribution or advancement of expenses as provided under this Article, except with respect to indemnification for liabilities arising under the Securities Act of 1933 that the corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the metropolitan area in which the principal executive offices of the corporation are located at the time, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the corporation, the second of whom shall be selected by the indemnified representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, and if one of the parties fails or refuses to select an arbitrator or the arbitrators selected by the corporation and the indemnified representative cannot agree on the selection of the third arbitrator within 30 days after such time as the corporation and the indemnified representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction in such metropolitan area. (b) Burden of Proof. The party or parties challenging the right of an --------------- indemnified representative to the benefits of this Article shall have the burden of proof. (c) Expenses. The corporation shall reimburse an indemnified -------- representative for the expenses (including attorneys' fees and disbursements) incurred in successfully prosecuting or defending such arbitration. (d) Effect. Any award entered by the arbitrators shall be final, ------ binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent. jurisdiction, except that the corporation shall be entitled to interpose as a defense in any such judicial enforcement proceeding any prior final judicial determination adverse to the indemnified representative under Section 7.01(a)(2) in a proceeding not directly involving indemnification under this Article. This arbitration provision shall be specifically enforceable. Section 7.07 Contribution. If the indemnification provided for in this ------------ Article or otherwise is unavailable for any reason in respect of any liability or portion thereof, the corporation shall contribute to the liabilities to which the indemnified representative may be subject in such proportion as is appropriate to reflect the intent of this Article or otherwise. Section 7.08 Mandatory Indemnification of Directors, Officers, etc. To the ----------------------------------------------------- extent that an authorized representative of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1741 or 1742 of the Business Corporation Law or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith. 18 Section 7.09 Contract Rights; Amendment or Reveal. All rights under this ------------------------------------ Article shall be deemed a contract between the corporation and the indemnified representative pursuant to which the corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing. Section 7.10 Scope of Article. The rights granted by this Article shall ---------------- not be deemed exclusive of any other rights to which those seeking indemnification, contribution or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an indemnified capacity and as to action in any other capacity. The indemnification, contribution and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. Section 7.11 Reliance on Provisions. Each person who shall act as an ---------------------- indemnified representative of the corporation shall be deemed to be doing so in reliance upon the rights of indemnification, contribution and advancement of expenses provided by this Article. Section 7.12 Interpretation. The provisions of this Article are intended -------------- to constitute bylaws authorized by 15 Pa.C.S. (S)(S) 513 and 1746 and 42 Pa.C.S. (S) 8365. ARTICLE VIII MISCELLANEOUS ------------- Section 8.01 Corporate Seal. The corporation shall have a corporate seal -------------- in the form of a circle containing the name of the corporation, the year of incorporation and such other details as may be approved by the board of directors. The affixation of the corporate seal shall not be necessary to the valid execution, assignment or endorsement by the corporation of any instrument or other document. Section 8.02 Checks. All checks, notes, bills of exchange or other similar ------ orders in writing shall be signed by such one or more officers or employees as the board of directors or any person authorized by resolution of the board of directors may from time to time designate. Section 8.03 Contracts. Except as otherwise provided in the Business --------- Corporation Law in the case of transactions that require action by the shareholders, the board of directors may authorize any officer or agent to enter into any contract or to execute or deliver any instrument on behalf of the corporation, and such authority may be general or confined to specific instances. Section 8.04 Interested Directors or Officers; Quorum. (a) General Rule. A ---------------------------------------- ------------ contract or transaction between the corporation and one or more of its directors or officers or between the corporation and another corporation, partnership, joint venture, trust or other enterprise in which one or more of its directors or officers are directors or officers or have a financial or other interest, shall not be void or voidable solely for that reason, or solely because the director or 19 officer is present at or participates in the meeting of the board of directors that authorizes the contract or transaction, or solely because his, her or their votes are counted for that purpose, if: (i) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and the board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum: (ii) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or (iii) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors or the shareholders. (b) Quorum. Common or interested directors may be counted in ------ determining the presence of a quorum at a meeting of the board which authorizes a contract or transaction specified in subsection (a). Section 8.05 Deposits. All funds of the corporation shall be deposited -------- from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees as the board of directors shall from time to time determine. Section 8.06 Corporate Records. (a) Required Records. The corporation ----------------- ---------------- shall keep complete and accurate books and records of account, minutes of the proceedings of the incorporators, shareholders and directors and a share register giving the names and addresses of all shareholders and the number and class of shares held by each. The share register shall be kept at either the registered office of the corporation in the Commonwealth of Pennsylvania or at its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time. (b) Right of Inspection. Every shareholder shall, upon written ------------------- verified demand stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books and records of account, and records of the proceedings of the incorporators, shareholders and directors to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to the interest of the person as a shareholder. In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand shall be accompanied by a verified power of attorney or other writing that authorizes the attorney or other agent to so act on behalf of the shareholder. The demand shall be directed to the corporation at its registered office in the Commonwealth of Pennsylvania or at its principal place of business wherever situated. Section 8.07 Financial Reports. Unless otherwise agreed between the ----------------- corporation and a shareholder, the corporation shall furnish to its shareholders annual financial statements, 20 including at least a balance sheet as of the end of each fiscal year and a statement of income and expenses for the fiscal year. The financial statements shall be prepared an the basis of generally accepted accounting principles, if the corporation prepares financial statements for the fiscal year on that basis for any purposes and may be consolidated statements of the corporation and one or more of its subsidiaries. The financial statements shall be mailed by the corporation to each of its shareholders entitled thereto within 120 days after the close of each fiscal year and, after the mailing and upon written request, shall be mailed by the corporation to any shareholder or beneficial owner entitled thereto to whom a copy of the most recent annual financial statements has not previously been mailed. Statements that are audited or reviewed by a public accountant shall be accompanied by the report of the accountant; in other cases, each copy shall be accompanied by a statement of the person in charge of the financial records of the corporation: (i) Stating his or her reasonable belief as to whether or not the financial statements were prepared in accordance with generally accepted accounting principles and, if not, describing the basis of presentation. (ii) Describing any material respects in which the financial statements were not prepared on a basis consistent with those prepared for the previous year. Section 8.08 Amendment of Bylaws. These bylaws may be amended or repealed, ------------------- or new bylaws may be adopted, either (i) by vote of the shareholders at any duly organized annual or special meeting of shareholders, or (ii) with respect to those matters that are not by statute committed expressly to the shareholders and regardless of whether the shareholders have previously adopted or approved the bylaw being amended or repealed, by vote of a majority of the board of directors of the corporation in office at any regular or special meeting of directors. Any change in these bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change. See Section 2.03 (b) (relating to notice of action by shareholders on bylaws). 21 EX-3.13 24 CERTIFICATE OF INCORPORATION OF SHORE STONE CO. EXHIBIT 3.13 Certificate of Incorporation of SHORE STONE COMPANY, INC. This is to certify that, there is hereby organized a corporation under and by virtue of N.J.S. 14 A:1-1 et seq., the "New Jersey Business Corporation Act." 1. The name of the corporation is Shore Stone Company, Inc. 2. The address (and zip code) of this corporation's initial registered office is 3131 Princeton Pike Lawrenceville, NJ 08648 and the name of this corporation's initial registered agent at such address is Michael A. Zindler, Esquire 3. The purposes for which this corporation is organized are: To engage in any activity within the purposes for which corporations may be organized under the "New Jersey Business Corporation Act." N.J.S. 14A :1-1 et seq. 4. The aggregate number of shares which the corporation shall have authority to issue is 2,500 no par value. 5. The first Board of Directors of this corporation shall consist of Director(s) and the name and address of each person who is to serve as such Director is: Name Address Zip Code Arlene Kraus Penns Park, Pennsylvania 18943 Robert Kraus Penns Park, Pennsylvania 18943 Richard Keough Penns Park, Pennsylvania 18943 6. The name and address of each incorporator is: Name Address Zip Code Richard Keough Penns Park, Pennsylvania 18943 In Witness Whereof, each individual incorporator, each being over the age of eighteen years, has signed this Certificate; or if the incorporator be a corporation, has caused this Certificate to be signed by its authorized officers, this 6th day of May, 1983. /s/ /s/ Richard Keough - --------------------------- -------------------------------- Secretary Richard Keough 2 EX-3.13.1 25 CERTIFICATE OF AMENDMENT DATED NOVEMBER 28, 1990 Exhibit 3.13.1 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF SHORE STONE COMPANY, INC. (For Use by Domestic Corporations Only) To: The Secretary of State State of New Jersey Pursuant to the provisions of Section 14A:9-2(4) and Section 14A:9-4(3), Corporations, General, of the New Jersey Statutes, the undersigned corporation executes the following Certificate of Amendment to its Certificate of Incorporation: 1. The name of the corporation is Shore Stone Company, Inc. 2. The following amendment to the Certificate of Incorporation was approved by the directors and thereafter duly adopted by the shareholders of the corporation on the 28th day of November, 1990: RESOLVED, that Article 7 of the Certificate of Incorporation be added to read as follows: 7. Personal Liability of Directors and Officers. A director or -------------------------------------------- officer shall not be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders, except that this provision shall not relieve a director or officer from liability for any breach of duty based upon an act or omission (i) in breach of such person's duty of loyalty to the Corporation or its shareholders, (ii) not in good faith or involving a knowing violation of law or (iii) resulting in receipt by such person of an improper personal benefit. As used in this section, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the Corporation or its shareholders in connection with a matter in which he has a material conflict of interest. 3. The number of shares entitled to vote upon the amendment was 100. 4. That in lieu of a meeting and vote of the shareholders and in accordance with the provisions of Section 14A:5-6, the amendment was adopted by the shareholders without a meeting pursuant to the written consents of the shareholders and the number of shares represented by such consents is 100 shares. Dated this 28/th/ day of November, 1990. SHORE STONE COMPANY, INC. By: /s/ Arlene E. Kraus ----------------------------------- Arlene E. Kraus, as its Chairman of the Board and Chief Executive Officer ---------------------------------------- (Type or Print Name and Title) 2 I, The Secretary of State of the State of New Jersey, DO HEREBY CERTIFY that the foregoing is a true copy of CERTIFICATE OF AMENDMENT and the endorsements thereon, as the same is taken from and compared with the original filed in my office on the 30th day of Nov., A.D. 1990 and now remaining on file and of record therein. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my Official Seal at Trenton, this day 30th of Nov., A.D. 1990. /s/ Joan Haberle --------------------------------------------- SECRETARY OF STATE (Seal) EX-3.14 26 AMENDED AND RESTATED BY-LAWS OF SHORE STONE CO. EXHIBIT 3.14 ------------ AMENDED AND RESTATED BY-LAWS OF SHORE STONE COMPANY, INC. _____________________________ (A NEW JERSEY CORPORATION) ARTICLE I --------- OFFICES ------- Section 1.01 Registered Office and Agent. The registered office of the --------------------------- corporation in the State of New Jersey shall be as stated in the Certificate of Incorporation or at such other location to which the registered office shall be changed by action of the board of directors. The registered agent of the corporation at such office shall be as stated in the Certificate of Incorporation or such other agent as may be determined from time to time by the board of directors. Section 1.02 Other Offices. The corporation may also have offices at such ------------- other places within or without the State of New Jersey as the board of directors may from time to time appoint or the business of the corporation may require. ARTICLE II SHAREHOLDERS ------------ Section 2.01 Annual Meeting of Shareholders. An annual meeting of ------------------------------ shareholders shall be held in every calendar year at such time as the board of directors may fix. At the annual meeting, the shareholders shall elect directors and transact such other business as may come before the meeting. Section 2.02 Special Meetings. A special meeting of shareholders may be ---------------- called for any purpose by the chairman of the board or by a majority of the board of directors. Section 2.03 Action Without Meeting. Any action required or permitted to ---------------------- be taken at a meeting of shareholders may be taken without a meeting if all the shareholders consent in writing to such action. Such written consents shall be filed with the minutes of proceedings of shareholders. Section 2.04 Quorum. The presence at a meeting in person or by proxy of ------ the holders of shares entitled to cast a majority of the votes shall constitute a quorum. Section 2.05 Place of Meetings. Meetings of the shareholders shall be held ----------------- at the principal office of the corporation or at such other place within or without the State of New Jersey as shall be specified in the notice of meeting. Section 2.06 Notice of Meeting. Written notice of the time, place and ----------------- purposes of any annual or special meeting of shareholders shall be given not less than ten nor more than sixty days before the date of the meeting either personally or by mail to each shareholder of record entitled to vote at the meeting, except it shall not be necessary to give notice in cases of meetings adjourned in accordance with N.J.S.A. 14A:5-4. Section 2.07 Waiver of Notice. (a) Written Waiver. Whenever any written ---------------- -------------- notice is required to be given under the provisions of the Business Corporation Act, the Certificate of Incorporation or these bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. (b) Waiver by Attendance. The attendance of any shareholder at a -------------------- meeting, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver by him of notice of the meeting. ARTICLE III BOARD OF DIRECTORS ------------------ Section 3.01 Number and Term of Office. The management and control of the ------------------------- affairs, business and property of the corporation shall be vested in the board of directors which shall consist of such number of directors, not less than three nor more than eleven. Each director shall be elected by the shareholders at either an annual or special meeting and shall hold office until the director's successor shall have been elected and qualified. Section 3.02 Regular Meetings. A regular meeting of the board of directors ---------------- shall be held without notice immediately following and at the same place as the annual meeting of shareholders for the purposes of electing officers and conducting such other business as may come before the meeting. The board of directors, by resolution, may provide for additional regular meetings which may be held without notice, except to members not present at the time of the adoption of the resolution. Section 3.03 Special Meetings. A special meeting of the board of directors ---------------- may be called at any time by the chairman of the board or by a majority of the directors for any purpose. Such meeting shall be held upon two days' notice if given orally, either by telephone or in person, or by telegraph or facsimile transmission, or by four days' notice if given by depositing the notice in the United States mail, postage prepaid. Such notice shall specify the time and place of the meeting. Section 3.04 Meetings by Conference Telephone, etc. Any or all directors ------------------------------------- may participate in a meeting of the board of directors or a committee of the board of directors by 2 means of conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other. Section 3.05 Action Without Meeting. Any action required or permitted to ---------------------- be taken pursuant to authorization voted at a meeting of the board of directors or any committee thereof may be taken without a meeting if, prior or subsequent to such action, all members of the board of directors or such committee shall consent in writing to such action and such written consents are filed with the minutes of the proceedings of the board of directors or committee. Section 3.06 Quorum. A majority of the entire board of directors shall ------ constitute a quorum for the transaction of business. Section 3.07 Vacancies in the Board of Directors. Any vacancy in the board ----------------------------------- of directors, including a vacancy caused by an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though less than a quorum of the board of directors, or by a sole remaining director. Section 3.08 Personal Liability of Directors. A director shall not be ------------------------------- personally liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders, except that this provision shall not relieve a director from liability for any breach of duty based upon an act or omission (i) in breach of such person's duty of loyalty to the corporation or its shareholders, (ii) not in good faith or involving a knowing violation of law or (iii) resulting in receipt by such person of an improper personal benefit. As used in this section, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the corporation or its shareholders in connection with a matter in which he has a material conflict of interest. ARTICLE IV WAIVER OF NOTICE ---------------- Any notice required by these by-laws, the Certificate of Incorporation, or by the New Jersey Business Corporation Act may be waived by a writing signed by the person or persons entitled to such notice either before or after the action with respect to which notice is waived. Any director or shareholder attending a meeting without protesting, prior to its conclusion, a lack of proper notice shall be deemed to have waived notice of such meeting. ARTICLE V FISCAL YEAR ----------- The fiscal year of the corporation shall end on the Saturday in December or January that is closest to December 31 in each year unless otherwise fixed by the board of directors. 3 ARTICLE VI OFFICERS -------- Section 6.01 Election. At its regular meeting following the annual meeting -------- of shareholders, the board of directors shall elect a chairman of the board, a president, a treasurer, and a secretary, and it may elect such other officers, including one or more vice presidents, assistant secretaries or assistant treasurers, as it shall deem necessary. One person may hold any two or more offices. Section 6.02 Duties and Authority of Chairman of the Board. The chairman --------------------------------------------- of the board shall be the chief executive officer of the corporation and, subject to the control of the board of directors, shall have general charge and control of all its business and affairs and shall have all powers and shall perform all duties incident to the office of chairman of the board. The chairman of the board, or, in the absence of the chairman, the president, shall preside at all meetings of the shareholders and (if a director) of the board of directors. Section 6.03 Duties and Authority of President. The president shall be the --------------------------------- chief operating officer of the corporation and shall have general supervision over the operations of the corporation, subject however, to the control of the board of directors and the chairman of the board. In the absence of the chairman of the board, the president shall preside at all meetings of the shareholders and (if a director) of the board of directors, and shall perform such other duties as from time to time may be assigned by the board of directors or the chairman of the board. Section 6.04 Duties and Authority of Vice President. The vice president, -------------------------------------- if any, shall perform such duties and have such authority as from time to time may be delegated to him by the chairman of the board or by the board of directors. Section 6.05 Duties and Authority of Treasurer. The treasurer shall have --------------------------------- the custody of the funds and securities of the corporation and shall keep or cause to be kept regular books of account for the corporation. The treasurer shall perform such other duties and possess such other powers as are incident to that office or as shall be assigned by the chairman of the board or the board of directors. Section 6.06 Duties and Authority of Secretary. The secretary shall cause --------------------------------- notices of all meetings to be served as prescribed in these by-laws and shall keep or cause to be kept the minutes of all meetings of the shareholders and the board of directors. The secretary shall have charge of the seal of the corporation. The secretary shall perform such other duties and possess such other powers as are incident to that office or as are assigned by the chairman of the board or the board of directors Section 6.07 Duties and Authority of Assistant Secretary or Assistant -------------------------------------------------------- Treasurer. The assistant secretary or secretaries and assistant treasurer or - --------- treasurers shall act under the direction of the secretary or treasurer, respectively, and in the absence or disability of the secretary or treasurer, shall perform the respective duties and exercise the respective powers of the secretary or treasurer. Any assistant secretary or assistant treasurer shall be authorized to execute, attest, acknowledge, receive and/or certify any corporate document which the secretary or treasurer, 4 respectively, could execute, attest, acknowledge, receive and/or certify, irrespective of the absence or disability of the secretary or treasurer, unless the board of directors shall otherwise determine. Section 6.08 Personal Liability of Officers. An officer shall not be ------------------------------ personally liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders, except that this provision shall not relieve an officer from liability for any breach of duty based upon an act or omission (i) in breach of such person's duty of loyalty to the corporation or its shareholders, (ii) not in good faith or involving a knowing violation of law or (iii) resulting in receipt by such person of an improper personal benefit. As used in this section, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the corporation or its shareholders in connection with a matter in which he has a material conflict of interest. ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER AUTHORIZED REPRESENTATIVES --------------------------------------------------------------------------- Section 7.01 Scope of Indemnification. (a) General Rule. The corporation ------------------------ ------------ shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise by reason of the fact that such person is or was serving in an indemnified capacity, including, without limitation, liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict or products liability, except: (i) where such indemnification is expressly prohibited by applicable law; (ii) where the conduct of the indemnified representative has been finally determined pursuant to Section 6 or otherwise: (A) to constitute a breach of his duty of loyalty to the corporation or its shareholders; (B) to be not in good faith or to involve a knowing violation of law; or (C) to be based upon or attributable to the receipt by the indemnified representative from the corporation of an improper personal benefit to which the indemnified representative is not legally entitled; or (iii) to the extent such indemnification has been finally determined in a final adjudication pursuant to Section 6 to be otherwise unlawful. (b) Partial Payment. If an indemnified representative is entitled to --------------- indemnification in respect of a portion, but not all, of any liabilities to which such person may be 5 subject, the corporation shall indemnify such indemnified representative to the maximum extent for such portion of the liabilities. (c) Presumption. The termination of a proceeding by judgment, order, ----------- settlement or conviction or upon a plea of nolo contendere or its equivalent --------------- shall not of itself create a presumption that the indemnified representative is not entitled to indemnification. (d) Definitions. For purposes of this Article: ----------- (i) "indemnified capacity" means any and all past, present and future service by an indemnified representative in one or more capacities as a director, officer, employee or agent of the corporation, or, at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise; (ii) "indemnified representative" means any and all directors and officers of the corporation and any other person designated as an indemnified representative by the board of directors of the corporation (which may, but need not, include any person serving at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise); (iii) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, attorneys' fees and disbursements); and (iv) "proceeding" means any threatened, pending or completed action, suit, appeal or other proceeding of any nature, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation, a class of its security holders or otherwise. Section 7.02 Proceedings Initiated by Indemnified Representatives. ---------------------------------------------------- Notwithstanding any other provision of this Article, the corporation shall not indemnify under this Article an indemnified representative for any liability incurred in a proceeding initiated (which shall not be deemed to include counter-claims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or - ------ ------ participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This section does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under Section 6 or otherwise successfully prosecuting or defending the rights of an indemnified representative granted by or pursuant to this Article. Section 7.03 Advancing Expenses. The corporation shall pay the expenses ------------------ (including attorneys' fees and disbursements) incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 1 or the initiation of or participation in which is authorized pursuant to Section 2 upon receipt of an undertaking by or on behalf of the indemnified representative to repay the amount if it is ultimately determined 6 pursuant to Section 6 that such person is not entitled to be indemnified by the corporation pursuant to this Article. The financial ability of an indemnified representative to repay an advance shall not be a prerequisite to the making of such advance. Section 7.04 Securing of Indemnification Obligations. To further effect, --------------------------------------- satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self- insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the board of directors shall deem appropriate. Absent fraud, the determination of the board of directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability. Section 7.05 Payment of Indemnification. An indemnified representative -------------------------- shall be entitled to indemnification within 30 days after a written request for indemnification has been delivered to the secretary of the corporation. Section 7.06 Arbitration. (a) General Rule. Any dispute related to the ----------- ------------ right to indemnification, contribution or advancement of expenses as provided under this Article, except with respect to indemnification for liabilities arising under the Securities Act of 1933 that the corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the metropolitan area in which the principal executive offices of the corporation are located at the time, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the corporation, the second of whom shall be selected by the indemnified representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, and if one of the parties fails or refuses to select an arbitrator or the arbitrators selected by the corporation and the indemnified representative cannot agree on the selection of the third arbitrator within 30 days after such time as the corporation and the indemnified representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction in such metropolitan area. (b) Burden of Proof. The party or parties challenging the right of an --------------- indemnified representative to the benefits of this Article shall have the burden of proof. (c) Expenses. The corporation shall reimburse an indemnified -------- representative for the expenses (including attorneys' fees and disbursements) incurred in successfully prosecuting or defending such arbitration. (d) Effect. Any award entered by the arbitrators shall be final, ------ binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction, except that the corporation shall be entitled to interpose as a defense in any such judicial enforcement proceeding any prior final judicial 7 determination adverse to the indemnified representative under Section l (a)(2) in a proceeding not directly involving indemnification under this Article. This arbitration provision shall be specifically enforceable. Section 7.07 Contribution. If the indemnification provided for in this ------------ Article or otherwise is unavailable for any reason in respect of any liability or portion thereof, the corporation shall contribute to the liabilities to which the indemnified representative may be subject in such proportion as is appropriate to reflect the intent of this Article or otherwise. Section 7.08 Mandatory Indemnification of Directors, Officers, etc. To the ----------------------------------------------------- extent that an authorized representative of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in N.J.S.A. 14A:3-5(4) of the Business Corporation Act or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith. Section 7.09 Contract Rights; Amendment or Repeal. All rights under this ------------------------------------ Article shall be deemed a contract between the corporation and the indemnified representative pursuant to which the corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing. Section 7.10 Scope of Article. The rights granted by this Article shall ---------------- not be deemed exclusive of any other rights to which those seeking indemnification, contribution or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an indemnified capacity and as to action in any other capacity. The indemnification, contribution and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. Section 7.11 Reliance on Provisions. Each person who shall act as an ---------------------- indemnified representative of the corporation shall be deemed to be doing so in reliance upon the rights provided by this Article. Section 7.12 Interpretation. The provisions of this Article are intended -------------- to constitute by-laws authorized by N.J.S.A. 14A:3-5(8). ARTICLE VIII LOANS, GUARANTEES AND OTHER ASSISTANCE TO DIRECTORS --------------------------------------------------- The corporation may lend money to, or guarantee any obligation of, or otherwise assist, any director, officer or employee of the corporation or of any subsidiary, whenever, in the judgment of the directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be made with or without interest, and may be unsecured, or secured in such a manner as the board shall approve, 8 including, without limitation, a pledge of shares of the corporation, and may be made upon such other terms and conditions as the board may determine. ARTICLE IX AMENDMENT OF BY-LAWS -------------------- These by-laws may be altered, amended or repealed by the shareholders or the board of directors. Any by-law adopted, amended or repealed by the shareholders may be amended or repealed by the board of directors, unless the resolution of the shareholders adopting such by-law expressly reserves the right to amend or repeal it to the shareholders. 9 EX-3.15 27 CERTIFICATE OF INCORPORATION OF PENN. GLASS EXHIBIT 3.15 CERTIFICATE OF INCORPORATION OF MORGAN NATIONAL SILICA CO. I, the undersigned, in order to form a corporation for the purposes hereinafter stated, under and pursuant to the provisions of the General Corporation Law of the State of Delaware, being Title 8 Chapter 1 of the Delaware Code (1974 Revision), and the Acts amendatory thereof and supplementary thereto, do hereby certify as follows: FIRST: The name of the corporation is Morgan National Silica Co. ----- (hereinafter called the "Corporation"). SECOND: The location of the registered office of the Corporation in the ------ State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or ----- activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of stock which the Corporation shall ------ have authority to issue is one hundred shares of common stock of the par value of $10 per share. FIFTH: The name and address of the incorporator is as follows: ----- Name Address ---- ------- Charles V. Bush 1115 Fairfax Street Berkeley Springs, WV 25411 SIXTH: The powers of the incorporator shall terminate upon the filing of ----- this Certificate of Incorporation. The names and addresses of the persons who are to serve as directors of the Corporation until the first annual meeting of stockholders or until their successors are elected and qualify are set forth below in accordance with Section 102(a)(6) of the General Corporation Law of Delaware: Name Address ---- ------- Richard E. Goodell Route 5, Box 250 Hedgesville, WV 25427 L. John Renshaw 1800 Blue Ridge Road Hagerstown, MD 21740 Richard E. Day Route 4, Box 468 Berkeley Springs, WV 25411 SEVENTH: In furtherance and not in limitation of the powers conferred by ------- law, the Board of Directors of the Corporation is expressly authorized: (a) To make, alter, amend or repeal the By-Laws of the Corporation. (b) To direct and determine the use and disposition of net profits or net assets in excess of capital; to set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose; and to abolish any such reserve in the manner in which it was created. (c) To establish bonus, profit-sharing, stock option, retirement or other types of incentive or compensation plans for the employees (including officers and directors) of the Corporation and to fix the amount of the profits to be distributed or shared and to determine the persons to participate in any such plans and the amounts of their respective participations. (d) From time to time to determine whether and to what extent, and at what time and places and under what conditions and regulations, the accounts and books of the Corporation (other than the stock ledger), or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by statute or authorized by the Board of Directors or by a resolution of the stockholders. (e) To authorize, and cause to be executed, mortgages and liens upon the real and personal property of the Corporation. EIGHTH: Meetings of stockholders may be held within or without the State ------ of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to 2 any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation. NINTH: Whenever the vote of stockholders at a meeting thereof is required ----- or permitted to be taken for or in connection with any corporate action by any provision of the General Corporation Law of Delaware, the meeting and vote of stockholders may be dispensed with if the holders of stock having not less than the minimum percentage of the vote required by statute for the proposed corporate action shall consent in writing to such corporate action being taken, provided that prompt notice must be given to all stockholders of the taking of such corporate action without a meeting and by less than unanimous written consent. TENTH: Stockholders may at any time, at a meeting expressly called for ----- that purpose, remove any or all of the directors, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. ELEVENTH: The Corporation reserves the right to amend, alter, change or -------- repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders and directors are subject to this reserved power. 3 IN WITNESS WHEREOF, I have hereunto set my hand and seal the 20th day of October, 1986. /s/ Charles V. Bush (SEAL) -------------------------------- STATE OF WEST VIRGINIA ) : ss.: COUNTY OF MORGAN ) On this 20th day of October, 1986, there personally came before me Charles V. Bush, the person who executed the foregoing certificate, known to me personally to be such, and he duly executed said certificate before me and acknowledged that it was his act and deed and that the facts therein are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. /s/ Mary E. Phillips -------------------------------- (Notary Seal) 4 EX-3.15.1 28 CERTIFICATE OF AMENDMENT DATED DECEMBER 15, 1986 Exhibit 3.15.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION Morgan National Silica Co., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors, of said corporation, by unanimous written consent, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of MORGAN NATIONAL SILICA CO. be amended by changing Article First thereof to read as follows: "FIRST: The name of the corporation is PENNSYLVANIA GLASS SAND CORPORATION (hereinafter called the "Corporation")." SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions of section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of sections 242 and 228 of the General Corporation Law of the State of Delaware. FOURTH: That this Certificate of Amendment of the Certificate of Incorporation shall be effective on December 31, 1986. IN WITNESS WHEREOF, said Morgan National Silica Co. has caused this certificate to be signed by Richard E. Goodell, its President, and attested by Charles V. Bush, its Secretary, this 2nd day of December, 1986. -------- MORGAN NATIONAL SILICA CO. (Corporate Seal) By /s/ Richard E. Goodell -------------------------------- President ATTEST: By /s/ Charles V. Bush -------------------------- Secretary 2 STATE OF WEST VIRGINIA ) : ss.: COUNTY OF MORGAN ) BE IT REMEMBERED that on this 2nd day of December, 1986, personally came before me, a Notary Public in and for the County and State aforesaid, Richard E. Goodell, President of Morgan National Silica Co., a corporation of the State of Delaware, the corporation described in and which executed the foregoing certificate, known to me personally to be such, and he duly executed said certificate before me and acknowledged the said certificate to be his act and deed and the act and deed of said corporation, and that the facts stated therein are true and that the seal affixed to said certificate and attested by the Secretary of said corporation is the corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. /s/ Mary E. Phillips ---------------------------------------- Notary Public My Commission Expires: Sept. 10, 1996 ---------------- EX-3.16 29 BY-LAWS OF PENNSYLVANIA GLASS SAND CORPORATION EXHIBIT 3.16 BY-LAWS of PENNSYLVANIA GLASS SAND CORPORATION _____________________ (herein called the "Company") ARTICLE I --------- Stockholders ------------ Section 1.01. Annual Meeting. The Board of Directors by resolution shall ------------ -------------- designate the time, place and date (which shall be, in the case of the first annual meeting, not more than 13 months after the organization of the Company and, in the case of all other annual meetings, not more than 13 months after the date of the last annual meeting) of the annual meeting of the stockholders for the election of directors and the transaction of such other business as may come before it. Section 1.02. Special Meetings. Special meetings of the stockholders, for ------------ ---------------- any purpose or purposes, may be called at any time by the Chairman, the Vice- Chairman, the President, any Vice-President, the Treasurer, the Secretary or the Assistant Secretary, by resolution of the Board of Directors or upon written request by the holders of one-third of the outstanding shares. Special meetings of stockholders shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Section 1.03. Notice of Meetings of Stockholders. Whenever stockholders ------------ ----------------------------------- are required or permitted to take any action at a meeting, written notice of the meeting shall be given (unless that notice shall be waived or unless the meeting is to be dispensed with in accordance with the provisions of the General Corporation Law of the State of Delaware and the Certificate of Incorporation of the Company and Section 1.12 hereof) which shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given, personally or by mail, not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Company. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.04. Quorum. At all meetings of the stockholders, the holders of ------------ ------ one-third of the stock issued and outstanding and entitled to vote thereat, present in person or by proxy, shall constitute a quorum for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders. 2 The stockholders present may adjourn the meeting despite the absence of a quorum and at any such adjourned meeting at which the requisite amount of voting stock shall be represented, the Company may transact any business which might have been transacted at the original meeting had a quorum been there present. Section 1.05. Method of Voting. The vote upon any question before the ------------ ---------------- meeting need not be by ballot. All elections and all other questions shall be decided by a plurality of the votes cast, at a meeting at which a quorum is present, except as expressly provided otherwise by the General Corporation Law of the State of Delaware or the Certificate of Incorporation. Section 1.06. Voting Rights of Stockholders and Proxies. Each stockholder ------------ ----------------------------------------- of record entitled to vote in accordance with the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of stock entitled to vote standing in his name on the books of the Company, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 1.07. Ownership of its Own Stock. Shares of its own capital stock ------------ -------------------------- belonging to the Company or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Company, shall neither be entitled to vote nor be counted for quorum purposes. Nothing in this section shall be construed as limiting the right of any corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.08. Voting by Fiduciaries and Pledgors. Persons holding stock ------------ ---------------------------------- in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be 3 entitled to vote, unless in the transfer by the pledgor on the books of the Company he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Section 1.09. Fixing Date for Determination of Stockholders of Record. In ------------ ------------------------------------------------------- order to determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed by the Board of Directors, the record date shall be determined in accordance with the provisions of the General Corporation Law of the State of Delaware. Section 1.10. List of Stockholders. The officer who has charge of the ------------ -------------------- stock ledger of the Company shall prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held (which place shall be specified in the notice of the meeting or, if not so specified, at the place where said meeting is to be held), and the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who may be present. Upon the 4 willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. Section 1.11. Stockholder's Right of Inspection. Stockholders of record, ------------ --------------------------------- in person or by attorney or other agent, shall have the right, upon written demand under oath stating the purpose thereof, during the usual hours for business to inspect for any proper purpose the Company's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Company at its registered office in this State or at its principal place of business. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 1.10 or the books of the Company, or to vote in person or by proxy at any meeting of the stockholders. Section 1.12. Consent in Lieu of Meeting. Any corporate action, with ------------ -------------------------- respect to which the vote of the stockholders at a meeting thereof is required or permitted by any provision of the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company, or these By-Laws, may be taken without that vote and meeting, and that vote and meeting may be dispensed with, if that corporate action has been consented to in writing by the holders of a majority (or, if with respect to a particular corporate action the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company or these By-Laws 5 specifies a greater percentage, by the holders of that percentage) of the stock that would have been entitled to vote upon that action if a meeting were held. Prompt notice shall be given to all stockholders of the taking of any corporate action pursuant to the provisions of that paragraph unless that action has been consented to in writing by the holders of all of the stock that would have been entitled to vote upon that action if a meeting were held. ARTICLE II ---------- Directors --------- Section 2.01. Management of Business. The business of the Company shall ------------ ---------------------- be managed by its Board of Directors. The Board of Directors, in addition to the powers and authority expressly conferred upon it herein, by statute, by the Certificate of Incorporation of the Company or otherwise, is hereby empowered to exercise all such powers as may be exercised by the Company, except as expressly provided otherwise by the statutes of the State of Delaware, by the Certificate of Incorporation of the Company or by these By-Laws. Without prejudice to the generality of the foregoing, the Board of Directors, by resolution or resolutions, may create and issue, whether or not in connection with the issue and sale of any shares of stock or other securities of the Company, rights or options entitling the holders thereof to purchase from the Company any shares of its capital stock of any class or classes or any other securities of the Company, such rights or options to be evidenced by or in such instrument or instruments as shall be approved by the Board of Directors. The terms upon which, including the 6 time or times, which may be limited or unlimited in duration, at or within which, and the price or prices at which, any such rights or options may be issued and any such shares or other securities may be purchased from the Company upon the exercise of any such right or option shall be such as shall be fixed and stated in the resolution or resolutions adopted by the Board of Directors providing for the creation and issue of such rights or options, and, in every case, set forth or incorporated by reference in the instrument or instruments evidencing such rights or options. In the absence of actual fraud in the transaction, the judgment of the directors as to the consideration for the issuance of such rights or options and the sufficiency thereof shall be conclusive. In case the shares of stock of the Company to be issued upon the exercise of such rights or options shall be shares having a par value, the price or prices so to be received therefor shall not be less than the par value thereof. In case the shares of stock so to be issued shall be shares of stock without par value, the consideration therefor shall be determined in the manner provided in Section 153 of the General Corporation Law of the State of Delaware. Section 2.02. Qualifications and Number of Directors. Directors need not ------------ -------------------------------------- be stockholders. The number of directors which shall constitute the whole Board shall be not less than three nor more than eleven. Section 2.03. Election and Term. The directors shall be elected at the ------------ ----------------- annual meeting of the stockholders, and each director shall be elected to hold office until his successor shall be elected and qualified, or until his earlier resignation or removal. Section 2.04. Resignations. Any director of the Company may resign at any ------------ ------------ time by giving written notice to the Company. Such resignation shall take effect at the time specified therein, if any, or if no time is specified therein, then upon receipt of such notice by the 7 Company; and, unless otherwise provided therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.05. Vacancies and Newly Created Directorships. Vacancies and ------------ ----------------------------------------- newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until their successors shall be elected and qualified, or until their earlier resignation or removal. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as herein provided in the filling of other vacancies. Section 2.06. Quorum of Directors. At all meetings of the Board of ------------ ------------------- Directors, one-third of the entire Board shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as provided in Sections 2.05 and 2.12 hereof. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting of the directors to another time and place. Notice of any adjournment need not be given if such time and place are announced at the meeting. Section 2.07. Annual Meeting. The newly elected Board of Directors shall ------------ -------------- meet immediately following the adjournment of the annual meeting of stockholders in each year at the same place, within or without the State of Delaware, and no notice of such meeting shall be necessary. 8 Section 2.08. Regular Meetings. Regular meetings of the Board of ------------ ---------------- Directors may be held at such time and place, within or without the State of Delaware, as shall from time to time be fixed by the Board and no notice thereof shall be necessary. Section 2.09. Special Meetings. Special meetings may be called at any ------------ ---------------- time by the President, the Secretary or by resolution of any two Directors. Special meetings shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Special meetings of the Board of Directors shall be held upon notice to the directors or waiver thereof. Unless waived, notice of each special meeting of the directors, stating the time and place of the meeting, shall be given to each director by delivered letter, by telegram or by personal communication either over the telephone or otherwise, in each such case not later than the second day prior to the meeting, or by mailed letter deposited in the United States mail with postage thereon prepaid not later than the seventh day prior to the meeting. Notices of special meetings of the Board of Directors and waivers thereof need not state the purpose or purposes of the meeting. Section 2.10. Action Without a Meeting. 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 all members of the Board or committee, as the case may be, consent thereto in a writing or writings and the writing or writings are filed with the minutes of proceedings of the Board or committee. 9 Section 2.11. Compensation. Directors shall receive any such fixed sums ------------ ------------ and expenses of attendance for attendance at each meeting of the Board or of any committee and/or any such salary as may be determined from time to time by the Board of Directors; provided that nothing herein contained shall be construed to preclude any director from serving the Company in any other capacity and receiving compensation therefor. Section 2.12. Executive Committee. The Board of Directors may, by ------------ ------------------- resolution or resolutions, passed by a majority of the whole Board, designate an Executive Committee (and may discontinue the same at any time) to consist of three or more of the directors of the Company. The members shall be appointed by the Board and shall hold office at the pleasure of the Board. The Board may designate one or more directors as alternate members of the Committee, who may replace an absent or disqualified member at any meeting of the Committee. The Executive Committee shall have and may exercise all the powers of the Board of Directors (when the Board is not in session) in the management of the business and affairs of the Company (and may authorize the seal of the Company to be affixed to all papers which may require it), except that the Executive Committee shall have no power (a) to elect directors; (b) to alter, amend or repeal these By-Laws or any resolution or resolutions of the directors designating an Executive Committee; (c) to declare any dividend or make any other distribution to the stockholders of the Company; or (d) to appoint any member of the Executive Committee. Regular meetings of the Executive Committee may be held at such time and place, within or without the State of Delaware, as shall from time to time be fixed by the Executive Committee and no notice thereof shall be necessary. Special meetings may be called at any time by any officer of the Company or any member of the Committee. Special meetings shall be held at such place, within or without the State of Delaware, as shall be fixed by the person calling the meeting 10 and stated in the notice or waiver of the meeting. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business and the act of a majority present at which there is a quorum shall be the act of the Executive Committee. Notice of each special meeting of the Executive Committee shall be given (or waived) in the same manner as notice of a directors' meeting. ARTICLE III ----------- Officers -------- Section 3.01. Number. The officers of the Company shall be chosen by the ------------ ------ Board of Directors. The officers shall be a President and/or Chairman, a Secretary and a Treasurer, and such number of Vice-Presidents, Assistant Secretaries and Assistant Treasurers, and such other officers, if any, as the Board may from time to time determine. The Board may choose such other agents as it shall deem necessary. Any number of offices may be held by the same person. Section 3.02. Terms of Office. Each officer shall hold his office until ------------ --------------- his successor is chosen and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Company. Section 3.03. Removal. Any officer may be removed from office at any time ------------ ------- by the Board of Directors with or without cause. Section 3.04. Authority. The Secretary shall record all of the ------------ --------- proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose, and shall have the authority, perform the duties and exercise the powers in the management of the Company 11 usually incident to the office held by him, and/or such other authority, duties and powers as may be assigned to him from time to time by the Board of Directors, the Chairman, the Vice-Chairman or the President. The other officers, and agents, if any, shall have the authority, perform the duties and exercise the powers in the management of the Company usually incident to the offices held by them, respectively, and/or such other authority, duties and powers as may be assigned to them from time to time by the Board of Directors or (except in the case of the Chairman, the Vice-Chairman or the President) by the Chairman, the Vice President or the President. Section 3.05. Voting Securities Owned by the Company. Powers of attorney, ------------ -------------------------------------- proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Company may be executed in the name of and on behalf of the Company by the Chairman, the Vice Chairman, the President or any Vice- President and any such officer may, in the name of and on behalf of the Company, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Company may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Company might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. ARTICLE IV ---------- Capital Stock ------------- Section 4.01. Stock Certificates. Every holder of stock in the Company ------------ ------------------ shall be entitled to have a certificate signed by, or in the name of the Company by, the Chairman, or Vice 12 Chairman of the Board of Directors or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Company, certifying the number of shares owned by him in the Company. Where such certificate is signed (1) by a transfer agent other than the Company or its employee, or (2) by a registrar other than the Company or its employee, the signatures of the officers of the Company may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Company with the same effect as if he were such officer at the date of issue. Section 4.02. Transfers. Stock of the Company shall be transferable in ------------ --------- the manner prescribed by the laws of the State of Delaware. Section 4.03. Registered Holders. Prior to due presentment for ------------ ------------------ registration of transfer of any security of the Company in registered form, the Company shall treat the registered owner as the person exclusively entitled to vote, to receive notifications and to otherwise exercise all the rights and powers of an owner, and shall not be bound to recognize any equitable or other claim to, or interest in, any security, whether or not the Company shall have notice thereof, except as otherwise provided by the laws of the State of Delaware. 13 Section 4.04. New Certificates. The Company shall issue a new certificate ------------ ---------------- of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, if the owner: (1) so requests before the Company has notice that the shares of stock represented by that certificate have been acquired by a bona fide purchaser; (2) files with the Company a bond sufficient (in the judgment of the directors) to indemnify the Company against any claim that may be made against it on account of the alleged loss or theft of that certificate or the issuance of a new certificate; and (3) satisfies any other requirements imposed by the directors that are reasonable under the circumstances. A new certificate may be issued without requiring any bond when, in the judgment of the directors, it is proper so to do. ARTICLE V --------- INDEMNIFICATION --------------- Section 5.01. The Company shall indemnify its officers, directors, ------------ employees and agents to the fullest extent permitted by the General Corporation Law of Delaware and the relevant provision in the Certificate of Incorporation of the Corporation, if applicable. ARTICLE VI ---------- Miscellaneous ------------- Section 6.01. Offices. The registered office of the Company in the State ------------ ------- of Delaware shall be as stated in the Certificate of Incorporation or at such other location to which the registered office shall be changed by action of the board of directors The Company may also have offices at other places within and/or without the State of Delaware. 14 Section 6.02. Seal. The corporate seal shall have inscribed thereon the ------------ ---- name of the Company, the year of its incorporation and the words "Corporate Seal Delaware." Section 6.03. Checks. All checks or demands for money shall be signed by ------------ ------ such person or persons as the Board of Directors may from time to time determine. Section 6.04. Fiscal Year. The fiscal year shall begin the first day of ------------ ----------- January in each year and shall end on the thirty-first day of December of such year. Section 6.05. Waivers of Notice; Dispensing with Notice. Whenever any ------------ ----------------------------------------- notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Corporation, or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Whenever any notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Company, or of these By-Laws, to any person with whom communication is made unlawful by any law of the United States of America, or by any rule, regulation, proclamation or executive order issued 15 under any such law, then the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person; and any action or meeting which shall be taken or held without notice to any such person or without giving or without applying for a license or permit to give any such notice to any such person with whom communication is made unlawful as aforesaid, shall have the same force and effect as if such notice had been given as provided under the provisions of the General Corporation Law of the State of Delaware, or under the provisions of the Certificate of Incorporation of the Company or of these By-Laws. In the event that the action taken by the Company is such as to require the filing of a certificate under any of the other sections of this title, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. Section 6.06. Loans to and Guarantees of Obligations of Employees and ------------ ------------------------------------------------------- Officers. The Company may lend money to or guaranty any obligation of, or - -------- otherwise assist any officer or other employee of the Company or of a subsidiary, including any officer or employee who is a director of the Company or a subsidiary, whenever, in the judgment of the Board of Directors, such loan, guaranty or assistance may reasonably be expected to benefit the Company. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Company. Nothing in this Section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Company at common law or under any other statute. Section 6.07. Amendment of By-Laws. These By-Laws may be altered, amended ------------ -------------------- or repealed at any meeting of the Board of Directors. 16 Section 6.08. Section Headings and Statutory References. The headings of ------------ ----------------------------------------- the Articles and Sections of these By-Laws, have been inserted for convenience of reference only and shall not be deemed to be a part of these By-Laws. 17 EX-3.17 30 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.17 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF GEORGE F. PETTINOS, INC. Adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware FIRST: The name of the Corporation is George F. Pettinos, Inc. (hereinafter sometimes called the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 100 and the par value of each of such shares is $0.01. FIFTH: The following additional provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for the creation, definition, limitation and regulation of the powers of the Corporation, the directors and the stockholders: 1. Election of directors need not be by written ballot. The Board of Directors shall have power to make, alter, amend and repeal the By-Laws of the Corporation and to fix the compensation of directors for services in any capacity. 2. Any director may be removed at any time, with or without cause, upon the affirmative vote of the holders of a majority of the stock of the Corporation at that time having voting power for the election of directors; provided, however, that no director who shall have been elected by the holders of a separate class of stock shall be removed under the provisions of this subdivision except upon the affirmative vote of the holders of a majority of the class whose holders elected him, if such holders are then entitled to vote for the election of directors. 3. Any corporate action, with respect to which the vote of the stockholders at a meeting thereof is required or permitted by any provision of the General Corporation Law of the State of Delaware or of the Certificate of Incorporation or the By-Laws of the Corporation, is authorized to be taken and may be taken without that vote and meeting, and that vote and meeting may be dispensed with, with the written consent of the holders of a majority (or, if with respect to a particular corporate action where the General Corporation Law of the State of Delaware or the Certificate of Incorporation or the By-Laws of the Corporation specifies a greater percentage, by the holders of that greater percentage) of the stock that would have been entitled to vote upon that action if a meeting were held. Prompt notice shall be given to all stockholders of the taking of any corporate action pursuant to the provisions of this paragraph 3 unless that action has been consented to in writing by the holders of all of the stock that would have been entitled to vote upon that action if a meeting were held. 4. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. 5. The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, by reason of the fact that he, or the person whose legal representative he is, (i) is or was a stockholder, director, officer, employee or agent of the Corporation (including the incorporator thereof), or (ii) is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) is or was a director, officer or employee of the Corporation serving at the request of the Corporation as a fiduciary of an employee benefit plan or trust maintained for the benefit of employees of the Corporation or employees of any such corporation, partnership, joint venture, trust, or other enterprise, against judgments, fines, penalties, amounts paid in settlement, and expenses, including attorneys' fees, actually and reasonably incurred by him and the person whose legal representative he is, in connection with such action, suit or proceeding, or any appeal therein, to the fullest extent permitted by law. Expenses which may be indemnifiable under this paragraph 5 incurred in defending an action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors upon agreement by or on behalf of the stockholder, director, officer, employee or agent, or his legal representative, to repay such amount if he is later found not entitled to be indemnified by the Corporation as authorized in this paragraph 5. The Corporation shall not indemnify any stockholder, director, officer, employee or agent against judgments, fines, amounts paid in settlement and expenses, including attorneys' fees, to an extent greater than that authorized by this paragraph 5, but the Corporation may procure and maintain insurance providing greater indemnification and may share the premium cost with any stockholder, director, officer, employee or agent on such basis as may be agreed upon. -2- IN WITNESS WHEREOF, I, the undersigned, being an officer of the Corporation, have hereto set my hand this 30/th/ day of July, 1998. /s/ John A. Ulizio ----------------------------- John A. Ulizio Vice President and Secretary -3- EX-3.18 31 BY-LAWS OF GEORGE F. PETTINOS, INC. EXHIBIT 3.18 BY-LAWS of GEORGE F. PETTINOS, INC. _____________________ (herein called the "Company") ARTICLE I --------- Stockholders ------------ Section 1.01. Annual Meeting. The Board of Directors by resolution shall ------------ -------------- designate the time, place and date (which shall be, in the case of the first annual meeting, not more than 13 months after the organization of the Company and, in the case of all other annual meetings, not more than 13 months after the date of the last annual meeting) of the annual meeting of the stockholders for the election of directors and the transaction of such other business as may come before it. Section 1.02. Special Meetings. Special meetings of the stockholders, for ------------ ---------------- any purpose or purposes, may be called at any time by the Chairman, the Vice- Chairman, the President, any Vice-President, the Treasurer, the Secretary or the Assistant Secretary, by resolution of the Board of Directors or upon written request by the holders of one-third of the outstanding shares. Special meetings of stockholders shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Section 1.03. Notice of Meetings of Stockholders. Whenever stockholders ------------ ----------------------------------- are required or permitted to take any action at a meeting, written notice of the meeting shall be given (unless that notice shall be waived or unless the meeting is to be dispensed with in accordance with the provisions of the General Corporation Law of the State of Delaware and the Certificate of Incorporation of the Company and Section 1.12 hereof) which shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given, personally or by mail, not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Company. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.04. Quorum. At all meetings of the stockholders, the holders of ------------ ------ one-third of the stock issued and outstanding and entitled to vote thereat, present in person or by proxy, shall constitute a quorum for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders. 2 The stockholders present may adjourn the meeting despite the absence of a quorum and at any such adjourned meeting at which the requisite amount of voting stock shall be represented, the Company may transact any business which might have been transacted at the original meeting had a quorum been there present. Section 1.05. Method of Voting. The vote upon any question before the ------------ ---------------- meeting need not be by ballot. All elections and all other questions shall be decided by a plurality of the votes cast, at a meeting at which a quorum is present, except as expressly provided otherwise by the General Corporation Law of the State of Delaware or the Certificate of Incorporation. Section 1.06. Voting Rights of Stockholders and Proxies. Each stockholder ------------ ----------------------------------------- of record entitled to vote in accordance with the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of stock entitled to vote standing in his name on the books of the Company, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 1.07. Ownership of its Own Stock. Shares of its own capital stock ------------ -------------------------- belonging to the Company or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Company, shall neither be entitled to vote nor be counted for quorum purposes. Nothing in this section shall be construed as limiting the right of any corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.08. Voting by Fiduciaries and Pledgors. Persons holding stock ------------ ---------------------------------- in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be 3 entitled to vote, unless in the transfer by the pledgor on the books of the Company he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Section 1.09. Fixing Date for Determination of Stockholders of Record. In ------------ ------------------------------------------------------- order to determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed by the Board of Directors, the record date shall be determined in accordance with the provisions of the General Corporation Law of the State of Delaware. Section 1.10. List of Stockholders. The officer who has charge of the ------------ -------------------- stock ledger of the Company shall prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held (which place shall be specified in the notice of the meeting or, if not so specified, at the place where said meeting is to be held), and the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who may be present. Upon the 4 willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. Section 1.11. Stockholder's Right of Inspection. Stockholders of record, ------------ --------------------------------- in person or by attorney or other agent, shall have the right, upon written demand under oath stating the purpose thereof, during the usual hours for business to inspect for any proper purpose the Company's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Company at its registered office in this State or at its principal place of business. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 1.10 or the books of the Company, or to vote in person or by proxy at any meeting of the stockholders. Section 1.12. Consent in Lieu of Meeting. Any corporate action, with ------------ -------------------------- respect to which the vote of the stockholders at a meeting thereof is required or permitted by any provision of the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company, or these By-Laws, may be taken without that vote and meeting, and that vote and meeting may be dispensed with, if that corporate action has been consented to in writing by the holders of a majority (or, if with respect to a particular corporate action the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company or these By-Laws 5 specifies a greater percentage, by the holders of that percentage) of the stock that would have been entitled to vote upon that action if a meeting were held. Prompt notice shall be given to all stockholders of the taking of any corporate action pursuant to the provisions of that paragraph unless that action has been consented to in writing by the holders of all of the stock that would have been entitled to vote upon that action if a meeting were held. ARTICLE II ---------- Directors --------- Section 2.01. Management of Business. The business of the Company shall ------------ ---------------------- be managed by its Board of Directors. The Board of Directors, in addition to the powers and authority expressly conferred upon it herein, by statute, by the Certificate of Incorporation of the Company or otherwise, is hereby empowered to exercise all such powers as may be exercised by the Company, except as expressly provided otherwise by the statutes of the State of Delaware, by the Certificate of Incorporation of the Company or by these By-Laws. Without prejudice to the generality of the foregoing, the Board of Directors, by resolution or resolutions, may create and issue, whether or not in connection with the issue and sale of any shares of stock or other securities of the Company, rights or options entitling the holders thereof to purchase from the Company any shares of its capital stock of any class or classes or any other securities of the Company, such rights or options to be evidenced by or in such instrument or instruments as shall be approved by the Board of Directors. The terms upon which, including the 6 time or times, which may be limited or unlimited in duration, at or within which, and the price or prices at which, any such rights or options may be issued and any such shares or other securities may be purchased from the Company upon the exercise of any such right or option shall be such as shall be fixed and stated in the resolution or resolutions adopted by the Board of Directors providing for the creation and issue of such rights or options, and, in every case, set forth or incorporated by reference in the instrument or instruments evidencing such rights or options. In the absence of actual fraud in the transaction, the judgment of the directors as to the consideration for the issuance of such rights or options and the sufficiency thereof shall be conclusive. In case the shares of stock of the Company to be issued upon the exercise of such rights or options shall be shares having a par value, the price or prices so to be received therefor shall not be less than the par value thereof. In case the shares of stock so to be issued shall be shares of stock without par value, the consideration therefor shall be determined in the manner provided in Section 153 of the General Corporation Law of the State of Delaware. Section 2.02. Qualifications and Number of Directors. Directors need not ------------ -------------------------------------- be stockholders. The number of directors which shall constitute the whole Board shall be not less than three nor more than eleven. Section 2.03. Election and Term. The directors shall be elected at the ------------ ----------------- annual meeting of the stockholders, and each director shall be elected to hold office until his successor shall be elected and qualified, or until his earlier resignation or removal. Section 2.04. Resignations. Any director of the Company may resign at any ------------ ------------ time by giving written notice to the Company. Such resignation shall take effect at the time specified therein, if any, or if no time is specified therein, then upon receipt of such notice by the 7 Company; and, unless otherwise provided therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.05. Vacancies and Newly Created Directorships. Vacancies and ------------ ----------------------------------------- newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until their successors shall be elected and qualified, or until their earlier resignation or removal. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as herein provided in the filling of other vacancies. Section 2.06. Quorum of Directors. At all meetings of the Board of ------------ ------------------- Directors, one-third of the entire Board shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as provided in Sections 2.05 and 2.12 hereof. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting of the directors to another time and place. Notice of any adjournment need not be given if such time and place are announced at the meeting. Section 2.07. Annual Meeting. The newly elected Board of Directors shall ------------ -------------- meet immediately following the adjournment of the annual meeting of stockholders in each year at the same place, within or without the State of Delaware, and no notice of such meeting shall be necessary. 8 Section 2.08. Regular Meetings. Regular meetings of the Board of ------------ ---------------- Directors may be held at such time and place, within or without the State of Delaware, as shall from time to time be fixed by the Board and no notice thereof shall be necessary. Section 2.09. Special Meetings. Special meetings may be called at any ------------ ---------------- time by the President, the Secretary or by resolution of any two Directors. Special meetings shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Special meetings of the Board of Directors shall be held upon notice to the directors or waiver thereof. Unless waived, notice of each special meeting of the directors, stating the time and place of the meeting, shall be given to each director by delivered letter, by telegram or by personal communication either over the telephone or otherwise, in each such case not later than the second day prior to the meeting, or by mailed letter deposited in the United States mail with postage thereon prepaid not later than the seventh day prior to the meeting. Notices of special meetings of the Board of Directors and waivers thereof need not state the purpose or purposes of the meeting. Section 2.10. Action Without a Meeting. 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 all members of the Board or committee, as the case may be, consent thereto in a writing or writings and the writing or writings are filed with the minutes of proceedings of the Board or committee. 9 Section 2.11. Compensation. Directors shall receive any such fixed sums ------------ ------------ and expenses of attendance for attendance at each meeting of the Board or of any committee and/or any such salary as may be determined from time to time by the Board of Directors; provided that nothing herein contained shall be construed to preclude any director from serving the Company in any other capacity and receiving compensation therefor. Section 2.12. Executive Committee. The Board of Directors may, by ------------ ------------------- resolution or resolutions, passed by a majority of the whole Board, designate an Executive Committee (and may discontinue the same at any time) to consist of three or more of the directors of the Company. The members shall be appointed by the Board and shall hold office at the pleasure of the Board. The Board may designate one or more directors as alternate members of the Committee, who may replace an absent or disqualified member at any meeting of the Committee. The Executive Committee shall have and may exercise all the powers of the Board of Directors (when the Board is not in session) in the management of the business and affairs of the Company (and may authorize the seal of the Company to be affixed to all papers which may require it), except that the Executive Committee shall have no power (a) to elect directors; (b) to alter, amend or repeal these By-Laws or any resolution or resolutions of the directors designating an Executive Committee; (c) to declare any dividend or make any other distribution to the stockholders of the Company; or (d) to appoint any member of the Executive Committee. Regular meetings of the Executive Committee may be held at such time and place, within or without the State of Delaware, as shall from time to time be fixed by the Executive Committee and no notice thereof shall be necessary. Special meetings may be called at any time by any officer of the Company or any member of the Committee. Special meetings shall be held at such place, within or without the State of Delaware, as shall be fixed by the person calling the meeting 10 and stated in the notice or waiver of the meeting. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business and the act of a majority present at which there is a quorum shall be the act of the Executive Committee. Notice of each special meeting of the Executive Committee shall be given (or waived) in the same manner as notice of a directors' meeting. ARTICLE III ----------- Officers -------- Section 3.01. Number. The officers of the Company shall be chosen by the ------------ ------ Board of Directors. The officers shall be a President and/or Chairman, a Secretary and a Treasurer, and such number of Vice-Presidents, Assistant Secretaries and Assistant Treasurers, and such other officers, if any, as the Board may from time to time determine. The Board may choose such other agents as it shall deem necessary. Any number of offices may be held by the same person. Section 3.02. Terms of Office. Each officer shall hold his office until ------------ --------------- his successor is chosen and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Company. Section 3.03. Removal. Any officer may be removed from office at any time ------------ ------- by the Board of Directors with or without cause. Section 3.04. Authority. The Secretary shall record all of the ------------ --------- proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose, and shall have the authority, perform the duties and exercise the powers in the management of the Company 11 usually incident to the office held by him, and/or such other authority, duties and powers as may be assigned to him from time to time by the Board of Directors, the Chairman, the Vice-Chairman or the President. The other officers, and agents, if any, shall have the authority, perform the duties and exercise the powers in the management of the Company usually incident to the offices held by them, respectively, and/or such other authority, duties and powers as may be assigned to them from time to time by the Board of Directors or (except in the case of the Chairman, the Vice-Chairman or the President) by the Chairman, the Vice President or the President. Section 3.05. Voting Securities Owned by the Company. Powers of attorney, ------------ -------------------------------------- proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Company may be executed in the name of and on behalf of the Company by the Chairman, the Vice Chairman, the President or any Vice- President and any such officer may, in the name of and on behalf of the Company, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Company may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Company might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. ARTICLE IV ---------- Capital Stock ------------- Section 4.01. Stock Certificates. Every holder of stock in the Company ------------ ------------------ shall be entitled to have a certificate signed by, or in the name of the Company by, the Chairman, or Vice 12 Chairman of the Board of Directors or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Company, certifying the number of shares owned by him in the Company. Where such certificate is signed (1) by a transfer agent other than the Company or its employee, or (2) by a registrar other than the Company or its employee, the signatures of the officers of the Company may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Company with the same effect as if he were such officer at the date of issue. Section 4.02. Transfers. Stock of the Company shall be transferable in ------------ --------- the manner prescribed by the laws of the State of Delaware. Section 4.03. Registered Holders. Prior to due presentment for ------------ ------------------ registration of transfer of any security of the Company in registered form, the Company shall treat the registered owner as the person exclusively entitled to vote, to receive notifications and to otherwise exercise all the rights and powers of an owner, and shall not be bound to recognize any equitable or other claim to, or interest in, any security, whether or not the Company shall have notice thereof, except as otherwise provided by the laws of the State of Delaware. 13 Section 4.04. New Certificates. The Company shall issue a new certificate ------------ ---------------- of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, if the owner: (1) so requests before the Company has notice that the shares of stock represented by that certificate have been acquired by a bona fide purchaser; (2) files with the Company a bond sufficient (in the judgment of the directors) to indemnify the Company against any claim that may be made against it on account of the alleged loss or theft of that certificate or the issuance of a new certificate; and (3) satisfies any other requirements imposed by the directors that are reasonable under the circumstances. A new certificate may be issued without requiring any bond when, in the judgment of the directors, it is proper so to do. ARTICLE V --------- INDEMNIFICATION --------------- Section 5.01. The Company shall indemnify its officers, directors, ------------ employees and agents to the fullest extent permitted by the General Corporation Law of Delaware and the relevant provision in the Certificate of Incorporation of the Corporation, if applicable. ARTICLE VI ---------- Miscellaneous ------------- Section 6.01. Offices. The registered office of the Company in the State ------------ ------- of Delaware shall be as stated in the Certificate of Incorporation or at such other location to which the registered office shall be changed by action of the board of directors The Company may also have offices at other places within and/or without the State of Delaware. 14 Section 6.02. Seal. The corporate seal shall have inscribed thereon the ------------ ---- name of the Company, the year of its incorporation and the words "Corporate Seal Delaware." Section 6.03. Checks. All checks or demands for money shall be signed by ------------ ------ such person or persons as the Board of Directors may from time to time determine. Section 6.04. Fiscal Year. The fiscal year shall begin the first day of ------------ ----------- January in each year and shall end on the thirty-first day of December of such year. Section 6.05. Waivers of Notice; Dispensing with Notice. Whenever any ------------ ----------------------------------------- notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Corporation, or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Whenever any notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Company, or of these By-Laws, to any person with whom communication is made unlawful by any law of the United States of America, or by any rule, regulation, proclamation or executive order issued 15 under any such law, then the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person; and any action or meeting which shall be taken or held without notice to any such person or without giving or without applying for a license or permit to give any such notice to any such person with whom communication is made unlawful as aforesaid, shall have the same force and effect as if such notice had been given as provided under the provisions of the General Corporation Law of the State of Delaware, or under the provisions of the Certificate of Incorporation of the Company or of these By-Laws. In the event that the action taken by the Company is such as to require the filing of a certificate under any of the other sections of this title, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. Section 6.06. Loans to and Guarantees of Obligations of Employees and ------------ ------------------------------------------------------- Officers. The Company may lend money to or guaranty any obligation of, or - -------- otherwise assist any officer or other employee of the Company or of a subsidiary, including any officer or employee who is a director of the Company or a subsidiary, whenever, in the judgment of the Board of Directors, such loan, guaranty or assistance may reasonably be expected to benefit the Company. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Company. Nothing in this Section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Company at common law or under any other statute. Section 6.07. Amendment of By-Laws. These By-Laws may be altered, amended ------------ -------------------- or repealed at any meeting of the Board of Directors. 16 Section 6.08. Section Headings and Statutory References. The headings of ------------ ----------------------------------------- the Articles and Sections of these By-Laws, have been inserted for convenience of reference only and shall not be deemed to be a part of these By-Laws. 17 EX-3.19 32 CERTIFICATE OF INCORPORATION OF OTTAWA SILICA CO. EXHIBIT 3.19 CERTIFICATE OF INCORPORATION OF LaSALLE NATIONAL SILICA CO. I, the undersigned, in order to form a corporation for the purposes hereinafter stated, under and pursuant to the provisions of the General Corporation Law of the State of Delaware, being Title 8 Chapter 1 of the Delaware Code (1974 Revision), and the Acts amendatory thereof and supplementary thereto, do hereby certify as follows: FIRST: The name of the corporation is LaSalle National Silica Co., ----- (hereinafter called the "Corporation"). SECOND: The location of the registered office of the Corporation in the ------ State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or ----- activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of stock which the Corporation shall ------ have authority to issue is one hundred shares of common stock of the par value of $10 per share. FIFTH: The name and address of the incorporator is as follows: ----- Name Address ---- ------- Charles V. Bush 1115 Fairfax Street Berkeley Springs, WV 25411 SIXTH: The powers of the incorporator shall terminate upon the filing of ----- this Certificate of Incorporation. The names and addresses of the persons who are to serve as directors of the Corporation until the first annual meeting of stockholders or until their successors are elected and qualify are set forth below in accordance with Section 102(a) (6) of the General Corporation Law of Delaware: Name Address ---- ------- Lawrence F. Bellotti Route 4 Ottawa, IL 61350 William F. Penfield 206 Forest Park Place, Ottawa, IL 61350 Walter R. Hoambrecker 104 Leland Lane, Ottawa, IL 61350 SEVENTH: In furtherance and not in limitation of the powers conferred ------- by law, the Board of Directors of the Corporation is expressly authorized: (a) To make, alter, amend or repeal the By-Laws of the Corporation. (b) To direct and determine the use and disposition of net profits or net assets in excess of capital; to set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose; and to abolish any such reserve in the manner in which it was created. (c) To establish bonus, profit-sharing, stock option, retirement or other types of incentive or compensation plans for the employees (including officers and directors) of the Corporation and to fix the amount of the profits to be distributed or shared and to determine the persons to participate in any such plans and the amounts of their respective participations. (d) From time to time to determine whether and to what extent, and at what time and places and under what conditions and regulations the accounts and books of the Corporation (other than the stock ledger), or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by statute or authorized by the Board of Directors or by a resolution of the stockholders. (e) To authorize, and cause to be executed, mortgages and liens upon the real and personal property of the Corporation. 2 EIGHTH: Meetings of stockholders may be held within or without the State ------ of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation. NINTH: Whenever the vote of stockholders at a meeting thereof is ----- required or permitted to be taken for or in connection with any corporate action by any provision of the General Corporation Law of Delaware, the meeting and vote of stockholders may be dispensed with if the holders of stock having not less than the minimum percentage of the vote required by statute for the proposed corporate action shall consent in writing to such corporate action being taken, provided that prompt notice must be given to all stockholders of the taking of such corporate action without a meeting and by less than unanimous written consent. TENTH: Stockholders may at any time, at a meeting expressly called for ----- that purpose, remove any or all of the directors, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. ELEVENTH: The Corporation reserves the right to amend, alter, change or -------- repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders and directors are subject to this reserved power. 3 IN WITNESS WHEREOF, I have hereunto set my hand and seal the 20th day of October, 1986. /s/ Charles V. Bush (SEAL) -------------------- 4 STATE OF WEST VIRGINIA ) : ss.: COUNTY OF MORGAN ) On this 20th day of October, 1986, there personally came before me Charles V. Bush, the person who executed the foregoing certificate, known to me personally to be such, and he duly executed said certificate before me and acknowledged that it was his act and deed and that the facts therein are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. /s/ Mary E. Phillips -------------------- (Notary Seal) 5 EX-3.19.1 33 CERTIFICATE OF AMENDMENT DATED DECEMBER 15, 1986 EXHIBIT 3.19.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION LaSalle National Silica Co., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, by unanimous written consent, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of LaSALLE NATIONAL SILICA CO. be amended by changing Article First thereof to read as follows: "FIRST: The name of the Corporation is OTTAWA SILICA COMPANY thereinafter called the "Corporation")". SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions of section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of sections 242 and 228 of the General Corporation Law of the State of Delaware. FOURTH: That this Certificate of Amendment of the Certificate of Incorporation shall be effective on December 31, 1986. IN WITNESS WHEREOF, said LaSalle National Silica Co., has caused this certificate to be signed by Lawrence F. Bellotti, its President, and attested by Charles V. Bush, its Secretary, this 2nd day of December, 1986. LaSALLE NATIONAL SILICA CO. (Corporate Seal) By /s/ L. F. Bellotti ------------------ President ATTEST: By /s/ Charles V. Bush ------------------- Secretary 2 STATE OF ILLINOIS ) : ss.: COUNTY OF LaSALLE ) BE IT REMEMBERED that on this 2/nd/ day of December, 1986, personally came before me, a Notary Public in and for the County and State aforesaid, Lawrence P. Bellotti, President of LaSalle National Silica Co., a corporation of the State of Delaware, the corporation described in and which executed the foregoing certificate, known to me personally to be such, and he duly executed said certificate before me and acknowledged the said certificate to be his act and deed and the act and deed of said corporation, and that the facts stated therein are true and that the seal affixed to said certificate and attested by the Secretary of said corporation is the corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. /s/ -------------------------------------- Notary Public My Commission Expires: Mar. 26, 1990 ------------------ 3 EX-3.20 34 BY-LAWS OF OTTAWA SILICA COMPANY EXHIBIT 3.20 BY-LAWS of OTTAWA SILICA COMPANY _____________________ (herein called the "Company") ARTICLE I --------- Stockholders ------------ Section 1.01. Annual Meeting. The Board of Directors by resolution shall ------------ -------------- designate the time, place and date (which shall be, in the case of the first annual meeting, not more than 13 months after the organization of the Company and, in the case of all other annual meetings, not more than 13 months after the date of the last annual meeting) of the annual meeting of the stockholders for the election of directors and the transaction of such other business as may come before it. Section 1.02. Special Meetings. Special meetings of the stockholders, for ------------ ---------------- any purpose or purposes, may be called at any time by the Chairman, the Vice- Chairman, the President, any Vice-President, the Treasurer, the Secretary or the Assistant Secretary, by resolution of the Board of Directors or upon written request by the holders of one-third of the outstanding shares. Special meetings of stockholders shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Section 1.03. Notice of Meetings of Stockholders. Whenever stockholders ------------ ----------------------------------- are required or permitted to take any action at a meeting, written notice of the meeting shall be given (unless that notice shall be waived or unless the meeting is to be dispensed with in accordance with the provisions of the General Corporation Law of the State of Delaware and the Certificate of Incorporation of the Company and Section 1.12 hereof) which shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given, personally or by mail, not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Company. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.04. Quorum. At all meetings of the stockholders, the holders of ------------ ------ one-third of the stock issued and outstanding and entitled to vote thereat, present in person or by proxy, shall constitute a quorum for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders. 2 The stockholders present may adjourn the meeting despite the absence of a quorum and at any such adjourned meeting at which the requisite amount of voting stock shall be represented, the Company may transact any business which might have been transacted at the original meeting had a quorum been there present. Section 1.05. Method of Voting. The vote upon any question before the ------------ ---------------- meeting need not be by ballot. All elections and all other questions shall be decided by a plurality of the votes cast, at a meeting at which a quorum is present, except as expressly provided otherwise by the General Corporation Law of the State of Delaware or the Certificate of Incorporation. Section 1.06. Voting Rights of Stockholders and Proxies. Each stockholder ------------ ----------------------------------------- of record entitled to vote in accordance with the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of stock entitled to vote standing in his name on the books of the Company, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 1.07. Ownership of its Own Stock. Shares of its own capital stock ------------ -------------------------- belonging to the Company or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Company, shall neither be entitled to vote nor be counted for quorum purposes. Nothing in this section shall be construed as limiting the right of any corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.08. Voting by Fiduciaries and Pledgors. Persons holding stock ------------ ---------------------------------- in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be 3 entitled to vote, unless in the transfer by the pledgor on the books of the Company he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Section 1.09. Fixing Date for Determination of Stockholders of Record. In ------------ ------------------------------------------------------- order to determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed by the Board of Directors, the record date shall be determined in accordance with the provisions of the General Corporation Law of the State of Delaware. Section 1.10. List of Stockholders. The officer who has charge of the ------------ -------------------- stock ledger of the Company shall prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held (which place shall be specified in the notice of the meeting or, if not so specified, at the place where said meeting is to be held), and the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who may be present. Upon the 4 willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. Section 1.11. Stockholder's Right of Inspection. Stockholders of record, ------------ --------------------------------- in person or by attorney or other agent, shall have the right, upon written demand under oath stating the purpose thereof, during the usual hours for business to inspect for any proper purpose the Company's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Company at its registered office in this State or at its principal place of business. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 1.10 or the books of the Company, or to vote in person or by proxy at any meeting of the stockholders. Section 1.12. Consent in Lieu of Meeting. Any corporate action, with ------------ -------------------------- respect to which the vote of the stockholders at a meeting thereof is required or permitted by any provision of the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company, or these By-Laws, may be taken without that vote and meeting, and that vote and meeting may be dispensed with, if that corporate action has been consented to in writing by the holders of a majority (or, if with respect to a particular corporate action the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company or these By-Laws 5 specifies a greater percentage, by the holders of that percentage) of the stock that would have been entitled to vote upon that action if a meeting were held. Prompt notice shall be given to all stockholders of the taking of any corporate action pursuant to the provisions of that paragraph unless that action has been consented to in writing by the holders of all of the stock that would have been entitled to vote upon that action if a meeting were held. ARTICLE II ---------- Directors --------- Section 2.01. Management of Business. The business of the Company shall ------------ ---------------------- be managed by its Board of Directors. The Board of Directors, in addition to the powers and authority expressly conferred upon it herein, by statute, by the Certificate of Incorporation of the Company or otherwise, is hereby empowered to exercise all such powers as may be exercised by the Company, except as expressly provided otherwise by the statutes of the State of Delaware, by the Certificate of Incorporation of the Company or by these By-Laws. Without prejudice to the generality of the foregoing, the Board of Directors, by resolution or resolutions, may create and issue, whether or not in connection with the issue and sale of any shares of stock or other securities of the Company, rights or options entitling the holders thereof to purchase from the Company any shares of its capital stock of any class or classes or any other securities of the Company, such rights or options to be evidenced by or in such instrument or instruments as shall be approved by the Board of Directors. The terms upon which, including the 6 time or times, which may be limited or unlimited in duration, at or within which, and the price or prices at which, any such rights or options may be issued and any such shares or other securities may be purchased from the Company upon the exercise of any such right or option shall be such as shall be fixed and stated in the resolution or resolutions adopted by the Board of Directors providing for the creation and issue of such rights or options, and, in every case, set forth or incorporated by reference in the instrument or instruments evidencing such rights or options. In the absence of actual fraud in the transaction, the judgment of the directors as to the consideration for the issuance of such rights or options and the sufficiency thereof shall be conclusive. In case the shares of stock of the Company to be issued upon the exercise of such rights or options shall be shares having a par value, the price or prices so to be received therefor shall not be less than the par value thereof. In case the shares of stock so to be issued shall be shares of stock without par value, the consideration therefor shall be determined in the manner provided in Section 153 of the General Corporation Law of the State of Delaware. Section 2.02. Qualifications and Number of Directors. Directors need not ------------ -------------------------------------- be stockholders. The number of directors which shall constitute the whole Board shall be not less than three nor more than eleven. Section 2.03. Election and Term. The directors shall be elected at the ------------ ----------------- annual meeting of the stockholders, and each director shall be elected to hold office until his successor shall be elected and qualified, or until his earlier resignation or removal. Section 2.04. Resignations. Any director of the Company may resign at any ------------ ------------ time by giving written notice to the Company. Such resignation shall take effect at the time specified therein, if any, or if no time is specified therein, then upon receipt of such notice by the 7 Company; and, unless otherwise provided therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.05. Vacancies and Newly Created Directorships. Vacancies and ------------ ----------------------------------------- newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until their successors shall be elected and qualified, or until their earlier resignation or removal. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as herein provided in the filling of other vacancies. Section 2.06. Quorum of Directors. At all meetings of the Board of ------------ ------------------- Directors, one-third of the entire Board shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as provided in Sections 2.05 and 2.12 hereof. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting of the directors to another time and place. Notice of any adjournment need not be given if such time and place are announced at the meeting. Section 2.07. Annual Meeting. The newly elected Board of Directors shall ------------ -------------- meet immediately following the adjournment of the annual meeting of stockholders in each year at the same place, within or without the State of Delaware, and no notice of such meeting shall be necessary. 8 Section 2.08. Regular Meetings. Regular meetings of the Board of ------------ ---------------- Directors may be held at such time and place, within or without the State of Delaware, as shall from time to time be fixed by the Board and no notice thereof shall be necessary. Section 2.09. Special Meetings. Special meetings may be called at any ------------ ---------------- time by the President, the Secretary or by resolution of any two Directors. Special meetings shall be held at such place, within or without the State of Delaware, as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting. Special meetings of the Board of Directors shall be held upon notice to the directors or waiver thereof. Unless waived, notice of each special meeting of the directors, stating the time and place of the meeting, shall be given to each director by delivered letter, by telegram or by personal communication either over the telephone or otherwise, in each such case not later than the second day prior to the meeting, or by mailed letter deposited in the United States mail with postage thereon prepaid not later than the seventh day prior to the meeting. Notices of special meetings of the Board of Directors and waivers thereof need not state the purpose or purposes of the meeting. Section 2.10. Action Without a Meeting. 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 all members of the Board or committee, as the case may be, consent thereto in a writing or writings and the writing or writings are filed with the minutes of proceedings of the Board or committee. 9 Section 2.11. Compensation. Directors shall receive any such fixed sums ------------ ------------ and expenses of attendance for attendance at each meeting of the Board or of any committee and/or any such salary as may be determined from time to time by the Board of Directors; provided that nothing herein contained shall be construed to preclude any director from serving the Company in any other capacity and receiving compensation therefor. Section 2.12. Executive Committee. The Board of Directors may, by ------------ ------------------- resolution or resolutions, passed by a majority of the whole Board, designate an Executive Committee (and may discontinue the same at any time) to consist of three or more of the directors of the Company. The members shall be appointed by the Board and shall hold office at the pleasure of the Board. The Board may designate one or more directors as alternate members of the Committee, who may replace an absent or disqualified member at any meeting of the Committee. The Executive Committee shall have and may exercise all the powers of the Board of Directors (when the Board is not in session) in the management of the business and affairs of the Company (and may authorize the seal of the Company to be affixed to all papers which may require it), except that the Executive Committee shall have no power (a) to elect directors; (b) to alter, amend or repeal these By-Laws or any resolution or resolutions of the directors designating an Executive Committee; (c) to declare any dividend or make any other distribution to the stockholders of the Company; or (d) to appoint any member of the Executive Committee. Regular meetings of the Executive Committee may be held at such time and place, within or without the State of Delaware, as shall from time to time be fixed by the Executive Committee and no notice thereof shall be necessary. Special meetings may be called at any time by any officer of the Company or any member of the Committee. Special meetings shall be held at such place, within or without the State of Delaware, as shall be fixed by the person calling the meeting 10 and stated in the notice or waiver of the meeting. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business and the act of a majority present at which there is a quorum shall be the act of the Executive Committee. Notice of each special meeting of the Executive Committee shall be given (or waived) in the same manner as notice of a directors' meeting. ARTICLE III ----------- Officers -------- Section 3.01. Number. The officers of the Company shall be chosen by the ------------ ------ Board of Directors. The officers shall be a President and/or Chairman, a Secretary and a Treasurer, and such number of Vice-Presidents, Assistant Secretaries and Assistant Treasurers, and such other officers, if any, as the Board may from time to time determine. The Board may choose such other agents as it shall deem necessary. Any number of offices may be held by the same person. Section 3.02. Terms of Office. Each officer shall hold his office until ------------ --------------- his successor is chosen and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Company. Section 3.03. Removal. Any officer may be removed from office at any time ------------ ------- by the Board of Directors with or without cause. Section 3.04. Authority. The Secretary shall record all of the ------------ --------- proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose, and shall have the authority, perform the duties and exercise the powers in the management of the Company 11 usually incident to the office held by him, and/or such other authority, duties and powers as may be assigned to him from time to time by the Board of Directors, the Chairman, the Vice-Chairman or the President. The other officers, and agents, if any, shall have the authority, perform the duties and exercise the powers in the management of the Company usually incident to the offices held by them, respectively, and/or such other authority, duties and powers as may be assigned to them from time to time by the Board of Directors or (except in the case of the Chairman, the Vice-Chairman or the President) by the Chairman, the Vice President or the President. Section 3.05. Voting Securities Owned by the Company. Powers of attorney, ------------ -------------------------------------- proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Company may be executed in the name of and on behalf of the Company by the Chairman, the Vice Chairman, the President or any Vice- President and any such officer may, in the name of and on behalf of the Company, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Company may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Company might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. ARTICLE IV ---------- Capital Stock ------------- Section 4.01. Stock Certificates. Every holder of stock in the Company ------------ ------------------ shall be entitled to have a certificate signed by, or in the name of the Company by, the Chairman, or Vice 12 Chairman of the Board of Directors or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Company, certifying the number of shares owned by him in the Company. Where such certificate is signed (1) by a transfer agent other than the Company or its employee, or (2) by a registrar other than the Company or its employee, the signatures of the officers of the Company may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Company with the same effect as if he were such officer at the date of issue. Section 4.02. Transfers. Stock of the Company shall be transferable in ------------ --------- the manner prescribed by the laws of the State of Delaware. Section 4.03. Registered Holders. Prior to due presentment for ------------ ------------------ registration of transfer of any security of the Company in registered form, the Company shall treat the registered owner as the person exclusively entitled to vote, to receive notifications and to otherwise exercise all the rights and powers of an owner, and shall not be bound to recognize any equitable or other claim to, or interest in, any security, whether or not the Company shall have notice thereof, except as otherwise provided by the laws of the State of Delaware. 13 Section 4.04. New Certificates. The Company shall issue a new certificate ------------ ---------------- of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, if the owner: (1) so requests before the Company has notice that the shares of stock represented by that certificate have been acquired by a bona fide purchaser; (2) files with the Company a bond sufficient (in the judgment of the directors) to indemnify the Company against any claim that may be made against it on account of the alleged loss or theft of that certificate or the issuance of a new certificate; and (3) satisfies any other requirements imposed by the directors that are reasonable under the circumstances. A new certificate may be issued without requiring any bond when, in the judgment of the directors, it is proper so to do. ARTICLE V --------- INDEMNIFICATION --------------- Section 5.01. The Company shall indemnify its officers, directors, ------------ employees and agents to the fullest extent permitted by the General Corporation Law of Delaware and the relevant provision in the Certificate of Incorporation of the Corporation, if applicable. ARTICLE VI ---------- Miscellaneous ------------- Section 6.01. Offices. The registered office of the Company in the State ------------ ------- of Delaware shall be as stated in the Certificate of Incorporation or at such other location to which the registered office shall be changed by action of the board of directors The Company may also have offices at other places within and/or without the State of Delaware. 14 Section 6.02. Seal. The corporate seal shall have inscribed thereon the ------------ ---- name of the Company, the year of its incorporation and the words "Corporate Seal Delaware." Section 6.03. Checks. All checks or demands for money shall be signed by ------------ ------ such person or persons as the Board of Directors may from time to time determine. Section 6.04. Fiscal Year. The fiscal year shall begin the first day of ------------ ----------- January in each year and shall end on the thirty-first day of December of such year. Section 6.05. Waivers of Notice; Dispensing with Notice. Whenever any ------------ ----------------------------------------- notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Corporation, or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Whenever any notice whatever is required to be given under the provisions of the General Corporation Law of the State of Delaware, of the Certificate of Incorporation of the Company, or of these By-Laws, to any person with whom communication is made unlawful by any law of the United States of America, or by any rule, regulation, proclamation or executive order issued 15 under any such law, then the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person; and any action or meeting which shall be taken or held without notice to any such person or without giving or without applying for a license or permit to give any such notice to any such person with whom communication is made unlawful as aforesaid, shall have the same force and effect as if such notice had been given as provided under the provisions of the General Corporation Law of the State of Delaware, or under the provisions of the Certificate of Incorporation of the Company or of these By-Laws. In the event that the action taken by the Company is such as to require the filing of a certificate under any of the other sections of this title, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. Section 6.06. Loans to and Guarantees of Obligations of Employees and ------------ ------------------------------------------------------- Officers. The Company may lend money to or guaranty any obligation of, or - -------- otherwise assist any officer or other employee of the Company or of a subsidiary, including any officer or employee who is a director of the Company or a subsidiary, whenever, in the judgment of the Board of Directors, such loan, guaranty or assistance may reasonably be expected to benefit the Company. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Company. Nothing in this Section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Company at common law or under any other statute. Section 6.07. Amendment of By-Laws. These By-Laws may be altered, amended ------------ -------------------- or repealed at any meeting of the Board of Directors. 16 Section 6.08. Section Headings and Statutory References. The headings of ------------ ----------------------------------------- the Articles and Sections of these By-Laws, have been inserted for convenience of reference only and shall not be deemed to be a part of these By-Laws. 17 EX-3.21 35 ARTICLES OF INCORPORATION OF THE FULTON LAND EXHIBIT 3.21 ARTICLES OF INCORPORATION TO THE DEPARTMENT OF STATE; COMMONWEALTH OF PENNSYLVANIA: In compliance with the requirements of the "Business Corporation Law," (Act No. 106), approved the 5th day of May, A. D. 1933, the undersigned, all of whom are citizens of the United States, desiring that they may be incorporated as a business corporation, do hereby certify: 1st. The name of the corporation is THE FULTON LAND AND TIMBER COMPANY. 2nd. The location and post office address of its initial registered office in this Commonwealth is 123 S. Broad St., c/o C T Corporation System, Philadelphia, Philadelphia County. 3rd. The purpose or purposes of the corporation are: To acquire and hold by purchase, lease or otherwise, and to use, improve, manage, lease, mortgage or otherwise encumber and lands, tenements and real property of every description and tenure, and dispose of same or any or all thereof in any manner whatsoever; to engage in the general lumber, timber and milling business. 4th. The term of its existence is perpetual. 5th. The authorized capital stock of the corporation is 50 shares of the par value of $100.00 per share. 6th. The amount of paid in capital with which the corporation will begin business is $500.00. 7th. The names and addresses of the first directors and their terms of office are: NAME ADDRESS TERM OF OFFICE ---- ------- -------------- Frederick C. Elkins 248 W. Johnson Street, 1 year Philadelphia, PA Robert C. Willis, Jr. 26 South Street, 1 year Baltimore, MD Harold A. MacConney 4404 Chatham Road, 1 year Baltimore, MD 8th. The names and addresses of the incorporators and the number and class of shares subscribed by each are: NO. AND CLASS NAME ADDRESS OF SHARES ---- ------- -------------- F. Stanley Saurman Southampton, PA 1 Robert E. Boyd 100 Schoolhouse Lane, 1 Ardmore, PA Thomas J. Cauley 933 Marlyn Road, 1 Philadelphia, PA 9th. In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend and repeal by-laws, subject to the power of the shareholders to change or repeal such by-laws; and to set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose or to abolish any such reserve in the manner in which it was created. The corporation may in its by-laws confer powers upon its Board of Directors in addition to the foregoing, and in addition to the powers and authorities expressly conferred upon it by statute, but not in conflict with the laws of the Commonwealth of Pennsylvania. 2 10th. The corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon shareholders herein are granted subject to this reservation. F. STANLEY SAURMAN (SEAL) ------------------ ROBERT E. BOYD (SEAL) ------------------ THOMAS J. CAULEY (SEAL) ------------------ 3 COMMONWEALTH OF PENNSYLVANIA : : ss.: COUNTY OF PHILADELPHIA : Before me, a Notary Public in and for the county aforesaid, personally came the above named, F. Stanley Saurman, Robert E. Boyd, Thomas J. Cauley who, in due form of law, acknowledged the foregoing instrument to be their act and deed for the purposes therein specified. Witness my hand and seal of office the 9th day of April, 1942. EDNA H. GERDINE ------------------------------------ (SEAL) Notary Public My Commission Expires March 6, 1945. Approved and filed in the Department of State, this 13th day of April, 1942. Charter Book No. 407, Page 555. GENE D. SMITH ------------------------------------ Deputy Secretary of the Commonwealth COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE --- 0000000--- TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING: WHEREAS, In and by the Business Corporation Law (Act No. 106), approved the 5th day of May, Anno Domini, One Thousand Nine Hundred and Thirty-three, the Department of State is authorized and required to issue a CERTIFICATE OF INCORPORATION evidencing the incorporation of a business corporation organized under the provisions of that law. AND WHEREAS, The stipulations and conditions of that law have been fully complied with by the persons desiring to incorporate as THE FULTON LAND AND TIMBER COMPANY. THEREFORE, KNOW YE, That subject to the Constitution of this Commonwealth and, under the authority of the Business Corporation Law, I do by these presents, which I have caused to be sealed with the Great Seal of the Commonwealth, create, erect, and incorporate the incorporators of and the subscribers to the shares of the proposed corporation named above, their associates and successors, and also those who may thereafter become subscribers or holders of the shares of such corporation, into a body politic and corporate in deed and in law by the name chosen and hereinbefore specified, which shall exist PERPETUALLY and shall be invested with, and have and enjoy all the powers, privileges, and franchises incident to a business corporation and be subject to all the duties, requirements, and restrictions specified and enjoined in and by the Business Corporation Law and all other applicable laws of this Commonwealth. GIVEN under my Hand and the Great Seal of the Commonwealth, at the City of Harrisburg, this 13th day of April, in the year of our Lord One Thousand (SEAL) Nine Hundred and Forty-two and of the Commonwealth the one hundred and sixty-sixth. GENE D. SMITH ---------------------------------------- Deputy Secretary of the Commonwealth 2 EX-3.22 36 AMENDED AND RESTATED BY-LAWS OF FULTON LAND EXHIBIT 3.22 AMENDED AND RESTATED BY-LAWS OF FULTON LAND AND TIMBER COMPANY ________________ (a Pennsylvania Corporation) ARTICLE I OFFICES AND FISCAL YEAR ----------------------- Section 1.01 Registered Office. The registered office of the corporation ----------------- in the Commonwealth of Pennsylvania shall be as stated in the Articles of Incorporation (the "articles") or at such other location to which the registered office shall be changed by action of the board of directors. Section 1.02 Other Offices. The corporation may also have offices at such ------------- other places within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or the business of the corporation may require. Section 1.03 Fiscal Year. The fiscal year of the corporation shall end on ----------- the Saturday in December or January that is closest to December 31 in each year unless otherwise fixed by the board of directors. ARTICLE II NOTICE--WAIVERS--MEETINGS GENERALLY ----------------------------------- Section 2.01 Manner of Giving Notice. (a) General Rule. Whenever ----------------------- ------------ written notice is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by facsimile transmission to the address (or to the telex, TWX, facsimile or telephone number) of the person appearing on the books of the corporation or, in the case of directors, supplied by the director to the corporation for the purpose of notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in the case of facsimile transmission when received. A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of the Business Corporation Law, the articles or these bylaws. (b) Adjourned Shareholder Meetings. When a meeting of shareholders is ------------------------------ adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board fixes a new record date for the adjourned meeting in which event notice shall be given in accordance with Section 2.03. Section 2.02 Notice of Meetings of Board of Directors. Notice of a ---------------------------------------- regular meeting of the board of directors need not be given. Notice of every special meeting of the board of directors shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone, telex, TWX or facsimile transmission) or 48 hours (in the case of notice by telegraph, courier service or express mail) or five days (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time and place of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board need be specified in a notice of the meeting. Section 2.03 Notice of Meetings of Shareholders. (a) General Rule. ---------------------------------- ------------ Written notice of every meeting of the shareholders shall be given by, or at the direction of, the secretary or other authorized person to each shareholder of record entitled to vote at the meeting at least (1) ten days prior to the day named for a meeting (and, in case of a meeting called to consider a merger, consolidation, share exchange or division, to each shareholder of record not entitled to vote at the meeting) called to consider a fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day named for the meeting in any other case. If the secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so. In the case of a special meeting of shareholders, the notice shall specify the general nature of the business to be transacted. (b) Notice of Action by Shareholders an Bylaws. In the case of a ------------------------------------------ meeting of shareholders that has as one of its purposes action on the bylaws, written notice shall be given to each shareholder that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment or repeal of the bylaws. There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby. Section 2.04 Waiver of Notice. (a) Written Waiver. Whenever any written ---------------- -------------- notice is required to be given under the provisions of the Business Corporation Law, the articles or these by-laws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as provided in the next sentence, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted at such meeting. (b) Waiver by Attendance. Attendance of a person at any meeting -------------------- shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 2.05 Modification of Proposal Contained in Notice. Whenever the -------------------------------------------- language of a proposed resolution is included in a written notice of a meeting required to be given under the provisions of the Business Corporation Law or the articles or these bylaws, the meeting 2 considering the resolution may without further notice adopt it with such clarifying or other amendments as do not enlarge its original purpose. Section 2.06 Exception to Requirement of Notice. (a) General Rule. ---------------------------------- ------------ Whenever any notice or communication is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws or by the terms of any agreement or other instrument or as a condition precedent to taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required. (b) Shareholders Without Forwarding Addresses. Notice or other ----------------------------------------- communications need not be sent to any shareholder with whom the corporation has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the corporation with a current address. Whenever the shareholder provides the corporation with a current address, the corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders. Section 2.07 Use of Conference Telephone and Similar Equipment. Any ------------------------------------------------- director may participate in any meeting of the board of directors, and the board of directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more persons may participate in a meeting of the shareholders of the corporation by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at the meeting. ARTICLE III SHAREHOLDERS ------------ Section 3.01 Place of Meeting. All meetings of the shareholders of the ---------------- corporation shall be held at the registered office of the corporation or such other place as may be designated by the board of directors in the notice of a meeting. Section 3.02 Annual Meeting. The board of directors may fix and designate -------------- the date and time of the annual meeting of the shareholders, but if no such date and time is fixed and designated by the board, the meeting for any calendar year shall be held on the second Monday of May in such year, if not a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on the next succeeding business day, not a Saturday, at 10:00 o'clock A.M., and at said meeting the shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. If the annual meeting shall not have been called and held within six months after the designated time, any shareholder may call the meeting at any time thereafter. Section 3.03 Special Meetings. (a) Call of Special Meetings. Special ---------------- ------------------------ meetings of the shareholders may be called at any time: 3 (1) by the chairman of the board; (2) by the board of directors; or (3) unless otherwise provided in the articles, by shareholders entitled to cast at least 20% of the votes that all shareholders are entitled to cast at the particular meeting. (b) Fixing of Time for Meeting. At any time, upon written request, -------------------------- of any person who has called a special meeting, it shall be the duty of the secretary to fix the time of the meeting which shall be held not more than 60 days after the receipt of the request. If the secretary neglects or refuses to fix the time of the meeting, the person or persons calling the meeting may do so. Section 3.04 Quorum and Adjournment. (a) General Rule. A meeting of ---------------------- ------------ shareholders of the corporation duly called shall not be organized for the transaction of business unless a quorum is present. The presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted, upon at the meeting shall constitute a quorum, for the purposes of consideration and action on the matter. Shares of the corporation owned, directly or indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be counted in determining the total number of outstanding shares for quorum purposes at any given time. (b) Withdrawal of a Quorum. The shareholders present at a duly ---------------------- organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. (c) Adjournments Generally. Any regular or special meeting of the ---------------------- shareholders, including one at which directors are to be elected and one which cannot be organized because a quorum has not attended may be adjourned for such period and to such place as the shareholders present and entitled to vote shall direct. (d) Electing Directors at Adjourned Meeting. Those shareholders --------------------------------------- entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of electing directors. (e) Other Action in Absence of Quorum. Those shareholders entitled --------------------------------- to vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. Section 3.05 Action by Shareholders. Except as otherwise provided in the ---------------------- Business Corporation Law or the articles or these bylaws, whenever any corporate action is to be taken by vote of the shareholders of the corporation, it shall be authorized by a majority of the votes cast at a duly organized meeting of shareholders by the holders of shares entitled to vote thereon. 4 Section 3.06 Organization. At every meeting of the shareholders, the ------------ chairman of the board, if there be one, or, in the case of vacancy in office or absence of the chairman of the board, one of the following persons present in the order stated: the president, the vice presidents in their order of rank and seniority, or a person chosen by vote of the shareholders present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of both the secretary and assistant secretaries, a person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 3.07 Voting Rights of Shareholders. Unless otherwise provided in ----------------------------- the articles, every shareholder of the corporation shall be entitled to one vote for every share standing in the name of the shareholder on the books of the corporation. Section 3.08 Voting and Other Action by Proxy. (a) General Rule. (1) -------------------------------- ------------ Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person to act for the shareholder by proxy. (2) The presence of, or vote or other action at a meeting of shareholders, or the expression of consent or dissent to corporate action in writing, by a proxy of a shareholder shall constitute the presence of, or vote or action by, or written consent or dissent of, the shareholder. (3) Where two or more proxies of a shareholder are present, the corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons. (b) Minimum Requirements. Every proxy shall be executed in writing -------------------- by the shareholder or by the duly authorized attorney-in-fact of the shareholder and filed with the secretary of the corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the secretary of the corporation. An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the secretary of the corporation. (c) Expenses. The corporation shall pay the reasonable expenses of -------- solicitation of votes, proxies or consents of shareholders by or on behalf of the board of directors or its nominees for election to the board, including solicitation by professional proxy solicitors and otherwise. Section 3.09 Voting by Fiduciaries and Pledgees. Shares of the ---------------------------------- corporation standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A 5 shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee. Section 3.10 Voting by Joint Holders of Shares. (a) General Rule. Where --------------------------------- ------------ shares of the corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise: (1) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the corporation shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and (2) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves. (b) Exception. If there has been filed with the secretary of the --------- corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the document latest in date of operative effect so filed, and only these persons, shall be entitled to vote the shares but only in accordance therewith. Section 3.11 Voting by Corporations. (a) Voting by Corporate Shareholders. ---------------------- -------------------------------- Any corporation that is a shareholder of this corporation may vote at meetings of shareholders of this corporation, or consent or dissent to corporate action in writing, by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the board of directors of the other corporation or a provision of its articles or bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the secretary of this corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares. (b) Controlled Shares. Shares of this corporation owned, directly or ----------------- indirectly, by it and controlled, directly or indirectly, by the board of directors of this corporation, as such, shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares for voting purposes at any given time. Section 3.12 Determination of Shareholders of Record. (a) Fixing Record --------------------------------------- ------------- Date. The board of directors may fix a time prior to the date of any meeting of - ---- shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 90 days prior to the date of the meeting of shareholders. Only shareholders of record an the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the corporation after any record date fixed as provided in this subsection. The board of directors may similarly fix a record date for the determination of shareholders of record for any other purpose. When a determination of 6 shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the board fixes a new record date for the adjourned meeting. (b) Determination When a Record Date is Not Fixed. If a record date --------------------------------------------- is not fixed: (1) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day an which notice is given or, if notice is waived, at the close of business an the day immediately preceding the day on which the meeting is held. (2) The record date for determining shareholders entitled to express consent or dissent to corporate action in writing without a meeting, when prior action by the board of directors is not necessary, shall be the close of business on the day on which the first written consent or dissent is filed with the secretary of the corporation. (3) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. (c) Certification by Nominee. The board of directors may adopt a ------------------------ procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons.. Upon receipt by the corporation of a certification complying with the procedure the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. Section 3.13 Voting Lists. (a) General Rule. The officer or agent having ------------ ------------ charge of the transfer books for shares of the corporation shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof. (b) Effect of List. Failure to comply with the requirements of this -------------- section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. The original share register or transfer book, or a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of shareholders. Section 3.14 Judges of Election. (a) Appointment. In advance of any ------------------ ----------- meeting of shareholders of the corporation, the board of directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder 7 shall, appoint judges of election at the meeting. The number of judges shall be one or three. A person who is a candidate for an office to be filled at the meeting shall not act as a judge. (b) Vacancies. In case any person appointed as a judge fails to --------- appear or fails or refuses to act, the vacancy may be filled by appointment made by the board of directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof. (c) Duties. The judges of election shall determine the number of ------ shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with nominations by shareholders or the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. if there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. (d) Report. On request of the presiding officer of the meeting or of ------ any shareholder, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein. Section 3.15 Consent of Shareholders in Lieu of Meeting. (a) Unanimous ------------------------------------------ --------- Written Consent. Any action require or permitted to be taken at a meeting of the - --------------- shareholders or of a class of shareholders may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the shareholders who would be entitled to vote at a meeting for such purpose shall be filed with the secretary of the corporation. (b) Partial Written Consent. Any action required or permitted to be ----------------------- taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting upon the written consent of shareholders who would have been entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. The consents shall be filed with the secretary of the corporation. The action shall not become effective until after at least ten days' written notice of the action has been given to each shareholder entitled to vote thereon who has not consented thereto. Section 3.16 Minors as Securityholders. The corporation may treat a minor ------------------------- who holds shares or obligations of the corporation as having capacity to receive and to empower others to receive dividends, interest, principal and other payments or distributions, to vote or express consent or dissent, and to make elections and exercise rights relating to such shares or obligations unless, in the case of payments or distributions on shares, the corporate officer responsible for maintaining the list of shareholders or the transfer agent of the corporation or, in the case of payments or distributions on obligations, the treasurer or paying officer or agent has received written notice that the holder is a minor. 8 ARTICLE IV BOARD OF DIRECTORS ------------------ Section 4.01 Powers; Personal Liability. (a) General Rule. Unless -------------------------- ------------ otherwise provided by statute, all powers vested by law in the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors. (b) Personal Liability of Directors. (1) A director shall not be ------------------------------- personally liable, as such, for monetary damages for any action taken, or any failure to take any action, unless: (i) the director has breached or failed to perform the duties of his or her office under Section 1721 of the Business Corporation Law (or any successor provision); and (ii) the breach or failure to perform constitutes self dealing, willful misconduct or recklessness. (2) The provisions of paragraph (1) shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, state or federal law. (c) Notation of Dissent. A director who is present at a meeting of ------------------- the board of directors, or of a committee of the board, at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files a written dissent to the action with the secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the secretary of the corporation immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action. Nothing in this section shall bar a director from asserting that minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the secretary, in writing, of the asserted omission or inaccuracy. Section 4.02 Qualifications and Selection of Directors. (a) ----------------------------------------- Qualifications. Each director of the corporation shall be a natural person of - -------------- full age who need not be a resident of the Commonwealth of Pennsylvania or a shareholder of the corporation. (b) Power to Select Directors. Except as otherwise provided in these ------------------------- bylaws, directors of the corporation shall be elected by the shareholders. (c) Nomination of Candidates. Upon the demand of any shareholder at ------------------------ any meeting of shareholders for the election of directors the chairman of the meeting shall call for and shall afford a reasonable opportunity for the making of nominations for the office of director. If the board of directors is classified with respect to the power to elect directors or with respect to the terms of directors and if, due to a vacancy or vacancies, or otherwise, directors of than one class are to be elected, each class of directors to be elected at the meeting shall be nominated and 9 elected separately. Any shareholder may nominate as many persons for the office of director as there are positions to be filled. If nominations for the office of director have been called for as provided in this section only candidates who have been so nominated shall be eligible for election. (d) Election of Directors. In elections for directors, voting need --------------------- not be by ballot, except upon demand made by a shareholder entitled to vote at the election and before the voting begins. The candidates receiving the highest number of votes from each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the class or group of classes shall be elected. If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election. (e) Cumulative Voting. Unless the articles provide for straight ----------------- voting, in each election of directors every shareholder entitled to vote shall have the right to multiply the number of votes to which the shareholder may be entitled by the total number of directors to be elected in the same election by the holders of the class or classes of shares of which his or her shares are a part and the shareholder may cast the whole number of his or her votes for one candidate or may distribute them among too or more candidates. If cumulative voting is applicable to the election, the chairman of the meeting may, and upon the request of any shareholder shall, instruct the judges of election that, if a ballot cast in the election of directors so directs, the judges shall cumulate the total votes cast by such ballot in such manner as may be required in order to elect the maximum number of nominees for which such ballot casts votes in the order of priority specified in such ballot, taking into account the total votes cast in the election of directors by each other ballot. Section 4.03 Number and Term of Office. (a) Number. The board of ------------------------- ------ directors shall consist of such number of directors, not less than three nor more than eleven. (b) Term of Office. Each director shall hold office until his -------------- successor shall have been elected and qualified or until his or her earlier death, resignation or removal. A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director. (c) Resignation. Any director may resign at any time upon written ----------- notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation. Section 4.04 Vacancies. (a) General Rule. Vacancies in the board of --------- ------------ directors, including vacancies resulting from an increase in the number of directors, may be filled by a majority vote of the remaining members of the board though less than a quorum, or by a sole remaining director, and each person so selected shall be a director to serve until the next selection of the class for which such director has been chosen, and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. (b) Action by Resigned Directors. When one or more directors resign ---------------------------- from the board effective at a future date, the directors then in office, including those who have so 10 resigned, shall have power by the applicable vote to fill the vacancies, the vote thereon to take effect when the resignations become effective. Section 4.05 Removal of Directors. (a) Removal by the Shareholders. The -------------------- --------------------------- entire board of directors, or any class of the board, or any individual director may be removed from office by vote of the shareholders entitled to vote thereon without assigning any cause. In case the board or a class of the board or any one or more directors are so removed, new directors may be elected at the same meeting. (b) Removal by the Board. The board of directors may declare vacant -------------------- the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if, within 60 days after notice of his or her selection, the director does not accept the office either in writing or by attending a meeting of the board of directors. Section 4.06 Place of Meetings. Meetings of the board of directors may be ----------------- held at such place within or without the Commonwealth of Pennsylvania as the board of directors may from time to time appoint or as may be designated in the notice of the meeting. Section 4.07 Organization of Meetings. At every meeting of the board of ------------------------ directors, the chairman of the board, if there be one, or, in the case of a vacancy in the office or absence of the chairman of the board, one of the following officers present in the order stated: the president, the vice presidents in their order of rank and seniority, or a person chosen by a majority of the directors present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or, in the absence of the secretary and the assistant secretaries, any person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 4.08 Regular Meetings. Regular meetings of the board of directors ---------------- shall be held at such time and place as shall be designated from time to time by resolution of the board of directors. Section 4.09 Special Meetings. Special meetings of the board of directors ---------------- shall be held whenever called by the chairman or by two or more of the directors. Section 4.10 Quorum of and Action by Directors. (a) General Rule. A --------------------------------- ------------ majority of the directors in office of the corporation shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the board of directors. (b) Action by Written Consent. Any action required or permitted to ------------------------- be taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the secretary of the corporation. Section 4.11 Executive and Other Committees. (a) Establishment and Powers. ------------------------------ ------------------------ The board of directors may, by resolution adopted by a majority of the directors in office, establish one or more committees to consist of one or more directors of the corporation. Any committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all 11 of the powers and authority of the board of directors except that a committee shall not have any power or authority as to the following: (1) The submission to shareholders of any action requiring approval of shareholders under the Business corporation Law. (2) The creation or filling of vacancies in the board of directors. (3) The adoption, amendment or repeal of these bylaws. (4) The amendment or repeal of any resolution of the board that by its terms is amendable or repealable only by the board. (5) Action on matters committed by a resolution of the board of directors to another committee of the board. (b) Alternate Committee Members. The board may designate one or more --------------------------- directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. In the absence or disqualification of a member and alternate member or members of a committee the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member. (c) Term. Each committee of the board shall serve at the pleasure of ---- the board. (d) Committee Procedures. The term "board of directors" or "board," -------------------- when used in any provision of these bylaws relating to the organization or procedures of or the manner of taking action by the board of directors, shall be construed to include and refer to any executive or other committee of the board. Section 4.12 Compensation. The board of directors shall have the authority ------------ to fix the compensation of directors for their services as directors and a director may be a salaried officer of the corporation. ARTICLE V OFFICERS -------- Section 5.01 Officers Generally. (a) Number, Qualifications and ------------------ -------------------------- Designation. The officers of the corporation shall be a chairman of the board, a - ----------- president, one or more vice presidents, a secretary, a treasurer, and such other officers as may be elected in accordance with the provisions of Section 5.03. Officers may but need not be directors or shareholders of the corporation. The president and secretary shall be natural persons of full age. The treasurer may be a corporation, but if a natural person shall be of full age. Any number of offices may be held by the same person. 12 (b) Bonding. The corporation may secure the fidelity of any or all of ------- its officers by bond or otherwise. (c) Standard of Care. Except as otherwise provided in the articles, ---------------- an officer shall perform his or her duties as an officer in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so perform his or her duties shall not be liable by reason of having been an officer of the corporation. Section 5.02 Election, Term of Office and Resignations. (a) Election and ----------------------------------------- ------------ Term of Office. The officers of the corporation, except those elected by - -------------- delegated authority pursuant to Section 5.03, shall be elected annually by the board of directors, and each such officer shall hold office for a term of one year and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. (b) Resignations. Any officer may resign at any time upon written ------------ notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as may be specified in the notice of resignation. Section 5.03 Subordinate Officers, Committees and Agents. The board of ------------------------------------------- directors may from time to time elect such other officers and appoint such committees, employees or other agents as the business of the corporation may require, including one or more assistant secretaries, and one or more assistant treasurers, each of whom shall hold office for such periods have such authority, and perform such duties as are provided in these bylaws, or as the board of directors may from time to time determine. The board of directors may delegate to any officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. Section 5.04 Removal of Officers and Agents. Any officer or agent of the ------------------------------ corporation may be removed by the board of directors with or without cause. The removal shall be without prejudice to the contract rights, if any, of any person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 5.05 Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification, or any other cause, may be filled by the board of directors or by the officer or committee to which the power to fill such office has been delegated pursuant to Section 5.03, as the case may be, and if the office is one for which these bylaws prescribe a term, shall be filled for the unexpired portion of the term. Section 5.06 Authority. All officers of the corporation, as between --------- themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided by or pursuant to resolutions or orders of the board of directors or, in the absence of controlling provisions in the resolutions or orders of the board of directors, as may be determined by or pursuant to these bylaws. 13 Section 5.07 The Chairman of the Board. The chairman of the board shall be ------------------------- the chief executive officer of the corporation and, subject to the control of the board of directors, shall have general charge and control of all its business and affairs and shall have all powers and shall perform all duties incident to the office of chairman of the board. The chairman of the board, or, in the absence of the chairman, the president, shall preside at all meetings of the shareholders and (if a director) of the board of directors. Section 5.08 The President. The president shall be the chief operating ------------- officer of the corporation and shall have general supervision over the operations of the corporation, subject however, to the control of the board of directors and the chairman of the board. In the absence of the chairman of the board, the president shall preside at all meetings of the shareholders and (if a director) of the board of directors, and shall perform such other duties as from time to time may be assigned by the board of directors or the chairman of the board. Section 5.09 The Vice Presidents. The vice presidents shall perform the ------------------- duties of the President in the absence of the president and such other duties as may from time to time be assigned to them by the board of directors or the chairman of the board. Section 5.10 The Secretary. The secretary or an assistant secretary shall ------------- attend all meetings of the shareholders and of the board of directors and all committees thereof and shall record all the votes of the shareholders and of the directors and the minutes of the meetings of the shareholders and of the board of directors and of committees of the board in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the corporation as required by law; shall be the custodian of the seal of the corporation and see that it is affixed to all documents to be executed on behalf of the corporation under its seal; and, in general, shall perform all duties incident to the office of secretary, and such other duties as may from time to time be assigned by the board of directors or the chairman of the board. Section 5.11 The Treasurer. The treasurer or an assistant treasurer shall ------------- have or provide for the custody of the funds or other property of the corporation; shall collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the corporation; shall deposit all funds in his or her custody as treasurer in such banks or other places of deposit as the board of directors may from time to time designate; shall, whenever so required by the board of directors, render an account showing all transactions as treasurer, and the financial condition of the corporation; and, in general, shall discharge such other duties as may from time to time be assigned by the board of directors or the chairman of the board. Section 5.12 Salaries. The salaries of the officers elected by the board -------- of directors shall be fixed from time to time by the board of directors or by such officer as may be designated by resolution of the board. The salaries or other compensation of any other officers, employees and other agents shall be fixed from time to time by the officer or committee to which the power to elect such officers or to retain or appoint such employees or other agents has been delegated pursuant to Section 5.03. No officer shall be prevented from receiving such salary or other compensation by reason of the fact that the officer is also a director of the corporation. 14 ARTICLE VI CERTIFICATES OF STOCK, TRANSFER, ETC. ------------------------------------- Section 6.01 Share Certificates. (a) Form of Certificates. Certificates ------------------ -------------------- for shares of the corporation shall be in such form as approved by the board of directors, and shall state that the corporation is incorporated under the laws of the Commonwealth of Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents. If the corporation is authorized to issue shares of more than one class or series, certificates for shares of the corporation shall set forth upon the face or back of the certificate (or shall state on the face or back of the certificate that the corporation will furnish to any shareholder upon request and without charge), a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the board of directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the classes and series of shares of the corporation. (b) Share Register. The share register or transfer books and blank -------------- share certificates shall be kept by the secretary or by any transfer agent or registrar designated by the board of directors for that purpose. Section 6.02 Issuance. The share certificates of the corporation shall be -------- numbered and registered in the share register or transfer books of the corporation as they are issued. They shall be executed in such manner as the board of directors shall determine. Section 6.03 Transfer. Transfers of shares shall be made an the share -------- register or transfer books of the corporation upon surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S. (S)(S) 8101 et seq., and -- --- its amendments and supplements. Section 6.04 Record Holder of Shares. The corporation shall be entitled to ----------------------- treat the person in whose name any share or shares of the corporation stand on the books of the corporation as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person. Section 6.05 Lost, Destroyed or Mutilated Certificates. The holder of any ----------------------------------------- shares of the corporation shall immediately notify the corporation of any loss, destruction or mutilation of the certificate therefor, and the board of directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, if the board of directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct. ARTICLE VII 15 INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER AUTHORIZED REPRESENTATIVES --------------------------------------------------------------------------- Section 7.01 Scope of Indemnification. (a) General Rule. The corporation ------------------------ ------------ shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise by reason of the fact that such person is or was serving in an indemnified capacity, including, without limitation, liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict or products liability, except: (1) where such indemnification is expressly prohibited by applicable law; (2) where the conduct of the indemnified representative has been finally determined pursuant to Section 7.06 or otherwise: (i) to constitute willful misconduct or recklessness within the meaning of 15 Pa.C.S. (S)(S) 513(b) and 1746(b) and 42 Pa.C.S. (S) 8365(b) or any superseding provision of law sufficient in the circumstances to bar indemnification against liabilities arising from the conduct; or (ii) to be based upon or attributable to the receipt by the indemnified representative from the corporation of a personal benefit to which the indemnified representative is not legally entitled; or (3) to the extent such indemnification has been finally determined in a final adjudication pursuant to Section 7.06 to be otherwise unlawful. (b) Partial Payment. If an indemnified representative is entitled to --------------- indemnification in respect of a portion, but not all, of any liabilities to which such person may be subject, the corporation shall indemnify such indemnified representative to the maximum extent for such portion of the liabilities. (c) Presumption. The termination of a proceeding by judgment, order, ----------- settlement or conviction or upon a plea of nolo contendere or its equivalent ---- ---------- shall not of itself create a presumption that the indemnified representative is not entitled to indemnification. (d) Definitions. For purposes of this Article: ----------- (1) "indemnified capacity" means any and all past, present and future service by an indemnified representative in one or more capacities as a director, officer, employee or agent of the corporation, or, at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise; (2) "indemnified representative" means any and all directors and officers of the corporation and any other person designated as an indemnified representative by the board of directors of the corporation (which may, but need not, include any person 16 serving at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise); (3) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, attorneys' fees and disbursements); and (4) "proceeding" means any threatened, pending or completed action, suit, appeal or other proceeding of any nature, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation, a class of its security holders or otherwise. Section 7.02 Proceedings Initiated by Indemnified Representatives. ---------------------------------------------------- Notwithstanding any other provision of this Article, the corporation shall not indemnify under this Article an indemnified representative for any liability incurred in a proceeding initiated (which shall not be deemed to include counter claims or affirmative defenses) or participated in as an intervenor or amicus ------ curiae by the person seeking indemnification unless such initiation of or - ------ participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This section does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under Section 7.06 or otherwise successfully prosecuting or defending the rights of an indemnified representative granted by or pursuant to this Article. Section 7.03 Advancing Expenses. The corporation shall pay the expenses ------------------ (including attorneys' fees and disbursements) incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 7.01 or the initiation of or participation in which is authorized pursuant to Section 7.02 upon receipt of an undertaking by or on behalf of the indemnified representative to repay the amount if it is ultimately determined pursuant to Section 7.06 that such person is not entitled to be indemnified by the corporation pursuant to this Article. The financial ability of an indemnified representative to repay an advance shall not be a prerequisite to the making of such advance. Section 7.04 Securing of Indemnification Obligations. To further effect, --------------------------------------- satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self- insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the board of directors shall deem appropriate. Absent fraud, the determination of the board of directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability. 17 Section 7.05 Payment of Indemnification. An indemnified representative -------------------------- shall be entitled to indemnification within 30 days after a written request for indemnification has been delivered to the secretary of the corporation. Section 7.06 Arbitration. (a) General Rule. Any dispute related to the ----------- ------------ right to indemnification, contribution or advancement of expenses as provided under this Article, except with respect to indemnification for liabilities arising under the Securities Act of 1933 that the corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the metropolitan area in which the principal executive offices of the corporation are located at the time, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the corporation, the second of whom shall be selected by the indemnified representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, and if one of the parties fails or refuses to select an arbitrator or the arbitrators selected by the corporation and the indemnified representative cannot agree on the selection of the third arbitrator within 30 days after such time as the corporation and the indemnified representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction in such metropolitan area. (b) Burden of Proof. The party or parties challenging the right of an --------------- indemnified representative to the benefits of this Article shall have the burden of proof. (c) Expenses. The corporation shall reimburse an indemnified -------- representative for the expenses (including attorneys' fees and disbursements) incurred in successfully prosecuting or defending such arbitration. (d) Effect. Any award entered by the arbitrators shall be final, ------ binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent. jurisdiction, except that the corporation shall be entitled to interpose as a defense in any such judicial enforcement proceeding any prior final judicial determination adverse to the indemnified representative under Section 7.01(a)(2) in a proceeding not directly involving indemnification under this Article. This arbitration provision shall be specifically enforceable. Section 7.07 Contribution. If the indemnification provided for in this ------------ Article or otherwise is unavailable for any reason in respect of any liability or portion thereof, the corporation shall contribute to the liabilities to which the indemnified representative may be subject in such proportion as is appropriate to reflect the intent of this Article or otherwise. Section 7.08 Mandatory Indemnification of Directors, Officers, etc. To the ----------------------------------------------------- extent that an authorized representative of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1741 or 1742 of the Business Corporation Law or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith. 18 Section 7.09 Contract Rights; Amendment or Reveal. All rights under this ------------------------------------ Article shall be deemed a contract between the corporation and the indemnified representative pursuant to which the corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing. Section 7.10 Scope of Article. The rights granted by this Article shall ---------------- not be deemed exclusive of any other rights to which those seeking indemnification, contribution or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an indemnified capacity and as to action in any other capacity. The indemnification, contribution and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. Section 7.11 Reliance on Provisions. Each person who shall act as an ---------------------- indemnified representative of the corporation shall be deemed to be doing so in reliance upon the rights of indemnification, contribution and advancement of expenses provided by this Article. Section 7.12 Interpretation. The provisions of this Article are intended -------------- to constitute bylaws authorized by 15 Pa.C.S. (S)(S) 513 and 1746 and 42 Pa.C.S. (S) 8365. ARTICLE VIII MISCELLANEOUS ------------- Section 8.01 Corporate Seal. The corporation shall have a corporate seal -------------- in the form of a circle containing the name of the corporation, the year of incorporation and such other details as may be approved by the board of directors. The affixation of the corporate seal shall not be necessary to the valid execution, assignment or endorsement by the corporation of any instrument or other document. Section 8.02 Checks. All checks, notes, bills of exchange or other similar ------ orders in writing shall be signed by such one or more officers or employees as the board of directors or any person authorized by resolution of the board of directors may from time to time designate. Section 8.03 Contracts. Except as otherwise provided in the Business --------- Corporation Law in the case of transactions that require action by the shareholders, the board of directors may authorize any officer or agent to enter into any contract or to execute or deliver any instrument on behalf of the corporation, and such authority may be general or confined to specific instances. Section 8.04 Interested Directors or Officers; Quorum. (a) General Rule. ---------------------------------------- ------------ A contract or transaction between the corporation and one or more of its directors or officers or between the corporation and another corporation, partnership, joint venture, trust or other enterprise in which one or more of its directors or officers are directors or officers or have a financial or other interest, shall not be void or voidable solely for that reason, or solely because the director or 19 officer is present at or participates in the meeting of the board of directors that authorizes the contract or transaction, or solely because his, her or their votes are counted for that purpose, if: (1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and the board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum: (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors or the shareholders. (b) Quorum. Common or interested directors may be counted in ------ determining the presence of a quorum at a meeting of the board which authorizes a contract or transaction specified in subsection (a). Section 8.05 Deposits. All funds of the corporation shall be deposited -------- from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees as the board of directors shall from time to time determine. Section 8.06 Corporate Records. (a) Required Records. The corporation ----------------- ----------------- shall keep complete and accurate books and records of account, minutes of the proceedings of the incorporators, shareholders and directors and a share register giving the names and addresses of all shareholders and the number and class of shares held by each. The share register shall be kept at either the registered office of the corporation in the Commonwealth of Pennsylvania or at its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time. (b) Right of Inspection. Every shareholder shall, upon written ------------------- verified demand stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books and records of account, and records of the proceedings of the incorporators, shareholders and directors to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to the interest of the person as a shareholder. In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand shall be accompanied by a verified power of attorney or other writing that authorizes the attorney or other agent to so act on behalf of the shareholder. The demand shall be directed to the corporation at its registered office in the Commonwealth of Pennsylvania or at its principal place of business wherever situated. Section 8.07 Financial Reports. Unless otherwise agreed between the ----------------- corporation and a shareholder, the corporation shall furnish to its shareholders annual financial statements, 20 including at least a balance sheet as of the end of each fiscal year and a statement of income and expenses for the fiscal year. The financial statements shall be prepared an the basis of generally accepted accounting principles, if the corporation prepares financial statements for the fiscal year on that basis for any purposes and may be consolidated statements of the corporation and one or more of its subsidiaries. The financial statements shall be mailed by the corporation to each of its shareholders entitled thereto within 120 days after the close of each fiscal year and, after the mailing and upon written request, shall be mailed by the corporation to any shareholder or beneficial owner entitled thereto to whom a copy of the most recent annual financial statements has not previously been mailed. Statements that are audited or reviewed by a public accountant shall be accompanied by the report of the accountant; in other cases, each copy shall be accompanied by a statement of the person in charge of the financial records of the corporation: (1) Stating his or her reasonable belief as to whether or not the financial statements were prepared in accordance with generally accepted accounting principles and, if not, describing the basis of presentation. (2) Describing any material respects in which the financial statements were not prepared on a basis consistent with those prepared for the previous year. Section 8.08 Amendment of Bylaws. These bylaws may be amended or repealed, ------------------- or new bylaws may be adopted, either (i) by vote of the shareholders at any duly organized annual or special meeting of shareholders, or (ii) with respect to those matters that are not by statute committed expressly to the shareholders and regardless of whether the shareholders have previously adopted or approved the bylaw being amended or repealed, by vote of a majority of the board of directors of the corporation in office at any regular or special meeting of directors. Any change in these bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change. See Section 2.03 (b) (relating to notice of action by shareholders on bylaws). 21 EX-3.23 37 CERTIFICATE OF INCORPORATION OF ELLEN JAY, INC. EXHIBIT 3.23 CERTIFICATE OF INCORPORATION OF ELLEN JAY INC. _______ THE UNDERSIGNED, of the age of twenty-one years or over, for the purpose of forming a corporation pursuant to the provisions of Title 14A, Corporations, General, of the New Jersey Statutes, does hereby execute the following Certificate of Incorporation - FIRST: The name of the Corporation is ELLEN JAY INC. SECOND: The address of the corporation's registered office is 30 Washington Avenue, Haddonfield, New Jersey 08033, and the name of the corporation's registered agent at such address is New Jersey Corporation Guarantee and Trust Company. THIRD: The purpose or purposes for which the corporation is organized are: The corporation may engage in any activity within the purposes for which corporations may be organized under Title 14A, Corporations, General. FOURTH: The aggregate number of shares which the corporation shall have authority to issue is Two Thousand Five Hundred (2,500) without par value. FIFTH: The Board of Directors is authorized and empowered to make, alter, amend and rescind the By-Laws of the corporation. SIXTH: The name and address of the initial Director is as follows: Name Address ---- ------- Deborah Lawler 200 East Montgomery Ave. Ardmore, PA 19003 SEVENTH: The name and address of the Incorporator is as follows: Name Address ---- ------- Ira S. Pimm, Jr. 2225 Land Title Bldg. Philadelphia, PA 19110 SIGNED this 25th day of February, 1974 Ira S. Pimm, Jr. --------------------------- STATE OF NEW JERSEY Department of State I, the Secretary of State of the State of New Jersey, do hereby Certify that the foregoing is a true copy of the Certificate of Incorporation ---------------- of ELLEN JAY INC. ------------------------------------------------------------------------------ and the endorsements thereon, as the same is taken from and compared with the original filed in my office on the 1/st/ day of March A.D. 1974, ------------- ----------- --------- and now remaining on file and of record therein. In Testimony Whereof, I have hereunto set my hand and affixed my Official Seal at Trenton, this (SEAL) 1/st/ day of March A.D. 1974. ------- -------- /s/_____________________________________ Secretary of State EX-3.24 38 AMENDED AND RESTATED BY-LAWS OF ELLEN JAY, INC. EXHIBIT 3.24 AMENDED AND RESTATED BY-LAWS OF ELLEN JAY, INC. _____________________________ (A NEW JERSEY CORPORATION) ARTICLE I OFFICES ------- Section 1.01 Registered Office and Agent. The registered office of the --------------------------- corporation in the State of New Jersey shall be as stated in the Certificate of Incorporation or at such other location to which the registered office shall be changed by action of the board of directors. The registered agent of the corporation at such office shall be as stated in the Certificate of Incorporation or such other agent as may be determined from time to time by the board of directors. Section 1.02 Other Offices. The corporation may also have offices at such ------------- other places within or without the State of New Jersey as the board of directors may from time to time appoint or the business of the corporation may require. ARTICLE II SHAREHOLDERS ------------ Section 2.01 Annual Meeting of Shareholders. An annual meeting of ------------------------------ shareholders shall be held in every calendar year at such time as the board of directors may fix. At the annual meeting, the shareholders shall elect directors and transact such other business as may come before the meeting. Section 2.02 Special Meetings. A special meeting of shareholders may be ---------------- called for any purpose by the chairman of the board or by a majority of the board of directors. Section 2.03 Action Without Meeting. Any action required or permitted to ---------------------- be taken at a meeting of shareholders may be taken without a meeting if all the shareholders consent in writing to such action. Such written consents shall be filed with the minutes of proceedings of shareholders. Section 2.04 Quorum. The presence at a meeting in person or by proxy of ------ the holders of shares entitled to cast a majority of the votes shall constitute a quorum. Section 2.05 Place of Meetings. Meetings of the shareholders shall be held ----------------- at the principal office of the corporation or at such other place within or without the State of New Jersey as shall be specified in the notice of meeting. Section 2.06 Notice of Meeting. Written notice of the time, place and ----------------- purposes of any annual or special meeting of shareholders shall be given not less than ten nor more than sixty days before the date of the meeting either personally or by mail to each shareholder of record entitled to vote at the meeting, except it shall not be necessary to give notice in cases of meetings adjourned in accordance with N.J.S.A. 14A:5-4. Section 2.07 Waiver of Notice. (a) Written Waiver. Whenever any written ---------------- -------------- notice is required to be given under the provisions of the Business Corporation Act, the Certificate of Incorporation or these bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. (b) Waiver by Attendance. The attendance of any shareholder at a -------------------- meeting, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver by him of notice of the meeting. ARTICLE III BOARD OF DIRECTORS ------------------ Section 3.01 Number and Term of Office. The management and control of the ------------------------- affairs, business and property of the corporation shall be vested in the board of directors which shall consist of such number of directors, not less than three nor more than eleven. Each director shall be elected by the shareholders at either an annual or special meeting and shall hold office until the director's successor shall have been elected and qualified. Section 3.02 Regular Meetings. A regular meeting of the board of directors ---------------- shall be held without notice immediately following and at the same place as the annual meeting of shareholders for the purposes of electing officers and conducting such other business as may come before the meeting. The board of directors, by resolution, may provide for additional regular meetings which may be held without notice, except to members not present at the time of the adoption of the resolution. Section 3.03 Special Meetings. A special meeting of the board of directors ---------------- may be called at any time by the chairman of the board or by a majority of the directors for any purpose. Such meeting shall be held upon two days' notice if given orally, either by telephone or in person, or by telegraph or facsimile transmission, or by four days' notice if given by depositing the notice in the United States mail, postage prepaid. Such notice shall specify the time and place of the meeting. Section 3.04 Meetings by Conference Telephone, etc. Any or all directors ------------------------------------- may participate in a meeting of the board of directors or a committee of the board of directors by means of conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other. 2 Section 3.05 Action Without Meeting. Any action required or permitted to ---------------------- be taken pursuant to authorization voted at a meeting of the board of directors or any committee thereof may be taken without a meeting if, prior or subsequent to such action, all members of the board of directors or such committee shall consent in writing to such action and such written consents are filed with the minutes of the proceedings of the board of directors or committee. Section 3.06 Quorum. A majority of the entire board of directors shall ------ constitute a quorum for the transaction of business. Section 3.07 Vacancies in the Board of Directors. Any vacancy in the board ----------------------------------- of directors, including a vacancy caused by an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though less than a quorum of the board of directors, or by a sole remaining director. Section 3.08 Personal Liability of Directors. A director shall not be ------------------------------- personally liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders, except that this provision shall not relieve a director from liability for any breach of duty based upon an act or omission (i) in breach of such person's duty of loyalty to the corporation or its shareholders, (ii) not in good faith or involving a knowing violation of law or (iii) resulting in receipt by such person of an improper personal benefit. As used in this section, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the corporation or its shareholders in connection with a matter in which he has a material conflict of interest. ARTICLE IV WAIVER OF NOTICE ---------------- Any notice required by these by-laws, the Certificate of Incorporation, or by the New Jersey Business Corporation Act may be waived by a writing signed by the person or persons entitled to such notice either before or after the action with respect to which notice is waived. Any director or shareholder attending a meeting without protesting, prior to its conclusion, a lack of proper notice shall be deemed to have waived notice of such meeting. ARTICLE V FISCAL YEAR ----------- The fiscal year of the corporation shall end on the Saturday in December or January that is closest to December 31 in each year unless otherwise fixed by the board of directors. 3 ARTICLE VI OFFICERS -------- Section 6.01 Election. At its regular meeting following the annual meeting -------- of shareholders, the board of directors shall elect a chairman of the board, a president, a treasurer, and a secretary, and it may elect such other officers, including one or more vice presidents, assistant secretaries or assistant treasurers, as it shall deem necessary. One person may hold any two or more offices. Section 6.02 Duties and Authority of Chairman of the Board. The chairman --------------------------------------------- of the board shall be the chief executive officer of the corporation and, subject to the control of the board of directors, shall have general charge and control of all its business and affairs and shall have all powers and shall perform all duties incident to the office of chairman of the board. The chairman of the board, or, in the absence of the chairman, the president, shall preside at all meetings of the shareholders and (if a director) of the board of directors. Section 6.03 Duties and Authority of President. The president shall be the --------------------------------- chief operating officer of the corporation and shall have general supervision over the operations of the corporation, subject however, to the control of the board of directors and the chairman of the board. In the absence of the chairman of the board, the president shall preside at all meetings of the shareholders and (if a director) of the board of directors, and shall perform such other duties as from time to time may be assigned by the board of directors or the chairman of the board. Section 6.04 Duties and Authority of Vice President. The vice president, -------------------------------------- if any, shall perform such duties and have such authority as from time to time may be delegated to him by the chairman of the board or by the board of directors. Section 6.05 Duties and Authority of Treasurer. The treasurer shall have --------------------------------- the custody of the funds and securities of the corporation and shall keep or cause to be kept regular books of account for the corporation. The treasurer shall perform such other duties and possess such other powers as are incident to that office or as shall be assigned by the chairman of the board or the board of directors. Section 6.06 Duties and Authority of Secretary. The secretary shall cause --------------------------------- notices of all meetings to be served as prescribed in these by-laws and shall keep or cause to be kept the minutes of all meetings of the shareholders and the board of directors. The secretary shall have charge of the seal of the corporation. The secretary shall perform such other duties and possess such other powers as are incident to that office or as are assigned by the chairman of the board or the board of directors Section 6.07 Duties and Authority of Assistant Secretary or Assistant -------------------------------------------------------- Treasurer. The assistant secretary or secretaries and assistant treasurer or - --------- treasurers shall act under the direction of the secretary or treasurer, respectively, and in the absence or disability of the secretary or treasurer, shall perform the respective duties and exercise the respective powers of the secretary or treasurer. Any assistant secretary or assistant treasurer shall be authorized to execute, attest, acknowledge, receive and/or certify any corporate document which the secretary or treasurer, 4 respectively, could execute, attest, acknowledge, receive and/or certify, irrespective of the absence or disability of the secretary or treasurer, unless the board of directors shall otherwise determine. Section 6.08 Personal Liability of Officers. An officer shall not be ------------------------------ personally liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders, except that this provision shall not relieve an officer from liability for any breach of duty based upon an act or omission (i) in breach of such person's duty of loyalty to the corporation or its shareholders, (ii) not in good faith or involving a knowing violation of law or (iii) resulting in receipt by such person of an improper personal benefit. As used in this section, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the corporation or its shareholders in connection with a matter in which he has a material conflict of interest. ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER AUTHORIZED REPRESENTATIVES --------------------------------------------------------------------------- Section 7.01 Scope of Indemnification. (a) General Rule. The corporation ------------------------ ------------ shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise by reason of the fact that such person is or was serving in an indemnified capacity, including, without limitation, liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict or products liability, except: (i) where such indemnification is expressly prohibited by applicable law; (ii) where the conduct of the indemnified representative has been finally determined pursuant to Section 6 or otherwise: (A) to constitute a breach of his duty of loyalty to the corporation or its shareholders; (B) to be not in good faith or to involve a knowing violation of law; or (C) to be based upon or attributable to the receipt by the indemnified representative from the corporation of an improper personal benefit to which the indemnified representative is not legally entitled; or (iii) to the extent such indemnification has been finally determined in a final adjudication pursuant to Section 6 to be otherwise unlawful. (b) Partial Payment. If an indemnified representative is entitled to --------------- indemnification in respect of a portion, but not all, of any liabilities to which such person may be 5 subject, the corporation shall indemnify such indemnified representative to the maximum extent for such portion of the liabilities. (c) Presumption. The termination of a proceeding by judgment, order, ----------- settlement or conviction or upon a plea of nolo contendere or its equivalent ---- ---------- shall not of itself create a presumption that the indemnified representative is not entitled to indemnification. (d) Definitions. For purposes of this Article: ----------- (i) "indemnified capacity" means any and all past, present and future service by an indemnified representative in one or more capacities as a director, officer, employee or agent of the corporation, or, at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise; (ii) "indemnified representative" means any and all directors and officers of the corporation and any other person designated as an indemnified representative by the board of directors of the corporation (which may, but need not, include any person serving at the request of the corporation, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise); (iii) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, attorneys' fees and disbursements); and (iv) "proceeding" means any threatened, pending or completed action, suit, appeal or other proceeding of any nature, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation, a class of its security holders or otherwise. Section 7.02 Proceedings Initiated by Indemnified Representatives. ---------------------------------------------------- Notwithstanding any other provision of this Article, the corporation shall not indemnify under this Article an indemnified representative for any liability incurred in a proceeding initiated (which shall not be deemed to include counter-claims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or - ------ ------ participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This section does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under Section 6 or otherwise successfully prosecuting or defending the rights of an indemnified representative granted by or pursuant to this Article. Section 7.03 Advancing Expenses. The corporation shall pay the expenses ------------------ (including attorneys' fees and disbursements) incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 1 or the initiation of or participation in which is authorized pursuant to Section 2 upon receipt of an undertaking by or on behalf of the indemnified representative to repay the amount if it is ultimately determined 6 pursuant to Section 6 that such person is not entitled to be indemnified by the corporation pursuant to this Article. The financial ability of an indemnified representative to repay an advance shall not be a prerequisite to the making of such advance. Section 7.04 Securing of Indemnification Obligations. To further effect, --------------------------------------- satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self- insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the board of directors shall deem appropriate. Absent fraud, the determination of the board of directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability. Section 7.05 Payment of Indemnification. An indemnified representative -------------------------- shall be entitled to indemnification within 30 days after a written request for indemnification has been delivered to the secretary of the corporation. Section 7.06 Arbitration. (a) General Rule. Any dispute related to the ----------- ------------ right to indemnification, contribution or advancement of expenses as provided under this Article, except with respect to indemnification for liabilities arising under the Securities Act of 1933 that the corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the metropolitan area in which the principal executive offices of the corporation are located at the time, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the corporation, the second of whom shall be selected by the indemnified representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, and if one of the parties fails or refuses to select an arbitrator or the arbitrators selected by the corporation and the indemnified representative cannot agree on the selection of the third arbitrator within 30 days after such time as the corporation and the indemnified representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction in such metropolitan area. (b) Burden of Proof. The party or parties challenging the right of an --------------- indemnified representative to the benefits of this Article shall have the burden of proof. (c) Expenses. The corporation shall reimburse an indemnified -------- representative for the expenses (including attorneys' fees and disbursements) incurred in successfully prosecuting or defending such arbitration. (d) Effect. Any award entered by the arbitrators shall be final, ------ binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction, except that the corporation shall be entitled to interpose as a defense in any such judicial enforcement proceeding any prior final judicial 7 determination adverse to the indemnified representative under Section 1 (a)(2) in a proceeding not directly involving indemnification under this Article. This arbitration provision shall be specifically enforceable. Section 7.07 Contribution. If the indemnification provided for in this ------------ Article or otherwise is unavailable for any reason in respect of any liability or portion thereof, the corporation shall contribute to the liabilities to which the indemnified representative may be subject in such proportion as is appropriate to reflect the intent of this Article or otherwise. Section 7.08 Mandatory Indemnification of Directors, Officers, etc. To the ----------------------------------------------------- extent that an authorized representative of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in N.J.S.A. 14A:3-5(4) of the Business Corporation Act or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith. Section 7.09 Contract Rights; Amendment or Repeal. All rights under this ------------------------------------ Article shall be deemed a contract between the corporation and the indemnified representative pursuant to which the corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing. Section 7.10 Scope of Article. The rights granted by this Article shall ---------------- not be deemed exclusive of any other rights to which those seeking indemnification, contribution or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an indemnified capacity and as to action in any other capacity. The indemnification, contribution and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. Section 7.11 Reliance on Provisions. Each person who shall act as an ---------------------- indemnified representative of the corporation shall be deemed to be doing so in reliance upon the rights provided by this Article. Section 7.12 Interpretation. The provisions of this Article are intended -------------- to constitute by-laws authorized by N.J.S.A. 14A:3-5(8). ARTICLE VIII LOANS, GUARANTEES AND OTHER ASSISTANCE TO DIRECTORS --------------------------------------------------- The corporation may lend money to, or guarantee any obligation of, or otherwise assist, any director, officer or employee of the corporation or of any subsidiary, whenever, in the judgment of the directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be made with or without interest, and may be unsecured, or secured in such a manner as the board shall approve, 8 including, without limitation, a pledge of shares of the corporation, and may be made upon such other terms and conditions as the board may determine. ARTICLE IX AMENDMENT OF BY-LAWS -------------------- These by-laws may be altered, amended or repealed by the shareholders or the board of directors. Any by-law adopted, amended or repealed by the shareholders may be amended or repealed by the board of directors, unless the resolution of the shareholders adopting such by-law expressly reserves the right to amend or repeal it to the shareholders. 9 EX-3.25 39 CERTIFICATE OF FORMATION OF STONE MATERIALS CO. EXHIBIT 3.25 CERTIFICATE OF FORMATION OF STONE MATERIALS COMPANY, LLC The undersigned, desiring to form a limited liability company pursuant to the Delaware Limited Liability Company Act, does hereby certify as follows: 1. The name of the limited liability company is: Stone Materials Company, LLC 2. The address of its registered office in the State of Delaware is 9 East Loockerman Street, in the City of Dover, County of Kent, State of Delaware 19901. The name of its registered agent at such address is National Registered Agents, Inc. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of Stone Materials Company, LLC this 24th day of September, 1999. /s/ Melissa Freidenreich ----------------------------------------- Melissa Freidenreich EX-3.26 40 LIMITED LIABILITY COMPANY OPERATING AGREEMENT EXHIBIT 3.26 EXECUTION COPY ================================================================================ LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF STONE MATERIALS COMPANY, LLC DATED AS OF SEPTEMBER 30, 1999 ================================================================================ LIMITED LIABILITY COMPANY OPERATING AGREEMENT of STONE MATERIALS COMPANY, LLC This Limited Liability Company Operating Agreement (the "Agreement"), dated as of September 30, 1999 is entered --------- into solely by Better Minerals & Aggregates Company (the "Member"). ------ WHEREAS, a certificate of formation of Stone Materials Company, LLC (the "Company") has been filed by an authorized person with the ------- Office of the Secretary of State of Delaware, causing the formation of a limited liability company in accordance with the Delaware Limited Liability Company Act (6 Del. C.(ss)18-101 et seq.) (hereinafter referred to as the "Act"), and the -- --- --- Member intends by the execution hereof to become the sole Member thereof as of the date of such execution; and WHEREAS, the Member desires to provide for the operation and management of the Company for the purposes stated herein; NOW, THEREFORE, in consideration of the mutual covenants, promises and agreements contained herein, the Member hereby agrees as follows: ARTICLE I FORMATION OF THE COMPANY ------------------------ Section 1.01 Formation. The Member acknowledges that the --------- certificate of formation for the Company has been filed, with the Office of the Secretary of State of Delaware on September 24, 1999. The Member agrees to be bound by and comply with the provisions thereof and hereof. Section 1.02 Registered Office. The registered office in the ----------------- State of Delaware shall be: 9 East Loockerman Street, Dover, DE 19901. Section 1.03 Registered Agent. The registered agent of the ---------------- Company in the State of Delaware shall be National Registered Agents, Inc. Section 1.04 Purpose and Character of Business. The general --------------------------------- purpose of the Company is to engage in any lawful act or activity for which limited liability companies may be organized under the Act. Section 1.05 Duration. -------- The Company shall continue in existence until it is dissolved pursuant to Section 8.1. 1 Section 1.06 Filings, Reports and Formalities. The Member -------------------------------- shall cause the Company to make all filings and to submit all reports required to be filed or submitted under the Act with respect to the Company, and shall cause the Company to make such filings or take such other actions required under the laws of any jurisdiction where the Company conducts business. Throughout the term of the Company, the Company shall comply with all requirements necessary to maintain the limited liability status of the Company and the limited liability of the Member under the laws of the State of Delaware and of each other jurisdiction in which the Company does business. ARTICLE II CAPITAL CONTRIBUTIONS --------------------- Section 2.01 Initial Capital Contribution. The Member will ---------------------------- make an initial Capital Contribution of $1,000, payable simultaneously with the execution hereof. The Member's acquisition of its Membership Units in the Company shall be effective upon the payment in full in cash of such initial Capital Contribution. "Membership Units" or "Units" means the Member's aggregate rights in the Company, including, without limitation, the Member's right to a share of the profits and losses of the Company, the Member's right to receive distributions from the Company and the right to vote and participate in the management of the Company. Membership Units shall be represented by a certificate. Section 2.02 Article 8 Election. All Membership Units shall ------------------ be governed by and determined to be a security under Article 8 of the Uniform Commercial Code as adopted in the State of Delaware and in the State of New York. Section 2.03 Return of Contributions. No interest shall ----------------------- accrue on any contributions to the capital of the Company. The Member shall not have the right to withdraw or to be repaid any Capital Contribution made by the Member except as otherwise provided herein or in the Act. Section 2.04 Liability of Member. (a) The Member shall not ------------------- be personally liable for the debts, obligations or liabilities of the Company solely by reason of being the Member of the Company. Notwithstanding any provision herein to the contrary, in no event shall the liability of the Member for the debts, obligations or liabilities of the Company exceed the Member's Capital Contribution. (b) The Member's Units in the Company shall be personal property for all purposes. All property owned by the Company shall be deemed to be owned by the Company as an entity and the Member shall not be deemed to own any such property or any portion thereof. (c) The Company shall defend, indemnify and hold harmless the Member and its directors, officers, members, managers, employees and representatives and its successors, assigns and affiliates from and against any and all losses, claims, expenses or damages suffered or sustained by any of them (including, but not limited to, any judgment, award, settlement, reasonable 2 attorney's fees and other costs or expenses incurred in connection with the investigation and defense or prosecution of any actual or threatened action, proceeding or claim) (1) related to, or arising out of, any claim that the Member is liable for any debt, obligation or liability of the Company or is directly or indirectly required to make any payments in respect thereof or in connection therewith, and (2) by reason of any act, omission, or alleged act or omission, arising out of the Member's activities or alleged activities on behalf of the Company or in furtherance of the interests of the Company; provided, -------- however, that this Section 2.04(c) shall be of no force or effect if the act, - ------- omission, or alleged act or omission upon which such actual or threatened action, proceeding or claim is based was performed or omitted as a result of willful misconduct or a knowing and material breach of this Agreement by the Member. (d) The Company shall pay in advance any legal or other expenses incurred in investigating or defending against any loss, claim, expense or damage that may be subject to indemnification under Section 2.04(c) hereof, upon receipt of an undertaking from the person on whose behalf such expenses are paid to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Company. The Company may purchase insurance, to the extent available at reasonable cost, to cover losses, claims, expenses or damages subject to indemnification under Section 2.04(c) hereof. ARTICLE III MANAGEMENT OF THE COMPANY ------------------------- Section 3.01 Management by the Member. The Member, ------------------------ exclusively in its capacity as such, shall manage the business of the Company. Section 3.02 The Member Has No Exclusive Duty to the --------------------------------------- Company. This Agreement shall not prohibit the Member from having other business - ------- interests and engaging in other activities in addition to those relating to the Company. The Company shall not have any right, by virtue of this Agreement, to share or participate in such other activities of the Member or to the income or proceeds derived therefrom. The Member shall not incur any liability to the Company as a result of engaging in any other business or venture. ARTICLE IV TAX TREATMENT ------------- Section 4.01 Tax Treatment. The Member intends that, for tax ------------- purposes, the Company will be treated as a disregarded entity and not as a partnership. ARTICLE V ALLOCATIONS AND DISTRIBUTIONS ----------------------------- Section 5.01 Allocation of Profits and Losses. -------------------------------- 3 For each fiscal year (or portion thereof), all items of income, gain, loss and deduction of the Company shall be allocated to the Member. Section 5.02 Distributions of Cash Flow. Except as provided -------------------------- in Section 8.02 hereof, cash flow, the availability of which shall be determined by the Member, shall be distributed to the Member, at such times and in such amounts as the Member shall determine. Section 5.03 Net Proceeds Upon Liquidation. Upon the ----------------------------- liquidation of the Company, after payment of, or adequate provision for, the debts and obligations of the Company, the remaining assets of the Company shall be distributed to the Member. ARTICLE VI INSPECTION, RECORDS, CONFIDENTIALITY ------------------------------------ Section 6.01 Access to Properties. The Member, and each of -------------------- its duly authorized employees and representatives, at the Member's own risk and expense, and subject to the provisions of any third party management agreement, shall at all reasonable times have access to all Company assets, activities, operations and records. Section 6.02 Books of Account. Books of account shall at all ---------------- times be open to inspection, audit and copying by the Member or its duly authorized representative. Section 6.03 Confidentiality. All such records and accounts --------------- including reports shall be treated as confidential and the Member shall take or cause to be taken such reasonable precautions as may be necessary to prevent the disclosure thereof to any unauthorized Person, firm or corporation for a period ending two (2) years following the termination of the Company. ARTICLE VII TRANSFER -------- Section 7.01 Transfer. The Member may sell, transfer, -------- pledge, make a gift of, or otherwise dispose of or assign all of its Membership Units in the Company. Upon a sale, transfer, pledge, gift, disposal or assignment, the transferee thereof shall become a Member of the Company; provided that, if the Membership Units are pledged, or otherwise assigned as a - -------- security interest, the transferee shall become a Member of the Company only the manner event and to the extent expressly provided in the agreement effecting such pledge or assignment or by operation of law. ARTICLE VIII DISSOLUTION, LIQUIDATION AND TERMINATION ---------------------------------------- Section 8.01 Events of Dissolution. The Company shall be --------------------- dissolved, and its affairs shall be wound up, upon the first to occur of the following: (a) the date that the Member consents to its dissolution; 4 (b) the sale, exchange, involuntary conversion, or other disposition or transfer of all or substantially all of the assets of the Company; (c) the dissolution, bankruptcy or withdrawal of the Member; and (d) the entry of a decree of judicial dissolution under the Act. Section 8.02 Procedures Upon Dissolution. Upon dissolution --------------------------- of the Company, the Member shall wind up the affairs of the Company, sell its assets to the extent necessary to pay its liabilities, and after payment of all liabilities of the Company (including liabilities to the Member or Affiliate of the Member, if it is a creditor), shall distribute the remaining assets of the Company in accordance with Sections 5.02 and 5.03 hereof. Any distribution made pursuant to this Section 8.02 shall be made within a reasonable time period. Section 8.03 Termination. Upon the dissolution and the ----------- completion of winding up of the Company, the Member shall file a certificate of cancellation with the Office of the Secretary of State of the State of Delaware in accordance with the Act. ARTICLE IX MISCELLANEOUS ------------- Section 9.01 Partial Invalidity. In case any one or more ------------------ of the covenants, agreements, or provisions hereof shall be invalid, illegal, or unenforceable in any respect, the validity of the remaining covenants, agreements, or provisions hereof shall be in no way affected, prejudiced, or disturbed thereby. Section 9.02 Notices. All notices or other communications ------- required or permitted to be given hereunder shall be in writing, shall be given by mail, return receipt requested, postage prepaid, prepaid telegram with confirmation of delivery obtained, nationally recognized overnight delivery service, telecopy with evidence of transmission, or personally delivered with confirmation of delivery obtained, to the address of such Person as set forth in the records of the Company. Section 9.03 Amendment. This Agreement may be modified or --------- amended at any time only upon the consent of the Member, which shall be evidenced by the Member executing a writing effecting such amendment. Section 9.04 No Waiver. The failure of the Member to insist --------- upon strict performance of any provision hereof shall not constitute a waiver of, or estoppel against asserting, the right to require such performance in the future, nor shall a waiver or estoppel in any one instance constitute a waiver or estoppel with respect to a later breach of a similar nature or otherwise. 5 Section 9.05 Binding Effect; Assignment. This Agreement -------------------------- shall be binding upon and inure to the benefit of the Company and the Member and the Member's permitted transferees. Section 9.06 Choice of Law. The rights and duties of the ------------- Member and the Company under this Agreement shall be governed by the law of the State of Delaware. Section 9.07 Entire Agreement. ---------------- This Agreement constitutes the entire agreement with respect to the subject matter contained herein and supersedes all other prior understandings or agreements, both written and oral, with respect to the matters contained herein. IN WITNESS WHEREOF, the Member has executed this Agreement with effect on the date set forth in the first paragraph hereof. MEMBER: BETTER MINERALS & AGGREGATES COMPANY By: /s/ John A. Ulizio ------------------------------------- Name: Title: 6 EX-3.27 41 ARTICLES OF INCORPORATION OF COMMERCIAL STONE CO. EXHIBIT 3.27 3-1-72.05 473 ---- Commonwealth of Pennsylvania Department of State Corporation Bureau ARTICLES OF INCORPORATION In compliance with the requirements of the Business Corporation Law, approved the 5th day of May, A.D. 1933, P.L. 364, as amended, the undersigned, all of whom are of full age/*/ desiring that they may be incorporated as a business corporation, do hereby certify: 1. The name of the corporation is: COMMERCIAL STONE CO., INC. - -------------------------------------------------------------------------------- 2. The location and post office address of its initial registered office in this Commonwealth is: 46 East Main Street, Uniontown, Fayette County, Pennsylvania - -------------------------------------------------------------------------------- Number Street City County 3. The purpose or purposes of the corporation which shall be organized under this Act are as follows:/**/ The corporation shall have unlimited power to engage in and to do any lawful act concerning any or all lawful business for which corporations may be incorporated under the Business Corporation Law of 1933, as amended. Without limiting the generality of the foregoing, the corporation shall have the power to quarry, mine, manufacture and otherwise produce and prepare various types and qualities of stone and other building material for market; to buy, and sell, various types and qualities of stone and other building material; to own and operate mills and other machinery in the conduct of said business; and also, to buy, sell, lease, own and hold such real estate as may be necessary, desirable, and convenient for carrying out the object of its incorporation. 4. The term of its existence is: Perpetual. ____________________________ /*/ One or more corporations or natural persons of full age may incorporate a business corporation under the provisions of this Act. /**/ It shall not be permissible or necessary to set forth any powers enumerated in Section 302 of the Act. FILING FEE--$40.00 NOTE: Exercise Tax at the rate of 1/5th of 1% ($2.00 per $1,000) will be due and payable at the time of filing of the Articles, computed by multiplying the number of authorized shares having par value by their par value, or if shares of no par stock are authorized, then on the stated capital applicable thereto as well. ONLY A CLEARLY LEGIBLE ORIGINAL SHOULD BE SUBMITTED, SIGNATURES SHOULD BE IN BLACK INK. 5. The aggregate number of shares which the corporation shall have authority to issue is:/***/ Three hundred (300) shares of stock (common) having a par value of One Thousand ($1,000.00) Dollars per share. The holders of shares of stock in this corporation shall have pre-emptive rights. 6. The names and addresses of each of the first directors, who shall serve until the first annual meeting, are: NAME ADDRESS (Including street and number, if any) 7. The names and addresses of each of the incorporators and the number and class of shares subscribed by each are: NAME ADDRESS NUMBER AND CLASS OF SHARES (Including street and number, if any) Gerald R. Solomon 511 North Water Street 1 share of common stock Masontown, Pennsylvania
IN TESTIMONY WHEREOF, the incorporators have signed and sealed these Articles of Incorporation this 24th day of January, 1972. /s/ Gerald R. Solomon (SEAL) _________________________(SEAL) - --------------------------- Gerald R. Solomon ___________________________(SEAL) _________________________(SEAL) ___________________________(SEAL) _________________________(SEAL) Approved and filed in the Department of State on the 27th day of January A.D. 1972 /s/ ------------------------------------------ Secretary of the Commonwealth _______________________ /***/ There should be set forth the number and par value of all shares having par value; the number of shares without par value; and the stated capital applicable thereto. If the shares are to be divided into classes, a description of each class and a statement of the preferences, qualifications, limitations, restrictions, and the special or relative rights granted to, or imposed upon, the shares of each class. NOTE: The Articles must be accompanied with registry statement, executed in triplicate, in the form prescribed by Section 206-B of the Act--all of which should be signed by an incorporator, as such. 2 Commonwealth of Pennsylvania Department of State Office of the Secretary of the Commonwealth To all whom these Presents shall come, Greeting: WHEREAS, Under the provisions of the Business Corporation Law, approved the 5th day of May, Anno Domini one thousand nine hundred and thirty-three, P.L. 364, as amended, the Department of State is authorized and required to issue a CERTIFICATE OF INCORPORATION evidencing the incorporation of a business corporation organized under the terms of that law. AND WHEREAS, The stipulations and conditions of that law have been fully complied with by the persons desiring to incorporate as COMMERCIAL STONE CO., INC. THEREFORE,, KNOW YE, That subject to the Constitution of this Commonwealth and under the authority of the Business Corporation Law, I do by these presents, which I have caused to be sealed with the Great Seal of the Commonwealth, create, erect, and incorporate the incorporators of and the subscribers to the shares of the proposed corporation named above, their associates and successors, and also those who may thereafter become subscribers or holders of the shares of such corporation, into a body politic and corporate in deed and in law by the name chosen hereinbefore specified, which shall exist perpetually and shall be invested with and have and enjoy all the powers, privileges, and franchises incident to a business corporation and be subject to all the duties, requirements, and restrictions specified and enjoined in and by the Business Corporation Law and all other applicable laws of this Commonwealth. GIVEN under my Hand the Great Seal of the Commonwealth, at the City of Harrisburg, this 27th day of January in the year of our Lord one thousand nine hundred and seventy- two and of the Commonwealth the one hundred and ninety-sixth /s/ C. D. Tucker -------------------------------------- Secretary of the Commonwealth EX-3.27.1 42 CERTIFICATE OF AMENDMENT DATED DECEMBER 29, 1983 Exhibit 3.27.1 Filed on _______ 84021500 Secretary of the Commonwealth ARTICLES OF AMENDMENT --------------------- 74776 To the Department of State Corporation Bureau Commonwealth of Pennsylvania: In compliance with the requirements of Article VIII of the Business Corporation Law approved the 5th day of May, 1933, P.L. 364, as amended, the applicant, COMMERCIAL STONE CO., INC., desiring to amend its Articles of Incorporation, hereby certifies under its corporate seal that: 1. The name of the Corporation is Commercial Stone Co., Inc. and its registered office is located at 46 East Main Street, Uniontown, Fayette County, Pennsylvania, 15401. 2. The Corporation was incorporated on January 27, 1972, under the Business Corporation Law, Act of May 5, 1933, P.L. 364, as amended. 3. The Amendment was adopted on the 23rd day of December, 1982 by a Consent in writing, setting forth the action to be taken, signed by all the shareholders entitled to vote thereon and filed with the Secretary of the Corporation. 4. At the time of such action of the shareholders, the total number of shares of the Corporation outstanding and entitled to vote was 120 shares of Common Stock, $1,000 par value per share. 5. In such action taken by the shareholders, all the 120 outstanding shares of Common Stock of the Corporation were voted in favor of the Amendment. 6. The Amendment adopted by the shareholders, set forth in full, provides as follows: RESOLVED, that Article 5 of the Articles of Incorporation of Commercial Stone Co., Inc. be amended to read in full as follows: "5. The aggregate number of shares which the Corporation shall have authority to issue shall be: a) 1,200 shares of Class A voting Common Stock, $5.00 par value per share; and b) 22,800 shares of Class B non-voting Common Stock, $5.00 par value per share. The qualifications, privileges, limitations, restrictions and the special or relative rights in respect to the capital stock of the Corporation are as follows: (1) Except as otherwise expressly required by the statutes of the Commonwealth of Pennsylvania, or as herein otherwise provided, the holders of the Class A Common Stock shall exclusively possess voting power for the election of directors and for all other purposes, and the holders of Class B Common Stock shall have no voting powers or rights whatsoever. The holders of Class A Common Stock shall have the right of cumulative voting in the election of directors. No holder of Class B Common Stock shall be entitled as such to any notice of any annual or special meeting of the stockholders or to be present thereat, unless he shall be entitled to vote thereat. (2) The holders of shares of Class A Common Stock shall have preemptive rights with respect to any shares of Class A or Class B Common Stock which may be issued by the Corporation or which may be sold or transferred out of the treasury of the Corporation, as well as all securities convertible into shares of Class A or Class B Common Stock, whether such shares or convertible securities are issued or sold for cash, services or property or in exchange for other securities or otherwise. No employee share purchase or option plan shall be adopted with respect to shares of Class A or Class B Common Stock except with the approval of at least 85% of the outstanding shares of Class A Common Stock. The holders of shares of Class B Common Stock shall have no preemptive rights. (3) No amendment to the Articles of Incorporation shall be adopted unless approved by at least 85% of the outstanding shares of Class A Common Stock. (4) The relative rights, privileges and limitations of the Class A Common Stock and the Class B Common Stock shall be in all respects identical, share for share, except as provided in paragraphs (1), (2) and (3) above; and in the event of any dividend or any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, partial or otherwise, the amount paid or distributed in respect of each share of Class A Common Stock shall be the same as the amount paid or distributed in respect of each share of Class B Common Stock." RESOLVED FURTHER, that effective upon the filing of Articles of Amendment to effectuate the foregoing amendment to Article 5, each share of the Corporation's Common Stock, $1,000 par value per share, then outstanding shall be changed into and shall become: 2 10 shares of Class A voting Common Stock $5.00 par value per share; and 190 shares of Class B non-voting Common Stock, $5.00 par value per share. IN TESTIMONY WHEREOF, the applicant, Commercial Stone Co., Inc. has caused these Articles of Amendment to be signed by its President and its Corporate Seal, duly attested by its Secretary, to be hereunder affixed this 28th day of December, 1983. ATTEST: COMMERCIAL STONE CO., INC. By: /s/ By: /s/ ----------------------- --------------------------- Secretary President (Corporate Seal) The foregoing Articles of Amendment are approved by and filed with the Department of State on the _____ day of December, 1983. ------------------------------------------- Secretary of the Commonwealth 3 84021504 COMMERCIAL STONE CO., INC. Consent of Shareholders and Directors ------------------------------------- The undersigned, being all the Directors and Shareholders of Commercial Stone Co., Inc., a Pennsylvania corporation (the "Corporation") by unanimous written consent as permitted by Sections 402(7) and 513 of the Business Corporation Law of the Commonwealth of Pennsylvania, hereby adopt the following preambles and resolutions and consent to any and all action taken by virtue of such preambles and resolutions as though they had been adopted at a duly convened joint meeting of the Directors and Shareholders. I. APPROVAL OF PLAN OF RECAPITALIZATION ------------------------------------ WHEREAS, the aggregate number of shares which the Corporation has authority to issue is presently 300 shares of voting Common Stock, $1,000 par value per share, 120 shares of which are issued, fully paid and outstanding; and WHEREAS, the Board of Directors and the Shareholders have determined it to be in the best interests of the Corporation to revise the capital structure of the Corporation in order to assure continued unity of ownership and management. NOW, THEREFORE, BE IT RESOLVED, that the following Plan of Recapitalization is hereby adopted: 1. As promptly as possible, the Corporation shall file Articles of Amendment to its Articles of Incorporation effecting the amendments referred to in Part II below, which amendments provide for, among other things, a capital structure consisting of: (a) 1,200 shares of Class A voting Common Stock, $5.00 par value per share, authorized, issued and outstanding; and (b) 22,800 shares of Class B non-voting Common Stock, $5.00 par value per share, authorized, issued and outstanding. 2. Effective upon the filing of said Articles of Amendment, each share of the Corporation's presently existing Common Stock, $1,000 par value per share, then outstanding shall be changed into and shall become: 10 shares of Class A voting Common Stock, $5.00 par value per share; and 190 shares of Class B non-voting Common Stock, $5.00 par value per share. Certificates representing the aforesaid shares will be issued upon surrender of and in exchange for certificates representing shares of the existing Common Stock, $1,000 par value per share. 3. The expenses incurred in carrying out this Plan of Recapitalization will be paid by the Corporation. II. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION -------------------------------------------------- WHEREAS, in order to implement the plan of Recapitalization referred to in Part I above, it is necessary that Article 5 of the Corporation's Articles of Incorporation be amended. RESOLVED, that Article 5 of the Articles of Incorporation of Commercial Stone Co., Inc. be amended to read in full as follows; "5. The aggregate number of shares which the Corporation shall have authority to issue shall be: a) 1,200 shares of Class A voting Common Stock, $5.00 par value per share; b) 22,800 shares of Class B non-voting Common Stock, $5.00 par value per share. The qualifications, privileges, limitations, restrictions and the special or relative rights in respect to the capital stock of the Corporation are as follows: (1) Except as otherwise expressly required by the statutes of the Commonwealth of Pennsylvania, or as herein otherwise provided, the holders of the Class A Common Stock shall exclusively possess voting power for the election of directors and for all other 2 purposes, and the holders of Class B Common Stock shall have no voting powers or rights whatsoever. The holders of Class A Common Stock shall have the right of cumulative voting in the election of directors. No holder of Class B Common Stock shall be entitled as such to any notice of any annual or special meeting of the stockholders or to be present thereat, unless he shall be entitled to vote thereat. (2) The holders of shares of Class A Common Stock shall have preemptive rights with respect to any shares of Class A or Class B Common Stock which may be issued by the Corporation or which may be sold or transferred out of the treasury of the Corporation, as well as all securities convertible into shares of Class A or Class B Common Stock, whether such shares or convertible securities are issued or sold for cash, services or property or in exchange for other securities or otherwise. No employee share purchase or option plan shall be adopted with respect to shares of Class A or Class B Common Stock except with the approval of at least 85% of the outstanding shares of Class A Common Stock. The holders of shares of Class B Common Stock shall have no preemptive rights. (3) No amendment to the Articles of Incorporation shall be adopted unless approved by at least 85% of the outstanding shares of Class A Common Stock. (4) The relative rights, privileges and limitations of the Class A Common Stock and the Class B Common Stock shall be in all respects identical, share for share, except as provided in paragraphs (1), (2) and (3) above; and in the event of any dividend or any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, partial or otherwise, the amount paid or distributed in respect of each share of Class A Common Stock shall be the same as the amount paid or distributed in respect of each share of Class B Common Stock." RESOLVED FURTHER, that effective upon the filing of Articles of Amendment to effectuate the foregoing amendment to Article 5, each share of the Corporation's Common Stock, $1,000 par value per share, then outstanding shall be changed into and shall become: 10 shares of Class A voting Common Stock, $5.00 par value per share; 190 shares of Class B non-voting Common Stock, $5.00 par value per share. RESOLVED, FURTHER, that the President or the Vice President and the Secretary of the Corporation be, and they hereby are, authorized and directed to execute and cause to be filed in the Office of the Secretary of State of the Commonwealth of Pennsylvania appropriate Articles of Amendment in order to effect the amendment to the Corporation's Articles of Incorporation set forth in the preceding resolution and that the proper officers of the Corporation be, and hereby each of them is, authorized and directed, on behalf of the Corporation, to execute and deliver any and all such certificates and other documents and to take any and all such action as may be necessary or desirable 3 to implement the resolutions herein set forth and to accomplish the corporate action reflected thereby. WITNESS, the due execution hereof of the foregoing preambles and resolutions relating to the Approval of the Plan of Recapitalization and the Amendment to Articles of Incorporation of the Corporation this 23/rd/ day of December, 1983. DIRECTORS: SHAREHOLDERS: /s/ Dell H. Shearer /s/ Dell H. Shearer - ------------------------------- ----------------------------- Dell H. Shearer Dell H. Shearer /s/ Joseph H. Shearer /s/ Joseph H. Shearer - ------------------------------- ----------------------------- Joseph H. Shearer Joseph H. Shearer /s/ R. Scott Shearer /s/ R. Scott Shearer - ------------------------------- ----------------------------- R. Scott Shearer R. Scott Shearer 4 84021504 84021509 74775 COMMONWEALTH OF PENNSYLVANIA [LOGO] DEPARTMENT OF STATE To All to Whom These Presents Shall Come, Greeting: WHEREAS, In and by Article VIII of the Business Corporation Law, approved the fifth day of May, Anno Domini one thousand nine hundred and thirty-three, P.L. 364, as amended, the Department of State is authorized and required to issue a CERTIFICATE OF AMENDMENT evidencing the amendment of the Articles of Incorporation of a business corporation organized under or subject to the provisions of that Law, and WHEREAS, The stipulation and conditions of that Law pertaining to the amendment of Articles of Incorporation have been fully complied with by COMMERCIAL STONE CO., INC. THEREFORE, KNOW YE, That subject to the Constitution of this Commonwealth and under the authority of the Business Corporation Law, I do by these presents, which I have caused to be sealed with the Great Seal of the Commonwealth, extend the rights and powers of the corporation named above, in accordance with the terms and provisions of the Articles of Amendment presented by it to the Department of State, with full power and authority to use and enjoy such rights and powers, subject to all the provisions and restrictions of the Business Corporation Law and all other applicable laws of this Commonwealth. GIVEN under my Hand the Great Seal of the Commonwealth, at the City of Harrisburg, this 29th day of December in the year of our Lord one thousand nine hundred and eighty-three and of the Commonwealth the two hundred and eighth. /s/ William R. Davis ----------------------------------------- Secretary of the Commonwealth EX-3.27.2 43 STATEMENT OF CHANGE OF REGISTERED OFFICE Exhibit 3.27.2
Applicant's Account No. ________ Filed this _______________________ day of DSCB: BCL-207 (Rev. B-72) FEB. 09 1984, A.D. 19 -------------------- Filing Fee: $40 Commonwealth of Pennsylvania AB-2 Department of State 84111465 ---------------------------- Statement of Change of Registered COMMONWEALTH OF PENNSYLVANIA Office-Domestic DEPARTMENT OF STATE Business Corporation CORPORATION BUREAU 74776 Secretary of the Commonwealth - --------------------------------------------------------------------------------------------------------
In compliance with the requirements of section 307 of the Business Corporation Law, act of May 5, 1933 (T.L. 374), [___________] that it [___________________________]: 1. The name of the corporation is: Commercial Stone Co., Inc. - -------------------------------------------------------------------------------- 2. The address of its present registered office in this Commonwealth is (the Department of State is hereby authorized to correct the following statement to conform to the records of the Department): 46 East Main Street - -------------------------------------------------------------------------------- (NUMBER) (STREET) Uniontown Pennsylvania 15401 - -------------------------------------------------------------------------------- (CITY) (ZIP CODE) 3. The address to which the registered office in this Commonwealth is to be changed is: 850 Weldon Street - -------------------------------------------------------------------------------- (NUMBER) (STREET) Latrobe Pennsylvania 15650 - -------------------------------------------------------------------------------- (CITY) (ZIP CODE) 4. Such change was authorized by resolution duly adopted by at least a majority of the members of the board of directors of the corporation. IN TESTIMONY WHEREOF, the undersigned corporation has caused this statement to be signed by a duly authorized officer, and its corporate seal, duly attested by another such officer, to be hereunto affixed, this 24th day of January, 1984. Commercial Stone Co., Inc. ------------------------------------ (NAME OF CORPORATION) By: /s/ Joseph H. Shearer --------------------------------- (SIGNATURE) Joseph H. Shearer, President ------------------------------------- (TITLE: PRESIDENT, VICE PRESIDENT, ETC.) Attest: /s/ R. Scott Shearer - --------------------------- (SIGNATURE) R. Scott Shearer, Secretary - --------------------------- (TITLE: SECRETARY, ASSISTANT SECRETARY, ETC.) (CORPORATE SEAL) EX-3.27.3 44 CERTIFICATE OF AMENDMENT OF COMMERCIAL STONE CO. Exhibit 3.27.3 AMENDMENT TO ARTICLES OF INCORPORATION -------------------------------------- 74776 To the Department of State Corporation Bureau Commonwealth of Pennsylvania: In compliance with the requirements of Article VIII of the Business Corporation Law approved the 5th day of May, 1933, P.L. 364, as amended, the applicant, COMMERCIAL STONE CO., INC., desiring to amend its Articles of Incorporation, hereby certifies under its corporate seal that: 1. The name of the Corporation is Commercial Stone Co., Inc. and its registered office is located at 850 Weldon Street, Latrobe, Westmoreland County, Pennsylvania, 15650. 2. The Corporation was incorporated on January 27, 1972, under the Business Corporation Law, Act of May 5, 1933, P.L. 364, as amended. 3. The Amendment was adopted on the 17th day of December, 1986 by a Consent in writing, setting forth the action so taken, signed by all the shareholders entitled to vote thereon and filed with the Secretary of the Corporation. 4. At the time of such action of the shareholders, the total number of shares of the Corporation outstanding and entitled to vote was 1,200 shares of Common Stock, $5.00 par value per share. 5. In such action taken by the shareholders, all the 1,200 outstanding shares of Common Stock of the Corporation were voted in favor of the Amendment. 6. The Amendment adopted by the shareholders, set forth in full, provides as follows: RESOLVED, that Article 5 of the Articles of Incorporation of Commercial Stone Co., Inc. be amended to read in full as follows: "5. The aggregate number of shares which the Corporation shall have authority to issue shall be: a) 1,200 shares of Class A voting Common Stock, $5.00 par value per share; and b) 22,800 shares of Class B non-voting Common Stock, $5.00 par value per share. The qualifications, privileges, limitations, restrictions and the special or relative rights in respect to the capital stock of the Corporation are as follows: (1) Except as otherwise expressly required by the statutes of the Commonwealth of Pennsylvania, or as herein otherwise provided, the holders of the Class A Common Stock shall exclusively possess voting power for the election or directors and for all other purposes, and the holders of Class B Common Stock shall have no voting powers or rights whatsoever. The holders of Class A Common Stock shall have the right of cumulative voting in the election of directors. No holder of Class B Common Stock shall be entitled as such to any notice of any annual or special meeting of the stockholders or to be present thereat, unless he shall be entitled to vote thereat. (2) No amendment to the Articles of Incorporation shall be adopted unless approved by at least 85% of the outstanding shares of Class A Common Stock. 2 (3) The relative rights, privileges and limitations of the Class A Common Stock and the Class B Common Stock shall be in all respects identical, share for share, except as provided in paragraphs (1) and (2) above; and in the event of any dividend or any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, partial or otherwise, the amount paid or distributed in respect of each share of Class A Common Stock shall be the same as the amount paid or distributed in respect of each share of Class B Common Stock." IN TESTIMONY WHEREOF, the applicant, Commercial Stone Co., Inc. has caused these Articles of Amendment to be signed by its President and its Corporate Seal, duly attested by its Secretary, to be hereunder affixed this 17th day of December, 1986. ATTEST: COMMERCIAL STONE CO., INC. By: /s/ By: /s/ Joseph H. Shearer ------------------------- -------------------------- Secretary President [Corporate Seal] The foregoing Amendment to Articles of Amendment are approved by and filed with the Department of State on the 24th day of December, 1986. ________________________________________ Secretary of the Commonwealth 3 COMMONWEALTH OF PENNSYLVANIA [LOGO] DEPARTMENT OF STATE To All to Whom These Presents Shall Come, Greeting: WHEREAS, In and by Article VIII of the Business Corporation Law, approved the fifth day of May, Anno Domini one thousand nine hundred and thirty-three, P.L. 364, as amended, the Department of State is authorized and required to issue a CERTIFICATE OF AMENDMENT evidencing the amendment of the Articles of Incorporation of a business corporation organized under or subject to the provisions of that Law, and WHEREAS, The stipulations and conditions of that Law pertaining to the amendment of Articles of Incorporation have been fully complied with by COMMERCIAL STONE CO., INC. THEREFORE, KNOW YE, That subject to the Constitution of this Commonwealth and under the authority of the Business Corporation Law, I do by these presents, which I have caused to be sealed with the Great Seal of the Commonwealth, extend the rights and powers of the corporation named above, in accordance with the terms and provisions of the Articles of Amendment presented by it to the Department of State, with full power and authority to use and enjoy such rights and powers, subject to all the provisions and restrictions of the Business Corporation Law and all other applicable laws of this Commonwealth. GIVEN under my Hand the Great Seal of the Commonwealth, at the City of Harrisburg, this 24th day of December in the year of our Lord one thousand nine hundred and eighty-six and of the Commonwealth the two hundred eleventh. /s/ ------------------------------------- Secretary of the Commonwealth EX-3.28 45 BY-LAWS OF COMMERCIAL STONE CO., INC. EXHIBIT 3.28 BY-LAWS of COMMERCIAL STONE CO., INC. TABLE OF CONTENTS
Page ---- ARTICLE I OFFICES Section 1.01 Offices....................................................... 1 ARTICLE II SEAL Section 2.01 Seal.......................................................... 1 ARTICLE III SHAREHOLDER'S MEETING Section 3.01 Place of Meeting.............................................. 1 Section 3.02 Annual Meeting................................................ 1 Section 3.03 Quorum........................................................ 1 Section 3.04 Voting........................................................ 2 Section 3.05 Notice of Meeting............................................. 2 Section 3.06 Judges of Election............................................ 2 Section 3.07 Special Meetings.............................................. 2 Section 3.08 Voting List................................................... 3 ARTICLE IV DIRECTORS Section 4.01 Board of Directors............................................ 3 Section 4.02 Powers........................................................ 3 Section 4.03 Meetings of the Board......................................... 3 Section 4.04 Special Meetings.............................................. 4 Section 4.05 Quorum........................................................ 4 Section 4.06 Vacancies..................................................... 4 Section 4.07 Compensation of Directors..................................... 4
i ARTICLE V OFFICERS Section 5.01 Office, Elections, Term, etc................................. 4 Section 5.02 Chairman of the Board........................................ 4 Section 5.03 President.................................................... 5 Section 5.04 Executive Vice President..................................... 5 Section 5.05 Secretary.................................................... 5 Section 5.06 Treasurer.................................................... 5 Section 5.07 Vacancies.................................................... 5 Section 5.08 Signing Checks, Notes, etc................................... 5 ARTICLE VI ACTIONS BY CONSENT AND TELECOMMUNICATION Section 6.01 Action by Consent............................................ 6 Section 6.02 Telephone Participation in Meetings.......................... 6 ARTICLE VII CORPORATE RECORDS Section 7.01 Records Required............................................. 6 Section 7.02 Inspection................................................... 6 ARTICLE VIII SHARES Section 8.01 Certificates................................................. 7 Section 8.02 Transfers of Shares.......................................... 7 Section 8.03 Closing Share Transfer Books or Fixing Record Date........... 7 Section 8.04 Lost Certificates............................................ 7 ARTICLE IX CORPORATE FINANCE Section 9.01 Dividends.................................................... 7 Section 9.02 Reserves..................................................... 8
ii Section 9.03 Annual Statement............................................. 8 Section 9.04 Fiscal Year.................................................. 8 ARTICLE X INDEMNIFICATION Section 10.01 Directors and Officers...................................... 8 Section 10.02 Basis of Rights; Other Rights............................... 8 Section 10.03 Insurance................................................... 9 ARTICLE XI MISCELLANEOUS PROVISIONS Section 11.01 Notices..................................................... 9 ARTICLE XII AMENDMENTS Section 12.01 Amendment of By-Laws........................................ 9
iii Exhibit B BY-LAWS OF COMMERCIAL STONE CO., INC. ARTICLE I OFFICES ------- Section 1.01 Offices. The registered office shall be at 2200 Springfield ------- Pike, Connellsville, Pennsylvania 15425. The corporation may also have offices at such other places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II SEAL ---- Section 2.01 Seal. The corporate seal shall have inscribed thereon the ---- name of the corporation, the year of its organization and the words "Corporate Seal, Pennsylvania - 1972." ARTICLE III SHAREHOLDERS' MEETING --------------------- Section 3.01 Place of Meeting. All meetings of the shareholders shall be ---------------- held at 2200 Springfield Pike, Connellsville, Pennsylvania 15425, or such other place or places, either within or without the Commonwealth of Pennsylvania, as may from time to time be selected. Section 3.02 Annual Meeting. The annual meeting of the shareholders shall -------------- be held on the 1st Monday of June in each year if not a legal holiday, and if a legal holiday, then on the next secular day following at 11:00 o'clock A.M. when they shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. If the annual meeting shall not be called and held within six months after the designated time, any shareholder may call such meeting. Section 3.03 Quorum. A Shareholders' meeting duly called shall not be ------ organized for the transaction of business unless a quorum is present. The presence in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on the particular matter shall constitute a quorum for the purpose of considering such matter. The Shareholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Adjournment or adjournments of any annual or special meeting may be taken, but any meeting at which directors are to be elected shall be adjourned only from day to day, or for such longer periods not exceeding fifteen days each, as may be directed by shareholders who are present in person or by proxy and who are entitled to cast at least a majority of the votes which all such shareholders would be entitled to cast at any election of directors until such directors have been elected. If a meeting cannot be organized because a quorum has not attended, those present may, except as otherwise provided by statute, adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. Section 3.04 Voting. At each meeting of the shareholders, every ------ shareholder having the right to vote shall be entitled to vote in person or by proxy executed in writing by such shareholder or by his duly authorized attorney in fact, and filed with the secretary of the corporation. No unrevoked proxy shall be valid after eleven months from the date of its execution, unless a longer time is expressly provided therein, but in no event shall a proxy, unless coupled with an interest, be voted on after three years from the date of its execution. Elections for directors shall be by cumulative voting. Upon demand made by a shareholder at any election for the directors before the voting begins, the election shall be by ballot. No share shall be voted at any meeting upon which any installment is due and unpaid. The original share transfer book, or a duplicate thereof kept in this Commonwealth shall be prima facie evidence of the right of the person named therein to vote thereon. Section 3.05 Notice of Meeting. Written notice of the annual meeting ----------------- shall be mailed to each shareholder entitled to vote thereat, at such address as appears on the books of the corporation, at least ten days prior to the meeting. Section 3.06 Judges of Election. In advance of any meeting of ------------------ shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election be not so appointed, the Chairman of any such meeting may, and on the request of any shareholder or his proxy shall make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one or three judges are to be appointed. On request of the Chairman of the meeting, or of any shareholder or his proxy, the judge(s) shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. No person who is a candidate for office shall act as a judge. Section 3.07 Special Meetings. Special meetings of the shareholders may ---------------- be called at any time by the President, or the Board of Directors, or the holders of not less than one-fifth of the votes which all shareholders are entitled to cast at the particular meeting. At any time, upon written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary to fix the date of the meeting to be held not less than ten nor more than sixty days after receipt of the request, and to give due notice thereof. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so. 2 Business transacted at all special meetings shall be confined to the objects stated in the call and matters germane thereto, unless all shareholders entitled to vote consent thereto. Written notice of a special meeting of shareholders, stating the time, place, and object thereof, shall be given to each shareholder entitle to vote thereat at least five days before such meeting, unless a greater period of notice is required by statute in a particular case. Section 3.08 Voting List. The office or agent having charge of the share ----------- transfer book shall make, at least five days before each meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, with the address of an the number of shares held by each. The list shall be kept on file at the registered office of the corporation, and shall be subject to inspection by any shareholder at any time during usual business hours, and shall also be produced and kept open at the time and place of the meeting, and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in this Commonwealth, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share transfer book, or to vote, in person or by proxy, at any meeting of shareholders. ARTICLE IV DIRECTORS --------- Section 4.01 Board of Directors. The business of the corporation shall be ------------------ managed by its Board of Directors, two in number, who shall be natural persons of full age and need not be resident(s) of this Commonwealth or shareholders in the corporation. They shall be elected by the shareholders, at the annual meeting of shareholders of the corporation, and each director shall be elected for the term of at least one year, and until his successor shall be elected and shall qualify. Section 4.02 Powers. In addition to the powers and authorities by these ------ By-Laws expressly conferred upon them, the Board may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-Laws directed or required to be exercised or done by the shareholders. Section 4.03 Meetings of the Board. The meetings of the Board of --------------------- Directors may be held at such place within this Commonwealth, or elsewhere, as a majority of the directors may from time to time appoint, or as may be designated in the notice calling the meeting. Each newly elected Board of Directors may meet at such place and time as shall be fixed by the shareholders at the meeting at which such directors are elected and no notice shall be necessary to the necessary to the newly elected directors in order legally to constitute the meeting, or they may meet at such place and time as may be fixed by the consent in writing of all the directors. Regular meetings of the Board shall be held without notice at the registered office of the corporation, or at such other time and place as shall be determined by the Board. 3 Section 4.04 Special Meetings. Special meetings of the Board of Directors ---------------- may be called by the President on five days' notice to each director, either personally or by telegram; special meetings shall be called by the President or Secretary in a like manner and on like notice on the written request of a director. Section 4.05 Quorum. A majority of the directors in office shall be ------ necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors. Section 4.06 Vacancies. Vacancies in the Board of Directors, including --------- vacancies resulting from an increase in the number of directors, shall be filled by a majority of the remaining members of the Board though less than a quorum and each person so elected shall be a director until his successor is elected by the shareholders, who may make such election at the next annual meeting of the shareholders or at any special meeting duly called for that purpose and held prior thereto. Section 4.07 Compensation of Directors. Directors as such, shall not ------------------------- receive any stated salary for their services, but by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board provided, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE V OFFICERS -------- Section 5.01 Office, Elections, Term, etc. The executive officers of the ---------------------------- corporation shall be chosen by the directors and shall be a Chairman, President, Executive Vice President, Secretary, and Treasurer. The Board of Directors may also choose such other officers and agents as it shall deem necessary, who shall hold their offices for such duties as from time to time shall be prescribed by the Board of Directors. Any two or more offices may be held by the same person. It shall not be necessary for the officers to be directors. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. The officers of the corporation shall hold office for one year and until their successors are chosen and have qualified. Any officer elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in their judgment the best interests of the corporation will be served thereby. Section 5.02 Chairman of the Board. The Chairman of the Board of --------------------- Directors shall preside at all meetings of the shareholders and of the directors at which he is present, and shall have such authority and perform such duties as the Board of Directors may from time to time designate. The Chairman of the Board of Directors shall be the chief executive officer of the corporation and as such shall have general and active executive management of all of the business, property, and affairs of the corporation and shall see that all orders and resolutions of 4 the Board of Directors and its committees are carried into effect. In the event of the absence, incapacity, inability, or refusal of the Chairman of the Board to act, the President shall assume the authority and perform the duties of the Chairman of the Board. Section 5.03 President. The President shall, in the absence of the --------- Chairman of the Board, preside at all meetings of the shareholders and of the directors at which he is present, and shall be the chief operating officer of the corporation. Subject to the control of the Board of Directors, the President shall have general and active management of the operations of the corporation, shall see that all orders and resolutions of the Board of Directors are carried into effect, subject, however, to the right of the directors to delegate any specific power, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the corporation. He shall execute bonds, mortgages, and other contracts requiring a seal, under the seal of the corporation. He shall be ex-officio a member of all committees, and shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation that are not vested by these bylaws in the Chairman of the Board. Section 5.04 Executive Vice President. The Executive Vice President shall ------------------------ serve under the direction of the President. In the absence, incapacity, or inability or refusal of the President to act, the Executive Vice President shall assume the authority and perform the duties of the President. The Board of Directors may appoint additional Vice Presidents, in which event the Vice Presidents shall be subordinate to the Executive Vice President. Section 5.05 Secretary. The Secretary shall attend all sessions of the --------- Board and all meetings of the shareholders and act as clerk thereof, record all the votes of the corporation and the minutes of all its transactions in a book to be kept for that purpose; and shall perform like duties for all committees of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, or President, and under whose supervision he shall be. He shall keep in safe custody the corporate seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it. Section 5.06 Treasurer. The Treasurer shall have custody of the corporate --------- funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall keep the moneys of the corporation in a separate account to the credit of the corporation. He shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman, President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. Section 5.07 Vacancies. If the office of any officers or agent, one or --------- more, becomes vacant for any reason, the Board of Directors may choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. Section 5.08 Signing Checks, Notes, etc. Unless otherwise provided by -------------------------- resolution of the Board of Directors, all checks, notes, or other obligations for the payment of money by the corporation shall be signed by any one of the following officers of the corporation: Chairman, President, or Treasurer. Any such officer shall have power in the name and on behalf of the 5 corporation to endorse for collection and deposit in any account maintained with any banking institution by the corporation, all checks or other negotiable instruments payable to the order of the corporation. The Board of Directors may, however, authorize any one of such officers to sign any such instruments for, and on behalf of, the corporation without the necessity of counter-signature; may designate officers or employees of the corporation, other than those named above, who may, in the name of the corporation, sign such instruments; and may authorize the use of facsimile signatures of any of such persons. ARTICLE VI ACTIONS BY CONSENT AND TELECOMMUNICATION ---------------------------------------- Section 6.01 Action by Consent. Any action which may be taken at a ----------------- meeting of the shareholders, or at a meeting of the directors or members of the executive committee, may be taken without a meeting, if a consent or consents in writing setting forth the action so taken shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose, or by all of the directors or the members of the executive committee, as the case may be, and shall be filed with the Secretary of the corporation. Section 6.02 Telephone Participation in Meetings. One or more ----------------------------------- shareholders or directors may participate in a meeting of the shareholders or Board of Directors, of a committee thereof, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. ARTICLE VII CORPORATE RECORDS ----------------- Section 7.01 Records Required. There shall be kept at the registered ---------------- office of the corporation an original or duplicate record of the proceedings of the shareholders and of the directors, and the original or a copy of its By- Laws, including all amendments or alterations thereof to date, certified by the Secretary of the corporation. An original or duplicate share transfer book shall also be kept at the registered office, or at the office of a transfer agent or registrar within this Commonwealth, giving the names of the shareholders in alphabetical order, and showing their respective addresses, the number and classes of shares held by each, the number and date of certificates issued for the shares, and the number and date of cancellation of every certificate surrendered for cancellation. Section 7.02 Inspection. Every shareholder s hall have a right to ---------- examine, in person or by his agent or attorney, at any reasonable time or times for any reasonable purpose, the share transfer book, books or records of account, and records of the proceedings of the shareholders and directors, and make extracts therefrom. 6 ARTICLE VIII SHARES ------ Section 8.01 Certificates. The share certificates of the corporation ------------ shall be numbered and registered in the share transfer books of the corporation, as they are issued. They shall be signed by the President and Secretary and shall bear the corporate seal. Section 8.02 Transfers of Shares. Transfers of shares of the corporation ------------------- shall be made only on stock transfer records of the corporation (which may be kept in written or computer form). Transfers shall be made by the corporation or its duly authorized agent as required by law. The corporation shall be entitled to treat the person in whose name shares stand on the books of the corporation as the owner thereof for all purposes. Section 8.03 Closing Share Transfer Books or Fixing Record Date. The -------------------------------------------------- Board of Directors may fix a time, not more than fifty days prior to the date fixed for the payment of any dividend or distribution, or the date fixed for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution or to receive any such allotment or rights, or to exercise the rights in respect to any change, conversion, or exchange of shares. In such cases, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting, or to receive payment of such dividend, or to receive such allotment or rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after any record date fixed as aforesaid. The Board of Directors may close the books of the corporation against transfers of shares during the whole or any part of such period, and in such case written or printed notice thereof shall be mailed at least ten days before the closing thereof to each shareholder of record at the address appearing on the records of the corporation or supplied by him to the corporation for the purpose of notice. While the share transfer books of the corporation are closed, no transfer of shares shall be made thereon. If no record date is fixed for the determination of shareholders entitled to receive notice of and vote at, a shareholders' meeting, transferees of shares which are transferred on the books of the corporation within ten days next preceding the date of such meeting shall not be entitled to notice of and vote at such meeting. Section 8.04 Lost Certificates. Any person claiming the loss, destruction ----------------- or mutilation of a share certificate may have a new certificate issued therefor upon such terms and indemnity to the corporation as the Board of Directors may prescribe. ARTICLE IX CORPORATE FINANCE ----------------- Section 9.01 Dividends. Subject to the provisions of the statutes and the --------- Articles of Incorporation, the Board of Directors may declare and pay dividends upon the outstanding shares of the corporation from time to time and to such extent as it deems advisable. 7 Section 9.02 Reserves. Before payment of any dividend there may be set -------- aside out of the net profits of the corporation such sum or sums as the directors, from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for such other purpose as the directors shall think conducive to the interests of the corporation, and the directors may abolish any such reserve in the manner in which it was created. Section 9.03 Annual Statement. The Chairman, President, and Board of ---------------- Directors shall present at each annual meeting a full and complete statement of the business and affairs of the corporation for the preceding year. Such statement shall be prepared and presented in whatever manner the Board of Directors shall deem advisable and need not be verified by a certified public accountant. Section 9.04 Fiscal Year. The fiscal year of the corporation shall begin ----------- on the 1st day of April in each year. ARTICLE X INDEMNIFICATION --------------- Section 10.01 Directors and Officers. The corporation shall indemnify ---------------------- each director or officer (including each former director or officer) and may, by action of the Board of Directors, indemnify any other authorized representative (including any former authorized representative) of the corporation to the fullest extent now or hereafter permitted by law against all expenses (including attorneys' fees and disbursements), judgments, fines, and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, to which such person was, is or is threatened to be made a party or a witness by reason of the fact that such person is or was an authorized representative of the corporation. For the purposes of this Article, "authorized representative" shall mean a director, officer, employee, or agent of the corporation or of any subsidiary of the corporation, or a trustee, custodian, administrator, committeeman, or fiduciary of any employee benefit plan established and maintained by the corporation or by any subsidiary of the corporation, or a person who is or was serving another corporation, partnership, joint venture, trust or other enterprise in any such capacity at the request of the corporation. Section 10.02 Basis of Rights; Other Rights. Each person who shall act as ----------------------------- an authorized representative of the corporation shall be deemed to be doing so in reliance upon such rights of indemnification as are provided in this Article. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under any agreement, vote of shareholders or disinterested directors, statute, or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office or position, and shall continue as to a person who has ceased to be an authorized representative of the corporation and shall inure to the benefit of the heirs, executors, and administrators of such a person. 8 Section 10.03 Insurance. The corporation may purchase and maintain --------- insurance on behalf of any person who is or was a director or officer of the corporation, or is or was an authorized representative of the corporation, against any liability asserted against or incurred by such person in any such capacity, or arising out of the status of such person as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Article. ARTICLE XI MISCELLANEOUS PROVISIONS ------------------------ Section 11.01 Notices. Whenever written notice is required to be given to ------- any person, it may be given to such person, either personally or by sending a copy thereof through the mail, or by telegram, charges prepaid, to his address appearing on the books of the corporation, or supplied by him to the corporation for the purpose of notice. If the notice is sent by mail or telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office for transmission to such person. Such notice shall specify the place, day and hour of the meeting and, in the case of a special meeting, the general nature of the business to be transacted. Any shareholder or director may waive in writing and at any time, any notice required to be given under the By-Laws. Attendance of a person, either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where the express purpose of such attendance is to object to the transaction of any business because the meeting was not lawfully called or convened. ARTICLE XII AMENDMENTS ---------- Section 12.01 Amendment of By-Laws. These By-Laws may be altered, amended -------------------- or repealed by the affirmative vote of a majority of the shares issued and outstanding and entitled to vote thereat at any regular or special meeting of the shareholders, if notice of the proposed alteration, amendment or repeal be contained in the notice of the meeting. 9 EX-3.29 46 CERTIFICATE OF FORMATION OF COMMERCIAL AGGREGATES EXHIBIT 3.29 CERTIFICATE OF FORMATION OF Commercial Aggregates Transportation & Sales, LLC The undersigned, desiring to form a limited liability company pursuant to the Delaware Limited Liability Company Act, does hereby certify as follows: 1. The name of the limited liability company is: Commercial Aggregates Transportation & Sales, LLC 2. The address of its registered office in the State of Delaware is 9 East Loockerman Street, in the City of Dover, County of Kent, State of Delaware 19901. The name of its registered agent at such address is National Registered Agents, Inc. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of Commercial Aggregates Transportation & Sales, LLC this 27/th/ day of September, 1999. /s/ Melissa Freidenreich -------------------------------------- Melissa Freidenreich EX-3.29.1 47 CONTRIBUTION AGREEMENT DATED AS OF OCTOBER 1, 1999 EXHIBIT 3.29.1 CONTRIBUTION AGREEMENT ---------------------- THIS CONTRIBUTION AGREEMENT (this "Agreement") dated as of the 1st day of October, 1999 between Stone Materials Company, LLC, a Delaware limited liability company ("Stone Materials"), and Commercial Stone Co., Inc, a Pennsylvania corporation ("Commercial"). W I T N E S S E T H: ------------------- WHEREAS, Stone Materials is the sole owner of CATS, LLC, a Delaware limited liability company ("CATS"); and WHEREAS, the parties hereto desire to effectuate the transactions contemplated hereby in furtherance of the reorganization of the business and operations of the companies of USS Holdings, Inc., a Delaware corporation, and the ultimate parent company of Stone Materials, Commercial and CATS pursuant to a plan of reorganization substantially in the form of the draft presented to the Board of Directors for its review (the "Reorganization"); and WHEREAS, in furtherance of the Reorganization, Stone Materials has authorized the contribution to Commercial of the entire right, title and interest of Stone Materials in CATS (the "LLC Interest"); and WHEREAS, Commercial desires to accept such contribution. NOW, THEREFORE, the parties hereto, intending to be legally bound, in consideration of the agreements herein contained and other valuable consideration, hereby agree as follows: 1. Contribution. Stone Materials hereby contributes, transfers and ------------ conveys the LLC Interest to Commercial for the account and for the benefit of Commercial, and Commercial hereby accepts such contribution, transfer and conveyance from Stone Materials for the benefit of Commercial. 2 Delivery of Certificate; Further Assurances. To the extent the LLC ------------------------------------------- Interest is represented by a certificate, upon execution of this Agreement, Stone Materials shall deliver to CATS a certificate representing such LLC Interest, duly endorsed in blank or with a fully executed transfer power attached, all in proper form for transfer. Each of the parties hereto covenants and agrees that, from and after the date hereof, it will execute and deliver to the appropriate party such additional instruments and documents and take such further action as may be necessary in order to more fully vest, record and/or perfect Commercial's title to, or interest in, the LLC Interest being conveyed hereunder. 3. Effective Date. The parties hereto agree that the transactions -------------- contemplated hereby shall, upon satisfaction of the terms and conditions set forth herein, be deemed effective as of the date of this Agreement. 4. Entire Agreement. This Agreement constitutes the entire agreement ---------------- between the parties hereto with respect to the subject matter of this Agreement and supersedes all prior discussions, agreements and understandings, whether written or oral, with respect to the subject matter hereof. 2 5. Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of Delaware without giving effect to its conflict of law rules. 6. Counterparts. This Agreement may be signed in any number of ------------ counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 3 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. STONE MATERIALS COMPANY, LLC By: Better Minerals & Aggregates Company, as Manager By: /s/ John A. Ulizio ----------------------------------------------- Name: John A. Ulizio Title:: Vice President COMMERCIAL STONE CO., INC. By: /s/ John A. Ulizio ----------------------------------------------- Name: John A. Ulizio Title:: Secretary 4 EX-3.30 48 LIMITED LIABILITY COMPANY OPERATING AGREEMENT EXHIBIT 3.30 EXECUTION COPY ================================================================================ LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, LLC DATED AS OF SEPTEMBER 30, 1999 ================================================================================ LIMITED LIABILITY COMPANY OPERATING AGREEMENT of COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, LLC This Limited Liability Company Operating Agreement (the "Agreement"), --------- dated as of September 30, 1999 is entered into solely by Stone Materials Company, LLC (the "Member"). ------ WHEREAS, a certificate of formation of Commercial Aggregates Transportation and Sales, LLC (the "Company") has been filed by an authorized ------- person with the Office of the Secretary of State of Delaware, causing the formation of a limited liability company in accordance with the Delaware Limited Liability Company Act (6 Del. C. (S)18-101 et seq.) (hereinafter referred to as -- --- the "Act"), and the Member intends by the execution hereof to become the sole --- Member thereof as of the date of such execution; and WHEREAS, the Member desires to provide for the operation and management of the Company for the purposes stated herein; NOW, THEREFORE, in consideration of the mutual covenants, promises and agreements contained herein, the Member hereby agrees as follows: ARTICLE I FORMATION OF THE COMPANY ------------------------ Section 1.01 Formation. The Member acknowledges that the certificate --------- of formation for the Company has been filed, with the Office of the Secretary of State of Delaware on September 27, 1999. The Member agrees to be bound by and comply with the provisions thereof and hereof. Section 1.02 Registered Office. The registered office in the State of ----------------- Delaware shall be: 9 East Loockerman Street, Dover, DE 19901. Section 1.03 Registered Agent. The registered agent of the Company in ---------------- the State of Delaware shall be National Registered Agents, Inc. Section 1.04 Purpose and Character of Business. The general purpose --------------------------------- of the Company is to engage in any lawful act or activity for which limited liability companies may be organized under the Act. Section 1.05 Duration. -------- The Company shall continue in existence until it is dissolved pursuant to Section 8.1. 1 Section 1.06 Filings, Reports and Formalities. The Member shall cause the -------------------------------- Company to make all filings and to submit all reports required to be filed or submitted under the Act with respect to the Company, and shall cause the Company to make such filings or take such other actions required under the laws of any jurisdiction where the Company conducts business. Throughout the term of the Company, the Company shall comply with all requirements necessary to maintain the limited liability status of the Company and the limited liability of the Member under the laws of the State of Delaware and of each other jurisdiction in which the Company does business. ARTICLE II CAPITAL CONTRIBUTIONS --------------------- Section 2.01 Initial Capital Contribution. The Member will make an initial ---------------------------- Capital Contribution of $1,000, payable simultaneously with the execution hereof. The Member's acquisition of its Membership Units in the Company shall be effective upon the payment in full in cash of such initial Capital Contribution. "Membership Units" or "Units" means the Member's aggregate rights in the Company, including, without limitation, the Member's right to a share of the profits and losses of the Company, the Member's right to receive distributions from the Company and the right to vote and participate in the management of the Company. Membership Units shall be represented by a certificate. Section 2.02 Article 8 Election. All Membership Units shall be governed by ------------------ and determined to be a security under Article 8 of the Uniform Commercial Code as adopted in the State of Delaware and in the State of New York. Section 2.03 Return of Contributions. No interest shall accrue on any ----------------------- contributions to the capital of the Company. The Member shall not have the right to withdraw or to be repaid any Capital Contribution made by the Member except as otherwise provided herein or in the Act. Section 2.04 Liability of Member. The Member shall not be personally ------------------- liable for the debts, obligations or liabilities of the Company solely by reason of being the Member of the Company. Notwithstanding any provision herein to the contrary, in no event shall the liability of the Member for the debts, obligations or liabilities of the Company exceed the Member's Capital Contribution. (b) The Member's Units in the Company shall be personal property for all purposes. All property owned by the Company shall be deemed to be owned by the Company as an entity and the Member shall not be deemed to own any such property or any portion thereof. (c) The Company shall defend, indemnify and hold harmless the Member and its directors, officers, members, managers, employees and representatives and its successors, assigns and affiliates from and against any and all losses, claims, expenses or damages suffered or sustained by any of them (including, but not limited to, any judgment, award, settlement, reasonable 2 attorney's fees and other costs or expenses incurred in connection with the investigation and defense or prosecution of any actual or threatened action, proceeding or claim) (1) related to, or arising out of, any claim that the Member is liable for any debt, obligation or liability of the Company or is directly or indirectly required to make any payments in respect thereof or in connection therewith, and (2) by reason of any act, omission, or alleged act or omission, arising out of the Member's activities or alleged activities on behalf of the Company or in furtherance of the interests of the Company; provided, -------- however, that this Section 2.04(c) shall be of no force or effect if the act, - ------- omission, or alleged act or omission upon which such actual or threatened action, proceeding or claim is based was performed or omitted as a result of willful misconduct or a knowing and material breach of this Agreement by the Member. (d) The Company shall pay in advance any legal or other expenses incurred in investigating or defending against any loss, claim, expense or damage that may be subject to indemnification under Section 2.04(c) hereof, upon receipt of an undertaking from the person on whose behalf such expenses are paid to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Company. The Company may purchase insurance, to the extent available at reasonable cost, to cover losses, claims, expenses or damages subject to indemnification under Section 2.04(c) hereof. ARTICLE III MANAGEMENT OF THE COMPANY ------------------------- Section 3.01 Management by the Member. The Member, exclusively in its ------------------------ capacity as such, shall manage the business of the Company. Section 3.02 The Member Has No Exclusive Duty to the Company. This ----------------------------------------------- Agreement shall not prohibit the Member from having other business interests and engaging in other activities in addition to those relating to the Company. The Company shall not have any right, by virtue of this Agreement, to share or participate in such other activities of the Member or to the income or proceeds derived therefrom. The Member shall not incur any liability to the Company as a result of engaging in any other business or venture. ARTICLE IV TAX TREATMENT ------------- Section 4.01 Tax Treatment. The Member intends that, for tax ------------- purposes, the Company will be treated as a disregarded entity and not as a partnership. ARTICLE V ALLOCATIONS AND DISTRIBUTIONS ----------------------------- Section 5.01 Allocation of Profits and Losses. -------------------------------- 3 For each fiscal year (or portion thereof), all items of income, gain, loss and deduction of the Company shall be allocated to the Member. Section 5.02 Distributions of Cash Flow. Except as provided in -------------------------- Section 8.02 hereof, cash flow, the availability of which shall be determined by the Member, shall be distributed to the Member, at such times and in such amounts as the Member shall determine. Section 5.03 Net Proceeds Upon Liquidation. Upon the liquidation of ----------------------------- the Company, after payment of, or adequate provision for, the debts and obligations of the Company, the remaining assets of the Company shall be distributed to the Member. ARTICLE VI INSPECTION, RECORDS, CONFIDENTIALITY ------------------------------------ Section 6.01 Access to Properties. The Member, and each of its duly -------------------- authorized employees and representatives, at the Member's own risk and expense, and subject to the provisions of any third party management agreement, shall at all reasonable times have access to all Company assets, activities, operations and records. Section 6.02 Books of Account. Books of account shall at all times be ---------------- open to inspection, audit and copying by the Member or its duly authorized representative. Section 6.03 Confidentiality. All such records and accounts including --------------- reports shall be treated as confidential and the Member shall take or cause to be taken such reasonable precautions as may be necessary to prevent the disclosure thereof to any unauthorized Person, firm or corporation for a period ending two (2) years following the termination of the Company. ARTICLE VII TRANSFER -------- Section 7.01 Transfer. The Member may sell, transfer, pledge, make a gift -------- of, or otherwise dispose of or assign all of its Membership Units in the Company. Upon a sale, transfer, pledge, gift, disposal or assignment, the transferee thereof shall become a Member of the Company; provided that, if the -------- Membership Units are pledged, or otherwise assigned as a security interest, the transferee shall become a Member of the Company only in the manner and to the extent expressly provided in the agreement effecting such pledge or assignment or by operation of law. ARTICLE VIII DISSOLUTION, LIQUIDATION AND TERMINATION ---------------------------------------- Section 8.01 Events of Dissolution. The Company shall be dissolved, --------------------- and its affairs shall be wound up, upon the first to occur of the following: (a) the date that the Member consents to its dissolution; 4 (b) the sale, exchange, involuntary conversion, or other disposition or transfer of all or substantially all of the assets of the Company; (c) the dissolution, bankruptcy or withdrawal of the Member; and (d) the entry of a decree of judicial dissolution under the Act. Section 8.02 Procedures Upon Dissolution. Upon dissolution of the --------------------------- Company, the Member shall wind up the affairs of the Company, sell its assets to the extent necessary to pay its liabilities, and after payment of all liabilities of the Company (including liabilities to the Member or Affiliate of the Member, if it is a creditor), shall distribute the remaining assets of the Company in accordance with Sections 5.02 and 5.03 hereof. Any distribution made pursuant to this Section 8.02 shall be made within a reasonable time period. Section 8.03 Termination. Upon the dissolution and the completion of ----------- winding up of the Company, the Member shall file a certificate of cancellation with the Office of the Secretary of State of the State of Delaware in accordance with the Act. ARTICLE IX MISCELLANEOUS ------------- Section 9.01 Partial Invalidity. In case any one or more of the ------------------ covenants, agreements, or provisions hereof shall be invalid, illegal, or unenforceable in any respect, the validity of the remaining covenants, agreements, or provisions hereof shall be in no way affected, prejudiced, or disturbed thereby. Section 9.02 Notices. All notices or other communications required or ------- permitted to be given hereunder shall be in writing, shall be given by mail, return receipt requested, postage prepaid, prepaid telegram with confirmation of delivery obtained, nationally recognized overnight delivery service, telecopy with evidence of transmission, or personally delivered with confirmation of delivery obtained, to the address of such Person as set forth in the records of the Company. Section 9.03 Amendment. This Agreement may be modified or amended at --------- any time only upon the consent of the Member, which shall be evidenced by the Member executing a writing effecting such amendment. Section 9.04 No Waiver. The failure of the Member to insist upon --------- strict performance of any provision hereof shall not constitute a waiver of, or estoppel against asserting, the right to require such performance in the future, nor shall a waiver or estoppel in any one instance constitute a waiver or estoppel with respect to a later breach of a similar nature or otherwise. Section 9.05 Binding Effect; Assignment. This Agreement shall be -------------------------- binding upon and inure to the benefit of the Company and the Member and the Member's permitted transferees. 5 Section 9.06 Choice of Law. The rights and duties of the Member and ------------- the Company under this Agreement shall be governed by the law of the State of Delaware. Section 9.07 Entire Agreement. ---------------- This Agreement constitutes the entire agreement with respect to the subject matter contained herein and supersedes all other prior understandings or agreements, both written and oral, with respect to the matters contained herein. 6 IN WITNESS WHEREOF, the Member has executed this Agreement with effect on the date set forth in the first paragraph hereof. MEMBER: STONE MATERIALS COMPANY, LLC By: Better Minerals & Aggregates Company, ------------------------------------- as Manager By: /s/ John A. Ulizio ------------------------------------- Name: Title: 7 EX-4.1 49 INDENTURE, DATED AS OF OCTOBER 1, 1999 EXHIBIT 4.1 ================================================================================ BETTER MINERALS & AGGREGATES COMPANY 13% Senior Subordinated Notes due 2009 __________ INDENTURE Dated as of October 1, 1999 __________ THE BANK OF NEW YORK, as Trustee ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE 1 Definitions and Incorporation by Reference ------------------------------------------ SECTION 1.01. Definitions............................................................ 1 SECTION 1.02. Other Definitions...................................................... 21 SECTION 1.03. Incorporation by Reference of Trust Indenture Act...................... 22 SECTION 1.04. Rules of Construction.................................................. 22 ARTICLE 2 The Securities -------------- SECTION 2.01. Form and Dating........................................................ 23 SECTION 2.02. Execution and Authentication........................................... 23 SECTION 2.03. Registrar and Paying Agent............................................. 24 SECTION 2.04. Paying Agent to Hold Money in Trust.................................... 25 SECTION 2.05. Holder Lists........................................................... 25 SECTION 2.06. Transfer and Exchange.................................................. 25 SECTION 2.07. Replacement Securities................................................. 26 SECTION 2.08. Outstanding Securities................................................. 27 SECTION 2.09. Temporary Securities................................................... 27 SECTION 2.10. Cancellation........................................................... 27 SECTION 2.11. Defaulted Interest..................................................... 27 SECTION 2.12. CUSIP and "ISIN" Numbers............................................... 28 ARTICLE 3 Redemption ---------- SECTION 3.01. Notices to Trustee..................................................... 28 SECTION 3.02. Selection of Securities To Be Redeemed................................. 28 SECTION 3.03. Notice of Redemption................................................... 28
Page ---- SECTION 3.04. Effect of Notice of Redemption......................................... 29 SECTION 3.05. Deposit of Redemption Price............................................ 29 SECTION 3.06. Securities Redeemed in Part............................................ 30 ARTICLE 4 Covenants --------- SECTION 4.01. Payment of Securities.................................................. 30 SECTION 4.02. SEC Reports............................................................ 30 SECTION 4.03. Limitation of Indebtedness............................................. 31 SECTION 4.04. Limitation on Restricted Payments...................................... 34 SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries.............................................. 37 SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock..................... 38 SECTION 4.07. Limitation on Transactions with Affiliates............................. 41 SECTION 4.08. Change of Control...................................................... 42 SECTION 4.09. Compliance Certificate................................................. 44 SECTION 4.10. Further Instruments and Acts........................................... 44 SECTION 4.11. Future Note Guarantors................................................. 44 SECTION 4.12. Limitation on Lines of Business........................................ 44 SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries.............................................. 44 ARTICLE 5 Successor Company ----------------- SECTION 5.01. When Company May Merge or Transfer Assets.............................. 45
Page ---- ARTICLE 6 Defaults and Remedies --------------------- SECTION 6.01. Events of Default...................................................... 46 SECTION 6.02. Acceleration........................................................... 48 SECTION 6.03. Other Remedies......................................................... 49 SECTION 6.04. Waiver of Past Defaults................................................ 49 SECTION 6.05. Control by Majority.................................................... 49 SECTION 6.06. Limitation on Suits.................................................... 50 SECTION 6.07. Rights of Holders to Receive Payment................................... 50 SECTION 6.08. Collection Suit by Trustee............................................. 50 SECTION 6.09. Trustee May File Proofs of Claim....................................... 50 SECTION 6.10. Priorities............................................................. 51 SECTION 6.11. Undertaking for Costs.................................................. 51 SECTION 6.12. Waiver of Stay or Extension Laws....................................... 51 ARTICLE 7 Trustee ------- SECTION 7.01. Duties of Trustee...................................................... 52 SECTION 7.02. Rights of Trustee...................................................... 53 SECTION 7.03. Individual Rights of Trustee........................................... 53 SECTION 7.04. Trustee's Disclaimer................................................... 54 SECTION 7.05. Notice of Defaults..................................................... 54 SECTION 7.06. Reports by Trustee to Holders.......................................... 54 SECTION 7.07. Compensation and Indemnity............................................. 54 SECTION 7.08. Replacement of Trustee................................................. 55 SECTION 7.09. Successor Trustee by Merger............................................ 56 SECTION 7.10. Eligibility; Disqualification.......................................... 57 SECTION 7.11. Preferential Collection of Claims Against Company...................... 57 SECTION 7.12. Investment of Funds.................................................... 57
Page ---- ARTICLE 8 Discharge of Indenture, Defeasance ---------------------------------- SECTION 8.01. Discharge of Liability on Securities; Defeasance....................... 57 SECTION 8.02. Conditions to Defeasance............................................... 58 SECTION 8.03. Application of Trust Money............................................. 59 SECTION 8.04. Repayment to Company................................................... 59 SECTION 8.05. Indemnity for Government Obligations................................... 60 SECTION 8.06. Reinstatement.......................................................... 60 ARTICLE 9 Amendments ---------- SECTION 9.01. Without Consent of Holders............................................. 60 SECTION 9.02. With Consent of Holders................................................ 61 SECTION 9.03. Compliance with Trust Indenture Act.................................... 62 SECTION 9.04. Revocation and Effect of Consents and Waivers.......................... 62 SECTION 9.05. Notation on or Exchange of Securities.................................. 63 SECTION 9.06. Trustee to Sign Amendments............................................. 63 ARTICLE 10 Subordination ------------- SECTION 10.01. Agreement to Subordinate............................................... 63 SECTION 10.02. Liquidation, Dissolution, Bankruptcy................................... 64 SECTION 10.03. Default on Senior Indebtedness......................................... 64 SECTION 10.04. Acceleration of Payment of Securities.................................. 65 SECTION 10.05. When Distribution Must Be Paid Over.................................... 65
Page ---- SECTION 10.06. Subrogation............................................................ 65 SECTION 10.07. Relative Rights........................................................ 65 SECTION 10.08. Subrogation May Not Be Impaired by Company............................. 66 SECTION 10.09. Rights of Trustee and Payment Agent.................................... 66 SECTION 10.10. Distribution or Notice to Representative............................... 66 SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right to Accelerate........................................................ 66 SECTION 10.12. Trust Monies Not Subordinated.......................................... 66 SECTION 10.13. Trustee Entitled to Rely............................................... 67 SECTION 10.14. Trustee to Effectuate Subordination.................................... 67 SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness......................................................... 67 SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions............................................. 67 ARTICLE 11 Note Guarantees --------------- SECTION 11.01. Note Guarantees........................................................ 68 SECTION 11.02. Limitation on Liability................................................ 70 SECTION 11.03. Successors and Assigns................................................. 70 SECTION 11.04. No Waiver.............................................................. 71 SECTION 11.05. Modification........................................................... 71 SECTION 11.06. Execution of Supplemental Indenture for Future Note Guarantors........................................................... 71 SECTION 11.07. Non-Impairment......................................................... 71 ARTICLE 12 Subordination of the Note Guarantees ------------------------------------ SECTION 12.01. Agreement to Subordinate............................................... 71 SECTION 12.02. Liquidation, Dissolution, Bankruptcy................................... 72
Page ---- SECTION 12.03. Default on Designated Senior Indebtedness of a Note Guarantor............................................................ 72 SECTION 12.04. Demand for Payment..................................................... 73 SECTION 12.05. When Distribution Must Be Paid Over.................................... 73 SECTION 12.06. Subrogation............................................................ 74 SECTION 12.07. Relative Rights........................................................ 74 SECTION 12.08. Subordination May Not Be Impaired by a Note Guarantor.................. 74 SECTION 12.09. Rights of Trustee and Paying Agent..................................... 74 SECTION 12.10. Distribution or Notice to Representative............................... 75 SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit Right 75 To Accelerate.............................................. SECTION 12.12. Trustee Entitled to Rely............................................... 75 SECTION 12.13. Trustee To Effectuate Subordination.................................... 75 SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of a Note Guarantor.................................................. 75 SECTION 12.15. Reliance by Holders of Senior Indebtedness of a Note Guarantor on Subordination Provisions................................ 76 SECTION 12.16. Defeasance............................................................. 76 ARTICLE 13 Miscellaneous ------------- SECTION 13.01. Trust Indenture Act Controls........................................... 76 SECTION 13.02. Notices................................................................ 76 SECTION 13.03. Communication by Holders with Other Holders............................ 77 SECTION 13.04. Certificate and Opinion as to Conditions Precedent..................... 77 SECTION 13.05. Statements Required in Certificate or Opinion.......................... 77 SECTION 13.06. When Securities Disregarded............................................ 78 SECTION 13.07. Rules by Trustee, Paying Agent and Registrar........................... 78 SECTION 13.08. Legal Holidays......................................................... 78 SECTION 13.09. GOVERNING LAW.......................................................... 78 SECTION 13.10. No Recourse Against Others............................................. 78 SECTION 13.11. Successors............................................................. 78 SECTION 13.12. Multiple Originals..................................................... 78
Page ---- SECTION 13.13. Table of Contents; Headings............................................ 79
Appendix A - Provisions Relating to Initial Securities, Private Exchange Securities and Exchange Securities Exhibit A - Form of Initial Security and Private Exchange Security Exhibit B - Form of Exchange Security Exhibit C - Form of Supplemental Indenture Exhibit D - Form of Transferee Letter of Representation INDENTURE dated as of October 1, 1999, among BETTER MINERALS & AGGREGATES COMPANY, a Delaware corporation (the "Company"), U.S. SILICA COMPANY, a Delaware corporation, BETTER MATERIALS CORPORATION, a Pennsylvania corporation, GEORGE F. PETTINOS, INC., a Delaware corporation, OTTAWA SILICA COMPANY, a Delaware corporation, THE FULTON LAND AND TIMBER COMPANY, a Pennsylvania corporation, PENNSYLVANIA GLASS SAND CORPORATION, a Delaware corporation, BUCKS COUNTY CRUSHED STONE COMPANY, a Pennsylvania corporation, CHIPPEWA FARMS CORPORATION, a Pennsylvania corporation, SHORE STONE COMPANY, INC., a New Jersey corporation, BMC TRUCKING, INC., a Delaware corporation, ELLEN JAY, INC., a New Jersey corporation, STONE MATERIALS COMPANY, LLC, a Delaware limited liability company, COMMERCIAL STONE CO., INC., a Pennsylvania corporation, COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, LLC, a Delaware limited liability company (collectively, the "Note Guarantors") and THE BANK OF NEW YORK, a New York banking corporation, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of (a) the Company's 13% Senior Subordinated Notes due 2009 issued on the date hereof (the "Initial Securities"), (b) if and when issued as provided in the Registration Agreement (as defined in Appendix A hereto (the "Appendix")), the Company's 13% Senior Subordinated Notes due 2009 issued in the Registered Exchange Offer in exchange for any Initial Securities (the "Exchange Securities") and (c) if and when issued as provided in the Registration Agreement, the Private Exchange Securities (together with the Initial Securities and any Exchange Securities issued hereunder, the "Securities") issued in the Private Exchange. Except as otherwise provided herein, the Securities will be limited to $150,000,000 in aggregate principal amount outstanding. ARTICLE 1 Definitions and Incorporation by Reference ------------------------------------------ SECTION 1.01. Definitions. ------------ "Acquisition Term Loan Facility" means the facility referred to as the Acquisition Facility in the Credit Agreement. "Additional Assets" means (a) any property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary in a Permitted Business; (b) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the 2 acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (c) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that any such -------- ------- Restricted Subsidiary described in clauses (b) or (c) above is primarily engaged in a Permitted Business. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also mean any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of Parent, Holdings or the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (a) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary), (b) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary or (c) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary other than, in the case of (a), (b) and (c) above, (i) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (ii) for purposes of Section 4.06 only, a disposition that constitutes a Restricted Payment permitted by Section 4.04, (iii) a disposition of assets with a Fair Market Value of less than $500,000 and (iv) a transfer of real property to a state, county, local or municipal governmental agency in exchange for the granting of a permit or the taking of other regulatory action by such governmental agency that enhances the value of mining properties owned by the Company or a Restricted Subsidiary, provided that the Board of Directors has determined in good faith that such exchange is in the best interest of the Company. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (a) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled 3 principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (b) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable under or in respect of the Credit Agreement and any Refinancing Indebtedness with respect thereto, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of the Board of Directors of the Company. "Business Day" means each day which is not a Legal Holiday. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty. "Change of Control" means the occurrence of any of the following events: (a) prior to the earliest to occur of (i) the first public offering of common stock of Parent, (ii) the first public offering of common stock of Holdings or (iii) the first public offering of common stock of the Company (each, a "Public Market Offering"), the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of Parent, Holdings or the Company, whether as a result of issuance of securities of Parent, Holdings or the Company, any merger, consolidation, liquidation or dissolution of Parent, Holdings or the Company, any direct or indirect transfer of securities by any Permitted Holder or otherwise (for purposes of this clause (a) and clause (b) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of an entity (the "specified entity") held by any other entity (the "parent entity") so long as the Permitted Holders beneficially own (as so 4 defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity); (b) after a Public Market Offering has occurred, (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (a) above), whether by merger, consolidation, other business combination or otherwise, directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company, Holdings or Parent and (ii) the Permitted Holders "beneficially own" (as defined in clause (a) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company, Holdings or Parent than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of the Company, Holdings or Parent, as the case may be (for the purposes of this clause (b), such other person shall be deemed to beneficially own any Voting Stock of a specified entity held by a parent entity, if such other person is the beneficial owner (as defined in clause (a) above), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders "beneficially own" (as defined in clause (a) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity); (c) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of the Company, Holdings or Parent, as the case may be (together with any new directors whose election by such board of directors of the Company, Holdings or Parent, as the case may be, or whose nomination for election by the shareholders of the Company, Holdings or Parent, as the case may be, was approved by a vote of 66-2/3% of the directors of the Company, Holdings or Parent, as the case may be, then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors of the Company, Holdings or Parent, as the case may be, then in office; or (d) the adoption of a plan relating to the liquidation or dissolution of the Company, Holdings or Parent. "Closing Date" means the date of this Indenture. "Code" means the Internal Revenue Code of 1986, as amended. "Commodity Agreement" means any agreement designed to hedge against fluctuations in commodity prices, including natural gas prices, entered into in the ordinary course of business. 5 "Company" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and, solely for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (a) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination to (b) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (i) if the Company or any Restricted -------- ------- Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (ii) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness, (iii) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (iv) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period and (v) if since the beginning 6 of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (iii) or (iv) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets or other Investment, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company and shall comply with the requirements of Rule 11-02 of Regulation S-X promulgated by the SEC. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its Consolidated Restricted Subsidiaries, plus, to the extent Incurred by the Company and its Consolidated Restricted Subsidiaries in such period but not included in such interest expense, without duplication (a) interest expense attributable to Capitalized Lease Obligations and the interest expense attributable to leases constituting part of a Sale/Leaseback Transaction, (b) amortization of debt discount (but not debt issuance costs), (c) capitalized interest, (d) noncash interest expense, (e) commissions, discounts and other fees and charges attributable to letters of credit and bankers' acceptance financing, (f) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Restricted Subsidiary; (g) net costs associated with Hedging Obligations, (h) dividends in respect of all Disqualified Stock of the Company and all Preferred Stock of any Restricted Subsidiary, to the extent held by Persons other than the Company or another Restricted Subsidiary, (i) interest Incurred in connection with investments in discontinued operations and (j) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. "Consolidated Leverage Ratio" as of any date of determination means the ratio of: (a) Indebtedness of the Company and its Consolidated Restricted Subsidiaries as of the end of the most recent fiscal quarter ending at least 45 days prior to the date of such determination; (b) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination; provided, however, that: -------- ------- 7 (i) if the Company or any Restricted Subsidiary has incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination, Indebtedness and EBITDA for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (ii) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Leverage Ratio, Indebtedness and EBITDA for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness, (iii) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Indebtedness shall be reduced by any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiary is sold, the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (iv) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, Indebtedness and EBITDA for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period, and 8 (v) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (iii) or (iv) above if made by the Company or a Restricted Subsidiary during such period, Indebtedness and EBITDA for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets or other Investment, the amount of income or earnings relating thereto and the amount of any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company and shall comply with the requirements of Rule 11-02 or Regulation S-X promulgated by the SEC. If any Indebtedness bears a floating rate of interest and is being given to pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months). "Consolidated Net Income" means, for any period, the net income of the Company and its Consolidated Subsidiaries for such period; provided, however, -------- ------- that there shall not be included in such Consolidated Net Income: (a) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that (i) subject to the limitations contained in clause (d) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution made to a Restricted Subsidiary, to the limitations contained in clause (c) below) and (ii) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income; (b) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (c) any net income (or loss) of any Restricted Subsidiary to the extent such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that the Company's equity in a net loss of any such 9 Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (d) any gain or loss realized upon the sale or other disposition of any asset of the Company or its Consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person; (e) any extraordinary gain or loss; and (f) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such Section pursuant to clause (a) (iv)(3)(D) thereof. "Consolidation" means the consolidation of the amounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; provided, however, that "Consolidation" shall not include -------- ------- consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary shall be accounted for as an investment. The term "Consolidated" has a correlative meaning. "Credit Agreement" means the credit agreement dated as of the Closing Date among the Company, as borrower, Parent, as parent guarantor, George F. Pettinos (Canada) Limited, as Canadian borrower, Banque Nationale de Paris, as agent, and the financial institutions and other institutional lenders named therein, as the same may be amended, restated, supplemented, waived, replaced, refinanced, restructured or otherwise modified from time to time, in each case, whether or not upon termination, whether with the original financial institutions, other institutional lenders or agents, and whether with one or more credit agreements with the Company or one or more Restricted Subsidiaries as borrowers. "Currency Agreement" means with respect to any Person any foreign exchange contract, currency swap agreements or other similar agreement or arrangement to which such Person is a party or of which it is a beneficiary. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Indebtedness" of the Company means (a) the Bank Indebtedness and Indebtedness in respect of Hedging Obligations, and (b) any other Senior Indebtedness of the Company that, at the date of determination, has an aggregate principal 10 amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to at least $25.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Designated Senior Indebtedness" of a Note Guarantor has a correlative meaning. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b) is convertible or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary; provided, however, that any such conversion or exchange shall be deemed an - -------- ------- Incurrence of Indebtedness or Disqualified Stock, as applicable) or (c) is redeemable at the option of the holder thereof, in whole or in part, in the case of each of clauses (a), (b) and (c), on or prior to the first anniversary of the Stated Maturity of the Securities; provided, however, that any Capital Stock -------- ------- that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Securities shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable in a material respect to the holders of such Capital Stock than the provisions of Sections 4.06 and 4.08. "Domestic Subsidiary" means any Restricted Subsidiary of the Company other than a Foreign Subsidiary. "EBITDA" for any period means the Consolidated Net Income for such period, plus, without duplication, the following to the extent deducted in calculating such Consolidated Net Income: (a) income tax expense of the Company and its Consolidated Restricted Subsidiaries, (b) Consolidated Interest Expense, (c) depreciation expense of the Company and its Consolidated Restricted Subsidiaries, (d) amortization expense of the Company and its Consolidated Restricted Subsidiaries (excluding amortization expense attributable to a prepaid cash item that was paid in a prior period), (e) depletion expense of the Company and its Consolidated Restricted Subsidiaries, and (f) all other noncash charges of the Company and its Consolidated Restricted Subsidiaries (excluding any such noncash charge to the extent it represents an accrual of or reserve for cash expenditures in any future period) less all non-cash items of income of the Company and its Restricted Subsidiaries, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation, amortization and depletion and noncash charges of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all 11 agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. For purposes of this Indenture, Fair Market Value will be determined in good faith by the Board of Directors, whose determination will be conclusive and evidenced by a resolution of the Board of Directors. "Foreign Subsidiary" means any Restricted Subsidiary of the Company that is not organized under the laws of the United States of America or any State thereof or the District of Columbia. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including those set forth in (a) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) statements and pronouncements of the Financial Accounting Standards Board, (c) such other statements by such other entities as approved by a significant segment of the accounting profession, and (d) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (b) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term -------- ------- "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement, Currency Agreement or Commodity Agreement. 12 "Holder" means the Person in whose name a Security is registered on the Registrar's books. "Holdings" means USS Holdings, Inc., a Delaware corporation, until a successor replaces it, and, thereafter, means the successor. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or redemption, repayment or -------- ------- repurchase obligation in respect of Preferred Stock or Disqualified Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non- interest bearing or other discount security shall not be deemed the Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person on any date of determination, without duplication: (a) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money; (b) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto); (d) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than twelve months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; (e) all Capitalized Lease Obligations and all Attributable Debt of such Person; (f) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (g) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be -------- ------- the lesser of (i) the Fair Market Value of such asset at such date of determination and (ii) the amount of such Indebtedness of such other Persons; 13 (h) Hedging Obligations of such Person; and (i) all obligations of the type referred to in clauses (a) through (h) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee. The amount of Indebtedness (other than Hedging Obligations) of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. The amount of Indebtedness in respect of Hedging Obligations shall be determined in accordance with GAAP. Notwithstanding the foregoing, for the purposes of the definition of Consolidated Leverage Ratio, Indebtedness shall not include any obligations in respect of undrawn letters of credit or any Hedging Obligations. "Indenture" means this Indenture as amended or supplemented from time to time. "Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (a) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, -------- however, that upon a redesignation of such Subsidiary as a Restricted - ------- Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to (i) the Company's "Investment" in such Subsidiary at the time of such redesignation less (ii) the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and (b) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer. "Issue Date" means the date on which the Initial Securities are originally issued. 14 "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "liquidated damages" means any liquidated damages payable under the Registration Agreement. "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of (a) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (b) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition, (c) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition and (d) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Note Guarantee" means each Guarantee of the obligations with respect to the Securities issued by a Person pursuant to the terms of this Indenture. "Note Guarantor" means any Person that has issued a Note Guarantee. "Offering Memorandum" means the Offering Memorandum dated September 28, 1999 for the Company's 13% Senior Subordinated Notes due 2009. "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officer" of a Note Guarantor has a correlative meaning. 15 "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel. The counsel may be an employee of or counsel to the Company or a Note Guarantor. "Parent" means BMAC Holdings, Inc., a Delaware corporation, until a successor replaces it and, thereafter, means the successor. "Permitted Asset Swap" means any one or more transactions in which the Company or any Restricted Subsidiary exchanges assets for consideration consisting of (a) Capital Stock in or assets of a Person engaged in a Permitted Business and (b) any cash, provided that such cash will be considered Net Available Cash from an Asset Disposition. "Permitted Business" means any business engaged in by the Company or any Restricted Subsidiary on the Closing Date and any Related Business. "Permitted Holders" means (a) Chase Capital Partners, its Affiliates and their respective directors and officers, (b) D. George Harris & Associates, LLC ("DGHA") and individuals who are equity owners, directors or employees of DGHA, the Company, Holdings or Parent (or the estate or any beneficiary of any such individual or any immediate family member of any such individual or any trust established for the benefit of any such immediate family member) and (c) any Person acting in the capacity of an underwriter in connection with a public or private offering of the Company's, Parent's or Holdings' Capital Stock. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in (a) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a - -------- ------- Permitted Business; (b) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Permitted Business; - -------- ------- (c) Temporary Cash Investments; (d) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, -------- however, that such trade terms may include such concessionary trade terms as the - ------- Company or any such Restricted Subsidiary deems reasonable under the circumstances; (e) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (f) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary and not exceeding $1.0 million in the aggregate outstanding at any one time; (g) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (h) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition that was made pursuant to and in compliance with Section 4.06; (i) Investments the payment for which consists of (A) Capital Stock (other than Disqualified Stock) or the cash 16 proceeds from the sale of Capital Stock (other than Disqualified Stock), in each case of the Company or (B) the proceeds of cash capital contributions to the Company; provided, however, that such cash proceeds from sales of Capital Stock -------- ------- or cash capital contributions will not increase the amount available for Restricted Payments under Section 4.04(a)(iv)(3); (j) Loans to DGHA pursuant to the Amended and Restated Management Services Agreement, dated October 6, 1998 or any amendment or replacement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders of the Notes in any material respect than the agreement as in effect as of the Closing Date; (k) Investments in the ordinary course of business in an insurer required as a condition to the provision by such insurer of insurance coverage; and (l) any Person having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (l) that are at the time outstanding, not to exceed the greater of 3.0% of Total Assets or $15.0 million at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value). "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Public Equity Offering" means an underwritten primary public offering of common stock of the Company, Parent or Holdings, as applicable, pursuant to an effective registration statement under the Securities Act. "Public Market" means any time after (a) a Public Equity Offering has been consummated and (b) at least 15% of the total issued and outstanding common stock of the Company, Parent or Holdings (as applicable) has been distributed by means of an effective registration statement under the Securities Act. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) any Indebtedness of the Company or any Restricted Subsidiary existing on the Closing Date or Incurred in compliance with this Indenture (including Indebtedness of the 17 Company or any Restricted Subsidiary that Refinances Refinancing Indebtedness); provided, however, that (a) the Refinancing Indebtedness has a Stated Maturity - -------- ------- no earlier than the Stated Maturity of the Indebtedness being Refinanced, (b) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced, (c) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being Refinanced plus any reasonable premiums required to be paid with respect to the Indebtedness being Refinanced, and (d) if the Indebtedness being Refinanced is subordinated in right of payment to the Securities, such Refinancing Indebtedness is subordinated in right of payment to the Securities at least to the same extent as the Indebtedness being Refinanced; provided further, however, that (x) Refinancing Indebtedness shall -------- ------- ------- not include (i) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor that Refinances Indebtedness of the Company or (ii) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary and (y) Refinancing Indebtedness referred to in the definition of "Bank Indebtedness" or in respect of the Acquisition Term Loan Facility shall not be subject to clauses (a), (b) or (c) of this definition. "Related Business" means any business related, ancillary or complementary to the businesses of the Company and the Restricted Subsidiaries on the Closing Date. "Representative" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness. "Responsible Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "SEC" means the Securities and Exchange Commission. 18 "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Secured Indebtedness" of a Note Guarantor has a correlative meaning. "Securities" means the Securities issued under this Indenture. "Securities Act" means the Securities Act of 1933. "Senior Indebtedness" of the Company or any Note Guarantor means the principal of, premium (if any) and accrued and unpaid interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of the Company or any Note Guarantor, regardless of whether or not a claim for post-filing interest is allowed in such proceedings) and fees and other amounts owing in respect of, Bank Indebtedness and all other Indebtedness of the Company or any Note Guarantor, as applicable, whether outstanding on the Closing Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the Securities or such Note Guarantor's Note Guarantee; provided, however, that -------- ------- Senior Indebtedness of the Company or any Note Guarantor shall not include (a) any obligation of the Company to Parent, Holdings or any Subsidiary of the Company or of such Note Guarantor to Parent, Holdings or the Company or any other Subsidiary of the Company, (b) any liability for Federal, state, local or other taxes owed or owing by the Company or such Note Guarantor, as applicable, (c) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities but excluding liabilities of the Company or a Note Guarantor, as applicable, with respect to performance or surety bonds or similar obligations, in each case entered into in the ordinary course of business), as applicable, (d) any Indebtedness or obligation of the Company or such Note Guarantor (and any accrued and unpaid interest in respect thereof) that by its terms is subordinate or junior in right of payment to any other Indebtedness or obligation of the Company or such Note Guarantor, as applicable, including any Senior Subordinated Indebtedness and any Subordinated Obligations of the Company or such Note Guarantor, as applicable, (e) any obligations with respect to any Capital Stock or (f) any Indebtedness Incurred in violation of this Indenture. "Senior Subordinated Indebtedness" of the Company means the Securities and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank equally with the Securities in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of a Note Guarantor has a correlative meaning. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and 19 payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Closing Date or thereafter Incurred) that is subordinate or junior in right of payment to the Securities pursuant to a written agreement. "Subordinated Obligation" of a Note Guarantor has a correlative meaning. "Subsidiary" of any Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (a) such Person, (b) such Person and one or more Subsidiaries of such Person or (c) one or more Subsidiaries of such Person. "Temporary Cash Investments" means any of the following: (a) any investment in direct obligations of the United States of America or any agency thereof or obligations Guaranteed by the United States of America or any agency thereof, (b) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits aggregating in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose long-term debt is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act), (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above, (d) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. ("S&P"), and (e) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's Investors Service, Inc. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. " 77aaa- ------ 77bbbb) as in effect on the Closing Date. "Total Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company. 20 "Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means (a) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (b) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any Restricted Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, -------- however, that either (i) the Subsidiary to be so designated has total - ------- Consolidated assets of $1,000 or less or (ii) if such Subsidiary has Consolidated assets greater than $1,000, then such designation would be permitted under Section 4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that -------- ------- (a) immediately after giving effect to such designation no Default shall have occurred and be continuing and (b) at the time of such designation, the Company or a Restricted Subsidiary could have Incurred all of the outstanding Indebtedness of such Subsidiary and its Subsidiaries under Section 4.03. Any such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. 21 "Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all the Voting Stock of which (other than directors' qualifying shares) is owned by the Company and/or another Wholly Owned Subsidiary. SECTION 1.02. Other Definitions. ------------------
Defined in Term Section - ---- ---------- "Affiliate Transaction"................................................ 4.07(a) "Appendix"............................................................. Preamble "Bankruptcy Law"....................................................... 6.01 "beneficially own"..................................................... 1.01 "Blockage Notice"...................................................... 10.03 "Change of Control Offer".............................................. 4.08(b) "covenant defeasance option"........................................... 8.01(b) "Custodian"............................................................ 6.01 "Definitive Securities"................................................ Appendix A "Event of Default"..................................................... 6.01 "Exchange Securities".................................................. Preamble "Global Securities".................................................... Appendix A "Guarantee Blockage Notice"............................................ 12.03 "Guaranteed Obligations"............................................... 11.01 "Guaranteed Payment Blockage Period"................................... 12.03 "incorporated provision"............................................... 13.01 "Initial Securities"................................................... Preamble "legal defeasance option".............................................. 8.01(b) "Legal Holiday"........................................................ 13.08 "Notice of Default".................................................... 6.01 "Offer"................................................................ 4.06(b) "Offer Amount"......................................................... 4.06(c)(ii) "Offer Period"......................................................... 4.06(c)(ii) "pay its Guarantee".................................................... 12.03 "pay the Securities"................................................... 10.03 "Paying Agent"......................................................... 2.03 "Payment Blockage Period".............................................. 10.03 "Private Exchange Securities".......................................... Appendix A "protected purchaser".................................................. 2.07 "Purchase Date"........................................................ 4.06(c)(i) "Registered Exchange Offer"............................................ Appendix A "Registrar"............................................................ 2.03 "Restricted Payment"................................................... 4.04(a) "Successor Company".................................................... 5.01(a)
22 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. -------------------------------------------------- This Indenture is subject to the mandatory provisions of the TIA, which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities and the Note Guarantees. "indenture security holder" means a Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company, the Note Guarantors and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise ---------------------- requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) "including" means including without limitation; (e) words in the singular include the plural and words in the plural include the singular; (f) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (g) the principal amount of any non interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and 23 (h) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater. ARTICLE 2 The Securities -------------- SECTION 2.01. Form and Dating. Provisions relating to the Initial --------------- Securities, the Private Exchange Securities and the Exchange Securities are set forth in the Appendix, which is hereby incorporated in and expressly made a part of this Indenture. The (a) Initial Securities and the Trustee's certificate of authentication and (b) Private Exchange Securities and the Trustee's certificate of authentication shall each be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities and the Trustee's certificate of authentication shall each be substantially in the form of Exhibit B hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company or any Note Guarantor is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Security shall be dated the date of its authentication. The Securities shall be issuable only in registered form without interest coupons and only in denominations of $1,000 and integral multiples thereof. SECTION 2.02. Execution and Authentication. One Officer shall sign ----------------------------- the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate and make available for delivery Securities as set forth in the Appendix. In authenticating the Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and shall be fully protected in relying upon: (a) A copy of the resolution or resolutions of the Board of Directors in or pursuant to which the terms and form of the Securities were established, certified by the secretary or an assistant secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect as of the date of such certificate, and if the terms and form of such 24 Securities are established by an Officers' Certificate pursuant to general authorization of the Board of Directors, such Officers' Certificate; (b) an Opinion of Counsel which shall state: (i) that the form of such Securities has been established by or pursuant to a resolution of the Board of Directors in conformity with the provisions of this Indenture; (ii) that the terms of such Securities have been established in conformity with the other provisions of this Indenture; (iii) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles. The Trustee shall have the right to decline to authenticate and deliver any Securities under this Section 2.02 if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing Holders. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Any such appointment shall be evidenced by an instrument signed by a Responsible Officer, a copy of which shall be furnished to the Company. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.03. Registrar and Paying Agent. (a) The Company shall --------------------------- maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent, and the term "Registrar" includes any co-registrars. The Company initially appoints the Trustee as (i) Registrar and Paying Agent in connection with the Securities and (ii) the Securities Custodian with respect to the Global Securities. (b) The Company shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the 25 Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically organized Wholly Owned Subsidiaries may act as Paying Agent or Registrar. (c) The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided, however, -------- ------- that no such removal shall become effective until (i) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (i) above. The Registrar or Paying Agent may resign at any time upon written notice to the Company and the Trustee. SECTION 2.04. Paying Agent to Hold Money in Trust. Subject to ------------------------------------ Section 13.08, prior to each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary is acting as Paying Agent, segregate and hold in trust for the benefit of the Persons entitled thereto) a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities, shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. Holder Lists. The Trustee shall preserve in as current ------------- a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders. SECTION 2.06. Transfer and Exchange. The Securities shall be issued ---------------------- in registered form and shall be transferable only upon the surrender of a Security for registration of transfer and in compliance with the Appendix. When a Security is presented to the Registrar with a request to register a transfer, the Registrar shall register the transfer as requested if its requirements therefor are met. When Securities are presented to the Registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's request. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. The Company shall not be required to make and the Registrar need not 26 register transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or to transfer or exchange any Securities for a period of 15 days before a selection of Securities to be redeemed. Prior to the due presentation for registration of transfer of any Security, the Company, the Note Guarantors, the Trustee, the Paying Agent, and the Registrar may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and (subject to paragraph 2 of the Securities) interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, any Note Guarantor, the Trustee, the Paying Agent, or the Registrar shall be affected by notice to the contrary. Any Holder of a Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interest in such Global Security may be effected only through a book-entry system maintained by (a) the Holder of such Global Security (or its agent) or (b) any Holder of a beneficial interest in such Global Security, and that ownership of a beneficial interest in such Global Security shall be required to be reflected in a book entry. All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt and will be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. SECTION 2.07. Replacement Securities. If a mutilated Security is ----------------------- surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Holder (a) satisfies the Company or the Trustee within a reasonable time after he has notice of such loss, destruction or wrongful taking and the Registrar does not register a transfer prior to receiving such notification, (b) makes such request to the Company or the Trustee prior to the Security being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (a "protected purchaser") and (c) satisfies any other reasonable requirements of the Trustee (including, without limitation, obtaining from the Company an Officers' Certificate stating that the requirements of Section 8-405 of the UCC have been met). If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Trustee to protect the Company, the Trustee, the Paying Agent and the Registrar from any loss that any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. In the event any such mutilated, lost, destroyed or wrongfully taken Security has become or is about to become due and payable, the Company in its discretion may pay such Security instead of issuing a new Security in replacement thereof. Every replacement Security is an additional obligation of the Company. 27 The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Securities. SECTION 2.08. Outstanding Securities. Securities outstanding at any ----------------------- time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation and those described in this Section as not outstanding. Subject to Section 13.06, a Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a protected purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest and liquidated damages, if any, payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Temporary Securities. In the event that Definitive --------------------- Securities are to be issued under the terms of this Indenture, until such Definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities and deliver them in exchange for temporary Securities upon surrender of such temporary Securities at the office or agency of the Company, without charge to the Holder. SECTION 2.10. Cancelation. The Company at any time may deliver ------------ Securities to the Trustee for cancelation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Securities surrendered for registration of transfer, exchange, payment or cancelation and shall dispose of canceled Securities in accordance with its customary procedures or deliver canceled Securities to the Company pursuant to written direction by an Officer, provided, however, that the Trustee shall not -------- ------- be required to destroy Securities. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancelation. The Trustee shall not authenticate Securities in place of canceled Securities other than pursuant to the terms of this Indenture. SECTION 2.11. Defaulted Interest. If the Company defaults in a ------------------- payment of interest on the Securities, the Company shall pay the defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the 28 defaulted interest to the Persons who are Holders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail or cause to be mailed to each Holder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP and "ISIN" Numbers. The Company in issuing the ------------------------- Securities may use "CUSIP" and "ISIN" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" and "ISIN" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that -------- ------- no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE 3 Redemption ---------- SECTION 3.01. Notices to Trustee. If the Company elects to redeem ------------------- Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date and the principal amount of Securities to be redeemed. The Company shall give each notice to the Trustee provided for in this Section at least 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein. Any such notice may be canceled at any time prior to notice of such redemption being mailed to any Holder by written notice thereof to the Trustee and shall thereby be void and of no effect. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than --------------------------------------- all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by such other method that the Trustee shall deem to be fair and appropriate. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. (a) At least 30 days but not --------------------- more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption 29 by first-class mail to each Holder of Securities to be redeemed at such Holder's registered address. The notice shall identify the Securities to be redeemed and shall state: (i) the redemption date; (ii) the redemption price and the amount of accrued interest to the redemption date; (iii) the name and address of the Paying Agent; (iv) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (v) if fewer than all the outstanding Securities are to be redeemed, the certificate numbers and principal amounts of the particular Securities to be redeemed; (vi) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; (vii) the CUSIP or ISIN number, if any, printed on the Securities being redeemed; and (viii) that no representation is made as to the correctness or accuracy of the CUSIP or ISIN number, if any, listed in such notice or printed on the Securities. (b) At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section. SECTION 3.04. Effect of Notice of Redemption. Once notice of ------------------------------- redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest and liquidated damages, if any, to the redemption date; provided, however, that if the redemption date is -------- ------- after a regular record date and on or prior to the interest payment date, the accrued interest and liquidated damages, if any, shall be payable to the Holder of the redeemed Securities registered on the relevant record date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on ---------------------------- the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a 30 Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest and liquidated damages, if any, on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption that have been delivered by the Company to the Trustee for cancelation. On and after the redemption date, interest will cease to accrue on Securities or portions thereof called for redemption so long as the Company has deposited with the Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid interest and liquidated damages, if any, on, the Securities to be redeemed, unless the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a ---------------------------- Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE 4 Covenants --------- SECTION 4.01. Payment of Securities. The Company shall promptly pay ---------------------- the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. SEC Reports. Notwithstanding that the Company may not ------------ be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC (if it will accept such filing), and provide the Trustee and Holders and prospective Holders (upon request) within 15 days after it files them with the SEC, copies of its annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act. In addition, following a Public Equity Offering, the Company shall furnish to the Trustee and the Holders, promptly upon their becoming available, copies of the annual report to shareholders and any other information provided by the Company, Holdings or Parent to its public shareholders generally. The Company also shall comply with the other provisions of TIA ' 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive 31 notice of any information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.03. Limitation on Indebtedness. (a) The Company shall --------------------------- not, and shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company and the Note -------- ------- Guarantors may Incur Indebtedness if on the date of such Incurrence and after giving effect thereto, the Consolidated Coverage Ratio would be greater than 2.00 to 1 if such Indebtedness is Incurred on or prior to December 31, 2001 and 2.25 to 1 if such Indebtedness is Incurred thereafter. (b) Notwithstanding Section 4.03(a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness: (i) (1) Bank Indebtedness in an aggregate principal amount not to exceed $250.0 million less the aggregate amount of all prepayments of principal applied to permanently reduce any such Indebtedness pursuant to Section 4.06 and (2) (A) Indebtedness under the Acquisition Term Loan Facility in an aggregate principal amount not to exceed $40.0 million less the aggregate amount of all prepayments applied to permanently reduce any principal of such Indebtedness pursuant to Section 4.06; provided, however, -------- ------- that at the time the Company or any Restricted Subsidiary Incurs any Indebtedness under this Section 4.06(b)(i)(2), the Company has a Consolidated Leverage Ratio of 5.00:1 or less, and (B) any Refinancing Indebtedness in respect thereof; (ii) Indebtedness of the Company owed to and held by any Wholly Owned Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company or any Wholly Owned Subsidiary; provided, however, that (1) any -------- ------- subsequent issuance or transfer of any Capital Stock or any other event that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof, (2) if the Company is the obligor on such Indebtedness, such Indebtedness is made subordinate and junior in right of payment to the Securities and (3) if a Restricted Subsidiary that is a Note Guarantor is the obligor on such Indebtedness and such Indebtedness is owed to and held by a Wholly Owned Subsidiary that is not a Note Guarantor, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations of such Restricted Subsidiary with respect to its Note Guarantee; (iii) Indebtedness (1) represented by the Securities and the Note Guarantees, (2) outstanding on the Closing Date (other than the Indebtedness described in clauses (i) and (ii) above), (3) consisting of Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (iii) (including Indebtedness that is Refinancing Indebtedness) or Section 4.03(a), (4) consisting of Guarantees of any Indebtedness permitted under clauses (i) and (ii) of this paragraph (b) and (5) consisting of (i) Guarantees by the Company of Indebtedness or other obligations of any of its 32 Restricted Subsidiaries or (ii) Guarantees by any Note Guarantor of Indebtedness of the Company or a Restricted Subsidiary, in each case so long as the Incurrence of the Indebtedness being Guaranteed is permitted under the terms of this Indenture; provided that if such Guaranteed -------- Indebtedness is by its express terms subordinated in right of payment to the Securities or the Note Guarantee of such Restricted Subsidiary, as applicable, any such Guarantee of the Company or such Note Guarantor with respect to such Indebtedness shall be subordinated in right of payment to the Securities or such Note Guarantor's Note Guarantee with respect to the Securities substantially to the same extent as such Indebtedness is subordinated to the Securities or the Note Guarantee of such Restricted Subsidiary, as applicable; (iv) (1) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Restricted Subsidiary was acquired (including by way of merger) by the Company or any Restricted Subsidiary (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Subsidiary of or was otherwise acquired by the Company); provided, however, that on the date that such -------- ------- Restricted Subsidiary is acquired, the Company or such Restricted Subsidiary would have been able to Incur such Indebtedness under this Section 4.03 and (2) Refinancing Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by such Restricted Subsidiary pursuant to this clause (iv); (v) Indebtedness (1) in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds provided by the Company or the Restricted Subsidiaries in the ordinary course of their business, and (2) under Currency Agreements, Interest Rate Agreements and Commodity Agreements entered into for bona fide hedging purposes of the Company or a Restricted Subsidiary in the ordinary course of business; provided, however, that such agreements do not increase the Indebtedness of -------- ------- the Company or the Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in interest rates, currency exchange rates or commodity prices or by reason of fees, indemnities and compensation payable thereunder; (vi) Indebtedness (including Capitalized Lease Obligations and Attributable Debt) incurred by the Company or any of the Restricted Subsidiaries to finance the purchase, lease or improvements of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount which, when aggregated with the principal amount of all other Indebtedness then outstanding and incurred pursuant to this clause (vi) and all Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (vi), does not exceed the greater of $25.0 million or 5.0% of Total Assets; (vii) Indebtedness of Foreign Subsidiaries in an aggregate principal amount not to exceed $15.0 million outstanding at any one time; or 33 (viii) Indebtedness (other than Indebtedness permitted to be Incurred pursuant to Section 4.03(a) or any other clause of this paragraph (b)) in an aggregate principal amount on the date of Incurrence that, when added to all other Indebtedness Incurred pursuant to this clause (viii) and then outstanding, shall not exceed $30.0 million. (c) Notwithstanding the foregoing, the Company shall not Incur any Indebtedness pursuant to Section 4.03(b) above if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated Obligations unless such Indebtedness shall be subordinated to the Securities to at least the same extent as such Subordinated Obligations. The Company shall not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. In addition, the Company shall not Incur any Secured Indebtedness which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Securities equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Securities) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. A Note Guarantor shall not Incur any Indebtedness if such Indebtedness is by its terms expressly subordinate or junior in ranking in any respect to any Senior Indebtedness of such Note Guarantor unless such Indebtedness is Senior Subordinated Indebtedness of such Note Guarantor or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Note Guarantor. In addition, a Note Guarantor shall not Incur any Secured Indebtedness that is not Senior Indebtedness of such Note Guarantor unless contemporaneously therewith effective provision is made to secure the Note Guarantee of such Note Guarantor equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to such Note Guarantee) such Secured Indebtedness for as long as such Secured Indebtedness is secured by a Lien. (d) Notwithstanding any other provision of this Section 4.03, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may Incur pursuant to this Section shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rates of currencies. For purposes of determining the outstanding principal amount of any particular Indebtedness Incurred pursuant to this Section 4.03, (i) Indebtedness Incurred pursuant to the Credit Agreement prior to or on the Closing Date shall be treated as Incurred pursuant to Section 4.03(b)(i), (ii) Indebtedness permitted by this Section 4.03 need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this Section permitting such Indebtedness, and (iii) in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in this Section 4.03, the Company, in its sole discretion, shall classify such Indebtedness and only be required to include the amount of such Indebtedness in one of such clauses, and may from time to time reclassify Indebtedness permitted under Section 4.03(b) among the different clauses thereof. 34 SECTION 4.04. Limitation on Restricted Payments. (a) The Company ---------------------------------- shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock or make any similar payment (including any payment in connection with any merger or consolidation involving the Company or any Subsidiary of the Company) to the direct or indirect holders of its Capital Stock except (A) dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and (B) dividends or distributions payable to the Company or a Restricted Subsidiary (and, if such Restricted Subsidiary has shareholders other than the Company or other Restricted Subsidiaries, to its other shareholders on a pro rata basis), (ii) purchase, repurchase, redeem, retire or otherwise acquire for value any Capital Stock of (A) Parent, Holdings or the Company held by Persons other than the Company or a Restricted Subsidiary or (B) any Restricted Subsidiary (other than Preferred Stock that is not Voting Stock) held by any Affiliate of the Company (other than Restricted Subsidiary), (iii) purchase, repurchase, redeem, retire, defease or otherwise acquire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations of the Company or any Note Guarantor (other than the purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Subordinated Obligations acquired in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, payment, purchase, redemption, repurchase, defeasance, retirement or other acquisition or Investment being herein referred to as a "Restricted Payment") if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company could not Incur at least $1.00 of additional Indebtedness under Section 4.03(a); or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors) declared or made subsequent to the Closing Date would exceed the sum, without duplication, of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Closing Date occurs to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the Company from the issue or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Closing Date (other than an issuance or sale to (x) a Subsidiary of the Company 35 or (y) an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries); (C) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by or with a Subsidiary of the Company) subsequent to the Closing Date of any Indebtedness of the Company or its Restricted Subsidiaries issued after the Closing Date which is convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company or a Note Guarantor (less the amount of any cash or the Fair Market Value of other property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); (D) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (x) payments of dividends, repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (y) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investment") not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary; and (E) $5.0 million. (b) The provisions of Section 4.04(a) shall not prohibit: (i) any purchase, repurchase, redemption, retirement or other acquisition for value of Capital Stock of the Company or Subordinated Obligations of the Company or any Note Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries); provided, however, that (1) such purchase, repurchase, -------- ------- redemption, retirement or other acquisition for value shall be excluded in the calculation of the amount of Restricted Payments, and (2) the Net Cash Proceeds from such sale applied in the manner set forth in this clause (i) shall be excluded from the calculation of amounts under Section 4.04(a)(iv)(3)(B); (ii) any prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Subordinated Obligations of the Company or a Note Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company or a Note Guarantor that is permitted to be Incurred pursuant to Section 4.03; provided, however, that such prepayment, repayment, -------- ------- purchase, repurchase, redemption, retirement, defeasance or other acquisition for value shall be excluded in the calculation of the amount of Restricted Payments; 36 (iii) any prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Subordinated Obligations from Net Available Cash to the extent permitted by Section 4.06; provided, however, that such prepayment, repayment, purchase, -------- ------- repurchase, redemption, retirement, defeasance or other acquisition for value shall be excluded in the calculation of the amount of Restricted Payments; (iv) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividends would have complied with this Section 4.04; provided, however, that such dividends shall be -------- ------- included in the calculation of the amount of Restricted Payments; (v) any purchase, repurchase, redemption, retirement or other acquisition for value of shares of, or options to purchase shares of, Capital Stock (other than Disqualified Stock) of Holdings, Parent, the Company or any of its Subsidiaries from employees, former employees, officers, former officers, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, officers, former officers, directors or former directors), pursuant to the terms of agreements (including employment agreements) or plans (or amendments thereto) approved by the board of directors of the Company, Parent or Holdings under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock; provided, however, that the aggregate amount of such purchases, -------- ------- repurchases, redemptions, retirements and other acquisitions for value, together with the aggregate amount of payments made under Section 4.04(b)(vi)(3), shall not exceed in any calendar year the sum of (x) $2.0 million and (y) the cash proceeds received in such calendar year by the Company or any Restricted Subsidiary from the sale of Capital Stock (other than Disqualified Stock) of Holdings, Parent or the Company to employees, officers or directors of the Company (provided that such cash proceeds will not increase the amounts available for Restricted Payments under Section 4.04(a)(3)(B)); provided further, however, that such purchases, ---------------- ------- repurchases, redemptions, retirements and other acquisitions for value shall be excluded in the calculation of the amount of Restricted Payments; or (vi) any payment of dividends, other distributions or other amounts (including in the form of loans or advances) by the Company for the purposes set forth in clauses (1) through (3) below; provided, however, -------- ------- that such dividends, distributions or other amounts set forth in clauses (1) through (3) shall be excluded in the calculation of the amount of Restricted Payments for the purposes of Section 4.04(a): (1) to Parent or Holdings in amounts equal to the amounts required for Parent or Holdings to pay franchise taxes and other fees required to maintain its corporate existence and provide for other operating costs in an aggregate amount of up to $350,000 per fiscal year; (2) to Parent or Holdings in amounts equal to amounts required for Parent or Holdings to pay Federal, state and local income taxes to the extent such 37 income taxes are attributable to the income of the Company and its Restricted Subsidiaries (and, to the extent of amounts actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries); (3) to Parent or Holdings in amounts equal to amounts expended by Parent or Holdings for any purchase, repurchase, redemption, retirement or other acquisition for value of shares of, or options to purchase shares of, Capital Stock (other than Disqualified Stock) of Parent or Holdings from employees, former employees, officers, former officers, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, officers, former officers, directors or former directors), pursuant to the terms of agreements (including employment agreements) or plans (or amendments thereto) approved by the board of directors of the Company, Parent or Holdings under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock; provided, however, that the aggregate amount of such purchases, -------- ------- repurchases, redemptions, retirements and other acquisitions for value, together with the aggregate amount of payments made under Section 4.04(b)(v), shall not exceed in any calendar year the sum of (x) $2.0 million and (y) the cash proceeds received in such calendar year by the Company or any Restricted Subsidiary from the sale of Capital Stock (other than Disqualified Stock) of Holdings, Parent or the Company to employees, officers or directors of the Company (provided that such cash proceeds will not increase the amounts available for Restricted Payments under Section 4.04(a)(3)(B)). SECTION 4.05. Limitation on Restrictions on Distributions from ------------------------------------------------ Restricted Subsidiaries. The Company shall not, and shall not permit any - ------------------------ Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the Company, (b) make any loans or advances to the Company or (c) transfer any of its property or assets to the Company, except: (i) any encumbrance or restriction pursuant to applicable law or an agreement in effect at or entered into on the Closing Date; (ii) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary prior to the date on which such Restricted Subsidiary was acquired by the Company or a Restricted Subsidiary (other than Indebtedness Incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which 38 such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company or a Restricted Subsidiary) and outstanding on such date; (iii) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (c) (i) or (c) (ii) of this Section 4.05 or this clause (c)(iii) or contained in any amendment to an agreement referred to in clause (c)(i) or (c)(ii) of this Section 4.05 or this clause (c)(iii); provided, however, that the encumbrances and restrictions contained in any -------- ------- such Refinancing agreement or amendment are no less favorable to the Holders in any material respect than the encumbrances and restrictions contained in such predecessor agreements; (iv) in the case of clause (c), any encumbrance or restriction (1) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or (2) contained in security agreements securing Indebtedness of the Company or a Restricted Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject to such security agreements; (v) with respect to a Restricted Subsidiary, any restriction imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and (vi) any encumbrance or restriction existing or created pursuant to Indebtedness permitted to be Incurred by a Restricted Subsidiary subsequent to the Closing Date pursuant to Section 4.03; provided, however, that any such encumbrance or restrictions are reasonable and customary with respect to the type of Indebtedness being Incurred (under the relevant circumstances). SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. --------------------------------------------------- (a) The Company shall not, and shall not permit any Restricted Subsidiary to, make any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the Fair Market Value of the shares and assets subject to such Asset Disposition, (ii) except in the case of a Permitted Asset Swap, at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash and (iii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (1) first, to the extent the Company elects (or is required by the terms of any - ----- Indebtedness), to prepay, repay, purchase, repurchase, redeem, retire, defease or otherwise acquire for value Senior Indebtedness of the Company or Indebtedness of a Restricted Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company (other than an Affiliate of Chase Capital Partners which is a lender in the ordinary course of business) and other than obligations in respect of Disqualified Stock) within 180 days 39 after the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (2) second, to the extent of the balance of Net Available Cash ------ after application in accordance with clause (1), to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within 180 days from the later of such Asset Disposition or the receipt of such Net Available Cash; (3) third, to the extent of the balance of such Net ----- Available Cash after application in accordance with clauses (1) and (2), to make an Offer (as defined in Section 4.06(b)) to purchase Securities pursuant to and subject to the conditions of Section 4.06(b); provided, however, that if the -------- ------- Company elects (or is required by the terms of any Senior Subordinated Indebtedness), such Offer may be made ratably to purchase the Securities and other Senior Subordinated Indebtedness of the Company, and (4) fourth, to the ------ extent of the balance of such Net Available Cash after application in accordance with clauses (1), (2) and (3), for any general corporate purpose permitted by the terms of this Indenture; provided, however, that in connection with any -------- ------- final prepayment, repayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of Indebtedness pursuant to clause (1), (2) or (4) above, the Company or such Restricted Subsidiary shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid, purchased, repurchased, redeemed, retired, defeased or otherwise acquired for value. Pending final application of any Net Available Cash in accordance with the foregoing, the Company or a Restricted Subsidiary may use such Net Available Cash to temporarily reduce (and, within such 180-day period, reborrow) Indebtedness or invest such Net Available Cash in Temporary Cash Equivalents. Notwithstanding the foregoing provisions of this Section 4.06, the Company and the Restricted Subsidiaries shall not be required to apply any Net Available Cash in accordance with this Section 4.06(a) except to the extent that the aggregate Net Available Cash from all Asset Dispositions that is not applied in accordance with this Section 4.06(a) exceeds $7.5 million. For the purposes of this Section 4.06, the following are deemed to be cash: (A) the assumption of Indebtedness of the Company (other than obligations in respect of Disqualified Stock of the Company) or any Restricted Subsidiary (other than obligations in respect of Disqualified Stock and Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor) and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition and (B) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. (b) In the event of an Asset Disposition that requires the purchase of Securities pursuant to Section 4.06(a)(iii)(3), the Company shall be required (i) to purchase Securities tendered pursuant to an offer by the Company for the Securities (the "Offer") at a purchase price of 100% of their principal amount plus accrued and unpaid interest and liquidated damages thereon, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) in accordance with the procedures (including prorating in the event of oversubscription) set forth in Section 4.06(c) and (ii) to purchase other Senior Subordinated Indebtedness of the Company on the terms and to the 40 extent contemplated thereby (provided that in no event shall the Company offer to purchase such other Senior Subordinated Indebtedness of the Company at a purchase price in excess of 100% of its principal amount (without premium), plus accrued and unpaid interest thereon, unless an equal premium is offered to Holders in the Offer). If the aggregate purchase price of Securities (and other Senior Subordinated Indebtedness) tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Securities (and other Senior Subordinated Indebtedness), the Company shall apply the remaining Net Available Cash in accordance with Section 4.06(a)(iii)(4). The Company shall not be required to make an Offer for Securities (and other Senior Subordinated Indebtedness) pursuant to this Section 4.06 if the Net Available Cash available therefor (after application of the proceeds as provided in clauses (1) and (2) of Section 4.06(a)(iii)) is less than $5.0 million for any particular Asset Disposition (which lesser amount shall be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). (c) (i) Promptly, and in any event within 15 days after the Company becomes obligated to make an Offer, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorating as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date") and shall contain such information concerning the business of the Company which the Company in good faith believes will enable such Holders to make an informed decision (which at a minimum shall include (1) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Dispositions otherwise described in the offering materials (or corresponding successor reports), (2) a description of material developments in the Company's business subsequent to the date of the latest of such reports, and (3) if material, appropriate pro forma financial information) and all instructions and materials necessary to tender Securities pursuant to the Offer, together with the address referred to in clause (iii). (ii) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided above, the Company shall deliver to the Trustee an Officers' Certificate as to (1) the amount of the Offer (the "Offer Amount"), (2) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (3) the compliance of such allocation with the provisions of Section 4.06(a). On such date, the Company shall also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) an amount equal to the Offer Amount to be invested in Temporary Cash Investments (which Temporary Cash Investments will be made only pursuant to written instructions of an officer of the Company) and to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancelation the Securities or portions thereof that have been properly tendered to 41 and are to be accepted by the Company. The Trustee (or the Paying Agent, if not the Trustee) shall, on the date of purchase, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the Offer Amount delivered by the Company to the Trustee is greater than the purchase price of the Securities (and other Senior Subordinated Indebtedness) tendered, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section 4.06. (iii) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed (which form shall include certain information concerning the Holder and the Security), to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered by the Holder for purchase and a duly signed statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities and any other Senior Subordinated Indebtedness included in the Offer surrendered by holders thereof exceeds the Offer Amount, the Company shall select the Securities and other Senior Subordinated Indebtedness to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities and other Senior Subordinated Indebtedness in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (iv) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (v) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section 4.06. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.06, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.06 by virtue thereof. SECTION 4.07. Limitation on Transactions with Affiliates. (a) The ------------------------------------------- Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction or series of related transactions (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless such Affiliate Transaction is on terms (i) that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is 42 not such an Affiliate, (ii) that, in the event that such Affiliate Transaction involves an aggregate amount in excess of $1.0 million, (1) are set forth in writing and (2) have been approved by a majority of the members of the Board of Directors having no personal stake in such Affiliate Transaction and (iii) that, in the event that such Affiliate Transaction involves an amount in excess of $10.0 million, have been determined by a nationally recognized appraisal or investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. (b) The provisions of Section 4.07(a) shall not prohibit (i) any Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors, (iii) the grant of stock options or similar rights to employees and directors of the Company pursuant to plans approved by the Board of Directors, (iv) loans or advances to employees in the ordinary course of business in accordance with past practices of the Company or any Restricted Subsidiary, but in any event not to exceed $2.0 million in the aggregate outstanding at any one time, (v) the payment of reasonable fees to directors of the Company and its Subsidiaries who are not employees of the Company or its Subsidiaries, (vi) any transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries or (vii) the performance of any agreement as in effect as of the Closing Date (including the Tax Sharing Agreement, dated July 21, 1998, and the Amended and Restated Management Services Agreement, dated October 6, 1998 (as each is defined in the Offering Memorandum)) or any amendment or replacement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders of the Securities in any material respect than the original agreement as in effect as of the Closing Date. SECTION 4.08. Change of Control. (a) Upon the occurrence of a ------------------ Change of Control, each Holder shall have the right to require that the Company repurchase all or any part of such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with the terms contemplated in Section 4.08(b); provided, however, that notwithstanding the -------- ------- occurrence of a Change of Control, the Company shall not be obligated to repurchase the Securities pursuant to this Section 4.08 in the event that it has exercised its right to redeem all the Securities under paragraph 5 of the Securities. In the event that at the time of such Change of Control the terms of the Bank Indebtedness restrict or prohibit the repurchase of Securities pursuant to this Section 4.08, then prior to the mailing of the notice to Holders provided for in Section 4.08(b) below but in any event within 45 days following any Change of Control, the Company shall (i) repay in full all Bank Indebtedness or, if doing so will allow the repurchase of Securities, offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness of each lender who has accepted such offer or (ii) obtain the requisite consent under the agreements governing the Bank Indebtedness to permit the repurchase of the Securities as provided for in Section 4.08(b). 43 (b) Within 45 days following any Change of Control (except as provided in the proviso to the first sentence of Section 4.08(a)), the Company shall mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating: (i) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase all or a portion of such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); (ii) the circumstances and relevant facts and financial information regarding such Change of Control; (iii) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (iv) the instructions determined by the Company, consistent with this Section, that a Holder must follow in order to have its Securities purchased. (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (d) On the purchase date, all Securities purchased by the Company under this Section shall be delivered to the Trustee for cancelation, and the Company shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto. (e) Notwithstanding the foregoing provisions of this Section, the Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.08 applicable to a Change of Control Offer made by the Company and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer. (f) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section 4.08. A Security shall be deemed to have been accepted for purchase at the time the 44 Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (g) Prior to any Change of Control Offer, the Company shall deliver to the Trustee an Officers' Certificate stating that all conditions precedent contained herein to the right of the Company to make such offer have been complied with. (h) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section 4.08. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.08, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.08 by virtue thereof. SECTION 4.09. Compliance Certificate. The Company shall deliver to ----------------------- the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with Section 314(a)(4) of the TIA. SECTION 4.10. Further Instruments and Acts. Upon request of the ----------------------------- Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 4.11. Future Note Guarantors. The Company shall cause (a) ----------------------- each Domestic Subsidiary and (b) each Foreign Subsidiary that Guarantees any Indebtedness (other than Indebtedness of a Restricted Subsidiary that is not a Note Guarantor), to become a Note Guarantor, and if applicable, execute and deliver to the Trustee a supplemental indenture substantially in the form of Exhibit C pursuant to which such Subsidiary will Guarantee payment of the Securities. SECTION 4.12. Limitation on Lines of Business. The Company shall -------------------------------- not, and shall not permit any Restricted Subsidiary to, engage in any business, other than a Permitted Business. SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of ------------------------------------------------------ Restricted Subsidiaries. The Company shall not sell or otherwise dispose of any - ------------------------ shares of Capital Stock (other than Preferred Stock that is not Voting Stock) of a Restricted Subsidiary, and shall not permit any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any shares of its Capital Stock (other than Preferred Stock that is not Voting Stock) except: (a) to the Company or a Wholly Owned Subsidiary; (b) if, immediately after giving effect to such issuance, sale or other disposition, neither the Company nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary or (c) if, immediately after giving effect to such 45 issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect thereto would have been permitted to be made under Section 4.04 if made on the date of such issuance, sale or other disposition (and such Investment shall be deemed to be an Investment made for purposes of such Section 4.04). The proceeds of any sale of such Capital Stock subject to and permitted by this Section 4.13 shall be treated as Net Available Cash from an Asset Disposition and shall be applied in accordance with Section 4.06. ARTICLE 5 Successor Company ----------------- SECTION 5.01. (a) When Company May Merge or Transfer Assets. The ------------------------------------------ Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (the "Successor Company") shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by a supplemental indenture hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (ii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to Section 4.03(a); (iv) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture; and (v) the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee to the effect that the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such transaction and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such transaction had not occurred. The Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but the predecessor 46 Company in the case of a conveyance, transfer or lease of all or substantially all its assets shall not be released from the obligation to pay the principal of and interest on the Securities. (b) Subject to Sections 4.06 and 11.02(b), the Company shall not permit any Note Guarantor to consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets to any Person unless: (i) the resulting, surviving or transferee Person (the "Successor Guarantor") will be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia (unless the Successor Guarantor is a Foreign Subsidiary), and such Person (if not a Note Guarantor) shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Note Guarantor under its Note Guarantee; (ii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Guarantor or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Guarantor or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; and (iii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture. (c) Notwithstanding the foregoing, (i) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company and (ii) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction to realize tax or other benefits. ARTICLE 6 Defaults and Remedies --------------------- SECTION 6.01. Events of Default. An "Event of Default" occurs if: ------------------ (a) the Company defaults in any payment of interest on any Security when the same becomes due and payable or in any payment of liquidated damages, whether or not such payment shall be prohibited by Article 10, and such default continues for a period of 30 days; (b) the Company (i) defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon required redemption or repurchase, upon declaration or otherwise, whether or not such payment shall be prohibited by Article 10 or (ii) fails to redeem or purchase Securities when required 47 pursuant to this Indenture or the Securities, whether or not such redemption or purchase shall be prohibited by Article 10; (c) the Company fails to comply with Section 5.01; (d) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12 or 4.13 (other than a failure to purchase Securities when required under Section 4.06 or 4.08) and such failure continues for 30 days after receipt of the notice specified below; (e) the Company or any Note Guarantor fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in (a), (b), (c) or (d) above) and such failure continues for 60 days after receipt of the notice specified below; (f) Indebtedness of the Company or any Restricted Subsidiary is not paid within any applicable grace period after final maturity (and has not subsequently been paid) or the acceleration (which has not been rescinded) by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $10.0 million or its foreign currency equivalent at the time and such failure continues for 10 days after receipt of the notice specified below; (g) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian of it or for any substantial part of its property; or (iv) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Significant Subsidiary in an involuntary case; (ii) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or 48 (iii) orders the winding up or liquidation of the Company or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (i) any judgment or decree for the payment of money (other than judgments or decrees which are covered by enforceable insurance policies or indemnifications issued by or entered into with solvent Persons) in excess of $10.0 million or its foreign currency equivalent is rendered against the Company or any Restricted Subsidiary and either (i) an enforcement proceeding has been commenced by any creditor upon such judgment or decree and is not stayed or dismissed within 10 days or (ii) there is a period of 60 days following the entry of such judgment or decree during which such judgment or decree is not discharged, waived or the execution thereof stayed; or (j) any Note Guarantee ceases to be in full force and effect (except as contemplated by the terms hereof) or any Note Guarantor or Person acting by or on behalf of such Note Guarantor denies or disaffirms its obligations under this Indenture or any Note Guarantee and such Default continues for 10 days after receipt of the notice specified below. The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any ------------------ similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (d), (e), (f) or (j) above is not an Event of Default until the Trustee notifies the Company or Holders of at least 25% in principal amount of the outstanding Securities notify the Company and the Trustee of the Default and the Company or the Note Guarantor, as applicable, does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to a Responsible Officer of the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any event which with the giving of notice or the lapse of time would become an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an ------------- Event of Default specified in Section 6.01(g) or (h) with respect to the Company) occurs and is 49 continuing, the Trustee by notice to the Company or the Holders of at least 25% in principal amount of the outstanding Securities by notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(g) or (h) with respect to the Company occurs, the principal of and interest on all the Securities shall ipso facto become and be ---- ----- immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is --------------- continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in ------------------------ principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (a) a Default in the payment of the principal of or interest on a Security, (b) a Default arising from the failure to redeem or purchase any Security when required pursuant to the terms of this Indenture or (c) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Holder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in -------------------- principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Holders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by - -------- ------- the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. 50 SECTION 6.06. Limitation on Suits. (a) Except to enforce the right -------------------- to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to this Indenture or the Securities unless: (i) the Holder gives to a Responsible Officer of the Trustee written notice stating that an Event of Default is continuing; (ii) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer to the Trustee reasonable security or indemnity reasonably satisfactory to the Trustee against any loss, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (v) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. (b) A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding ------------------------------------- any other provision of this Indenture, the right of any Holder to receive payment of principal of and liquidated damages and interest on the Securities held by such Holder, on or after the respective due dates expressed or provided for in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default --------------------------- specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount then due and owing (together with interest on overdue principal and (to the extent lawful) on any unpaid interest at the rate provided for in the Securities) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file --------------------------------- such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, any Subsidiary or Note Guarantor, their creditors or their property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, 51 disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money or ----------- property pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness of the Company to the extent required by Article 10 and to holders of Senior Indebtedness of the Note Guarantors to the extent required by Article 12; THIRD: to Holders for amounts due and unpaid on the Securities for principal and interest, ratably, and any liquidated damages without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, any liquidated damages and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Holder and the Company a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement ---------------------- of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company --------------------------------- nor any Note Guarantor (to the extent it may lawfully do so) shall at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company and each Note Guarantor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. 52 ARTICLE 7 Trustee ------- SECTION 7.01. Duties of Trustee. (a) If an Event of Default has ------------------ occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it shall be conclusively determined by a court of competent jurisdiction that it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (iv) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. 53 (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 7.02. Rights of Trustee. (a) The Trustee may conclusively ------------------ rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents, attorneys, custodians or nominees and shall not be responsible for the misconduct or negligence of any agent, attorney, custodian or nominee appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful -------- ------- misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other paper or document unless requested in writing to do so by the Holders of not less than a majority in principal amount of the Securities at the time outstanding, but the Trustee may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney. SECTION 7.03. Individual Rights of Trustee. The Trustee in its ----------------------------- individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any 54 Paying Agent, Registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be --------------------- responsible for and makes no representation as to the validity or adequacy of this Indenture, any Note Guarantee or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company or any Note Guarantor in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. The Trustee shall not be charged with knowledge of any Default or Event of Default under Sections 6.01(c), (d), (e), (f), (i) or (j) or of the identity of any Significant Subsidiary unless either (a) a Responsible Officer shall have actual knowledge thereof or (b) a Responsible Officer of the Trustee shall have received notice thereof in accordance with Section 13.02 hereof from the Company, any Note Guarantor or any Holder. SECTION 7.05. Notice of Defaults. If a Default occurs and is ------------------- continuing and, subject to Section 7.04 hereof, if it is actually known to a Responsible Officer of the Trustee, the Trustee shall mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is known to a Responsible Officer. Except in the case of a Default in payment of principal of or interest on any Security (including payments pursuant to the redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Holders. SECTION 7.06. Reports by Trustee to Holders. As promptly as ------------------------------ practicable after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to July 15 in each year, the Trustee shall mail to each Holder a brief report dated as of such May 15 that complies with Section 313(a) of the TIA if and to the extent required thereby. The Trustee shall also comply with Section 313(b) of the TIA. A copy of each report at the time of its mailing to Holders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to --------------------------- the Trustee from time to time such compensation as shall be agreed to in writing by the Company and the Trustee from time to time for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company and each Note Guarantor, jointly and severally shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorneys' fees and expenses) including taxes (other than taxes 55 based upon, measured by or determined by the income of the Trustee) incurred by or in connection with the administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company of any claim for which it may seek indemnity promptly upon obtaining actual knowledge thereof; provided, however, that any failure so to notify the Company shall not relieve - -------- ------- the Company or any Note Guarantor of its indemnity obligations hereunder. The Company shall defend the claim and the indemnified party shall provide reasonable cooperation at the Company's expense in the defense. Such indemnified parties may have separate counsel and the Company and the Note Guarantors, as applicable shall pay the fees and expenses of such counsel; provided, however, -------- ------- that the Company shall not be required to pay such fees and expenses if it assumes such indemnified parties' defense and, in such indemnified parties' reasonable judgment, there is no conflict of interest between the Company and the Note Guarantors, as applicable, and such parties in connection with such defense. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by an indemnified party through such party's own wilful misconduct, negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest and liquidated damages, if any, on particular Securities. The Company's payment obligations pursuant to this Section shall survive the satisfaction or discharge of this Indenture, any rejection or termination of this Indenture under any bankruptcy law or the resignation or removal of the Trustee. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(g) or (h) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. (a) The Trustee may resign at ----------------------- any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (i) the Trustee fails to comply with Section 7.10; (ii) the Trustee is adjudged bankrupt or insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee otherwise becomes incapable of acting. (b) If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the 56 Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. (c) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective only upon receipt of charges due to the Resigning Trustee, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. (d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee fails to comply with Section 7.10, unless the Trustee's duty to resign is stayed as provided in TIA '310(b), any Holder who has been a bona fide holder of a Security for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. (g) If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 60 days after the giving of such notice of resignation or removal, the resigning or removed Trustee, as the case may be, may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities. SECTION 7.09. Successor Trustee by Merger. If the Trustee ---------------------------- consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. 57 SECTION 7.10. Eligibility; Disqualification. The Trustee shall at ------------------------------ all times satisfy the requirements of TIA ' 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA ' 310(b), subject to its right to apply for a stay of its duty to resign under the penultimate paragraph of TIA '310(b); provided, however, that there shall be -------- ------- excluded from the operation of TIA ' 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA ' 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The -------------------------------------------------- Trustee shall comply with TIA ' 311(a), excluding any creditor relationship listed in TIA ' 311(b). A Trustee who has resigned or been removed shall be subject to TIA ' 311(a) to the extent indicated. SECTION 7.12. Investment of Funds. In the event of a loss on the -------------------- sale of any Temporary Cash Investments purchased at the direction of the Company (after giving effect to any interest or other income thereon except to the extent theretofore paid to the Company), the Trustee shall have no responsibility in respect of such loss except that the Trustee shall notify the Company of the amount of such loss and the Company shall promptly pay such amount to the Trustee to be credited as part of the moneys originally invested. ARTICLE 8 Discharge of Indenture; Defeasance ---------------------------------- SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) ------------------------------------------------- When (i) all outstanding Securities (other than Securities replaced or paid pursuant to Section 2.07) have been canceled or delivered to the Trustee for cancelation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article 3 hereof, and the Company irrevocably deposits with the Trustee funds in an amount sufficient or U.S. Government Obligations, the principal of and interest on which will be sufficient, or a combination thereof sufficient, in the written opinion of a nationally recognized firm of independent public accountants delivered to the Trustee (which delivery shall only be required if U.S. Government Obligations have been so deposited) to pay the principal of and interest on the outstanding Securities when due at maturity or upon redemption of, including interest thereon to maturity or such redemption date (other than Securities replaced or paid pursuant to Section 2.07) and liquidated damages, if any, and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. 58 (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all of its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12 and 4.13, and the operation of Section 5.01(a)(iii), 6.01(d), 6.01(f), 6.01(g) (with respect to Significant Subsidiaries of the Company only), 6.01(h) (with respect to Significant Subsidiaries of the Company only) and 6.01(i) ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. In the event that the Company terminates all of its obligations under the Securities and this Indenture by exercising its legal defeasance option or its covenant defeasance option, the obligations under the Note Guarantees shall each be terminated simultaneously with the termination of such obligations. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Section 6.01(d), 6.01(f), 6.01(g), (with respect to Significant Subsidiaries of the Company only), 6.01(h) (with respect to Significant Subsidiaries of the Company only) or 6.01(i) or because of the failure of the Company to comply with clause (iii) of Section 5.01(a). Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and in this Article 8 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. (a) Conditions to Defeasance. The Company may ------------------------- exercise its legal defeasance option or its covenant defeasance option only if: (i) the Company irrevocably deposits in trust with the Trustee money in an amount sufficient or U.S. Government Obligations, the principal of and interest on which will be sufficient, or a combination thereof sufficient, to pay the principal, premium (if any) and interest on the Securities when due at maturity or redemption, as the case may be, including interest thereon to maturity or such redemption date and liquidated damages, if any; (ii) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; 59 (iii) 123 days pass after the deposit is made and during the 123-day period no Default specified in Section 6.01(g) or (h) with respect to the Company occurs which is continuing at the end of the period; (iv) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article 10; (v) the Company delivers to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (vi) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee stating that (1) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (2) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (vii) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee to the effect that the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (viii) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with. (b) Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3. SECTION 8.03. Application of Trust Money. The Trustee shall hold in --------------------------- trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to Article 10 or 12. SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent --------------------- shall promptly turn over to the Company upon request any money or U.S. Government Obligations held by it as provided in this Article which, in the written opinion of nationally 60 recognized firm of independent public accountants delivered to the Trustee (which delivery shall only be required if U.S. Government Obligations have been so deposited), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent discharge or defeasance in accordance with this Article. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Holders entitled to the money must look to the Company for payment as general creditors and the Trustee, and the Paying Agent shall have no further liability with respect to such monies. SECTION 8.05. Indemnity for Government Obligations. The Company ------------------------------------- shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is -------------- unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that, if the --------- ------- Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 Amendments ---------- SECTION 9.01. (a) Without Consent of Holders. The Company, the Note --------------------------- Guarantors and the Trustee may amend this Indenture or the Securities without notice to or consent of any Holder: (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the -------- ------- uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; 61 (iv) to make any change in Article 10 or Article 12 that would limit or terminate the benefits available to any holder of Senior Indebtedness (or representatives thereof) under Article 10 or Article 12; (v) to add additional Guarantees with respect to the Securities or to secure the Securities; (vi) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (vii) to comply with any requirement of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; (viii) to make any change that does not adversely affect the rights of any Holder in a material respect; or (ix) to provide for the issuance of the Exchange Securities or Private Exchange Securities, which shall have terms substantially identical in all material respects to the Initial Securities (except that the transfer restrictions contained in the Initial Securities shall be modified or eliminated, as appropriate), and which shall be treated, together with any outstanding Initial Securities, as a single issue of securities. (b) An amendment under this Section 9.01 may not make any change to Article 10 or Article 12 that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section 9.01 becomes effective, the Company shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. (a) The Company, the Note ------------------------ Guarantors and the Trustee may amend this Indenture or the Securities without notice to any Holder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange for the Securities). However, without the consent of each Holder affected, an amendment may not: (i) reduce the amount of Securities whose Holders must consent to an amendment; (ii) reduce the rate of or extend the time for payment of interest or any liquidated damages on any Security; 62 (iii) reduce the principal of or extend the Stated Maturity of any Security; (iv) reduce the premium payable upon the redemption of any Security or accelerate the time at which any Security may be redeemed; (v) make any Security payable in money other than that stated in the Security; (vi) make any change in Article 10 or Article 12 that adversely affects the rights of any Holder under Article 10 or Article 12; (vii) make any change in Section 6.04 or 6.07 or the second sentence of this Section 9.02; or (viii) modify the Note Guarantees in any manner adverse to the Holders in a material respect. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. An amendment under this Section 9.02 may not make any change that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section 9.02 becomes effective, the Company shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.02. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment ------------------------------------ to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. (a) A ---------------------------------------------- consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officers' Certificate from the Company certifying that the requisite number of consents have been received. After an amendment or waiver becomes effective, it shall bind every Holder. An amendment or waiver becomes effective upon the (i) receipt by the Company or the Trustee of the requisite number of consents, (ii) satisfaction of conditions to effectiveness as set forth in this Indenture and any 63 indenture supplemental hereto containing such amendment or waiver and (iii) execution of such amendment or waiver (or supplemental indenture) by the Company and the Trustee. (b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment -------------------------------------- changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee to Sign Amendments. The Trustee shall sign any --------------------------- amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and that such amendment is the legal, valid and binding obligation of the Company and the Note Guarantors enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof (including Section 9.03). ARTICLE 10 Subordination ------------- SECTION 10.01. Agreement To Subordinate. The Company agrees, and ------------------------- each Holder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full of all Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of ---- ----- the Company and only Indebtedness of the Company that is Senior Indebtedness of the Company shall rank senior to the Securities in accordance with the provisions set forth herein. For purposes of this Article 10, the Indebtedness evidenced by the Securities shall be deemed to 64 include any liquidated damages payable pursuant to the provisions set forth in the Securities and the Registration Agreement. All provisions of this Article 10 shall be subject to Section 10.12. SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any ------------------------------------- payment or distribution of the assets of the Company to creditors upon a liquidation or a dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (a) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full of such Senior Indebtedness before Holders shall be entitled to receive any payment of principal of or interest on the Securities; and (b) until the Senior Indebtedness of the Company is paid in full , any payment or distribution to which Holders would be entitled but for this Article 10 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Holders may receive shares of stock and any debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the Securities. SECTION 10.03. Default on Senior Indebtedness. The Company may not ------------------------------- pay the principal of, premium (if any) or interest on the Securities or make any deposit pursuant to Section 8.01 and may not otherwise repurchase, redeem or otherwise acquire or retire for value any Securities (collectively, "pay the Securities") if (a) any Designated Senior Indebtedness of the Company is not paid when due or (b) any other default on any Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (i) the default has been cured or waived and any such acceleration has been rescinded or (ii) such Designated Senior Indebtedness has been paid in full; provided, however, -------- ------- that the Company may pay the Securities without regard to the foregoing if the Company and a Responsible Officer of the Trustee receive written notice approving such payment from the Representative of such Designated Senior Indebtedness with respect to which either of the events set forth in clause (a) or (b) of this sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (a) or (b) of the preceding sentence) with respect to any Designated Senior Indebtedness of the Company pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a "Payment Blockage Period") commencing upon the receipt by a Responsible Officer of the Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (a) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (b) by repayment in full of such Designated Senior Indebtedness or (c) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the second preceding and in the immediately succeeding sentence), unless the holders of such Designated Senior Indebtedness or 65 the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after the end of such Payment Blockage Period, including any missed payments. Not more than one Blockage Notice may be given in any consecutive 360- day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period; provided, however, that if any Blockage -------- ------- Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give another Blockage Notice within such period; provided further, however, that in no event may the total number of ---------------- ------- days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this Section 10.03, no default or event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. SECTION 10.04. Acceleration of Payment of Securities. If payment of -------------------------------------- the Securities is accelerated because of an Event of Default, the Company or the Trustee (provided, that the Trustee shall have received written notice from the -------- Company, on which notice the Trustee shall be entitled to conclusively rely) shall promptly notify the holders of the Designated Senior Indebtedness of the Company (or their Representative) of the acceleration. If any Designated Senior Indebtedness of the Company is outstanding, the Company may not pay the Securities until five Business Days after such holders or the Representative of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Securities only if this Article 10 otherwise permits payment at that time. SECTION 10.05. When Distribution Must Be Paid Over. If a payment or ------------------------------------ distribution is made to Holders that because of this Article 10 should not have been made to them, the Holders who receive the payment or distribution shall hold it in trust for holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. SECTION 10.06. Subrogation. After all Senior Indebtedness of the ------------ Company is paid in full and until the Securities are paid in full, Holders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article 10 to holders of such Senior Indebtedness which otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on such Senior Indebtedness. SECTION 10.07. Relative Rights. This Article 10 defines the relative ---------------- rights of Holders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall: 66 (a) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on and liquidated damages, if any, in respect of, the Securities in accordance with their terms; or (b) prevent the Trustee or any Holder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Holders. SECTION 10.08. Subordination May Not Be Impaired by Company. No --------------------------------------------- right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding ----------------------------------- Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Responsible Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article 10. The Company, the Registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Company may give the notice; provided, -------- however, that, if an issue of Senior Indebtedness of the Company has a - ------- Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 or any other Section of this Indenture. SECTION 10.10. Distribution or Notice to Representative. Whenever a ----------------------------------------- distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any). SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit ---------------------------------------------------- Right To Accelerate. The failure to make a payment pursuant to the Securities - -------------------- by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 10 shall have any effect on the right of the Holders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. Trust Monies Not Subordinated. Notwithstanding ------------------------------ anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article 8 by the Trustee for the payment of principal of and 67 interest on the Securities and liquidated damages, if any, shall not be subordinated to the prior payment of any Senior Indebtedness of the Company or subject to the restrictions set forth in this Article 10, and none of the Holders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company. SECTION 10.13. Trustee Entitled To Rely. Upon any payment or ------------------------- distribution pursuant to this Article 10, the Trustee and the Holders shall be entitled to rely conclusively (a) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (b) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (c) upon the Representatives for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 10, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10. SECTION 10.14. Trustee To Effectuate Subordination. Each Holder by ------------------------------------ accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Holders and the holders of Senior Indebtedness of the Company as provided in this Article 10 and appoints the Trustee as attorney-in- fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior ------------------------------------------- Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the - ------------- holders of Senior Indebtedness of the Company and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 10 or otherwise. SECTION 10.16. Reliance by Holders of Senior Indebtedness on --------------------------------------------- Subordination Provisions. Each Holder by accepting a Security acknowledges and - ------------------------- agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness 68 shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE 11 Note Guarantees --------------- SECTION 11.01. (a) Note Guarantees. Each Note Guarantor hereby ---------------- jointly and severally irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, to each Holder and to the Trustee and its successors and assigns (i) the full and punctual payment when due, whether at Stated Maturity, by acceleration, by redemption or otherwise, of all obligations of the Company under this Indenture (including obligations to the Trustee) and the Securities, whether for payment of principal of, interest on or liquidated damages, if any, in respect of the Securities and all other monetary obligations of the Company under this Indenture and the Securities and (ii) the full and punctual performance within applicable grace periods of all other monetary obligations of the Company whether for fees, expenses, indemnification or otherwise under this Indenture and the Securities (all the foregoing being hereinafter collectively called the "Guaranteed Obligations"). Each Note Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Note Guarantor, and that each such Note Guarantor shall remain bound under this Article 11 notwithstanding any extension or renewal of any Guaranteed Obligation. (b) Each Note Guarantor waives presentation to, demand of payment from and protest to the Company of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Note Guarantor waives notice of any default under the Securities or the Guaranteed Obligations. The obligations of each Note Guarantor hereunder shall not be affected by (i) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (ii) any extension or renewal of any thereof; (iii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement except to the extent such rescission, waiver, amendment or modification explicitly relates to such Note Guarantor's obligations hereunder; (iv) the release of any security held by any Holder or the Trustee for the Guaranteed Obligations or any of them; (v) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (vi) any change in the ownership of such Note Guarantor, except as provided in Section 11.02(b). (c) Each Note Guarantor hereby waives any right to which it may be entitled to have its obligations hereunder divided among the Note Guarantors, such that such Note Guarantor's obligations would be less than the full amount claimed. Each Note Guarantor hereby waives any right to which it may be entitled to have the assets of the Company first be used and depleted as payment of the Company's or such Note Guarantor's obligations hereunder prior to any amounts being claimed from or paid by such Note Guarantor hereunder. Each Note 69 Guarantor hereby waives any right to which it may be entitled to require that the Company be sued prior to an action being initiated against such Note Guarantor. (d) Each Note Guarantor further agrees that its Note Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guaranteed Obligations. (e) The Note Guarantee of each Note Guarantor is, to the extent and in the manner set forth in Article 12, subordinated and subject in right of payment to the prior payment in full of the principal of and premium, if any, and interest on all Senior Indebtedness of the relevant Note Guarantor and is made subject to such provisions of this Indenture. (f) Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06, the obligations of each Note Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Note Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Note Guarantor or would otherwise operate as a discharge of any Note Guarantor as a matter of law or equity. (g) Each Note Guarantor agrees that its Note Guarantee shall remain in full force and effect until payment in full of all the Guaranteed Obligations. Each Note Guarantor further agrees that its Note Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. (h) In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Note Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Note Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by law) and (iii) all other monetary obligations of the Company to the Holders and the Trustee. 70 (i) Each Note Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations and all obligations to which the Guaranteed Obligations are subordinated as provided in Article 12. Each Note Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of any Note Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article 6, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by such Note Guarantor for the purposes of this Section 11.01. (j) Upon request of the Trustee, each Note Guarantor shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 11.02. Limitation on Liability. (a) Any term or provision ------------------------ of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by any Note Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Note Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. (b) A Note Guarantee as to any Note Guarantor shall terminate and be of no further force or effect and such Note Guarantor shall be deemed to be released from all obligations under this Article 11 upon (i) the merger or consolidation of such Note Guarantor with or into any Person other than the Company or a Subsidiary of the Company where such Note Guarantor is not the surviving entity of such consolidation or merger or (ii) the sale by the Company or any Subsidiary of the Company (or any pledgee of the Company) of the Capital Stock of such Note Guarantor, where, after such sale, such Note Guarantor is no longer a Subsidiary of the Company; provided, however, that each such merger, -------- ------- consolidation or sale (or, in the case of a sale by such a pledgee, the disposition of the proceeds of such sale) shall comply with Section 4.06 and Section 5.01(b). At the request of the Company, the Trustee shall execute and deliver an appropriate instrument evidencing such release (in the form provided by the Company). SECTION 11.03. Successors and Assigns. This Article 11 shall be ----------------------- binding upon each Note Guarantor and (subject to the provisions hereof) its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. 71 SECTION 11.04. No Waiver. Neither a failure nor a delay on the part ---------- of either the Trustee or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 11 at law, in equity, by statute or otherwise. SECTION 11.05. Modification. No modification, amendment or waiver of ------------- any provision of this Article 11, nor the consent to any departure by any Note Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Note Guarantor in any case shall entitle such Note Guarantor to any other or further notice or demand in the same, similar or other circumstances. SECTION 11.06. Execution of Supplemental Indenture for Future Note --------------------------------------------------- Guarantors. Each Subsidiary which is required to become a Note Guarantor - ----------- pursuant to Section 4.11 shall promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit C hereto pursuant to which such Subsidiary shall become a Note Guarantor under this Article 11 and shall guarantee the Guaranteed Obligations. Concurrently with the execution and delivery of such supplemental indenture, the Company shall deliver to the Trustee an Opinion of Counsel and an Officers' Certificate to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors' rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Note Guarantee of such Note Guarantor is a legal, valid and binding obligation of such Note Guarantor, enforceable against such Note Guarantor in accordance with its terms and or to such other matters as the Trustee may reasonably request. SECTION 11.07. Non-Impairment. The failure to endorse a Note Guarantee --------------- on any Security shall not affect or impair the validity thereof. ARTICLE 12 Subordination of the Note Guarantees ------------------------------------ SECTION 12.01. Agreement To Subordinate. Each Note Guarantor agrees, ------------------------- and each Holder by accepting a Security agrees, that the obligations of a Note Guarantor hereunder are subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment in full of all Senior Indebtedness of such Note Guarantor and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness of such Note Guarantor. The obligations hereunder with respect to a Note Guarantor shall in all 72 respects rank pari passu with all other Senior Subordinated Indebtedness of such ---- ----- Note Guarantor and shall rank senior to all existing and future Subordinated Obligations of such Note Guarantor; and only Indebtedness of such Note Guarantor that is Senior Indebtedness of such Note Guarantor shall rank senior to the obligations of such Note Guarantor in accordance with the provisions set forth herein. SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any ------------------------------------- payment or distribution of the assets of a Note Guarantor to creditors upon a liquidation or a dissolution of such Note Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Note Guarantor and its properties: (a) holders of Senior Indebtedness of such Note Guarantor shall be entitled to receive payment in full of such Senior Indebtedness before Holders shall be entitled to receive any payment pursuant to any Guaranteed Obligations from such Note Guarantor; and (b) until the Senior Indebtedness of such Note Guarantor is paid in full, any payment or distribution to which Holders would be entitled but for this Article 12 shall be made to holders of such Senior Indebtedness as their respective interests may appear, except that Holders may receive shares of stock and any debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the Note Guarantees. SECTION 12.03. Default on Designated Senior Indebtedness of a Note --------------------------------------------------- Guarantor. A Note Guarantor may not make any payment pursuant to any of the - ---------- Guaranteed Obligations or repurchase, redeem or otherwise retire any Securities (collectively, "pay its Guarantee") if (a) any Designated Senior Indebtedness of such Note Guarantor is not paid when due or (b) any other default on any Designated Senior Indebtedness of such Note Guarantor occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (i) the default has been cured or waived and any such acceleration has been rescinded or (ii) such Designated Senior Indebtedness has been paid in full; provided, however, that such Note Guarantor may pay its -------- ------- Guarantee without regard to the foregoing if such Note Guarantor and a Responsible Officer of the Trustee receive written notice approving such payment from the Representative of the holders of such Designated Senior Indebtedness with respect to which either of the events in clause (a) or (b) of this sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (a) or (b) of the preceding sentence) with respect to any Designated Senior Indebtedness of a Note Guarantor pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, such Note Guarantor may not pay its Guarantee for a period (a "Guarantee Payment Blockage Period") commencing upon the receipt by a Responsible Officer of the Trustee (with a copy to such Note Guarantor and the Company) of written notice (a "Guarantee Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness of such Note Guarantor specifying an election to effect a Guarantee Payment Blockage Period and ending 179 days thereafter (or 73 earlier if such Guarantee Payment Blockage Period is terminated (a) by written notice to a Responsible Officer of the Trustee (with a copy to such Note Guarantor and the Company) from the Person or Persons who gave such Guarantee Blockage Notice, (b) because such Designated Senior Indebtedness has been repaid in full or (c) because the default giving rise to such Guarantee Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the second preceding and in the immediately succeeding sentence), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, such Note Guarantor may resume to paying its Note Guarantee after such Guarantee Payment Blockage Period, including any missed payments. Not more than one Guarantee Blockage Notice may be given with respect to a Note Guarantor in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of such Note Guarantor during such period; provided, however, that if any Guarantee Blockage Notice within such 360-day - -------- ------- period is given by or on behalf of any holders of Designated Senior Indebtedness of such Note Guarantor other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give another Guarantee Blockage Notice within such period; provided further,however, that in no event may the total number of days ---------------- ------- during which any Guarantee Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this Section 12.03, no default or event of default that existed or was continuing on the date of the commencement of any Guarantee Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Guarantee Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Guarantee Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. SECTION 12.04. Demand for Payment. If payment of the Securities is ------------------- accelerated because of an Event of Default and a demand for payment is made on a Note Guarantor pursuant to Article 11, the Trustee (provided that the Trustee -------- shall have received written notice from the Company or such Note Guarantor, on which notice the Trustee shall be entitled to conclusively rely) shall promptly notify the holders of the Designated Senior Indebtedness of such Note Guarantor (or the Representative of such holders) of such demand. If any Designated Senior Indebtedness of such Note Guarantor is outstanding, such Note Guarantor may not pay its Guarantee until five Business Days after such holders or the Representative of the holders of the Designated Senior Indebtedness of such Note Guarantor receive notice of such demand and, thereafter, may pay its Guarantee only if this Article 12 otherwise permits payment at that time. SECTION 12.05. When Distribution Must Be Paid Over. If a payment or ------------------------------------ distribution is made to Holders that because of this Article 12 should not have been made to them, the Holders who receive the payment or distribution shall hold such payment or distribution in trust for holders of the Senior Indebtedness of the relevant Note Guarantor and pay it over to them as their respective interests may appear. 74 SECTION 12.06. Subrogation. After all Senior Indebtedness of a Note ------------ Guarantor is paid in full and until the Securities are paid in full in cash, Holders shall be subrogated to the rights of holders of Senior Indebtedness of such Note Guarantor to receive distributions applicable to Designated Senior Indebtedness of such Note Guarantor. A distribution made under this Article 12 to holders of Senior Indebtedness of such Note Guarantor which otherwise would have been made to Holders is not, as between such Note Guarantor and Holders, a payment by such Note Guarantor on Senior Indebtedness of such Note Guarantor. SECTION 12.07. Relative Rights. This Article 12 defines the relative ---------------- rights of Holders and holders of Senior Indebtedness of a Note Guarantor. Nothing in this Indenture shall: (a) impair, as between a Note Guarantor and Holders, the obligation of a Note Guarantor which is absolute and unconditional, to make payments with respect to the Guaranteed Obligations to the extent set forth in Article 11; or (b) prevent the Trustee or any Holder from exercising its available remedies upon a default by a Note Guarantor under its obligations with respect to the Guaranteed Obligations, subject to the rights of holders of Senior Indebtedness of such Note Guarantor to receive distributions otherwise payable to Holders. SECTION 12.08. Subordination May Not Be Impaired by a Note -------------------------------------------- Guarantor. No right of any holder of Senior Indebtedness of a Note Guarantor to - ---------- enforce the subordination of the obligations of such Note Guarantor hereunder shall be impaired by any act or failure to act by such Note Guarantor or by its failure to comply with this Indenture. SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding ----------------------------------- Section 12.03, the Trustee or the Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Responsible Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article 12. A Note Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of a Note Guarantor may give the notice; provided, however, that if an issue of Senior Indebtedness -------- ------- of a Note Guarantor has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness of a Note Guarantor with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 12 with respect to any Senior Indebtedness of a Note Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of such Note Guarantor; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 12 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 or any other Section of this Indenture. 75 SECTION 12.10. Distribution or Notice to Representative. Whenever a ----------------------------------------- distribution is to be made or a notice given to holders of Senior Indebtedness of a Note Guarantor, the distribution may be made and the notice given to their Representative (if any). SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit ---------------------------------------------------- Right To Accelerate. The failure of a Note Guarantor to make a payment on any - -------------------- of its obligations by reason of any provision in this Article 12 shall not be construed as preventing the occurrence of a default by such Note Guarantor under such obligations. Nothing in this Article 12 shall have any effect on the right of the Holders or the Trustee to make a demand for payment on a Note Guarantor pursuant to Article 11. SECTION 12.12. Trustee Entitled To Rely. Upon any payment or ------------------------- distribution pursuant to this Article 12, the Trustee and the Holders shall be entitled to rely (a) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 are pending, (b) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (c) upon the Representatives for the holders of Senior Indebtedness of a Note Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness of a Note Guarantor and other Indebtedness of a Note Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of a Note Guarantor to participate in any payment or distribution pursuant to this Article 12, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such Note Guarantor held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 12, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 12. SECTION 12.13. Trustee To Effectuate Subordination. Each Holder by ------------------------------------ accepting a Security authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Holders and the holders of Senior Indebtedness of each of the Note Guarantors as provided in this Article 12 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 12.14. Trustee Not Fiduciary for Holders of Senior ------------------------------------------- Indebtedness of a Note Guarantor. The Trustee shall not be deemed to owe any - --------------------------------- fiduciary duty to the holders of Senior Indebtedness of a Note Guarantor and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the relevant Note Guarantor or any other Person, money or assets to which any holders of Senior Indebtedness of such Note Guarantor shall be entitled by virtue of this Article 12 or otherwise. 76 SECTION 12.15. Reliance by Holders of Senior Indebtedness of a Note ---------------------------------------------------- Guarantor on Subordination Provisions. Each Holder by accepting a Security - -------------------------------------- acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of a Note Guarantor, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. SECTION 12.16. Defeasance. The terms of this Article 12 shall not ----------- apply to payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee for the payment of principal of and interest on the Securities pursuant to the provisions described in Section 8.03. ARTICLE 13 Miscellaneous ------------- SECTION 13.01. Trust Indenture Act Controls. If and to the extent ----------------------------- that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by, or with another provision (an "incorporated provision") included in this Indenture by operation of, TIA" 310 to 318, inclusive, such imposed duties or incorporated provision shall control. SECTION 13.02. Notices. Any notice or communication shall be in -------- writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: c/o USS Holdings, Inc. Route 522 North P.O. Box 187 Berkeley Springs, West Virginia 25411 Attention of: Chief Financial Officer if to the Trustee: The Bank of New York 101 Barclay Street, Floor 21 West Floor 21 West New York, NY 10286 Telephone: (212) 815-5939 77 Facsimile: (212) 815-5915 Attention of: Corporate Trust Administration The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Holder shall be mailed, first class mail, to the Holder at the Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 13.03. Communication by Holders with Other Holders. Holders -------------------------------------------- may communicate pursuant to TIA ' 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ' 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. --------------------------------------------------- Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 13.05. Statements Required in Certificate or Opinion. Each ---------------------------------------------- certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture (other than pursuant to Section 4.09) shall include: (a) a statement that the individual making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and 78 (d) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 13.06. When Securities Disregarded. In determining whether ---------------------------- the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company, any Note Guarantor or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any Note Guarantor shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The --------------------------------------------- Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a --------------- Sunday or other day on which banking institutions are not required by law or regulation to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES -------------- SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 13.10. No Recourse Against Others. A director, officer, --------------------------- employee or stockholder, as such, of the Company or any of the Note Guarantors, shall not have any liability for any obligations of the Company or any of the Note Guarantors under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 13.11. Successors. All agreements of the Company and each ----------- Note Guarantor in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.12. Multiple Originals. The parties may sign any number ------------------- of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. 79 SECTION 13.13. Table of Contents; Headings. The table of contents, ---------------------------- cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 80 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. BETTER MINERALS & AGGREGATES COMPANY, by /s/ John A. Ulizio --------------------------------------------- Name: John A. Ulizio Title: Vice President, General Counsel and Assistant Secretary U.S. SILICA COMPANY, by /s/ John A. Ulizio --------------------------------------------- Name: John A. Ulizio Title: Senior Vice President, General Counsel and Assistant Secretary BETTER MATERIALS CORPORATION, by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Vice President and Assistant Secretary GEORGE F. PETTINOS, INC., by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Vice President and Secretary OTTAWA SILICA COMPANY, by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Secretary 81 THE FULTON LAND AND TIMBER COMPANY, by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Secretary PENNSYLVANIA GLASS SAND CORPORATION, by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Secretary BUCKS COUNTY CRUSHED STONE COMPANY by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Vice President and Assistant Secretary CHIPPEWA FARMS CORPORATION, by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Vice President and Assistant Secretary SHORE STONE COMPANY, INC., by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Vice President and Assistant Secretary 82 BMC TRUCKING, INC., by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Vice President and Assistant Secretary ELLEN JAY, INC., by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Vice President and Secretary STONE MATERIALS COMPANY, LLC by: Better Minerals and Aggregates Company, as Manager by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Vice President, General Counsel and Assistant Secretary of Better Minerals & Aggregates Company COMMERCIAL STONE CO., INC. by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Secretary 83 COMMERCIAL AGGREGATES TRANSPORTATON AND SALES, LLC by: Stone Materials Company, LLC, as Manager by /s/ John A. Ulizio ---------------------------------------------- Name: John A. Ulizio Title: Vice President, General Counsel and Assistant Secretary of Better Minerals & Aggregates Company, Manager of Stone Materials Company, LLC, as Manager THE BANK OF NEW YORK, as Trustee by /s/ Mary Beth Lewicki ------------------------------- Name: Mary Beth Lewicki Title: Vice President APPENDIX A PROVISIONS RELATING TO INITIAL SECURITIES, ------------------------------------------ PRIVATE EXCHANGE SECURITIES --------------------------- AND EXCHANGE SECURITIES ----------------------- 1. Definitions ----------- 1.1 Definitions ----------- For the purposes of this Appendix A the following terms shall have the meanings indicated below: "Applicable Procedures" means, with respect to any transfer or transaction involving a Regulation S Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Global Security, Euroclear and Cedel, in each case to the extent applicable to such transaction and as in effect from time to time. "Cedel" means Cedel Bank, S.A., or any successor securities clearing agency. "Definitive Security" means a certificated Initial Security, Private Exchange Security or Exchange Security (bearing the Restricted Securities Legend if the transfer of such Security is restricted by applicable law) that does not include the Global Securities Legend. "Depositary" means The Depository Trust Company, its nominees and their respective successors. "Euroclear" means the Euroclear Clearance System or any successor securities clearing agency. "Global Securities Legend" means the legend set forth under that caption in Exhibit A to this Indenture. "IAI" means an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Initial Purchasers" means Chase Securities Inc. and BNP Capital Markets, LLC. "Private Exchange" means an offer by the Company, pursuant to the Registration Agreement, to issue and deliver to certain purchasers, in exchange for the Initial Securities held by such purchasers as part of their initial distribution, a like aggregate principal amount of Private Exchange Securities. 2 "Private Exchange Securities" means the Securities of the Company issued in exchange for Initial Securities pursuant to this Indenture in connection with the Private Exchange pursuant to the Registration Agreement. "Purchase Agreement" means the Purchase Agreement dated September 28, 1999, among the Company, the Existing Guarantors (as defined therein) and the Initial Purchasers, as amended by the Purchase Agreement Amendment dated October 1, 1999, among the Company, the Note Guarantors and the Initial Purchasers. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registered Exchange Offer" means the offer by the Company, pursuant to the Registration Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for their Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. "Registration Agreement" means the Exchange and Registration Rights Agreement dated October 1, 1999, among the Company, the Note Guarantors and the Initial Purchasers. "Regulation S" means Regulation S under the Securities Act. "Regulation S Securities" means all Initial Securities offered and sold outside the United States in reliance on Regulation S. "Restricted Period", with respect to any Securities, means the period of 40 consecutive days beginning on and including the later of (a) the day on which such Securities are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S, notice of which day shall be promptly given by the Company to the Trustee, and (b) the Issue Date with respect to such Securities. "Restricted Securities Legend" means the legend set forth in Section 2.3(e)(i) herein. "Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Rule 144A" means Rule 144A under the Securities Act. "Rule 144A Securities" means all Initial Securities offered and sold to QIBs in reliance on Rule 144A. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depositary) or any successor person thereto, who shall initially be the Trustee. 3 "Shelf Registration Statement" means a registration statement filed by the Company in connection with the offer and sale of Initial Securities pursuant to the Registration Agreement. "Transfer Restricted Securities" means Definitive Securities and any other Securities that bear or are required to bear the Restricted Securities Legend. 1.2 Other Definitions ----------------- Term: Defined in Section: ---- ------------------ "Agent Members"....................................... 2.1(c) "IAI Global Security"................................. 2.1(b) "Global Security"..................................... 2.1(b) "Regulation S Global Security"........................ 2.1(b) "Rule 144A Global Security"........................... 2.1(b) 2. The Securities -------------- 2.1 Form and Dating --------------- (a) The Initial Securities issued on the date hereof will be (i) offered and sold by the Company pursuant to the Purchase Agreement and (ii) resold, initially only to (1) QIBs in reliance on Rule 144A and (2) Persons other than U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such Initial Securities may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S and, except as set forth below, IAIs in accordance with Rule 501. (b) Global Securities. Rule 144A Securities shall be issued ------------------ initially in the form of one or more permanent global Securities in definitive, fully registered form (collectively, the "Rule 144A Global Security") and Regulation S Securities shall be issued initially in the form of one or more global Securities (collectively, the "Regulation S Global Security"), in each case without interest coupons and bearing the Global Securities Legend and Restricted Securities Legend, which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Securities Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. One or more global securities in definitive, fully registered form without interest coupons and bearing the Global Securities Legend and the Restricted Securities Legend (collectively, the "IAI Global Security") shall also be issued on the Closing Date, deposited with the Securities Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as provided in this Indenture to accommodate transfers of beneficial interests in the Securities to IAIs subsequent to the initial distribution. Beneficial ownership interests in the Regulation S Global Security shall not be exchangeable for interests in the Rule 144A Global Security, the IAI Global Security or 4 any other Security without a Restricted Securities Legend until the expiration of the Restricted Period. The Rule 144A Global Security, the IAI Global Security and the Regulation S Global Security are each referred to herein as a "Global Security" and are collectively referred to herein as "Global Securities", provided, that the term "Global Security" when used in Sections 2.1(b)(third - -------- paragraph), 2.1(c), 2.3(g)(i), 2.3(h)(i) and 2.4 shall also include any Security in global form issued in connection with a Registered Exchange Offer or Private Exchange. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee and on the schedules thereto as hereinafter provided. (c) Book-Entry Provisions. This Section 2.1(c) shall apply only to a ---------------------- Global Security deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(c) and Section 2.2 and pursuant to an order of the Company signed by two Officers, authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of the Depositary for such Global Security or Global Securities or the nominee of such Depositary and (ii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the Trustee as Securities Custodian. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as Securities Custodian or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (d) Definitive Securities. Except as provided in Section 2.3 or 2.4, ---------------------- owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. 2.2 Authentication. The Trustee shall authenticate and make available for --------------- delivery upon a written order of the Company signed by two Officers (a) Initial Securities for original issue on the date hereof in an aggregate principal amount of $150,000,000 and (b) the (i) Exchange Securities for issue only in a Registered Exchange Offer and (ii) Private Exchange Securities for issue only in the Private Exchange, in the case of each of (i) and (ii) pursuant to the Registration Agreement and for a like principal amount of Initial Securities exchanged pursuant thereto. Such order shall specify the amount of the Securities to be authenticated, the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Securities or Private Exchange Securities. The aggregate principal amount 5 of Securities outstanding at any time may not exceed $150,000,000 except as provided in Sections 2.07 and 2.08 of this Indenture. 2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive ---------------------- ----------------------------------- Securities. When Definitive Securities are presented to the Registrar with a - ----------- request: (i) to register the transfer of such Definitive Securities; or (ii) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for -------- ------- transfer or exchange: (1) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (2) in the case of Transfer Restricted Securities, are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in the form set forth on the reverse side of the Initial Security); or (B) if such Definitive Securities are being transferred to the Company, a certification to that effect (in the form set forth on the reverse side of the Initial Security); or (C) if such Definitive Securities are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or in reliance upon another exemption from the registration requirements of the Securities Act, (x) a certification to that effect (in the form set forth on the reverse side of the Initial Security) and (y) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(e)(i). (b) Restrictions on Transfer of a Definitive Security for a ------------------------------------------------------- Beneficial Interest in a Global Security. A Definitive Security may not be - ----------------------------------------- exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, together with: 6 (i) certification (in the form set forth on the reverse side of the Initial Security) that such Definitive Security is being transferred (1) to a QIB in accordance with Rule 144A, (2) to an IAI that has furnished to the Trustee a signed letter substantially in the form of Exhibit D or (3) outside the United States in an offshore transaction within the meaning of Regulation S and in compliance with Rule 904 under the Securities Act; and (ii) written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate principal amount of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such increase, then the Trustee shall cancel such Definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Securities Custodian, the aggregate principal amount of Securities represented by the Global Security to be increased by the aggregate principal amount of the Definitive Security to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the principal amount of the Definitive Security so canceled. If no Global Securities are then outstanding and the Global Security has not been previously exchanged for certificated securities pursuant to Section 2.4, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Global Security in the appropriate principal amount. (c) Transfer and Exchange of Global Securities. (i) The transfer ------------------------------------------- and exchange of Global Securities or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Security shall deliver a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in such Global Security or another Global Security and such account shall be credited in accordance with such order with a beneficial interest in the applicable Global Security and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Security being transferred. Transfers by an owner of a beneficial interest in the Rule 144A Global Security or the IAI Global Security to a transferee who takes delivery of such interest through the Regulation S Global Security, whether before or after the expiration of the Restricted Period, shall be made only upon receipt by the Trustee of a certification in the form provided on the reverse of the Initial Securities from the transferor to the effect that such transfer is being made in accordance with Regulation S or (if available) Rule 144 under the Securities Act and that, if such transfer is being made prior to the expiration of the Restricted Period, the interest transferred shall be held immediately thereafter through Euroclear or Cedel. In the case of a transfer of a beneficial interest in either the Regulation S Global Security or the Rule 144A Global Security for an interest in the IAI Global Security, the transferee must furnish a signed letter substantially in the form of Exhibit D to the Trustee. 7 (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of Global Security from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (iv) In the event that a Global Security is exchanged for Definitive Securities pursuant to Section 2.4 prior to the consummation of the Registered Exchange Offer or the effectiveness of the Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A, Regulation S or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company. (d) Restrictions on Transfer of Regulation S Global Security. (i) --------------------------------------------------------- Prior to the expiration of the Restricted Period, interests in the Regulation S Global Security may only be held through Euroclear or Cedel. During the Restricted Period, beneficial ownership interests in the Regulation S Global Security may only be sold, pledged or transferred through Euroclear or Cedel in accordance with the Applicable Procedures and only (1) to the Company, (2) so long as such security is eligible for resale pursuant to Rule 144A, to a person whom the selling holder reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, (3) in an offshore transaction in accordance with Regulation S, (4) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if applicable) under the Securities Act, (5) to an IAI purchasing for its own account, or for the account of such an IAI, in a minimum principal amount of Securities of $250,000 or (6) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. Prior to the expiration of the Restricted Period, transfers by an owner of a beneficial interest in the Regulation S Global Security to a transferee who takes delivery of such interest through the Rule 144A Global Security or the IAI Global Security shall be made only in accordance with Applicable Procedures and upon receipt by the Trustee of a written certification from the transferor of the beneficial interest in the form provided on the reverse of the Initial Security to the effect that such transfer is being made to (1) a QIB within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or (2) an IAI 8 purchasing for its own account, or for the account of such an IAI, in a minimum principal amount of the Securities of $250,000. Such written certification shall no longer be required after the expiration of the Restricted Period. In the case of a transfer of a beneficial interest in the Regulation S Global Security for an interest in the IAI Global Security, the transferee must furnish a signed letter substantially in the form of Exhibit D to the Trustee. (ii) Upon the expiration of the Restricted Period, beneficial ownership interests in the Regulation S Global Security shall be transferable in accordance with applicable law and the other terms of this Indenture. (e) Legend. ------ (i) Except as permitted by the following paragraphs (ii), (iii) or (iv), each Security certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form (each defined term in the legend being defined as such for purposes of the legend only): "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 9 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE." Each Definitive Security shall bear the following additional legend: "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." (ii) Upon any sale or transfer of a Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Initial Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all requirements pertaining to the Restricted Securities Legend on such Initial Securities or such Private Exchange Securities shall cease to apply and the requirements that any such Initial Securities or such Private Exchange Securities be issued in global form shall continue to apply. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to Initial Securities that Initial Securities be issued in global form shall continue to apply, and Exchange Securities in global form without the Restricted Securities Legend shall be 10 available to Holders that exchange such Initial Securities in such Registered Exchange Offer. (v) Upon the consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities be issued in global form shall continue to apply, and Private Exchange Securities in global form with the Restricted Securities Legend shall be available to Holders that exchange such Initial Securities in such Private Exchange. (vi) Upon a sale or transfer after the expiration of the Restricted Period of any Initial Security acquired pursuant to Regulation S, all requirements that such Initial Security bear the Restricted Securities Legend shall cease to apply and the requirements requiring any such Initial Security be issued in global form shall continue to apply. (f) Cancelation or Adjustment of Global Security. At such time as --------------------------------------------- all beneficial interests in a Global Security have either been exchanged for Definitive Securities, transferred, redeemed, repurchased or canceled, such Global Security shall be returned by the Depositary to the Trustee for cancelation or retained and canceled by the Trustee. At any time prior to such cancelation, if any beneficial interest in a Global Security is exchanged for Definitive Securities, transferred in exchange for an interest in another Global Security, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (g) Obligations with Respect to Transfers and Exchanges of ------------------------------------------------------ Securities. - ----------- (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate, Definitive Securities and Global Securities at the Registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchanges pursuant to Sections 2.06, 3.06, 4.06, 4.08 and 9.05 of this Indenture). (iii) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent or the Registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the 11 Company, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary. (iv) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (h) No Obligation of the Trustee. ----------------------------- (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depositary or any other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to the registered Holders (which shall be the Depositary or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Definitive Securities --------------------- (a) A Global Security deposited with the Depositary or with the Trustee as Securities Custodian pursuant to Section 2.1 or issued in connection with a Registered Exchange Offer or Private Exchange shall be transferred to the beneficial owners thereof in the form of Definitive Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as a Depositary for such Global Security or if at any time the Depositary ceases to be a "clearing agency" registered under the Exchange Act, and a successor depositary is not appointed by the Company within 90 days of such notice or after the Company becomes aware of such cessation, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole 12 discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Securities under this Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to the Trustee, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depositary shall direct. Any certificated Initial Security in the form of a Definitive Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(e), bear the Restricted Securities Legend. (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to the Trustee a reasonable supply of Definitive Securities in fully registered form without interest coupons. EXHIBIT A [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT 2 HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. Each Definitive Security shall bear the following additional legend: IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. No. $__________ 13% Senior Subordinated Note due 2009 CUSIP No. ______ [ISIN No. _______] BETTER MINERALS & AGGREGATES COMPANY, a Delaware corporation, promises to pay to [Cede & Co.], or registered assigns, the principal sum [of Dollars] [listed on the Schedule of Increases or Decreases in Global Security attached hereto] on [ ], [ ]. Interest Payment Dates: March 15 and September 15. Record Dates: March 1 and September 1. 2 Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. BETTER MINERALS & AGGREGATES COMPANY, by _________________________________ Name: Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. By:___________________________ Authorized Signatory * If the Security is to be issued in global form, add the Global Securities Legend and the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL SECURITIES B SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". [FORM OF REVERSE SIDE OF INITIAL SECURITY AND PRIVATE EXCHANGE SECURITY] 13% Senior Subordinated Note due 2009 1. Interest -------- (a) BETTER MINERALS & AGGREGATES COMPANY, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company shall pay interest semiannually on March 15 and September 15 of each year. Interest on the Securities shall accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from October 1, 1999 until the principal hereof is due. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. (b) Liquidated Damages. The holder of this Security is entitled to ------------------ the benefits of an Exchange and Registration Rights Agreement, dated as of October 1, 1999, among the Company, U.S. SILICA COMPANY, BETTER MATERIALS CORPORATION, GEORGE F. PETTINOS, INC., OTTAWA SILICA COMPANY, THE FULTON LAND AND TIMBER COMPANY, PENNSYLVANIA GLASS SAND CORPORATION, BUCKS COUNTY CRUSHED STONE COMPANY, CHIPPEWA FARMS CORPORATION, SHORE STONE COMPANY, INC., BMC TRUCKING, INC., ELLEN JAY, INC., STONE MATERIALS COMPANY, LLC, COMMERCIAL STONE CO., INC. and COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, LLC (the "Note Guarantors") and the Initial Purchasers named therein (the "Registration Agreement"). Capitalized terms used in this paragraph (b) but not defined herein have the meanings assigned to them in the Registration Agreement. If (i) the Shelf Registration Statement or Exchange Offer Registration Statement, as applicable under the Registration Agreement, is not filed with the Commission on or prior to 135 days after the Issue Date, (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is not declared effective within 195 days after the Issue Date, (iii) the Registered Exchange Offer is not consummated on or prior to 240 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 195 days after the Issue Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 45 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company shall pay liquidated damages to each holder of Transfer Restricted Securities, during the period of such Registration Default, in an amount equal to $0.192 per week per $1,000 principal amount of the Securities constituting Transfer Restricted Securities held by such holder until the applicable Registration Statement is filed or declared effective, the Registered Exchange Offer is consummated or the Shelf Registration Statement again becomes effective, as the case may be. All accrued liquidated damages shall be paid to 2 holders in the same manner as interest payments on the Securities on semi-annual payment dates which correspond to interest payment dates for the Securities. Following the cure of all Registration Defaults, the accrual of liquidated damages shall cease. The Trustee shall have no responsibility with respect to the determination of the amount of any such liquidated damages. For purposes of the foregoing, "Transfer Restricted Securities" means (i) each Initial Security until the date on which such Initial Security has been exchanged for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) each Initial Security or Private Exchange Security until the date on which such Initial Security or Private Exchange Security has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement or (iii) each Initial Security or Private Exchange Security until the date on which such Initial Security or Private Exchange Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 2. Method of Payment ----------------- The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the March 1 or September 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal, premium, liquidated damages, if any, and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium, liquidated damages, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium and interest), and the Securities may be exchanged or transferred, at the office or agency of the Company in the Borough of Manhattan, The City of New York (which initially shall be the Corporate Trust Office of the Trustee, at 101 Barclay Street, New York, New York 10286), except that, at the option of the Company, payment of interest may be made by check mailed directly to Holders at their registered addresses; provided, however, that payments on the Securities may -------- ------- also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar -------------------------- Initially, THE BANK OF NEW YORK, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 3 4. Indenture --------- The Company issued the Securities under an Indenture dated as of October 1, 1999 (the "Indenture"), among the Company, the Note Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. " 77aaa-77bbbb) as in effect on the date of the Indenture (the ------ "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all terms and provisions of the Indenture, and Holders (as defined in the Indenture) are referred to the Indenture and the TIA for a statement of such terms and provisions. The Securities are senior subordinated unsecured obligations of the Company limited to $150,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the [Initial] [Private Exchange] Securities referred to in the Indenture issued in an aggregate principal amount of $150,000,000. The Securities include the Initial Securities and any Exchange Securities and Private Exchange Securities issued in exchange for Initial Securities. The Initial Securities, the Exchange Securities and the Private Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, issue or sell shares of capital stock of such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, and make asset sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into any other Person or convey, transfer or lease all or substantially all of the property of the Company. To guarantee the due and punctual payment of the principal and interest on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Note Guarantors have jointly and severally unconditionally guaranteed the Guaranteed Obligations on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption ------------------- Except as set forth in the following paragraph, the Securities shall not be redeemable at the option of the Company prior to September 15, 2004. Thereafter, the Securities shall be redeemable at the option of the Company, in whole or in part, on not less than 30 nor more than 60 days prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest and liquidated damages, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on September 15 of the years set forth below: 4 Year Redemption Price -------------------------------------------------------- 2004 106.500% 2005 104.333% 2006 102.167% 2007 and thereafter 100.000% In addition, prior to September 15, 2002, the Company may redeem up to a maximum of 35% of the original aggregate principal amount of the Securities with the Net Cash Proceeds of one or more Public Equity Offerings (i) by the Company or (ii) by Parent or Holdings to the extent the Net Cash Proceeds thereof are contributed to the Company or used to purchase Capital Stock (other than Disqualified Stock) of the Company from the Company following which there is a Public Market, at a redemption price equal to 113% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages thereon, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that after giving effect to any such redemption, at -------- ------- least 65% of the original aggregate principal amount of the Securities remains outstanding. Any such redemption shall be made within 90 days of such Public Equity Offering upon not less than 30 nor more than 60 days notice mailed to each holder of Securities being redeemed and otherwise in accordance with the procedures set forth in the Indenture. 6. Sinking Fund ------------ The Securities are not subject to any sinking fund. 7. Notice of Redemption -------------------- Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued and unpaid interest and liquidated damages, if any, on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 8. Repurchase of Securities at the Option of Holders upon Change of Control ------------------------------------------------------------------------ Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest and liquidated damages, if any, to 5 the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. In accordance with Section 4.06 of the Indenture, the Company will be required to offer to purchase Securities upon the occurrence of certain events. 9. Subordination ------------- The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company and each Note Guarantor agrees, and each Holder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 10. Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed. 11. Persons Deemed Owners --------------------- Except as provided in paragraph 2 hereof, the registered Holder of this Security may be treated as the owner of it for all purposes. 12. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 13. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the 6 Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 14. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended without prior notice to any Holder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) any default may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Securities, the Company and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5 of the Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to add Note Guarantees with respect to the Securities; (v) to secure the Securities; (vi) to add additional covenants or to surrender rights and powers conferred on the Company; (vii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; (viii) to make any change that does not adversely affect the rights of any Holder; (ix) to make any change in the subordination provisions of the Indenture that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company (or any representative thereof) under such subordination provisions; or (x) to provide for the issuance of the Exchange Securities or Private Exchange Securities. 15. Defaults and Remedies --------------------- If an Event of Default occurs (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company) and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of and interest on all the Securities shall become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Securities may rescind any such acceleration with respect to the Securities and its consequences. If an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to a Responsible Officer of the Trustee reasonable indemnity or security reasonably satisfactory to the Trustee against any loss, liability or expense and certain other conditions are complied with. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Securities unless (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal 7 amount of the outstanding Securities have requested the Trustee in writing to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity reasonably satisfactory to the Trustee against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Securities have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Securities are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. 16. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 17. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company or any Note Guarantor shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 18. Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations ------------- Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 8 20. Governing Law ------------- THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 21. CUSIP and ISIN Numbers ---------------------- The Company has caused CUSIP [and ISIN] numbers to be printed on the Securities and has directed the Trustee to use CUSIP [and ISIN] numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder of Securities upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security. 9 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ ____________________________________________________________ Sign exactly as your name appears on the other side of this Security. 10 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED SECURITIES This certificate relates to $_________ principal amount of Securities held in (check applicable space) ____ book-entry or _____ definitive form by the undersigned. The undersigned (check one box below): [_] has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Security held by the Depositary a Security or Securities in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Security (or the portion thereof indicated above); [_] has requested the Trustee by written order to exchange or register the transfer of a Security or Securities. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act, the undersigned confirms that such Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) [_] to the Company; or (2) [_] to the Registrar for registration in the name of the Holder, without transfer; or (3) [_] pursuant to an effective registration statement under the Securities Act of 1933; or (4) [_] inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (5) [_] outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933 and such Security shall be held immediately after the transfer through Euroclear and Cedel until the expiration of the Restricted Period (as defined in the Indenture); or 11 (6) [_] to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements; or (7) [_] pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any Person other than the registered holder thereof; provided, however, that if box -------- ------- (5), (6) or (7) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. ________________________ Your Signature Signature Guarantee: Date: __________________________ __________________________ Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee ____________________________________________________________ TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as 12 the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ____________________ ______________________________ NOTICE: To be executed by an executive officer 13 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $[ ]. The following increases or decreases in this Global Security have been made: Date of Amount of decrease in Amount of increase in Principal amount of this Signature of Exchange Principal Amount of Principal Amount of this Global Security authorized signatory this Global Security Global Security following such decrease of Trustee or or increase Securities Custodian
OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 (Asset Disposition) or 4.08 (Change of Control) of the Indenture, check the box: Asset Disposition [_] Change of Control [_] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount ($1,000 or an integral multiple thereof): $ Date: __________________ Your Signature: __________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_______________________________________________ Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. EXHIBIT B [FORM OF FACE OF EXCHANGE SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. 2 No. $__________ 13% Senior Subordinated Note due 2009 CUSIP No. ______ [ISIN No. ______ ] BETTER MINERALS & AGGREGATES COMPANY, a Delaware corporation, promises to pay to [Cede & Co.], or registered assigns, the principal sum [of Dollars] [listed on the Schedule of Increases or Decreases in Global Security attached hereto] on [ ], [ ]. Interest Payment Dates: March 15 and September 15. Record Dates: March 1 and September 1. 3 Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. BETTER MINERALS & AGGREGATES COMPANY, by _____________________________________ Name: Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. by _____________________________ Authorized Signatory * If the Security is to be issued in global form, add the Global Securities Legend and the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL SECURITIES B SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". 4 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY] 13% Senior Subordinated Note due 2009 1. Interest. -------- BETTER MINERALS & AGGREGATES COMPANY, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company shall pay interest semiannually on March 15 and September 15 of each year. Interest on the Securities shall accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from October 1, 1999 until the principal hereof is due. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment ----------------- The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the March 1 or September 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal, premium and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) shall be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case - -------- ------- of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar -------------------------- Initially, THE BANK OF NEW YORK, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 5 4. Indenture --------- The Company issued the Securities under an Indenture dated as of October 1, 1999 (the "Indenture"), among the Company, the Note Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C." 77aaa-77bbbb) as in effect on the date of the Indenture (the ------ "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all terms and provisions of the Indenture, and Holders (as defined in the Indenture) are referred to the Indenture and the TIA for a statement of such terms and provisions. The Securities are senior subordinated unsecured obligations of the Company limited to $150,000,000 aggregate principal amount at any one time outstanding, of which $150,000,000 in aggregate principal amount will be initially issued on the Closing Date. This Security is one of the Exchange Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities and Private Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities, the Exchange Securities and the Private Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, issue or sell shares of capital stock of such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates and make Asset Sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into any other Person or convey, transfer or lease all or substantially all of the property of the Company. To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Note Guarantors have, jointly and severally, unconditionally guaranteed the Guaranteed Obligations on a senior basis subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption ------------------- Except as set forth in the following paragraph, the Securities shall not be redeemable at the option of the Company prior to September 15, 2004. Thereafter, the Securities shall be redeemable at the option of the Company, in whole or in part, on not less than 30 nor more than 60 days prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest and liquidated damages, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive 6 interest due on the relevant interest payment date), if redeemed during the 12- month period commencing on September 15, of the years set forth below: Year Redemption Price ---------------------------------------------------------- 2004 106.500% 2005 104.333% 2006 102.167% 2007 and thereafter 100.000% In addition, prior to September 15, 2002, the Company may redeem up to a maximum of 35% of the original aggregate principal amount of the Securities with the Net Cash Proceeds of one or more Public Equity Offerings (i) by the Company or (ii) by Parent or Holdings to the extent the Net Cash Proceeds thereof are contributed to the Company or used to purchase Capital Stock (other than Disqualified Stock) of the Company from the Company following which there is a Public Market, at a redemption price equal to 113% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages thereon, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that after giving effect to any such redemption, at -------- ------- least 65% of the original aggregate principal amount of the Securities remains outstanding. Any such redemption shall be made within 90 days of such Public Equity Offering upon not less than 30 nor more than 60 days notice mailed to each holder of Securities being redeemed and otherwise in accordance with the procedures set forth in the Indenture. 6. Sinking Fund ------------ The Securities are not subject to any sinking fund. 7. Notice of Redemption -------------------- Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued and unpaid interest and liquidated damages, if any, on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 8. Repurchase of Securities at the Option of Holders upon Change of Control ------------------------------------------------------------------------ Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part 7 of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. In accordance with Section 4.06 of the Indenture, the Company will be required to offer to purchase Securities upon the occurrence of certain events. 9. Subordination ------------- The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company and each Note Guarantor agrees, and each Holder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 10. Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 11. Persons Deemed Owners --------------------- Except as provided in paragraph 2 hereof, the registered Holder of this Security may be treated as the owner of it for all purposes. 12. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 8 13. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 14. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended without prior notice to any Holder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) any default may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Securities, the Company and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5 of the Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to add Note Guarantees with respect to the Securities; (v) to secure the Securities; (vi) to add additional covenants or to surrender rights and powers conferred on the Company; (vii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; (viii) to make any change that does not adversely affect the rights of any Holder; (ix) to make any change in the subordination provisions of the Indenture that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company (or any representative thereof) under such subordination provisions; or (x) to provide for the issuance of the Exchange Securities or Private Exchange Securities. 15. Defaults and Remedies --------------------- If an Event of Default occurs (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company) and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of and interest on all the Securities shall become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Securities may rescind any such acceleration with respect to the Securities and its consequences. If an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense and certain other conditions are complied with. 9 Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Securities unless (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal amount of the outstanding Securities have requested the Trustee in writing to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity reasonably satisfactory to the Trustee against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Securities have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Securities are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. 16. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 17. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company or any Note Guarantor shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 18. Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations ------------- Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint 10 tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. Governing Law ------------- THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 21. CUSIP and ISIN Numbers ---------------------- The Company has caused CUSIP [and ISIN] numbers to be printed on the Securities and has directed the Trustee to use CUSIP [and ISIN] numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder of Securities upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security. 11 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ ____________________________________________________________ Sign exactly as your name appears on the other side of this Security. Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. 12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 (Asset Disposition) or 4.08 (Change of Control) of the Indenture, check the box: Asset Disposition [_] Change of Control [_] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount ($1,000 or an integral multiple thereof): $ Date: __________________ Your Signature: ___________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_______________________________________________ Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. 13 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $[ ]. The following increases or decreases in this Global Security have been made:
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of Exchange Principal Amount of Principal Amount of this Global Security authorized signatory this Global Security Global Security following such decrease of Trustee or or increase Securities Custodian
EXHIBIT C FORM OF SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of , among [GUARANTOR] (the "New Guarantor"), a subsidiary of BETTER MINERALS & AGGREGATES COMPANY (or its successor), a Delaware corporation (the "Company"), [EXISTING GUARANTORS] and THE BANK OF NEW YORK, a New York banking corporation, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H : WHEREAS the Company and [OLD GUARANTORS] (the "Existing Guarantors") has heretofore executed and delivered to the Trustee an Indenture (the "Indenture") dated as of October 1, 1999, providing for the issuance of an aggregate principal amount of up to $150,000,000 of 113% Senior Subordinated Notes due 2009 (the "Securities"); WHEREAS Section 4.11 of the Indenture provides that under certain circumstances the Company is required to cause the New Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all the Company's obligations under the Securities pursuant to a Note Guarantee on the terms and conditions set forth herein; and WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the Existing Guarantors are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Company, the Existing Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Agreement to Guarantee. The New Guarantor hereby agrees, jointly ---------------------- and severally with all the Existing Guarantors, to unconditionally guarantee the Company's obligations under the Securities on the terms and subject to the conditions set forth in Articles 11 and 12 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities. 2. Ratification of Indenture; Supplemental Indentures Part of ---------------------------------------------------------- Indenture. Except as expressly amended hereby, the Indenture is in all respects - --------- ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental 2 Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, ------------- AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 4. Trustee Makes No Representation. The Trustee makes no ------------------------------- representation as to the validity or sufficiency of this Supplemental Indenture. 5. Counterparts. The parties may sign any number of copies of this ------------ Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 6. Effect of Headings. The Section headings herein are for ------------------ convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. [NEW GUARANTOR], by __________________________________________ Name: Title: BETTER MINERALS & AGGREGATES COMPANY, by __________________________________________ Name: Title: 3 [EXISTING GUARANTORS], by_____________________________ Name: Title: THE BANK OF NEW YORK, as Trustee, by _________________________________ Name: Title: EXHIBIT D Form of Transferee Letter of Representation Better Minerals & Aggregates Company In care of The Bank of New York 101 Barclay Street New York, New York 10286 Ladies and Gentlemen: This certificate is delivered to request a transfer of $[ ] principal amount of the 13% Senior Subordinated Notes due 2009 (the "Securities") of Better Minerals & Aggregates Company (the "Company"). Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows: Name:________________________ Address:_____________________ Taxpayer ID Number:__________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")), purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we invest in or purchase securities similar to the Securities in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date that is two years 2 after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement that has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that is purchasing for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in each case in a minimum principal amount of Securities of $250,000, or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Securities pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Trustee. TRANSFEREE:_________________, by:________________________ EX-4.2 50 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.2 EXECUTION COPY BETTER MINERALS & AGGREGATES COMPANY (formerly named USS INTERMEDIATE HOLDCO, INC.) $150,000,000 13% Senior Subordinated Notes due 2009 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT ------------------------------------------ October 1, 1999 CHASE SECURITIES INC. BNP CAPITAL MARKETS, LLC c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: Better Minerals & Aggregates Company (formerly named USS Intermediate Holdco, Inc.), a Delaware corporation (the "Company"), proposes to issue and ------- sell to Chase Securities Inc. and BNP Capital Markets, LLC (together with Chase Securities Inc., the "Initial Purchasers"), upon the terms and subject to the ------------------ conditions set forth in a purchase agreement dated September 28, 1999 (the "Purchase Agreement"), $150,000,000 aggregate principal amount of its 13% ------------------ Senior Subordinated Notes due 2009 (the "Securities") to be jointly and ---------- severally guaranteed on a senior subordinated basis by certain subsidiaries of the Company signatory hereto (collectively, the "Subsidiary Guarantors"). --------------------- Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Company and the Subsidiary Guarantors agree with the Initial Purchasers, for the benefit of the holders (including the Initial Purchasers and the Market-Maker (as defined herein)) of the Securities, the Exchange Securities (as defined herein) and the Private Exchange Securities (as defined herein) (collectively, the "Holders"), as follows: ------- 1. Registered Exchange Offer. The Company and the Subsidiary Guarantors shall (i) prepare and, not later than 135 days following the date of original issuance of the Securities (the "Issue Date"), file with the Commission ---------- a registration statement (the "Exchange Offer Registration Statement") on an ------------------------------------- appropriate form under the Securities Act with respect to a proposed offer to the Holders of the Securities (the 2 "Registered Exchange Offer") to issue and deliver to such Holders, in exchange ------------------------- for the Securities, a like aggregate principal amount of debt securities of the Company (the "Exchange Securities") that are identical in all material respects ------------------- to the Securities, except for the transfer restrictions relating to the Securities, (ii) use their reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 195 days after the Issue Date and the Registered Exchange Offer to be consummated no later than 240 days after the Issue Date and (iii) keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Securities will be issued ---------------------------------- under the Indenture or an indenture (the "Exchange Securities Indenture") among ----------------------------- the Company, the Subsidiary Guarantors and the Trustee or such other bank or trust company that is reasonably satisfactory to the Initial Purchasers, as trustee (the "Exchange Securities Trustee"), such indenture to be identical in --------------------------- all material respects to the Indenture, except for the transfer restrictions relating to the Securities. All references in this exchange and registration rights agreement (this "Agreement") to "prospectus" shall, except where the --------- context otherwise requires, include any prospectus (or amendment or supplement thereto) filed with the Commission pursuant to Section 6 of this Agreement. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as defined herein) not complying with the requirements of the next sentence, (b) is not an Initial Purchaser holding Securities that have, or that are reasonably likely to have, the status of an unsold allotment in an initial distribution, (c) acquires the Exchange Securities in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any person to participate in the distribution of the Exchange Securities) and to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Subsidiary Guarantors, the Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, each Holder that is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is ----------------- required to deliver a prospectus containing substantially the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer. 3 If, prior to the consummation of the Registered Exchange Offer, any Holder holds any Securities acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Registered Exchange Offer, the Company shall, upon the request of any such Holder, simultaneously with the delivery of the Exchange Securities in the Registered Exchange Offer, issue and deliver to any such Holder, in exchange for the Securities held by such Holder (the "Private Exchange"), a like aggregate ---------------- principal amount of debt securities of the Company (the "Private Exchange ---------------- Securities") that are identical in all material respects to the Exchange - ---------- Securities, except for the transfer restrictions relating to such Private Exchange Securities. The Private Exchange Securities will be issued under the same indenture as the Exchange Securities, and the Company shall use its reasonable best efforts to cause the Private Exchange Securities to bear the same CUSIP number as the Exchange Securities. In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York City time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all respects with all laws that are applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer and any Private Exchange, as the case may be, the Company shall: (a) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (b) deliver to the Trustee for cancelation all Securities so accepted for exchange; and 4 (c) cause the Trustee or the Exchange Securities Trustee, as the case may be, promptly to authenticate and deliver to each Holder, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange. The Company and the Subsidiary Guarantors shall use their reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be used by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided that (i) in the case where such prospectus and any amendment or - -------- supplement thereto must be delivered by an Exchanging Dealer, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers have sold all Exchange Securities held by them and (ii) if required by rule, regulation or interpretation of the Commission's staff, the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 90 days after the consummation of the Registered Exchange Offer. The Indenture or the Exchange Securities Indenture, as the case may be, shall provide that the Securities, the Exchange Securities and the Private Exchange Securities shall vote and consent together on all matters as one class and that none of the Securities, the Exchange Securities or the Private Exchange Securities will have the right to vote or consent as a separate class on any matter. Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Securities surrendered in exchange therefor or, if no interest has been paid on the Securities, from the Issue Date. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company or, if it is such an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Notwithstanding any other provisions hereof, the Company and the Subsidiary Guarantors shall ensure that (i) any Exchange Offer Registration Statement and any amendment thereto, when it becomes effective, and any prospectus forming part thereof and any supplement thereto as of the consummation of the Registered Exchange Offer, complies in all material respects with the Securities Act and the rules and 5 regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not, as of the consummation of the Registered Exchange Offer, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If (i) because of any change in law or applicable interpretations thereof by the Commission's staff the Company is not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) any Securities validly tendered pursuant to the Registered Exchange Offer are not exchanged for Exchange Securities within 240 days after the Issue Date, or (iii) any Initial Purchaser so requests with respect to Securities or Private Exchange Securities not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following the consummation of the Registered Exchange Offer, or (iv) any applicable law or interpretations do not permit any Holder to participate in the Registered Exchange Offer, or (v) any Holder that participates in the Registered Exchange Offer does not receive freely transferable Exchange Securities in exchange for tendered Securities, or (vi) the Company so elects, then the following provisions shall apply: (a) The Company and the Subsidiary Guarantors shall use their reasonable best efforts to file as promptly as practicable (but in no event more than 45 days after so required or requested pursuant to this Section 2) with the Commission, and thereafter shall use their reasonable best efforts to cause to be declared effective, a shelf registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities (as defined below) by the Holders thereof from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "Shelf ----- Registration Statement" and, together with any Exchange Offer Registration ---------------------- Statement, a "Registration Statement"). ---------------------- (b) The Company and the Subsidiary Guarantors shall use their reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders of Transfer Restricted Securities for a period ending on the earlier of (i) two years from the Issue Date or such shorter period that will terminate when all the Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant thereto and (ii) the date on which the Securities become eligible for resale without volume restrictions pursuant to Rule 144 under the Securities Act (in any such case, such period being called the "Shelf ----- Registration Period"). The Company and the Subsidiary Guarantors shall be ------------------- deemed not to 6 have used their reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if either of them voluntarily take any action that would result in Holders of Transfer Restricted Securities covered thereby not being able to offer and sell such Transfer Restricted Securities during that period, unless such action is required by applicable law. (c) Notwithstanding any other provisions hereof, the Company and the Subsidiary Guarantors shall ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the "Holders' -------- Information")) does not contain an untrue statement of a material fact or ----------- omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3. Liquidated Damages. (a) The parties hereto agree that the Holders of Transfer Restricted Securities (as defined below) will suffer damages if the Company or the Subsidiary Guarantors fail to fulfill their obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the applicable Registration Statement is not filed with the Commission on or prior to 135 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to (x) the request of an Initial Purchaser made pursuant to clause (iii) of the first paragraph of Section 2 and received later than 120 days after the Issue Date, (a "Late IP Request"), on or prior to 165 days after the Issue Date, or (y) a change in law or the applicable interpretations of the Commission's staff, if later, within 45 days after publication of the law or interpretations), (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is not declared effective within 195 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to (x) a Late IP Request, within 240 days after the Issue Date, or (y) a change in law or the applicable interpretations of Commission's staff, if later, within 45 days after publication of the change in law or interpretations), (iii) the Registered Exchange Offer is not consummated on or prior to 240 days after the Issue Date, or (iv) any required Shelf Registration Statement is filed and declared effective within 195 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to (x) a late IP Request, within 240 days after the Issue Date, or (y) a change in law or the applicable interpretations of 7 Commission's staff, if later, within 45 days after publication of the change in law or interpretations) but shall thereafter cease to be effective (at any time that the Company and the Subsidiary Guarantors are obligated to maintain the effectiveness thereof) without being succeeded within 45 days by an additional Registration Statement (or post-effective amendment to the Shelf Registration Statement) filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Subsidiary -------------------- Guarantors will be jointly and severally obligated to pay liquidated damages to each Holder of Transfer Restricted Securities, during the period of one or more such Registration Defaults, in an amount equal to $ 0.192 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement is declared effective and the Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, as the case may be. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. As used herein, the term "Transfer Restricted Securities" ------------------------------ means (i) each Security until the date on which such Security has been exchanged for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) each Security or Private Exchange Security until the date on which it has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) each Security or Private Exchange Security until the date on which it is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), the Company shall not be required to pay liquidated damages to a Holder of Transfer Restricted Securities if such Holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1 or failed to provide the information required to be provided by it, if any, pursuant to Section 4(m). (b) The Company shall notify the Trustee and the paying agent (the "Paying Agent") under the Indenture immediately upon the happening of each and - ------------- every Registration Default. The Company and the Subsidiary Guarantors shall pay the liquidated damages due on the Transfer Restricted Securities by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Securities, sums sufficient to pay the liquidated damages then due. The liquidated damages due shall be payable on each interest payment date specified by the Indenture and the Securities to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay liquidated damages shall be deemed to accrue from and include the date of the applicable Registration Default. (c) The parties hereto agree that the liquidated damages provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by Holders of Transfer Restricted Securities by reason of 8 the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer Registration Statement to be declared effective and the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement. 4. Registration Procedures. In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as any Initial Purchaser may reasonably propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by any Initial Purchaser and if in compliance with applicable law, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company shall advise each Initial Purchaser, each Exchanging Dealer known to the Company and, in the case of a Shelf Registration Statement, the Holders named therein (or their counsel) and, if requested by any such person, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; 9 (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities, the Exchange Securities or the Private Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein in order that the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) If any event contemplated by Section 4(b)(ii) through (v) occurs during the period for which the Company and the Subsidiary Guarantors are required to maintain an effective Registration Statement, the Company and the Subsidiary Guarantors will promptly prepare and file with the Commission a post- effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Securities, Exchange Securities or Private Exchange Securities from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The Company and the Subsidiary Guarantors will make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of any Registration Statement. (e) The Company will furnish to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (f) The Company will, during the Shelf Registration Period, promptly deliver to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company and the Subsidiary Guarantors consent to the use of such prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities in connection with the offer and sale of the Transfer Restricted Securities covered by such prospectus or any amendment or supplement thereto. 10 (g) The Company will furnish to each Initial Purchaser and each Exchanging Dealer known to the Company, and to any other Holder who so requests, without charge, at least one conformed copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any Initial Purchaser or Exchanging Dealer or any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (h) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Initial Purchaser, each Exchanging Dealer and such other persons that are required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or other persons may reasonably request; and the Company and the Subsidiary Guarantors consent to the use of such prospectus or any amendment or supplement thereto by any such Initial Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid. (i) Prior to the effective date of any Registration Statement, the Company and the Subsidiary Guarantors will use their reasonable best efforts to register or qualify, or cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities included therein and their respective counsel in connection with the registration or qualification of, such Securities, Exchange Securities or Private Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities, Exchange Securities or Private Exchange Securities covered by such Registration Statement; provided that the Company and the Subsidiary Guarantors -------- will not be required to qualify generally to do business in any jurisdiction where they are not then so qualified or to take any action which would subject them to general service of process or to taxation in any such jurisdiction where they are not then so subject. Upon request of the Company, the Initial Purchasers shall furnish to the Company a list of jurisdictions where, to its knowledge, beneficial owners of the Securities reside, but the Initial Purchasers will not be responsible for any mistakes or inaccuracies in such list. (j) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Securities, the Exchange Securities and the Private Exchange Securities, as the case may be, and provide the applicable trustee with certificates for the Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. 11 (k) The Company and the Subsidiary Guarantors will comply with all applicable rules and regulations of the Commission and the Company will make generally available to the Holders as soon as practicable after the effective date of the applicable Registration Statement an earning statement satisfying the provisions of Section 11(a) of the Securities Act; provided that in no event -------- shall such earning statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period. (l) The Company and the Subsidiary Guarantors will cause the Indenture or the Exchange Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (m) The Company may require each Holder of Transfer Restricted Securities to be registered pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement and to execute and deliver such questionnaires, powers of attorney, underwriting agreement and other documents reasonably required in connection with such Shelf Registration or pursuant to Section 10 hereof, and the Company may exclude from such registration the Transfer Restricted Securities of any Holder that fails to furnish such information or documents within a reasonable time after receiving such request. (n) In the case of a Shelf Registration Statement, each Holder of Transfer Restricted Securities to be registered pursuant thereto agrees by acquisition of such Transfer Restricted Securities that, upon receipt of any notice from the Company pursuant to Section 4(b)(ii) through (v), such Holder will discontinue disposition of such Transfer Restricted Securities until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(c) or until advised in writing (the "Advice") by the ------ Company that the use of the applicable prospectus may be resumed. If the Company shall give any notice under Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be -------------------- extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(c) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). (o) In the case of a Shelf Registration Statement, the Company and the Subsidiary Guarantors shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Securities, Exchange 12 Securities and Private Exchange Securities being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. (p) In the case of a Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined below) acting for, Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold and any underwriter participating in any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter in connection with such Shelf Registration Statement. (q) In the case of a Shelf Registration Statement, the Company shall, if requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use its reasonable best efforts to cause (i) its counsel to deliver an opinion relating to the Shelf Registration Statement and the Securities, Exchange Securities or Private Exchange Securities, as applicable, in customary form, (ii) its officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) and (iii) its independent public accountants to provide a comfort letter or letters in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 5. Registration Expenses. The Company and the Subsidiary Guarantors shall jointly and severally bear all expenses incurred in connection with the performance of its obligations under Sections 1, 2, 3 and 4 and the Company will reimburse the Holders for the reasonable fees and disbursements, as such are negotiated between the Company and the Holders, of one firm of attorneys chosen by the Holders of a majority in aggregate principal amount of the Securities, and the Private Exchange Securities to be sold pursuant to each Registration Statement other than the Exchange Offer Registration Statement (the "Special ------- Counsel") acting for the Holders in connection therewith. - ------- 6. Market-Making. (a) For so long as any of the Securities, Exchange Securities or Private Exchange Securities are outstanding and Chase Securities Inc. (the "Market-Maker") or any of its affiliates is an affiliate of USS ------------ Holdings, Inc., the Company or any of its affiliates (as defined in the rules and regulations of the Commission) and proposes to make a market in the Securities, Exchange Securities or 13 Private Exchange Securities as part of its business in the ordinary course, then, to the extent that, in the opinion of the Market-Maker's counsel (which may be an employee of the Market-Maker), the Market-Maker is obligated under the Securities Act to deliver a prospectus in connection with its market-making activities, the following provisions shall apply for the sole benefit of the Market Maker: (i) The Company and the Subsidiary Guarantors shall (A) on the date that the Exchange Offer Registration Statement is filed with the Commission, file a registration statement (the "Market-Making Registration -------------------------- Statement") (which may be the Exchange Offer Registration Statement or the --------- Shelf Registration Statement if permitted by the rules, regulations or interpretations of the Commission) and use their best efforts to cause such Market-Making Registration Statement to be declared effective by the Commission on or prior to the consummation of the Exchange Offer; (B) periodically amend such Market-Making Registration Statement so that the information contained therein complies with the requirements of Section 10(a) under the Securities Act; (C) within 45 days following the end of each of the Company's first three fiscal quarters in each fiscal year, file a supplement (which may consist of a periodic report of the Company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), ------------ which is filed by the Company as a prospectus supplement under the Securities Act) (hereinafter, an "Exchange Act Supplement") to the ----------------------- prospectus contained in the Market-Making Registration Statement that sets forth the financial results of the Company for such quarter; (D) within 90 days following the end of each of the Company's fiscal years, file a supplement (which may be an Exchange Act Supplement) to the prospectus contained in the Market-Making Registration Statement that sets forth the financial results of the Company for such fiscal year; and (E) amend the Market-Making Registration Statement or supplement the related prospectus when necessary to reflect any material changes in the information provided therein; provided, however, that (1) prior to filing the Market-Making -------- ------- Registration Statement, any amendment thereto or any supplement to the related prospectus (other than an Exchange Act Supplement), the Company will furnish to the Market-Maker copies of all such documents proposed to be filed, which documents will be subject to the review of the Market-Maker and its counsel, (2) the Company and the Subsidiary Guarantors will not file the Market-Making Registration Statement, any amendment thereto or any supplement to the related prospectus (other than an Exchange Act Supplement) to which the Market-Maker and its counsel shall reasonably object unless the Company is advised by counsel that such Market-Making Registration Statement, amendment or supplement is required to be filed, (3) the Company will provide the Market-Maker and its counsel with copies of the Market-Making Registration Statement and each amendment and supplement filed and (4) the 45-day and 90-day period referred to in clause (C) and (D), respectively, above shall be extended to the extent that the Company utilizes Rule 12b-25 under the Exchange Act. 14 (ii) Promptly upon the Company satisfying the eligibility criteria for use of Form S-3 under the Securities Act, the Company and the Subsidiary Guarantors shall file a post-effective amendment to the Market- Making Registration Statement to convert it to a Form S-3 registration statement. (iii) The Company shall notify the Market-Maker and, if requested by the Market-Maker, confirm such advice in writing, (A) when any post- effective amendment to the Market-Making Registration Statement or any amendment or supplement to the related prospectus (other than an Exchange Act Supplement) has been filed, and, with respect to any post-effective amendment, when the same has become effective; (B) of any request by the Commission for any post-effective amendment to the Market-Making Registration Statement, any supplement or amendment to the related prospectus or for additional information; (C) the issuance by the Commission of any stop order suspending the effectiveness of the Market- Making Registration Statement or the initiation of any proceedings for that purpose; (D) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; (E) of the happening of any event that makes any material statement made in the Market-Making Registration Statement, the related prospectus or any amendment or supplement thereto untrue or that, under applicable law, requires the making of any changes in the Market-Making Registration Statement, such prospectus or any amendment or supplement thereto, in order to make the statements therein not misleading under the circumstances under which they were made; and (F) of any advice from a nationally recognized statistical rating organization that such organization has placed the Company under surveillance or review with negative implications or has determined to downgrade the rating of the Securities, Exchange Securities or Private Exchange Securities or any other debt obligation of the Company. (iv) If any event contemplated by Section 6(a)(iii)(B) through (E) occurs during the period for which the Company and the Subsidiary Guarantors are required to maintain an effective Market-Making Registration Statement, the Company and the Subsidiary Guarantors shall promptly prepare and file with the Commission a post-effective amendment to the Market- Making Registration Statement or a supplement to the related prospectus or file any other required document so that the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (v) In the event of the issuance of any stop order suspending the effectiveness of the Market-Making Registration Statement or of any order 15 suspending the qualification of the Securities, Exchange Securities or Private Exchange Securities for sale in any jurisdiction, the Company and the Subsidiary Guarantors shall use promptly its best efforts to obtain its withdrawal. (vi) The Company shall furnish to the Market-Maker, without charge, (A) at least one conformed copy of the Market-Making Registration Statement and any post-effective amendment thereto; and (B) as many copies of the related prospectus and any amendment or supplement thereto as the Market- Maker may reasonably request. (vii) The Company and the Subsidiary Guarantors shall consent to the use of the prospectus contained in the Market-Making Registration Statement or any amendment or supplement thereto by the Market-Maker in connection with the offering and sale of the Securities, Exchange Securities or Private Exchange Securities. (viii) For so long as the Securities, Exchange Securities or Private Exchange Securities shall be outstanding, the Company shall furnish to the Market-Maker (A) as soon as practicable after the end of each of the Company's fiscal years, the number of copies reasonably requested by the Market-Maker of the Company's annual report for such year, (B) as soon as available, the number of copies reasonably requested by the Market-Maker of each report (including, without limitation, reports on Forms 10-K, 10-Q and 8-K) or definitive proxy statements of the Company filed under the Exchange Act or mailed to stockholders and (C) to the extent not required to be furnished under clause (A) or (B), all material public reports and all reports and financial statements furnished by the Company to the Nasdaq National Market System or any U.S. national securities exchange or quotation service upon which the Securities or Exchange Securities may be listed pursuant to requirements of or agreements with such exchange or quotation service or to the Commission pursuant to the Exchange Act or any rule or regulation of the Commission thereunder. (b) In the case of the Market-Making Registration Statement, the Market-Maker agrees that, upon receipt of any notice from the Company pursuant to Section 6(a)(iii)(B) through (E), the Market-Maker will discontinue disposition of such Securities, Exchange Securities or Private Exchange Securities until the Market-Maker's receipt of copies of the supplemental or amended prospectus contemplated by Section 6(a)(iv) or until advised in writing by the Company that the use of the applicable prospectus may be resumed. (c) If, in connection with the Market-Making Registration Statement, counsel for the Market-Maker (which may be an employee of the Market-Maker) advises the Market-Maker in writing that any of the following is necessary or desirable in order for the Market-Maker to comply with applicable law, the Company shall make 16 reasonably available for inspection by a representative of, and counsel acting for, the Market-Maker all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative or counsel or the Market-Maker. (d) Prior to the effective date of the Market-Making Registration Statement, the Company and the Subsidiary Guarantors will use their reasonable best efforts to register or qualify, or cooperate with the Market-Maker and its respective counsel in connection with the registration or qualification of, such Securities, Exchange Securities or Private Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as the Market- Maker reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities, Exchange Securities or Private Exchange Securities covered by the Market-Making Registration Statement; provided that the Company and the -------- Subsidiary Guarantors will not be required to qualify generally to do business in any jurisdiction where they are not then so qualified or to take any action which would subject them to general service of process or to taxation in any such jurisdiction where they are not then so subject. (e) The Company represents that the Market-Making Registration Statement, any post-effective amendments thereto, any amendments or supplements to the related prospectus and any documents filed by them under the Exchange Act will, when they become effective or are filed with the Commission, as the case may be, conform in all material respects to the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission thereunder and will not, as of the effective date of such Market-Making Registration Statement or post-effective amendments and as of the filing date of amendments or supplements to such prospectus or filings under the Exchange Act, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading; provided -------- that no representation or warranty is made as to information contained in or omitted from the Market-Making Registration Statement or the related prospectus in reliance upon and in conformity with written information furnished to the Company by the Market-Maker specifically for inclusion therein, which information the parties hereto agree will be limited to the statements concerning the Market-Making activities of the Market-Maker to be set forth on the cover page and in the "Plan of Distribution" section of the prospectus (the "Market-Maker's Information.") -------------------------- (f) At the time of effectiveness of the Market-Making Registration Statement and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented, the Company shall (if requested by the Market-Maker) furnish the Market-Maker and its 17 counsel with a certificate of its Chairman of the Board of Directors or President and Chief Financial Officer to the effect that: (i) the Market-Making Registration Statement has been declared effective; (ii) in the case of an amendment or supplement, such amendment has become effective under the Securities Act as of the date and time specified in such certificate, if applicable; such amendment or supplement to the prospectus was filed with the Commission pursuant to the subparagraph of Rule 424(b) under the Securities Act specified in such certificate on the date specified therein; (iii) to the knowledge of such officers, no stop order suspending the effectiveness of the Market-Making Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the Commission; (iv) such officers have carefully examined the Market-Making Registration Statement and the prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and as of the date of such Market-Making Registration Statement, amendment or supplement, as applicable, the Market-Making Registration Statement and the prospectus, as amended or supplemented, if applicable, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (g) At the time of effectiveness of the Market-Making Registration Statement and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented (other than by means of an Exchange Act Supplement), the Company shall (if requested by the Market-Maker) furnish the Market-Maker and its counsel with the written opinion of counsel for the Company reasonably satisfactory to the Market-Maker to the effect that: (i) the Market-Making Registration Statement has been declared effective; (ii) in the case of an amendment or supplement, such amendment has become effective under the Securities Act as of the date and time specified in such opinion, if applicable; (iii) to the knowledge of such counsel, such amendment or supplement to the prospectus was filed with the Commission pursuant to the subparagraph of Rule 424(b) under the Securities Act specified in such opinion on the date specified therein, and no stop order suspending the effectiveness of the Market-Making Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the Commission; and (iv) such counsel has reviewed the Market-Making Registration Statement and the prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and participated with officers of the Company and independent public accountants for the Company in the preparation of such Market-Making Registration Statement and prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and has no reason to believe that as of the date of such Market-Making Registration Statement, amendment or supplement, as applicable, 18 the Market-Making Registration Statement and the prospectus, as amended or supplemented, if applicable (in each case excluding all financial statements, financial and statistical data and Market-Maker's Information), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (h) At the time of effectiveness of the Market-Making Registration Statement and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented to include audited annual financial information, the Company shall (if requested by the Market-Maker) furnish the Market-Maker and its counsel with a letter of PricewaterhouseCoopers LLP (or other independent public accountants for the Company of nationally recognized standing), in form satisfactory to the Market-Maker, addressed to the Market-Maker and dated the date of delivery of such letter, (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission and, (ii) in all other respects, substantially in the form of the letter delivered to the Initial Purchasers pursuant to Section 5(f) of the Purchase Agreement, with, in the case of an amendment or supplement to include audited financial information, such changes as may be necessary to reflect the amended or supplemented financial information. (i) The Company hereby agrees to indemnify the Market-Maker, and, if applicable, contribute to the Market-Maker, in accordance with Section 7 and 8 of this Agreement. (j) The Company will comply with the provisions of this Section 6 at its own expense and will reimburse the Market-Maker for its reasonable expenses associated with this Section 6 (including fees of outside counsel). (k) The agreements contained in this Section 6 and the representations, warranties and agreements contained in this Agreement shall survive all offers and sales of the Securities and shall remain in full force and effect, regardless of any termination or cancelation of this Agreement or any investigation made by or on behalf of any indemnified party. (l) For purposes of this Section 6, any reference to the terms "amend", "amendment" or "supplement" with respect to the Market-Making Registration Statement or the prospectus contained therein shall be deemed to refer to and include the filing under the Exchange Act of any document deemed to be incorporated therein by reference. 7. Indemnification. (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as applicable, or in connection with any prospectus delivery by the Market-Maker, the Company and the Subsidiary 19 Guarantors shall jointly and severally indemnify and hold harmless each Holder (including, without limitation, any such Initial Purchaser, the Market-Maker or any such Exchanging Dealer), its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 7 and Section 8 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Securities, Exchange Securities or Private Exchange Securities), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or Market-Making Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iii) in the case of the Market-Maker, any violation of the Securities Act resulting from any breach by the Company of its representations, warranties and agreements contained in Section 6, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Subisidiary -------- ------- Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information or Market-Maker's Information; and provided, further, that with -------- ------- respect to any such untrue statement in or omission from any related preliminary prospectus or final prospectus, the indemnity agreement contained in this Section 7(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Securities, Exchange Securities or Private Exchange Securities to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) a copy of the final prospectus or an amendment or supplement thereto was not sent or given to such person at or prior to the written confirmation of the sale of such Securities, Exchange Securities or Private Exchange Securities to such person and (B) the untrue statement in or omission from the related preliminary prospectus or final prospectus was corrected in the final prospectus or such amendment or supplement, as the case may be, unless, in either case, such failure to deliver the final prospectus or such amendment or supplement was a result of non-compliance by the Company with Section 4(e), 4(f), 4(g), 4(h) or 6(a)(vi)(B), as applicable. 20 (b) In the event of a Shelf Registration Statement or in connection with any prospectus delivery by the Market-Maker, each Holder (including, if applicable, the Market- Maker), shall indemnify and hold harmless the Company, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 7(b) and Section 8 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or Market-Making Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders' Information or Market-Maker's Information furnished to the Company by such Holder, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable -------- ------- for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement or prospectus. (c) Promptly after receipt by an indemnified party under this Section 7 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 7(a) or 7(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, -------- however, that the failure to notify the indemnifying party shall not relieve it - ------- from any liability which it may have under this Section 7 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to -------- ------- notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 7. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to 21 the indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, -------- ------- that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) the Indemnified Party has reasonably concluded that a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 7(a) and 7(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense or settlement of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. 8. Contribution. If the indemnification provided for in Section 7 is unavailable or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (a) in such proportion as shall be appropriate to reflect the relative benefits received by the Company from the initial offering and sale of the Securities, on the one hand, and by a Holder from receiving 22 Securities, Exchange Securities or Private Exchange Securities, as applicable, registered under the Securities Act, on the other, or (b) if the allocation provided by clause (a) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (a) above but also the relative fault of the Company and the Subsidiary Guarantors, on the one hand, and such Holder, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company and the Subsidiary Guarantors or information supplied by the Company and the Subsidiary Guarantors, on the one hand, or to any Holders? Information or Market-Maker's Information supplied by such Holder, on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 8 were to be determined by pro rata allocation or by -------- any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8 shall be deemed to include, for purposes of this Section 8, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 8, an indemnifying party that is a Holder of Securities, Exchange Securities or Private Exchange Securities shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities, Exchange Securities or Private Exchange Securities sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 9. Rules 144 and 144A. The Company shall use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any Holder of Transfer Restricted Securities or the Market-Maker, make publicly available other information so long as necessary to permit sales of such Holder's or the Market-Maker's securities pursuant to Rules 144 and 144A. The Company and the Subsidiary Guarantors covenant that they will take such further action as any Holder of Transfer Restricted Securities or the Market-Maker may reasonably request, all to the extent required from time to time to enable such Holder or the Market-Maker to sell Transfer Restricted Securities without registration under the Securities Act within the limitations of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 23 144A(d)(4)). Upon the written request of any Holder of Transfer Restricted Securities or the Market-Maker, the Company and the Subsidiary Guarantors shall deliver to such Holder or the Market-Maker a written statement as to whether they have complied with such requirements. Notwithstanding the foregoing, nothing in this Section 9 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 10. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed), and such Holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 11. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities, taken as a single class (and, with respect to the provisions of Section 6, the written consent of the Market-Maker). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities, Exchange Securities or Private Exchange Securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities being sold by such Holders pursuant to such Registration Statement. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier or air courier guaranteeing next-day delivery: (i) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 11(b), which address initially is, with respect to each Holder, the address of such Holder maintained by 24 the registrar under the Indenture, with a copy in like manner to Chase Securities Inc. and BNP Capital Markets, LLC; (ii) if to an Initial Purchaser, initially at its address set forth in the Purchase Agreement; and (iii) if to the Company, initially at the address of the Company set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. (c) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) and by the 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. (e) Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (h) Remedies. In the event of a breach by the Company, the Subsidiary Guarantors or any Holder of any of their obligations under this Agreement, each Holder, the Company or the Subsidiary Guarantors, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company or the Subsidiary Guarantors of its obligations under Sections 1 or 2 hereof for which liquidated damages have been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company, the Subsidiary Guarantors and each Holder agree that 25 monetary damages would not be adequate compensation for any loss incurred by reason of a breach by each such person of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, each such person shall waive the defense that a remedy at law would be adequate. (i) No Inconsistent Agreements. Each of the Company and the Subsidiary Guarantors represents, warrants to and agrees with the Initial Purchasers that (i) it has not entered into, and shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent in a material respect with the rights granted to the Holders in this Agreement or otherwise conflicts in a material respect with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) (with respect to the Company) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Securities and the Market-Maker, it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are not in conflict or inconsistent in a material respect with the provisions of this Agreement. (j) No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the Holders of Transfer Restricted Securities in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Registered Exchange Offer other than Transfer Restricted Securities. (k) Severability. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. Please confirm that the foregoing correctly sets forth the agreement among the Company, the Subsidiary Guarantors and the Initial Purchasers. Very truly yours, BETTER MINERALS & AGGREGATES COMPANY by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Vice President, General Counsel and Assistant Secretary U.S. SILICA COMPANY by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Senior Vice President, General Counsel and Assistant Secretary BETTER MATERIALS CORPORATION by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Vice President and Assistant Secretary GEORGE F. PETTINOS, INC. by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Vice President and Secretary OTTAWA SILICA COMPANY by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Secretary THE FULTON LAND AND TIMBER COMPANY by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Secretary PENNSYLVANIA GLASS SAND CORPORATION by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Secretary BUCKS COUNTY CRUSHED STONE COMPANY, by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Vice President and Assistant Secretary CHIPPEWA FARMS CORPORATION by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Vice President and Assistant Secretary SHORE STONE COMPANY, INC. by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Vice President and Assistant Secretary BMC TRUCKING, INC. by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Vice President and Assistant Secretary ELLEN JAY, INC. by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Vice President and Secretary STONE MATERIALS COMPANY, LLC by: Better Minerals & Aggregates Company, as Manager by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Vice President, General Counsel and Assistant Secretary of Better Minerals & Aggregates Company COMMERCIAL STONE CO., INC. by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Secretary COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, LLC by: Stone Materials Company, LLC as Manager by /s/ John A. Ulizio ------------------------------------------ Name: John A. Ulizio Title: Vice President, General Counsel and Assistant Secretary of Better Minerals & Aggregates Company, Manager of Stone Materials Company, LLC Accepted: CHASE SECURITIES INC. by /s/ - ------------------------------ Authorized Signatory BNP CAPITAL MARKETS, LLC by ------------------------------ Authorized Signatory ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities were acquired by such broker- dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution". ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until [ ] 199[ ], all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Registered Exchange Offer other than commissions or concessions of any broker-dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. ANNEX D [_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: Address: If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-5.1 51 OPINION OF WINTHROP, STIMSON, PUTNAM & ROBERTS Exhibit 5.1 ----------- [Letterhead of Winthrop, Stimson, Putnam & Roberts] March 13, 2000 Better Minerals & Aggregates Company U.S. Silica Company Better Materials Corporation BMC Trucking, Inc. Bucks County Crushed Stone Company Chippewa Farms Corporation Shore Stone Company, Inc. Pennsylvania Glass Sand Corporation George F. Pettinos, Inc. Ottawa Silica Company The Fulton Land and Timber Company Ellen Jay, Inc. Stone Materials Company, LLC Commercial Stone Co., Inc. Commercial Aggregates Transportation and Sales, LLC c/o Better Minerals & Aggregates Company Route 522 North, P.O. Box 187 Berkeley Springs, West Virginia 25411 Ladies and Gentlemen: We have acted as counsel to Better Minerals & Aggregates Company, a Delaware corporation (the "Company"), U.S. Silica Company, BMC Trucking, Inc., Pennsylvania Glass Sand Corporation, George F. Pettinos, Inc. and Ottawa Silica Company, each a Delaware corporation, Better Materials Corporation, Bucks County Crushed Stone Company, Chippewa Farms Corporation, The Fulton Land and Timber Company and Commercial Stone Co., Inc., each a Pennsylvania corporation, Shore Stone Company, Inc. and Ellen Jay, Inc., each a New Jersey corporation, and Stone Materials Company, LLC and Commercial Aggregates Transportation and Sales, LLC, each a Delaware limited liability company (individually, a "Guarantor" and, collectively, the "Guarantors") in connection with the Registration Statement on Form S-4 (the "Registration Statement") filed by the Company and the Guarantors with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933 relating to the Company's proposed offer to exchange (the "Exchange Offer") up to $150,000,000 aggregate principal amount of its new 13% Senior Subordinated Notes due 2009 (the "New Notes") for an equal principal amount of its outstanding 13% Senior Subordinated Notes due 2009 (the "Old Notes") and the related guarantees of the New Notes by the Guarantors (individually, a "Guarantee" and, collectively, the "Guarantees"). The Old Notes and the Guarantees have been, and the New Notes will be, issued pursuant to an Indenture dated as of October 1, 1999 (the "Indenture") among the Company, the Guarantors and The Bank of New York, as trustee (the "Trustee"). In our capacity as such counsel, we have reviewed the Indenture, the form of the New Notes, the Registration Statement and such other corporate records, agreements, documents and other instruments of the Company and the Guarantors as in effect on the date hereof, and satisfied ourselves as to such other matters, as we have deemed necessary or appropriate as a basis for this opinion. In such review, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as certified, conformed or photostatic copies or forms and the authenticity of the originals of such latter documents. We have assumed that each of the Company and the Guarantors are validly existing and in good standing under the laws of their respective jurisdiction of organization and that each has the corporate power and authority to issue the New Notes and the Guarantees, respectively. Based on the foregoing, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that, when the New Notes are duly executed by the Company and authenticated by the Trustee in accordance with the provisions of the Indenture and have been duly issued and delivered in exchange for an equal principal amount of the Old Notes in accordance with the Exchange Offer as described in the Registration Statement, which shall have been declared effective by the Commission, (i) the New Notes will constitute the valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms and (ii) the Guarantees will constitute the valid and legally binding obligations of the Guarantors enforceable against each Guarantor in accordance with their terms, in each case, except as limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or other laws affecting creditors' rights generally, general equitable principles (regardless of whether considered in a proceeding in equity or at law) and requirements of reasonableness, good faith and fair dealing. We are members of the Bar of the State of New York and, for purposes of this opinion, do not hold ourselves out as experts on the law of any jurisdiction other than the law of the State of New York and the Delaware General Corporation Law. This opinion is limited to matters governed by the law of the State of New York and the Delaware General Corporation Law. 2 We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the heading "Legal Matters" in the prospectus that is a part of the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder. Very truly yours, Winthrop, Stimson, Putnam & Roberts 3 EX-8.1 52 OPINION OF WINTHROP, STIMSON, PUTNAM & ROBERTS Exhibit 8.1 ----------- [Letterhead of Winthrop, Stimson, Putnam & Roberts] March 13, 2000 Better Minerals & Aggregates Company Route 522 North, P.O. Box 187 Berkeley Springs, West Virginia 25411 Ladies and Gentlemen: We have acted as counsel to Better Minerals & Aggregates Company, a Delaware corporation (the "Company"), in connection with the Company's offer to issue up to $150 million aggregate principal amount of 13% Senior Subordinated Notes that have been registered under the Securities Act of 1933 (the "Act"), in exchange for an equal principal amount of its outstanding 13% Senior Subordinated Notes due 2009, including the preparation of the prospectus (the "Prospectus") contained in the Registration Statement on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission (the "Commission") by the Company for the purpose of such registration. In our capacity as such counsel, we have reviewed the Registration Statement and such other records, agreements, documents and other instruments of the Company as in effect on the date hereof, and satisfied ourselves as to such other matters, as we have deemed necessary or appropriate as a basis for this opinion. Based on the foregoing and upon consideration of applicable law, and subject to the qualifications, assumptions and limitations stated herein, the discussions of United States federal tax considerations set forth under the captions "Summary--The Exchange Offer--Certain United States Federal Income Tax Consequences" and "Certain United States Federal Tax Consequences" in the Prospectus, insofar as they relate to provisions of United States federal income or estate tax law, are, taken as a whole, accurate in all material respects. This opinion is limited to the federal income and estate tax laws of the United States and does not consider the effects of any foreign, state or local laws or any federal law of the United States other than those pertaining to income or estate taxation. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the heading "Certain United States Federal Tax Consequences" in the Prospectus. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder. Very truly yours, Winthrop, Stimson, Putnam & Roberts 2 EX-10.1 53 THE STOCKHOLDERS AGREEMENT, DATED AS OF 02/09/96 EXHIBIT 10.1 - -------------------------------------------------------------------------------- USS HOLDINGS, INC. --------------------------------------------------- STOCKHOLDERS AGREEMENT --------------------------------------------------- Dated as of February 9, 1996 - -------------------------------------------------------------------------------- STOCKHOLDERS AGREEMENT dated as of February 9, 1996, among USS HOLDINGS, INC., a Delaware corporation (the "Corporation"), and the stockholders of' the Corporation listed on Schedule 1 (each, a "Stockholder" and collectively the "Stockholders"). Each Stockholder owns that number of Securities (as hereinafter defined) set forth opposite such Stockholder's name on Schedule 1 hereto. It is deemed to be in the best interest of the Corporation and the Stockholders that provision be made for the continuity and stability of the business and policies of the Corporation, and, to that end, the Corporation and the Stockholders hereby set forth their agreement with respect to the Securities owned by them. ACCORDINGLY, in consideration of the mutual covenants and agreements contained in this Agreement, the parties agree as follows: 1. Definitions; Rules of Construction. ---------------------------------- (a) Capitalized terms used in this Agreement have the meanings ascribed to them below: "Accounting Period" has the meaning ascribed to it in Section 3(a)(i). ----------------- "Acquisition" means USS Acquisition, Inc., a Delaware corporation, and ----------- any successors thereto (including U.S. Silica after the Merger). "Actual EBITDA" shall be calculated at the end of each Accounting ------------- Period of the Corporation, beginning with the Accounting Period ending February 28, 1998, and shall mean the EBITDA of the Corporation for the twelve- month period ended on the last day of such Accounting Period. "Additional Institutional Director" shall have the meaning ascribed to --------------------------------- it in Section 2(b). "Additional Retiring Purchase" has the meaning ascribed to it in ---------------------------- Section 14(a). "Adjusted Proportionate Percentage" shall mean, with respect to any --------------------------------- Stockholder, the Proportionate Percentage of such Stockholder, calculated as if the Retiring Shares were not issued and outstanding at the time of calculation. "Affiliate" means (i) with respect to any individual, (A) a spouse or --------- descendant of such individual and (B) any trust or family partnership whose primary beneficiary shall be such individual and/or such individual's spouse and/or any Person related by blood or adoption to such individual or such individual's spouse, (ii) with respect to any Person which is not an individual, any other Person that, directly or indirectly through one or more intermediaries Controls, is Controlled by, or is under common Control with, such Person and/or one or more Affiliates thereof, and, without limiting the generality of the --- foregoing, with respect to CMCC includes (x) the ultimate parent corporation of CMCC, upon the completion of the merger of Chemical Banking Corporation and Chase Manhattan Corporation, and all the Affiliates of the aforementioned ultimate parent and (y) a corporation, a general partnership, a limited partnership or limited liability corporation, in which all the beneficial interests of any of the foregoing entities is owned directly or indirectly by one or more present or former employees or executives of CMCC or their respective Affiliates. "Approved Sale" has the meaning ascribed to it in Section 13. ------------- "Board" means the Board of Directors of the Corporation. ----- "Bylaws" means the Bylaws of the Corporation as amended from time to ------ time. "Budgeted EBITDA" shall mean, for the twelve-month period ending on --------------- the last day of each Accounting Period, beginning with the Accounting Period ending February 28, 1998, the EBITDA set forth opposite such Accounting Period on Schedule 2. "Cause" shall mean the commission by a Promoter Stockholder of a ----- felony or other crime involving moral turpitude, or the commission by a Promoter Stockholder of any other act which is a breach of his fiduciary duty of loyalty to his employer or the repeated failure of a Promoter Stockholder to otherwise perform his duties to his employer as determined in good faith by such employer's Board of Directors. "Certificate" means the Amended and Restated Certificate of ----------- Incorporation of the Corporation as filed with the Secretary of State of Delaware on February 9, 1996, as supplemented by all Certificates of Designations filed through the date hereof, copies of which are attached as Schedule 3, as the same may hereafter be amended, modified, supplemented and restated from time to time. "Class A Restricted Shares" means, collectively, the DGHA Restricted ------------------------- Shares and the Manager Restricted Shares. "CMCC" means Chase Manhattan Capital Corporation, a New York ---- corporation. "Code" means the Internal Revenue Code of 1986, as amended. ---- "Common Stock" means the Class A Common Stock, $. 01 par value, of the ------------ Corporation, and the Class B Common Stock, $0.01 par value, of the Corporation. "Common Equivalents" means, at any point in time, (i) as to any ------------------ Stockholder, the number of shares of Common Stock held by such Stockholder at such time, plus the number of shares of Common Stock which are issuable (at such time or thereafter) upon the exercise or conversion of any option, warrant or convertible security held at such time by such Stockholder and (ii) as to all Stockholders, collectively, the aggregate number of shares of Common Stock outstanding at such time plus the aggregate number of shares of Common Stock issuable (at such time or thereafter) upon the exercise or conversion of all outstanding options, warrants and convertible securities. 2 "Company" means, collectively, the Corporation and its Subsidiaries ------- and, individually, the Corporation and each Subsidiary of the Corporation. "Compensation Committee" shall mean the Compensation Committee of the ---------------------- Board, as constituted from time to time in accordance with Section 2(c). "Competitor" means any Person who directly or indirectly, owns, ---------- manages, operates, joins, controls or participates in the ownership, management, operation or control of, or is connected as a director, officer, employee, partner, consultant or otherwise with, any profit or non-profit business or organization in any part of the United States or any other jurisdiction in which the Company sells products or provides services, which, directly or indirectly, Competes (as hereinafter defined) with the Company. A profit or non-profit business or organization shall be deemed to "Compete" with the Company if such business or organization (i) competes with the business of the Company as it is conducted as of the date hereof or at any time while this Agreement is in effect, or (ii) engages in the development, production or sale of products, or the rendering of services, which are the same as, similar to or competitive with, the products or services being developed, provided, sold or rendered by the Company as of the date hereof or at any time while this Agreement is in effect. "Control" means the possession, directly or indirectly, of the power, ------- by stock ownership, contract right, proxy or otherwise, to direct the management and policies of a Person. "Corporation" has the meaning ascribed to it in the Preamble. ----------- "Credit Agreement" means the Credit Agreement dated as of February 9, ---------------- 1996, as amended from time to time, among Acquisition and the lenders named therein. "Credit Event" means (i) the existence of an event of default under ------------ any Debt Document, or (ii) the existence of a default, which is not waived or cured within any applicable grace period provided for therein, under any other document or agreement to which any Company is a party or an obligor, which evidences indebtedness of any Company individually or in the aggregate of more than $1,000,000. "Debt Documents" shall mean the Credit Agreement and the Note Purchase -------------- Agreement, the documents attached as exhibits thereto and any other loan agreement pursuant to which the debt under such agreements is refinanced in whole or in part. "Deferral Date" has the meaning ascribed to it in Section 14(f ). ------------- "Deferral Election" has the meaning ascribed to it in Section 14(f ). ----------------- "DGHA" shall mean D. George Harris & Associates, Inc. ---- "DGHA Fee Letter" means the letter agreement dated the date hereof --------------- among the Corporation, certain Subsidiaries thereof and DGHA, as amended from time to time. "DGHA Original Shares" shall mean the 100,000 shares of Series B -------------------- Preferred Stock issued to certain of the Promoter Stockholders pursuant to the Subscription Agreement. 3 "DGHA Repurchase Agreement" means the DGHA Repurchase Agreement dated ------------------------- the date hereof, among the Corporation and the DGHA Stockholders named therein. "DGHA Restricted Shares" means the 276,814 (as adjusted pursuant to ---------------------- Section 7(d) and as further adjusted to reflect any stock splits, stock dividends, reverse stock splits or reclassifications of the Class A Common Stock) shares of Class A Common Stock issued or issuable to the DGHA Stockholders party to the DGHA Repurchase Agreement (and any Securities issued in respect thereof), which shares are subject to repurchase by the Corporation upon an IRR Event pursuant to the DGHA Repurchase Agreement, for so long as such shares of Class A Common Stock are subject to the DGHA Repurchase Agreement. "DGHA Stockholders" shall mean any Person listed on the Schedule of ----------------- DGHA Stockholders attached hereto as Schedule 4 and any other employee of DGHA or an Affiliate of DGHA who is designated as such by the Chairman of DGHA. "EBITDA" has the meaning, for any period, ascribed to such term in the ------ Credit Agreement. "EBITDA Event" shall mean and occur if, at the end of any Accounting ------------ Period commencing with the twelve-month period ending February 28, 1998, the Actual EBITDA for the twelve-month period ending on the last day of such Accounting Period is less than 75% of the Budgeted EBITDA for the twelve-month period ending on the last day of the corresponding Accounting Period. "Eligible Stockholders" has the meaning ascribed to it in --------------------- Section 14(a). "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 controlled group of any Obligor, or under common control with any Obligor, within the meaning of Section 414 of the 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 (or the penalty for failure to provide such notice) 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 any Obligor or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Obligor 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 imposition of a lien under Section 302(f) of 4 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 could reasonably be expected to constitute grounds for the termination of, or the appointment of a trustee to administer, such Plan. "Excess Attributable to the First Priority Additional Retiring ------------------------------------------------------------- Purchases" shall mean the lesser of (x) the number of Remaining Retiring Shares - --------- to be purchased in the aggregate by the First Priority Eligible Stockholders pursuant to their Additional Retiring Purchases and (y) the excess Remaining Retiring Shares remaining after the Second Retirement Reduction. "Excess Attributable to the Second Priority Additional Retiring -------------------------------------------------------------- Purchases" shall mean the lesser of (x) the number of Remaining Retiring Shares - --------- to be purchased in the aggregate by the Second Priority Eligible Stockholders pursuant to their Additional Retiring Purchases and (y) the excess Remaining Retiring Shares remaining prior to the First Retirement Reduction. "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ or any similar federal law then in force. "Exclusive Period" has the meaning ascribed to it in Section 15. ---------------- "Exempt Issuance" shall mean (i) the issuance of shares of Class A --------------- Common Stock or Class B Common Stock upon the conversion of shares of Series B Preferred Stock and the issuance of shares of Class A Common Stock upon the conversion of shares of Class B Common Stock, (ii) the issuance of Securities to a DGHA Stockholder pursuant to Section 3 of the DGHA Repurchase Agreement and Section 7(b), (iii) the issuance of Securities to a Manager Stockholder pursuant to Section 3 of the Manager Repurchase Agreement and Section 7(a), (iv) the issuance of Securities to a Manager Stockholder pursuant to Section 7(c), (v) the issuance of the Warrants pursuant to the Warrant Issuance Agreement and the issuance of Securities pursuant to the exercise of the Warrants, (vi) the issuance of Securities, or any securities convertible into or exercisable for Securities, pursuant to a Public Offering and (vii) the issuance of Securities to a DGHA Stockholder or a Manager Stockholder after repurchase by the Corporation pursuant to the DGHA Repurchase Agreement, the Manager Repurchase Agreement or pursuant to Section 14, of an equivalent or greater number of Securities from one or more DGHA Stockholders, Manager Stockholders or HCG/HSC Stockholders. "Fair Value" has the meaning ascribed to it in Section 15(a). ---------- "First Priority Eligible Stockholders" shall mean (i) with respect to ------------------------------------ any Transfer to be made by a DGHA Stockholder, the other DGHA Stockholders, (ii) with respect to any Transfer to be made by a Manager Stockholder, the other Manager Stockholders and (iii) with respect to any Transfer to be made by an HCG/HSC Stockholder, the other HCG/HSC Stockholders. "First Refusal Amount" has the meaning ascribed to it in Section 5(a). -------------------- "First Refusal Securities" has the meaning ascribed to it in ------------------------ Section 5(a). 5 "GAAP" means United States generally accepted accounting principles, ---- consistently applied. "HCG" shall mean Harris Chemical Group, Inc. --- "HCG/HSC Stockholder" shall mean any Person listed on the Schedule of ------------------- HCG/HSC Stockholders attached hereto as Schedule 5 and any other full-time employee of HCG or HSC or any Subsidiary thereof who is designated as such by the Chairman of HCG or HSC, as the case may be, but specifically excluding the DGHA Stockholders. "HSC" shall mean Harris Specialty Chemicals, Inc. --- "Harris Securities" shall mean at the time in question the Securities ----------------- (excluding the Securities comprising the Class A Restricted Shares) owned by the Promoter Stockholders. "Individual Investor Put Shares" has the meaning ascribed to it in ------------------------------ Section 14(c). "Initial Institutional Director" shall have the meaning ascribed to it ------------------------------ in Section 2(a)(iii). "Initial Public Offering" means the initial Public offering of equity ----------------------- securities of the Corporation. "Initial Retiring Purchase" has the meaning ascribed to it in ------------------------- Section 14(a). "Institutional Directors" has the meaning ascribed to it in ----------------------- Section 2(b). "Institutional Securities" means all Securities owned by the ------------------------ Institutional Stockholders. "Institutional Stockholders" means any Person listed on the Schedule -------------------------- of Institutional Stockholders attached hereto as Schedule 6 and any successor to, or Permitted Transferee (excluding any transferee who purchases Institutional Securities pursuant to Section 6) of, any such Person who or which agrees in writing to be treated as an Institutional Stockholder hereunder and to be bound by the terms and comply with all applicable provisions hereof. "IRR Event" means the occurrence of any of the following: --------- (i) the sale of all or substantially all of the assets of the Corporation and its Subsidiaries (in each case after assumption of all the liabilities of the Corporation or the Subsidiary), on a consolidated basis; (ii) the sale of all or substantially all of the Securities; (iii) a merger of the Corporation or any Subsidiary, provided that the merger comprises all or substantially all of the assets of the Corporation and its Subsidiaries, 6 with another Person if the stockholders of the Corporation immediately prior to such merger do not own more than 80% of the corporation surviving such merger; (iv) the consummation of a Qualified Public Offering; or (v) a sale made pursuant to Section 15. "Majority of the Institutional Stockholders" means those Institutional ------------------------------------------ Stockholders who at the time in question hold a majority of the Common Equivalents then held by all Institutional Stockholders. "Majority of the DGHA Stockholders" means those DGHA Stockholders who --------------------------------- at the time in question hold a majority of the Common Equivalents then held by all DGHA Stockholders. "Management Services Agreement" means the Management Services ----------------------------- Agreement dated as of the date hereof among the Corporation, certain subsidiaries thereof and DGHA, as amended or modified from time to time. "Manager Repurchase Agreement" means the Manager Repurchase Agreement, ---------------------------- attached hereto and forming Schedule 7, to be entered into among the Corporation and each Manager Stockholder who purchases Manager Restricted Shares. "Manager Restricted Shares" means the 138,411 (as adjusted pursuant to ------------------------- Section 7(d) and as further adjusted to reflect any stock splits, stock dividends, reverse stock splits or reclassifications of the Class A Common Stock) shares of Class A Common Stock issued or issuable to the Manager Stockholders party to the Manager Repurchase Agreement (and any Securities issued in respect thereof), which shares are subject to repurchase by the Corporation upon an IRR Event pursuant to the Manager Repurchase Agreement, for so long as such shares of Class A Common Stock are subject to the Manager Repurchase Agreement. "Manager Stockholder" shall mean any Person listed on the Schedule of ------------------- Manager Stockholders attached hereto as Schedule 8 and any Stockholder who purchases Securities who is a full-time employee of the Corporation or of any Subsidiary and is designated as such by the Board, but specifically excluding the DGHA Stockholders. "Manager Shares" shall have the meaning ascribed to it in -------------- Section 7(c). "Merger" means the consummation of the merger between Acquisition and ------ U.S. Silica, with U.S. Silica as the surviving corporation. "Multiple Employer Plan" means a single employer plan, as defined in ---------------------- Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Obligor or any ERISA Affiliate and at least one Person other than the Obligors and the ERISA Affiliates or (b) was so maintained and in respect of which any Obligor 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. 7 "Note Purchase Agreement" means the Note Purchase Agreement dated as ----------------------- of February 9, 1996, as amended from time to time, among Acquisition and the lenders named therein. "Notice Date" has the meaning ascribed to it in Section 14(b). ----------- "Notice of Offer" has the meaning ascribed to it in Section 11(a). --------------- "Obligor" means Acquisition and U.S. Silica. ------- "Offer" has the meaning ascribed to it in Section 11(a). ----- "Offeree" has the meaning ascribed to it in Section 11(a). ------- "Offeror" shall have the meaning ascribed to it in Section 11(a). ------- "Officer's Report" has the meaning ascribed to it in Section 3(a)(ii). ---------------- "Option" has the meaning ascribed to it in Section 6(a)(i). ------ "Option Notice" has the meaning ascribed to it in Section 6(a)(iv). ------------- "Option Term" has the meaning ascribed to it in Section 6(a)(ii). ----------- "Original Per Unit Cost" shall mean $27.78 (subject to adjustments for ---------------------- stock splits, stock dividends, stock combinations, stock subdivisions and the like with respect to the Units). "Other Stockholders" has the meaning ascribed to it in Section 12(a). ------------------ "PBGC" means the Pension Benefit Guaranty Corporation. ---- "Permitted Transferees" has the meaning ascribed to such term in --------------------- Section 8(d). "Person" shall be construed broadly and shall include an individual, a ------ partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. ---- "Preferred Stock" means (i) the Series A Preferred Stock, the Series B --------------- Preferred Stock and the Seller Preferred Stock and (ii) any shares of any series of Preferred Stock of the Corporation issued to the Stockholders on or after the date hereof. "Primary Retirement Notice" has the meaning ascribed to it in ------------------------- Section 14(a). "Promoter Stockholders" means, collectively, the DGHA Stockholders, --------------------- the Manager Stockholders and the HCG/HSC Stockholders. 8 "Proportionate Percentage" means, with respect to a Stockholder, a ------------------------ fraction (expressed as a percentage) the numerator of which is the number of Common Equivalents held by such Stockholder and the denominator of which is (i) in a situation where the Proportionate Percentage is being calculated with respect to all Stockholders, the total number of Common Equivalents outstanding at the time in question and (ii) in a situation where the Proportionate Percentage is being calculated with respect to a group of Stockholders, the total number of Common Equivalents held by the members of such group. "Public Offering" means the closing of a public offering of Common --------------- Stock pursuant to a registration statement declared effective under the Securities Act, except that a Public Offering shall not include an offering made in connection with an employee benefit plan. "Public Sale" means any sale, occurring simultaneously with or after a ----------- Public Offering, of Securities to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144. "Qualified Public Offering" means the sale by the Corporation and/or ------------------------- one or more stockholders of the Corporation in an underwritten Public Offering registered under the Securities Act of Common Stock which results in aggregate net cash proceeds (net of underwriters' discounts and commissions and estimated offering expenses) to the Corporation and/or any selling stockholders of not less than $30 million. "Reference Date" has the meaning ascribed to it in Section 7(c). -------------- "Registration Rights Agreement" means the Registration Rights ----------------------------- Agreement dated as of February 9, 1996, as amended from time to time, among the Corporation and the parties named therein. "Regulatory Problem" means (i) any set of facts or circumstance ------------------ wherein it has been asserted by any governmental regulatory agency, or a Stockholder believes based on advice of counsel that there is a substantial risk of such assertion, that such Stockholder is not legally permitted to hold, or exercise any significant right with respect to, the securities (including any Securities or debt securities) of the Corporation which it holds or (ii) a Voting Regulatory Problem. "Remaining Retiring Shares" has the meaning ascribed to it in ------------------------- Section 14(a). "Requisite Stockholders" means a Majority of the Institutional ---------------------- Stockholders and a Majority of the DGHA Stockholders; provided, however, that if the Majority of the Institutional Stockholders have designated the Additional Institutional Directors pursuant to Section 2(b) hereof, "Requisite --------- Stockholders" means, solely for purposes of Section 4(a) (other than subsection - ------------ 4(a)(vii) and subsection 4(a)(xi) only with respect to any transactions between the Corporation or any of its Subsidiaries and any Institutional Stockholder), Section 4(b) and Section 13, a Majority of the Institutional Stockholders. "Requisite Stockholder Approval" is the approval of the terms and ------------------------------ vesting of the Class A Restricted Shares, by vote or written consent in lieu thereof, of the holders of more than 75% of the voting power of all outstanding stock of the Corporation entitled to vote as of the 9 consummation of an IRR Event. There shall be excluded, for purposes of the preceding calculation, stock of the Corporation that would not be counted as outstanding stock under Code Section 280G(b)(5) or applicable Treasury Regulations thereunder (whether proposed, temporary or final). "Restricted Securities" means, at any point in time, any Securities --------------------- which have not theretofore been transferred in a Public Sale. "Retiring Participation Shares" has the meaning ascribed to it in ----------------------------- Section 14(a). "Retiring Shares" has the meaning ascribed to it in Section 14(a). --------------- "Retiring Stockholder" has the meaning ascribed to it in -------------------- Section 14(a). "Rule 144" means Rule 144 promulgated by the Securities and Exchange -------- Commission under the Securities Act as such rule may be amended from time to time, or any similar rule then in force. "Sale of the Company" has the meaning ascribed to it in Section 13(a). ------------------- "Sale Notice" has the meaning ascribed to it in Section 13(a). ----------- "Secondary Retirement Notice" has the meaning ascribed to it in --------------------------- Section 14(a). "Second Priority Eligible Stockholders" of shall mean (i) with respect ------------------------------------- to any Transfer to be made by a DGHA Stockholder, the Stockholders other than the DGHA Stockholders, (ii) with respect to any Transfer to be made by a Manager Stockholder, the Stockholders other than the Manager Stockholders, and (iii) with respect to any Transfer to be made by an HCG/HSC Stockholder, the Stockholders other than the HCG/HSC Stockholders. "Second Retirement Notice" has the meaning ascribed to it in ------------------------ Section 14(b). "Section 12 Acceptance" shall have the meaning ascribed to it in --------------------- Section 12(a). "Section 12 Notice" shall have the meaning ascribed to it in ----------------- Section 12(a). "Section 12 Offer" shall have the meaning ascribed to it in ---------------- Section 12(a). "Section 12 Offeree" shall have the meaning ascribed to it in ------------------ Section 12(a). "Section 12 Offeror" shall have the meaning ascribed to it in ------------------ Section 12(a). "Securities" means the Common Stock, the Preferred Stock, and any and ---------- all other Common Stock, Preferred Stock or other capital stock or equity securities (including the Warrants and other derivative securities therefor) of the Corporation. "Securities Act" means the Securities Act of 1933, as amended, or any -------------- similar federal law then in force. 10 "Securities and Exchange Commission" includes any governmental body or ---------------------------------- agency succeeding to the functions thereof. "Seller Preferred Stock" means the Series C Preferred Stock, $.01 par ---------------------- value, of the Corporation issued to U.S. Borax Inc. upon the closing of the Stock Purchase Agreement. "Series A Preferred Stock" means the Series A Preferred Stock, $.01 ------------------------ par value, of the Corporation. "Series B Preferred Stock" means the Series B Preferred Stock, $0.01 ------------------------ par value, of the Corporation. "Single Employer Plan" means a single employer plan, as defined in -------------------- Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Obligor or any ERISA Affiliate and no Person other than the Obligors and the ERISA Affiliates or (b) was so maintained, and in respect of which any Obligor or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Stock Purchase Agreement" means the Stock Purchase Agreement between ------------------------ U.S. Borax Inc. and the Corporation dated October 23, 1995, as amended or modified from time to time. "Stock Purchase Loan Note" shall mean the Secured Promissory Note ------------------------ substantially in the form of Schedule 9 attached hereto. "Subscription Agreement" shall mean the Stock Subscription and ---------------------- Exchange Agreement dated the date hereof, among the Corporation and the Stockholders which are parties thereto. "Subsidiary" means with respect to any Person, any corporation or ---------- other entity of which the shares of stock having a majority of the general voting power in electing the board of directors of such corporation or other entity are, at the time as of which any determination is being made, owned by such Person either directly or indirectly through Subsidiaries. "Tax Sharing Agreement" means the Tax Sharing Agreement dated as of --------------------- February 9, 1996 between the Corporation and the parties named therein. "Termination Event" has the meaning ascribed to it in Section 14(d). ----------------- "Transfer" shall be construed broadly and shall include any transfer -------- (whether voluntary, involuntary or by operation of law) of securities or any interest therein, including without limitation, by way of issuance, sale, participation, pledge, gift, bequeath, intestate transfer, distribution, liquidation, merger or consolidation. "Transfer Date" has the meaning ascribed to it in Section 14(e). ------------- "Trigger Event" shall mean (a) the existence of a Credit Event or the ------------- occurrence of an EBITDA Event, (b) the termination of the Exclusive Period or (c) both of Mr. D. George 11 Harris and Mr. Anthony J. Petrocelli shall have ceased to serve on the Board due to death, disability or resignation. "Unit" means 1 share of Series A Preferred Stock and 2 shares of ---- Series B Preferred Stock. "Unit Price" has the meaning ascribed to it in Section 6(a)(iii). ---------- "U.S. Silica" means U.S. Silica Company, a Delaware corporation. ----------- "Valuation Price per Share" means, with respect to any Security, the ------------------------- amount distributable to such Security, if the Company is sold at Fair Value and the proceeds are distributed by the Corporation in complete liquidation pursuant to the rights and preferences set forth in the Certificate immediately prior to the Notice Date. "Voting Regulation Problem" shall exist when a Person and such ------------------------- Person's Affiliates would own, control or have power over a greater quantity of securities (including any Securities or debt securities) of any kind issued by the Corporation or any successor than are permitted under any requirement of any governmental authority having jurisdiction over such Person. "Voting Securities" means the Class A Common Stock, the Series B ----------------- Preferred Stock (from and after a Trigger Event in accordance with the terms of the Certificate) and any other Securities of the Corporation which shall at the time in question be entitled to vote on each matter as to which stockholders of the Corporation are entitled to vote. "Warrants" means the warrants to purchase shares of Series A Preferred -------- Stock and Series B Preferred Stock granted from time to time pursuant to the Warrant Issuance Agreement. "Warrant Issuance Agreement" means a Warrant Issuance Agreement or -------------------------- similar document to be entered into by the Corporation and the Persons who shall, from time to time, purchase Warrants. "Withdrawal Liability" has the meaning assigned to such term in Part I -------------------- of Subtitle E of Title IV of ERISA. (b) The use in this Agreement of the term "including" means "including, without limitation." The words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits, as the same may from time to time be amended or supplemented, and not to any particular subparagraph or clause contained in this Agreement. All references to schedules and exhibits mean the schedules and exhibits attached to this Agreement. (c) Unless otherwise expressly set forth herein, whenever the term "best efforts" is used, such efforts shall not include any obligation to incur substantial expenses or liabilities. 12 (d) The title of and the section and paragraph headings in this Agreement are for convenience of reference only and shall not govern the interpretation of any of the terms or provisions of this Agreement. (e) The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require. (f) Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement has been chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. 2. Board of Directors; Adjustment EBITDA Targets. --------------------------------------------- (a) Election of Directors Generally. Each Stockholder shall from ------------------------------- time to time take such action, in his capacity as a stockholder of the Corporation, including the voting of all Securities owned or controlled by such Stockholder, as may be necessary to cause the Corporation to be managed at all times by a Board, consisting of seven members to be designated as follows: (i) for so long as D. George Harris and his Affiliates own 50% or more of the Securities (other than DGHA Restricted Shares) held by them on the date hereof, two directors shall be designated by D. George Harris, one of which designated directors shall be D. George Harris (each a "George Harris Director" and together the "George Harris Directors"); (ii) for so long as Anthony J. Petrocelli and his Affiliates own 50% or more of the Securities (other than the DGHA Restricted Shares) held by them on the date hereof, two directors shall be designated by Anthony J. Petrocelli, one of which designated directors shall be Anthony J. Petrocelli (each a "Petrocelli Director" and together the "Petrocelli Directors"); (iii) three directors shall be designated by a Majority of the Institutional Stockholders (each an "Initial Institutional Director" and together the "Initial Institutional Directors"); (iv) for so long as D. George Harris shall be elected as a director he shall also be elected as the Chairman of the Board and Chief Executive Officer of the Corporation, and for so long as Anthony J. Petrocelli shall be elected as a director he shall also be elected as the Vice-Chairman of the Board; Notwithstanding the forgoing, in the event of a Termination Event with respect to D. George Harris or Anthony J. Petrocelli, the DGHA Stockholder with respect to which such Termination Event has occurred shall not be entitled to designate any directors and the Harris Directors or the Petrocelli Directors, as applicable, shall thereafter be designated by the Majority of the DGHA Stockholders. 13 (b) Election of Additional Institutional Directors. In addition to ---------------------------------------------- the directors designated pursuant to Section 2(a), upon the occurrence of a Trigger Event, the Majority of the Institutional Stockholders shall have the right to designate two additional directors (each an "Additional Institutional Director" and together the "Additional Institutional Directors") so as to cause the directors designated by the Institutional Stockholders to constitute a majority of the directors on the Board; provided, however, that such right -------- ------- shall be exercisable by the Majority of the Institutional Stockholders only upon the delivery to the Corporation, during the continuance of the Trigger Event, of a written notice by a representative of the Majority of the Institutional Stockholders of their desire to designate the Additional Institutional Directors. The Initial Institutional Directors and the Additional Institutional Directors are referred to herein collectively as the "Institutional Directors" and each, individually, an "Institutional Director". Each Stockholder shall, at such times as the Majority of the Institutional Stockholders are entitled to designate the Additional Institutional Directors and upon written notice from the Corporation or take such action, in his capacity as a stockholder of the Corporation, including the voting of all Securities owned or controlled by such Stockholder, as may be necessary to cause the Additional Institutional Directors to be elected to the Board. (c) Compensation Committee. Each Stockholder shall from time to ---------------------- time take such action, in his capacity as a stockholder of the Corporation, including the voting of all Securities owned or controlled by such Stockholder, as may be necessary to cause a Compensation Committee of the Board to be constituted and to consist of three directors, two of which shall be Institutional Directors and one of which shall be a George Harris Director. (d) Expenses. The Corporation shall pay the reasonable out-of-pocket -------- expenses incurred by each Board member designated pursuant to Section 2(a) or 2(b) in connection with attending the meetings of the Board and any committees thereof. (e) Covenant to Vote. Each of the Stockholders agrees to vote, in ---------------- person or by proxy, all of the Securities owned by such Stockholder and entitled to vote at any annual or special meeting of the stockholders of the Corporation called for the purpose of voting on the election of directors, or to execute a written consent in lieu thereof, in favor of the election of the directors selected in accordance with Section 2(a) or 2(b). (f) Removal of Directors. -------------------- (i) At all times (A) a Majority of the Institutional Stockholders shall have the right to recommend the removal, without cause, of any or all of the Institutional Directors, (B) D. George Harris (or, if the George Harris Directors are at such time designated by the Majority of the DGHA Stockholders, the Majority of the DGHA Stockholders) shall have the right to recommend the removal, without cause, of any or all of the George Harris Directors, and (C) Anthony J. Petrocelli (or, if the Petrocelli Directors are at such time designated by the Majority of the DGHA Stockholders, the Majority of the DGHA Stockholders) shall have the right to recommend the removal, without cause, of any or all of the Petrocelli Directors. (ii) In the event that any Stockholder acting as described in Section 2(f)(i) shall, in accordance with their rights specified herein, recommend the removal of any director 14 or directors with respect to whom they have such right, then each of the other Stockholders hereby agrees to join with such acting Stockholder in recommending such removal as described above, and in causing the Corporation either to promptly hold a special meeting of stockholders and to vote, in person or by proxy, all of the Securities owned by such Stockholder and entitled to vote at such meeting or to execute a written consent in lieu thereof, as the case may be, in favor of such removal. (g) Vacancies. In the event a vacancy is created on the Board by --------- reason of the death, removal or resignation of any director, (i) such vacancy may be filled by the remaining directors in accordance with Sections 2(a) or 2(b), as applicable, (ii) if not so filled, each of the Stockholders hereby agrees, in its capacity as a stockholder of the Corporation, to elect a director to fill such vacancy in accordance with the selection procedures set forth in Sections 2(a) and 2(b) as applicable. Such election shall occur within thirty days after such vacancy occurs. Each of the Stockholders hereby agrees, in his capacity as a stockholder of the Corporation, to use his best efforts to cause the Corporation either to promptly hold a special meeting of stockholders or to execute a written consent in lieu thereof, and each of the Stockholders hereby agrees to vote all of the Securities owned by such Stockholder and entitled to vote at such meeting, in person or by proxy, or pursuant to such written consent of stockholders, in favor of the person or persons selected in accordance with Sections 2(a) or 2(b) to fill such vacancy and, if necessary, in favor of removing any director elected to fill such vacancy other than in accordance with the selection procedures of Section 2(a) or 2(b). (h) No Inconsistent Agreements. Each Stockholder represents that he -------------------------- has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement, and no Stockholder shall grant any proxy or become party to any voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement. (i) Budgeted EBITDA. In the event the Corporation or any --------------- Subsidiary makes any capital expenditures not contemplated by the projections upon which the Budgeted EBITDA targets are based, or the Corporation or any Subsidiary consummates any mergers, acquisitions or dispositions (whether of assets or stock or other interests) or other extraordinary transactions, the Board will determine in good faith appropriate adjustments to the Budgeted EBITDA targets, which adjustments shall be final and binding. 3. Financial Statements and Other Information, Inspections and Board ----------------------------------------------------------------- Meetings. - -------- (a) Prior to the consummation of an Initial Public Offering, the Corporation will deliver to each Stockholder having a Proportionate Percentage of at least 5%: (i) as soon as available but in any event within 30 days after the end of each four-week or five-week accounting period (the "Accounting Periods") in each fiscal year, unaudited consolidated and consolidating statements of income and cash flows of the Corporation and its Subsidiaries for such Accounting Period and for the period from the beginning of the fiscal year to the end of such Accounting Period, which statements shall also include the EBITDA of the Corporation and its Subsidiaries for such Accounting Period, and commencing on and after the first anniversary of this Agreement, for the 15 twelve-month period ending on the last day of such Accounting Period and consolidated and consolidating balance sheets of the Corporation and its Subsidiaries as of the end of such Accounting Period, setting forth in each case comparisons to the corresponding period in the annual budget and to the corresponding period in the preceding fiscal year with variances delineated, and all such statements will be prepared in accordance with generally accepted accounting principles, consistently applied; (ii) as soon as available but in any event within 45 days after the end of each fiscal quarter of the Corporation unaudited consolidated and consolidating statements of income and cash flows of the Corporation and its Subsidiaries for such fiscal quarter, setting forth in each case comparisons to the corresponding period in the annual budget and to the corresponding period in the preceding fiscal year with variances delineated, and accompanied by a written report of the Corporation's Chief Executive Officer, Chief Operating Officer or Chief Financial Officer with respect to (a) such Officer's lack of actual knowledge after due investigation of any condition or event which constitutes an event of default under the terms of this Agreement, a Credit Event or an EBITDA Event; (b) the operations, problems and achievements of the Corporation during such period and (c) the calculation of the financial tests required under the Credit Agreement for such period (such written report being referred to herein as the "Officer's Report"); (iii) as soon as available but in any event within 90 days after the end of each fiscal year of the Corporation, audited consolidated and consolidating statements of income and cash flows of the Corporation and its Subsidiaries for such year, and the related balance sheets of the Corporation and its Subsidiaries as of the end of such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year and for the annual budget for such year, and accompanied by (a) an opinion thereon of independent certified public accountants reasonably acceptable to a majority in interest of all Stockholders (it being agreed that Coopers & Lybrand is presumptively acceptable), which opinion shall state that said financial statements (other than the annual budget) fairly present the financial condition and results of operations of the Corporation and its Subsidiaries as at the end of, and for, such fiscal year, (b) a letter from such accounting firm stating that in the course of its examination they obtained no knowledge, except as specifically stated, that there was a default in existence by the Corporation or any Subsidiary under this Agreement or any other material agreement to which the Corporation or any Subsidiary is a party, (c) a copy of such firm's annual management letter to the Board and (d) an Officer's Report; (iv) promptly upon receipt thereof, any additional reports, management letters or other detailed information concerning significant aspects of the Corporation's and its Subsidiaries' operations and financial affairs given to the Corporation by its independent accountants (and not otherwise contained in other materials provided hereunder); (v) no later than 30 days prior to the end of each fiscal year, a consolidated and consolidating annual budget prepared on a monthly basis for the Corporation and its Subsidiaries for the succeeding fiscal year (displaying anticipated statements of income and cash flows and balance sheets); 16 (vi) promptly (but in any event within ten (10) business days) after the discovery or receipt of notice of (a) any default under the terms of any material agreement to which the Corporation or any Subsidiary is a party (including without limitation, this Agreement) or, without limitation to the generality of the foregoing, a Trigger Event or any other adverse event or circumstance affecting the Corporation or any Subsidiary which is material to the Corporation and its Subsidiaries taken as a whole (including the filing of any material litigation against the Corporation or any Subsidiary or the existence of a dispute that may reasonably be expected to lead to material litigation) or (b) any noncompliance by the Corporation or any Subsidiary with applicable laws, rules and regulations of all governmental authorities, the violation of which might reasonably be expected to have a material adverse effect upon the financial condition of the Corporation and its Subsidiaries taken as a whole, an Officer's Certificate specifying the nature and a period of existence thereof and what actions the Corporation and its Subsidiaries have taken and propose to take with respect thereto; (vii) within ten (10) days after transmission thereof, copies of all registration statements which the Corporation files with the Securities and Exchange Commission, and copies of all press releases and other statements made available generally by the Corporation to the public concerning material developments in the Corporation's business; (viii) immediately upon receipt thereof, copies of all environmental reports or other communications concerning environmental matters of the Corporation or its Subsidiaries which might reasonably be expected to have a material adverse effect upon the financial condition of the Corporation and its Subsidiaries taken as a whole; and (ix) with reasonable promptness, such other information and financial data concerning the Corporation and its Subsidiaries as any Stockholder having a Proportionate Percentage of at least 5% may reasonably request. To the best of the Corporation's knowledge, each of the financial statements referred to in subparagraphs (i), (ii) and (iii) will be true and correct in all material respects as of the dates and for the periods stated therein, subject in the case of the unaudited financial statements to footnotes and changes resulting from normal year-end audit adjustments. The Corporation will provide to all Stockholders, when available, audited consolidated and consolidating statements of income and cash flows of the Corporation and its Subsidiaries and the related consolidated and consolidating balance sheet of the Corporation and its Subsidiaries, accompanied by an opinion thereon of the Corporation's independent certified public accountant. (b) Except as consented to in writing by the Corporation or as otherwise required by law or judicial order or decree or by any governmental agency or authority, each Person which obtains information regarding the Corporation and its Subsidiaries under this Section 3 will use its best efforts to maintain the confidentiality of all nonpublic information obtained by it hereunder which the Corporation has reasonably designated as proprietary or confidential in 17 nature; provided that each such Person may disclose such information to a Permitted Transferee in connection with the sale or transfer of any Securities if such Permitted Transferee agrees in writing to be bound by the provisions hereof. (c) Prior to the consummation of an Initial Public Offering, the Corporation will permit each representative designated by any Stockholder having a Proportionate Percentage of at least 5%, upon reasonable notice to the Chief Executive Officer of the Corporation, during normal business hours or such other times as any such holder may reasonably request and in such manner so as not to unreasonably interfere with the business and operations of the Corporation or any Subsidiary, to, at such holder's expense, (i) visit and inspect any of the properties of the Corporation and its Subsidiaries, (ii) examine the corporate and financial records of the Corporation and its Subsidiaries and make copies thereof or extracts therefrom and (iii) discuss the affairs, finances and accounts of any such corporations with the directors, officers, key employees and independent accountants of the Corporation and its Subsidiaries. 4. Additional Voting Agreements; Required Sale. ------------------------------------------- (a) The Corporation shall not, and shall ensure that each Subsidiary shall not, without the affirmative vote or written consent of the Requisite Stockholders: (i) consummate a Public Offering; (ii) except as contemplated by this Agreement, the Subscription Agreement or the Warrant Issuance Agreement, after it shall have been executed, issue any Securities other than to the Corporation or to a wholly-owned Subsidiary; (iii) merge or consolidate with or into another entity (other than mergers of wholly-owned Subsidiaries and mergers of a wholly-owned Subsidiary with and into the Corporation where the Corporation is the surviving corporation); (iv) acquire any business from, or capital stock of, any Person; (v) redeem the Seller Preferred Stock, otherwise than as required pursuant to the Certificate; (vi) amend its Certificate of Incorporation, except for the certificate of designations with respect to the Seller Preferred Stock, attached hereto as Schedule 3, which the Stockholders hereby agree shall be adopted by the Corporation on the date hereof; (vii) amend its Bylaws; (viii) increase the compensation of any of its officers, directors or management employees, above the levels in existence as of the date hereof, or pay any fees to directors unless approved by the Compensation Committee; (ix) sell, lease, exchange, convey, license or otherwise dispose of in any 12-month period in excess of 10% (or, in the aggregate during the term of this Agreement, in 18 excess of 25%) of its consolidated assets or assets which contributed 10% (or, in the aggregate during the term of this Agreement, in excess of 25%), or more of its average annual EBITDA over the last 12 fiscal months, in any transaction or series of related transactions (other than sales in the ordinary course of business); (x) liquidate, dissolve or effect a recapitalization or reorganization in any form of transaction; (xi) enter into, revise or amend any contract, agreement or transaction with any of its officers, directors, management employees or Affiliates, except for (a) the entering into of the Management Services Agreement, the DGHA Fee Letter, the Warrant Issuance Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Tax Sharing Agreement, the DGHA Repurchase Agreement and the Manager Repurchase Agreement, and the amendment of the Management Services Agreement contemplated by Section 5(d) thereof and (b) employment related transactions on customary terms, bonus plans approved by the Compensation Committee and for normal employment arrangements and benefit programs on reasonable terms and except as otherwise contemplated by this Agreement; (xii) incur or create, any indebtedness for borrowed money in excess of the amounts permitted by the Debt Documents; (xiii) make any loans or advances to, guarantees for the benefit of, or investments in any Person (other than a wholly-owned Subsidiary), except as permitted by the Debt Documents and except for (a) reasonable advances to employees in the ordinary course of business, (b) investments having a stated maturity no greater than one year from the date the Corporation makes such investment in (1) obligations of the United States government or any agency thereof or obligations guaranteed by the United States government, (2) certificates of deposit of commercial banks having combined capital and surplus of at least $50 million or (3) commercial paper with a rating of at least "Prime-1" by Moody's Investors Service, Inc. or "A-l" by Standard & Poor's Corporation and (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (b)(1) of this subparagraph (xiii) entered into with any bank meeting the qualifications specified in clause (b)(2) of this subparagraph (xiii); (xiv) declare or pay any dividends upon the Securities (other than the Series A Preferred Stock and the Seller Preferred Stock); or (xv) take any action that would cause the Corporation or any Subsidiary to incur a material liability to any Plan or the PBGC or substantially increase the rate of annual contributions to any Plan. (b) At all times during the term of this Agreement the Corporation will, and will cause each Subsidiary to unless consent is obtained from the Requisite Stockholders: (i) cause to be done all things necessary to maintain, preserve and renew its corporate existence and all material licenses, authorizations and permits necessary to the conduct of its businesses; 19 (ii) maintain and keep its properties in good repair, working order and condition, and from time to time make all necessary or desirable repairs, renewals and replacements, so that its businesses may be properly and advantageously conducted at all times; (iii) pay and discharge when payable all taxes, assessments and governmental charges imposed upon its properties or upon the income or profits therefrom (in each case before the same becomes delinquent and before penalties accrue thereon) and all claims for labor, materials or supplies which if unpaid might by law become a lien upon any of its property, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves (as determined in accordance with generally accepted accounting principles, consistently applied) have been established on its books with respect thereto; (iv) comply with all other material obligations which it incurs pursuant to any contract or agreement, whether oral or written, express or implied, as such obligations become due, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves (as determined in accordance with generally accepted accounting principles, consistently applied) have been established on its books with respect thereto; (v) comply with all applicable laws, rules and regulations of all governmental authorities, the violation of which might reasonably be expected to have a material adverse effect upon the financial condition, operating results or business prospects of the Corporation and its Subsidiaries taken as a whole; (vi) maintain proper books of record and account which fairly present its financial condition and results of operations and make provisions on its financial statements for all such proper reserves as in each case are required in accordance with generally accepted accounting principles, consistently applied; (vii) comply with all environmental regulations and orders with respect to such regulations, provided that this subparagraph shall not limit the ability of the Corporation or any Subsidiary thereof to contest in good faith any such order or regulation; (viii) apply for and continue in force with good and responsible insurance companies adequate insurance covering risks of such types and in such amounts as are customary for well-insured corporations of similar size engaged in similar lines of business, all as determined by the Board; (ix) (A) promptly and in any event within 10 days after Acquisition or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, furnish to CMCC a statement of the chief financial officer or treasurer of Acquisition describing such ERISA Event and the action, if any, that Acquisition or such ERISA Affiliate has taken and proposes to take with respect thereto and (B) on the date any records, documents or other information must be furnished to the PBGC with respect to 20 any Plan pursuant to Section 4010 of ERISA, furnish to CMCC a copy of such records, documents and information; (x) promptly and in any event within five days after receipt thereof by Acquisition or any ERISA Affiliate, furnish to CMCC copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (xi) furnish to CMCC promptly upon receipt thereof by the Company or any ERISA Affiliate, a copy of the annual actuarial valuation report of each Plan; and (xii) promptly and in any event within ten days after receipt thereof by Acquisition or any ERISA Affiliate from the sponsor of a Multiemployer Plan, furnish to CMCC copies of each notice concerning (i) the imposition of Withdrawal Liability by any such Multiemployer Plan, (ii) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the amount of liability incurred, or that may be incurred, by Acquisition or any ERISA Affiliate in connection with any event described in clause (i) or (ii). (c) Each Stockholder shall in his capacity as a stockholder of the Corporation, cause that the Corporation observe and perform its obligations under Section 4(a) and Section 4(b). 5. First Refusal Rights for Securities Issued by the Corporation. ------------------------------------------------------------- (a) Except for the issuance of Securities in connection with an Exempt Issuance, if the Corporation authorizes the issuance and sale to any other Person of any Securities or any securities containing options or rights to acquire any Securities (the "First Refusal Securities"), the Corporation will first offer to sell to each Stockholder a portion of the First Refusal Securities in an amount equal to such Stockholder's Proportionate Percentage of the First Refusal Securities (the "First Refusal Amount"). Each Stockholder will be entitled to purchase the First Refusal Securities at the same price per share and on the same terms as the First Refusal Securities are to be offered to such other Person. (b) Each Stockholder must exercise its purchase rights hereunder within 20 days after receipt of written notice from the Corporation describing in reasonable detail the First Refusal Securities being offered, the purchase price per share, the payment terms and such Stockholder's Proportionate Percentage and First Refusal Amount. If all of the First Refusal Securities offered to the Stockholders are not fully subscribed by such Stockholders, the remaining First Refusal Securities will be reoffered to the Stockholders purchasing their entire First Refusal Amount upon the terms set forth in this Section until all such First Refusal Securities are fully subscribed or until all such Stockholders have subscribed for all such First Refusal Securities which they desire to purchase, except that such Stockholders must exercise their purchase rights within 5 days after receipt of all such reoffers. (c) Upon the expiration of the offering periods described above, the Corporation will be free to sell such First Refusal Securities which such Stockholders have not elected to purchase during the 60 days following such expiration, on terms and conditions no more favorable to the purchasers thereof than those offered to such Stockholders. Any First Refusal Securities offered 21 or sold by the Corporation after such 60-day period must be reoffered to the Stockholders pursuant to the terms of this Section. (d) Payment for First Refusal Securities which a Stockholder has elected to purchase shall be made against delivery of (i) the certificates representing the First Refusal Securities at the principal office of the Corporation not earlier than 10 days nor later than 20 days after expiration of the 20 days or 5 days referred to in Section 5(b), as the case may be, and (ii) of the entire price, by cash, certified or bank cashier's check, or such other consideration specified in the Corporation's offer. 6. CMCC Option to DGHA Stockholders and Purchase and Sale of Units to ------------------------------------------------------------------ HCG/HSC Stockholders. - -------------------- (a) (i) CMCC hereby grants to each DGHA Stockholder named on Schedule 11 attached hereto an option (the "Option") during the Option Term to purchase in the aggregate up to the number of Units set forth opposite such DGHA Stockholder's name on such Schedule for the purchase price per Unit set out in Section 6(a)(iii). Each Option shall be non-transferable, except that if any Units are not purchased by any DGHA Stockholder pursuant to an Option prior to January 15, 1997, such Units may be purchased by such other DGHA Stockholders, and in such other amounts, as may be determined by the Chairman of the Corporation. (ii) The Option may be exercised at any time in the period commencing on the date hereof and expiring on the first anniversary of the date hereof ("Option Term"). (iii) The per unit purchase price for each Option Unit (the "Unit Price") shall be: (x) if such Unit is purchased on or before August 15, 1996, the per Unit purchase price shall be the Original Per Unit Cost; and (y) if such Unit is purchased between August 15, 1996 and the expiry of the Option Term, the per Unit purchase price shall be an amount equal to the Original Per Unit Cost plus interest on such amount at a rate of 12% per annum from the date hereof to the date of closing of the purchase. (iv) The Option may be exercised by a DGHA Stockholder, by delivery of a written notice (the "Option Notice") to the Corporation with a copy to CMCC which notice shall set out the number of Units such DGHA Stockholder requests to purchase in accordance with the foregoing provisions of this Section 6(a). (v) Transfers of Units under the terms of this Section 6(a) shall be made at the offices of the Corporation on a mutually satisfactory business day within 15 days after the delivery of an Option Notice. Delivery of certificates or other instruments evidencing the Units, duly endorsed for transfer and free and clear of all liens and encumbrances, shall be made on such date against payment of the Unit Price therefor. 22 (b) (i) As an accommodation to the HCG/HSC Stockholders and for the purposes of facilitating their investment in the Corporation, 50,000 Units are being held by CMCC for the possible resale of such Units to the HCG/HSC Stockholders, in such amounts (which, in the aggregate, shall not exceed 50,000) as shall be determined by the Chairman of the Corporation. Any HCG/HSC Stockholder desiring to purchase Units pursuant to this Section 6(b) must deliver a written notice to CMCC, signed by such HCG/HSC Stockholder and the Chairman of the Corporation, specifying the number of Units to be purchased by such HCG/HSC Stockholder within 90 days after the date hereof, accompanied by (i) a duly executed purchase agreement in the form of Schedule 11 attached hereto and (ii) a check payable to CMCC in the amount of the Original Per Unit Cost for each Unit to be purchased. Upon delivery of such documents and payment of the purchase price for the Units purchased, CMCC will transfer and assign such Units to each such HCG/HSC Stockholder, free and clear of all liens and encumbrances, by delivery to such HCG/HSC Stockholder of stock certificates representing such Units. The Corporation will issue to CMCC such number of stock certificates as CMCC shall reasonably request to effect the foregoing sales. (ii) As a condition precedent to the sale described in Section 6(b)(i), each HCG/HSC Stockholder shall have executed and delivered to the Corporation a counterpart signature page to this Agreement and an undertaking pursuant to which such HCG/HSC Stockholder agrees to be bound by the terms of and to comply with the provisions of this Agreement. 7. Issuance of Additional Securities to DGHA Stockholders and Manager ------------------------------------------------------------------ Stockholders. - ------------ (a) The Corporation shall have the right, but not the obligation, to issue to the Manager Stockholders from time to time, at the discretion of the Chairman of the Corporation, the Manager Restricted Shares at a purchase price of $.01 per share; provided, however, that it shall be a condition precedent of the -------- ------- issue of any Manager Restricted Shares that each Manager Stockholder to whom any Manager Restricted Shares are issued shall have executed and delivered to the Corporation a counterpart signature page to this Agreement and the Manager Repurchase Agreement, pursuant to which such Manager Stockholder agrees to be bound by the provisions of this Agreement and the Manager Repurchase Agreement. (b) The Corporation shall have the right, but not the obligation, to issue to the DGHA Stockholders from time to time, at the discretion of the Chairman of the Corporation, any portion of the DGHA Restricted Shares that are not issued and outstanding on or after the date hereof, at a purchase price of $.01 per share; provided, however, that it shall be a condition precedent of the issue of -------- ------- any DGHA Restricted Shares that each DGHA Stockholder to whom any DGHA Restricted Shares are issued shall have executed and delivered to the Corporation a counterpart signature page of this Agreement and the DGHA Repurchase Agreement, pursuant to which such DGHA Stockholder agrees to be bound by the provisions of this Agreement and the DGHA Repurchase Agreement. 23 (c) In the period commencing on the date hereof and expiring on July 31, 1996 (the "Reference Date"), the Corporation shall have the right, but not the obligation, to issue to the Manager Stockholders up to 100,000 shares of Series B Preferred Stock at a purchase price of $10 per share of Series B Preferred Stock. Upon written request therefor delivered to the Corporation not less than three (3) business days prior to any proposed purchase of shares of Series B Preferred Stock pursuant to this Section, any Manager Stockholder shall have the right to borrow from the Corporation up to 80% of the cash purchase price to be paid by such Manager Stockholder. All loans to be made by the Corporation pursuant to this Section shall be evidenced by a Stock Purchase Loan Note duly executed and delivered by the borrowing Manager Stockholder. It shall be a condition precedent to the issuance of shares of Series B Preferred Stock hereunder that each Manager Stockholder who purchases shares of Series B Preferred Stock pursuant to this Section shall have executed and delivered to the Corporation a counterpart of this Agreement pursuant to which such Manager Stockholder agrees to be bound by the provisions of this Agreement. The shares of Series B Preferred Stock sold to the Manager Stockholders pursuant to this Section 7(c) are referred to herein as the "Manager Shares". (d) In the event that on the Reference Date, the aggregate number of Manager Shares that were sold by the Corporation to the Manager Stockholders pursuant to Section 7(c) shall be less than 100,000, the DGHA Stockholders and the Manager Stockholders shall, as soon as practicable thereafter, surrender to the Corporation for cancellation (without any payment from the Corporation to such Stockholders) the number of DGHA Original Shares, DGHA Restricted Shares and Manager Restricted Shares calculated as provided below. (1) The aggregate number of DGHA Original Shares to be surrendered for cancellation shall be equal to 100,000 minus the result obtained from the following calculation (where "X" is equal to the number of Manager Shares sold pursuant to Section 7(c) above): ((1,800,000 + X) / .95) - (1,800,000 + X) (2) The aggregate number of DGHA Restricted Shares and Manager Restricted Shares to be surrendered for cancellation shall be equal to 415,225 minus the result obtained from the following calculation (where "XI" is equal to the number of Manager Shares sold pursuant to Section 7(c) above and "Y" is equal to the number of DGHA Original Shares outstanding after giving effect to the surrender of DGHA Original Shares as provided in Section 7(d)(1)): ((2,152,941 + X + Y) / .85) - (2,152,941 + X + Y) If on the Reference Date: (A) less than all of the Manager Restricted Shares shall have been issued pursuant to Section 7(a), the Corporation shall determine the maximum number of Manager Restricted Shares permitted to be outstanding by subtracting from 138,411 the number of Manager Restricted Shares that would have been required to be surrendered as provided herein if all Manager Restricted Shares had been issued prior to the Reference Date, or (B) less than all of the DGHA Restricted Shares shall have been issued pursuant to Section 7(b), the Corporation shall determine the maximum number of DGHA Restricted Shares 24 permitted to be outstanding by subtracting from 276,814 the number of DGHA Restricted Shares that would have been required to be surrendered herein if all DGHA Restricted Shares had been issued prior to the Reference Date; and shall then effect the surrender of Manager Restricted Shares and DGHA Restricted Shares only to the extent the outstanding number of Manager Restricted Shares and DGHA Restricted Shares in each case exceeds such maximum permitted amounts (in which event the definition herein of Manager Restricted Shares shall be deemed amended to replace the number 138,411 with such maximum permitted amount of Manager Restricted Shares and the definition herein of DGHA Restricted Shares shall be deemed amended to replace the number 276,814 with such permitted amount of DGHA Restricted Shares). (3) Any DGHA Original Shares, DGHA Restricted Shares and Manager Restricted Shares required to be surrendered hereunder shall be surrendered by the holders pro rata based upon the number of such --- ---- shares held. (e) No later than August 10, 1996, the Corporation shall notify CMCC in writing of (i) the number of Manager Shares that were sold by the Corporation to the Manager Stockholders as of the Reference Date pursuant to Section 7(c) and (ii) if applicable, the number of DGHA Original Shares, DGHA Restricted Shares and Manager Restricted Shares that are required to be surrendered pursuant to Section 7(d) and the Corporation's calculations in determining such numbers. 8. Limitations on Transfers of Stock - General. ------------------------------------------- (a) The provisions regarding Transfers of Securities contained herein shall apply to all Securities now owned or hereafter acquired by a Stockholder, including Securities acquired by reason of any dividend distribution, exchange or conversion, additional issuances of Securities, and acquisitions of outstanding Securities from another Person, and such provisions shall apply to any Securities obtained by a Stockholder upon the exercise, exchange or conversion of any option, warrant or other Security. (b) No Stockholder shall Transfer any Security to a Person not already a party to this Agreement as a Stockholder unless and until such Person executes and delivers to the Corporation a written agreement in form and substance reasonably acceptable to the Corporation pursuant to which such Person shall agree to become a party to, and to be bound by and to comply with the provisions of, this Agreement in the same capacity and to the same extent as the Stockholder Transferring such Security. In the event of any Transfer to an Affiliate contemplated by clauses (i) (A) or (i)(B) of the definition thereof, the Transferee shall grant an irrevocable proxy, which shall be deemed to be coupled with an interest, with respect to voting rights of such Securities to D. George Harris (or, if D. George Harris is no longer a Stockholder or if the transferor is D. George Harris, to Anthony J. Petrocelli and if Anthony J. Petrocelli is no longer a Stockholder, to an individual elected by a majority of the Board), which proxy shall expire upon an Initial Public Offering. Any Transfer of Securities that is not made in compliance with the provisions hereof shall be void ab initio. 25 (c) Any provision of this Agreement to the contrary notwithstanding, no Stockholder shall (i) Transfer any Security to a Person which is a Competitor or to any Affiliates of a Competitor, (ii) effect any Transfer which would subject the Corporation to the reporting requirements of the Exchange Act or (iii) Transfer any Security to any Person if such Transfer would result in an event of default under any Debt Document. (d) The restrictions on Transfer contained in Sections 9, 10, 11 and 12 shall not apply with respect to any Transfer of Securities by any Stockholder to its Affiliates, nor shall they apply to any Transfers made pursuant to Section 6 (collectively referred to herein as "Permitted Transferees"). 9. Limitations on Transfers of Restricted Shares. --------------------------------------------- Except as permitted by Section 8(d) or pursuant to Section 13, no Stockholder shall Transfer any Class A Restricted Shares at any time that the Class A Restricted Shares shall be subject to the restrictions contained in the DGHA Repurchase Agreement or the Manager Repurchase Agreement. 10. Limitations on Transfers prior to Third Anniversary. --------------------------------------------------- Except as permitted by Section 8(d) or pursuant to Section 13 or Section 14, no Stockholder shall Transfer any Securities prior to the third anniversary of the date hereof, except on or before the first anniversary of the date hereof CMCC shall have the right to Transfer any number of the Units it owns, as it determines in its absolute discretion, if following such Transfer or Transfer(s) CMCC and its Affiliates shall continue to own at least 50% of the Units owned by CMCC on the date hereof. 11. Rights of First Refusal after Third Anniversary. ----------------------------------------------- Except for Transfers permitted by Section 8(d) or Section 13, on or after the third anniversary of the date hereof the Stockholders shall comply with the following procedures in connection with any Transfer of Securities: (a) The Stockholder ("Offeror") shall first deliver to the Corporation a written notice (hereinafter in this Section 11 called the "Notice of Offer"), which shall be irrevocable for a period of 60 days after delivery thereof, offering (the "Offer") to the Corporation and the other Stockholders (the "Offerees") all of the Securities proposed to be Transferred by the Offeror at the purchase price and on the terms specified therein (which Notice of Offer shall include all relevant terms of the proposed Transfer). The Offeror shall also furnish to the Corporation such additional information relating to the Offer as may reasonably be requested by the Corporation. The Corporation shall have the right and option, for a period of 30 days after delivery of the Notice of Offer by the Offeror, to accept all or any portion of the Securities so offered at the purchase price and on the terms stated in the Notice of Offer. The Corporation shall, if it does not elect to purchase all of the offered Securities, deliver a copy of the Notice of Offer to the Offerees. Each Offeree shall have the right and option, for a period of 30 days after delivery of the Notice of Offer by the Corporation, by delivery of written notice to the Corporation (x) to accept all or any of its Proportionate Percentage of the Securities so offered at the purchase price and on the terms stated in the Notice of Offer and (y) to offer to purchase any Securities not accepted by the other Offerees, in which case the Securities not 26 accepted by the other Offerees, shall be deemed to have been offered to and accepted by the Offerees, which exercised their option under this clause (y) pro rata in accordance with their respective Proportionate Percentages (computed - --- ---- without including the Offerees, who have not exercised their option to purchase Securities under this clause (y)), on the above-described terms and conditions, and if all of the offered Securities shall not have been fully subscribed by such Offerees, the remaining offered Securities will be reofferred to the Offerees who agreed to purchase their entire entitlement of offered Securities under clause (x) upon the terms set forth in this Section until all such Securities are fully subscribed or until all such Offerees have subscribed for all such offered Securities which they desire to purchase, except that such Offerees must exercise their purchase rights within five (5) business days after receipt of all such reoffers. Notwithstanding the foregoing provisions of this Section 11(a), if the Offeror is a DGHA Stockholder, a Manager Stockholder, a HCG/HSC Stockholder or an Institutional Stockholder, the other DGHA Stockholders, Manager Stockholders, HCG/HSC Stockholders or Institutional Stockholders, as the case may be, shall have the right to purchase, on a pro --- rata basis among such Stockholders, all of the Securities so offered prior to - ---- any purchases by any other Stockholders. (b) Transfers of Securities under the terms of this Section 11 shall be made at the offices of the Corporation on a mutually satisfactory business day within 15 days after the expiration of the applicable time periods. Delivery of certificates or other instruments evidencing such Securities, duly endorsed for transfer and free and clear of all liens and encumbrances, shall be made on such date against payment of the purchase price therefor. (c) If the Corporation and the Offerees shall not have accepted to purchase all the Securities offered for sale pursuant to the aforesaid Notice of Offer, then the Offeror may Transfer to a third party that number of the Securities not accepted by the Corporation and the Offerees at the price and on substantially equivalent terms stated in the original Notice of Offer, at any time within 180 days after the expiration of the offers required by Section 11(a). In the event the Securities are not Transferred by the Offeror on such terms during such 180-day period, the restrictions of this Section 11 shall again become applicable to any Transfer of Securities by the Offeror unless within such 180-day period the Offeror shall deliver to the Corporation a Notice of Offer with respect to an Offer of the same Securities at a purchase price which is less than the purchase price set forth in the previous Offer, in which case the 30-day period specified in Section 11(a) shall be reduced to 15 days and a new 180-day period shall begin. Nothing in this Section 11 shall preclude any Stockholder from engaging in discussions with any investment banker, potential transferee of Securities or other Person with respect to a possible purchase of Securities from it, so long as the provisions of this Section 11 are complied with prior to the consummation of any Transfer to which this applies. (d) The Offeror may specify in the Notice of Offer that all Securities mentioned therein must be Transferred, in which case any acceptance received pursuant to Section 11(a) shall be deemed conditioned upon (x) receipt of written notices of binding acceptance with respect to all Securities mentioned in such Notice of Offer or (y) the Transfer of the remaining Securities pursuant to Section 11(c). 27 12. Right of Co-Sale. ---------------- (a) Subject to the provisions of Section 12(c), in the event that on or after the third anniversary of the date hereof a Stockholder or group of Stockholders (hereinafter, a "Section 12 Offeree") receives a bona fide offer ---- ---- (the "Section 12 Offer") from a third party which is not an Affiliate of the Section 12 Offeree (the "Section 12 Offeror") to purchase from such Section 12 Offeree Securities, for a specified price payable in cash or otherwise and on specified terms and conditions, such Section 12 Offeree shall promptly forward a notice (the "Section 12 Notice") complying with Section 12(b) to the Corporation and to the other Stockholders (the Stockholders receiving a Section 12 Notice collectively referred to herein as the "Other Stockholders"). The Section 12 Offeree shall not Transfer any Securities prior to the expiration of the 15-day period referred to below to the Section 12 Offeror unless the terms of the Section 12 Offer are extended to each Other Stockholders with respect to its Proportionate Percentage of the aggregate number and classes of Securities to which the Section 12 Offer relates, whereupon each Other Stockholder shall be entitled to Transfer such Other Stockholder's Proportionate Percentage of the aggregate number of Securities to which the Section 12 Offer relates. Each Other Stockholder shall have a period of 15 days to deliver a written notice (the "Section 12 Acceptance") to the Section 12 Offeree evidencing its acceptance of the Section 12 Offer. (b) The Section 12 Notice shall set forth (i) the number of Securities to which the Section 12 Offer relates and the name of the Section 12 Offeree, (ii) the name and address of the Section 12 Offeror, (iii) the proposed amount and type of consideration (including, if the consideration consists in whole or in part of non-cash consideration, such information to the Section 12 Offeree as may be reasonably necessary for the Other Stockholders to properly analyze the economic value and investment risk of such non-cash consideration) and the terms and conditions of payment offered by the Section 12 Offeror and (iv) that the Section 12 Offeror has been informed of the co-sale rights provided for in this Section 12, and has agreed to purchase Securities held by the Other Stockholders in accordance with the terms of this Section 12 (which agreement may contain the Section 12 Offeror's obligation to purchase all of the Securities held by the Other Stockholders subject to the Section 12 Offer from the Section 12 Offeree so long as such Section 12 Offeree agrees to purchase simultaneously with such sale from the Other Stockholders if they deliver a Section 12 Acceptance the Securities held by the Other Stockholders subject to such Section 12 Notice of Acceptance). (c) The foregoing provisions of this Section 12 shall not apply to a Transfer or Transfer(s) by a Stockholder or group of Stockholders of up to the greater of (i) 0.50% of the Common Equivalents outstanding at such time, and (ii) 10% of the Securities held by such Stockholder or group of Stockholders at such time. 13. Drag-Along Rights. ----------------- (a) If the Requisite Stockholders approve a sale of all or substantially all of the capital stock or assets of the Company to a Person which is not an Affiliate of any Stockholder (other than an Affiliate of a DGHA Stockholder) (an "Approved Sale"), whether by way of merger, consolidation, sale of stock or assets, or otherwise (each, a "Sale of the Company"), all Stockholders shall consent to and raise no objections against the Approved Sale, and if the Approved Sale is structured as (A) a merger or consolidation of the Corporation or a Subsidiary, 28 or a sale of all or substantially all of the assets of the Corporation or a Subsidiary, each Stockholder shall waive any dissenters rights, appraisal rights or similar rights in connection with such merger, consolidation or asset sale, or (B) a sale of all the capital stock of the Corporation or a Subsidiary, the Stockholders shall agree to sell their Securities on the terms and conditions approved by the Requisite Stockholders. The Stockholders shall take all necessary and desirable actions approved by the Requisite Stockholders, in connection with the consummation of the Approved Sale, including the execution of such agreements and such instruments and other actions reasonably necessary to (1) provide the representations, warranties, indemnities, covenants, conditions, non-compete agreements, escrow agreements and other provisions and agreements relating to such Approved Sale and (2) effectuate the allocation and distribution of the aggregate consideration upon the Approved Sale as set forth below. The Stockholders shall be permitted to sell their Securities pursuant to an Approved Sale without complying with the provisions of Sections 8, 9, 10, 11 or 12 of this Agreement. (b) The obligations of the Stockholders pursuant to this Section 13 are subject to the satisfaction of the following conditions: (i) subject to Section 13(b)(iii), upon the consummation of the Approved Sale, all of the Stockholders shall receive the same proportion of the aggregate consideration from such Approved Sale that such holder would have received if such aggregate consideration had been distributed by the Corporation in complete liquidation pursuant to the rights and preferences set forth in the Certificate as in effect immediately prior to such Approved Sale (giving effect to applicable orders of priority) and after giving effect to the purchase rights (if any) set forth in the DGHA Repurchase Agreement and the Manager Repurchase Agreement; (ii) if any Stockholders of a class are given an option as to the form and amount of consideration to be received, all holders of such class will be given the same option; (iii) all holders of then-currently exercisable Common Equivalents will be given an opportunity to either (A) exercise such rights prior to the consummation of the Approved Sale (but only to the extent such Common Equivalents are then vested) and participate in such sale as Stockholders or (B) upon the consummation of the Approved Sale, receive in exchange for such Common Equivalents consideration equal to the amount determined by multiplying (x) the same amount of consideration per share of Common Stock (of the same class as that for which the Common Equivalent is exercisable) received by the holders of such class of Common Stock in connection with the Approved Sale less the exercise price per Common Equivalent by (y) the number of Common Equivalents; (iv) no Stockholder shall be-obligated to make any out-of-pocket expenditure prior to the consummation of the Approved Sale (excluding modest expenditures for postage, copies, etc.) and no Stockholder shall be obligated to pay more than his pro rata share (based upon the amount of consideration received) of reasonable expenses incurred in connection with a consummated Approved Sale to the extent such costs are incurred for the benefit of all Stockholders and are not otherwise paid by the Corporation or the acquiring party (costs incurred by or on behalf of a Stockholder for its or his sole benefit 29 will not be considered costs of the transaction hereunder), provided that a Stockholder's liability for such expenses shall be capped at the total purchase price received by such Stockholder for his Securities (including the exercise price thereof); and (v) in the event that the Stockholders are required to provide any representations or indemnities in connection with the Approved Sale (other than representations and indemnities concerning each Stockholder's valid ownership of his Securities, free of all liens and encumbrances (other than those arising under applicable securities laws), and each Stockholder's authority, power, and right to enter into and consummate such purchase or merger agreement without violating any other agreement), then each Stockholder shall not be liable for more than his pro rata share (based upon the number of Securities held and not the amount of consideration received) of any liability for misrepresentation or indemnity and such liability shall not exceed the total purchase price received by such Stockholder for his Securities (including the exercise price thereof), after taxes (after giving effect to all potential amendments of tax returns arising in connection with any indemnification claim) and expenses, and such liability shall be satisfied solely out of any funds escrowed for such purpose. (c) If the Corporation and any of the Stockholders or their representatives, enter into any negotiation or transaction for which Rule 506 under the Securities Act (or any similar rule then in effect) may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), each Stockholder who is not an accredited investor (as such term is defined in Rule 501 under the Securities Act) will, at the request of the Corporation or the institutional Stockholders, appoint a purchaser representative (as such term is defined in Rule 501 under the Securities Act) reasonably acceptable to the Corporation or such Stockholders. 14. Options Upon Termination Event. ------------------------------ (a) Upon the occurrence of a Termination Event with respect to a Stockholder who is a Manager Stockholder, an HCG/HSC Stockholder or a DGHA Stockholder (except a Termination Event described in Section 14(d)(ii)(1) or (2) with respect to a Stockholder who is a DGHA Stockholder), in each case occurring on or prior to the fifth anniversary of the date hereof (or at any time with respect to a Termination Event described in Section 14(d)(i)(1) or (2) with respect to a Stockholder who is a Manager Stockholder or Section 14(d)(ii)(1) or (2) with respect to a Stockholder who is an HCG/HSC Stockholder), subject to Section 14(c), the Corporation shall have the right but not the obligation to purchase any or all of such Stockholder's (the "Retiring Stockholder") Securities (other than Class A Restricted Shares) (the "Retiring Shares"). The Corporation shall have 20 days after the occurrence of any Termination Event described above in which to give notice (the "Primary Retirement Notice") to the Retiring Stockholder of its election to purchase all of the Retiring Shares. The Primary Retirement Notice will disclose in reasonable detail the Corporation's election to purchase all of the Retiring Shares and the terms and conditions of the sale including the price per share of the Retiring Shares. In the event that the Corporation does not elect to purchase all of the Retiring Shares, the Corporation shall, within 20 days after the occurrence of any Termination Event described above, deliver, on behalf of the Retiring Stockholder but at the expense of the Corporation, a written notice (the "Secondary Retirement Notice") to the remaining Stockholders (the "Eligible 30 Stockholders") and the Retiring Stockholder, which Secondary Retirement Notice will disclose in reasonable detail the terms and conditions of the sale including the total number of Retiring Shares and the number of Retiring Shares, if any, to be purchased by the Corporation and the price per share of the Retiring Shares. Upon receipt of the Secondary Retirement Notice, each Eligible Stockholder shall have a right to purchase the Retiring Shares which will not be purchased by the Corporation (the "Remaining Retiring Shares"), in the case of each Eligible Stockholder, up to that number of the Retiring Shares equal to such Eligible Stockholder's Adjusted Proportionate Percentage of the Remaining Retiring Shares (such number of shares hereinafter referred to as the "Retiring Participation Shares") with respect to such Eligible Stockholder. The Eligible Stockholders shall have 20 days after the Secondary Retirement Notice is received in which to give counter-notice of such Eligible Stockholder's election to purchase such Remaining Retiring Shares (such election by an Eligible Stockholder being referred to as an "Initial Retiring Purchase"). An Initial Retiring Purchase by an Eligible Stockholder may be of all or part of his or its Retiring Participation Shares. Any Eligible Stockholder may at any time elect in his or its counter-notice to purchase, in addition to his or its Retiring Participation Shares, the balance (or the balance up to a maximum stated number) of any Remaining Retiring Shares being offered to other Eligible Stockholders which are not accepted by such other Eligible Stockholders (such acceptance being hereinafter referred to as an "Additional Retiring Purchase"). If the number of Remaining Retiring Shares that the Eligible Stockholders elect to purchase in their Initial Retiring Purchases and Additional Retiring Purchases exceeds the number of Remaining Retiring Shares, the number of Remaining Retiring Shares to be purchased in the aggregate by all Second Priority Eligible Stockholders shall be reduced to the extent of the Excess Attributable to the second Priority Additional Retiring Purchases with such reduction in the number of Remaining Retiring Shares to be purchased in the aggregate by all Second Priority Eligible Stockholders to be allocated among such Second Priority Eligible Stockholders in proportion to the number of Remaining Retiring Shares each Second Priority Eligible Stockholder has agreed to purchase in such Second Priority Eligible Stockholder's Additional Retiring Purchase (the "First Retirement Reduction"). If any excess remains after the First Retirement Reduction, the number of Remaining Retiring Shares to be purchased in the aggregate by all Second Priority Eligible Stockholders shall be further reduced to the extent of the Excess Attributable to the Second Priority Initial Retiring Purchases with such reduction in the number of Remaining Retiring Shares to be purchased in the aggregate by all Second Priority Eligible Stockholders to be allocated among such Second Priority Eligible Stockholders in proportion to the number of Remaining Retiring Shares each Second Priority Eligible Stockholder has agreed to purchase in such Second Priority Eligible Stockholder's Initial Retiring Purchase (the "Second Retirement Reduction"). If any excess remains after the Second Retirement Reduction, the number of Remaining Retiring Shares to be purchased in the aggregate by all First Priority Eligible Stockholders shall be reduced to the extent of the Excess Attributable to the First Priority Additional Retiring Purchases with such reduction in the number of Remaining Retiring Shares to be purchased in the aggregate by all First Priority Eligible Stockholders to be allocated among such First Priority Eligible Stockholders in proportion to the number of Remaining Retiring Shares each First Priority Eligible Stockholder has agreed to purchase in such First Priority Eligible Stockholder's Additional Retiring Purchase. To the extent possible, any mechanical problems shall be solved in any equitable manner determined by the Board to be consistent with the intent of the parties hereto. 31 (b) The price per share for Retiring Shares shall be the valuation Price per Share as in effect on the date of the Primary Retirement Notice or, in the event that the Corporation does not deliver a Primary Retirement Notice, as in effect on the date of the Secondary Retirement Notice (the "Notice Date"); provided, however, that in the case of a Termination Event described in Section 14(d)(i)(5) with respect to a Manager Stockholder, the price per share shall be the price paid for such Securities, with interest thereon at the rate of 6% per annum from the date of purchase of such Securities by such Stockholder. (c) Upon the occurrence of any Termination Event (except for a Termination Event described in Section 14(d)(i)(5) or Section 14(d)(ii)(5) with respect to a Stockholder who is a Manager Stockholder, an HCG/HSC Stockholder or a DGHA Stockholder, in each case occurring on or prior to the fifth anniversary of the date hereof (or at any time with respect to a Termination Event described in Section 14(d)(i)(1) or (2) or Section 14(d)(ii)(1) or (2)), such Stockholder or his or her designated beneficiaries, as the case may be, shall be entitled to require, subject to the provisions of the next sentence, by written notice delivered to the Corporation within 60 days of such Termination Event, that the Corporation (or, at the election of the Corporation, the Corporation's designee) repurchase for cash not less than all Securities (other than Class A Restricted Shares) then held by such Stockholder prior to such Termination Event (the "Individual Investor Put Shares") at a price per share equal to the Valuation Price per Share as of the date of such Termination Event. The Corporation's repurchase obligation described in the foregoing sentence shall be in all cases subject to any applicable restrictions provided by the Delaware General Corporation Law, the Certificate and any applicable restrictions and conditions set out in the Debt Documents. (d) As used in this Section 14, a "Termination Event" shall have occurred if: (i) a Manager Stockholder's employment with the Corporation or any Subsidiary thereof is terminated (and not continued, or substantially simultaneously resumed, with the Corporation or any Subsidiary thereof) as a result of: (1) the death of such Manager Stockholder; (2) the permanent disability (as determined by the Board or the Board of Directors or such Subsidiary, as the case may be, in good faith) of such Manager Stockholder; (3) the retirement at age 65 (or such other age as may be determined by the Compensation Committee) of such Manager Stockholder; (4) termination by the Corporation or any such Subsidiary of such Manager Stockholder for any reason other than for Cause; or (5) such Manager Stockholder notifies the Corporation or any such Subsidiary that he is terminating his employment, or the Corporation or any such Subsidiary notifies such Manager Stockholder that the employment of such Manager Stockholder is being terminated for Cause; or 32 (ii) an HCG/HSC Stockholder's or DGHA Stockholder's employment with HCG, HSC or any Affiliate thereof is terminated (and not continued, or substantially simultaneously resumed, with HCG, HSC or any Affiliate thereof or of DGHA) as a result of: (1) the death of such HCG/HSC Stockholder or DGHA Stockholder; (2) the permanent disability (as determined by the Board or Board of Directors of HCG, HSC or such Affiliates thereof, as the case may be, in good faith) of such HCG/HSC Stockholder or DGHA Stockholder; (3) the retirement at age 70 (or such other age as may be determined by the Compensation Committee) of such DGHA Stockholder or the retirement at age 65 (or such other age as may be determined by the Compensation Committee) of such HCG/HSC Stockholder; (4) termination by HCG, HSC or any Affiliate thereof of such HCG/HSC Stockholder or DGHA Stockholder for any reason other than for Cause; or (5) such HCG/HSC Stockholder or DGHA Stockholder notifies HCG, HSC or any Affiliate thereof that he is terminating his employment, or HCG, HSC or any Affiliate thereof notifies such HCG/HSC Stockholder or DGHA Stockholder that the employment of such HCG/HSC Stockholder or DGHA Stockholder is being terminated for Cause. (e) Any repurchase by the Corporation or purchase by an Eligible Stockholder of the Individual Investor Put Shares or the Retiring Shares, as the case may be, pursuant to this Section 14 shall be effected by delivery by the Stockholder or his beneficiaries, as the case may be, of the certificate(s) for all such Retiring Shares or Individual Investor Put Shares (properly endorsed for transfer) to the appropriate transferee(s) on a date five (5) business days after the requisite notice or notices pursuant to this Section 14 requiring the repurchase or purchase of all such Retiring Shares or Individual Investor Put Shares, as the case may be, have been given (the "Transfer Date"). As of the Transfer Date, title to such Retiring Shares or Individual Investor Put Shares shall be deemed transferred to the respective transferee(s) upon tender by such transferee(s) of the purchase price for such Retiring Shares or Individual Investor Put Shares to the Stockholder or his designated beneficiaries by a check or checks in New York Clearing House funds or by a wire transfer to the account of the Stockholder or his designated beneficiaries. (f) Notwithstanding anything to the contrary contained in this Section 14, the Corporation and the Retiring Stockholder (in the case of a repurchase contemplated by Section 14(a)) or the Corporation and the Manager Stockholder, HCG/HSC Stockholder or DGHA Stockholder or his or her designated beneficiaries (in the case of a repurchase contemplated by (Section 14(c)), as the case may be, shall have the right and option to elect (the "Deferral Election"), pursuant to a written agreement duly executed by such persons, to deem the date of the relevant Termination Event to be deferred for purposes of this Section 14 until a date (the 33 "Deferral Date") not more than six years following the date of the Deferral Election. A Deferral Election must be made within 90 days of the occurrence of the relevant Termination Event.. A Deferral Election shall be effective solely to defer for purposes of this Section 14 the date of a Termination Event until the Deferral Date specified in, or determined pursuant to, such Deferral Election (at which time Sections 14(a) and 14(c) shall be applicable according to their respective terms) and such Deferral Election shall not otherwise affect the rights or obligations of any party hereto. 15. Required Sale. ------------- Notwithstanding anything contained herein to the contrary if, at any time on or after the fourth anniversary of the date hereof, an IRR Event shall not have occurred, the Majority of the Institutional Stockholders shall have the right, at any time, to serve written notice on the Corporation of the desire of the Majority of the Institutional Stockholders to effect a Sale of the Company. The DGHA Stockholders shall have the exclusive right for a period of 180 days (the "Exclusive Period"), commencing on the date of the determination of "Fair Value" (as hereinafter defined) to consummate either a Sale of the Company at Fair Value or the acquisition of the Institutional Securities, at a price equal to what the Institutional Stockholders would receive for the Institutional Securities if a Sale of the Company was consummated at Fair Value after giving affect to the provisions of the DGHA Repurchase Agreement and the Manager Repurchase Agreement. "Fair Value" means the highest price that would be paid for all or substantially all of (i) the Securities, (ii) the capital stock of a Subsidiary, (iii) the assets of the Corporation (after the assumption of all of the liabilities of the Corporation), or (v) the assets of a Subsidiary (after the assumption of all the liabilities of such Subsidiary), as the case may be, and in each case, on a going-concern basis in a single arm's-length transaction between a willing buyer and a willing seller in an orderly process, using valuation techniques then prevailing in the securities industry and assuming full disclosure of all relevant information and a reasonable period of time for effectuating such sale, as determined jointly by the Majority of the Institutional Stockholders and the Majority of the DGHA Stockholders. If such parties are unable to reach agreement within 30 days, such Fair Value shall be determined by an independent nationally recognized investment bank experienced in valuing companies or assets jointly selected by the Majority of the Institutional Stockholders and the Majority of the DGHA Stockholders. If the parties cannot agree on the selection of an investment bank within 30 days, the investment bank will be selected by an independent arbitrator appointed in accordance with the rules of the American Arbitration Association. The determination of such investment bank shall be final and binding upon the parties, and the Corporation shall pay the fees and expenses of such investment bank. 16. Regulatory Matters. ------------------ (a) Regulatory Compliance Cooperation. (i) If a Stockholder determines that it has a Regulatory Problem, the Corporation agrees to take all such actions as are reasonably requested by such Stockholder (x) to effectuate and facilitate any Transfer by such Stockholder of any Securities (as defined below) of the Corporation then held by such Stockholder to any Person designated by such Stockholder, (y) to permit such stockholder (or any Affiliate 34 of such Stockholder) to exchange all or any portion of the voting Securities then held by such Person on a share-for-share basis for shares of a class of nonvoting Securities of the Corporation, which nonvoting Securities shall be identical in all respects to such voting Securities, except that such new Securities shall be nonvoting and shall be convertible into voting Securities on such terms as are requested by such Stockholder in light of regulatory considerations then prevailing, and (z) to continue and preserve the respective allocation of the voting interests with respect to the Corporation provided for in the Certificate and this Agreement and with respect to such Stockholder's ownership of the Corporation's voting Securities. Such actions may include, without limitation, (x) entering into such additional agreements as are reasonably requested by such Stockholder to permit any Person(s) designated by such Stockholder to exercise any voting power which is relinquished by such Stockholder upon any exchange of voting Securities for nonvoting Securities of the Corporation; and (y) entering into such additional agreements, adopting such amendments to this Agreement, the Certificate and the Bylaws of the Corporation and taking such additional actions as are reasonably requested by such Stockholder in order to effectuate the intent of the foregoing; provided, however that such actions will not change materially any of the agreements, rights or obligations of the parties reflected herein or in the Certificate or the Bylaws. (ii) Before the Corporation redeems, purchases or otherwise acquires, directly or indirectly, or converts or takes any action with respect to the voting rights of, any Securities, the Corporation shall give written notice of such pending action to each Stockholder. Upon the written request of any Stockholder made within 10 days after its receipt of such notice stating that after giving effect to such action such Stockholder would have a Voting Regulatory Problem, the Corporation shall defer taking such action for such period (not to extend beyond 45 days after such Stockholder's receipt of the Corporation's original notice) as such Stockholder requests to permit it and its Affiliates to reduce the quantity of Securities they own or take other appropriate action in order to avoid the Voting Regulatory Problem. In addition, in the event that the Corporation shall be a party to any merger, consolidation, recapitalization or other transaction pursuant to which any Stockholder would be required to take any voting Securities, or any Securities convertible into, or exchangeable or exercisable for, voting Securities, which might reasonably be expected to cause such Stockholder to have a Voting Regulatory Problem, then the Corporation shall not be a party to such transaction unless such Stockholder shall receive non-voting Securities. (b) Cooperation of Other Stockholders. Each Stockholder agrees to cooperate with the Corporation in complying with Section 16(a) above, including without limitation, voting to approve amending the Certificate, this Agreement or the Bylaws in a manner reasonably requested by the Stockholder requesting such amendment. (c) Covenant Not to Amend. The Corporation and each Stockholder agree not to amend or waive the voting or other provisions of the Certificate, this Agreement or the Bylaws if such amendment or waiver would cause any Stockholder to have a Voting Regulatory Problem, provided that any such Stockholder notifies the Corporation that it would have a Voting Regulatory Problem promptly after it has notice of such amendment or waiver. 35 17. Requisite Shareholder Approval. ------------------------------ (a) At the Closing, each Stockholder, in addition to any Disclosure Statement and Consent or Consent and Irrevocable Proxy executed by such Stockholder, hereby votes and consents to approve the terms of the DGHA Repurchase Agreement and the Manager Repurchase Agreement. (b) Each Stockholder, by acceptance and receipt of any Securities, in addition to any Disclosure Statement and Consent or Consent and Irrevocable Proxy executed by such Stockholder, hereby grants an irrevocable proxy, which shall be deemed to be coupled with an interest, with respect to voting rights of such shares to the Chairman of the Corporation to vote in favor of each proposal intended by the Corporation to achieve the Requisite Stockholder Approval. If for any reason any such proxy is terminated, each Stockholder, in addition to any Disclosure Statement and Consent or Consent and Irrevocable Proxy executed by such Stockholder, hereby agrees to vote (or to provide written consent in lieu thereof) in favor of each proposal intended by the Corporation to achieve the Requisite Stockholder Approval. (c) If a Stockholder is not an individual and if under the circumstances Code Section 280G(b)(5) or applicable Treasury Regulations thereunder (whether proposed, temporary or final) would require a separate vote of holders of the voting power of such entity, then in addition to the Stockholder's vote (or written consent in lieu thereof) as described in Section 14 the Stockholder shall obtain the separate vote or votes (or shall obtain written consent or consents in lieu thereof) in favor of any proposal intended by the Corporation to achieve the Requisite Stockholder Approval of or from the holder or holders of voting power of the Stockholder necessary to satisfy Code Section 280G(b)(5) or applicable Treasury Regulations thereunder (whether proposed, temporary or final). (d) Each Stockholder acknowledges that such Stockholder has received and reviewed the Disclosure Statement and Consent. In connection with any proposal intended by the Corporation to achieve the Requisite Stockholder Approval, the Corporation agrees to provide information to the Stockholders as required by Code Section 280G(b)(5)(B)(ii). 18. Amendment And Waiver. -------------------- (a) Except as expressly set forth herein, the provisions of this Agreement may only be amended or waived with the prior written consent of the Corporation, a Majority of the Institutional Stockholders and a Majority of the DGHA Stockholders; provided, however, that Schedule 1 to this Agreement shall be deemed to be automatically amended from time to time to reflect issuances and Transfers of Securities made in accordance with the terms hereof without requiring the consent of any party, and the Corporation will, upon request, distribute to any Stockholder a revised Schedule 1 to reflect any such changes. (b) No course of dealing between the Corporation, its Subsidiaries and the Stockholders (or any of them) or any delay in exercising any rights hereunder will operate as a waiver of any rights of any party to this Agreement. (c) For purposes of this Agreement shares of capital stock held by the Corporation or any Subsidiaries will not be deemed to be outstanding. 36 (d) The failure of any party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. 19. Securities Law Compliance; Legends. ---------------------------------- (a) Restriction on Transfer. No Stockholder shall Transfer Restricted Securities except in compliance with the conditions specified in this Agreement or pursuant to a Public Sale. (b) Restrictive Legends. Each certificate for the Restricted Securities shall (unless otherwise provided by the provisions of Section 19(d)) be stamped or otherwise imprinted with a legend in substantially the following terms: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR LAWS. (c) Notice of Transfer. The holder of any Restricted Securities, by its acceptance or purchase thereof, agrees, prior to any Transfer of any such Restricted Securities (except pursuant to an effective registration statement), to give written notice to the Corporation of such holder's intention to effect such Transfer and agrees to comply in all other respects with the provisions of this Section 19. Each such notice shall describe the manner and circumstances of the proposed Transfer and, unless waived by the Corporation, shall be accompanied by the written opinion, addressed to the Corporation, of counsel for the holder of such Restricted Securities (which counsel shall be reasonably satisfactory to the Corporation), stating that in the opinion of such counsel (which opinion shall be reasonably satisfactory to the Corporation) such proposed Transfer does not involve a transaction requiring registration or qualification of such Restricted Securities under the Securities Act or the securities laws of any state of the United States. Subject to complying with the other applicable provisions hereof, such holder of Restricted Securities shall be entitled to consummate such Transfer in accordance with the terms of the notice delivered by it to the Corporation if the Corporation does not object (on the basis that such Transfer violates the provisions of this Section 19) to such Transfer within five days after the delivery of such notice. Each certificate or other instrument evidencing the securities issued upon the Transfer of any Restricted Securities (and each certificate or other instrument evidencing any untransferred balance of such Securities) shall bear the legend set forth in Section 19(b) unless (i) in such opinion of such counsel registration of future Transfer is not required by the applicable provisions of the Securities Act or the securities laws of any state of the United States or (ii) the Corporation shall have waived the requirement of such legend. (d) Removal of Legends, Etc. Notwithstanding the foregoing provisions of this Section 19, the restriction imposed by Sections 19(a), (b) and (c) upon the transferability of any Restricted Securities shall cease and terminate when (i) any such Restricted Securities are sold or otherwise disposed of in accordance with the intended method of disposition by the seller or 37 sellers thereof set forth in a registration statement or are sold or otherwise disposed of in a transaction contemplated by Section 19(c) which does not require that the securities transferred bear the legend set forth in Section 19(b), or (ii) the holder of such Restricted Securities has met the requirement of transfer of such Restricted Securities pursuant to subparagraph (k) of Rule 144. Whenever the restrictions imposed by Sections 19(a), (b) and (c) shall terminate, as herein provided, the holder of any Restricted Securities shall be entitled to receive from the Corporation, without expense, a new certificate not bearing the restrictive legend set forth in Section 19(b) and not containing any other reference to the restrictions imposed by Sections 19(a), (b) and (c). (e) Additional Legend. Each certificate evidencing Securities and each certificate issued in exchange for or upon the Transfer of any Securities (if such shares remain Securities as defined herein after such Transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO A STOCKHOLDERS AGREEMENT DATED AS OF FEBRUARY 9, 1996 AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS. THE TERMS OF SUCH STOCKHOLDERS AGREEMENT INCLUDE, AMONG OTHER THINGS, VOTING AGREEMENTS, REPURCHASE AGREEMENTS AND RESTRICTIONS ON TRANSFERS. A COPY OF SUCH STOCKHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST." The Corporation shall imprint such legends on certificates evidencing shares outstanding prior to the date hereof. The legend set forth above shall be removed from the certificates evidencing any shares which cease to be Securities in accordance with the terms of this Agreement. 20. Duration of Agreement. --------------------- The rights and obligations of each Stockholder under this Agreement shall terminate as to such Stockholder upon the earliest to occur of (a) the Transfer of all Securities owned by such Stockholder and (b) the consummation of an IRR Event. 21. Severability. ------------ Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, and such invalid, void or otherwise unenforceable provisions shall be null and void. It is the intent of the parties, however, that any invalid, void or otherwise unenforceable provisions be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable to the fullest extent permitted by law. 38 22. Entire Agreement. ---------------- This document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. 23. Certain Stockholders. -------------------- If any Stockholder is an entity that was formed for the purpose of acquiring Securities or that has no substantial assets other than Securities or interests in Securities, such Stockholder agrees that (a) shares of its common stock or other instruments reflecting equity interests in such entity (and the shares of common stock or other equity interests in any similar entities controlling such entity) will note the restrictions contained in this Agreement on the transfer of Securities as if such common stock or other equity interests were Securities and (b) no shares of such common stock or other equity interests may be transferred to any Person other than in accordance with the terms and provisions of this Agreement as if such common stock or other equity interests were Securities. 24. Successors and Assigns. ---------------------- Except as otherwise provided herein, this Agreement will bind and inure to the benefit of and be enforceable by the Corporation and its successors and assigns and the Stockholders and any subsequent holders of Securities and the respective successors and permitted assigns of each of them, so long as they hold Securities. None of the provisions hereof shall create, or be construed or deemed to create, any right to employment in favor of any Person by the Corporation or any of its Subsidiaries. This Agreement is not intended to create any third party beneficiaries. 25. Counterparts. ------------ This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 26. Remedies. -------- (a) Each Stockholder shall have all rights and remedies reserved for such Stockholder pursuant to this Agreement, the Subscription Agreement dated the date hereof, the Certificate and Bylaws and all rights and remedies which such holder has been granted at any time under any other agreement or contract and all of the rights which such holder has under any law or equity. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity. (b) The parties hereto agree that if any parties seek to resolve any dispute arising under this Agreement pursuant to a legal proceeding, the prevailing parties to such proceeding 39 shall be entitled to receive reasonable fees and expenses (including reasonable attorneys' fees and expenses) incurred in connection with such proceedings. (c) It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. 27. Notices. ------- All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (a) when delivered personally to the recipient, (b) one business day after being sent by reputable overnight courier (charges prepaid) (regardless of whether the recipient refuses to accept delivery), (c) five business days after being sent to the recipient by certified or registered mail, return receipt requested and postage prepaid regardless of whether the recipient refuses to accept delivery) or (d) when sent to the recipient by facsimile (followed promptly by personal, courier or certified or registered mail delivery). The Corporation's address is: USS Holdings, Inc. c/o D. George Harris & Associates, Inc. 399 Park Avenue 32nd Floor New York, New York 10022 Telephone: (212) 207-6400 Telecopier: (212) 207-6470 Attention: Donald G. Kilpatrick With a copy to: Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, New York 10004 Telephone: (212) 858-1000 Telecopier: (212) 858-1500 Attention: Kenneth E. Adelsberg, Esq. The address for each Stockholder is set forth on Schedule 1 hereto; and if to CMCC, with a copy to: 40 O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Telephone: (212) 408-2400 Telecopier: (212) 408-2420 Attention: John J. Suydam, Esq. 27. Governing Law. ------------- All questions concerning the construction, interpretation and validity of this Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether in the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. 28. Further Assurances. ------------------ Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. 29. Jurisdiction; Venue; Process. ---------------------------- The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly (but not exclusively) lie in any federal or state court located in the State of New York. By execution and delivery of this Agreement, the parties hereto irrevocably submit to the jurisdiction of such courts for himself and in respect of his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby waive any objection that such court is an improper or inconvenient forum for the resolution of such action. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without necessity for service by any other means provided by statute or rule of court. 30. Representation and Warranties of the Stockholders. ------------------------------------------------- Each Stockholder (as to himself or itself only) represents and warrants to the Corporation and the other Stockholders that, as of the time such Stockholder becomes a party to this Agreement: (a) this Agreement has been duly and validly executed and delivered by such Stockholder and this Agreement constitutes a legal and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms; (b) the execution, delivery and performance by such Stockholder of this Agreement and the consummation by such Stockholder of the transactions contemplated hereby will not, 41 with or without the giving of notice or lapse of time, or both (i) violate any provision of law, statute, rule or regulation to which the Stockholder is subject, (ii) violate any order, judgment or decree applicable to such Stockholder, or (iii) conflict with, or result in a breach or default under, any term or condition of any agreement or other instrument to which such Stockholder is a party or by which such Stockholder is bound, except for such violations, conflicts, breaches or defaults that would not, in the aggregate, materially affect the Stockholder's ability to perform its obligations hereunder; (c) the Stockholder purchased the Securities owned by it for its own account, for investment and not with a view to the distribution thereof within the meaning of the Securities Act; (d) the Stockholder understands that (i) the Securities have not been registered under the Securities Act or registered or qualified under applicable state securities laws by reason of their issuance by the Corporation in a transaction exempt from the registration and qualification requirements of the Securities Act and applicable state securities laws, and (ii) the Securities must be held by the Stockholder indefinitely unless a subsequent disposition thereof is registered or qualified under the Securities Act and applicable state securities laws or is exempt from such registration or qualification. The Stockholder understands that the certificates for the Securities will bear the legends described in Section 19(b) and (e); (e) the Stockholder further understands that, with respect to the Securities, the exemption from registration afforded by Rule 144 (the provisions of which are known to the Stockholder) depends on the satisfaction of various conditions, and that, if applicable, Rule 144 may only afford the basis for sales only in limited amounts; (f) the Stockholder has not employed any broker or finder or similar person in connection with its purchase of the Securities; (g) except as disclosed in writing to the Corporation prior to the acquisition of Securities by such Stockholder, the Stockholder is an "accredited investor" (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act). The Corporation has made available to the Stockholder or its representatives all agreements, documents, records and books that the Stockholder has requested relating to an investment in the Securities. The Stockholder has had an opportunity to ask questions of, and receive answers from, Persons acting on behalf of the Corporation concerning the terms and conditions of this investment, and answers have been provided to all of such questions to the full satisfaction of the Stockholder. No oral representations have been made or furnished to, or relied on by, the Stockholder or its representatives in connection with its investment in the Securities. The Stockholder has such knowledge and experience in financial and business matters that it is capable of evaluating the risks and merits of its investment in the Securities; (h) the Stockholder has no need for liquidity in its investment in the Securities and is able to bear the economic risk of its investment in the Securities and the complete loss of all of such investment; 42 (i) the Stockholder further understands that this Agreement is made with the Stockholder in reliance upon the Stockholder's representations to the Corporation contained in this Section 31; and (j) the Stockholder and its representatives have conducted a due diligence investigation and have had the opportunity to review all documents and information which the Stockholder and its representatives have requested concerning Silica, the Corporation, the Subsidiaries and the Stockholder's investment. In reaching its decision to invest in the Corporation, the Stockholder has relied on the foregoing investigation and information, on the representations and warranties in the Stock Purchase Agreement and on the representations and warranties set forth herein. 31. Conflicting Agreements. ---------------------- No Stockholder shall enter into any stockholder agreements or arrangements of any kind with any Person with respect to any Securities on terms inconsistent with the provisions of this Agreement (whether or not such agreements or arrangements are with other Stockholders or with Persons that are not parties to this Agreement), including but not limited to, agreements or arrangements with respect to the acquisition or disposition of Securities of the Corporation in a manner which is inconsistent with this Agreement. 32. Mutual Waiver of Jury Trial. --------------------------- BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. * * * * * 43 IN WITNESS WHEREOF, the undersigned have duly executed this Stockholders Agreement as of the date first written above. USS HOLDINGS, INC. By: /s/ Richard J. Nick ---------------------------------------- Name: Richard J. Nick Title: Vice President CHASE MANHATTAN CAPITAL CORPORATION By: /s/ Robert R. Ruggiero, Jr. ---------------------------------------- Name: Robert R. Ruggiero, Jr. Title: Vice President [SUB-DEBT HOLDER] By: ________________________________________ Name: Title: _____________________________________________ D. George Harris _____________________________________________ Anthony J. Petrocelli /s/ Richard J. Donahue --------------------------------------------- Richard J. Donahue /s/ Donald G. Kilpatrick --------------------------------------------- Donald G. Kilpatrick _____________________________________________ David Willetts /s/ Richard J. Nick --------------------------------------------- Richard J. Nick /s/ William J. Sichko --------------------------------------------- William J. Sichko /s/ Emanuel J. Di Teresi --------------------------------------------- Emanuel J. Di Teresi _____________________________________________ Michael R. Boyce /s/ Matthew J. Dowd --------------------------------------------- Matthew J. Dowd Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Robert Harris By ________________________________________ Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Margaret Harris By ________________________________________ Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Keith Coleman By ________________________________________ Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Augustus Northridge By ________________________________________ Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated January 31, 1995 F/B/O P.G.F. Scurr By ________________________________________ Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of Anthony J. Petrocelli dated October 29, 1990 By ________________________________________ D. George Harris, Trustee By: /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee 46 Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Daniel G. Kilpatrick By: /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee By: /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Eleanor P. Kilpatrick By: /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee By: /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Jennifer C. Kilpatrick By: /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee By: /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Douglas A. Kilpatrick By: /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee By: /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee 47 SCHEDULE 1 ---------- Stockholders/Address -------------------- Chase Manhattan Capital Corporation 1 Chase Manhattan Plaza New York, NY 10081 D. George Harris* Anthony J. Petrocelli* Richard J. Donahue* Donald G. Kilpatrick* David Willetts* Richard J. Nick* William J. Sichko* Emanuel J. Di Teresi* Michael R. Boyce* Matthew J. Dowd* Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Robert Harris* Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Margaret Harris* Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Paige Coleman* Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Keith Coleman* Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Augustus Northridge* Trust under Agreement of D. George Harris dated January 31, 1995 F/B/O P.G.F. Scurr* Trust under Agreement of Anthony J. Petrocelli dated October 29, 1990* Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Daniel G. Kilpatrick* Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Eleanor P. Kilpatrick* Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Jennifer C. Kilpatrick* Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Douglas A. Kilpatrick* * c/o D. George Harris & Associates, Inc. 399 Park Avenue 32nd Floor. New York, NY 10022 SCHEDULE 2 ---------- The Budgeted EBITDA numbers attached hereto as Annex 1 have been agreed between the parties and shall be used by Chase Manhattan Capital Corporation to calculate the Budgeted EBITDA monthly numbers for the purposes of this Agreement by apportioning with respect to each calendar year number attached hereto for each month the percentages set out below: % ----- January 7.1 February 7.0 March 7.5 April 9.3 May 10.8 June 8.5 July 8.6 August 9.4 September 9.0 October 11.8 November 8.1 December 2.9 ----- 100.0 ===== For example, the Budgeted EBITDA for the twelve month period ending June 30, 1999 shall equal 30,119 x 49.8 = 14,999.27 ---- 100 31,010 x 50.2 = 15,567.02 ---- --------- 100 30,566.29 ========= ANNEX 1 Calendar Year 000's ------------- ----- 1996 26,790 1997 29,503 1998 30,119 1999 31,010 2000 31,927 2001 32,272 2002 33,246 2003 34,249 2004 35,283 2005 36,348 WORKSHEET --------- Management Agreement EBITDA Trigger Formula (Schedule 2)
Months January February March April May June July August September October November December ------- -------- ----- ----- --- ---- ---- ------ --------- ------- -------- -------- Annual EBITDA 1997 29,503 7.100% 7.000% 7.500% 9.300% 10.800% 8.500% 8.600% 9.400% 9.000% 11.800% 8.100% 2.900% 1998 30,119 7.100% 7.000% 7.500% 9.300% 10.800% 8.500% 8.600% 9.400% 9.000% 11.800% 8.100% 2.900% 1999 31,010 7.100% 7.000% 7.500% 9.300% 10.800% 8.500% 8.600% 9.400% 9.000% 11.800% 8.100% 2.900% 2000 31,927 7.100% 7.000% 7.500% 9.300% 10.800% 8.500% 8.600% 9.400% 9.000% 11.800% 8.100% 2.900% 2001 32,272 7.100% 7.000% 7.500% 9.300% 10.800% 8.500% 8.600% 9.400% 9.000% 11.800% 8.100% 2.900% 2002 33,248 7.100% 7.000% 7.500% 9.300% 10.800% 8.500% 8.600% 9.400% 9.000% 11.800% 8.100% 2.900% 2003 34,249 7.100% 7.000% 7.500% 9.300% 10.800% 8.500% 8.600% 9.400% 9.000% 11.800% 8.100% 2.900% 2004 35,283 7.100% 7.000% 7.500% 9.300% 10.800% 8.500% 8.600% 9.400% 9.000% 11.800% 8.100% 2.900% 2005 36,348 7.100% 7.000% 7.500% 9.300% 10.800% 8.500% 8.600% 9.400% 9.000% 11.800% 8.100% 2.900% Rolling 12 Month Calculation January February March April May June July August September October November December ------- -------- ----- ----- --- ---- ---- ------ --------- ------- -------- -------- 1998 29,590 29,638 29,893 29,760 29,812 29,865 29,023 29,970 30,051 30,101 30,119 1999 30,182 30,245 30,311 30,394 30,491 30,568 30,643 30,727 30,807 30,912 30,964 31,010 2000 31,075 31,139 31,208 31,293 31,392 31,470 31,549 31,635 31,718 31,628 31,900 31,927 2001 31,051 31,976 32,002 32,034 32,071 32,100 32,130 32,162 32,193 32,234 32,262 32,272 2002 32,341 32,409 32,482 32,573 32,678 32,761 32,845 32,936 33,024 33,139 33,218 33,248 2003 33,317 33,387 33,463 35,536 33,664 33,760 33,836 33,930 34,020 34,139 34,220 34,249 2004 34,322 34,395 34,472 34,589 34,680 34,768 34,857 34,954 35,047 35,169 35,253 35,283 2005 35,359 35,433 35,513 35,612 35,727 35,818 35,909 36,009 38,105 38,231 36,317 36,248
SCHEDULE 3 ---------- [Form of Restated Certificate] AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF USS HOLDINGS, INC. ___________________________ Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware ___________________________ USS Holdings, Inc., hereinafter called the "Corporation," a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that: FIRST: The Corporation's original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on September 19, 1995. SECOND: This Amended and Restated Certificate of Incorporation restates, integrates and amends the Certificate of Incorporation and has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware. THIRD: The text of the Certificate of Incorporation of the Corporation is hereby amended and restated to read in its entirety as follows: ARTICLE FIRST ------------- The name of the Corporation is USS Holdings, Inc. ARTICLE SECOND -------------- The address of the registered office of the Corporation in the State of Delaware is The Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware. The name of the registered agent of the Corporation at such address is The Corporation Trust Company. ARTICLE THIRD ------------- The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the "Delaware Statute"). ARTICLE FOURTH -------------- The total number of shares of all classes of stock which the Corporation shall have authority to issue is 11,300,000 shares, consisting of (a) 3,800,000 shares of preferred stock, $.01 par value (the "Preferred Stock"), of which 1,200,000 shares are designated Series A Redeemable Preferred Stock (the "Series A Preferred Stock") and 2,500,000 are designated Series B Convertible Preferred Stock (the "Series B Preferred Stock") and (b) 7,500,000 shares of common stock, $.01 par value (the "Common Stock"), of which 5,000,000 shares are designated Class A Common Stock (the "Class A Common Stock") and 2,500,000 shares are designated Class B Common Stock (the "Class B Common Stock"). Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as are stated herein and in the resolution or resolutions providing for the establishment of such series adopted by the Board of Directors as hereinafter provided. Except as otherwise expressly stated herein or in the resolution or resolutions providing for the establishment of any series of Preferred Stock, any shares of Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided by law. Authority is hereby expressly granted to the Board of Directors to issue, from time to time, shares of Preferred Stock in one or more series, and, in connection with the establishment of any such series by resolution or resolutions, to determine and fix such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including, without limitation, dividend rights, conversion rights, redemption privileges, preemptive rights and liquidation preferences, as shall be stated in such resolution or resolutions, all to the full extent permitted by the Delaware Statute; provided, however, that no such -------- ------- Preferred Stock established by resolution or resolutions shall possess any voting rights, except to the extent expressly provided in the resolution or resolutions establishing such Preferred Stock or as otherwise required by the Delaware Statute. Without limiting the generality of the foregoing, the resolution or resolutions providing for the establishment of any series of Preferred Stock may, to the extent permitted by law, provide that such series shall be superior or rank equally or be junior to any other series. Except as may otherwise be provided in this Certificate of Incorporation with respect to the Series A Preferred Stock and Series B Preferred Stock and except as may be provided in the resolutions providing for the establishment of any series of Preferred Stock issued after the date hereof, no vote of the holders of Preferred Stock or Common Stock shall be a prerequisite to the establishment of any series of Preferred Stock or the issuance of any shares of any series of the Preferred Stock authorized by and complying with the conditions of this Certificate of Incorporation. The designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof in respect of the Series A Preferred Stock, Series B Preferred Stock, Class A Common Stock and Class B Common Stock are as follows: 2 A. SERIES A PREFERRED STOCK ------------------------ 1. Dividends. --------- (a) The Corporation shall accrue dividends on each share of Series A Preferred Stock on each Dividend Accrual Date, at an amount per share equal to the Series A Dividend Rate times the average balance of the Series A Liquidation Preference from the last Dividend Accrual Date (or, in the case of the first Dividend Accrual Date, the Original Issuance Date) to the Dividend Accrual Date in question. Dividends on the Series A Preferred Stock for any period other than a full dividend period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. All unpaid dividends hereunder shall accrue and cumulate and shall increase the Series A Liquidation Preference from the applicable Dividend Accrual Date. (b) Except for dividends on Junior Stock payable solely in additional shares of Junior Stock, unless all accrued dividends on all outstanding shares of the Series A Preferred Stock shall have been paid or declared and set aside for payment, no dividend shall be declared, paid or set apart for payment or any other distribution (whether in cash or obligations of the Corporation or other properties) upon any Junior Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation. (c) Dividends shall accrue in accordance with this Section A.1 to the holders of record of Series A Preferred Stock as they appear on the stock ledger of the Corporation on the Dividend Accrual Date. (d) Accrued dividends on the Series A Preferred Stock shall be paid when, as and if declared by the Board or otherwise as provided herein. 2. Rights on Liquidation. --------------------- (a) In the event of any Liquidation, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to receive out of the assets of the Corporation legally available for distribution to its stockholders, whether from capital, surplus or earnings, before any payment shall be made to the holders of any Junior Stock, an amount per share equal to the Series A Liquidation Preference. After payment of such liquidating distributions, the holders of shares of Series A Preferred Stock will not be entitled to any further participation in any distribution of assets by the Corporation. (b) The merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation or any other corporation into or with the Corporation shall not be deemed a Liquidation within the meaning of this Section A.2. 3. Redemption of Series A Preferred Stock. -------------------------------------- (a) The Corporation shall redeem all of the shares of Series A Preferred Stock then outstanding on the Redemption Date. 3 (b) The Corporation may redeem (pro rata as to each holder based upon --- ---- the number of shares of Series A Preferred Stock held by such holder), at any time and at its option, any or all of the shares of Series A Preferred Stock then outstanding. (c) The per share redemption price at which shares of Series A Preferred Stock are to be redeemed pursuant to this Section A.3 shall be equal to the Series A Liquidation Preference. If less than all of the outstanding shares of the Series A Preferred Stock are to be redeemed pursuant to Section A.3(b), the shares shall be redeemed from the holders thereof pro rata based --- ---- upon the number of shares of Series A Preferred Stock held by each such holder. (d) At least 30 days but not more than 60 days prior to the date fixed for any redemption (each, a "Series A Redemption Date") of shares of the Series A Preferred Stock, a written notice (the "Series A Redemption Notice") shall be given to each holder of record of shares of the Series A Preferred Stock to be redeemed. Such notice shall specify (1) the number of shares being redeemed from such holder, (2) the Series A Redemption Date and (3) the amount to be paid for each share of Series A Preferred Stock to be redeemed. The Series A Redemption Notice shall call upon such holder to surrender to the Corporation on the Series A Redemption Date, at the place or places designated in the Series A Redemption Notice, the certificate or certificates representing the number of shares of the Series A Preferred Stock to be redeemed from such holder as specified in the Series A Redemption Notice. On and after the Series A Redemption Date, each holder of shares of the Series A Preferred Stock to be redeemed shall be entitled to receive the redemption price for such shares upon the presentation and surrender of the certificate or certificates representing such shares at the place designated in the Series A Redemption Notice. Each surrendered certificate shall be canceled. If less than all of the shares represented by any certificate are redeemed, a new certificate shall be issued representing the shares not redeemed. From and after the Series A Redemption Date (unless default shall be made by the Corporation in payment of the redemption price), or from and after the date the Series A Redemption Notice has been sent as aforesaid and a sum sufficient to redeem the shares of the Series A Preferred Stock called for redemption shall have been irrevocably deposited or set aside, all dividends on the shares of the Series A Preferred Stock designated for redemption in the Series A Redemption Notice shall cease to accrue, all rights to the holders thereof as stockholders of the Corporation, except the right to receive the redemption price thereof upon the surrender of certificates representing such shares, shall cease and terminate, such shares shall not thereafter be transferred on the books of the Corporation, and such shares shall not be deemed to be outstanding for any purpose whatsoever. 4. Voting Rights. ------------- (a) The holders of the Series A Preferred Stock shall not, except as otherwise required by law or as set forth herein, have any right or power to vote on any matter or in any proceeding or to be represented on any matter or in any proceeding or to be represented at, or to receive notice of, any meeting of stockholders. The holders of the Series A Preferred Stock shall be entitled to one vote for each share held on any matter as to which they shall be entitled to vote. (b) So long as any shares of the Series A Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote, or the written consent as provided by law, of 4 the holders of at least two-thirds of the shares of the Series A Preferred Stock then outstanding, voting as a class: (i) change the preferences, rights or powers with respect to the Series A Preferred Stock so as to affect such stock adversely; or (ii) authorize, create or issue any (i) equity securities of the Corporation having rights (other than as to voting), preferences or priorities (including dividend and liquidation preferences) equal to or superior to the Series A Preferred Stock, other than the Seller Preferred Stock, and additional shares of the Series A Preferred Stock, or (ii) any bonds, debentures, notes or other obligations convertible into or exchangeable for, or having option rights to purchase, any shares of stock of the Corporation (other than shares of Series A Preferred Stock) having rights, preferences or priorities (including dividend and liquidation preferences) equal to or superior to the Series A Preferred Stock. 5. Retired Shares. -------------- Shares of Series A Preferred Stock redeemed, purchased or otherwise acquired by the Corporation shall be deemed retired and may not thereafter be reissued or otherwise disposed of by the Corporation. B. SERIES B PREFERRED STOCK ------------------------ 1. Dividends. --------- (a) The Corporation shall accrue dividends on each share of Series B Preferred Stock on each Dividend Accrual Date, at an amount per share equal to the Series B Dividend Rate times the average balance of the Series B Liquidation Preference from the last Dividend Accrual Date (or, in the case of the first Dividend Accrual Date, the Original Issuance Date) to the Dividend Accrual Date in question. Dividends on the Series B Preferred Stock for any period other than a full dividend period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. All unpaid dividends hereunder shall accrue and cumulate and shall increase the Series B Liquidation Preference from the applicable Dividend Accrual Date. (b) Unless all accrued dividends on all outstanding shares of the Series B Preferred Stock shall have been paid or declared and set aside for payment, no dividend shall be declared, paid or set apart for payment or any other distribution (whether in cash or obligations of the Corporation or other properties) upon any Junior Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation, other than dividends on Junior Stock payable solely in additional shares of Junior Stock. (c) Dividends shall accrue in accordance with this Section B.1 to the holders of record of Series B Preferred Stock as they appear on the stock ledger of the Corporation on the Dividend Accrual Date. 5 (d) In addition to the dividends set forth in paragraph (a) above, in the event that the Corporation shall pay a cash dividend on shares of Common Stock, the holder of each share of Series B Preferred Stock shall be entitled to receive a cash dividend, simultaneously with and in an amount equal to the amounts paid to the holder of each share of Common Stock; provided, however, -------- ------- that for the purpose of calculating the amounts due per share of Series B Preferred Stock under this paragraph (d), each share of Series B Preferred Stock shall be deemed to be that number of shares of Common Stock into which such share of Series B Preferred Stock was convertible as of the record date fixed for the determination of the holders of Common Stock entitled to receive such dividends. (e) In addition to the dividends set forth in paragraphs (a) and (d) above, in the event that the Corporation shall pay a non-cash dividend or distribution upon its Common Stock including, without limitation, any distribution of capital stock of the Corporation, stock or other securities of other persons, evidences of indebtedness issued by the Corporation or other persons, other assets or options or rights, the holders of Series B Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock into which their shares of Series B Preferred Stock were convertible as of the record date fixed for the determination of the holders of Common Stock entitled to receive such distribution. 2. Rights on Liquidation. --------------------- (a) In the event of any Liquidation, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to receive out of the assets of the Corporation legally available for distribution to its stockholders, whether from capital, surplus or earnings, before any payment shall be made to the holders of any Junior Stock, an amount per share equal to the Series B Liquidation Preference. After payment of such liquidating distributions, the holders of shares of Series B Preferred Stock will not be entitled to any further participation in any distribution of assets by the Corporation. (b) The merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation shall not be deemed a Liquidation within the meaning of this Section B.2. 3. Voting Rights. ------------- (a) Except as otherwise required by law, holders of Series B Preferred Stock shall not, prior to the occurrence of a Trigger Event, be entitled to vote on any matter to be voted on by the stockholders of the Corporation. From and after the occurrence of a Trigger Event, each share of Series B Preferred Stock shall entitle the holder thereof to vote on all matters as to which holders of Class A Common Stock shall be entitled to vote (with the number of votes specified in this Section B.3), together with such holders of Class A Common Stock as one class and in the same manner and with the same effect as such holders of Class A Common Stock, with each share of Series B Preferred Stock entitling the holder thereof to a number of votes equal to the number of shares of Common Stock issuable upon conversion of such share of Series B Preferred Stock on the date of such vote. 6 (b) The Corporation shall not, without the affirmative consent or approval of a majority of the shares of Series B Preferred Stock outstanding at such time, given by written consent in lieu of a meeting or by vote at a meeting called for such purpose for which notice shall have been given to the holders of Series B Preferred Stock in the manner provided by law: (A) authorize or designate or issue any additional shares of Series B Preferred Stock; or (B) change the preferences, rights or powers with respect to the Series B Preferred Stock so as to affect such stock adversely. 4. Conversion. ---------- (a) Optional Conversion. At any time and from time to time, any ------------------- holder of Series B Preferred Stock may convert all or any portion of such Series B Preferred Stock (including any fraction of a share) held by such holder into an equal number of fully paid and nonassessable Conversion Shares. (b) Automatic Conversion. All of the outstanding shares of Series B -------------------- Preferred Stock (including any fractional shares) shall automatically be converted, without any further act of the Corporation or its stockholders, into an equal number of fully paid and nonassessable Conversion Shares upon an Event of Conversion. The date on which an Event of Conversion occurs shall be referred to herein as the "Series B Conversion Date" in respect to shares converted pursuant to this Section B.4(b). (c) Conversion Procedure. -------------------- (i) Each conversion of Series B Preferred Stock shall be deemed to have been effected on (A) the Series B Conversion Date in the case of conversion pursuant to Section B.4(b) or (B) the close of business on the date on which the certificate or certificates representing the shares of Series B Preferred Stock to be converted have been surrendered at the principal office of the Corporation in the case of conversion pursuant to Section B.4(a). At such time as such conversion has been effected, the rights of the holder of the shares of Series B Preferred Stock being converted, shall cease and the Person or Persons in whose name or names any certificate or certificates for Conversion Shares are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the Conversion Shares represented thereby. (ii) As soon as possible after a conversion has been effected the Corporation shall deliver to the holder so converting shares of Series B Preferred Stock: (A) a certificate or certificates representing the number of Conversion Shares issuable by reason of such conversion in such name or names and such denomination or denominations as the holder has specified; and (B) a certificate representing any shares of Series B Preferred Stock, if any, which were represented by the certificate or certificates delivered to the Corporation in connection with such conversion but which were not converted. 7 (iii) The issuance of certificates for Conversion Shares upon conversion of shares of Series B Preferred Stock shall be made without charge to the holders of such shares of Series B Preferred Stock for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of Conversion Shares; provided, -------- however, that the holders shall pay any tax in respect of any transfer involved - ------- in the issuance of Conversion Shares in a name other than that in which the shares of Series B Preferred Stock were registered. Upon conversion of each share of Series B Preferred Stock, the Corporation shall take all such actions as are necessary in order to insure that the Conversion Shares issuable with respect to such conversion shall be validly issued, fully paid and nonassessable. (iv) The Corporation shall not close its books against the transfer of shares of Series B Preferred Stock or of Conversion Shares in any manner which interferes with the timely conversion of shares of Series B Preferred Stock. The Corporation shall assist and cooperate with any holder of shares required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of shares hereunder (including, without limitation, making any filings required to be made by the Corporation). (v) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Conversion Shares, solely for the purpose of issuance upon the conversion of the Series B Preferred Stock, such number of Conversion Shares issuable upon the conversion of all outstanding Series B Preferred Stock. All Conversion Shares which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to assure that all such Conversion Shares may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which Conversion Shares may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance). (d) Adjustments. If, at any time, the number of Conversion Shares ----------- outstanding is increased by a stock dividend payable in shares of Class A Common Stock or Class B Common Stock or by a subdivision or split-up of shares of Class A Common Stock or Class B Common Stock, then, in each such case, following the record date for such event, the number of shares of Class A Common Stock or Class B Common Stock into which each share of the Series B Preferred Stock is then, or at any time may be convertible, shall be increased in proportion to such increase in outstanding shares. If, at any time, the number of shares of Class A Common Stock or Class B Common Stock outstanding is decreased by a combination of the outstanding shares of Class A Common Stock or Class B Common Stock, then, following the record date for such combination, the number of shares of Class A Common Stock or Class B Common Stock into which each share of Series B Preferred Stock is then, or at any time may be convertible, shall be decreased in proportion to such decrease in outstanding shares. In case, at any time, of any capital reorganization, or any reclassification of the capital stock of the Corporation (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares) or the consolidation or merger of the Corporation with or into another person (other than a consolidation or merger in which the Corporation is the continuing corporation and which does not result in any change in the Conversion Shares) or of the sale or other disposition of all or 8 substantially all the properties and assets of the Corporation as an entirety to any other Person, each share of Series B Preferred Stock shall after such reorganization, reclassification, consolidation, merger, sale or other disposition be convertible into the kind and number of shares of stock or other securities or property of the Corporation or of the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold or otherwise disposed to which the holder of the number of Conversion Shares deliverable (immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or other disposition) upon conversion of such share of Series B Preferred Stock would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or other disposition. The provisions of this paragraph shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or other dispositions. C. COMMON STOCK ------------ 1. General. Except as otherwise provided in this Article Fourth, ------- all shares of Class A Common Stock and Class B Common Stock will be identical and will entitle the holders thereof to the same powers, preferences and relative participating, optional and other special rights, subject to the same qualifications and restrictions thereof. 2. Voting. Each holder of Class A Common Stock shall be entitled to ------ one vote per share of Class A Common Stock held by such holder on all matters to be voted on by the stockholders of the Corporation. Except as otherwise required by law, holders of Class B Common Stock shall not be entitled to vote on any matter to be voted on by the stockholders of the Corporation. 3. Rights. Except for and subject to those rights expressly granted ------ to the holders of the Preferred Stock, or except as may be provided by the laws of the State of Delaware, the holders of Common Stock shall have exclusively all other rights of stockholders. 4. Conversion. ---------- (a) Optional Conversion. Shares of Class A Common Stock may not be ------------------- converted into shares of Class B Common Stock. Shares of Class B Common Stock may not be converted into shares of Class A Common Stock except as provided in Section C.4(b). (b) Automatic Conversion. All of the outstanding shares of Class B -------------------- Common Stock (including any fractional shares) shall automatically be converted, without any further act of the Corporation or its stockholders, into an equal number of fully paid and nonassessable shares of Class A Common Stock upon a Trigger Event or Event of Conversion. The date on which a Trigger Event or an Event of Conversion occurs shall be referred to herein as the "Class B Conversion Date" in respect to shares converted pursuant to this Section C.4(b). (c) Conversion Procedure. -------------------- (i) The conversion of Class B Common Stock shall be deemed to have been effected on the Class B Conversion Date. At such time as such conversion has been effected, the rights of the holder of the shares of Class B Common Stock being converted shall cease and the Person or Persons in whose name or names any certificate or certificates for shares 9 of Class A Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Class A Common Stock represented thereby. (ii) As soon as possible after a conversion has been effected the Corporation shall deliver to each holder of Class B Common Stock a certificate or certificates representing the number of shares of Class A Common Stock issuable by reason of such conversion in such name or names and such denomination or denominations as the holder has specified. (iii) The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Class B Common Stock shall be made without charge to the holders of such shares for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of shares of Class A Common Stock; provided, however, that -------- ------- the holders shall pay any tax in respect of any transfer involved in the issuance of shares of Class A Common Stock in a name other than that in which the shares of Class B Common Stock were registered. Upon conversion of each share of Class B Common Stock, the Corporation shall take all such actions as are necessary in order to insure that the shares of Class A Common Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable. (iv) The Corporation shall not close its books against the transfer of shares of Class B Common Stock or of shares of Class A Common Stock in any manner which interferes with the timely conversion shares of Class B Common Stock. The Corporation shall assist and cooperate with any holder of shares required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of shares hereunder (including, without limitation, making any filings required to be made by the Corporation). (v) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of issuance upon the conversion of the Class B Common Stock, such number of shares of Class A Common Stock issuable upon the conversion of all outstanding Class B Common Stock. All shares of Class A Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to assure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Class A Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance). (d) Adjustments. ----------- If, at any time, the number of shares of Class A Common Stock outstanding is increased by a stock dividend payable in shares of Class A Common Stock or by a subdivision or split-up of shares of Class A Common Stock, or the number of shares of Class B Common Stock is decreased by a combination of the outstanding shares of Class B Common Stock, then, and in 10 each such case, following the record date for such event, the number of shares of Class A Common Stock into which each share of the Class B Common Stock is convertible shall be increased in proportion to such increase in outstanding shares of Class A Common Stock or decrease in outstanding shares of Class B Common Stock, as the case may be. If, at any time, the number of shares of Class B Common Stock is increased by a stock dividend payable in shares of Class B Common Stock or by a subdivision or split-up of shares of Class B Common Stock or the number of shares of Class A Common Stock outstanding is decreased by a combination of the outstanding shares of Class A Common Stock, then, in each such case, following the record date for such event, the number of shares of Class A Common Stock into which each share of Class B Common Stock is convertible shall be decreased in proportion to such increase in outstanding shares of Class B Common Stock or decrease in outstanding shares of Class A Common Stock, as the case may be. In case, at any time, of any capital reorganization, or any reclassification of the capital stock of the Corporation (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split- up or combination of shares) or the consolidation or merger of the Corporation with or into another person (other than a consolidation or merger in which the Corporation is the continuing corporation and which does not result in any change in the Class A Common Stock) or of the sale or other disposition of all or substantially all the properties and assets of the Corporation as an entirety to any other Person, each share of Class B Common Stock shall after such reorganization, reclassification, consolidation, merger, sale or other disposition be convertible into the kind and number of shares of stock or other securities or property of the Corporation or of the corporation resulting from such consolidation or surviving such merger or to which such properties and assets shall have been sold or otherwise disposed to which the holder of the number of shares of Class A Common Stock deliverable (immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or other disposition) upon conversion of such share of Class B Common Stock would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or other disposition. The provisions of this paragraph shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or other dispositions. D. DEFINITIONS ----------- "Acquisition Debt" shall mean the indebtedness incurred by the ---------------- Corporation or its Subsidiaries under the Credit Agreement and the Securities Purchase Agreement and any indebtedness incurred to refinance such indebtedness. "Class B Conversion Date" has the meaning ascribed to it in Section ----------------------- C.4(b). "Common Stock" means, collectively, the Corporation's Class A Common ------------ Stock and Class B Common Stock and any capital stock of any class of the Corporation (other than the Series A Preferred Stock, the Series B Preferred Stock and the Seller Preferred Stock) hereafter authorized which is not limited to a fixed sum or percentage of par or stated value in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon any Liquidation. 11 "Conversion Shares" shall mean (i) prior to the occurrence of a ----------------- Trigger Event, shares of Class B Common Stock and (ii) from and after the occurrence of a Trigger Event, shares of Class A Common Stock. "Credit Agreement" has the meaning ascribed to it in the Stockholders ---------------- Agreement. "Designated Offering" means an IPO which results in aggregate net cash ------------------- proceeds (net of underwriter discounts and commissions and estimated offering expenses) to the Corporation and/or any selling stockholders of not less than $30,000,000. "Dividend Accrual Date" means June 30 and December 31 of each year, --------------------- commencing June 30, 1996, and any other date upon which any payment on Liquidation or by way of a redemption is made on the Series A Preferred Stock or Series B Preferred Stock, as applicable. "Event of Conversion" means the first to occur of: ------------------- (i) the consummation of a Designated Offering; or (ii) the conversion by the holders thereof of more than 50% of the shares of Series B Preferred Stock issued on the Original Issuance Date. "IPO" means the initial public offering of the Common Stock registered --- pursuant to the Securities Act. "IRR Event" shall have the meaning ascribed to it in the Stockholders --------- Agreement. "Junior Stock" means (i) with respect to the Series A Preferred Stock, ------------ all other classes and series of equity securities of the Corporation now existing or hereafter created, including the Common Stock and any class or series of Preferred Stock other than the Seller Preferred Stock, and (ii) with respect to the Series B Preferred Stock, all other classes and series of equity securities of the Corporation now existing or hereafter created, including the Common Stock and any class or series of Preferred Stock other than Series A Preferred Stock and the Seller Preferred Stock. "Liquidation" means any liquidation, dissolution or winding-up of the ----------- Corporation, whether voluntary or involuntary. "Original Issuance Date" means, with respect to each share of Series A ---------------------- Preferred Stock and Series B Preferred Stock, the date upon which such share of Series A Preferred Stock or Series B Preferred Stock was issued. "Person" means an individual, a partnership, a corporation, an ------ association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. 12 "Redemption Date" means the first to occur of (i) the date which is 90 --------------- days after the repayment of all Acquisition Debt, (ii) February __, 2008 or (iii) the date on which an IRR Event shall occur. "Securities Act" means the Securities Act of 1933, as amended. -------------- "Securities Purchase Agreement" has the meaning ascribed to it in the ----------------------------- Stockholders Agreement. "Seller Preferred Stock" shall have the meaning ascribed thereto in ---------------------- the Stockholders Agreement. "Series A Accrued Dividends" means (whether or not there shall have -------------------------- been net profits or net assets of the Corporation legally available for the payment of dividends) that amount which shall be equal to the dividends on the Series A Preferred Stock that have accrued in accordance with Section A.1 for the period from the Original Issuance Date to the date in question but have not been paid. "Series A Dividend Rate" means 12% per annum. ---------------------- "Series A Liquidation Preference" means, at any point in time, an ------------------------------- amount per share equal to the Series A Original Liquidation Preference, plus the amount of any Series A Accrued Dividends, if any, through the date in question. "Series A Original Liquidation Preference" means, with respect to each ---------------------------------------- share of Series A Preferred Stock, $7.78. "Series A Redemption Date" has the meaning ascribed to it in Section ------------------------ A.3(d). "Series A Redemption Notice" has the meaning ascribed to it in Section -------------------------- A.3(d). "Series B Accrued Dividends" means (whether or not there have been net -------------------------- profits or net assets of the Corporation legally available for the payment of dividends) that amount which shall be equal to the dividends on the Series B Preferred Stock that have accrued in accordance with Section B.1 for the period from the Original Issuance Date to the date for the period from the Original Issuance Date to the date in question but have not been paid, plus any other dividends or distributions declared or required to be paid on the Series B Preferred Stock and which remain unpaid at such time. "Series B Conversation Date" has the meaning ascribed to it in Section -------------------------- B.4(b). "Series B Dividend Rate" means 9% per annum. ---------------------- "Series B Liquidation Preference" means, at any point in time, an ------------------------------- amount per share equal to the Series B Original Liquidation Preference, plus the amount of any Series B Accrued Dividends, if any, through the date in question. 13 "Series B Original Liquidation Preference" means with respect to each ---------------------------------------- share of Series B Preferred Stock, $10. "Stockholders Agreement" means the Stockholders Agreement dated as of ---------------------- February __, 1996, among the Corporation and the other parties thereto, as the same may be amended from time to time. "Subsidiary" means any corporation of which the shares of outstanding ---------- capital stock possessing the voting power (under ordinary circumstances) in electing the board of directors of such corporation are, at the time as of which any determination is being made, owned by the Corporation either directly or indirectly through one or more Subsidiaries. "Trigger Event" shall have the meaning ascribed thereto in the ------------- Stockholders Agreement. ARTICLE FIFTH ------------- The number of directors of the Corporation shall be such as from time to time shall be fixed in the manner provided in the By-laws of the Corporation. The election of directors of the Corporation need not be by ballot unless the By-laws so require. ARTICLE SIXTH ------------- A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware Statute, or (iv) for any transaction from which the director derived any improper personal benefit. If the Delaware Statute is amended after the date of incorporation of the Corporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware Statute, as so amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. The Corporation shall, to the fullest extent permitted by Section 145 of the Delaware Statute, as the same may be amended and supplemented, or by any successor thereto, indemnify any and all officers and directors of the Corporation from and against any and all of the expenses, liabilities or other matters referred to in or covered by said Section. Such right to indemnification shall continue as to any person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. The indemnification provided for herein shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise. 14 IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Richard J. Nick, its Vice President, and attested by Donald G. Kilpatrick, its Secretary, as of the _____ day of February, 1996. USS HOLDINGS, INC. By:___________________________________ Name: Richard J. Nick Title: Vice President ATTEST: By:_______________________ Name: Donald G. Kilpatrick Title: Secretary 15 State of Delaware Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF DESIGNATION OF "USS HOLDINGS, INC.", FILED IN THIS OFFICE ON THE NINTH DAY OF FEBRUARY, A.D. 1996, AT 2:22 O'CLOCK P.M. [SEAL] ____________________________________ Edward J. Freel, Secretary of State AUTHENTICATION: 2543882 8100 7822799 DATE: 960039654 02-09-96 Certificate of Designations by the Board of Directors as to the Designations, Preferences and Rights of the Series C Preferred Stock of USS HOLDINGS, INC. USS Holdings, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), the Amended and Restated Certificate of Incorporation of which was filed in the office of the Secretary of State of Delaware on February 9, 1996, does by its Vice Chairman and its Secretary, and under its corporate seal, hereby certify as follows: First: That by the Amended and Restated Certificate of Incorporation duly ----- filed in the above office as above stated, the total number of shares which the Corporation may issue is stated therein to be as follows: "The total number of shares of all classes of stock which the Corporation shall have authority to issue is 11,300,000 shares, consisting of (a) 3,800,000 shares of preferred stock, $.01 par value (the "Preferred Stock"), of which 1,200,000 shares are designated Series A Redeemable Preferred Stock (the "Series A Preferred Stock") and 2,500,000 shares are designated Series B Convertible Preferred Stock (the "Series B Preferred Stock") and (b) 7,500,000 shares of common stock, $.01 par value (the "Common Stock"), of which 5,000,000 shares are designated Class A Common Stock (the "Class A Common Stock") and 2,500,000 shares are designated Class B Common Stock (the "Class B Common Stock")." Second: That by said Amended and Restated Certificate of Incorporation, ------ the Board of Directors of the Corporation is expressly authorized to issue, as determined by resolution or resolutions of the Board of Directors before issuance, the Preferred Stock from time to time, in one or more series, and, in connection with the establishment of any such series by resolution or resolutions, to determine and fix such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including, without limitation, dividend rights, conversion rights, redemption privileges, preemptive rights and liquidation preferences, as shall be stated in such resolution or resolutions, all to the full extent permitted by the General Corporation Law of the State of Delaware; provided, however, that no such Preferred Stock established by resolution or resolutions shall possess any voting rights, except to the extent expressly provided in the resolution or resolutions establishing such Preferred Stock or as otherwise required by the General Corporation Law of the State of Delaware. Third: That pursuant to the authority so vested in the Board of ----- Directors, the Board of Directors duly adopted the following Resolutions: "RESOLVED, that there be created a series of preferred stock, par value $.01 per share, of the Corporation, bearing the designation "Series C Preferred Stock" (the "Series C Preferred Stock"); the number of shares of Series C Preferred Stock which the Corporation may issue shall be 20,000 shares (the "Shares"); and the Series C Preferred Stock shall have the following powers, preferences, relative rights and qualifications, limitations, restrictions, and other distinguishing characteristics: Section 1. Ranking and Voting Rights. ------------------------- (a) Ranking. The Series C Preferred Stock shall, with respect to ------- amounts payable on redemption and distributions upon the liquidation, winding-up and dissolution of the Corporation, rank senior to all classes of common stock of the Corporation and to each other class of Capital Stock or series of preferred stock of the Corporation (collectively "Junior Securities"). The Corporation may not issue any new class or series of preferred securities or other Capital Stock ranking senior to or on a parity with the Series C Preferred Stock as to dividends distributions, amounts payable on redemption and distributions upon the liquidation, winding-up and dissolution of the Corporation without the approval of the holders of at least 66 2/3% the shares of the Series C Preferred Stock then outstanding, voting or consenting, as the case may be, separately as one class, except that without the approval of the holders of the Series C Preferred Stock, the Corporation may issue shares of preferred securities or other Capital Stock the proceeds of which are used to redeem or repurchase all shares of the Series C Preferred Stock then outstanding. (b) Voting Rights. Each share of Series C Preferred Stock shall ------------- entitle the holder thereof to vote on all matters as to which holders of Class A Common Stock shall be entitled to vote, together with such holders of Class A Common Stock as one class and in the same manner and with the same effect as such holders of Class A Common Stock, with each share of Series C Preferred Stock entitling the holder thereof to five votes; provided, however, that in no event shall the holders of the Series C Preferred Stock have more than 28% of all of the votes 2 cast on any matter as to which the holders of Series C Preferred Stock shall be entitled to vote. Section 2. Dividends. The Series C Preferred Stock shall not accrue --------- dividends prior to the Mandatory Redemption Date, following which they shall accrue dividends at the rate of nine percent (9%) of their liquidation preference per annum, from the Mandatory Redemption Date until the date sufficient funds are made available for their redemption. Such dividends, if any, shall be payable in cash on redemption. Section 3. Redemptions. ----------- (a) Optional Redemption. The Series C Preferred Stock shall be ------------------- redeemable, in whole or in part, at any time prior to the Mandatory Redemption Date at the option of the Corporation in accordance with the Stock Purchase Agreement or upon not less than 30 nor more than 60 days' notice, at a redemption price per share equal to the Discounted Liquidation Preference. (b) Mandatory Redemption. The Series C Preferred Stock shall be -------------------- subject to mandatory redemption (subject to the legal availability of funds therefor) in whole on the Mandatory Redemption Date at a redemption price per share equal to the liquidation preference, plus all accumulated and unpaid dividends from the Mandatory Redemption Date to the date sufficient funds are made available for redemption. The Corporation is required to redeem all the outstanding Series C Preferred Stock at a purchase price equal to their Discounted Liquidation Preference, plus all accumulated and unpaid dividends from the Mandatory Redemption Date to the date sufficient funds are made available for redemption, following the breach of any covenant contained in Section 5 hereof on the 180th day after the giving of notice to the Corporation by the holders of at least 51% of the Series C Preferred Stock requesting redemption of the Series C Preferred Stock as a result of such breach. In addition following a Change of Control and each reduction in the amount of Capital Stock held by Harris Stockholders thereafter, on the 60th day (or such later date, up to the 180th day, on which any security of the Corporation senior to the Series C Preferred Stock may be entitled to be purchased or redeemed upon such event) after the giving of notice to the Corporation by the holders of at least 51% of the Series C Preferred Stock requesting redemption as a result of such Change of Control or reduction, as the case may be, the Corporation shall be required to redeem at a purchase price equal to their Discounted Liquidation Preference, plus all accumulated and unpaid dividends from the Mandatory Redemption Date to the date sufficient funds are made available for redemption, Series C Preferred Stock in such an amount so that the percentage of the Shares outstanding after giving effect to such redemption shall not be greater than the percentage then held by Harris Stockholders of Capital Stock of the Corporation held by Harris Stockholders at the Closing. The Corporation shall be obligated to redeem Series C Preferred Stock only to the extent permitted under the General Corporation Law of Delaware. 3 (c) Procedure for Redemption. On and after a redemption date, ------------------------ unless the Corporation defaults in the payment of the applicable redemption price, all rights of the holders of Shares subject to redemption on such date shall terminate except for the right to receive the redemption price, without interest. Except as set forth in the Stock Purchase Agreement, the Corporation shall send a written notice of redemption by first class mail to each holder of record of the Series C Preferred Stock at its registered address, not fewer than 30 days nor more than 60 days prior to the date fixed for such redemption. Shares of the Series C Preferred Stock issued and reacquired shall, upon compliance with the applicable requirements of Delaware law, have the status of authorized but unissued shares of preferred stock of the Corporation undesignated as to series and may with any and all other authorized but unissued shares of preferred stock of the Corporation be designated or redesignated and issued or reissued, as the case may be, as part of any series of preferred stock of the Corporation, subject to the provisions of the Corporation's certificate of incorporation (the "Certificate of Incorporation") and the terms of the Series C Preferred Stock remaining outstanding. Section 4. Liquidation Preference. Upon any voluntary or involuntary ---------------------- liquidation, dissolution or winding-up of the Corporation, the holders of the Series C Preferred Stock shall be entitled to be paid, out of the assets of the Corporation available for distribution, $1,000.00 plus all accumulated and unpaid dividends from the Mandatory Redemption Date to the dates sufficient funds are made available for redemption (or if such event occurs prior to the Mandatory Redemption Date, the Discounted Liquidation Preference) per share before any distribution is made on any Junior Securities, including, without limitation, common stock of the Corporation. After payment of the full amount of the liquidation preference to which they are entitled, the holders of the Series C Preferred Stock shall not be entitled to any further participation in any distribution of assets of the Corporation. However, neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more corporations shall be deemed to be a liquidation, dissolution or winding-up of the Corporation. Section 5. Certain Covenants. ----------------- (a) Limitation on Restricted Payments: Without the approval of the --------------------------------- holders of 66 2/3% of the shares of Series C Preferred Stock then outstanding, the Corporation (i) shall not, directly or indirectly, declare or pay any dividend, or make any distribution, in respect of its Capital Stock or to the holders thereof (including pursuant to a merger or consolidation of the Corporation, but excluding any dividends or distributions payable solely in shares of Junior Securities (other than Disqualified Stock) or in options, warrants or other rights to acquire Junior Securities (other than Disqualified Stock)), and (ii) shall not, and shall not permit any Subsidiary of the Corporation to, directly or indirectly, purchase, redeem or otherwise acquire or retire for value (a) any Capital Stock of the Corporation or (b) any options, warrants, or rights to acquire shares of Capital Stock of the 4 Corporation, (each of Clause (i) and (ii) being a "Restricted Payment"), unless: (1) no breach of a covenant contained in Section 3 hereof or this Section 5, and no event that with the lapse of time or the giving of notice, or both, would constitute a breach of a covenant contained in Section 3 hereof or this Section 5, shall have occurred and be continuing and (2) upon giving effect to such Restricted Payment, the aggregate of all Restricted Payments (other than Restricted Payments referred to in items (i), (iii) and (v) of the next sentence) following the Closing, does not exceed the sum of (a) 50% of the cumulative Consolidated Net Income of the Corporation (or if negative, 100% of the cumulative deficit) from the Closing through the last day of the last full fiscal quarter for which quarterly or annual financial statements of the Corporation are available, and (b) 100% of the aggregate net proceeds, including the fair value of property, to the Corporation from the issuance of Capital Stock (other than Disqualified Stock) of the Corporation and options, warrants or other rights to acquire Capital Stock (other than Disqualified Stock) of the Corporation (other than to a Subsidiary of the Corporation) and the principal amount (or accreted value) of Debt of the Corporation that has been converted into Capital Stock (other than Disqualified Stock) of the Corporation (other than Debt held, prior to such conversion, by a Subsidiary of the Corporation) after the Closing. Notwithstanding the foregoing, the Corporation and any of its Subsidiaries (i) may declare or pay any dividend, or make any distribution, in respect of the Series C Preferred Stock or to the holders thereof and may purchase, redeem or otherwise acquire or retire for value any Series C Preferred Stock, (ii) may purchase, redeem, acquire or retire Junior Securities in exchange for, or out of the proceeds of, the substantially concurrent issue of Junior Securities, except in each case to the extent that cash or any other property is to be paid or distributed by or on behalf of the Corporation in connection with such transaction, (iii) may make payments of up to $100,000 in any fiscal year to the extent necessary to pay the operating expenses of the parent entity of the Corporation, (iv) may purchase, redeem or otherwise acquire or retire for value shares of the Corporation's Capital Stock or options on such shares from officers or employees or former officers or employees of the Corporation or any Subsidiary thereof (or their estates or beneficiaries under their estates) upon death, disability, retirement or termination of employment of any such Person pursuant to the terms of any agreement under which such shares or options were issued, in an amount not in excess of $1,000,000 in any twelve-month period, (v) may purchase, redeem or otherwise acquire or retire for value shares of the Corporation's Capital Stock provided that the Corporation shall substantially concurrently redeem outstanding Series C Preferred Stock in the same proportion as Capital Stock held by Harris Stockholders is so purchased, redeemed or otherwise acquired or retired for value at such time. The foregoing provision shall not be violated by reason of the payment of any dividend within 60 days after declaration thereof if at the declaration date such payment would have complied with the foregoing provision. (b) Transactions with Affiliates: Without the approval of the ---------------------------- holders of 66 2/3% of the shares of Series C Preferred Stock then outstanding, the Corporation, except as permitted in the following paragraph, shall not, and shall 5 not permit any Subsidiary to, enter into any transaction with an Affiliate of the Corporation including any loan, advance or investment, either directly or indirectly, unless such transaction is on terms which are at least as favorable as those available from a Person which is not an Affiliate. Any such transaction (or series of related transactions) that involves in excess of $250,000 shall be prohibited unless (i) the Board of Directors of the Corporation determines, as evidenced by a resolution of the Board of Directors, that such transaction is on terms no less favorable to the Corporation or such Subsidiary than those that could be obtained in a comparable arm's-length transaction with an entity that is not an Affiliate and (ii) in the case of transactions that involve in excess of $5,000,000, the Board of Directors also obtains the opinion of a nationally recognized valuation firm to the same effect. The Corporation and any Subsidiary shall be permitted to enter into any transaction with an Affiliate of the Corporation if the Board of Directors obtains the opinion of an independent nationally recognized valuation firm to the effect that such transaction is on terms no less favorable to the Corporation than those that could be obtained in a comparable arm's-length transaction with an entity that is not an Affiliate. The above requirements shall not be applicable to (i) any transaction among the Corporation and its Subsidiaries, (ii) any transaction with any Institutional Investor for the purpose of the making of any loan or advance to, investment in, or financing or refinancing for the benefit of, the Corporation or any Subsidiary by such Institutional Investor, (iii) any transaction permitted by Sections 5(a) or 5(d) hereof and (iv) any transaction contemplated by the Registration Rights Agreement, the Management Services Agreement or the DGHA Fee Letter. "Institutional Investor" shall mean any financial institution that enters into such transactions in the ordinary course of its business. (c) Limitation on Certain Asset Dispositions: Without the approval ---------------------------------------- of the holders of 66 2/3% of the shares of Series C Preferred Stock then outstanding, the Corporation shall not, and shall not permit any Subsidiary to, make any Asset Disposition in one or more related transactions unless (i) the Corporation (or such Subsidiary) receives consideration at the time of such disposition at least equal to the fair market value of the shares or assets disposed of (as determined in good faith by (x) a designated officer of the Corporation if such consideration is less than $1 million or (y) the Corporation's Board of Directors if such consideration is greater than or equal to $1 million), and (ii) the Net Proceeds, less any amounts invested within 180 days of such disposition in assets related to the business of the Corporation and its Subsidiaries on the date of the Closing and related businesses, are applied (A) first, within 180 days of such disposition, to repay Debt then outstanding; and (B) second, to purchase outstanding Series C Preferred Stock at a purchase price equal to their Discounted Liquidation Preference. "Asset Disposition" means any transfer, conveyance, sale, lease or other disposition by the Corporation or any of its Subsidiaries (including by way of consolidation or merger), resulting in proceeds in excess of $500,000, of (i) shares of Capital Stock or other ownership interest of a Subsidiary of the Corporation, 6 (ii) substantially all of the assets of the Corporation or any Subsidiary representing a division or line of business, or (iii) other assets or rights outside of the ordinary course of business. (d) Mergers, Consolidations and Certain Sales of Assets: Without the --------------------------------------------------- approval of the holders of 66 2/3% of the shares of Series C Preferred Stock then outstanding, the Corporation shall not, in a single transaction or through a series of related transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer or lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of Affiliates, or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions, in the aggregate, would result in a sale, assignment, transfer, lease or disposal of all or substantially all of the properties and assets of the Corporation and its Subsidiaries on a consolidated basis to any other Person which is not a Subsidiary of the Corporation or to a group of Affiliates which are not Subsidiaries of the Corporation, unless: (1) in a transaction in which the Corporation does not survive or in which the Corporation sells, leases or otherwise disposes of all or substantially all of its assets, the successor entity to the Corporation is organized under the laws of the United States of America or any State thereof or the District of Columbia and shall issue preferred securities that are substantially identical to the Series C Preferred Stock; and (2) immediately before and after giving effect to such transaction, no breach of a covenant contained in Section 3 hereof or this Section 5 shall have occurred and be continuing. Notwithstanding the foregoing requirements, in the event that the successor entity is a Subsidiary of HCG, the preferred securities to be issued by such successor entity may, at the option of the successor entity, be issued by HCNA or HCG instead of being issued by the successor entity; provided that (1) if HCNA is the issuer of the preferred securities, such securities shall have covenants substantially identical to Section 1011 "Limitation on Restricted Payments" and Section 1016 "Limitation on Transactions with Affiliates and Related Persons" in the HCNA Indenture dated as of October 15, 1993, as the same may be amended, relating to HCNA's 10 3/4% Senior Subordinated Notes due October 15, 2003 and this Section 5(d) and shall omit the covenants contained in Sections 5(a), 5(b) and 5(c) hereof; and (2) if HCG is the issuer of the preferred securities, such securities shall have covenants substantially identical to the covenants contained in this Section 5 except that the covenant contained in Section 5(c) shall be omitted and the covenant contained in Section 5(a) shall contain an exception equivalent to clause (iii) of the second sentence thereof but without an annual limitation for obligations for operating expenses with respect to HCG's Capital Stock existing at the issuance of such securities and with an annual limitation for obligations to be assumed thereafter reasonably designed to permit practices of HCG existing at the time of the issuance of such preferred securities. Whether or not the successor entity is a Subsidiary of HCG, the preferred securities to be issued may, at the option of the successor entity, omit the covenants contained in Sections 5(a), 5(b) and 5(c) hereof, so long as HCG issues a guarantee containing covenants 7 substantially identical to the covenants referred to in clause (2) of the preceding sentence and guaranteeing the obligation of such successor entity to make mandatory redemptions of such preferred securities in the event of any breach of such covenants and as otherwise provided in such preferred securities. In the case of any new preferred securities issued in any of the cases referred to in this paragraph, the provision for "Change of Control" shall refer to a change of control of HCG and to definitions of "Harris Stockholders" and "Permitted Holders" substantially identical to the definitions contained herein except that the "Harris Stockholders" shall include such holders of HCG Capital Stock at the time of the issuance of such new preferred securities as the Chairman of D. George Harris & Associates, Inc. shall designate and "Permitted Holders" shall include all other holders of Capital Stock of HCG at the time of the issuance of such new preferred securities and the definition "Closing" shall mean the date of issuance of such new preferred securities. (e) Information: So long as any of the Series C Preferred Stock ----------- are outstanding, the Corporation shall provide the holders of the Series C Preferred Stock and prospective holders of the Series C Preferred Stock upon request with copies of the annual audited and quarterly financial statements of the Corporation. The (i) quarterly financial statements shall be accompanied by a certificate of the Corporation's chief financial officer and (ii) audited annual financial statements shall be accompanied by a certificate of the Corporation's chief financial officer, in each case certifying that the Corporation is in compliance with the covenants contained in this Section 5. (f) Definitions: "Affiliate" of any Person means any other ----------- Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Attributable Value" means, as to a Capital Lease Obligation under which any Person is at the time liable and at any date as of which the amount thereof is to be determined, the capitalized amount thereof that would appear on the face of a balance sheet of such Person in accordance with generally accepted accounting principles. "Capital Lease Obligation", of any Person means the obligation to pay rent or other payment amounts under a lease of (or other Debt arrangements conveying the right to use) real or personal property of such Person that is required to be classified and accounted for as a capital lease or a liability on the face of the balance sheet of such Person in accordance with generally accepted accounting principles. The stated maturity of such obligation shall be the date of the last 8 payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) or corporate stock of such Person. "Change of Control" is defined to mean when the Permitted Holders cease (i) to be the beneficial owners (as defined in Rule 13(d)(3) under the Securities Exchange Act of 1934), of at least 51% of the total voting power of all classes of Voting Stock of the Corporation or (ii) to have a sufficient number of their nominees elected to the Board of Directors of the Corporation such that such nominees constitute less than a majority of the Board of Directors of the Corporation. "Closing" shall have the meaning set forth in the Stock Purchase Agreement. "Consolidated Net Income" means for any period the consolidated net income (or loss) of the Corporation and its consolidated subsidiaries for such period determined in accordance with generally accepted accounting principles. "Debt" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses, (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), (v) every Capital Lease Obligation of such Person to the extent of its Attributable Value, (vi) the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination, (vii) every net obligation under any interest rate swap or similar agreement or foreign currency hedge, exchange or similar agreements of such Person and (viii) every obligation of the type referred to in Clauses (i) through (vii) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor, guarantor or otherwise. "DGHA Fee Letter" means the letter agreement, dated the date of the Closing, among the Corporation, certain Subsidiaries thereof and D. George Harris Associates, Inc., as in effect on the date of the Closing. "Discounted Liquidation Preference" means the liquidation preference of a share of Series C Preferred Stock, discounted from the Mandatory Redemption Date to the date of determination at the rate of 7.18% compounded annually. 9 "Disqualified Stock" means any Capital Stock of the Corporation or any Subsidiary which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the Mandatory Redemption Date. "Family Group" shall mean, with respect to any transferor of Capital Stock, such transferor's spouse and descendants (whether natural or adopted), and any trust or family partnership whose primary beneficiary shall be such transferor and/or such transferor's spouse and/or any individual related by blood or adoption to such transferor, such transferor's spouse or another member of such transferor's Family Group. "Harris Stockholders" shall mean at any time any employee of D. George Harris & Associates, Inc. or an Affiliate thereof, and any member of such person's Family Group. "HCNA" means Harris Chemical North America, Inc., a Delaware corporation and its successors. "HCG" means Harris Chemical Group, Inc., a Delaware corporation and its successors. "Management Services Agreement" means the Management Services Agreement, dated as of the date of the Closing, among the Corporation, certain Subsidiaries thereof and D. George Harris & Associates, Inc., as in effect on the date of the Closing and with such amendments and modifications thereto as are provided by Section 3 and Section 5(d) thereof. "Mandatory Redemption Date" means the tenth anniversary of the Closing. "Net Proceeds" from any Asset Disposition by any Person means cash and readily marketable cash equivalents (including by way of sale or discounting of a note, instalment receivable or other receivable, but excluding any other consideration received in the form of assumption by the acquiree of Debt or other obligations relating to such properties or assets or received in any other noncash form), net of all legal, title and recording tax expenses, commissions and other fees and expenses incurred and all federal, state, foreign and local taxes required to be accrued as a liability as a consequence of such Asset Disposition. "Permitted Holders" means Harris Stockholders from time to time and other holders of Capital Stock of the Corporation at the Closing, other than holders of the Series C Preferred Stock, and their respective Affiliates. "Person" means any individual, corporation, partnership, trust, unincorporated organization or any governmental agency. 10 "Redeemable Stock" of any Person means any equity security of such Person that by its terms or otherwise (i) is required to be redeemed prior to the Mandatory Redemption Date (ii) is redeemable at the option of the holder thereof at any time prior to the Mandatory Redemption Date or (iii) is convertible or exchangeable into any equity security described in clause (i) or (ii). "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date of the Closing, among the Corporation and the stockholders of the Corporation party thereto, as in effect on the date of the Closing. "Stock Purchase Agreement" means the Stock Purchase Agreement, dated as of October 23, 1995 and amended as of January 29, 1996, between U.S. Borax Inc. and the Corporation. "Subsidiary" of any Person means (i) a corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation) in which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof. "Voting Stock" of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. Section 6. Amendment and Waiver. No amendment, modification or -------------------- waiver shall be binding or effective with respect to any provision of this Certificate of Designation without the prior written consent of the holders of at least a majority of the Series C Preferred Stock outstanding at the time such action is taken. Section 7. Notices. Except as otherwise expressly provided herein, ------- all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested, postage prepaid and shall be deemed to have been given when so mailed (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). RESOLVED, that the statements contained in the foregoing Resolution creating and designating the Series C Preferred Stock and fixing the number, powers, preferences, relative rights and qualifications, limitations, restrictions, and other distinguishing characteristics thereof shall, upon the issuance date of such Series C Preferred Stock, be deemed to be included in and be a part of the 11 Certificate of Incorporation of the Corporation pursuant to the provisions of Section 104 and 151 of the General Corporation Law of the State of Delaware." Fourth: That the said Resolutions of the Board of Directors, and the ------ creation and authorization of issuance thereby of said Series C Preferred Stock and determination thereby of the provisions applicable to such series as described in the Resolutions contained in the Third article hereof, were duly made by the Board of Directors pursuant to authority as aforesaid in accordance with Section 151 of the General Corporation Law of the State of Delaware. 12 IN WITNESS WHEREOF, the Corporation has made under its corporate seal and the hands of its Vice Chairman and Secretary, respectively, the foregoing certificate, and said Vice Chairman and Secretary have hereunto set their hands and caused the corporate seal of the Corporation to be hereunto affixed as of the 9th day of February, 1996. USS HOLDINGS, INC. By: /s/ Richard J. Nick ------------------------------------- Richard J. Nick Vice President (Corporate Seal) Attest: By: /s/ Donald G. Kilpatrick ------------------------- Donald G. Kilpatrick Secretary 13 Schedule 4 DGHA Stockholders D. George Harris Anthony J. Petrocelli Richard J Donahue Donald G. Kilpatrick David Willitts Richard J. Nick Emanuel J. Di Teresi Matthew J. Dowd Schedule 5 HCG/HSC Stockholders Michael R. Boyce William J. Sichko Schedule 6 Institutional Stockholders Chase Manhattan Capital Corporation Schedule 7 Form of Manager Repurchase Agreement MANAGER REPURCHASE AGREEMENT dated as of ________, 1996, among USS HOLDINGS, INC., a Delaware corporation (the "Corporation") and the stockholders of the Corporation listed on Schedule 1(each a "Manager Stockholder" and collectively the "Manager Stockholders"). Each Manager Stockholder owns that number of Manager Restricted Shares (as defined in the Stockholders Agreement) set forth opposite such Manager Stockholder's name on Schedule 1. ACCORDINGLY, in consideration of the mutual covenants and agreements contained in this Agreement, the parties agree as follows: 1. Definitions; Rules of Construction. ---------------------------------- (a) Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings ascribed to them in the Stockholders Agreement. (b) The following capitalized terms have the meanings ascribed to them below: "Corporation" has the meaning ascribed to it in the Preamble. ----------- "Fair Market Value" for any Marketable Securities shall mean the ----------------- average of the closing prices of sales of Marketable Securities on all national domestic exchanges on the date in question, or, if there shall have been no sales on any such exchange on any such day, the average of the bid and asked prices at the end of such day on such exchange or, if such Marketable Securities are not listed on any national domestic exchange, the average of the high and low bid prices on such day as quoted in the NASDAQ system, in each case averaged over a period of 20 consecutive business days prior to the date as of which "Fair Market Value" is being determined. "Fair Value" means, with respect to any Non-Cash Proceeds, the value ---------- of such Non-Cash Proceeds, as determined jointly by the majority of the Institutional Stockholders and the Majority of the DGHA Stockholders. If such parties are unable to reach agreement within 30 days, such Fair Value shall be determined by an independent nationally recognized investment bank experienced in valuing companies or assets jointly selected by the Majority of the Institutional Stockholders and the Majority of the DGHA stockholders. If the parties cannot agree on the selection of an investment bank, within 30 days, the investment bank will be selected by an independent arbitrator appointed in accordance with the rules of the American Arbitration Association. The determination of such investment bank shall be final and binding upon the parties, and the Corporation shall pay the fees and expenses of such investment bank. "Initial Public Offering" means the initial Public Offering of equity ----------------------- securities of the Corporation. "Marketable Securities" means securities which (i) are listed for --------------------- trading on a national domestic securities exchange or quoted in the NASDAQ system, (ii) may be sold free from restrictions under the Securities Act or otherwise and (iii) are not subject to forfeiture or return by the holder --- thereof, provided that no securities will be Marketable Securities unless securities of the same class with a Fair Market Value of at least $10 million are held by Persons other than Affiliates of the issuer of such securities. "Non-Cash Proceeds" means any property, notes, stock or other ----------------- securities other than cash and Marketable Securities. "Original Issuance Date" means February 9, 1996. ---------------------- "Stockholders Agreement" means the Stockholders Agreement as of ---------------------- February 9, 1996 between the Corporation and the parties named therein as amended or modified from time to time. (c) The use in this Agreement of the term "including" means "including, without limitation." The words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits, as the same may from time to time be amended or supplemented, and not to any particular section, subsection, paragraph, subparagraph or clause contained in this Agreement. All references to sections, schedules and exhibits mean the sections of this Agreement and the schedules and exhibits attached to this Agreement. (d) The title of and the section and paragraph headings in this Agreement are for convenience of reference only and shall not govern the interpretation of any of the terms or provisions of this Agreement. (e) The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require. (f) Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement has been chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. 2. Corporation Obligation to Purchase Manager Restricted Shares; ------------------------------------------------------------- Dividends on Manager Restricted Shares. - -------------------------------------- (a) If, upon the consummation of an IRR Event, the IRR realized on a Unit is less than 30%, then the Corporation shall purchase from the Manager Stockholders hereunder, and from the DGHA Stockholders under the DGHA Repurchase Agreement, that number of Manager Restricted Shares and DGHA Restricted Shares (purchased from the holders thereof pro rata based upon the number of such -------- shares held) as shall be required to cause the IRR on a Unit 2 purchased on the Original Issuance Date and held through the date of such IRR Event to equal 30%. (b) If, upon the consummation of an IRR Event, the IRR realized on a Unit is less than 35% but greater than 30%, then the Corporation shall purchase from the Manager Stockholders hereunder, and from the DGHA Stockholders under the DGHA Repurchase Agreement, that number of Manager Restricted Shares and DGHA Restricted Shares (purchased from the holders thereof pro rata based upon the -------- number of such shares held), up to a maximum of 50% of the aggregate number of Manager Restricted shares and DGHA Restricted Shares outstanding on the date of the consummation of an IRR Event, as shall be required to cause the IRR on a Unit purchased on the Original Issuance Date and held through the date of such IRR Event to equal 35%. (c) The IRR on the Unit shall be calculated assuming such Unit was purchased by a single holder on the Original Issuance Date at a price of $27.78 and held by such Person until the time of an IRR Event and the "IRR" on such Unit shall mean the pre-tax, compounded annual internal rate of return realized thereon, calculated on a pro forma basis, using the following assumptions: (i) --------- any Non-Cash Proceeds received with respect to such Unit in connection with an IRR Event will be deemed for purposes of this definition to have a value equal to the Fair Value of such Non-Cash Proceeds, (ii) any cash proceeds or dividends received with respect to such Unit prior to the consummation of the IRR Event will be included in the calculation of the IRR as of the date of receipt, (iii) upon the consummation of an Initial Public Offering, the holder of such Unit will be deemed to have sold all Common Equivalents issued in respect of such Unit in such offering at a price per Common Equivalent equal to (A) 85% of the issue price in the Initial Public Offering if such Initial Public Offering was not initiated by the Institutional Investors pursuant to Section 2 of the Registration Rights Agreement and the Institutional Investors shall not have sold more than 50% of the Common Equivalents then held by them in such Initial Public Offering pursuant to Section 3 of the Registration Rights Agreement, or (B) 100% of the issue price if such Initial Public Offering was initiated by the Institutional Investors pursuant to Section 2 of the Registration Rights Agreement or the Institutional Investors shall have sold more than 50% of the Common Equivalents then held by them in such Initial Public Offering pursuant to Section 3 of the Registration Rights Agreement and (iv) the holder of such Unit will be deemed to have received Cash in an amount equal to the Fair Market Value of Marketable Securities received with respect to such Unit (which cash proceeds will be deemed to have been received on the date on which the securities constituting Marketable Securities are actually received by the holders of such Unit, or, if later, on the date such securities first meet all of the requirements of Marketable Securities contained in the definition thereof). (d) For the avoidance of doubt, the Corporation acknowledges that if, upon the consummation of an IRR Event, the IRR realized on a Unit is less than 30% after giving effect to the provisions of this Section 2, the obligations of the Manager Stockholders with respect thereto shall be limited solely to the sale of the Manager Restricted Shares described in subparagraph (a) above. (e) All the Manager Restricted Shares to be purchased pursuant to subparagraphs (a) or (b) above will be purchased by the Corporation for $.01 per share 3 immediately prior to the occurrence of an IRR Event. The Manager Restricted Shares to be purchased by the Corporation shall be purchased from the Manager Stockholders pro rata based upon the number of Manager Restricted Shares owned. -------- Each Manager Stockholder shall cause the transfer of the shares representing the Manager Restricted Shares to the Corporation to be consummated automatically without any action by the Corporation and the Corporation will pay the purchase price therefor within 30 days after written demand therefor. (f) Any and all dividends declared and paid, if any, with respect to the Manager Restricted Shares shall be held by an escrow agent to be appointed pursuant to the terms of an escrow agreement in a form to be agreed in good faith by the parties hereto. 3. Repurchase of Manager Restricted Shares From Terminating -------------------------------------------------------- Stockholders. - ------------ (a) In the event of a Termination Event described in Section 14(d)(i)(1), (2), (3) or (4) of the Stockholders Agreement with respect to a Manager Stockholder prior to the date of the occurrence of an IRR Event, unless such Termination Event occurs on or after the third anniversary of the later of (i) the date hereof and (ii) the date of such Manager Stockholder's initial employment with the Corporation or any Subsidiary thereof, the Corporation shall purchase from such Manager Stockholder hereunder all of the Manager Restricted Shares held by such Manager Stockholder. (b) In the event of a Termination Event described in Section 14(d)(i)(5) with respect to a Manager Stockholder prior to the date of the occurrence of an IRR Event, the Corporation shall purchase from such Manager Stockholder hereunder all of the Manager Restricted Shares held by such Manager Stockholder. (c) Any Manager Restricted Shares repurchased by the Corporation pursuant to Section 3(a) or (b) shall be repurchased at a price of $0.01 per share and may be reissued by the Corporation to other Manager Stockholders as directed by the Chairman of the Board in accordance with the Stockholders Agreement. 4. Duration of Agreement and Legend. -------------------------------- (a) The rights and obligations of each of the parties hereto under this Agreement shall terminate after the occurrence of an IRR Event and, if applicable, the repurchase of Manager Restricted Shares as contemplated herein. (b) The form of stock certificate issued by the Corporation with respect to the Manager Restricted Shares shall be stamped or otherwise imprinted with a legend which shall state, inter alia, that the Manager Restricted Shares are subject to the restrictions contained in this Agreement. 5. Severability. ------------ Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in 4 any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, and such invalid, void or otherwise unenforceable provisions shall be null and void. It is the intent of the parties, however, that any invalid, void or otherwise unenforceable provisions be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable to the fullest extent permitted by law. 6. Entire Agreement. ---------------- This document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. 7. Successors and Assigns. ---------------------- Except as otherwise provided herein, this Agreement will bind and inure to the benefit of and be enforceable by the Corporation and its successors and assigns, and the Manager Stockholders and any subsequent holders of Manager Restricted Shares and the respective successors and permitted assigns of each of them (including a Permitted Transferee pursuant to the Stockholders Agreement and any executor, administrator, legatee or distributee of the estate of a deceased Manager Stockholder), so long as they hold Manager Restricted Shares. None of the provisions hereof shall create, or be construed or deemed to create, any right to employment in favor of any Person by the Corporation or any of its subsidiaries. This Agreement is not intended to create any third party beneficiaries. 8. Counterparts. ------------ This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 9. Remedies. -------- It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. 10. Notices. ------- All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (a) when delivered personally to the recipient, (b) one business day after being sent 5 by reputable overnight courier charges prepaid) (regardless of whether the recipient refuses to accept delivery), (c) five business days after being sent to the recipient by certified or registered mail, return receipt requested and postage prepaid (regardless of whether the recipient refuses to accept delivery) or (d) when sent to the recipient by facsimile (followed promptly by personal, courier or certified or registered mail delivery). The Corporation's address is: USS Holdings, Inc. c/o D. George Harris & Associates, Inc. 399 Park Avenue 32nd Floor New York, New York 10022 Telephone: (212) 207-6400 Telecopier: (212) 207-6470 Attention: Donald G. Kilpatrick With a copy to: Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, New York 10004 Telephone: (212) 858-1000 Telecopier: (212) 858-1500 Attention: Kenneth E. Adelsberg, Esq. The address for each Manager Stockholder is set forth on Schedule I hereto. 11. Governing Law. ------------- All questions concerning the construction, interpretation and validity of this Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether in the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. 12. Further Assurances. ------------------ Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. 13. Amendment. --------- The provisions of this Agreement may only be amended or waived with the prior written consent of the Corporation, a Majority of the Institutional Stockholders and a Majority of the Manager Stockholders; provided, however, that -------- ------- Schedule I to this Agreement shall be deemed to be automatically amended from time to time to reflect issuances of Manager 6 Restricted Shares made in accordance with the terms of the Stockholders Agreement without requiring the consent of any party hereto, and the Corporation will, upon request, distribute to any Manager Stockholder a revised Schedule I to reflect any such changes. 14. Jurisdiction; Venue; Process. ---------------------------- The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly (but not exclusively) lie in any federal or state court located in the State of New York. By execution and delivery of this Agreement, the parties hereto irrevocably submit to the jurisdiction of such courts for himself and in respect of his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby waive any objection that such court is an improper or inconvenient forum for the resolution of such action. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without necessity for service by any other means provided by statute or rule of court. 15. Mutual Waiver of Jury Trial. --------------------------- BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. * * * * * 7 IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the date first written above. THE CORPORATION --------------- USS HOLDINGS, INC. By:_____________________________________ Name: Title: [HOLDERS OF Manager Restricted Shares] 8 Schedule 8 Manager Stockholders Schedule 9 SECURED PROMISSORY NOTE $_______________ _______________, 199_ FOR VALUE RECEIVED, _______________________ of _______________________ ("Maker"), hereby promises to pay to USS HOLDINGS, INC., a Delaware corporation ("Payee"), or order, on the fifth anniversary of the date hereof, to the extent not sooner paid in accordance with the provisions hereof, the principal sum of ______________________ Dollars ($___________) in legal tender of the United States of America, together with interest thereon as herein provided, at the office of Payee at 399 Park Avenue, 32nd Floor, New York, New York 10022, or any other place which may be specified in writing by the holder of this Note. 1. The unpaid principal of this Note shall bear interest at the rate of seven percent (7%) per annum, and shall be calculated based upon a year of 365 days (or 366 in the case of any leap year) and the actual number of days elapsed. Accrued interest on the unpaid principal amount of this Note shall be payable, in arrears, on each Interest Payment Date (as defined below). 2. The unpaid principal of this Note shall be payable on each Principal Payment Date (as defined below) in an amount equal to 50% of Maker's Bonus (as defined below) received on such Principal Payment Date. 3. If Maker fails to make any payment of principal or interest when due (whether at maturity, upon acceleration or otherwise), unless otherwise required by law, interest shall accrue on all unpaid principal and such overdue amount at the rate of nine percent (9%) per annum from five days after the due date until payments are current. 4. Maker shall have the right to prepay the unpaid principal of this Note in whole or in part, together with interest accrued on the amount prepaid, at any time without premium or penalty. 5. Upon the occurrence of any Event of Default (as hereinafter defined) hereunder, Payee may, at its option, declare the entire unpaid principal balance of this Note, together with interest accrued thereon, to be immediately due and payable, without presentation, demand or notice of any kind, all of which Maker and all other parties who may at any time be liable on this Note in any capacity hereby expressly waive. The following are Events of Default: (A) default shall occur in the payment of the principal of, or interest on, this Note when due (whether at maturity, upon acceleration or otherwise), and such default shall continue unremedied for sixty (60) days; or (B) Maker shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator for any substantial part of his property, (ii) admit in writing his inability to pay his debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be the subject of any involuntary petition seeking relief under the Bankruptcy Code, which petition is not dismissed within thirty (30) days, or Maker does not within the first five (5) days of such period interpose valid and good faith defenses to the grant of relief under such petition, or with respect to which petition an order for relief is entered, or (v) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or seeking to take advantage of any bankruptcy, reorganization or insolvency statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law; or (C) A Termination Event specified in Section 14(d)(i)(5) of the Stockholders Agreement (as defined below) shall have occurred with respect to Maker; or (D) Other than a transfer to a Permitted Transferee (as defined in the Stockholders Agreement) made with the prior approval of Payee's Board of Directors, Maker shall have sold or otherwise transferred any of his shareholdings in Payee or its successors in interest which constitute Pledged Collateral (as hereinafter defined) hereunder. The foregoing remedy of acceleration shall not be exclusive of any other right, power or remedy available to Payee by law. 6. No delay or omission on the part of Payee in exercising any right, power or remedy hereunder shall operate as a waiver of such right or any other right under this Note, nor shall any single or partial exercise of any such right, power or remedy by Payee preclude any other or further exercise thereof or the exercise of any other right, power or remedy. A waiver on any one occasion shall not be construed as a bar to or waiver of any such right, power or remedy on any future occasion. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. 7. As security for the due and punctual payment of Maker's obligations under this Note, Maker hereby delivers, pledges and hypothecates to Payee, and grants to Payee a security interest in, all shares of Series B Convertible Preferred Stock, $0.01 par value per share, of Payee owned by Maker, whether now or hereafter acquired, together with any dividends, distributions (whether in the form of cash, securities or other assets) or other proceeds in respect thereof 2 (including shares of Common Stock of Payee issued to Maker upon conversion thereof), all certificates representing such shares and all stock powers attached thereto executed in blank (collectively, the "Pledged Collateral"). Maker hereby agrees that physical possession of the Pledged Collateral shall at all times remain in the Payee until the unpaid principal and interest accrued thereon of this Note have been fully and finally paid to the Payee. 8. (a) As long as an Event of Default has not occurred under this Note, Maker shall be entitled to exercise any and all voting and/or consensual rights relating to or pertaining to the Pledged Collateral. (b) If any Event of Default under this Note shall occur and be continuing, the rights of Maker to exercise voting and/or consensual rights with respect to the Pledged Collateral shall cease, and all such rights shall become vested in Payee. 9. If an Event of Default under this Note shall occur and be continuing, then Payee shall be entitled to exercise the rights and remedies of a secured party under the Uniform Commercial Code of the State of New York. 10. Any notice under or in connection with this Note shall be in writing and addressed to Maker at _____________________________________ and to Payee at USS Holdings, Inc., c/o D. George Harris Associates, Inc., 399 Park Avenue, 32nd Floor, New York, New York 10022 or at such other address specified by notice given in accordance herewith. 11. Upon the payment of this Note, Payee shall reassign and redeliver to Maker or his designee, by appropriate instruments of reassignment and release reasonably satisfactory to such Maker, such of the Pledged Collateral as has not been sold or otherwise applied by Payee pursuant to this Note. 12. Maker agrees to pay all costs and expenses of enforcement of this Note, including, but not limited to, attorneys fees and court costs. 13. For purposes of this Note, the following terms shall have the following meanings: "Bonus" means the amount of (a) any bonus from the Payee or any of its subsidiaries paid pursuant to a bonus plan approved by the Payee's Board of Directors minus (b) any and all taxes estimated to be payable (assuming in each case the highest applicable marginal tax rate) with respect to any such bonus described in the foregoing clause (a). "Interest Payment Date" means the last business day of each March, June, September and December. "Principal Payment Date" means any day on which the Maker shall receive any Bonus from the Payee or any subsidiary thereof on or after (or with respect to the year ending) December 31, 1996. "Stockholders Agreement" means the Stockholders Agreement dated as of February 9, 1996 between Payee and the stockholders thereof, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. 3 14. This Note, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, estates and heirs, except that Maker shall not be permitted to assign this Note or any interest herein or in the Pledged Collateral (except, with respect to the Pledged Collateral, to a Permitted Transferee made with the prior approval of Payee's Board of Directors, in which case the terms, covenants and conditions hereof, including without limitation the pledge of the Pledged Collateral, shall be, and shall be deemed to be, binding upon the Permitted Transferee in respect of such transfer), or otherwise pledge or encumber the Pledged Collateral, or any part thereof. 15. Neither this Note nor any provisions hereof may be amended, modified, waived, discharged or terminated orally nor may any of the Pledged Collateral be released or the pledge or the security interest created hereby extended, except by an instrument in writing duly signed by or on behalf of Payee. 16. This Note shall be construed and enforced in accordance with the laws of the State of New York without regard to principles of choice or conflict of laws. 4 IN WITNESS WHEREOF, this Note has been executed and delivered by Maker on the date first set forth above. _________________________________ [Maker] 5 Schedule 10 DGHA Stockholders Receiving Options Option Units D. George Harris 16,000 Anthony J. Petrocelli 11,000 Richard J. Donahue 5,500 Donald G. Kilpatrick 5,500 David Willitts 5,500 Richard J. Nick 3,000 Emanuel J. Di Teresi 2,500 Matthew J. Dowd l,000 ------- Total 50,000 Schedule 11 Form of HCG/HSC Purchase Agreement STOCK PURCHASE AGREEMENT dated as of ____________, 1996, among CHASE MANHATTAN CAPITAL CORPORATION, a New York corporation ("CMCC"), and the Purchaser listed on the first column of Schedule I attached hereto (the "Purchaser"). The parties are entering into this Agreement to provide for the sale of that certain number of shares of Series A Preferred Stock and shares of Series B Preferred Stock of the Corporation (as hereinafter defined) set forth in the second column of Schedule I attached hereto (the "Sale Shares"), of USS Holdings, Inc., a Delaware corporation (the "Corporation") to the Purchaser pursuant to Section 6(b) of the Stockholders Agreement dated as of February 9, 1996 among the Corporation and the Stockholders as defined therein. ACCORDINGLY, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows: SECTION 1. Sale of Shares. -------------- Simultaneously with the execution and delivery of this Agreement CMCC shall sell to the Purchaser, and the Purchaser shall purchase from CMCC, the Sale Shares. SECTION 2. Closing. ------- Simultaneously with the execution and delivery of this Agreement, CMCC shall deliver to the Corporation stock certificates representing the Sale Shares, and cause the Corporation to issue and deliver to the Purchaser stock certificates registered in the name of the Purchaser, representing the Sale Shares being sold to the Purchaser, against receipt (i) by CMCC of a check payable to CMCC by the Purchaser of an amount equal to the amount set forth in the third column of Schedule I attached hereto, and (ii) by the Corporation, with a copy to CMCC, of a counterpart signature page to the Stockholders Agreement and the undertaking annexed hereto executed, in each case, by the Purchaser. SECTION 3. Representations and Warranties of CMCC. -------------------------------------- CMCC hereby represents and warrants to the Purchaser that it has good and marketable title to the Sale Shares, free and clear of all claims, security interests, judgments, liens, pledges and encumbrances. SECTION 4. Miscellaneous. ------------- This Agreement (a) contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous arrangements or understandings with respect thereto; (b) may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement; and (c) shall be governed by and construed in accordance with the laws of the State of New York to contracts made and to be performed therein. IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement on the date first above written. CHASE MANHATTAN CAPITAL CORPORATION By:______________________________________ Name: Title: [Purchaser] By:______________________________________ Name: 2 Schedule I ---------- Purchaser Sale Shares Purchase Amount $ --------- ----------- ----------------- FORM OF UNDERTAKING TO USS HOLDINGS, INC. AND STOCKHOLDERS DATE Dear Sirs: I refer to the Stockholders Agreement (the "Agreement") dated as of February 9, 1996 among USS Holdings, Inc. ("Holdings") and the other parties named herein, (collectively, the "Stockholders") each of whom shall be deemed to be addressees of this undertaking. I hereby undertake and agree with Holdings and each of the Stockholders to comply in all respects with all the terms and conditions of the Agreement. Sincerely yours By:_________________________ Title:______________________ EX-10.1.1 54 AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT EXHIBIT 10.1.1 AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT AMENDMENT NO. 1 dated as of October 15, 1996 (the "Amendment"), among USS Holdings, Inc., a Delaware corporation (the "Corporation"), and the stockholders of the Corporation listed on the signature pages hereof, to the Stockholders Agreement dated as of February 9, 1996 among the Corporation and the Stockholders (the "Stockholders Agreement"; terms defined therein being used herein as therein defined except as otherwise defined herein). The parties hereto, being the parties to the Stockholders Agreement required to amend the Stockholders Agreement in accordance with Section 18(a) thereof, hereby amend the Stockholders Agreement as follows: 1. Section 1(a) of the Stockholders Agreement is hereby amended by (a) deleting in the definition "DGHA Restricted Shares" the number "276,814" and by substituting therefor the number "245,098" and (b) deleting in the definition "Manager Restricted Shares" the number "138,411" and by substituting therefor the number "122,549". 2. Subparagraph (xi) of Section 4(a) of the Stockholders Agreement is hereby amended by deleting in clause (a) thereof the words "the DGHA Repurchase Agreement and the Manager Repurchase Agreement" and by substituting therefor the words "the DGHA Repurchase Agreement, the Manager Repurchase Agreement and the Stock Purchase Loan Notes". 3. Subparagraph (xiii) of Section 4(a) of the Stockholders Agreement is hereby amended by deleting in clause (a) thereof the words "reasonable advances to employees in the ordinary course of business" and by substituting therefor the words "loans pursuant to the Stock Purchase Loan Notes and reasonable advances to employees in the ordinary course of business". 4. Subparagraph (i) of Section 6(a) of the Stockholders Agreement is hereby amended by deleting the first sentence thereof and by substituting therefor the following: "CMCC hereby grants to each DGHA Stockholder named on Schedule 10 attached hereto an option (the "Option") during the Option Term to purchase, for the purchase price per Unit set out in Section 6(a)(iii), in the aggregate up to the number of Units equal to the sum of (a) the number of Units set forth opposite such DGHA Stockholder's name on such Schedule plus (b) the number of Units that have not been purchased by the HCG/HSC Stockholders pursuant to Section 6(b) on or prior to December 31, 1996 multiplied by a fraction the numerator of which is the "number of Units set forth opposite such DGHA Stockholder's name on such Schedule and the denominator of which is 50,000". 5. Subparagraph (i) of Section 6(b) of the Stockholders Agreement is hereby amended by deleting in the second sentence thereof the words "within 90 days after the date hereof" and by substituting therefor the words "no later than December 31, 1996". 6. Section 7(c) of the Stockholders Agreement is hereby amended by deleting in the first sentence thereof the words "July 31, 1996 (the "Reference Date"), the Corporation shall have the right, but not the obligation, to issue to the Manager Stockholders" and by substituting therefor the words "October 31, 1996 (the "Reference Date"), the Corporation shall have the right to issue to the Manager Stockholders, or reserve, by action taken by the Board, for issuance to the Manager Stockholders after the Reference Date,". 7. Section 7(d) of the Stockholders Agreement is hereby amended by deleting in the first sentence thereof the words "sold by the Corporation to the Manager Stockholders" and by substituting therefor the words "sold, or reserved by the Board for sale, by the Corporation to the Manager Stockholders". 8. Section 7(e) of the Stockholders Agreement is hereby amended by deleting the words "August 10, 1996, the Corporation shall notify CMCC in writing of (i) the number of Manager Shares that were sold by the Corporation to the Manager Stockholders" and by substituting therefor the words "December 31, 1996, the Corporation shall notify CMCC in writing of (i) the number of Manager Shares that were sold, or reserved by the Board for sale, by the Corporation to the Manager Stockholders". 9. Section 17 of the Stockholders Agreement is hereby amended by (a) deleting in Section 17(c) thereof the words "Section 14" and by substituting therefor the words "Section 17(b)" and (b) by adding new Section 17(e) thereto as follows: "(e) Each Stockholder, by acceptance and receipt of any Securities, hereby agrees, upon the request of the Corporation, to execute and deliver to the Corporation any Disclosure Statement and Consent or Consent and Irrevocable Proxy intended by the Corporation to achieve the Requisite Stockholder Approval". 10. The parties hereto hereby acknowledge and agree that, notwithstanding anything to the contrary contained in the Stockholders Agreement, Michael R. Boyce shall be permitted to purchase, and the Corporation shall be permitted to sell, up to 4,437 Manager Restricted Shares pursuant to Section 7(a) of the Stockholders Agreement and, solely with respect to such Manager Restricted Shares, Mr. Boyce shall be deemed to be a Manager Stockholder for purposes of the Stockholders Agreement. 11. The parties hereto hereby acknowledge and agree that, notwithstanding anything to the contrary contained in the Stockholders Agreement, (a) Paul Guttmann, James Walker and William White shall be permitted to purchase, and CMCC shall be permitted to sell, up to 12,160 Units pursuant to Section 6(b) of the Stockholders Agreement, provided that such persons shall not be deemed to be HCG/HSC Stockholders for purposes of the Stockholders Agreement and (b) the Corporation shall be permitted to loan to such persons up to 80% of the cash purchase price to be paid by such persons for such Units, such loans to be evidenced by Stock Purchase Loan Notes. 12. This Amendment may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Amendment. 13. This Amendment shall be governed by the internal law, and not the law of conflicts, of the State of New York. 2 IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above. USS HOLDINGS, INC. By: /s/ Donald G. Kilpatrick -------------------------------- Name: Title: CHASE MANHATTAN CAPITAL CORPORATION By: /s/ Jeffrey C. Walker -------------------------------- Name: Jeffrey C. Walker Title: President /s/ D. George Harris ----------------------------------- D. George Harris /s/ Anthony J. Petrocelli ----------------------------------- Anthony J. Petrocelli /s/ Richard J. Donahue ----------------------------------- Richard J. Donahue /s/ Donald G. Kilpatrick ----------------------------------- Donald G. Kilpatrick ___________________________________ David Willetts /s/ Richard J. Nick ----------------------------------- Richard J. Nick /s/ William J. Sichko ----------------------------------- William J. Sichko /s/ Emanuel J. Di Teresi ----------------------------------- Emanuel J. Di Teresi /s/ Michael R. Boyce ----------------------------------- Michael R. Boyce 3 /s/ Matthew J. Dowd ------------------------------------ Matthew J. Dowd Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Robert Harris By: /s/ Anthony J. Petrocelli --------------------------------- Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick --------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Margaret Harris By: /s/ Anthony J. Petrocelli --------------------------------- Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick --------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Paige Coleman By: /s/ Anthony J. Petrocelli --------------------------------- Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick --------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Keith Coleman By: /s/ Anthony J. Petrocelli --------------------------------- Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick --------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Augustus Northridge 4 By: /s/ Anthony J. Petrocelli -------------------------------------- Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick -------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated January 31, 1995 F/B/O P.G.F. Scurr By: /s/ Anthony J. Petrocelli -------------------------------------- Anthony J. Petrocelli, Trustee By: /s/ Donald G. Kilpatrick -------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of Anthony J. Petrocelli dated October 29, 1990 By: /s/ D. George Harris -------------------------------------- D. George Harris, Trustee By: /s/ Donald G. Kilpatrick -------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Daniel G. Kilpatrick By: /s/ Donald G. Kilpatrick -------------------------------------- Donald G. Kilpatrick, Trustee By: /s/ Anthony J. Petrocelli -------------------------------------- Anthony J. Petrocelli, Trustee Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Eleanor P. Kilpatrick By: /s/ Donald G. Kilpatrick -------------------------------------- Donald G. Kilpatrick, Trustee By: /s/ Anthony J. Petrocelli -------------------------------------- Anthony J. Petrocelli, Trustee 5 Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Jennifer C. Kilpatrick By: /s/ Donald G. Kilpatrick -------------------------------------- Donald G. Kilpatrick, Trustee By: /s/ Anthony J. Petrocelli -------------------------------------- Anthony J. Petrocelli, Trustee Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Douglas A. Kilpatrick By: /s/ Donald G. Kilpatrick -------------------------------------- Donald G. Kilpatrick, Trustee By: /s/ Anthony J. Petrocelli -------------------------------------- Anthony J. Petrocelli, Trustee 6 EX-10.1.2 55 AMENDMENT NO. 2 TO STOCKHOLDERS AGREEMENT EXHIBIT 10.1.2 USS HOLDINGS, INC. AMENDMENT NO. 2 TO STOCKHOLDERS AGREEMENT Dated as of October 6, 1998 Table of Contents Section 1. Definitions; Rules of Construction........................................................ 1 Section 2. Board of Directors; Adjustment EBITDA Targets............................................. 12 Section 3. Financial Statements and Other Information, Inspections and Board Meetings................ 15 Section 4. Additional Voting Agreements; Required Sale............................................... 18 Section 5. First Refusal Rights for Securities Issued by the Corporation............................. 21 Section 6. Affiliate Transactions.................................................................... 22 Section 7. Issuance of Additional Securities to DGHA Stockholders and Manager Stockholders........... 22 Section 8. Limitations on Transfers of Stock - General............................................... 23 Section 9. Limitations on Transfers of Restricted Shares............................................. 23 Section 10 Limitations on Transfers prior to Third Anniversary....................................... 23 Section 11 Rights of First Refusal after Third Anniversary........................................... 24 Section 12 Rights of Co-Sale......................................................................... 25 Section 13 Drag-Along Rights......................................................................... 26 Section 14 Options Upon Termination Event............................................................ 28 Section 15 Required Sale............................................................................. 32 Section 16 Regulatory Matters........................................................................ 32 Section 17 Requisite Stockholder Approval............................................................ 34 Section 18 Amendment and Waiver...................................................................... 34 Section 19 Securities Law Compliance; Legends........................................................ 34 Section 20 Duration of Agreement..................................................................... 36 Section 21 Severability.............................................................................. 36 Section 22 Entire Agreement.......................................................................... 37 Section 23 Certain Stockholders...................................................................... 37 Section 24 Successors and Assigns.................................................................... 37 Section 25 Counterparts.............................................................................. 37 Section 26 Remedies.................................................................................. 37 Section 27 Notices................................................................................... 38 Section 28 Governing Law............................................................................. 39 Section 29 Further Assurances........................................................................ 39 Section 30 Jurisdiction; Venue; Process.............................................................. 39 Section 31 Representation and Warranties of the Stockholders......................................... 39 Section 32 Conflicting Agreements.................................................................... 41 Section 33 Mutual Waiver of Jury Trial............................................................... 41
i AMENDMENT NO. 2 dated as of October 6, 1998 ("Amendment No. 2"), among USS HOLDINGS, INC., a Delaware corporation (the "Corporation"), and the stockholders of the Corporation (each a "Stockholder" and collectively the "Stockholders") listed on the signature pages hereof, to the Stockholders Agreement (the "Agreement") dated as of February 9, 1996, as amended, among the Corporation and the Stockholders. The parties hereto, being the parties to the Agreement required to amend the Agreement in accordance with Section 18(a) thereof, hereby amend the Agreement, which amendment shall become effective upon execution of this Amendment No. 2 by the Corporation, a Majority of the Institutional Stockholders and a Majority of the DGHA Stockholders, by deleting all of the text and replacing it with the following: SECTION 1. Definitions; Rules of Construction. ---------------------------------- (a) Capitalized terms used in this Agreement have the meanings ascribed to them below: "Accounting Period" has the meaning ascribed to it in Section 3(a)(i). ----------------- "Acquisition" means USS Acquisition, Inc., a Delaware corporation, and ----------- any successors thereto (including U.S. Silica after the Merger). "Actual EBITDA" shall be calculated at the end of each Accounting -------------- Period of the Corporation, beginning with the Accounting Period ending December 31, 1997, and shall mean the EBITDA of the Corporation for the twelve-month period ended on the last day of such Accounting Period. "Additional Institutional Director" shall have the meaning ascribed to --------------------------------- it in Section 2(b). "Additional Retiring Purchase" has the meaning ascribed to it in ---------------------------- Section 14(a). "Adjusted Proportionate Percentage" shall mean, with respect to any --------------------------------- Stockholder, the Proportionate Percentage of such Stockholder, calculated as if the Retiring Shares were not issued and outstanding at the time of calculation. "Affiliate" means (i) with respect to any individual, (A) a spouse or --------- descendant of such individual and (B) any trust or family partnership whose primary beneficiary shall be such individual and/or such individual's spouse and/or any Person related by blood or adoption to such individual or such individual's spouse, (ii) with respect to any Person which is not an individual, any other Person that, directly or indirectly through one or more intermediaries Controls, is Controlled by, or is under common Control with, such Person and/or one or more Affiliates thereof, and, without limiting the generality of the --- foregoing, with respect to CMC includes (x) the ultimate parent corporation of CMC, and all the Affiliates of the aforementioned ultimate parent and (y) a corporation, a general partnership, a limited partnership or limited liability corporation, in which all the beneficial interests of any of the foregoing entities is owned directly or indirectly by one or more present or former employees or executives of CMC or their respective Affiliates. "Approved Sale" has the meaning ascribed to it in Section 13. ------------- "Board" means the Board of Directors of the Corporation. ----- "Bylaws" means the Bylaws of the Corporation as amended from time to ------ time. "Budgeted EBITDA" shall mean, for the twelve-month period ending on --------------- the last day of each Accounting Period, beginning with the Accounting Period ending December 31, 1998, the EBITDA set forth opposite such Accounting Period on Schedule 2. "Cause" shall mean the commission by a Promoter Stockholder of a ----- felony or other crime involving moral turpitude, or the commission by a Promoter Stockholder of any other act which is a breach of his fiduciary duty of loyalty to his employer or the repeated failure of a Promoter Stockholder to otherwise perform his duties to his employer as determined in good faith by such employer's Board of Directors. "Certificate" means the Amended and Restated Certificate of ----------- Incorporation of the Corporation as filed with the Secretary of State of Delaware on February 9, 1996, as supplemented by all Certificates of Designation and Certificates of Amendment, copies of which are attached as Schedule 3. "Class A Common Stock" means the Class A Common Stock, $.01 par value, -------------------- of the Corporation. "Class B Common Stock" means the Class B Common Stock, $.01 par value, -------------------- of the Corporation. "Class C Common Stock" means the Class C Common Stock, $.0l par value, -------------------- of the Corporation. "Class C Restricted Shares" means, collectively, the DGHA Restricted ------------------------- Shares and the Manager Restricted Shares. "CMC" means Chase Manhattan Capital L.P., a Delaware limited --- partnership. "Code" means the Internal Revenue Code of 1986, as amended. ---- "Common Stock" means the Class A Common Stock, the Class B Common ------------ Stock and the Class C Common Stock. "Common Equivalents" means, at any point in time, (i) as to any ------------------ Stockholder, the number of shares of Common Stock held by such Stockholder at such time, plus the number of 2 shares of Common Stock which are issuable (at such time or thereafter) upon the exercise or conversion of any option, warrant or convertible security held at such time by such Stockholder and (ii) as to all Stockholders, collectively, the aggregate number of shares of Common Stock outstanding at such time plus the aggregate number of shares of Common Stock issuable (at such time or thereafter) upon the exercise or conversion of all outstanding options, warrants and convertible securities. "Company" means, collectively, the Corporation and its Subsidiaries ------- and, individually, the Corporation and each Subsidiary of the Corporation. "Compensation Committee" shall mean the Compensation Committee of the ---------------------- Board, as constituted from time to time in accordance with Section 2(c). "Competitor" means any Person who directly or indirectly, owns, ---------- manages, operates, joins, controls or participates in the ownership, management, operation or control of, or is connected as a director, officer, employee, partner, consultant or otherwise with, any profit or non-profit business or organization in any part of the United States or any other jurisdiction in which the Company sells products or provides services, which, directly or indirectly, Competes (as hereinafter defined) with the Company. A profit or non-profit business or organization shall be deemed to "Compete" with the Company if such business or organization (i) competes with the business of the Company as it is conducted as of the date hereof or at any time while this Agreement is in effect, or (ii) engages in the development, production or sale of products, or the rendering of services, which are the same as, similar to or competitive with, the products or services being developed, provided, sold or rendered by the Company as of the date hereof or at any time while this Agreement is in effect. "Control" means the possession, directly or indirectly, of the power, ------- by stock ownership, contract right, proxy or otherwise, to direct the management and policies of a Person. "Corporation" has the meaning ascribed to it in the Preamble. ----------- "Credit Agreement" means the Credit Agreement dated as of July 21, ---------------- 1998, as amended from time to time, among Acquisition and the lenders named therein. "Credit Event" means (i) the existence of an event of default under ------------ any Debt Document, or (ii) the existence of a default, which is not waived or cured within any applicable grace period provided for therein, under any other document or agreement to which any Company is a party or an obligor, which evidences indebtedness of any Company individually or in the aggregate of more than $1,000,000. "Debt Documents" shall mean the Credit Agreement, the documents -------------- attached as exhibits thereto and any other loan agreement pursuant to which the debt under such agreements is refinanced in whole or in part. "Deferral Date" has the meaning ascribed to it in Section 14(f). ------------- "Deferral Election" has the meaning ascribed to it in Section 14(f). ----------------- 3 "DGHA" shall mean D. George Harris & Associates, Inc. ---- "DGHA Fee Letter" means the letter agreement dated the Original --------------- Agreement Date among the Corporation, certain Subsidiaries thereof and DGHA, as amended from time to time. "DGHA Repurchase Agreement" means the DGHA Repurchase Agreement dated ------------------------- the date hereof, among the Corporation and the DGHA Stockholders named therein. "DGHA Restricted Shares" means the 216,263 (as adjusted to reflect any ---------------------- stock splits, stock dividends, reverse stock splits or reclassifications of the Class C Common Stock) shares of Class C Common Stock issued or issuable to the DGHA Stockholders party to the DGHA Repurchase Agreement (and any Securities issued in respect thereof), which shares are subject to repurchase by the Corporation upon an IRR Event pursuant to the DGHA Repurchase Agreement, for so long as such shares of Class C Common Stock are subject to the DGHA Repurchase Agreement. "DGHA Stockholders" shall mean any Person listed on the Schedule of ----------------- DGHA Stockholders attached hereto as Schedule 4 and any other employee of DGHA or an Affiliate of DGHA who is designated as such by the Chairman of DGHA. "EBITDA" has the meaning, for any period, ascribed to such term in the ------ Credit Agreement. "EBITDA Event" shall mean and occur if, at the end of any Accounting ------------ Period commencing with the twelve-month period ending December 31, 1997, the Actual EBITDA for the twelve-month period ending on the last day of such Accounting Period is less than 75% of the Budgeted EBITDA for the twelve-month period ending on the last day of the corresponding Accounting Period. "Eligible Stockholders" has the meaning ascribed to it in Section --------------------- 14(a). "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 controlled group of any Obligor, or under common control with any Obligor, within the meaning of Section 414 of the 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 (or the penalty for failure to provide such notice) 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 4 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 any Obligor or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Obligor 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 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 could reasonably be expected to constitute grounds for the termination of, or the appointment of a trustee to administer, such Plan. "Excess Attributable to the First Priority Additional Retiring ------------------------------------------------------------- Purchases" shall mean the lesser of (x) the number of Remaining Retiring Shares - --------- to be purchased in the aggregate by the First Priority Eligible Stockholders pursuant to their Additional Retiring Purchases and (y) the excess Remaining Retiring Shares remaining after the Second Retirement Reduction. "Excess Attributable to the Second Priority Additional Retiring -------------------------------------------------------------- Purchases" shall mean the lesser of (x) the number of Remaining Retiring Shares - --------- to be purchased in the aggregate by the Second Priority Eligible Stockholders pursuant to their Additional Retiring Purchases and (y) the excess Remaining Retiring Shares remaining prior to the First Retirement Reduction. "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ or any similar federal law then in force. "Exclusive Period" has the meaning ascribed to it in Section 15. ---------------- "Exempt Issuance" shall mean (i) the issuance of shares of Class A --------------- Common Stock or Class B Common Stock upon the conversion of shares of Series B Preferred Stock and the issuance of shares of Class A Common Stock upon the conversion of shares of Class B Common Stock, (ii) the issuance of Securities to a DGHA Stockholder pursuant to Section 3 of the DGHA Repurchase Agreement and Section 7(b), (iii) the issuance of Securities to a Manager Stockholder pursuant to Section 3 of the Manager Repurchase Agreement and Section 7(a), (iv) the issuance of the Warrants pursuant to the Warrant Issuance Agreement and the issuance of Securities pursuant to the exercise of the Warrants, (v) the issuance of Securities, or any securities convertible into or exercisable for Securities, pursuant to a Public Offering and (vi) the issuance of Securities to a DGHA Stockholder or a Manager Stockholder after repurchase by the Corporation pursuant to the DGHA Repurchase Agreement, the Manager Repurchase Agreement or pursuant to Section 14, of an equivalent or greater number of Securities from one or more DGHA Stockholders, Manager Stockholders or Non-Affiliated Stockholders. "Fair Value" has the meaning ascribed to it in Section 15(a). ---------- "First Priority Eligible Stockholders" shall mean (i) with respect to ------------------------------------ any Transfer to be made by a DGHA Stockholder, the other DGHA Stockholders, (ii) with respect to any Transfer to be made by a Manager Stockholder, the other Manager Stockholders and (iii) with 5 respect to any Transfer to be made by a Non-Affiliated Stockholder, the other Non-Affiliated Stockholders. "First Refusal Amount" has the meaning ascribed to it in Section 5(a). -------------------- "First Refusal Securities" has the meaning ascribed to it in Section ------------------------ 5(a). "GAAP" means United States generally accepted accounting principles, ---- consistently applied. "Individual Investor Put Shares" has the meaning ascribed to it in ------------------------------ Section 14(c). "Initial Institutional Director" shall have the meaning ascribed to it ------------------------------ in Section 2(a)(iii). "Initial Public Offering" means the initial Public Offering of equity ----------------------- securities of the Corporation. "Initial Retiring Purchase" has the meaning ascribed to it in Section ------------------------- 14(a). "Institutional Directors" has the meaning ascribed to it in Section ----------------------- 2(b). "Institutional Securities" means all Securities owned by the ------------------------ Institutional Stockholders. "Institutional Stockholders" means any Person listed on the Schedule -------------------------- of Institutional Stockholders attached hereto as Schedule 6 and any successor to, or Permitted Transferee (excluding any transferee who purchases Institutional Securities pursuant to Section 6) of, any such Person who or which agrees in writing to be treated as an Institutional Stockholder hereunder and to be bound by the terms and comply with all applicable provisions hereof. "IRR Event" means the occurrence of any of the following: -------- (i) the sale of all or substantially all of the assets of the Corporation and its Subsidiaries (in each case after assumption of all the liabilities of the Corporation or the Subsidiary), on a consolidated basis; (ii) the sale of all or substantially all of the Securities; (iii) a merger of the Corporation or any Subsidiary, provided that the merger comprises all or substantially all of the assets of the Corporation and its Subsidiaries, with another Person if the stockholders of the Corporation immediately prior to such merger do not own more than 80% of the corporation surviving such merger; (iv) the consummation of a Qualified Public Offering; or (v) a sale made pursuant to Section 15. 6 "Majority of the Institutional Stockholders" means those Institutional ------------------------------------------ Stockholders who at the time in question hold a majority of the Common Equivalents then held by all Institutional Stockholders. "Majority of the DGHA Stockholders" means those DGHA Stockholders who --------------------------------- at the time in question hold a majority of the Common Equivalents then held by all DGHA Stockholders. "Management Services Agreement" means the Amended and Restated ----------------------------- Management Services Agreement dated as of the date hereof among the Corporation, certain subsidiaries thereof and DGHA, as amended or modified from time to time. "Manager Repurchase Agreement" means the Manager Repurchase ---------------------------- Agreements, a form of which is attached hereto as Schedule 7, to be entered into between the Corporation and each Manager Stockholder who purchases Manager Restricted Shares, respectively. "Manager Restricted Shares" means the 216,263 (as adjusted to reflect ------------------------- any stock splits, stock dividends, reverse stock splits or reclassifications of the Class C Common Stock) shares of Class C Common Stock issued or issuable to the Manager Stockholders party to the Manager Repurchase Agreement (and any Securities issued in respect thereof), which shares are subject to repurchase by the Corporation upon an IRR Event pursuant to the Manager Repurchase Agreement, for so long as such shares of Class C Common Stock are subject to the Manager Repurchase Agreement. "Manager Stockholder" shall mean any Person listed on the Schedule of ------------------- Manager Stockholders attached hereto as Schedule 8 and any Stockholder who purchases Securities who is a full-time employee of the Corporation or of any Subsidiary and is designated as such by the Board, but specifically excluding the DGHA Stockholders. "Merger" means the consummation of the merger between Acquisition and ------ U.S. Silica, with U.S. Silica as the surviving corporation. "Multiple Employer Plan" means a single employer plan, as defined in ---------------------- Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Obligor or any ERISA Affiliate and at least one Person other than the Obligors and the ERISA Affiliates or (b) was so maintained and in respect of which any Obligor 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. "Non-Affiliated Stockholder" shall mean any Person listed on the -------------------------- Schedule of Non-Affiliated Stockholders attached hereto as Schedule 5. "Notice Date" has the meaning ascribed to it in Section 14(b). ----------- "Notice of Offer" has the meaning ascribed to it in Section 11(a). --------------- "Obligor" means Acquisition and U.S. Silica. ------- "Offer" has the meaning ascribed to it in Section 11(a). ----- 7 "Offeree" has the meaning ascribed to it in Section 11(a). ------- "Offeror" shall have the meaning ascribed to it in Section 11(a). ------- "Officer's Report" has the meaning ascribed to it in Section 3(a)(ii). ---------------- "Original Agreement Date" means February 9, 1996. ----------------------- "Other Stockholders" has the meaning ascribed to it in Section 12(a). ------------------ "PBGC" means the Pension Benefit Guaranty Corporation. ---- "Permitted Transferees" has the meaning ascribed to such term in --------------------- Section 8(d). "Person" shall be construed broadly and shall include an individual, a ------ partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. ---- "Preferred Stock" means (i) the Series A Preferred Stock, the Series B --------------- Preferred Stock and the Seller Preferred Stock and (ii) any shares of any series of Preferred Stock of the Corporation issued to the Stockholders on or after the Original Agreement Date. "Primary Retirement Notice" has the meaning ascribed to it in Section ------------------------- 14(a). "Proportionate Percentage" means, with respect to a Stockholder, a ------------------------ fraction (expressed as a percentage) the numerator of which is the number of Common Equivalents held by such Stockholder and the denominator of which is (i) in a situation where the Proportionate Percentage is being calculated with respect to all Stockholders, the total number of Common Equivalents outstanding at the time in question and (ii) in a situation where the Proportionate Percentage is being calculated with respect to a group of Stockholders, the total number of Common Equivalents held by the members of such group. "Public Offering" means the closing of a public offering of Common --------------- Stock pursuant to a registration statement declared effective under the Securities Act, except that a Public Offering shall not include an offering made in connection with an employee benefit plan. "Public Sale" means any sale, occurring simultaneously with or after a ----------- Public Offering, of Securities to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144. "Qualified Public Offering" means the sale by the Corporation and/or ------------------------- one or more stockholders of the Corporation in an underwritten Public Offering registered under the Securities Act of Common Stock which results in aggregate net cash proceeds (net of underwriters' discounts and commissions and estimated offering expenses) to the Corporation and/or any selling stockholders of not less than $30 million. 8 "Registration Rights Agreement" means the Registration Rights ----------------------------- Agreement dated as of February 9, 1996, as amended by Amendment No. 1 dated as of the date hereof and as may be amended or modified from time to time in the future, among the Corporation and the parties named therein. "Regulatory Problem" means (i) any set of facts or circumstances ------------------ wherein it has been asserted by any governmental regulatory agency, or a Stockholder believes based on advice of counsel that there is a substantial risk of such assertion, that such Stockholder is not legally permitted to hold, or exercise any significant right with respect to, the securities (including any Securities or debt securities) of the Corporation which it holds or (ii) a Voting Regulatory Problem. "Remaining Retiring Shares" has the meaning ascribed to it in Section ------------------------- 14(a). "Requisite Stockholders" means a Majority of the Institutional ---------------------- Stockholders and a Majority of the DGHA Stockholders; provided, however, that if the Majority of the Institutional Stockholders have designated the Additional Institutional Directors pursuant to Section 2(b) hereof, "Requisite --------- Stockholders" means, solely for purposes of Section 4(a) (other than subsection - ------------ 4(a)(vii) and subsection 4(a)(xi) only with respect to any transactions between the Corporation or any of its Subsidiaries and any Institutional Stockholder), Section 4(b) and Section 13, a Majority of the Institutional Stockholders. "Requisite Stockholder Approval" means the approval of the terms, ------------------------------ vesting or any other characteristics of any restricted stock of the Corporation, or any compensation arrangement relating to the Corporation, by vote or written consent in lieu thereof, that is intended to satisfy the requirements of Code Section 280G(b)(5) and applicable Treasury Regulations thereunder, and shall also include any vote (with or without a meeting) or any other action or actions. "Restricted Securities" means, at any point in time, any Securities --------------------- which have not theretofore been transferred in a Public Sale. "Retiring Participation Shares" has the meaning ascribed to it in ----------------------------- Section 14(a). "Retiring Shares" has the meaning ascribed to it in Section 14(a). --------------- "Retiring Stockholder" has the meaning ascribed to it in Section -------------------- 14(a). "Rule 144" means Rule 144 promulgated by the Securities and Exchange -------- Commission under the Securities Act as such rule may be amended from time to time, or any similar rule then in force. "Sale of the Company" has the meaning ascribed to it in Section 13(a). ------------------- "Sale Notice" has the meaning ascribed to it in Section 13(a). ----------- "Second Retirement Notice" has the meaning ascribed to it in Section ------------------------ 14(a). 9 "Second Priority Eligible Stockholders" shall mean (i) with respect to ------------------------------------- any Transfer to be made by a DGHA Stockholder, the Stockholders other than the DGHA Stockholders, (ii) with respect to any Transfer to be made by a Manager Stockholder, the Stockholders other than the Manager Stockholders, and (iii) with respect to any Transfer to be made by a Non-Affiliated Stockholder, the Stockholders other than the Non-Affiliated Stockholders. "Second Retirement Notice" has the meaning ascribed to it in Section ------------------------ 14(b). "Section 12 Acceptance" shall have the meaning ascribed to it in --------------------- Section 12(a). "Section 12 Notice" shall have the meaning ascribed to it in Section ----------------- 12(a). "Section 12 Offer" shall have the meaning ascribed to it in Section ---------------- 12(a). "Section 12 Offeree" shall have the meaning ascribed to it in Section ------------------ 12(a). "Section 12 Offeror" shall have the meaning ascribed to it in Section ------------------ 12(a). "Securities" means the Common Stock, the Preferred Stock, and any and ---------- all other Common Stock, Preferred Stock or other capital stock or equity securities (including the Warrants and other derivative securities therefor) of the Corporation. "Securities Act" means the Securities Act of 1933, as amended, or any -------------- similar federal law then in force. "Securities and Exchange Commission" includes any governmental body or ---------------------------------- agency succeeding to the functions thereof "Seller Preferred Stock" means the Series C Preferred Stock, $0.01 par ---------------------- value, of the Corporation issued to U.S. Borax Inc. upon the closing of the Stock Purchase Agreement. "Series A Preferred Stock" means the Series A Preferred Stock, $0.01 ------------------------ par value, of the Corporation. "Series B Preferred Stock" means the Series B Preferred Stock, $0.01 ------------------------ par value, of the Corporation. "Single Employer Plan" means a single employer plan, as defined in -------------------- Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Obligor or any ERISA Affiliate and no Person other than the Obligors and the ERISA Affiliates or (b) was so maintained and in respect of which any Obligor or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Stock Purchase Agreement" means the Stock Purchase Agreement between ------------------------ U.S. Borax Inc. and the Corporation dated October 23, 1995, as amended or modified from time to time. 10 "Subscription Agreement" shall mean the Stock Subscription and ---------------------- Exchange Agreement dated the Original Agreement Date, among the Corporation and the Stockholders which are parties thereto. "Subsidiary" means with respect to any Person, any corporation or ---------- other entity of which the shares of stock having a majority of the general voting power in electing the board of directors of such corporation or other entity are, at the time as of which any determination is being made, owned by such Person either directly or indirectly through Subsidiaries. "Tax Sharing Agreement" means the Amended and Restated Tax Sharing --------------------- Agreement dated as of July 21, 1998 between the Corporation and the parties named therein. "Termination Event" has the meaning ascribed to it in Section 14(d). ----------------- "Transfer" shall be construed broadly and shall include any transfer -------- (whether voluntary, involuntary or by operation of law) of securities or any interest therein, including without limitation, by way of issuance, sale, participation, pledge, gift, bequeath, intestate transfer, distribution, liquidation, merger or consolidation. "Transfer Date" has the meaning ascribed to it in Section 14(e). ------------- "Trigger Event" shall mean (a) the existence of a Credit Event or the ------------- occurrence of an EBITDA Event, (b) the termination of the Exclusive Period or (c) both of Mr. D. George Harris and Mr. Anthony J. Petrocelli shall have ceased to serve on the Board due to death, disability or resignation. "U.S. Silica" means U.S. Silica Company, a Delaware corporation. ----------- "Valuation Price per Share" means, with respect to any Security, the ------------------------- amount distributable to such Security, if the Company is sold at Fair Value and the proceeds are distributed by the Corporation in complete liquidation pursuant to the rights and preferences set forth in the Certificate immediately prior to the Notice Date. "Voting Regulatory Problem" shall exist when a Person and such ------------------------- Person's Affiliates would own, control or have power over a greater quantity of securities (including any Securities or debt securities) of any kind issued by the Corporation or any successor than are permitted under any requirement of any governmental authority having jurisdiction over such Person. "Voting Securities" means the Class A Common Stock, the Series B ----------------- Preferred Stock (from and after a Trigger Event in accordance with the terms of the Certificate) and any other Securities of the Corporation which shall at the time in question be entitled to vote on each matter as to which stockholders of the Corporation are entitled to vote. "Warrants" means the warrants to purchase shares of Series A Preferred -------- Stock and Series B Preferred Stock granted from time to time pursuant to the Warrant Issuance Agreement. 11 "Warrant Issuance Agreement" means a Warrant Issuance Agreement or -------------------------- similar document to be entered into by the Corporation and the Persons who shall, from time to time, purchase Warrants. "Withdrawal Liability" has the meaning assigned to such term in Part I -------------------- of Subtitle E of Title IV of ERISA. (b) The use in this Agreement of the term "including" means "including, without limitation." The words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits, as the same may from time to time be amended or supplemented, and not to any particular subparagraph or clause contained in this Agreement. All references to schedules and exhibits mean the schedules and exhibits attached to this Agreement. (c) Unless otherwise expressly set forth herein, whenever the term "best efforts" is used, such efforts shall not include any obligation to incur substantial expenses or liabilities. (d) The title of and the section and paragraph headings in this Agreement are for convenience of reference only and shall not govern the interpretation of any of the terms or provisions of this Agreement. (e) The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require. (f) Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement has been chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. SECTION 2. Board of Directors; Adjustment EBITDA Targets. --------------------------------------------- (a) Election of Directors Generally. Each Stockholder shall from ------------------------------- time to time take such action, in his capacity as a stockholder of the Corporation, including the voting of all Securities owned or controlled by such Stockholder, as may be necessary to cause the Corporation to be managed at all times by a Board, consisting of seven members to be designated as follows: (i) for so long as D. George Harris and his Affiliates own 50% or more of the Securities (other than DGHA Restricted Shares) held by them on the Original Agreement Date, two directors shall be designated by D. George Harris, one of which designated directors shall be D. George Harris (each a "George Harris Director" and together the "George Harris Directors"); (ii) for so long as Anthony J. Petrocelli and his Affiliates own 50% or more of the Securities (other than the DGHA Restricted Shares) held by them on 12 the Original Agreement Date, one director shall be designated by Anthony J. Petrocelli (the "Petrocelli Director"); (iii) three directors shall be designated by a Majority of the Institutional Stockholders (each an "Initial Institutional Director" and together the "Initial Institutional Directors"); (iv) one director shall be the President of the Corporation; (v) for so long as D. George Harris shall be elected as a director he shall also be elected as the Chairman of the Board and Chief Executive Officer of the Corporation, and for so long as Anthony J. Petrocelli shall be elected as a director he shall also be elected as the Vice-Chairman of the Board; Notwithstanding the forgoing, in the event of a Termination Event with respect to D. George Harris or Anthony J. Petrocelli, the DGHA Stockholder with respect to which such Termination Event has occurred shall not be entitled to designate any directors and the Harris Directors or the Petrocelli Director, as applicable, shall thereafter be designated by the Majority of the DGHA Stockholders. (b) Election of Additional Institutional Directors. In addition to ---------------------------------------------- the directors designated pursuant to Section 2(a), upon the occurrence of a Trigger Event, the Majority of the Institutional Stockholders shall have the right to designate two additional directors (each an "Additional Institutional Director" and together the "Additional Institutional Directors") so as to cause the directors designated by the Institutional Stockholders to constitute a majority of the directors on the Board; provided, however, that such right shall be exercisable by the Majority of -------- ------- the Institutional Stockholders only upon the delivery to the Corporation, during the continuance of the Trigger Event, of a written notice by a representative of the Majority of the Institutional Stockholders of their desire to designate the Additional Institutional Directors. The Initial Institutional Directors and the Additional Institutional Directors are referred to herein collectively as the "Institutional Directors" and each, individually, an "Institutional Director". Each Stockholder shall, at such times as the Majority of the Institutional Stockholders are entitled to designate the Additional Institutional Directors and upon written notice from the Corporation or take such action, in his capacity as a stockholder of the Corporation, including the voting of all Securities owned or controlled by such Stockholder, as may be necessary to cause the Additional Institutional Directors to be elected to the Board. (c) Compensation Committee. Each Stockholder shall from time to ---------------------- time take such action, in his capacity as a stockholder of the Corporation, including the voting of all Securities owned or controlled by such Stockholder, as may be necessary to cause a Compensation Committee of the Board to be constituted and to consist of three directors, two of which shall be Institutional Directors and one of which shall be a D. George Harris Director. 13 (d) Expenses. The Corporation shall pay the reasonable out-of- -------- pocket expenses incurred by each Board member designated pursuant to Section 2(a) or 2(b) in connection with attending the meetings of the Board and any committees thereof. (e) Covenant to Vote. Each of the Stockholders agrees to vote, in ---------------- person or by proxy, all of the Securities owned by such Stockholder and entitled to vote at any annual or special meeting of the stockholders of the Corporation called for the purpose of voting on the election of directors, or to execute a written consent in lieu thereof, in favor of the election of the directors selected in accordance with Section 2(a) or 2(b). (f) Removal of Directors. -------------------- (i) At all times (A) a Majority of the Institutional Stockholders shall have the right to recommend the removal, without cause, of any or all of the Institutional Directors, (B) D. George Harris (or, if the George Harris Directors are at such time designated by the Majority of the DGHA Stockholders, the Majority of the DGHA Stockholders) shall have the right to recommend the removal, without cause, of any or all of the George Harris Directors, and (C) Anthony J. Petrocelli (or, if the Petrocelli Director is at such time designated by the Majority of the DGHA Stockholders the Majority of the DGHA Stockholders) shall have the right to recommend the removal, without cause, of the Petrocelli Director. (ii) In the event that any Stockholder acting as described in Section 2(f)(i) shall, in accordance with their rights specified herein, recommend the removal of any director or directors with respect to whom they have such right, then each of the other Stockholders hereby agrees to join with such acting Stockholder in recommending such removal as described above, and in causing the Corporation either to promptly hold a special meeting of stockholders and to vote, in person or by proxy, all of the Securities owned by such Stockholder and entitled to vote at such meeting or to execute a written consent in lieu thereof, as the case may be, in favor of such removal. (g) Vacancies. In the event a vacancy is created on the Board by --------- reason of the death, removal or resignation of any director, (i) such vacancy may be filled by the remaining directors in accordance with Sections 2(a) or 2(b), as applicable, (ii) if not so filled, each of the Stockholders hereby agrees, in its capacity as a stockholder of the Corporation, to elect a director to fill such vacancy in accordance with the selection procedures set forth in Sections 2(a) and 2(b) as applicable. Such election shall occur within thirty days after such vacancy occurs. Each of the Stockholders hereby agrees, in his capacity as a stockholder of the Corporation, to use his best efforts to cause the Corporation either to promptly hold a special meeting of stockholders or to execute a written consent in lieu thereof, and each of the Stockholders hereby agrees to vote all of the Securities owned by such Stockholder and entitled to vote at such meeting, in person or by proxy, or pursuant to such written consent of stockholders, in favor of the person or persons selected in accordance with Sections 2(a) or 2(b) to fill such vacancy and, if 14 necessary, in favor of removing any director elected to fill such vacancy other than in accordance with the selection procedures of Sections 2(a) or 2(b). (h) No Inconsistent Agreements. Each Stockholder represents that he -------------------------- has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement, and no Stockholder shall grant any proxy or become party to any voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement. (i) Budgeted EBITDA. In the event the Corporation or any Subsidiary --------------- makes any material capital expenditures not contemplated by the projections upon which the Budgeted EBITDA targets are based, or the Corporation or any Subsidiary consummates any mergers, acquisitions or dispositions (whether of assets or stock or other interests) or other extraordinary transactions, the Board will determine in good faith appropriate adjustments to the Budgeted EBITDA targets, which adjustments shall be final and binding. (j) Appointment of President. Upon the removal or resignation of ------------------------ the President of the Corporation, his successor shall be appointed by the vote of a majority of the directors on the Board and the outgoing President shall abstain from such vote. SECTION 3. Financial Statements and Other Information, Inspections and ----------------------------------------------------------- Board Meetings. - -------------- (a) Prior to the consummation of an Initial Public Offering, the Corporation will deliver to each Stockholder having a Proportionate Percentage of at least 5%: (i) as soon as available but in any event within 30 days after the end of each calendar month (the "Accounting Periods") in each fiscal year, unaudited consolidated statements of income and cash flows of the Corporation and its Subsidiaries for such Accounting Period and for the period from the beginning of the fiscal year to the end of such Accounting Period, which statements shall also include the EBITDA of the Corporation and its Subsidiaries for such Accounting Period, and consolidated balance sheets of the Corporation and its Subsidiaries as of the end of such Accounting Period, setting forth in each case comparisons to the corresponding period in the annual budget and to the corresponding period in the preceding fiscal year with variances delineated, and all such statements will be prepared in accordance with generally accepted accounting principles, consistently applied; (ii) as soon as available but in any event within 45 days after the end of each fiscal quarter of the Corporation unaudited consolidated statements of income and cash flows of the Corporation and its Subsidiaries for such fiscal quarter, setting forth in each case comparisons to the corresponding period in the annual budget and to the corresponding period in the preceding fiscal year with variances delineated, and accompanied by a written report of the Corporation's Chief Executive Officer, Chief Operating Officer or Chief Financial Officer with 15 respect to (a) such Officer's lack of actual knowledge after due investigation of any condition or event which constitutes an event of default under the terms of this Agreement, a Credit Event or an EBITDA Event; (b) the operations, problems and achievements of the Corporation during such period and (c) the calculation of the financial tests required under the Credit Agreement for such period (such written report being referred to herein as the "Officer's Report"); (iii) as soon as available but in any event within 90 days after the end of each fiscal year of the Corporation, audited consolidated statements of income and cash flows of the Corporation and its Subsidiaries for such year, and the related balance sheets of the Corporation and its Subsidiaries as of the end of such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year and for the annual budget for such year, and accompanied by (a) an opinion thereon of independent certified public accountants reasonably acceptable to a majority in interest of all Stockholders (it being agreed that Price Waterhouse Coopers is acceptable), which opinion shall state that said financial statements (other than the annual budget) fairly present the financial condition and results of operations of the Corporation and its Subsidiaries as at the end of, and for, such fiscal year, (b) a letter from such accounting firm stating that in the course of its examination they obtained no knowledge, except as specifically stated, that there was a default in existence by the Corporation or any Subsidiary under this Agreement or any other material agreement to which the Corporation or any Subsidiary is a party and (c) an Officer's Report; (iv) promptly upon receipt thereof, any additional reports, management letters (including the annual management letter to the Board) or other detailed information concerning significant aspects of the Corporation's and its Subsidiaries' operations and financial affairs given to the Corporation by its independent accountants (and not otherwise contained in other materials provided hereunder); (v) no later than 30 days prior to the end of each fiscal year, a consolidated annual budget prepared on a monthly basis for the Corporation and its Subsidiaries for the succeeding fiscal year (displaying anticipated statements of income and cash flows and balance sheets); (vi) promptly (but in any event within ten (10) business days) after the discovery or receipt of notice of (a) any default under the terms of any material agreement to which the Corporation or any Subsidiary is a party (including without limitation, this Agreement) or, without limitation to the generality of the foregoing, a Trigger Event or any other adverse event or circumstance affecting the Corporation or any Subsidiary which is material to the Corporation and its Subsidiaries taken as a whole (including the filing of any material litigation against the Corporation or any Subsidiary or the existence of a dispute that may reasonably be expected to lead to material litigation) or (b) any noncompliance by the Corporation or any Subsidiary with applicable laws, rules and regulations of 16 all governmental authorities, the violation of which might reasonably be expected to have a material adverse effect upon the financial condition of the Corporation and its Subsidiaries taken as a whole, an Officer's Certificate specifying the nature and a period of existence thereof and what actions the Corporation and its Subsidiaries have taken and propose to take with respect thereto; (vii) within ten (10) days after transmission thereof, copies of all registration statements which the Corporation files with the Securities and Exchange Commission, and copies of all press releases and other statements made available generally by the Corporation to the public concerning material developments in the Corporation's business; (viii) immediately upon receipt thereof, copies of all environmental reports or other communications concerning environmental matters of the Corporation or its Subsidiaries which might reasonably be expected to have a material adverse effect upon the financial condition of the Corporation and its Subsidiaries taken as a whole; and (ix) with reasonable promptness, such other information and financial data concerning the Corporation and its Subsidiaries as any Stockholder having a Proportionate Percentage of at least 5% may reasonably request. To the best of the Corporation's knowledge, each of the financial statements referred to in subparagraphs (i), (ii) and (iii) will be true and correct in all material respects as of the dates and for the periods stated therein, subject in the case of the unaudited financial statements to footnotes and changes resulting from normal year-end audit adjustments. The Corporation will provide to all Stockholders, when available, audited consolidated statements of income and cash flows of the Corporation and its Subsidiaries and the related consolidated balance sheet of the Corporation and its Subsidiaries, accompanied by an opinion thereon of the Corporation's independent certified public accountant. (b) Except as consented to in writing by the Corporation or as otherwise required by law or judicial order or decree or by any governmental agency or authority, each Person which obtains information regarding the Corporation and its Subsidiaries under this Section 3 will use its best efforts to maintain the confidentiality of all nonpublic information obtained by it hereunder which the Corporation has reasonably designated as proprietary or confidential in nature; provided that each such Person may disclose such information to a Permitted Transferee in connection with the sale or transfer of any Securities if such Permitted Transferee agrees in writing to be bound by the provisions hereof. (c) Prior to the consummation of an Initial Public Offering, the Corporation will permit each representative designated by any Stockholder having a Proportionate Percentage of at least 5%, upon reasonable notice to the Chief Executive Officer of the Corporation, during normal business hours or such other times as any such holder may reasonably request and in such manner so as not to unreasonably interfere with the 17 business and operations of the Corporation or any Subsidiary, to, at such holder's expense, (i) visit and inspect any of the properties of the Corporation and its Subsidiaries, (ii) examine the corporate and financial records of the Corporation and its Subsidiaries and make copies thereof or extracts therefrom and (iii) discuss the affairs, finances and accounts of any such corporations with the directors, officers, key employees and independent accountants of the Corporation and its Subsidiaries. SECTION 4. Additional Voting Agreements; Required Sale. ------------------------------------------- (a) The Corporation shall not, and shall ensure that each Subsidiary shall not, without the affirmative vote or written consent of the Requisite Stockholders: (i) consummate a Public Offering; (ii) except as contemplated by this Agreement, the Subscription Agreement or the Warrant Issuance Agreement, after it shall have been executed, issue any Securities other than to the Corporation or to a wholly-owned Subsidiary; (iii) merge or consolidate with or into another entity (other than mergers of wholly-owned Subsidiaries and mergers of a wholly- owned Subsidiary with and into the Corporation where the Corporation is the surviving corporation); (iv) acquire any business from, or capital stock of, any Person; (v) redeem the Seller Preferred Stock, otherwise than as required pursuant to the Certificate; (vi) amend its Certificate of Incorporation; (vii) amend its Bylaws; (viii) increase the compensation of any of its officers, directors or management employees, above the levels in existence as of the date hereof, or pay any fees to directors unless approved by the Compensation Committee; (ix) sell, lease, exchange, convey, license or otherwise dispose of in any 12-month period in excess of 10% (or, in the aggregate during the term of this Agreement, in excess of 25%) of its consolidated assets or assets which contributed 10% (or, in the aggregate during the term of this Agreement, in excess of 25%), or more of its average annual EBITDA over the last 12 fiscal months, in any transaction or series of related transactions (other than sales in the ordinary course of business); (x) liquidate, dissolve or effect a recapitalization or reorganization in any form of transaction; 18 (xi) enter into, revise or amend any contract, agreement or transaction with any of its officers, directors, management employees or Affiliates, except for (a) the entering into of the Management Services Agreement, the DGHA Fee Letter, the Warrant Issuance Agreement, the Registration Rights Agreement, the Tax Sharing Agreement, the DGHA Repurchase Agreement and the Manager Repurchase Agreement and the amendment of the Management Services Agreement contemplated by Section 5(d) thereof and (b) employment related transactions on customary terms, bonus plans approved by the Compensation Committee and for normal employment arrangements and benefit programs on reasonable terms and except as otherwise contemplated by this Agreement; (xii) incur or create, any indebtedness for borrowed money in excess of the amounts permitted by the Debt Documents; (xiii) make any loans or advances to, guarantees for the benefit of, or investments in, any Person (other than a wholly-owned Subsidiary), except as permitted by the Debt Documents or the Management Services Agreement and except for (a) reasonable advances to employees in the ordinary course of business, (b) investments having a stated maturity no greater than one year from the date the Corporation makes such investment in (1) obligations of the United States government or any agency thereof or obligations guaranteed by the United States government, (2) certificates of deposit of commercial banks having combined capital and surplus of at least $50 million or (3) commercial paper with a rating of at least "Prime-1" by Moody's Investors Service, Inc. or "A- 1" by Standard & Poor's Corporation and (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (b)(1) of this subparagraph (xiii) entered into with any bank meeting the qualifications specified in clause (b)(2) of this subparagraph (xiii); (xiv) declare or pay any dividends upon the Securities (other than the Series A Preferred Stock and the Seller Preferred Stock); or (xv) take any action that would cause the Corporation or any Subsidiary to incur a material liability to any Plan or the PBGC or substantially increase the rate of annual contributions to any Plan. (b) At all times during the term of this Agreement the Corporation will, and will cause each Subsidiary to unless consent is obtained from the Requisite Stockholders: (i) cause to be done all things necessary to maintain, preserve and renew its corporate existence and all material licenses, authorizations and permits necessary to the conduct of its businesses; (ii) maintain and keep its properties in good repair, working order and condition, and from time to time make all necessary or desirable repairs, renewals and replacements, so that its businesses may be properly and advantageously conducted at all times; 19 (iii) pay and discharge when payable all taxes, assessments and governmental charges imposed upon its properties or upon the income or profits therefrom (in each case before the same becomes delinquent and before penalties accrue thereon) and all claims for labor, materials or supplies which if unpaid might by law become a lien upon any of its property, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves (as determined in accordance with generally accepted accounting principles, consistently applied) have been established on its books with respect thereto; (iv) comply with all other material obligations which it incurs pursuant to any contract or agreement, whether oral or written, express or implied, as such obligations become due, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves (as determined in accordance with generally accepted accounting principles, consistently applied) have been established on its books with respect thereto; (v) comply with all applicable laws, rules and regulations of all governmental authorities, the violation of which might reasonably be expected to have a material adverse effect upon the financial condition, operating results or business prospects of the Corporation and its Subsidiaries taken as a whole; (vi) maintain proper books of record and account which fairly present its financial condition and results of operations and make provisions on its financial statements for all such proper reserves as in each case are required in accordance with generally accepted accounting principles, consistently applied; (vii) comply with all environmental regulations and orders with respect to such regulations, provided that this subparagraph shall not limit the ability of the Corporation or any Subsidiary thereof to contest in good faith any such order or regulation; (viii) apply for and continue in force with good and responsible insurance companies adequate insurance covering risks of such types and in such amounts as are customary for well-insured corporations of similar size engaged in similar lines of business, all as determined by the Board, (ix) (A) promptly and in any event within 10 days after Acquisition or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, furnish to CMC a statement of the chief financial officer or treasurer of Acquisition describing such ERISA Event and the action, if any, that Acquisition or such ERISA Affiliate has taken and proposes to take with respect thereto and (B) on the date any records, documents or other information must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA, furnish to CMC a copy of such records, documents and information; 20 (x) promptly and in any event within five days after receipt thereof by Acquisition or any ERISA Affiliate, furnish to CMC copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (xi) furnish to CMC promptly upon receipt thereof by the Company or any ERISA Affiliate, a copy of the annual actuarial valuation report of each Plan; and (xii) promptly and in any event within ten days after receipt thereof by Acquisition or any ERISA Affiliate from the sponsor of a Multiemployer Plan, furnish to CMC copies of each notice concerning (i) the imposition of Withdrawal Liability by any such Multiemployer Plan, (ii) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the amount of liability incurred, or that may be incurred, by Acquisition or any ERISA Affiliate in connection with any event described in clause (i) or (ii). (c) Each Stockholder shall in his capacity as a stockholder of the Corporation, cause that the Corporation observe and perform its obligations under Section 4(a) and Section 4(b). SECTION 5. First Refusal Rights for Securities Issued by the Corporation. ------------------------------------------------------------- (a) Except for the issuance of Securities in connection with an Exempt Issuance, if the Corporation authorizes the issuance and sale to any other Person of any Securities or any securities containing options or rights to acquire any Securities (the "First Refusal Securities"), the Corporation will first offer to sell to each Stockholder a portion of the First Refusal Securities in an amount equal to such Stockholder's Proportionate Percentage of the First Refusal Securities (the "First Refusal Amount"). Each Stockholder will be entitled to purchase the First Refusal Securities at the same price per share and on the same terms as the First Refusal Securities are to be offered to such other Person. (b) Each Stockholder must exercise its purchase rights hereunder within 20 days after receipt of written notice from the Corporation describing in reasonable detail the First Refusal Securities being offered, the purchase price per share, the payment terms and such Stockholder's Proportionate Percentage and First Refusal Amount. If all of the First Refusal Securities offered to the Stockholders are not fully subscribed by such Stockholders, the remaining First Refusal Securities will be reoffered to the Stockholders purchasing their entire First Refusal Amount upon the terms set forth in this Section until all such First Refusal Securities are fully subscribed or until all such Stockholders have subscribed for all such First Refusal Securities which they desire to purchase, except that such Stockholders must exercise their purchase rights within 5 days after receipt of all such reoffers. (c) Upon the expiration of the offering periods described above, the Corporation will be free to sell such First Refusal Securities which such Stockholders 21 have not elected to purchase during the 60 days following such expiration, on terms and conditions no more favorable to the purchasers thereof than those offered to such Stockholders. Any First Refusal Securities offered or sold by the Corporation after such 60-day period must be reoffered to the Stockholders pursuant to the terms of this Section. (d) Payment for First Refusal Securities which a Stockholder has elected to purchase shall be made against delivery of (i) the certificates representing the First Refusal Securities at the principal office of the Corporation not earlier than 10 days nor later than 20 days after expiration of the 20 days or 5 days referred to in Section 5(b), as the case may be, and (ii) of the entire price, by cash, certified or bank cashier's check, or such other consideration specified in the Corporation's offer. SECTION 6. Affiliate Transactions. ---------------------- Payments made by the Corporation to DGHA pursuant to the Management Services Agreement shall be the only payments permitted to be made by the Corporation to DGHA and its Affiliates without the consent of a majority of the Institutional Directors. SECTION 7. Issuance of Additional Securities to DGHA Stockholders and ---------------------------------------------------------- Manager Stockholders. - -------------------- (a) The Corporation shall have the right, but not the obligation, to issue to the Manager Stockholders from time to time, at the discretion of the Board, any portion of the Manager Restricted Shares that are not issued and outstanding on or after the date hereof, at a purchase price of $.01 per share; provided, however, that it shall be a condition precedent of the -------- ------- issue of any Manager Restricted Shares that each Manager Stockholder to whom any Manager Restricted Shares are issued shall have executed and delivered to the Corporation a counterpart signature page to this Agreement and the Manager Repurchase Agreement, pursuant to which such Manager Stockholder agrees to be bound by the provisions of this Agreement and the Manager Repurchase Agreement. (b) The Corporation shall have the right, but not the obligation, to issue to the DGHA Stockholders from time to time, at the discretion of the Chairman of the Corporation, any portion of the DGHA Restricted Shares that are not issued and outstanding on or after the date hereof, at a purchase price of $.01 per share; provided, however, that it shall be a condition -------- ------- precedent of the issue of any DGHA Restricted Shares that each DGHA Stockholder to whom any DGHA Restricted Shares are issued shall have executed and delivered to the Corporation a counterpart signature page of this Agreement and the DGHA Repurchase Agreement, pursuant to which such DGHA Stockholder agrees to be bound by the provisions of this Agreement and the DGHA Repurchase Agreement. SECTION 8. Limitations on Transfers of Stock - General. ------------------------------------------- (a) The provisions regarding Transfers of Securities contained herein shall apply to all Securities now owned or hereafter acquired by a Stockholder, including Securities acquired by reason of any dividend, distribution, exchange or conversion, additional issuances of Securities, and acquisitions of outstanding Securities from another 22 Person, and such provisions shall apply to any Securities obtained by a Stockholder upon the exercise, exchange or conversion of any option, warrant or other Security. (b) No Stockholder shall Transfer any Security to a Person not already a party to this Agreement as a Stockholder unless and until such Person executes and delivers to the Corporation a written agreement in form and substance reasonably acceptable to the Corporation pursuant to which such Person shall agree to become a party to, and to be bound by and to comply with the provisions of, this Agreement in the same capacity and to the same extent as the Stockholder Transferring such Security. In the event of any Transfer to an Affiliate contemplated by clauses (i) (A) or (i)(B) of the definition thereof, the Transferee shall grant an irrevocable proxy, which shall be deemed to be coupled with an interest, with respect to voting rights of such Securities to D. George Harris (or, if D. George Harris is no longer a Stockholder or if the transferor is D. George Harris, to Anthony J. Petrocelli and if Anthony J. Petrocelli is no longer a Stockholder, to an individual elected by a majority of the Board), which proxy shall expire upon an Initial Public Offering. Any Transfer of Securities that is not made in compliance with the provisions hereof shall be void ab initio. (c) Any provision of this Agreement to the contrary notwithstanding, no Stockholder shall (i) Transfer any Security to a Person which is a Competitor or to any Affiliates of a Competitor, (ii) effect any Transfer which would subject the Corporation to the reporting requirements of the Exchange Act or (iii) Transfer any Security to any Person if such Transfer would result in an event of default under any Debt Document. (d) The restrictions on Transfer contained in Sections 9, 10, 11 and 12 shall not apply with respect to any Transfer of Securities by any Stockholder to its Affiliates. SECTION 9. Limitations on Transfers of Restricted Shares. --------------------------------------------- Except as permitted by Section 8(d) or pursuant to Section 13, no Stockholder shall Transfer any Class C Restricted Shares at any time that the Class C Restricted Shares shall be subject to the restrictions contained in the DGHA Repurchase Agreement or the Manager Repurchase Agreement. SECTION 10. Limitations on Transfers prior to Third Anniversary. --------------------------------------------------- Except as permitted by Section 8(d) or pursuant to Section 13 or Section 14 and except for sales of Securities by Manager Stockholders (to which CMC shall have consented in its sole discretion) and Non-Affiliated Stockholders to DGHA Stockholders or Manager Stockholders on or prior to December 31, 1998 at a price per share equal to $39.90 for Series B Preferred Stock, $39.90 for Class A Common Stock and $7.78 for Series A Preferred Stock, plus accrued dividends, no Stockholder shall Transfer any Securities prior to the third anniversary of the Original Agreement Date. SECTION 11. Rights of First Refusal after Third Anniversary. ----------------------------------------------- Except for Transfers permitted by Section 8(d) or Section 13 and except for sales of Securities by Manager Stockholders (to which CMC shall have consented in its sole 23 discretion) and Non-Affiliated Stockholders to DGHA Stockholders or Manager Stockholders on or prior to December 31, 1998 at a price per share equal to $39.90 for Series B Preferred Stock, $39.90 for Class A Common Stock and $7.78 for Series A Preferred Stock, plus accrued dividends, on or after the third anniversary of the Original Agreement Date the Stockholders shall comply with the following procedures in connection with any Transfer of Securities: (a) The Stockholder ("Offeror") shall first deliver to the Corporation a written notice (hereinafter in this Section 11 called the "Notice of Offer"), which shall be irrevocable for a period of 60 days after delivery thereof, offering (the "Offer") to the Corporation and the other Stockholders (the "Offerees") all of the Securities proposed to be Transferred by the Offeror at the purchase price and on the terms specified therein (which Notice of Offer shall include all relevant terms of the proposed Transfer). The Offeror shall also furnish to the Corporation such additional information relating to the Offer as may reasonably be requested by the Corporation. The Corporation shall have the right and option, for a period of 30 days after delivery of the Notice of Offer by the Offeror, to accept all or any portion of the Securities so offered at the purchase price and on the terms stated in the Notice of Offer. The Corporation shall, if it does not elect to purchase all of the offered Securities, deliver a copy of the Notice of Offer to the Offerees. Each Offeree shall have the right and option, for a period of 30 days after delivery of the Notice of Offer by the Corporation, by delivery of written notice to the Corporation (x) to accept all or any of its Proportionate Percentage of the Securities so offered at the purchase price and on the terms stated in the Notice of Offer and (y) to offer to purchase any Securities not accepted by the other Offerees, in which case the Securities not accepted by the other Offerees, shall be deemed to have been offered to and accepted by the Offerees, which exercised their option under this clause (y) pro rata in --- ---- accordance with their respective Proportionate Percentages (computed without including the Offerees, who have not exercised their option to purchase Securities under this clause (y)), on the above-described terms and conditions, and if all of the offered Securities shall not have been fully subscribed by such Offerees, the remaining offered Securities will be reofferred to the Offerees who agreed to purchase their entire entitlement of offered Securities under clause (x) upon the terms set forth in this Section until all such Securities are fully subscribed or until all such Offerees have subscribed for all such offered Securities which they desire to purchase, except that such Offerees must exercise their purchase rights within five (5) business days after receipt of all such reoffers. Notwithstanding the foregoing provisions of this Section 11(a), if the Offeror is a DGHA Stockholder, a Manager Stockholder, a Non-Affiliated Stockholder or an Institutional Stockholder, the other DGHA Stockholders, Manager Stockholders, Non-Affiliated Stockholders or Institutional Stockholders, as the case may be, shall have the right to purchase, on a pro rata basis among such Stockholders, all of the Securities so offered --- ---- prior to any purchases by any other Stockholders. (b) Transfers of Securities under the terms of this Section 11 shall be made at the offices of the Corporation on a mutually satisfactory business day within 15 days after the expiration of the applicable time periods. Delivery of certificates or other instruments evidencing such Securities, duly endorsed for transfer and free and clear of all liens and encumbrances, shall be made on such date against payment of the purchase price therefor. 24 (c) If the Corporation and the Offerees shall not have accepted to purchase all the Securities offered for sale pursuant to the aforesaid Notice of Offer, then the Offeror may Transfer to a third party that number of the Securities not accepted by the Corporation and the Offerees at the price and on substantially equivalent terms stated in the original Notice of Offer, at any time within 180 days after the expiration of the Offers required by Section 11(a). In the event the Securities are not Transferred by the Offeror on such terms during such 180-day period, the restrictions of this Section 11 shall again become applicable to any Transfer of Securities by the Offeror unless within such 180-day period the Offeror shall deliver to the Corporation a Notice of Offer with respect to an Offer of the same Securities at a purchase price which is less than the purchase price set forth in the previous Offer, in which case the 30-day period specified in Section 11(a) shall be reduced to 15 days and a new 180-day period shall begin. Nothing in this Section 11 shall preclude any Stockholder from engaging in discussions with any investment banker, potential transferee of Securities or other Person with respect to a possible purchase of Securities from it, so long as the provisions of this Section 11 are complied with prior to the consummation of any Transfer to which this applies. (d) The Offeror may specify in the Notice of Offer that all Securities mentioned therein must be Transferred, in which case any acceptance received pursuant to Section 11(a) shall be deemed conditioned upon (x) receipt of written notices of binding acceptance with respect to all Securities mentioned in such Notice of Offer or (y) the Transfer of the remaining Securities pursuant to Section 11 (c). SECTION 12. Rights of Co-Sale. ----------------- (a) Subject to the provisions of Section 12(c), in the event that on or after the third anniversary of the Original Agreement Date a Stockholder or group of Stockholders (hereinafter, a "Section 12 Offeree") receives a bona fide offer (the "Section 12 Offer") from a third party which is not an ---- ---- Affiliate of the Section 12 Offeree (the "Section 12 Offeror") to purchase from such Section 12 Offeree Securities, for a specified price payable in cash or otherwise and on specified terms and conditions, such Section 12 Offeree shall promptly forward a notice (the "Section 12 Notice") complying with Section 12(b) to the Corporation and to the other Stockholders (the Stockholders receiving a Section 12 Notice collectively referred to herein as the "Other Stockholders"). The Section 12 Offeree shall not Transfer any Securities prior to the expiration of the 15-day period referred to below to the Section 12 Offeror unless the terms of the Section 12 Offer are extended to each Other Stockholder with respect to its Proportionate Percentage of the aggregate number and classes of Securities to which the Section 12 Offer relates, whereupon each Other Stockholder shall be entitled to Transfer such Other Stockholder's Proportionate Percentage of the aggregate number of Securities to which the Section 12 Offer relates. Each Other Stockholder shall have a period of 15 days to deliver a written notice (the "Section 12 Acceptance") to the Section 12 Offeree evidencing its acceptance of the Section 12 Offer. (b) The Section 12 Notice shall set forth (i) the number of Securities to which the Section 12 Offer relates and the name of the Section 12 Offeree, (ii) the name and address of the Section 12 Offeror, (iii) the proposed amount and type of consideration 25 (including, if the consideration consists in whole or in part of non-cash consideration, such information to the Section 12 Offeree as may be reasonably necessary for the Other Stockholders to properly analyze the economic value and investment risk of such non-cash consideration) and the terms and conditions of payment offered by the Section 12 Offeror and (iv) that the Section 12 Offeror has been informed of the co-sale rights provided for in this Section 12, and has agreed to purchase Securities held by the Other Stockholders in accordance with the terms of this Section 12 (which agreement may contain the Section 12 Offeror's obligation to purchase all of the Securities held by the Other Stockholders subject to the Section 12 Offer from the Section 12 Offeree so long as such Section 12 Offeree agrees to purchase simultaneously with such sale from the Other Stockholders if they deliver a Section 12 Acceptance the Securities held by the Other Stockholders subject to such Section 12 Notice of Acceptance). (c) The foregoing provisions of this Section 12 shall not apply to a Transfer or Transfer(s) by a Stockholder or group of Stockholders of up to the greater of (i) 0.50% of the Common Equivalents outstanding at such time, and (ii) 10% of the Securities held by such Stockholder or group of Stockholders at such time. SECTION 13. Drag-Along Rights. ----------------- (a) If the Requisite Stockholders approve a sale of all or substantially all of the capital stock or assets of the Company to a Person which is not an Affiliate of any Stockholder (other than an Affiliate of a DGHA Stockholder) (an "Approved Sale"), whether by way of merger, consolidation, sale of stock or assets, or otherwise (each, a "Sale of the Company"), all Stockholders shall consent to and raise no objections against the Approved Sale, and if the Approved Sale is structured as (A) a merger or consolidation of the Corporation or a Subsidiary, or a sale of all or substantially all of the assets of the Corporation or a Subsidiary, each Stockholder shall waive any dissenters rights, appraisal rights or similar rights in connection with such merger, consolidation or asset sale, or (B) a sale of all the capital stock of the Corporation or a Subsidiary, the Stockholders shall agree to sell their Securities on the terms and conditions approved by the Requisite Stockholders. The Stockholders shall take all necessary and desirable actions approved by the Requisite Stockholders, in connection with the consummation of the Approved Sale, including the execution of such agreements and such instruments and other actions reasonably necessary to (1) provide the representations, warranties, indemnities, covenants, conditions, non-compete agreements, escrow agreements and other provisions and agreements relating to such Approved Sale and (2) effectuate the allocation and distribution of the aggregate consideration upon the Approved Sale as set forth below. The Stockholders shall be permitted to sell their Securities pursuant to an Approved Sale without complying with the provisions of Sections 8, 9, 10, 11 or 12 of this Agreement. (b) The obligations of the Stockholders pursuant to this Section 13 are subject to the satisfaction of the following conditions: (i) subject to Section 13(b)(iii), upon the consummation of the Approved Sale, all of the Stockholders shall receive the same proportion of the 26 aggregate consideration from such Approved Sale that such holder would have received if such aggregate consideration had been distributed by the Corporation in complete liquidation pursuant to the rights and preferences set forth in the Certificate as in effect immediately prior to such Approved Sale (giving effect to applicable orders of priority) and after giving effect to the purchase rights (if any) set forth in the DGHA Repurchase Agreement and the Manager Repurchase Agreement; (ii) if any Stockholders of a class are given an option as to the form and amount of consideration to be received, all holders of such class will be given the same option; (iii) all holders of then-currently exercisable Common Equivalents will be given an opportunity to either (A) exercise such rights prior to the consummation of the Approved Sale (but only to the extent such Common Equivalents are then vested) and participate in such sale as Stockholders or (B) upon the consummation of the Approved Sale, receive in exchange for such Common Equivalents consideration equal to the amount determined by multiplying (x) the same amount of consideration per share of Common Stock (of the same class as that for which the Common Equivalent is exercisable) received by the holders of such class of Common Stock in connection with the Approved Sale less the exercise price per Common Equivalent by (y) the number of Common Equivalents; (iv) no Stockholder shall be obligated to make any out-of- pocket expenditure prior to the consummation of the Approved Sale (excluding modest expenditures for postage, copies, etc.) and no Stockholder shall be obligated to pay more than his pro rata share (based upon the amount of consideration received) of reasonable expenses incurred in connection with a consummated Approved Sale to the extent such costs are incurred for the benefit of all Stockholders and are not otherwise paid by the Corporation or the acquiring party (costs incurred by or on behalf of a Stockholder for its or his sole benefit will not be considered costs of the transaction hereunder), provided that a Stockholder's liability for such expenses shall be capped at the total purchase price received by such Stockholder for his Securities (including the exercise price thereof); and (v) in the event that the Stockholders are required to provide any representations or indemnities in connection with the Approved Sale (other than representations and indemnities concerning each Stockholder's valid ownership of his Securities, free of all liens and encumbrances (other than those arising under applicable securities laws), and each Stockholder's authority, power, and right to enter into and consummate such purchase or merger agreement without violating any other agreement), then each Stockholder shall not be liable for more than his pro rata share (based upon the number of Securities held and not the amount of consideration received) of any liability for misrepresentation or indemnity and such liability shall not exceed the total purchase price received by such Stockholder for his Securities (including the exercise price thereof), after taxes 27 (after giving effect to all potential amendments of tax returns arising in connection with any indemnification claim) and expenses, and such liability shall be satisfied solely out of any funds escrowed for such purpose. (c) If the Corporation and any of the Stockholders or their representatives, enter into any negotiation or transaction for which Rule 506 under the Securities Act (or any similar rule then in effect) may be available with respect to such negotiation or reaction (including a merger, consolidation or other reorganization), each Stockholder who is not an accredited investor (as such term is defined in Rule 501 under the Securities Act) will, at the request of the Corporation or the Institutional Stockholders, appoint a purchaser representative (as such term is defined in Rule 501 under the Securities Act) reasonably acceptable to the Corporation or such Stockholders. SECTION 14. Options Upon Termination Event. ------------------------------ (a) Upon the occurrence of a Termination Event with respect to a Stockholder who is a Manager Stockholder or a DGHA Stockholder (except a Termination Event described in Section 14(d)(ii)(1) or (2) with respect to a Stockholder who is a DGHA Stockholder), in each case occurring on or prior to the fifth anniversary of the Original Agreement Date (or at any time with respect to a Termination Event described in Section 14(d)(i)(1) or (2) with respect to a Stockholder who is a Manager Stockholder), subject to Section 14(c), the Corporation shall have the right but not the obligation to purchase any or all of such Stockholder's (the "Retiring Stockholder") Securities (other than Class C Restricted Shares) (the "Retiring Shares"). The Corporation shall have 20 days after the occurrence of any Termination Event described above in which to give notice (the "Primary Retirement Notice") to the Retiring Stockholder of its election to purchase all of the Retiring Shares. The Primary Retirement Notice will disclose in reasonable detail the Corporation's election to purchase all of the Retiring Shares and the terms and conditions of the sale including the price per share of the Retiring Shares. In the event that the Corporation does not elect to purchase all of the Retiring Shares, the Corporation shall, within 20 days after the occurrence of any Termination Event described above, deliver, on behalf of the Retiring Stockholder but at the expense of the Corporation, a written notice (the "Secondary Retirement Notice") to the remaining Stockholders (the "Eligible Stockholders") and the Retiring Stockholder, which Secondary Retirement Notice will disclose in reasonable detail the terms and conditions of the sale including the total number of Retiring Shares and the number of Retiring Shares, if any, to be purchased by the Corporation and the price per share of the Retiring Shares. Upon receipt of the Secondary Retirement Notice, each Eligible Stockholder shall have a right to purchase the Retiring Shares which will not be purchased by the Corporation (the "R Retiring Shares"), in the case of each Eligible Stockholder, up to that number of the Retiring Shares equal to such Eligible Stockholder's Adjusted Proportionate Percentage of the Remaining Retiring Shares (such number of shares hereinafter referred to as the "Retiring Participation Shares") with respect to such Eligible Stockholder. The Eligible Stockholders shall have 20 days after the Secondary Retirement Notice is received in which to give counter-notice of such Eligible Stockholder's election to purchase such Remaining Retiring Shares (such election by an Eligible Stockholder being referred to as an "Initial Retiring Purchase"). An Initial Retiring Purchase by an Eligible Stockholder 28 may be of all or part of his or its Retiring Participation Shares. Any Eligible Stockholder may at any time elect in his or its counter-notice to purchase, in addition to his or its Retiring Participation Shares, the balance (or the balance up to a maximum stated number) of any Remaining Retiring Shares being offered to other Eligible Stockholders which are not accepted by such other Eligible Stockholders (such acceptance being hereinafter referred to as an "Additional Retiring Purchase"). If the number of Remaining Retiring Shares that the Eligible Stockholders elect to purchase in their Initial Retiring Purchases and Additional Retiring Purchases exceeds the number of Remaining Retiring Shares, the number of Remaining Retiring Shares to be purchased in the aggregate by all Second Priority Eligible Stockholders shall be reduced to the extent of the Excess Attributable to the Second Priority Additional Retiring Purchases with such reduction in the number of Remaining Retiring Shares to be purchased in the aggregate by all Second Priority Eligible Stockholders to be allocated among such Second Priority Eligible Stockholders in proportion to the number of Remaining Retiring Shares each Second Priority Eligible Stockholder has agreed to purchase in such Second Priority Eligible Stockholder's Additional Retiring Purchase (the "First Retirement Reduction"). If any excess remains after the First Retirement Reduction, the number of Remaining Retiring Shares to be purchased in the aggregate by all Second Priority Eligible Stockholders shall be further reduced to the extent of the Excess Attributable to the Second Priority Initial Retiring Purchases with such reduction in the number of Remaining Retiring Shares to be purchased in the aggregate by all Second Priority Eligible Stockholders to be allocated among such Second Priority Eligible Stockholders in proportion to the number of Remaining Retiring Shares each Second Priority Eligible Stockholder has agreed to purchase in such Second Priority Eligible Stockholder's Initial Retiring Purchase (the "Second Retirement Reduction"). If any excess remains after the Second Retirement Reduction, the number of Remaining Retiring Shares to be purchased in the aggregate by all First Priority Eligible Stockholders shall be reduced to the extent of the Excess Attributable to the First Priority Additional Retiring Purchases with such reduction in the number of Remaining Retiring Shares to be purchased in the aggregate by all First Priority Eligible Stockholders to be allocated among such First Priority Eligible Stockholders in proportion to the number of Remaining Retiring Shares each First Priority Eligible Stockholder has agreed to purchase in such First Priority Eligible Stockholder's Additional Retiring Purchase. To the extent possible, any mechanical problems shall be solved in any equitable manner determined by the Board to be consistent with the intent of the parties hereto. (b) The price per share for Retiring Shares shall be the Valuation Price per Share as in effect on the date of the Primary Retirement Notice or, in the event that the Corporation does not deliver a Primary Retirement Notice, as in effect on the date of the Secondary Retirement Notice (the "Notice Date"). (c) Upon the occurrence of any Termination Event (except for a Termination Event described in Section 14(d)(i)(5) or Section 14(d)(ii)(5) with respect to a Stockholder who is a Manager Stockholder or a DGHA Stockholder, in each case occurring on or prior to the fifth anniversary of the Original Agreement Date (or at any time with respect to a Termination Event described in Section 14(d)(i)(1) or (2) or Section 14(d)(ii)(1) or (2)), such Stockholder or his or her designated beneficiaries, as the 29 case may be, shall be entitled to require, subject to the provisions of the next sentence, by written notice delivered to the Corporation within 60 days of such Termination Event, that the Corporation (or, at the election of the Corporation, the Corporation's designee) repurchase for cash not less than all Securities (other than Class C Restricted Shares) then held by such Stockholder prior to such Termination Event (the "Individual Investor Put Shares") at a price per share equal to the Valuation Price per Share as of the date of such Termination Event. The Corporation's repurchase obligation described in the foregoing sentence shall be in all cases subject to any applicable restrictions provided by the Delaware General Corporation Law, the Certificate and any applicable restrictions and conditions set out in the Debt Documents. (d) As used in this Section 14, a "Termination Event" shall have occurred if: (i) a Manager Stockholder's employment with the Corporation or any Subsidiary thereof is terminated (and not continued, or substantially simultaneously resumed, with the Corporation or any Subsidiary thereof) as a result of: (1) the death of such Manager Stockholder; (2) the permanent disability (as determined by the Board or the Board of Directors of such Subsidiary, as the case may be, in good faith) of such Manager Stockholder; (3) the retirement at or above age 65 (or such other age as may be determined by the Compensation Committee) of such Manager Stockholder; (4) termination by the Corporation or any such Subsidiary of such Manager Stockholder for any reason other than for Cause; or (5) such Manager Stockholder notifies the Corporation or any such Subsidiary that he is terminating his employment, or the Corporation or any such Subsidiary notifies such Manager Stockholder that the employment of such Manager Stockholder is being terminated for Cause. (ii) a DGHA Stockholder's employment with DGHA or any Affiliate thereof is terminated (and not continued, or substantially simultaneously resumed, with DGHA or any Affiliate thereof) as a result of: (1) the death of such DGHA Stockholder; (2) the permanent disability (as determined by the Board or the Board of Directors of such Affiliate, as the case may be, in good faith) of such DGHA Stockholder; 30 (3) the retirement at or above age 70 (or such other age as may be determined by the Compensation Committee) of such DGHA Stockholder; (4) termination by DGHA or any Affiliate thereof of such DGHA Stockholder for any reason other than for Cause; or (5) such DGHA Stockholder notifies DGHA or any Affiliate thereof that he is terminating his employment, or DGHA or any Affiliate thereof notifies such DGHA Stockholder that the employment of such DGHA Stockholder is being terminated for Cause. (e) Any repurchase by the Corporation or purchase by an Eligible Stockholder of the Individual Investor Put Shares or the Retiring Shares, as the case may be, pursuant to this Section 14 shall be effected by delivery by the Stockholder or his beneficiaries, as the case may be, of the certificate(s) for all such Retiring Shares of Individual Investor Put Shares (properly endorsed for transfer) to the appropriate transferee(s) on a date five (5) business days after the requisite notice or notices pursuant to this Section 14 requiring the repurchase or purchase of all such Retiring Shares or Individual Investor Put Shares, as the case may be, have been given (the "Transfer Date"). As of the Transfer Date, title to such Retiring Shares or Individual Investor Put Shares shall be deemed transferred to the respective transferee(s) upon tender by such transferee(s) of the purchase price for such Retiring Shares or Individual Investor Put Shares to the Stockholder or his designated beneficiaries by a check or checks in New York Clearing House funds or by a wire transfer to the account of the Stockholder or his designated beneficiaries. (f) Notwithstanding anything to the contrary contained in this Section 14, the Corporation and the Retiring Stockholder (in the case of a repurchase contemplated by Section 14(a)) or the Corporation and the Manager Stockholder or DGHA Stockholder or his or her designated beneficiaries (in the case of a repurchase contemplated by (Section 14(c)), as the case may be, shall have the right and option to elect (the "Deferral Election"), pursuant to a written agreement duly executed by such persons, to deem the date of the relevant Termination Event to be deferred for purposes of this Section 14 until a date (the "Deferral Date") not more than six years following the date of the Deferral Election. A Deferral Election must be made within 90 days of the occurrence of the relevant Termination Event. A Deferral Election shall be effective solely to defer for purposes of this Section 14 the date of a Termination Event until the Deferral Date specified in, or determined pursuant to, such Deferral Election (at which time Sections 14(a) and 14(c) shall be applicable according to their respective terms) and such Deferral Election shall not otherwise affect the rights or obligations of any party hereto. SECTION 15. Required Sale. ------------- Notwithstanding anything contained herein to the contrary if, at any time on or after the fourth anniversary of the Original Agreement Date, an IRR Event shall not have occurred, the Majority of the Institutional Stockholders shall have the right, at any time, to serve 31 written notice on the Corporation of the desire of the Majority of the Institutional Stockholders to effect a Sale of the Company. The DGHA Stockholders shall have the exclusive right for a period of 180 days (the "Exclusive Period"), commencing on the date of the determination of "Fair Value" (as hereinafter defined) to consummate either a Sale of the Company at Fair Value or the acquisition of the Institutional Securities, at a price equal to what the Institutional Stockholders would receive for the Institutional Securities if a Sale of the Company was consummated at Fair Value after giving effect to the provisions of the DGHA Repurchase Agreement and the Manager Repurchase Agreement. "Fair Value" means the highest price that would be paid for all or substantially all of (i) the Securities, (ii) the capital stock of a Subsidiary, (iii) the assets of the Corporation (after the assumption of all of the liabilities of the Corporation), or (iv) the assets of a Subsidiary (after the assumption of all the liabilities of such Subsidiary), as the case may be, and in each case, on a going-concern basis in a single arm's-length transaction between a willing buyer and a willing seller in an orderly process, using valuation techniques then prevailing in the securities industry and assuming full disclosure of all relevant information and a reasonable period of time for effectuating such sale, as determined jointly by the Majority of the Institutional Stockholders and the Majority of the DGHA Stockholders. If such parties are unable to reach agreement within 30 days, such Fair Value shall be determined by an independent nationally recognized investment bank experienced in valuing companies or assets jointly selected by the Majority of the Institutional Stockholders and the Majority of the DGHA Stockholders. If the parties cannot agree on the selection of an investment bank within 30 days, the investment bank will be selected by an independent arbitrator appointed in accordance with the rules of the American Arbitration Association. The determination of such investment bank shall be final and binding upon the parties, and the Corporation shall pay the fees and expenses of such investment bank. SECTION 16. Regulatory Matters. ------------------ (a) Regulatory Compliance Cooperation. --------------------------------- (i) If a Stockholder determines that it has a Regulatory Problem, the Corporation agrees to take all such actions as are reasonably requested by such Stockholder (x) to effectuate and facilitate any Transfer by such Stockholder of any Securities (as defined below) of the Corporation then held by such Stockholder to any Person designated by such Stockholder, (y) to permit such Stockholder (or any Affiliate of such Stockholder) to exchange all or any portion of the voting Securities then held by such Person on a share-for-share basis for shares of a class of nonvoting Securities of the Corporation, which nonvoting Securities shall be identical in all respects to such voting Securities, except that such new Securities shall be nonvoting and shall be convertible into voting Securities on such terms as are requested by such Stockholder in light of regulatory considerations then prevailing, and (z) to continue and preserve the respective allocation of the voting interests with respect to the Corporation provided for in the Certificate and this Agreement and with respect to such Stockholder's ownership of the Corporation's voting Securities. Such actions may include, without limitation, (x) entering into such additional agreements as are reasonably requested by such Stockholder to permit any Person(s) designated by such Stockholder to exercise any voting power which is relinquished by such 32 Stockholder upon any exchange of voting Securities for nonvoting Securities of the Corporation; and (y) entering into such additional agreements, adopting such amendments to this Agreement, the Certificate and the Bylaws of the Corporation and taking such additional actions as are reasonably requested by such Stockholder in order to effectuate the intent of the foregoing; provided, however that such actions will not change materially any of the agreements, rights or obligations of the parties reflected herein or in the Certificate or the Bylaws. (ii) Before the Corporation redeems, purchases or otherwise acquires, directly or indirectly, or converts or takes any action with respect to the voting rights of, any Securities, the Corporation shall give written notice of such pending action to each Stockholder. Upon the written request of any Stockholder made within 10 days after its receipt of such notice stating that after giving effect to such action such Stockholder would have a Voting Regulatory Problem, the Corporation shall defer taking such action for such period (not to extend beyond 45 days after such Stockholder's receipt of the Corporation's original notice) as such Stockholder requests to permit it and its Affiliates to reduce the quantity of Securities they own or take other appropriate action in order to avoid the Voting Regulatory Problem. In addition, in the event that the Corporation shall be a party to any merger, consolidation, recapitalization or other transaction pursuant to which any Stockholder would be required to take any voting Securities, or any Securities convertible into, or exchangeable or exercisable for, voting Securities, which might reasonably be expected to cause such Stockholder to have a Voting Regulatory Problem, then the Corporation shall not be a party to such transaction unless such Stockholder shall receive non-voting Securities. (b) Cooperation of Other Stockholders. Each Stockholder agrees to --------------------------------- cooperate with the Corporation in complying with Section 16(a) above, including without limitation, voting to approve amending the Certificate, this Agreement or the Bylaws in a manner reasonably requested by the Stockholder requesting such amendment. (c) Covenant Not to Amend. The Corporation and each Stockholder --------------------- agree not to amend or waive the voting or other provisions of the Certificate, this Agreement or the Bylaws if such amendment or waiver would cause any Stockholder to have a Voting Regulatory Problem, provided that any such Stockholder notifies the Corporation that it would have a Voting Regulatory Problem promptly after it has notice of such amendment or waiver. SECTION 17. Requisite Stockholder Approval. ------------------------------ Each Stockholder agrees to consider in good faith any proposal or proposals made by the Corporation for a Stockholder vote (with or without a meeting), or for a Stockholder or Stockholders to take any other action or actions, that the Corporation deems reasonably advisable in connection with achieving a Requisite Stockholder Approval. The Corporation shall make one or more proposals for a Stockholder vote (with or without a meeting), or for a Stockholder or Stockholders to take any other action or actions, that the Corporation deems reasonably advisable in connection with achieving a Requisite Stockholder Approval. 33 SECTION 18. Amendment and Waiver. -------------------- (a) Except as expressly set forth herein, the provisions of this Agreement may only be amended or waived with the prior written consent of the Corporation, a Majority of the Institutional Stockholders and a Majority of the DGHA Stockholders; provided, however, that Schedule 1 to this Agreement shall be deemed to be automatically amended from time to time to reflect issuances and Transfers of Securities made in accordance with the terms hereof without requiring the consent of any party, and the Corporation will, upon request, distribute to any Stockholder a revised Schedule 1 to reflect any such changes. (b) No course of dealing between the Corporation, its Subsidiaries and the Stockholders (or any of them) or any delay in exercising any rights hereunder will operate as a waiver of any rights of any party to this Agreement. (c) For purposes of this Agreement, shares of capital stock held by the Corporation or any Subsidiaries will not be deemed to be outstanding. (d) The failure of any party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. SECTION 19. Securities Law Compliance; Legends. ---------------------------------- (a) Restriction on Transfer. No Stockholder shall Transfer ----------------------- Restricted Securities except in compliance with the conditions specified in this Agreement or pursuant to a Public Sale. (b) Restrictive Legends. Each certificate for the Restricted ------------------- Securities shall (unless otherwise provided by the provisions of Section 19(d)) be stamped or otherwise imprinted with a legend in substantially the following terms: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR LAWS. (c) Notice of Transfer. The holder of any Restricted Securities, ------------------ by its acceptance or purchase thereof, agrees, prior to any Transfer of any such Restricted Securities (except pursuant to an effective registration statement), to give written notice to the Corporation of such holder's intention to effect such Transfer and agrees to comply in all other respects with the provisions of this Section 19. Each such notice shall describe the manner and circumstances of the proposed Transfer and, unless waived by the Corporation, shall be accompanied by the written opinion, addressed to the 34 Corporation, of counsel for the holder of such Restricted Securities (which counsel shall be reasonably satisfactory to the Corporation), stating that in the opinion of such counsel (which opinion shall be reasonably satisfactory to the Corporation) such proposed Transfer does not involve a transaction requiring registration or qualification of such Restricted Securities under the Securities Act or the securities laws of any state of the United States. Subject to complying with the other applicable provisions hereof, such holder of Restricted Securities shall be entitled to consummate such Transfer in accordance with the terms of the notice delivered by it to the Corporation if the Corporation does not object (on the basis that such Transfer violates the provisions of this Section 19) to such Transfer within five days after the delivery of such notice. Each certificate or other instrument evidencing the securities issued upon the Transfer of any Restricted Securities (and each certificate or other instrument evidencing any untransferred balance of such Securities) shall bear the legend set forth in Section 19(b) unless (i) in such opinion of such counsel registration of future Transfer is not required by the applicable provisions of the Securities Act or the securities laws of any state of the United States or (ii) the Corporation shall have waived the requirement of such legend. (d) Removal of Legends, Etc. Notwithstanding the foregoing ----------------------- provisions of this Section 19, the restriction imposed by Sections 19(a), (b) and (c) upon the transferability of any Restricted Securities shall cease and terminate when (i) any such Restricted Securities are sold or otherwise disposed of in accordance with the intended method of disposition by the seller or sellers thereof set forth in a registration statement or are sold or otherwise disposed of in a transaction contemplated by Section 19(c) which does not require that the securities transferred bear the legend set forth in Section 19(b), or (ii) the holder of such Restricted Securities has met the requirement of transfer of such Restricted Securities pursuant to subparagraph (k) of Rule 144. Whenever the restrictions imposed by Sections 19(a), (b) and (c) shall terminate, as herein provided, the holder of any Restricted Securities shall be entitled to receive from the Corporation, without expense, a new certificate not bearing the restrictive legend set forth in Section 19(b) and not containing any other reference to the restrictions imposed by Sections 19(a), (b) and (c). (e) Additional Legend. Each certificate evidencing Securities ----------------- and each certificate issued in exchange for or upon the Transfer of any Securities (if such shares remain Securities as defined herein after such Transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO A STOCKHOLDERS AGREEMENT DATED AS OF FEBRUARY 9, 1996 AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS. THE TERMS OF SUCH STOCKHOLDERS AGREEMENT INCLUDE, AMONG OTHER THINGS, VOTING AGREEMENTS, REPURCHASE AGREEMENTS AND RESTRICTIONS ON TRANSFERS. A COPY OF SUCH STOCKHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT 35 CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST." The Corporation shall imprint such legends on certificates evidencing shares outstanding prior to the date hereof. The legend set forth above shall be removed from the certificates evidencing any shares which cease to be Securities in accordance with the terms of this Agreement. SECTION 20. Duration of Agreement. --------------------- The rights and obligations of each Stockholder under this Agreement shall terminate as to such Stockholder upon the earliest to occur of (a) the Transfer of all Securities owned by such Stockholder and (b) the consummation of an IRR Event. SECTION 21. Severability. ------------ Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, and such invalid, void or otherwise unenforceable provisions shall be null and void. It is the intent of the parties, however, that any invalid, void or otherwise unenforceable provisions be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable to the fullest extent permitted by law. SECTION 22. Entire Agreement. ---------------- This document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. SECTION 23. Certain Stockholders. -------------------- If any Stockholder is an entity that was formed for the purpose of acquiring Securities or that has no substantial assets other than Securities or interests in Securities, such Stockholder agrees that (a) shares of its common stock or other instruments reflecting equity interests in such entity (and the shares of common stock or other equity interests in any similar entities controlling such entity) will note the restrictions contained in this Agreement on the transfer of Securities as if such common stock or other equity interests were Securities and (b) no shares of such common stock or other equity interests may be transferred to any Person other than in accordance with the terms and provisions of this Agreement as if such common stock or other equity interests were Securities. SECTION 24. Successors and Assigns. ---------------------- Except as otherwise provided herein, this Agreement will bind and inure to the benefit of and be enforceable by the Corporation and its successors and assigns and the 36 Stockholders and any subsequent holders of Securities and the respective successors and permitted assigns of each of them, so long as they hold Securities. None of the provisions hereof shall create, or be construed or deemed to create, any right to employment in favor of any Person by the Corporation or any of its Subsidiaries. This Agreement is not intended to create any third party beneficiaries. SECTION 25. Counterparts. ------------ This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. SECTION 26. Remedies. -------- (a) Each Stockholder shall have all rights and remedies reserved for such Stockholder pursuant to this Agreement, the Subscription Agreement dated the Original Agreement Date, the Certificate and Bylaws and all rights and remedies which such holder has been granted at any time under any other agreement or contract and all of the rights which such holder has under any law or equity. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity. (b) The parties hereto agree that if any parties seek to resolve any dispute arising under this Agreement pursuant to a legal proceeding, the prevailing parties to such proceeding shall be entitled to receive reasonable fees and expenses (including reasonable attorneys' fees and expenses) incurred in connection with such proceedings. (c) It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. SECTION 27. Notices. ------- All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (a) when delivered personally to the recipient, (b) one business day after being sent by reputable overnight courier (charges prepaid) (regardless of whether the recipient refuses to accept delivery), (c) five business days after being sent to the recipient by certified or registered mail, return receipt requested and postage prepaid (regardless of whether the recipient refuses to accept delivery) or (d) when sent to the recipient by facsimile (followed promptly by personal, courier or certified or registered mail delivery). The Corporation's address is: 37 USS Holdings, Inc. c/o D. George Harris & Associates, Inc. 399 Park Avenue 32nd Floor New York, New York 10022 Telephone: (212) 207-6400 Telecopier: (212) 207-6470 Attention: Donald G. Kilpatrick With a copy to: Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, New York 10004 Telephone: (212) 858-1000 Telecopier: (212) 858-1500 Attention: Kenneth E. Adelsberg, Esq. The address for each Stockholder is set forth on Schedule 1 hereto; and if to CMC, with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Telephone: (212) 408-2400 Telecopier: (212) 408-2420 Attention: John J. Suydam, Esq. SECTION 28. Governing Law. ------------- All questions concerning the construction, interpretation and validity of this Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether in the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. SECTION 29. Further Assurances. ------------------ Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. 38 SECTION 30. Jurisdiction; Venue; Process. ---------------------------- The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly (but not exclusively) lie in any federal or state court located in the State of New York. By execution and delivery of this Agreement, the parties hereto irrevocably submit to the jurisdiction of such courts for himself and in respect of his property with respect to such action. The parties hereto irrevocably agree that venue would be proper in such court, and hereby waive any objection that such court is an improper or inconvenient forum for the resolution of such action. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without necessity for service by any other means provided by statute or rule of court. SECTION 31. Representation and Warranties of the Stockholders. ------------------------------------------------- Each Stockholder (as to himself or itself only) represents and warrants to the Corporation and the other Stockholders that, as of the time such Stockholder becomes a party to this Agreement: (a) this Agreement has been duly and validly executed and delivered by such Stockholder and this Agreement constitutes a legal and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms; (b) the execution, delivery and performance by such Stockholder of this Agreement and the consummation by such Stockholder of the transactions contemplated hereby will not, with or without the giving of notice or lapse of time, or both (i) violate any provision of law, statute, rule or regulation to which the Stockholder is subject, (ii) violate any order, judgment or decree applicable to such Stockholder, or (iii) conflict with, or result in a breach or default under, any term or condition of any agreement or other instrument to which such Stockholder is a party or by which such Stockholder is bound, except for such violations, conflicts, breaches or defaults that would not, in the aggregate, materially affect the Stockholder's ability to perform its obligations hereunder; (c) the Stockholder purchased the Securities owned by it for its own account, for investment and not with a view to the distribution thereof within the meaning of the Securities Act; (d) the Stockholder understands that the Securities have not been registered under the Securities Act or registered or qualified under applicable state securities laws by reason of their issuance by the Corporation in a transaction exempt from the registration and qualification requirements of the Securities Act and applicable state securities laws, and (ii) the Securities must be held by the Stockholder indefinitely unless a subsequent disposition thereof is registered or qualified under the Securities Act and applicable state securities laws or is exempt from such registration or qualification. The Stockholder understands that the certificates for the Securities will bear the legends described in Section 19(b) and (e); 39 (e) the Stockholder further understands that, with respect to the Securities, the exemption from registration afforded by Rule 144 (the provisions of which are known to the Stockholder) depends on the satisfaction of various conditions, and that, if applicable, Rule 144 may only afford the basis for sales only in limited amounts; (f) the Stockholder has not employed any broker or finder or similar person in connection with its purchase of the Securities; (g) except as disclosed in writing to the Corporation prior to the acquisition of Securities by such Stockholder, the Stockholder is an "accredited investor" (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act). The Corporation has made available to the Stockholder or its representatives all agreements, documents, records and books that the Stockholder has requested relating to an investment in the Securities. The Stockholder has had an opportunity to ask questions of, and receive answers from, Persons acting on behalf of the Corporation concerning the terms and conditions of this investment, and answers have been provided to all of such questions to the full satisfaction of the Stockholder. No oral representations have been made or furnished to, or relied on by, the Stockholder or its representatives in connection with its investment in the Securities. The Stockholder has such knowledge and experience in financial and business matters that it is capable of evaluating the risks and merits of its investment in the Securities; (h) the Stockholder has no need for liquidity in its investment in the Securities and is able to bear the economic risk of its investment in the Securities and the complete loss of all of such investment; (i) the Stockholder further understands that this Agreement is made with the Stockholder in reliance upon the Stockholder's representations to the Corporation contained in this Section 31; and (j) the Stockholder and its representatives have conducted a due diligence investigation and have had the opportunity to review all documents and information which the Stockholder and its representatives have requested concerning Silica, the Corporation, the Subsidiaries and the Stockholder's investment. In reaching its decision to invest in the Corporation, the Stockholder has relied on the foregoing investigation and information, on the representations and warranties in the Stock Purchase Agreement and on the representations and warranties set forth herein. SECTION 32. Conflicting Agreements. ---------------------- No Stockholder shall enter into any stockholder agreements or arrangements of any kind with any Person with respect to any Securities on terms inconsistent with the provisions of this Agreement (whether or not such agreements or arrangements are with other Stockholders or with Persons that are not parties to this Agreement), including but not limited to, agreements or arrangements with respect to the acquisition or disposition of Securities of the Corporation in a manner which is inconsistent with this Agreement. 40 SECTION 33. Mutual Waiver of Jury Trial. --------------------------- BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. * * * * * 41 IN WITNESS WHEREOF, the undersigned have duly executed this Amendment No. 2 as of the date first written above. USS HOLDINGS, INC. By: /s/ Donald G. Kilpatrick ---------------------------------- Name: Title: CHASE MANHATTAN CAPITAL, L.P. By: Chase Manhattan Capital Corporation, its general partner By: /s/ Arnold L. Chavkin ----------------------------- Name: Arnold L. Chavkin Title: General Partner CHASE VENTURE CAPITAL ASSOCIATES, L.P. By: Chase Capital Partners, its general partner By: /s/ Arnold L. Chavkin ----------------------------- Name: Arnold L. Chavkin Title: General Partner MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: __________________________________ Name: Title: 42 MASSMUTUAL PARTICIPATION INVESTORS By: __________________________________ Name: Title: MASSMUTUAL CORPORATE INVESTORS By: __________________________________ Name: Title: GERLACH & CO. By: __________________________________ Name: Title: /s/ D. George Harris -------------------------------------- D. George Harris /s/ Anthony J. Petrocelli -------------------------------------- Anthony J. Petrocelli /s/ Richard J. Donahue -------------------------------------- Richard J. Donahue /s/ Donald G. Kilpatrick -------------------------------------- Donald G. Kilpatrick ______________________________________ David Willetts /s/ Richard J. Nick -------------------------------------- Richard J. Nick 43 ______________________________________ William J. Sichko ______________________________________ Emanuel J. Di Teresi ______________________________________ Matthew J. Dowd ______________________________________ Michael R. Boyce ______________________________________ Peter McConnell ______________________________________ Robert F. Clark ______________________________________ Keith Clark ______________________________________ Susan E. Day ______________________________________ Daniel Richardson ______________________________________ Billy Whalen ______________________________________ Max Reynolds ______________________________________ Scott Randolph ______________________________________ Lawrence A. Schulte, Jr. 44 ___________________________________________ Kevin F.X. Brophy ___________________________________________ Gerard A. Gasparovich ___________________________________________ Gordon L. Rulong ___________________________________________ Jeffrey P. Jahn ___________________________________________ Richard Hunnisett ___________________________________________ Patrick W. Reeser ___________________________________________ Beverly G. Sykes, Jr. ___________________________________________ Jeffrey D. Thatcher ___________________________________________ Earle H. Andrews ___________________________________________ Gregory S. Fell ___________________________________________ Teddy D. Glennon ___________________________________________ Robert Mang ___________________________________________ Andrew L. Meyers 45 ___________________________________________ James W. Holmes ___________________________________________ John W. Hammer ___________________________________________ Gilberto Lopez ___________________________________________ Larry D. Martin ___________________________________________ Stephen L. Yeich ___________________________________________ Mack D. Jones ___________________________________________ Donald P. Altand ___________________________________________ Roque A. Pullio ___________________________________________ M. Ben Bushe ___________________________________________ George H. Didawick ___________________________________________ James A. Wagner ___________________________________________ Mark V. Lough ___________________________________________ Gary A. Randolph 46 ___________________________________________ Jon P. Sheridan ___________________________________________ Matthew J. Lyman ___________________________________________ Ronnie D. Conway ___________________________________________ James S. Vaccari ___________________________________________ Raymond A. LeClair ___________________________________________ Robert L. Krepps ___________________________________________ Dale M. McFadden ___________________________________________ William A. White ___________________________________________ Randall J. Massino ___________________________________________ David O. Bach ___________________________________________ Cyrus W. Kreamer, Jr. ___________________________________________ Steven J. Babler ___________________________________________ Kimberly A. Ranft 47 ___________________________________________ David R. Whitmarsh ___________________________________________ John E. Friton ___________________________________________ Eric K. Yildrim ___________________________________________ Les Van Alstyne, Jr. ___________________________________________ William L. Foutch ___________________________________________ Janice M. Widmeyer ___________________________________________ John H. Wilson ___________________________________________ Clive M. Kelsall ___________________________________________ H. William Bentgen ___________________________________________ Robert L. Oren ___________________________________________ John L. Mason ___________________________________________ Harvey S. Goldstein ___________________________________________ Larry A. Burkhart 48 ___________________________________________ Richard E. Goodell ___________________________________________ Gary E. Bockrath ___________________________________________ Robert B. Calamari ___________________________________________ Walter C. Pellish ___________________________________________ John A. Ulizio ___________________________________________ James D. Walker ___________________________________________ Daniel N. Gerber ___________________________________________ Robert H. Morrow ___________________________________________ Paul F. Guttmann ___________________________________________ Jerry D. Austin ___________________________________________ David A. Kistenfeger ___________________________________________ John F. Miller ___________________________________________ Lance D. Reed 49 ___________________________________________ James A. Sinkowski ___________________________________________ Troy L. Trentham ___________________________________________ Ray K. Weiland ___________________________________________ William P. Weiland ___________________________________________ Michael L. Thompson ___________________________________________ Richard J. Shearer Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Robert Harris By /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee By /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Margaret Harris By /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee By /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee 50 Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Paige Coleman By /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee By /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Keith Coleman By /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee By /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of D. George Harris dated November 18, 1994 F/B/O Augustus Northridge By /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee By /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee 51 Trust under Agreement of D. George Harris dated January 31, 1995 F/B/O P.G.F. Scurr By /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee By /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee Trust under Agreement of Anthony J. Petrocelli dated October 29, 1990 By /s/ D. George Harris ---------------------------------------- D. George Harris, Trustee By ________________________________________ Charles J. Cassata, Trustee Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Daniel G. Kilpatrick By /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee By /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee 52 Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Eleanor P. Kilpatrick By /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee By /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Jennifer C. Kilpatrick By /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee By /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Donald A. Kilpatrick By /s/ Donald G. Kilpatrick ---------------------------------------- Donald G. Kilpatrick, Trustee By /s/ Anthony J. Petrocelli ---------------------------------------- Anthony J. Petrocelli, Trustee 53 Schedule 1 Chase Manhattan Capital, L.P. Chase Venture Capital Massachusetts Mutual Life c/o Chase Manhattan Capital Associates, L.P. Insurance Company Corporation c/o Chase Capital Partners c/o Mr. Mark Ahmed 380 Madison Avenue, 12th Floor 380 Madison Avenue, 12th Floor Managing Director New York, NY 10017 New York, NY 10017 Securities Investment Division Mass Mutual 1295 State Street Springfield, MA 01111-0001 MassMutual Participation Mass Mutual Corporate Investors D. George Harris Investors c/o Mr. Mark Ahmed D. George Harris & Associates, Inc. c/o Mr. Mark Ahmed Managing Director 399 Park Avenue, 32nd floor Managing Director Securities Investment Division New York, NY 10022 Securities Investment Division Mass Mutual Mass Mutual 1295 State Street 1295 State Street Springfield, MA 01111-0001 Springfield, MA 01111-0001 Anthony J. Petrocelli Richard J. Donahue Donald G. Kilpatrick D. George Harris & Associates, Inc. D. George Harris & Associates, Inc. D. George Harris & Associates, Inc. 399 Park Avenue, 32nd floor 399 Park Avenue, 32nd floor 399 Park Avenue, 32nd floor New York, NY 10022 New York, NY 10022 New York, NY 10022 Richard J. Nick William J. Sichko Emanual J. DiTeresi D. George Harris & Associates, Inc. 9204 West 141st Street 13905 Flint 399 Park Avenue, 32nd floor Overland Park, KS 66221 Overland Park, KS 66221 New York, NY 10022 Matthew J. Dowd David Willetts Robert F. Clark D. George Harris & Associates, Inc. 1 Eldon Road 12740 Delmar Dr. 399 Park Avenue, 32nd floor Kensington Leawood, KS 66209 New York, NY 10022 London W8 5PU United Kingdom Keith E. Clark Susan E. Dey Daniel E. Richardson 9201 West 146th Pl. 9604 W. 125th St. 11621 Bluejacket Overland Park, KS 66221 Overland Park, KS 66213 Overland Park, KS 66210 Billy Whalen Max J. Reynolds Scott M. Randolph 13181 Hayes Ct. 2147 West 5025 South 14763 Eby Overland Park, KS 66223 Roy, UT 84067 Overland Park, KS 66221
Kevin Brophy Laurence A. Schulte Peter McConnell 399 South Pleasant Ave 8114 West 139th St. 38 Avenue Close Ridgewood, NY 07450 Overland Park, KS 66223 St. John's Wood London, NW8 6-A United Kingdom Gerald A. Gasparovich Michael R. Boyce Trust under Agreement of D. George 13004 West 128th Place 10600 Highland Lane Harris dated November 18, 1994 Overland Park, KS 66213 Olathe, KS 66061 F/B/O Robert Harris c/o D. George Harris & Associates, Inc. 399 Park Avenue, 32nd floor New York, NY 10022 Trust under Agreement of D. George Trust under Agreement of D. George Trust under Agreement of D. George Harris dated November 18, 1994 Harris dated November 18, 1994 Harris dated November 18, 1994 F/B/O Margaret Harris F/B/O Paige Coleman F/B/O Keith Coleman c/o D. George Harris & Associates, Inc. c/o D. George Harris & Associates, Inc. c/o D. George Harris & Associates, Inc. 399 Park Avenue, 32nd floor 399 Park Avenue, 32nd floor 399 Park Avenue, 32nd floor New York, NY 10022 New York, NY 10022 New York, NY 10022 Trust under Agreement of D. George Trust under Agreement of D. George Trust under Agreement of Anthony Harris dated November 18, 1994 Harris dated January 31, 1995 J. Petrocelli dated October 29, 1990 F/B/O Augustus Northridge F/B/O P.G.F. Scurr c/o D. George Harris & Associates, Inc. c/o D. George Harris & Associates, Inc. c/o D. George Harris & Associates, Inc. 399 Park Avenue, 32nd floor 399 Park Avenue, 32nd floor 399 Park Avenue, 32nd floor New York, NY 10022 New York, NY 10022 New York, NY 10022 Trust under Agreement of Donald G. Trust under Agreement Donald G. Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 Kilpatrick dated December 16, 1993 Kilpatrick dated December 16, 1993 F/B/O Daniel J. Kilpatrick F/B/O Eleanor P. Kilpatrick F/B/O Jennifer C. Kilpatrick c/o D. George Harris & Associates, Inc. c/o D. George Harris & Associates, Inc. c/o D. George Harris & Associates, Inc. 399 Park Avenue, 32nd floor 399 Park Avenue, 32nd floor 399 Park Avenue, 32nd floor New York, NY 10022 New York, NY 10022 New York, NY 10022 Trust under Agreement of Donald G. Kilpatrick dated December 16, 1993 F/B/O Douglas A. Kilpatrick c/o D. George Harris & Associates, Inc. 399 Park Avenue, 32nd floor New York, NY 10022 Donald P. Altland Earle H. Andrews Jerry D. Austin 705 Cherry Drive 15929 Short Hill Road 1433 Hamilton Blvd. Groesbeck, TX 76642 Purcellville, VA 20132 Hagerstown, MD 21742
2 Steven J. Babler David O. Bach H. William Bentgen 93 Hickory Hill 3555 East 5Th Road 249 Fairway Circle Eureka, MO 63025 Lasalle, IL 61301 Cross Junction, VA 22624 Gary E. Bockrath Larry A. Burkhart M. Ben Bushe 11411 Eastwood Court 402 S. Illinois Avenue 204 Man O'War Hagerstown, MD 21742 Martinsburg, WV 25401 Groesbeck, TX 76642 Robert B. Calamari Ronnie D. Conway George H. Didawick 1031 Breckinridge Lane 10920 Forest Trace Lane P. O. Box 615 Winchester, VA 22601 Glen Allen, VA 23060 Berkeley Springs, WV 25411 William P. Farrell Gregory S. Fell William L. Foutch 111 Winterberry Court 2004 Maplewood Drive 18710 Fairfield Road Winchester, VA 22602 Hagerstown, MD 21740 Hagerstown, MD 21742John John E. Friton Daniel N. Gerber Teddy D. Glennon 13003 Lance Circle 2143 Castlegreen Drive Route 4, Box 93 Hagerstown, MD 21742 Greencastle, PA 17225 Hedgesville, WV 25427-9316 Harvey S. Goldstein Richard E. Goodell Paul F. Guttmann 505 Victoria Lane Route 5, Box 250 Route 1, Box 246B Oswego, IL 60543 Hedgesville, WV 25427 Hedgesville, WV 25427 John W. Hammer James W. Holmes Richard Hunnisett 231 Jacques Haven Road 217 Green Acre Circle 14103 Barnhart Road Gaston, SC 29053 Lexington, SC 29073 Clear Spring, MD 21722 Jeffrey P. Jahn Mack D. Jones Clive M. Kelsall 1026 Lakeview Drive Route 3, Box 53 10241 Orleans Road NE Cross Junction, VA 22625 Thornton, TX 76687 Little Orleans, MD 21766 David A. Kistenfeger Cyrus W. Kreamer, Jr. Robert L. Krepps 1619 Dairy Lane Rt#l 6 Kilkenny Hill 15 Countryside Avenue Ottawa, IL 61350 Pacific, MO 63069 Ottawa, IL 61350 Raymond A. LeClair Gilberto Lopez Mark V. Lough 112 1/2 West Superior Street 307 Grantham Road 26 N. Ladow Avenue, Apt. 19D Ottawa, IL 61350 Irmo, SC 29063 Millville, NJ 08332 Matthew J. Lyman Robert Mang Larry D. Martin 155 Ashland Drive 49 Seely Pine Estates 173 Jefferson Place Winchester, VA 22603 Berkeley Springs, WV 25411 Columbia, SC 29212
3 John L. Mason Randall J. Massino Dale M. McFadden 400 Mawani Trail 1029 E. Court Street 708 W. Madison Berkeley Springs, WV 25411 Hennepin, IL 61327 Ottawa, IL 61350 Andrew L. Meyers John F. Miller Robert H. Morrow 5 Amblers Lane 11905 Sycamore Drive Route 1, Box 242 Honeywood Shenandoah Junction, WV 25442 Hagerstown, MD 21740 Hedgesville, WV 25427 Robert L. Oren Walter C. Pellish Roque A. Pullio Rt. 3, Box 5622 1501 W. Stephen Street 802 E. Yeagua Berryville, VA 22611 Martinsburg, WV 25401 Groesbeck, TX 76642 Gary A. Randolph Kimberly A. Ranft Lance D. Reed 1201 Willow Lane 434 Alverston Court 8235 South Oswego Sulphur, OK 73086 Ballwin, MO 63021 Tulsa, OK 74137 Patrick W. Reeser Gordon L. Rulong Jon P. Sheridan Route 1, Box 245 O 18901 Dover Drive 1901 Marsh Lane Hedgesville, WV 25427 Hagerstown, MD 21742 Ardmore, OK 73401 James A. Sinkowski Beverly G. Sykes, Jr. Jeffrey D. Thatcher 53 Westwood Drive Route 7, Box 12850 Route 2, Box 156 Groton, CT 06340 Berkeley Springs, WV 25411 Berkeley Springs, WV 25411 Michael L. Thompson Troy L. Trentham John A. Ulizio 177 Greenfield Drive 5211 Powers Ferry Road 19223 Old Ipswich Circle Winchester, VA 22603 Atlanta, GA 30327 Hagerstown, MD 21742 James S. Vaccari Les Van Alstyne, Jr. James A. Wagner 2245 Delaney Drive Rd 1, Box 6 2218 Shamrock Lane Ottawa, IL 61350 Huntingdon, PA 16652 Millville, NJ 08332 James D. Walker Ray K. Weiland William A. White 2002 Springdale Drive 714 Camelot Estates Drive 2111 Showers Lane Martinsburg, WV 25401 Hillsboro, MO 63050 Martinsburg, WV 25401 David R. Whitmarsh Janice M. Widmyer John H. Wilson 3475 Geiger Road 75 Michael Manor Rd. 135 10 Paradise Church Road Ida, MI 48140 Berkeley Springs, W 25411 Hagerstown, NM 21742 Stephen L. Yeich Eric K. Yildrim Richard J. Shearer 263 Hyatt 13316 Keener Road Route 4, Box 8930 Ruston, LA 71270 Hagerstown, MD 21742 Berkeley Springs, WV 25411
4 Schedule 2 Accounting Period Budgeted EBITDA ----------------- --------------- Fiscal Year Ending December 31, 1998 $31,715 Fiscal Year Ending December 31, 1999 $36,695 Fiscal Year Ending December 31, 2000 $40,642 Fiscal Year Ending December 31, 2001 $43,130 Fiscal Year Ending December 31, 2002 $45,400 Schedule 3 [Form of Restated Certificate] Schedule 4 DGHA Stockholders D. George Harris Anthony J. Petrocelli Richard J. Donahue Donald G. Kilpatrick Richard J. Nick Schedule 5 Non-Affiliated Stockholders Michael R. Boyce Peter McConnell Robert F. Clark Keith Clark Susan E. Day Daniel Richardson Billy Whalen Max Reynolds Scott Randolph Kevin F. X. Brophy Lawrence A. Schulte, Jr. Gerald A. Gasparovich William J. Sichko Emanuel J. DiTeresi Matthew J. Dowd David Willetts Schedule 6 Institutional Stockholders Chase Manhattan Capital, L.P. Chase Venture Capital Associates, L.P. Massachusetts Mutual Life Insurance Company Massmutual Participation Investors Massmutual Corporate Investors Gerlach & Co. Schedule 7 Form of Manager Repurchase Agreement Schedule 8 Manager Stockholders Donald P. Altland Larry D. Martin Earle H. Andrews John L. Mason Jerry D. Ausin Randall J. Massino Steven J. Babler Dale M. McFadden David O. Bach Andrew L. Meyers H. William Bentgen John F. Miller Gary E. Bockrath Robert H. Morrow Larry A. Burkhart Robert L. Oren M. Ben Bushe Walter C. Pellish Robert B. Calamari Roque A. Pullio Ronnie D. Conway Gary A. Randolph George H. Didawick Kimberly A. Ranft William P. Farrell Lance D. Reed Gregory S. Fell Patrick W. Reeser William L. Foutch Gordon L. Rulong John E. Friton Richard J. Shearer Daniel N. Gerber Jon P. Sheridan Teddy D. Glennon James A. Sinkowski Harvey S. Goldstein Beverly G. Sykes, Jr. Richard E. Goodell Jeffrey D. Thatcher Paul F. Guttmann Michael L. Thompson John W. Hammer Troy L. Trentham James W. Holmes John A. Ulizio Richard Hunnisett James S. Vaccari Jeffrey P. Jahn Les Van Alstyne, Jr. Mack D. Jones James A. Wagner Clive M. Kelsall James D. Walker David A. Kistenfeger Ray K. Weiland Cyrus W. Kreamer, Jr. William A. White Robert L. Krepps David R. Whitmarsh Raymond A. LeClair Janice M. Widmyer Gilberto Lopez John H. Wilson Mark V. Lough Stephen L. Yeich Matthew J. Lyman Eric K. Yildrim Robert Mang EX-10.2 56 AMENDED AND RESTATED MANAGEMENT SERVICES AGMT EXHIBIT 10.2 AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT (the "Agreement") dated as of October 1, 1998, among USS HOLDINGS, INC., a Delaware corporation ("USSH"), USS INTERMEDIATE HOLDCO, INC., a Delaware corporation ("USSIH"), U.S. SILICA COMPANY, a Delaware corporation ("Silica") (collectively, the "Companies", and individually a "Company"), and D. GEORGE HARRIS & ASSOCIATES, INC., a Delaware corporation ("DGHA"). WHEREAS, USSH, USSIH, USS Acquisition, Inc., a Delaware corporation ("USSA") and DGHA have entered into a Management Services Agreement dated as of February 9, 1996 (the "Old Agreement"); WHEREAS, USSA was merged with and into Silica on February 9, 1996. WHEREAS, each Company desires to continue to avail itself of DGHA's expertise and consequently has requested DGHA to continue to provide such expertise, from time to time, in rendering certain management services related to the business and affairs of such Company and its Subsidiaries and the review and analysis of certain financial and other transactions. WHEREAS, DGHA and the Companies agree that it is in their respective interests to enter into this Agreement whereby, for the consideration specified herein, DGHA shall provide such services to the Companies. WHEREAS, each Company and DGHA wish to amend in certain respects and restate the Old Agreement; NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the Companies and DGHA agree as follows: Section 1. Definitions. ----------- (a) Unless defined herein, capitalized terms used in this Agreement shall have the meanings ascribed to them in the Amended and Restated Stockholders Agreement dated as of the date hereof, as amended from time to time (the "Stockholders Agreement"), among USSH and the Stockholders. (b) The following capitalized terms used in this Agreement have the meanings ascribed to them below: "Actual EBITDA" shall be calculated at the end of each fiscal year, ------------- beginning with the fiscal year ending December 31, 1998, and shall mean the EBITDA of the Company for the twelve-month period ended on the last day of each fiscal year. "Budgeted EBITDA" shall be calculated at the end of each fiscal year, --------------- beginning with the fiscal year ending December 31, 1998, and shall mean for each fiscal year the EBITDA set forth opposite such fiscal year on Exhibit A. "EBITDA" shall have the meaning ascribed to it in the Credit Agreement ------ dated as of July 21, 1998, as amended from time to time, among Silica and the Lenders party thereto. "New Acquisition" means the acquisition of a business as a going concern, --------------- whether by asset acquisition, acquisition of capital stock or merger. (c) The use in this Agreement of the term "including" means "including, without limitation." The words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits, as the same may from time to time be amended or supplemented, and not to any particular section, subsection, paragraph, subparagraph or clause contained in this Agreement. All references to sections, schedules and exhibits mean the sections of this Agreement and the schedules and exhibits attached to this Agreement. (d) The title of and the section and paragraph headings in this Agreement are for convenience of reference only and shall not govern the interpretation of any of the terms or provisions of this Agreement. (e) The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require. Section 2. Retention of DGHA. ----------------- The Companies retain DGHA, and DGHA accepts such retention, upon the terms and conditions set forth in this Agreement. Section 3. Term. ---- (a) Subject to the provisions of Section 3(b), this Agreement shall commence on the date hereof and shall terminate on December 31, 2000 (the "Initial Term"); provided that upon the termination of the Initial Term this Agreement shall be automatically extended until terminated by USSH or DGHA by serving 9 months prior written notice upon the other.. (b) This Agreement shall automatically terminate with respect to (i) any Company and its Subsidiaries upon a sale of such Company to a person which is not an Affiliate of such Company (whether pursuant to a merger or consolidation, a sale of capital stock or all or substantially all of its assets) and (ii) all of the Companies in the event that (A) the Majority of the Institutional Stockholders have designated the Additional Institutional Directors pursuant to Section 2(b) of the Stockholders Agreement and USSH has provided written notice to DGHA of its desire to terminate this Agreement pursuant to this clause (ii)(A) of Section 3(b) or (B) the DGHA Stockholders and their respective Affiliates cease to own 50% or more of the Securities (other than the DGHA Restricted Shares) held by them on the date hereof. (c) This Agreement may be terminated at the option of USSH if neither D. George Harris nor Anthony J. Petrocelli is actively involved in the management of DGHA. 2 Section 4. Management Services. ------------------- (a) DGHA shall advise the Companies concerning such management matters as relate to proposed financial transactions, acquisitions and other senior management matters related to the Companies' business, administration and policies, in each case as the Companies shall reasonably and specifically request by way of notice to DGHA, which notice shall specify the services required of DGHA and shall include all background material necessary for DGHA to complete such services. DGHA shall not be required to devote any specified amount of time to any such written request and shall be required to devote only so much time to any such written request as DGHA shall, in its reasonable discretion, deem necessary to complete such services. Such consulting services shall, in DGHA's reasonable discretion, be rendered in person or by telephone or other communication. DGHA shall (i) use its reasonable efforts to deal effectively with all subjects submitted to it hereunder and (ii) endeavor to further, by performance of its services hereunder, the policies and objectives of the Companies. (b) DGHA shall perform all such services as an independent contractor to the Companies. DGHA is not an employee, agent or representative of any Company and has no authority to act for or to bind any Company without its prior written consent. (c) This Agreement shall in no way prohibit DGHA or any partner or employee thereof from engaging in other activities, whether or not competitive with any business of the Companies. Section 5. Compensation. ------------ (a) As consideration for DGHA's agreement to render the management services set forth in Section 4 and as compensation for any such services rendered by DGHA, the Companies shall pay DGHA (or one or more designees thereof) an annual fee (the "Annual Fee") of $500,000, which shall be subject to the adjustments set out in Sections 5(c) and (d). (b) The Annual Fee shall be paid for each fiscal year in equal monthly installments, payable in arrears. (c) Promptly after receipt by the Compensation Committee of the annual audited financial statements of the Companies for the preceding fiscal year, the Companies shall pay DGHA, or, if the result of the following calculation is a negative number, DGHA shall pay the Companies, an amount equal to the absolute value of: (i) the aggregate amount of compensation to be paid by the Companies to DGHA with respect to the preceding fiscal year as determined in accordance with Exhibit B based on the Actual EBITDA for such fiscal year compared to the Budgeted EBITDA for such fiscal year minus (ii) the aggregate amount of compensation actually paid by the Companies to DGHA with respect to the preceding fiscal year. Notwithstanding the foregoing, (x) subject to the following clause (y), any amount payable by DGHA to the Companies pursuant to Section 5(c) shall be paid by deducting such amount, in equal monthly installments through the end of the year in which any such amount is determined to be payable by DGHA, from the monthly installments payable by the Companies to 3 DGHA pursuant to Section 5(b), and (y) for any fiscal year during which this Agreement is terminated (and not renewed) pursuant to the terms hereof, (i) the Budgeted EBITDA for such fiscal year shall be prorated from the end of the immediately preceding fiscal year through the date of termination, (ii) all amounts otherwise payable as provided above shall be prorated from the end of the immediately preceding fiscal year through the date of termination and (iii) any amount payable by the Companies to DGHA or by DGHA to the Companies, as the case may be, pursuant to Section 5(c) shall be paid by the Companies or DGHA, as the case may be, notwithstanding any such termination, promptly after the financial statements of the Companies for the period from the end of the immediately preceding fiscal year through the date of termination become available. The Companies shall promptly prepare and make available such financial statements. (d) In the event of (i) any New Acquisition which is approved by the Requisite Stockholders pursuant to the Stockholders Agreement, this Agreement shall automatically be amended to increase the levels of aggregate compensation provided in Exhibit B hereto in such proportions as are necessary to reflect the increase resulting from such acquisition in the Budgeted EBITDA provided in Exhibit A hereto (as similarly adjusted), as such increase in the Budgeted EBITDA was submitted to the Requisite Stockholders in connection with the approval of such acquisition and (ii) any disposition by the Companies of the stock or assets of any Company or any Subsidiary thereof, this Agreement shall automatically be amended to decrease the levels of aggregate compensation provided in Exhibit B hereto in such proportions as are necessary to reflect the decrease (based upon the average annual EBITDA contribution of the disposed assets for the last 12 fiscal quarters immediately preceding such disposition) resulting from such disposition in the Budgeted EBITDA provided in Exhibit A hereto (as similarly adjusted). (e) All accounting determinations under this Agreement will be made in accordance with generally accepted accounting principles, consistently applied, as reasonably approved by the Compensation Committee. In the event of any dispute between the parties relating to any accounting determination or calculation hereunder, such dispute will be resolved by the Companies' independent accountants, whose written determination shall be final and binding on the parties hereto. (f) The Companies shall reimburse DGHA for all reasonable out-of- pocket travel and entertainment expenses incurred by DGHA in connection with the rendering of management services pursuant to this Agreement, provided that in any one year no more than $100,000 of such expenses not charged against a completed transaction shall be reimbursed. Section 6. Loans. ----- (a) At the request of DGHA, Silica shall provide to DGHA one or more interest-free loans of not more than $1 million in the aggregate per calendar year, throughout the term of this Agreement (the "Loans"). (b) The Loans shall mature and be payable as of the date of the consummation of an IRR Event. 4 (c) The Loans shall be guaranteed by the persons listed on Schedule 1 attached hereto (the "Guarantors") and in proportion with the percentages listed opposite such Guarantors' names on Schedule 1, which guarantees shall be several but not joint obligations of the Guarantor. A form of such guarantees is attached hereto as Exhibit C. Section 7. Acquisition Fee. --------------- Within 30 days after the closing of any New Acquisition, USSH shall pay to DGHA an acquisition fee equal to 1% (one percent) of the total purchase price, plus all third party indebtedness for borrowed money assumed by any Company or any Subsidiary of any Company, paid or payable, or otherwise to be distributed, directly or indirectly, by any Company or any Subsidiary of any Company in connection with such New Acquisition. Section 8. Notices. ------- All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed sufficient if personally delivered, sent by nationally-recognized overnight courier, by facsimile, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: if to DGHA, to: D. George Harris & Associates, Inc. 399 Park Avenue 32nd Floor New York, New York 10022 Attention: Anthony J. Petrocelli Telecopier: (212) 207-6450 Telephone: (212) 207-6405 if to the Companies: USS Holdings, Inc. c/o U.S. Silica Company P.O. Box 187 Berkeley Springs, WV 25411 Attention: President Telecopier: (304) 258-3500 Telephone: (304) 258-2500 5 with a copy to: Chase Venture Capital Associates, L.P. c/o Chase Capital Partners 380 Madison Avenue 12th Floor New York, NY 10017-2070 Attention: Timothy J. Walsh Telecopier: (212) 622-3755 Telephone: (212) 622-3054 or to such other address as the party to whom notice is to be given may have furnished to each other party in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of nationally- recognized overnight courier, on the next business day after the date when sent, (c) in the case of facsimile transmission, when received, and (d) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. Section 9. Benefits of Agreement. --------------------- This Agreement shall bind and inure to the benefit of any successors to or assigns of DGHA and the Companies; provided, however, that this Agreement may not be assigned by any party hereto without the prior written consent of the other parties. The obligations of the Companies hereunder shall be joint and several. Section 10. Governing Law. ------------- This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York (without giving effect to principles of conflicts of laws). Section 11. Entire Agreement; Amendments. ---------------------------- This Agreement contains the entire understanding of the parties with respect to its subject matter, and neither it nor any part of it may in any way be altered, amended, extended, waived, discharged or terminated except by a written agreement signed by each of the parties hereto. Section 12. Counterparts. ------------ This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 6 Section 13. Waivers. ------- Any party to this Agreement may, by written notice to the other parties, waive any provision of this Agreement. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. * * * * * 7 IN WITNESS WHEREOF, the parties have duly executed this Management Services Agreement as of the date first above written. USS HOLDINGS, INC. By: /s/ ------------------------ Name: Title: USS INTERMEDIATE HOLDCO, INC. By: /s/ ------------------------ Name: Title: U.S. SILICA COMPANY By: /s/ Richard E. Goodell ------------------------ Name: Title: D. GEORGE HARRIS & ASSOCIATES, INC. By: /s/ ------------------------ Name: Title: 8 EXHIBIT A --------- Fiscal Year EBITDA - ----------- ------ Fiscal Year Ending December 31, 1998 $30,986 Fiscal Year Ending December 31, 1999 33,222 Fiscal Year Ending December 31, 2000 35,607 EXHIBIT B --------- Aggregate For any fiscal year Compensation ------------------- ------------ Actual EBITDA equal to or greater than 118% of Budgeted EBITDA $804,570 Actual EBITDA equal to or greater than 116% of Budgeted EBITDA but less than 118% of Budgeted EBITDA $777,751 Actual EBITDA equal to or greater than 114% of Budgeted EBITDA but less than 116% of Budgeted EBITDA $750,932 Actual EBITDA equal to or greater than 112% of Budgeted EBITDA but less than 114% of Budgeted EBITDA $724,113 Actual EBITDA equal to or greater than 110% of Budgeted EBITDA but less than 112% of Budgeted EBITDA $697,294 Actual EBITDA equal to or greater than 108% of Budgeted EBITDA but less than 110% of Budgeted EBITDA $670,475 Actual EBITDA equal to or greater than 106% of Budgeted EBITDA but less than 108% of Budgeted EBITDA $643,656 Actual EBITDA equal to or greater than 104% of Budgeted EBITDA but less than 106% of Budgeted EBITDA $616,837 Actual EBITDA equal to or greater than 102% of Budgeted EBITDA but less than 104% of Budgeted EBITDA $590,018 Actual EBITDA equal to or greater than 100% of Budgeted EBITDA but less than 102% of Budgeted EBITDA $563,199 Aggregate For any fiscal year Compensation ------------------- ------------ Actual EBITDA equal to or greater than 98% of Budgeted EBITDA but less than 100% of Budgeted EBITDA $536,380 Actual EBITDA equal to or greater than 96% of Budgeted EBITDA but less than 98% of Budgeted EBITDA $509,561 Actual EBITDA equal to or greater than 94% of Budgeted EBITDA but less than 96% of Budgeted EBITDA $482,742 Actual EBITDA equal to or greater than 92% of Budgeted EBITDA but less than 94% of Budgeted EBITDA $455,923 Actual EBITDA equal to or greater than 90% of Budgeted EBITDA but less than 92% of Budgeted EBITDA $429,104 Actual EBITDA equal to or greater than 88% of Budgeted EBITDA but less than 90% of Budgeted EBITDA $402,285 Actual EBITDA equal to or greater than 86% of Budgeted EBITDA but less than 88% of Budgeted EBITDA $375,466 Actual EBITDA equal to or greater than 84% of Budgeted EBITDA but less than 86% of Budgeted EBITDA $348,647 Actual EBITDA equal to or greater than 82% of Budgeted EBITDA but less than 84% of Budgeted EBITDA $321,828 Actual EBITDA equal to or greater than 80% of Budgeted EBITDA but less than 82% of Budgeted EBITDA $295,009 Actual EBITDA less than 80% of Budgeted EBITDA $268,190 EX-10.2.1 57 ASSIGNMENT AND ASSUMPTION AGREEMENT EXHIBIT 10.2.1 ASSIGNMENT AND ASSUMPTION AGREEMENT 1. For and in consideration of the payment by D. George Harris & Associates, LLC, a Delaware limited liability company ("New DGHA") of one dollar ($1.00), D. George Harris & Associates, Inc., a Delaware corporation ("Old DGHA") does hereby sell, assign and transfer to New DGHA all of its rights, title and interest in, to and under the Amended and Restated Management Services Agreement, dated as of October 6, 1998, among USS Holdings, Inc., a Delaware Corporation ("Holdings"), Better Minerals & Aggregates Company (formerly USS Intermediate Holdco, Inc. ("Holdco")), a Delaware corporation ("Better Minerals"), U.S. Silica Company, a Delaware corporation ("Silica") and Old DGHA (the "Management Agreement"). New DGHA hereby absolutely and irrevocably assumes and is, and shall be, liable and solely responsible for any and all liabilities and obligations of Old DGHA in, to and under to the Management Agreement. 2. For and in consideration of the payment by BMAC Holdings, Inc., a Delaware corporation ("BMAC") of one dollar ($1.00), Better Minerals does hereby sell, assign and transfer to BMAC all of its rights, title and interest in, to and under the Management Agreement. BMAC hereby absolutely and irrevocably assumes and is, and shall be, liable and solely responsible for any and all liabilities and obligations of Better Minerals (as Holdco) in, to and under to the Management Agreement. 3. For and in consideration of the payment by Better Minerals of one dollar ($1.00), Silica does hereby sell, assign and transfer to Better Minerals all of its rights, title and interest in, to and under the Management Agreement. Better Minerals hereby absolutely and irrevocably assumes and is, and shall be, liable and solely responsible for any and all liabilities and obligations of Silica in, to and under to the Management Agreement. 4. Each party's signature below shall constitute such party's prior written consent to all assignments and assumptions herein, pursuant to Section 9 of the Management Agreement. 5. This Assignment and Assumption Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its principles of conflicts of laws. IN WITNESS WHEREOF, the parties hereby have caused this Assignment and Assumption Agreement to be executed as of this 30th day of September, 1999. D. GEORGE HARRIS & ASSOCIATES, INC. By: /s/ ____________________________________ Name: D. GEORGE HARRIS & ASSOCIATES, LLC By: /s/ -------------------------------------- Name: USS HOLDINGS, INC. By: /s/ -------------------------------------- Name: USS INTERMEDIATE HOLDCO, INC. By: /s/ John A. Ulizio -------------------------------------- Name: U.S. SILICA COMPANY By: /s/ -------------------------------------- Name: BMAC HOLDINGS, INC. By: /s/ John A. Ulizio -------------------------------------- Name: BETTER MINERALS & AGGREGATES COMPANY By: /s/ -------------------------------------- Name: 2 EX-10.3 58 AMENDED AND RESTATED TAX SHARING AGREEMENT EXHIBIT 10.3 TAX SHARING AGREEMENT --------------------- AMENDED AND RESTATED AGREEMENT dated as of October 1, 1999 by and among USS Holdings, Inc. ("USSH"), USS Intermediate Holdco, Inc. ("Holdco") and the other ---- ------ signatories hereto (the "Subsidiaries"). ------------ WHEREAS USSH, Holdco and certain of the Subsidiaries are parties to a Tax Sharing Agreement dated February 9, 1996, as amended, and seek to further amend such agreement; and WHEREAS, USSH is the common parent of an affiliated group of corporations (an "Affiliated Group"), as defined in Section 1504(a) of the Internal Revenue ---------------- Code of 1986, as amended (the "Code"); and ---- WHEREAS, USSH will file a United States consolidated federal income tax return (a "Consolidated Return") with members of the Affiliated Group of which ------------------- USSH is the common parent (the "USSH Consolidated Group"), ----------------------- NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto agree as follows: 1. USSH shall file a Consolidated Return for each taxable period for which this Agreement is in effect and for which the USSH Consolidated Group remains in existence. 2. (a) Subject to Section 4, Holdco shall pay to USSH with respect to each taxable year during which Holdco is a member of the USSH Consolidated Group an amount equal to the Holdco Tax Amount for such year. (b) The term "Holdco Tax Amount" shall mean an amount equal to the ----------------- federal income tax liability that Holdco would have incurred for a taxable year had Holdco filed a Consolidated Return that included (i) Holdco as common parent and (ii) those of Holdco's subsidiaries that would be members of an Affiliated Group having Holdco as the common parent (the "Holdco Subgroup"). For purposes --------------- of computing the Holdco Tax Amount for a taxable year, the Holdco Subgroup shall take into account all items of gain, income, deductions, losses, credits, carryovers of losses and credits (including the credit calculated under Code Section 53, if any) from prior taxable years (taking into account any actual federal income tax returns (whether separate returns or Consolidated Returns) filed by members of the Holdco Subgroup for a prior taxable year of such member), and all other tax attributes of the Holdco Subgroup, which attributes may be subject to limitations under the Code and applicable Treasury Regulations, that would have been taken into account had the Holdco Subgroup actually filed a Consolidated Return. Without limiting the generality of the foregoing, computation of the Holdco Tax Amount for any taxable year shall take into account and compensate the Holdco Subgroup for any deductions, losses, credits and carryovers of losses and credits generated by it (and that were utilized by the USSH Consolidated Group) at the time such deductions, losses or credits could have been used by the Holdco Subgroup to reduce its federal income tax liability (had the Holdco Subgroup actually filed a Consolidated Return). (c) For purposes of this Agreement, "federal income tax" shall include, but not be limited to, all federal taxes on income (including any tax imposed under Code Section 55) and any applicable interest, penalties or additions to tax. 3. If the Holdco Tax Amount for a taxable year is adjusted after the initial Consolidated Return of the USSH Consolidated Group has been filed (whether as a result of an amended return, a claim for refund, an audit by the Internal Revenue Service ("IRS"), or otherwise), then the amounts calculated under Section 2(a) shall be recomputed to reflect such adjustments. Subject to Section 4, Holdco shall make a payment of any resulting additional federal income tax to USSH or USSH shall make a payment of any resulting federal income tax refund to Holdco. 4. USSH shall make the computations under Section 2 and 3 in a reasonable manner. With respect to computations under Section 2, estimated federal income tax payments by Holdco shall be made no later than three (3) business days prior to the time USSH is required to make estimated federal income tax payments to the IRS, and final settlements for a taxable year shall be made between USSH and Holdco no later than three (3) business days prior to the filing of the Consolidated Return of the USSH Consolidated Group for such taxable year. With respect to computations under Section 3, payments determined to be due to USSH or Holdco shall be paid within fifteen (15) business days after the relevant federal income tax return (or amended return) or other document reflecting such adjustment is filed or executed; provided that, in no ------------- event shall USSH be required to make any actual payment to Holdco with respect to a refund until USSH actually receives such refund (or actually receives the benefit of such a refund through the use of a credit or otherwise), and provided -------- further that, if the Holdco Subgroup for any taxable year has a loss or credit - ------------ which could be carried back to and which would reduce the Holdco Tax Amount (as adjusted) for any earlier taxable year for which the Holdco Subgroup was included in the USSH Consolidated Group, then USSH shall pay to Holdco on the date the USSH Consolidated Group Consolidated Return is actually filed for such taxable year the amount by which the Holdco Tax Amount in such earlier taxable year is reduced by reason of such carryback (or, to the extent that USSH must file a claim for refund to recoup such amount, the date that USSH actually receives such refund (or actually receives the benefit of such a refund through the use of a credit or otherwise)). 5. The principles of this Agreement shall also apply to any consolidated, combined or unitary state or local income tax return that includes USSH and Holdco (or one or more of the members of the Holdco Subgroup). 6. This Agreement shall fix the liability between USSH and Holdco as to the matters covered herein, notwithstanding that (i) the Agreement or any part thereof is not controlling for federal income tax or other purposes, including, but not limited to, the computation of earnings and profits for federal income tax purposes, or (ii) USSH and 2 corporations (other than Holdco Subgroup members) which are now or may become members of the USSH Consolidated Group may enter into different agreements for the allocation of consolidated federal income tax liability to such other corporations. 7. This Agreement shall apply to the taxable year of the USSH Consolidated Group ending in 1996 and all subsequent taxable years during which members of the Holdco Subgroup, as it may exist from time to time, are members of the USSH Consolidated Group. This Agreement shall supersede any tax sharing agreements or arrangements with respect to USSH, Holdco or any Subsidiary, and each of USSH, Holdco, and the Subsidiaries agree that each such agreement shall be terminated hereby and be of no further force and effect. 8. (a) This Agreement shall be binding upon and inure to the benefit of any successors or assigns of any of the parties hereto, to the same extent as if the successor had been an original party to the Agreement. (b) No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. (c) Any alteration, modification, addition, deletion, or other change in the consolidated federal income tax return provisions of the Code or the Treasury Regulations thereunder shall automatically be applicable to this Agreement mutatis mutandis. ------- -------- (d) In the event that any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of any such provision in every other respect and the remaining provisions of this Agreement shall not be in any way impaired. (e) This Agreement may be executed in one or more counterparts. Each person that becomes a member of the Holdco Subgroup after the date hereof shall become a party hereto by executing a counterpart hereof and delivering the same to USSH. Each such counterpart shall be deemed an original, but all counterparts together shall constitute one and the same instrument. (f) This Agreement shall be governed by the laws of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above. USS HOLDINGS, INC. By: /s/ Richard J. Nick --------------------------------- Name: Richard J. Nick Title: Vice President BMAC HOLDINGS, INC. By: /s/ Richard J. Nick --------------------------------- Name: Richard J. Nick Title: Vice President BETTER MINERALS & AGGREGATES COMPANY By: /s/ Richard J. Nick --------------------------------- Name: Richard J. Nick Title: Vice President U.S. SILICA COMPANY By: /s/ Richard J. Nick --------------------------------- Name: Richard J. Nick Title: Vice President THE FULTON LAND AND TIMBER COMPANY By: /s/ Richard J. Nick --------------------------------- Name: Richard J. Nick Title: Vice President OTTAWA SILICA COMPANY By: /s/ John A. Ulizio -------------------------------- Name: John A. Ulizio Title: Secretary PENNSYLVANIA GLASS SAND CORPORATION By: /s/ Richard J. Nick -------------------------------- Name: Richard J. Nick Title: Treasurer BETTER MATERIALS CORPORATION By: /s/ Richard J. Nick -------------------------------- Name: Richard J. Nick Title: Vice President BMC TRUCKING, INC. By: /s/ Richard J. Nick -------------------------------- Name: Richard J. Nick Title: Vice President BUCKS COUNTY CRUSHED STONE COMPANY By: /s/ Richard J. Nick -------------------------------- Name: Richard J. Nick Title: Vice President CHIPPEWA FARMS CORPORATION By: /s/ Richard J. Nick ------------------------- Name: Richard J. Nick Title: Vice President SHORE STONE COMPANY, INC. By: /s/ Richard J. Nick ------------------------- Name: Richard J. Nick Title: Vice President GEORGE F. PETTINOS, INC. By: /s/ Richard J. Nick ------------------------- Name: Richard J. Nick Title: Vice President ELLEN JAY, INC. By: /s/ Richard J. Nick ------------------------- Name: Richard J. Nick Title: Vice President COMMERCIAL STONE CO., INC. By: /s/ Richard J. Nick ------------------------- Name: Richard J. Nick Title: Assistant Secretary EX-10.4 59 CREDIT AGREEMENT, DATED AS OF SEPTEMBER 30, 1999 EXHIBIT 10.4 $230,000,000 CREDIT AGREEMENT Dated as of September 30, 1999 Among BMAC HOLDINGS, INC., as Parent Guarantor, ------------------- BETTER MINERALS & AGGREGATES COMPANY, as Borrower, ----------- GEORGE F. PETTINOS (CANADA) LIMITED, as Canadian Borrower, --------------------- and THE INITIAL LENDERS NAMED HEREIN and BANQUE NATIONALE DE PARIS, as Agent, Swing Line Bank and Initial Issuing Bank -------------------------------------------------- ______________________________________ CHASE SECURITIES INC., as Lead Arranger, Book Manager, Syndication Agent and Documentation Agent T A B L E O F C O N T E N T S
Section Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01. Certain Defined Terms............................................................................ 1 1.02. Computation of Time Periods; Other Definitional Provisions....................................... 28 1.03. Accounting Terms................................................................................. 28 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT 2.01. The Advances and the Letters of Credit........................................................... 28 2.02. Making the Advances.............................................................................. 30 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit............................... 32 2.04. Drawings of Bankers' Acceptances................................................................. 33 2.05. Repayment of Advances............................................................................ 36 2.06. Termination or Reduction of the Commitments...................................................... 38 2.07. Prepayments...................................................................................... 40 2.08. Interest......................................................................................... 43 2.09. Fees............................................................................................. 45 2.10. Conversion of Advances........................................................................... 46 2.11. Renewal and Conversion of Bankers' Acceptances................................................... 47 2.12. Increased Costs, Etc............................................................................. 49 2.13. Payments and Computations........................................................................ 52 2.14. Taxes............................................................................................ 53 2.15. Sharing of Payments, Etc......................................................................... 56 2.16. Use of Proceeds.................................................................................. 57 2.17. Evidence of Debt................................................................................. 58 2.18. Replacement of Lenders........................................................................... 58 ARTICLE III CONDITIONS OF LENDING 3.01. Conditions Precedent to Initial Extension of Credit.............................................. 59 3.02. Conditions Precedent to Each Borrowing, Drawing and Issuance..................................... 66 3.03. Determinations Under Section 3.01................................................................ 67 ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrower.................................................. 67 ARTICLE V COVENANTS OF THE BORROWER OF THE CANADIAN BORROWER AND OF THE PARENT GUARANTOR 5.01. Affirmative Covenants........................................................................... 73 5.02. Negative Covenants.............................................................................. 77 5.03. Reporting Requirements.......................................................................... 86 5.04. Financial Covenants............................................................................. 89 5.05. Covenants of the Canadian Borrower.............................................................. 92 ARTICLE VI EVENTS OF DEFAULT 6.01. Events of Default............................................................................... 92 6.02. Actions in Respect of the Letters of Credit and Bankers' Acceptances upon Default............... 95 ARTICLE VII THE AGENT 7.01. Authorization and Action........................................................................ 95 7.02. Agent's Reliance, Etc........................................................................... 96 7.03. BNP and Affiliates.............................................................................. 96 7.04. Lender Party Credit Decision.................................................................... 96 7.05. Indemnification................................................................................. 97 7.06. Successor Agents................................................................................ 98 ARTICLE VIII MISCELLANEOUS 8.01. Amendments, Etc................................................................................. 99 8.02. Notices, Etc.................................................................................... 100 8.03. No Waiver; Remedies............................................................................. 100 8.04. Costs and Expenses.............................................................................. 100 8.05. Right of Set-off................................................................................ 102 8.06. Binding Effect.................................................................................. 102 8.07. Assignments and Participations.................................................................. 103 8.08. Execution in Counterparts....................................................................... 105 8.09. No Liability of the Issuing Bank................................................................ 105 8.10. Confidentiality................................................................................. 106 8.11. Jurisdiction, Etc............................................................................... 106 8.12. Judgment........................................................................................ 106 8.13. Governing Law................................................................................... 107
8.14. Waiver of Jury Trial................................ 107 8.15. Power of Attorney................................... 107
SCHEDULES Schedule I - Commitments and Applicable Lending Offices Schedule II - Subsidiary Guarantors Schedule 1.01 - Existing Letters of Credit Schedule 3.01(f) - Surviving Debt Schedule 3.01(g)(vii) - Secretary of State Certificates Schedule 3.01(g)(x)(A) - UCC Financing Statement Filings Schedule 3.01(g)(x)(B) - Lien Searches Schedule 3.01(g)(xiv)(B) - Properties Requiring Boundary Surveys Schedule 3.01(g)(xiv)(C) - Properties Requiring Survey Affidavits Schedule 3.01(g)(xxii) - Local Counsel Schedule 3.01(g)(xxv) - Locations of Leased Properties Requiring Landlord Consents Schedule 4.01(a) - Share Ownership Schedule 4.01(b) - Subsidiaries Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and Filings Schedule 4.01(l) - Plans, Multiemployer Plans and Welfare Plans Schedule 4.01(t)(i) - Environmental Laws and Permits Schedule 4.01(t)(ii) - Environmental Action Schedule 4.01(u)(i) - Environmental Listing Schedule 4.01(u)(ii) - Storage Tanks Schedule 4.01(u)(iii) - Asbestos Schedule 4.01(u)(iv) - Hazardous Material Schedule 4.01(z) - Open Years Schedule 4.01(aa) - Excluded Federal Tax Liability Schedule 4.01(bb) - Excluded State, Local and Foreign Tax Liability Schedule 4.01(ee) - Existing Debt Schedule 4.01(gg) - Material Owned Real Property Schedule 4.01(hh) - Material Leased Real Property Schedule 4.01(ii) - Investments Schedule 4.01(jj) - Intellectual Property iv Schedule 5.01(m) - Properties Requiring Post-Closing Surveys Schedule 5.02(a)(iii) - Existing Liens Schedule 5.02(e)(v) - Disposable Real Property EXHIBITS Exhibit A-1 - Form of Term A Note Exhibit A-2 - Form of Term B Note Exhibit A-3 - Form of Working Capital Note Exhibit A-4 - Form of Acquisition Note Exhibit A-5 - Form of Canadian Borrower Note Exhibit A-6 - Form of Generic Draft Exhibit B-1 - Form of Notice of Borrowing Exhibit B-2 - Form of Notice of Drawing Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Security Agreement Exhibit E - Form of Parent Guarantor Security Agreement Exhibit F - Form of Intellectual Property Security Agreement Exhibit G - Form of Canadian Security Agreement Exhibit H - Form of Parent Guaranty Exhibit I - Form of Subsidiary Guaranty Exhibit J - Form of Mortgage Exhibit K - [Intentionally Omitted] Exhibit L-1 - Form of Opinion of Counsel for the Borrower, the Parent Guarantor and the Subsidiary Guarantors Exhibit L-2 - Form of Opinion of Local Counsel to the Borrower Exhibit L-3 - Form of Opinion of Canadian Counsel to the Canadian Borrower Exhibit M-1 - Form of Parent Guarantor Solvency Certificate with Respect to a Permitted Acquisition Exhibit M-2 - Form of Parent Guarantor Solvency Certificate with Respect to the Acquisition v Exhibit M-3 - Form of Parent Guarantor Solvency Certificate with Respect to an Acquisition Borrowing Exhibit N-1 - Form of Borrower Intercompany Note Exhibit N-2 - Form of Subsidiary Intercompany Note Exhibit O - Form of Canadian Borrower Intercompany Note CREDIT AGREEMENT CREDIT AGREEMENT dated as of September 30, 1999 (this "Agreement"), among BMAC Holdings, Inc., a Delaware corporation (the "Parent Guarantor"), ---------------- Better Minerals & Aggregates Company, a Delaware corporation formerly known as "USS Intermediate Holdco, Inc." (the "Borrower"), George F. Pettinos (Canada) -------- Limited, a corporation organized and existing under the laws of Ontario, Canada (the "Canadian Borrower"), the banks, financial institutions and other ----------------- institutional lenders listed on the signature pages hereof as the Initial Lenders (the "Initial Lenders"), and Banque Nationale de Paris ("BNP"), as the --------------- --- Initial Issuing Bank (the "Initial Issuing Bank"), as the swing line bank (the -------------------- "Swing Line Bank") and as agent (together with any successor appointed pursuant --------------- to Article VII, the "Agent") for the Lender Parties (as hereinafter defined). ----- PRELIMINARY STATEMENTS: (1) The Borrower has requested that the Lender Parties make available to the Borrower and the Canadian Borrower the Facilities (as hereinafter defined) (a) to finance the acquisition (the "Acquisition") by the Borrower, ----------- directly or indirectly, of (i) all of the issued and outstanding capital stock of Commercial Stone Co. Inc., a Pennsylvania corporation ("CSC"), (ii) all the outstanding partnership interests in Commercial Aggregates Transportation and Sales, L.P., a Pennsylvania limited partnership ("CATS"), and (iii) certain real property (collectively with CSC and CATS, the "Acquired Businesses"), all ------------------- pursuant to the Purchase Agreement (as hereinafter defined), (b) to refinance certain Existing Debt, (c) to pay transaction fees and expenses, (d) to provide for working capital for the Borrower and the Canadian Borrower, (e) to finance the purchase of Permitted Acquisitions and (f) for other general corporate purposes permitted under this Agreement. (2) The Lender Parties are willing to provide the Facilities upon terms and conditions provided herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby 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): "Acquired Businesses" has the meaning specified in the Preliminary ------------------- Statements hereto. "Acquired EBITDA" means, with respect to any Acquired Entity or --------------- Business or any Sold Entity or Business for any period, the EBITDA of such Entity or Business for such period. "Acquired Entity or Business" has the meaning specified in the --------------------------- definition of the term "Adjusted EBITDA". --------------- "Acquisition" has the meaning specified in the Preliminary Statements ----------- hereto. "Acquisition Advance" has the meaning specified in Section 2.01(e). ------------------- "Acquisition Borrowing" means a borrowing consisting of simultaneous --------------------- Acquisition Advances of the same Type made by the Acquisition Lenders, made, converted or continued on the same date and, in the case of Eurodollar Rate Advances, as to which a single Interest Period is in effect. "Acquisition Commitment" means, with respect to any Acquisition Lender ---------------------- at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Acquisition Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, the amount set forth for such Lender in the Register maintained by the Agent pursuant to Section 8.07(d) as such Lender's "Acquisition Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Acquisition Facility" means, at any time, the aggregate amount of the -------------------- Acquisition Lenders' Acquisition Commitments at such time. "Acquisition Lender" means any Lender that has an Acquisition ------------------ Commitment. "Acquisition Note" means a promissory note of the Borrower payable to ---------------- the order of any Acquisition Lender, in substantially the form of Exhibit A-4 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from the Acquisition Advances made by such Lender, to the extent required to be issued pursuant to Section 2.17. "Acquisition Reduction Amount" has the meaning specified in Section ---------------------------- 2.07(b)(vi). "Advance" means a Term Advance, a Working Capital Advance, an ------- Acquisition Advance, a Swing Line Advance, a Canadian Borrower Advance or a Letter of Credit Advance. "Adjusted EBITDA" means, with respect to any Person for any period, --------------- EBITDA of such Person for such period, calculated by (a) including in the determination thereof 3 the Acquired EBITDA of any other Person, property, business or asset acquired during such period pursuant to a transaction permitted under Section 5.02(f) and not subsequently sold, transferred or otherwise disposed of during such period to the extent acquired by such Person or any of its Subsidiaries during such period (each such Person, property, business or asset acquired and not subsequently so disposed of, an "Acquired Entity or Business"), based on the actual Acquired EBITDA of --------------------------- such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition) and (b) excluding in the determination thereof the Acquired EBITDA of any Person, property, business or asset sold, transferred or otherwise disposed of by such Person or any of its Subsidiaries during such period (each such Person, property, business or asset so sold or disposed of, a "Sold Entity or Business") ----------------------- based on the actual Acquired EBITDA of such Sold Entity or Business for such period (including the portion thereof occurring prior to such sale, transfer or disposition). "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 5% 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, provided that the term "Affiliate", -------- as to The Chase Manhattan Bank, shall be deemed not to include Chase Capital. "Agent" has the meaning specified in the recital of parties to this ----- Agreement. "Agent's Account" means (a) in the case of Advances (other than --------------- Canadian Borrower Advances), the account of the Agent maintained by the Agent at the Federal Reserve Bank of New York, 33 Liberty Street, New York, New York 10048, ABA No. 026007689, for further credit to Account No. 750420-701-03 or such other account maintained by the Agent and designated by the Agent in a written notice to the Lender Parties and the Borrower, and (b) in the case of any Canadian Borrower Advance, the account of the Sub-Agent designated in writing from time to time by the Agent to the Canadian Borrower and the Canadian Lenders for such purpose. "Annualization Factor" means a factor the numerator of which is the -------------------- number 365 and the denominator of which is the number of days in the Rolling Period. "Applicable Borrower" means (a) with respect to the Term A Facility, ------------------- the Term B Facility, the Working Capital Facility, the Acquisition Facility, the Swing Line Facility or the Letter of Credit Facility or any Advances or Borrowings thereunder, the Borrower and 4 (b) with respect to the Canadian Facility or any Advances, Drawings or Borrowings thereunder, the Canadian Borrower. "Applicable Lending Office" means (a) in the case of any Advances ------------------------- (other than a Canadian Borrower Advance) and with respect to each Lender Party, such Lender Party's Domestic Lending Office in the case of a Base Rate Advance, such Lender Party's Eurodollar Lending Office in the case of a Eurodollar Rate Advance and (b) in the case of any Canadian Borrower Advance, each Canadian Lender's Canadian Domestic Lending Office. "Applicable Margin", with respect to Advances under the Term A ----------------- Facility, the Working Capital Facility, the Acquisition Facility and the Canadian Facility, Bankers' Acceptances or commitment fees under the Working Capital Facility or the Acquisition Facility, as the case may be, means the applicable percentage per annum determined by reference to the ratio of (i) Funded Debt as of the last day of the most recently ended fiscal quarter to (ii) Consolidated EBITDA of the Borrower and its Subsidiaries for the four fiscal quarters most recently ended prior to the start of such period, as determined pursuant to the financial statements most recently delivered to the Agent at the end of each fiscal quarter, as the case may be, as set forth below:
======================================================================================================================== Eurodollar Rate Base Rate Advances Advances under under the Term Applicable Working the Term A Canadian A Facility, the Margin with Capital Acquisition Funded Debt to Facility, the Prime Working respect to Facility Facility EBITDA Ratio Working Capital Rate Capital Facility Bankers' Commitment Commitment Facility and the Advances and the Acceptances Fees Fees Acquisition Acquisition Facility Facility ------------------------------------------------------------------------------------------------------------------------ Level I ------- greater than 4.50 to 1.00 2.00% 2.50% 3.00% 4.25% 0.50% 0.75% ------------------------------------------------------------------------------------------------------------------------ Level II -------- less than or equal to 4.50 to 1.00 but greater than 4.25 to 1.00 1.75% 2.25% 2.75% 4.00% 0.50% 0.75% ------------------------------------------------------------------------------------------------------------------------ Level III --------- less than or equal to 4.25 to 1.00 but greater than 1.50% 2.00% 2.50% 3.75% 0.50% 0.75%
5 ---------------------------------------------------------------------------------------------------------------------- than 4.00 to 1.00 ---------------------------------------------------------------------------------------------------------------------- Level IV -------- less than or equal to 4.00 to 1.00 but greater than 3.75 to 1.00 1.25% 1.75% 2.25% 3.50% 0.375% 0.50% ----------------------------------------------------------------------------------------------------------------------- Level V ------- less than or equal to 3.75 to 1.00 1.00% 1.50% 2.00% 3.25% 0.375% 0.50% ========================================================================================================================
provided that (a) from the date of the Initial Extension of Credit through -------- and including March 31, 2000, the Applicable Margin shall at all times be the Level I Applicable Margin referred to above, (b) no change in the Applicable Margin shall be effective until five Business Days after the date on which the Agent receives financial statements at the end of each fiscal quarter, and (c) if the Borrower has not submitted to the Agent the information described in clause (b) of this proviso as and when required, ------- the Applicable Margin shall be the Level I Applicable Margin for so long as such information described in clause (b) of this proviso has not been ------- received by the Agent. "Appropriate Lender" means, at any time, with respect to (a) any of ------------------ the Term A, Term B, Working Capital, Canadian or Acquisition Facilities, a Lender that has a Commitment with respect to such Facility at such time, (b) the Letter of Credit Facility, (i) any Issuing Bank and (ii) if the other Working Capital Lenders have made Letter of Credit Advances pursuant to Section 2.03(c) that are outstanding at such time, each such other Working Capital Lender and (c) the Swing Line Facility, (i) the Swing Line Bank and (ii) if the other Working Capital Lenders have made Swing Line Advances pursuant to Section 2.02(b) that are outstanding at such time, each such other Working Capital Lender. "Assignment and Acceptance" means an assignment and acceptance entered ------------------------- into by a Lender Party and an Eligible Assignee, and accepted by the Agent, in accordance with Section 8.07 and in substantially the form of Exhibit C hereto. "Available Amount" of any Letter of Credit means, at any time, the ---------------- maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing). "BA Lending Office" means, with respect to each Canadian Lender, the ----------------- office of such Lender set forth as its "BA 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 6 office of such Lender in Canada as such Lender may from time to time specify to the Canadian Borrower and the Agent for such purpose. "BA Rate" means, for all Bankers' Acceptances comprising part of the ------- same Drawing to be purchased by a Canadian Lender, the average rate (calculated on an annual basis of a year of 365 days or 366 Days, as the case may be, and rounded up to the nearest multiple of 1/4 of 1%, if such average is not such a multiple) for Canadian Dollar bankers' acceptances having a comparable term that appears on the Reuters Screen CDOR Page (or such other page as is a replacement page for such bankers' acceptances) at 10:00 A.M. (Toronto time) or, if such rate is not available at such time, the applicable discount rate in respect of such Bankers' Acceptances shall be the discount rate (calculated on an annual basis of 365 days or 366 days, as the case may be), quoted by the Sub-Agent at 9:30 A.M. (Toronto time) on the date of such Drawing as the discount rate at which the Sub- Agent would purchase, on such date, its own bankers' acceptances having an aggregate Face Amount equal to and with a term to maturity the same as the Bankers' Acceptances to be acquired by such Canadian Lender as part of such Drawing. "Bankers' Acceptance" has the meaning specified in Section 2.01(d). ------------------- "Bank Hedge Agreement" means any Hedge Agreement required or permitted -------------------- under Article V that is entered into by and between a Loan Party and any Hedge Bank. "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 higher of: (a) the rate of interest announced publicly by BNP in New York, New York, from time to time, as its prime rate (and such term shall not be construed to be its best or most favorable rate); and (b) 1/2 of one percent per annum above the Federal Funds Rate. "Base Rate Advance" means an Advance that bears interest as provided ----------------- in Section 2.08(b)(i). "BNP" has the meaning specified in the recital of parties to this --- Agreement. "Borrower" has the meaning specified in the recital of parties to this -------- Agreement. "Borrower's Account" means (a) with respect to the Borrower, the ------------------ account of such Borrower maintained by the Borrower with BNP at its office at 499 Park Avenue, New York, New York 10022, Account No. 200877-001-91, or such other account as the Borrower and the Agent may from time to time designate as such "Borrower's Account", 7 and (b) with respect to the Canadian Borrower, the account of such Canadian Borrower maintained by the Canadian Borrower with the Sub-Agent at its office at 121 King Street West, Suite 2130, Toronto M5H 3T9, Account No. 03-32551, or such other account as the Canadian Borrower and the Agent may from time to time designate as such "Borrower's Account". "Borrowing" means a Term Borrowing, a Working Capital Borrowing, an --------- Acquisition Borrowing, a Canadian Borrowing or a Swing Line 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, on which dealings are carried on in the London interbank market. "Business Plan" means the business plan of the Borrower which shall be ------------- in form and substance reasonably satisfactory to the Agent (including projected balance sheets, income, stockholders' equity and cash flow statements on a monthly basis for the Fiscal Year following such Fiscal Year then ended). "Canadian Borrower" has the meaning specified in the recital of ----------------- parties to this Agreement. "Canadian Borrower Advance" has the meaning specified in Section ------------------------- 2.01(d). "Canadian Borrower Note" means a promissory note of the Canadian ---------------------- Borrower payable to the order of any Canadian Lender, in substantially the form of Exhibit A-5 hereto, evidencing the aggregate indebtedness of the Canadian Borrower to such Lender resulting from the Canadian Borrower Advances made by or otherwise owing to such Lender, to the extent required to be issued pursuant to Section 2.17. "Canadian Borrowing" means a borrowing consisting of simultaneous ------------------ Canadian Borrower Advances made by the Canadian Lenders on the same date. "Canadian Business Day" means a day of the year on which banks are not --------------------- required or authorized by law to close in Toronto, Ontario, Canada. "Canadian Cash Collateral Account" has the meaning specified in the -------------------------------- Canadian Security Agreement. "Canadian Commitment" means, with respect to any Canadian Lender at ------------------- any time, the Canadian Dollar amount set forth opposite such Lender's name on Schedule I hereto under the caption "Canadian Commitment" or, if such Lender has entered into one 8 or more Assignments and Acceptances, set forth for such Lender in the Register maintained by the Agent pursuant to Section 8.07(d) as such Lender's "Canadian Commitment", as such Canadian Dollar amount may be reduced at or prior to such time pursuant to Section 2.06. "Canadian Dollars" and "CN$" each means lawful money of Canada. ---------------- --- "Canadian Domestic Lending Office" means, with respect to each -------------------------------- Canadian 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 Canadian Borrower and the Agent. "Canadian Facility" means, at any time, the aggregate amount of the ----------------- Canadian Lenders' Canadian Commitments at such time. "Canadian Interbank Rate" means the interest rate, expressed as a ----------------------- percentage per annum, which is customarily used by the Agent when calculating interest due by it or owing to it arising from or in connection with correction of errors between it and other Canadian chartered banks. "Canadian Lender" means any Lender that (a) is a resident in Canada --------------- for purposes of the Income Tax Act (Canada) and (b) has a Canadian Commitment. "Canadian Prime 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 higher of: (a) the rate of interest announced publicly by the Sub-Agent in Toronto, Ontario from time to time as its prime rate for determining rates of interest on commercial loans in Canadian Dollars made by it in Canada; and (b) 3/4 of one percent per annum above the rate for 30-day Canadian Dollar bankers' acceptances that appears on the Reuters Screen CDOR Page (or any replacement page) as of 10:00 A.M. (Toronto, Ontario time) on the date of determination. "Canadian Prime Rate Advance" means a Canadian Borrower Advance made --------------------------- in Canadian Dollars that bears interest as provided in Section 2.08(b)(iii). "Canadian Security Agreement" has the meaning specified in Section --------------------------- 3.01(g)(xi). 9 "Capital Expenditures" means, for any Person for any period, the sum -------------------- of, without duplication, (a) all expenditures made, directly or indirectly, by such Person or any of its Subsidiaries during such period for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto (excluding capitalized interest), that have been or should be, in accordance with GAAP, reflected as additions to property, plant or equipment on a Consolidated balance sheet of such Person plus (b) the aggregate principal amount of all Debt (including the aggregate principal amount of Obligations under Capitalized Leases) assumed or incurred in connection with any such expenditures; provided, however, there shall be excluded from the definition of Capital -------- ------- Expenditures, expenditures made to finance Permitted Acquisitions. "Capitalized Leases" means all leases that have been or should be, in ------------------ accordance with GAAP, recorded as capitalized leases. "Carryover Amount" has the meaning specified in Section 5.04(d). ---------------- "Cash Equivalents" means any of the following, to the extent owned by ---------------- the Parent Guarantor or any of its Subsidiaries free and clear of all Liens other than Liens created under the Collateral Documents or Permitted Liens and, other than in the case of investments described in clause (d) below, having a maturity of not greater than 180 days from the date of acquisition thereof: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) insured certificates of deposit of or time deposits with any commercial bank that is a Lender Party or a member of the Federal Reserve System, issues (or the parent of which issues) commercial paper rated as described in clause (c), is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $1 billion, (c) commercial paper in an aggregate amount of no more than $250,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any State of the United States and rated at least "Prime-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or "A-1" (or the then equivalent grade) by Standard & Poor's Ratings Services, (d) money market or mutual funds that invest in Cash Equivalents of the types described in clauses (a), (b) and (c) above or (e) in the case of the Canadian Borrower, any equivalent, prudent, short-term investment consistent with the foregoing. "CERCLA" means the Comprehensive Environmental Response, Compensation ------ and Liability Act of 1980, as amended from time to time. 10 "CERCLIS" means the Comprehensive Environmental Response, Compensation ------- and Liability Information System maintained by the U.S. Environmental Protection Agency. "Chase Capital" means Chase Capital Partners ("CCP") and its ------------- --- affiliates, which include any corporation, any general partnership, any limited partnership or any limited liability corporation, the beneficial interests of which are owned directly or indirectly by one or more present or former employees or executives of CCP or the respective Affiliates of any of the foregoing entities. "Collateral" means all "Collateral" and all "Intellectual Property ---------- Collateral", referred to in the Collateral Documents and all other property that is or is intended to be subject to any Lien in favor of the Agent for the benefit of the Secured Parties. "Collateral Documents" means the Security Agreement, the Canadian -------------------- Security Agreement, the Intellectual Property Security Agreement, the Parent Guarantor Security Agreement, the Mortgages and any other agreement that creates or purports to create a Lien in favor of the Agent for the benefit of the Secured Parties (including, without limitation, any agreement executed and delivered pursuant to Section 5.01(m)). "Commitment" means a Term A Commitment, a Term B Commitment, a Working ---------- Capital Commitment, a Canadian Commitment, an Acquisition Commitment, a Swing Line Commitment or a Letter of Credit Commitment. "Confidential Information" means information furnished to the Agent or ------------------------ any Lender Party on a confidential basis by or on behalf of any Loan Party and designated as such, but does not include any such information that is or becomes generally available to the public (other than through any breach of any undertaking hereunder or in connection herewith) or that is or becomes available to the Agent or such Lender from a source other than any Loan Party, Chase Capital, Chase Securities Inc. or D. George Harris & Associates, Inc. "Consolidated" refers, with respect to any Person, to the ------------ consolidation of accounts of such Person and its Subsidiaries in accordance with GAAP. "Conversion", "Convert" and "Converted" each refer to a conversion of ---------- ------- --------- Advances of one Type into Advances of the other Type pursuant to Section 2.10, 2.11 or 2.12. "Conversion Date" means September 30, 2002. --------------- "Current Assets" of any Person means all assets of such Person that -------------- would, in accordance with GAAP, be classified as current assets of a company conducting a 11 business the same as or similar to that of such Person, after deducting adequate reserves in each case in which a reserve is proper in accordance with GAAP. "Current Liabilities" of any Person means (a) all Debt of such Person ------------------- that by its terms is payable on demand or matures within one year after the date of determination other than Funded Debt and (b) all other items (including, without limitation, taxes accrued as estimated and payable within twelve months) that in accordance with GAAP would be classified as current liabilities of such Person. "D. George Harris & Associates Person" shall mean each of D. George ------------------------------------ Harris, Anthony J. Petrocelli, Richard J. Donahue, Donald G. Kilpatrick, Richard J. Nick and any other Persons whose shares of stock of USS Holdings, Inc. are voted by one or more of D. George Harris, Anthony J. Petrocelli and Donald G. Kilpatrick so long as such Persons are associated with D. George Harris & Associates, LLC. "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 not overdue by more than 90 days 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 created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under Capitalized Leases, (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock of or other ownership or profit interest in such Person or any other Person or any warrants, rights or options to acquire such capital stock, valued, in the case of Redeemable Preferred Stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Obligations of such Person in respect of Hedge Agreements, (i) all Debt of others referred to in clauses (a) through (h) above or clause (j) below guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (j) all Debt referred to in clauses (a) through (i) above of another Person secured by (or for which the holder of such Debt has 12 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. "Declining Lender" has the meaning specified in Section 2.07(c). ---------------- "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. "Domestic Lending Office" means, with respect to any Lender Party, the ----------------------- office of such Lender Party 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 Party, as the case may be, or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Agent. "Domestic Subsidiary" of the Borrower means any Subsidiary of the ------------------- Borrower organized under the laws of any State of the United States of America. "Draft" means a blank bill of exchange, within the meaning of the ----- Bills of Exchange Act (Canada), drawn by the Canadian Borrower on any Canadian Lender, in substantially the form of Exhibit A-6, and which, except as otherwise provided herein, has not been completed or accepted by such Lender. "Drawing" means the simultaneous acceptance of Drafts and purchase of ------- Bankers' Acceptances by the Canadian Lenders, in accordance with Section 2.04(a). "Drawing Purchase Price" means, with respect to each Bankers' ---------------------- Acceptance to be purchased by any Canadian Lender at any time, the amount (adjusted to the nearest whole cent or, if there is no nearest whole cent, the next higher whole cent) obtained by dividing (i) the aggregate Face Amount of such Bankers' Acceptance, by (ii) the sum of (A) one and (B) the product of (1) the BA Rate in effect at such time (expressed as a decimal) multiplied by (2) a fraction the numerator of which is the number of days ------------- in the term to maturity of such Bankers' Acceptance and the denominator of which is 365 days or 366 days, as the case may be. "EBITDA" means, with respect to any Person for any period, the sum, ------ determined on a Consolidated basis, of (a) net income (or net loss) and (b) without duplication and to the extent deducted from revenues in determining net income (or net loss) for such period, the sum of (i) Interest Expense, (ii) income tax expense, (iii) depreciation expense, (iv) amortization expense, (v) extraordinary or unusual losses deducted in calculating net income less extraordinary or unusual gains added in calculating net income, in each case of such Person and its Subsidiaries, determined in accordance with 13 GAAP for such period and (vi) in the case of the Parent Guarantor and its Subsidiaries, fees paid pursuant to the Harris Management Agreement; provided, however, there shall be excluded from EBITDA, to the extent -------- ------- therein included, all non-cash foreign currency losses and all non-cash foreign currency gains. "Eligible Assignee" means, with respect to any Facility: (i) a Lender; ----------------- (ii) an Affiliate of a Lender; (iii) a commercial bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $500,000,000; (iv) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a combined capital and surplus of at least $500,000,000; (v) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow or a political subdivision of any such country, and having a combined capital and surplus of at least $500,000,000, so long as such bank is acting through a branch or agency located in the United States; (vi) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having a combined capital and surplus of at least $250,000,000; (vii) any Federal Reserve Bank; (viii) in the case of any Lender that is a fund that invests in commercial loans, a Related Fund of such Lender; and (ix) any other Person approved by the Agent and the Borrower, such approval not to be unreasonably withheld or delayed; provided, however, that neither any -------- ------- Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition; and provided further that, with respect to -------- ------- the Canadian Facility, any Person that is not resident in Canada for purposes of the Income Tax Act (Canada) shall not qualify as an Eligible Assignee under this definition. "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, any Environmental Permit or Hazardous Material or arising from alleged injury or threat 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 third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Law" means any federal, state, local or foreign ----------------- statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, 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 14 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. "Equity Contributions" means (a) the contribution by USS Holdings, -------------------- Inc. to the Parent Guarantor of up to $35,000,000 as common equity on or prior to the date of the Initial Extension of Credit and (b) the contribution by USS Holdings, Inc. to the Parent Guarantor of the Net Cash Proceeds of the sale or issuance by USS Holdings, Inc. of capital stock of USS Holdings, Inc. to managers and employees of the Parent Guarantor and its Subsidiaries in an aggregate amount not in excess of $6,516,000 as common equity on or prior to the date that is six months after the Initial Extension of Credit. "Equivalent" (a) in U.S. Dollars of Canadian Dollars, on any date of ---------- determination, means the equivalent thereof determined by using the quoted spot rate at which the Sub-Agent's principal office in Toronto, Ontario offers to exchange U.S. Dollars for Canadian Dollars in Toronto, Ontario at 11:00 A.M. (New York City time) on such date, and (b) in Canadian Dollars of U.S. Dollars, on any date of determination means the equivalent thereof determined by using the quoted spot rate at which BNP's principal office in New York City, New York offers to exchange Canadian Dollars for U.S. Dollars in New York City, New York at 11:00 A.M. (New York City time) on such date. "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 controlled group of any Loan Party, or under common control with any Loan Party, 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 (or the penalty for failure to provide such notice) 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 15 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 any Loan Party or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Loan Party 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 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 could reasonably be expected to constitute grounds for the termination of, or the appointment of a trustee to administer, such Plan. "Eurocurrency Liabilities" has the meaning specified 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 Party, ------------------------- the office of such Lender Party 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 Party (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Agent. "Eurodollar Rate" means, for any Interest Period for all Eurodollar --------------- Rate Advances comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the average of the respective rates per annum (rounded upward to the next whole multiple of 1/16th of 1%) posted by each of the principal London offices of banks posting rates as displayed on the Dow Jones Markets screen, page 3750 or such other page as may replace such page on such service for the purpose of displaying the London interbank offered rate of major banks for deposits in U.S. Dollars, at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for deposits in an amount substantially equal to BNP's Eurodollar Rate Advance comprising part of such Borrowing to be outstanding during such Interest Period (or, if BNP shall not have such Eurodollar Rate Advance, $1,000,000) 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. "Eurodollar Rate Advance" means an Advance that bears interest as ----------------------- provided in Section 2.08(b)(ii). "Eurodollar Rate Reserve Percentage" for any Interest Period for ---------------------------------- all Eurodollar Rate Advances comprising part of the same Borrowing means the reserve percentage 16 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 is determined) having a term equal to such Interest Period, provided that a Lender Party shall be -------- deemed to be subject to such eurocurrency reserve requirements only from and after the date that such Lender Party has certified to the Borrower that a governmental authority has imposed any such eurocurrency reserve requirements subsequent to the date hereof which increase the cost to such Lender Party of making or maintaining Eurodollar Rate Advances hereunder. "Events of Default" has the meaning specified in Section 6.01. ----------------- "Excess Cash Flow" means, for any period, the sum of (a) pre-tax ---------------- income of the Borrower and its Subsidiaries for such period less ---- Consolidated income taxes plus (b) an amount equal to the aggregate amount ---- of all noncash charges (other than non-cash charges included in Current Liabilities) deducted in arriving at Consolidated net income (or loss) for each such period plus (c) an amount (whether positive or negative) equal to ---- the change in Consolidated Current Liabilities of the Borrower and its Subsidiaries during such period plus (d) the aggregate principal amount of ---- all Debt (including the aggregate principal amount of Obligations under Capitalized Leases) incurred or assumed during such period to the extent that the incurrence or assumption of such Debt constitutes a Capital Expenditure less (e) an amount equal to the aggregate amount of all noncash ---- credits included in arriving at such Consolidated net income (or net loss) less (f) an amount (whether positive or negative) equal to the change in ---- Consolidated Current Assets (excluding cash and Cash Equivalents) of the Borrower and its Subsidiaries during such period less (g) an amount equal ---- to the amount of all Capital Expenditures of the Borrower and its Subsidiaries paid in cash during such period to the extent permitted by this Agreement less (h) an amount equal to the aggregate amount of all ---- regularly scheduled principal payments of Funded Debt made during such period, together with any optional prepayments of Term Advances or Acquisition Advances made during such period in accordance with Section 2.07(a), less (i) an amount equal to the aggregate amount of income of the ---- Borrower and its Subsidiaries for such period included in pre-tax income of the Borrower and its Subsidiaries for such period resulting from any transaction creating Net Cash Proceeds or Extraordinary Receipts. "Existing Debt" means the Debt of the Borrower and its Subsidiaries ------------- identified on Schedule 4.01(ee). 17 "Existing Letters of Credit" means each of the letters of credit -------------------------- referred to on Schedule 1.01 attached hereto. "Extraordinary Receipts" means any cash received by or paid to or for ---------------------- the account of any Person not in the ordinary course of business constituting pension plan reversions, proceeds of property damage insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof) and indemnity payments (other than proceeds to the extent such proceeds constitute compensation for lost earnings); provided, however, that an Extraordinary Receipt shall not include cash -------- ------- constituting proceeds of insurance, condemnation awards or indemnity payments to the extent that such proceeds are applied within six months after the receipt of such proceeds, or in respect of which expenditures were previously made, (i) for replacements, substitutions therefor or additions thereto for inventory, equipment, fixed assets, real property or improvements relating to the property covered by such payments (replacements or substitutions to be of such same type of property) or (ii) in connection with liabilities covered by such indemnity. "Face Amount" means, with respect to any Bankers' Acceptance, the ----------- amount payable to the holder of such Bankers' Acceptance on its then existing Maturity Date. "Facility" means the Term A Facility, the Term B Facility, the Working -------- Capital Facility, the Canadian Facility, the Acquisition Facility, the Swing Line Facility or the Letter of Credit Facility. "Federal Funds Rate" means, for any period, a fluctuating interest ------------------ rate per annum equal for each day during such period (i) to the rate published by the Telerate service on page five of its daily report as the "New York Offered Rate" as of 10:00 A.M. (New York City time) for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) or (ii) if the Telerate service shall cease to publish or otherwise shall not publish such rates for any day that is a Business Day, 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 for such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fiscal Year" means a fiscal year of the Parent Guarantor and its ----------- consolidated Subsidiaries ending on December 31 in any calendar year. 18 "Funded Debt" of any Person at any time means indebtedness for ----------- borrowed amounts of such Person that by its terms matures more than one year after the date of creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year after such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year after such date, including, without limitation, all amounts of Funded Debt of such Person required to be paid or prepaid within one year after the date of determination. "GAAP" has the meaning specified in Section 1.03. ---- "Harris Management Agreement" means the Management Services Agreement --------------------------- dated as of October 6, 1998, among USS Holdings, Inc., a Delaware corporation, the Parent Guarantor (as assignee of the Borrower), the Borrower (as assignee of Silica) and D. George Harris & Associates, LLC, a Delaware limited liability company (as successor or assignee of D. George Harris & Associates, Inc., a Delaware corporation). "Hazardous Materials" means (a) petroleum or petroleum products, by- ------------------- products 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 and other similar agreements. "Hedge Bank" means any Lender Party (or any Affiliate thereof) in its ---------- capacity as a party to a Bank Hedge Agreement. "Home Jurisdiction Withholding Taxes" means (a) in the case of the ----------------------------------- Borrower or any Subsidiary Guarantor, withholding taxes imposed by the United States, and (b) in the case of the Canadian Borrower, withholding taxes imposed by Canada. "Indemnified Party" has the meaning specified in Section 8.04(b). ----------------- "Initial Extension of Credit" means the earlier to occur of the --------------------------- initial Borrowing, the initial issuance of a Letter of Credit or the initial Drawing hereunder, which in no event shall occur later than October 1, 1999. "Initial Lenders" has the meaning specified in the recital of parties --------------- to this Agreement. 19 "Insufficiency" means, with respect to any Plan, the excess, if any, ------------- of the accumulated benefit obligation (within the meaning of Statement of Financial Accounting Standards No. 87) over the fair market value of the Plan's assets, determined as of the most recent annual actuarial valuation date for the Plan. "Intellectual Property Security Agreement" has the meaning specified ---------------------------------------- in Section 3.01(g)(xiii). "Interest Coverage Ratio" means, with respect to any Person for any ----------------------- Rolling Period, the ratio of (a) EBITDA of such Person and its Subsidiaries for such Rolling Period to (b) Interest Expense of such Person and its Subsidiaries for such Rolling Period. "Interest Expense" means, with respect to any Person for any period, ---------------- the amount by which (i) interest expense (including the interest component on obligations under Capitalized Leases (but excluding, to the extent applicable, interest expense accrued under the agreement, dated August 8, 1995, between Silica and ITT Corporation, as in effect from time to time)), whether paid or accrued, on all Debt of such Person and its Subsidiaries for such period, including, without limitation and without duplication, (a) interest expense in respect of Debt resulting from Advances, (b) commissions, discounts and other fees and charges payable in connection with letters of credit (including, without limitation, any Letters of Credit), (c) interest which is capitalized in accordance with GAAP, (d) interest expense in respect of the Subordinated Debt and (e) any net payment payable in connection with Hedge Agreements less the sum of any net ---- credits received in connection with Hedge Agreements exceeds (ii) interest income, whether paid or accrued of such Person for such period. "Interest Period" means, for each Eurodollar Rate Advance comprising --------------- part of the same Borrowing, the period commencing on the date of such Eurodollar 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, each subsequent period commencing on the last day of the immediately 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: -------- ------- (a) the Borrower may not select any Interest Period with respect to any Eurodollar Rate Advance under a Facility that ends after any principal repayment installment date for such Facility unless, after giving effect to such selection, the 20 aggregate principal amount of Base Rate Advances and of Eurodollar Rate Advances having Interest Periods that end on or prior to such principal repayment installment date for such Facility shall be at least equal to the aggregate principal amount of Advances under such Facility due and payable on or prior to such date; (b) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration; (c) 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 immediately preceding Business Day; and (d) 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 applicable U.S. Treasury Regulations promulgated thereunder. "Inventory" means all Inventory referred to in Section 1(b) of the --------- Security Agreement. "Investment" in any Person means any loan or advance to such Person, ---------- any purchase or other acquisition of any evidences of indebtedness, capital stock or other ownership or profit interest, warrants, rights, options, obligations or other securities or all or substantially all the assets of or a business unit or division of such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (i) or (j) of the definition of "Debt" in ---- respect of such Person. "IRS" has the meaning specified in Section 2.14(e). --- "Issuing Bank" means BNP, as issuing bank under the Existing Letters ------------ of Credit and as Initial Issuing Bank hereunder and each Eligible Assignee to which a Letter of Credit Commitment hereunder has been assigned pursuant to Section 8.07(b). 21 "L/C Cash Collateral Account" has the meaning specified in the --------------------------- Security Agreement. "L/C Related Documents" has the meaning specified in Section --------------------- 2.05(e)(ii)(A). "Lender Party" means any Lender, the Swing Line Bank or the Issuing ------------ Bank. "Lenders" means the Initial Lenders and each Person that shall become ------- a Lender hereunder pursuant to Section 8.07. "Letter of Credit" means (i) each Existing Letter of Credit, and (ii) ---------------- each letter of credit issued pursuant to Section 2.01(g) hereof. "Letter of Credit Advance" means an advance made by the Issuing Bank ------------------------ or any Working Capital Lender pursuant to Section 2.03(c). "Letter of Credit Agreement" has the meaning specified in Section -------------------------- 2.03(a). "Letter of Credit Commitment" means, with respect to the Issuing Bank --------------------------- at any time, the amount set forth opposite such Issuing Bank's name on Schedule I hereto under the caption "Letter of Credit Commitment" or, if such Issuing Bank has entered into an Assignment and Acceptances, set forth for such Issuing Bank in the Register maintained by the Agent pursuant to Section 8.07(e) as such Issuing Bank's "Letter of Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Letter of Credit Facility" means, at any time, an amount equal to the ------------------------- aggregate amount of the Issuing Bank's Letter of Credit Commitment at such time which shall not exceed $12,000,000. "Leverage Ratio" means, with respect to any Person at any date of -------------- determination, the ratio of (a) Funded Debt (other than contingent obligations of the type described in clause (f) or (h) in the definition of "Debt") of such Person and its Subsidiaries to (b) Adjusted EBITDA of such ---- Person and its Subsidiaries for the most recently completed Rolling Period prior to such date multiplied by the Annualization Factor. "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. 22 "Loan Documents" means (a) for purposes of this Agreement and the -------------- Notes, if any, and any amendment or modification hereof or thereof and for all other purposes other than for purposes of the Parent Guaranty, the Subsidiary Guaranty and the Collateral Documents, (i) this Agreement, (ii) the Notes, if any, (iii) the Collateral Documents, (iv) each Letter of Credit Agreement, (v) the Parent Guaranty, (vi) the Bankers' Acceptances and (vii) the Subsidiary Guaranty, and (b) for purposes of the Parent Guaranty, the Subsidiary Guaranty and the Collateral Documents, (i) this Agreement, (ii) the Notes, if any, (iii) the Collateral Documents, (iv) each Letter of Credit Agreement, (v) the Parent Guaranty, (vi) the Subsidiary Guaranty, (vii) the Bankers' Acceptances and (viii) each Bank Hedge Agreement, in each case as amended or otherwise modified from time to time. "Loan Parties" means the Borrower, the Canadian Borrower, the Parent ------------ Guarantor, each Subsidiary Guarantor and each further Subsidiary of the Borrower that may become a guarantor or collateral grantor pursuant to Section 5.01(m) or Section 5.01(n). "Margin Stock" has the meaning specified in Regulation U. ------------ "Material Adverse Change" means any material adverse change in the ----------------------- business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower and its Subsidiaries, taken as a whole, or the Acquired Businesses, taken as a whole, as the context requires. "Material Adverse Effect" means a material adverse effect on (a) the ----------------------- business, condition (financial or otherwise), operations, performance, properties or prospects of the Parent Guarantor and its Subsidiaries, taken as a whole, (b) the rights and remedies of the Agent or the Lender Parties, taken as a whole, under any Loan Document or (c) the ability of the Parent Guarantor and its Subsidiaries, taken as a whole, to perform their Obligations under any Loan Document to which they are or are to be a party. "Material Lease" has the meaning specified in Section 4.01(hh). -------------- "Maturity Date" means, for each Bankers' Acceptance comprising part of ------------- the same Drawing, the date on which the Face Amount for such Bankers' Acceptance becomes due and payable in accordance with the provisions set forth below, which shall be a Canadian Business Day occurring thirty, sixty or ninety days or, if available to all Canadian Lenders purchasing Bankers' Acceptances in connection with the applicable Drawing, one hundred and eighty days after the date on which such Bankers' Acceptance is created and purchased as part of any Drawing, as the Canadian Borrower may select upon notice received by the Agent not later than 12:00 noon (New York City time) on a Canadian Business Day at least two Canadian Business Days prior to the date on which such 23 Bankers' Acceptance is to be accepted and purchased (whether as a new Drawing, by renewal or by Conversion); provided, however, that: -------- ------- (a) such Borrower may not select any Maturity Date for any Bankers' Acceptance that occurs after the then scheduled Termination Date; (b) the Maturity Date for all Bankers' Acceptances comprising part of the same Drawing shall occur on the same date; and (c) whenever the Maturity Date for any Bankers' Acceptance would otherwise occur on a day other than a Canadian Business Day, such Maturity Date shall be extended to occur on the next succeeding Canadian Business Day. "Mortgage" has the meaning set forth in Section 3.01(g)(xiv). -------- "Mortgage Policy" has the meaning specified in Section --------------- 3.01(g)(xiv)(A). "Multiemployer Plan" means a multiemployer plan, as defined in Section ------------------ 4001(a)(3) of ERISA, to which any Loan Party 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 any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party 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. "Natural Gas Hedge Agreement" means any Hedge Agreements entered into --------------------------- by a Loan Party pursuant to Section 5.02(b)(ii) hereof. "Net Cash Proceeds" means, with respect to any sale, lease, transfer ----------------- or other disposition of any asset or the sale or issuance of any Debt or capital stock or other ownership or profit interest, any securities convertible into or exchangeable for capital stock or other ownership or profit interest or any warrants, rights, options or other securities to acquire capital stock or other ownership or profit interest by any Person, or any Extraordinary Receipt received by or paid to or for the account of any Person, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction after deducting therefrom only (without duplication) (a) the reasonable and customary out-of-pocket expenses incurred by any Loan Party in 24 connection therewith, including, but not limited to, brokerage commissions, underwriting fees and discounts, legal fees, finder's fees and other similar fees and commissions, (b) the amount of taxes payable in connection with or as a result of such transaction, (c) the amount of any Debt secured by a Lien on such asset that, by the terms of such transaction, is required to be repaid in connection with such transaction and (d) the provision for cash reserves with respect to any liabilities associated with such assets, in each case to the extent, but only to the extent, that the amounts so deducted are properly attributable to such transaction or to the asset that is the subject thereof. "Nicks Silica Company Notes" means the promissory note and consulting -------------------------- agreement of Silica issued in connection with the acquisition by Silica of certain assets of Nicks Silica Company in an aggregate amount of $1,950,000, payable during Fiscal Year 1999 through Fiscal Year 2007. "Note" means a Term Note, a Working Capital Note, a Canadian Borrower ---- Note or an Acquisition Note, in each case to the extent required to be issued pursuant to Section 2.17. "Notice of Borrowing" has the meaning specified in Section 2.02(a). ------------------- "Notice of Drawing" has the meaning specified in Section 2.04(a). ----------------- "Notice of Issuance" has the meaning specified in Section 2.03(a). ------------------ "NPL" means the National Priorities List under CERCLA. --- "Obligation" means, with respect to any Person, any payment, ---------- performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation of any Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party, in its sole discretion, may elect to pay or advance on behalf of such Loan Party. "OECD" means the Organization for Economic Cooperation and ---- Development. 25 "Open Year" has the meaning specified in Section 4.01(z). --------- "Other Taxes" has the meaning specified in Section 2.14(b). ----------- "Parent Guarantor" has the meaning specified in the recital of parties ---------------- to this Agreement. "Parent Guarantor Security Agreement" has the meaning specified in ----------------------------------- Section 3.01(g)(xii). "Parent Guaranty" has the meaning specified in Section 3.01(g)(xv). --------------- "PBGC" means the Pension Benefit Guaranty Corporation. ---- "Permitted Acquisition" means the purchase or acquisition of all or --------------------- substantially all of the assets of or a business unit or division of or the privately held capital stock of a Person engaged in a similar line of business as the Borrower and its Subsidiaries. "Permitted Encumbrances" means the Liens disclosed in the Mortgage ---------------------- Policies. "Permitted Liens" means such of the following as to which no --------------- enforcement, collection, execution, levy or foreclosure proceedings shall have been commenced: (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 (i) are not overdue for a period of more than 90 days and (ii) either individually or when aggregated with all other Permitted Liens outstanding on any date of determination, do not materially affect the use or value of the property to which they relate; (c) pledges or deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, to secure obligations under worker's compensation laws or similar legislation or to secure public or statutory obligations; (d) easements, rights of way, defects and other encumbrances on title to real property that do not materially adversely affect the use of such property for its present purposes; (e) deed restrictions and other encumbrances on title to real property that do not, individually or in the aggregate, materially interfere with the business of the Borrower or any of its Subsidiaries; and (f) Liens arising under Canadian law or the law of any political subdivision thereof, imposed on assets owned by the Canadian Borrower or any of its Subsidiaries, in respect of wages, employee deductions, sales taxes, goods and service taxes, excise taxes, worker's compensation, pension fund obligations and overdue rents. 26 "Person" means an individual, partnership, corporation (including ------ a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. ---- "Preferred Stock" means, with respect to any corporation, capital --------------- stock issued by such corporation that is entitled to a preference or priority over any other capital stock issued by such corporation upon any distribution of such corporation's assets, whether by dividend or upon liquidation. "Prepayment Amount" has the meaning specified in Section 5.03(a). ----------------- "Prepayment Date" has the meaning specified in Section 5.03(a). --------------- "Prepayment Notice" has the meaning specified in Section 5.03(a). ----------------- "Pro Rata Share" of any amount means, with respect to any Working -------------- Capital Lender at any time, the product of such amount times a fraction the ----- numerator of which is the amount of such Lender's Working Capital Commitment at such time and the denominator of which is the Working Capital Facility at such time. "Purchase Agreement" means that certain Purchase Agreement dated ------------------ as of August 26, 1999 and entered into by and among CATS, Inc., a Pennsylvania corporation, JHS Family Partnership, a Pennsylvania limited partnership, RSS Family Partnership, a Pennsylvania limited partnership, the Dell H. Shearer Grandchildren's Trust, Joseph H. Shearer, R. Scott Shearer and Silica. "Redeemable" means, with respect to any capital stock or other ---------- ownership or profit interest, Debt or other right or Obligation, any such right or Obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder. "Reduction Amount" has the meaning specified in Section ---------------- 2.07(b)(v). "Register" has the meaning specified in Section 8.07(e). -------- "Regulation U" means Regulation U of the Board of Governors of ------------ the Federal Reserve System, as in effect from time to time. 27 "Related Documents" means the Purchase Agreement, the Harris ----------------- Management Agreement and the Tax Sharing Agreement. "Related Fund" means, with respect to any Lender that is a fund ------------ that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Required Lenders" means, at any time, Lenders owed or holding at ---------------- least 51% of the sum of (a) the aggregate principal amount of the Advances outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, (c) the aggregate Face Amount of all Bankers' Acceptances outstanding at such time, (d) the aggregate unused portion of the Commitments under the Term A and the Term B Facilities at such time, (e) the aggregate Unused Canadian Commitments at such time, (f) the aggregate Unused Acquisition Commitments at such time and (g) the aggregate Unused Working Capital Commitments at such time. For purposes of this definition, the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and of Letter of Credit Advances owing to any Issuing Bank and the Available Amount of each Letter of Credit shall be considered to be owed to the Working Capital Lenders ratably in accordance with their respective Working Capital Commitments. "Responsible Officer" means any executive officer of any Loan ------------------- Party or any of its Subsidiaries. "Rolling Period" means (a) with respect to any fiscal month of -------------- the Parent Guarantor ending prior to the first anniversary of the date of the Initial Extension of Credit, the period commencing on the date of the Initial Extension of Credit and ending on the last day of such fiscal month and (b) with respect to any fiscal month of the Parent Guarantor ending thereafter, the consecutive 12 fiscal month period ending on the last day of such fiscal month. "Secured Obligations" has the meaning specified in the Security ------------------- Agreement. "Secured Parties" means the Agent, the Sub-Agent, the Lender --------------- Parties, the Hedge Banks and the other Persons the Obligations owing to which are or are purported to be secured by the Collateral under the terms of the Collateral Documents. "Security Agreement" has the meaning specified in Section ------------------ 3.01(g)(x). "Silica" means U. S. Silica Company, a Delaware corporation that ------ is a wholly-owned Subsidiary of the Borrower. 28 "Single Employer Plan" means a single employer plan, as defined -------------------- in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and no Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Sold Entity or Business" has the meaning specified in the ----------------------- definition of the term "Adjusted EBITDA". --------------- "Solvent" and "Solvency" mean, with respect to any Person on a ------- -------- particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Stamping Fee" means, with respect to each Bankers' Acceptance, ------------ an amount equal to (a) the Applicable Margin, as in effect on the date of the Drawing or renewal, as the case may be, of such Bankers' Acceptance multiplied by (b) the Face Amount of such Bankers' Acceptance, calculated ------------- on the basis of the term to maturity of such Bankers' Acceptance and a year of 365 days or 366 days, as the case may be. "Standby Letter of Credit" means any Letter of Credit issued ------------------------ under the Letter of Credit Facility, other than a Trade Letter of Credit. "Sub-Agent" means Banque Nationale de Paris (Canada). --------- "Subordinated Debt" means (a) the Subordinated Notes and the ----------------- Subordinated Exchange Notes in an aggregate principal amount at any time not to exceed $150,000,000 and (b) the Debt represented thereby. "Subordinated Debt Documents" means any indenture under which the --------------------------- Subordinated Debt is issued and all other instruments, agreements and other documents evidencing or governing the Subordinated Debt or providing for any guaranty or other 29 right in respect thereof (excluding the Registration Rights Agreement and the Underwriting Agreement prepared in connection with the issuance of the Subordinated Notes). "Subordinated Exchange Notes" means the senior subordinated --------------------------- notes to be issued by the Borrower in exchange for Subordinated Notes on terms substantially identical to the terms of the Subordinated Notes. "Subordinated Notes" means the senior subordinated notes to be ------------------ issued by the Borrower in a public offering or in a Rule 144A or other private placement on or prior to the Initial Extension of Credit in the aggregate principal amount of $150,000,000. "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. "Subsidiary Guarantor" means each direct or indirect wholly-owned -------------------- Domestic Subsidiary of the Borrower listed on Schedule II hereto and each other direct or indirect wholly-owned Domestic Subsidiary of the Borrower that shall be required to execute and deliver a guaranty pursuant to Section 5.01(n). "Subsidiary Guaranty" has the meaning specified in Section ------------------- 3.01(g)(xvi). "Surviving Debt" has the meaning specified in Section 3.01(f). -------------- "Swing Line Advance" means an advance made by (a) the Swing Line ------------------ Bank pursuant to Section 2.01(f) or (b) any Working Capital Lender pursuant to Section 2.02(b). "Swing Line Bank" means BNP. --------------- "Swing Line Borrowing" means a borrowing consisting of a Swing -------------------- Line Advance made by the Swing Line Bank pursuant to Section 2.01(f) or the Working Capital Lenders pursuant to Section 2.02(b). 30 "Swing Line Commitment" means, with respect to the Swing Line --------------------- Bank at any time, the amount set forth opposite the Swing Line Bank's name on Schedule I hereto under the caption "Swing Line Commitment" or, if the Swing Line Bank has entered into an Assignment and Acceptance, set forth for the Swing Line Bank in the Register maintained by the Agent pursuant to Section 8.07(e) as the Swing line Bank's "Swing Line Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Swing Line Facility" has the meaning specified in Section ------------------- 2.01(f). "Tax Sharing Agreement" means the Amended and Restated Tax --------------------- Sharing Agreement dated as of July 21, 1998 among the Parent Guarantor, USS Holdings, Inc. and all of the Domestic Subsidiaries of the Parent Guarantor in form and substance satisfactory to the Agent pursuant to Section 3.01(b). "Taxes" has the meaning specified in Section 2.14(a). ----- "Term A Advance" has the meaning specified in Section 2.01(a). -------------- "Term A Borrowing" means a borrowing consisting of simultaneous ---------------- Term A Advances of the same Type made by the Term A Lenders, made, converted or continued on the same date and, in the case of Eurodollar Rate Advances, as to which a single Interest Period is in effect. "Term A Commitment" means, with respect to any Term Lender at any ----------------- time, the amount set forth opposite such Term Lender's name on Schedule I hereto under the caption "Term A Commitment" or, if such Term Lender has entered into one or more Assignments and Acceptances, the aggregate amount set forth for such Term Lender in the Register maintained by the Agent pursuant to Section 8.07(e) as such Term Lender's "Term A Commitment". "Term A Facility" means, at any time, the aggregate amount of the --------------- Term Lenders' Term A Commitments at such time. "Term A Lender" means any Lender that has a Term A Commitment. ------------- "Term Advance" means a Term A Advance or a Term B Advance. ------------ "Term B Advance" has the meaning specified in Section 2.01(b). -------------- "Term B Borrowing" means a borrowing consisting of simultaneous ---------------- Term B Advances of the same Type made by the Term B Lenders, made, converted or continued 31 on the same date and, in the case of Eurodollar Rate Advances, as to which a single Interest Period is in effect. "Term B Commitment" means, with respect to any Term Lender, the ----------------- amount set forth opposite such Term Lender's name on Schedule I hereto under the caption "Term B Commitment" or, if such Term Lender has entered into one or more Assignments or Acceptances, the aggregate amount set forth for such Term Lender in the Register maintained by the Agent pursuant to Section 8.07(e) as such Term Lender's "Term B Commitment". "Term B Facility" means, at any time, the aggregate amount of the --------------- Term Lenders' Term B Commitments at such time. "Term B Lender" means any Lender that has a Term B Commitment. ------------- "Term Borrowing" means a Term A Borrowing or a Term B Borrowing. -------------- "Term Commitment" means a Term A Commitment or a Term B --------------- Commitment. "Term Lender" means a Term A Lender or a Term B Lender. ----------- "Term Notes" means promissory notes of the Borrower payable to ---------- the order of any Lender, in substantially the form of Exhibits A-1 and A-2 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from the Term A Advances and Term B Advances, respectively, made by such Lender, to the extent required to be issued pursuant to Section 2.17. "Termination Date" means (a) with respect to the Term B Facility, ---------------- the earlier of September 30, 2007 and the date of termination in whole of the Term B Commitments pursuant to Section 2.06 or 6.01, and (b) with respect to each other Facility hereunder, the earlier of September 30, 2005 and the date of termination in whole of the Term A Commitments, the Canadian Commitments, the Acquisition Commitments, the Swing Line Commitments, the Working Capital Commitments and the Letter of Credit Commitments pursuant to Section 2.06 or 6.01. "Total Leverage Ratio" means "Consolidated Leverage Ratio" as -------------------- defined in the Subordinated Debt Documents as in effect on October 1, 1999. "Trade Letter of Credit" means any Letter of Credit that is ---------------------- issued under the Letter of Credit Facility for the benefit of a supplier of Inventory to the Borrower or any of its Subsidiaries to effect payment for such Inventory. 32 "Type" refers to the distinction between Advances (other than ---- Canadian Borrower Advances) bearing interest at the Base Rate and such Advances bearing interest at the Eurodollar Rate. "Unused Acquisition Commitment" means, with respect to any ----------------------------- Acquisition Lender at any time prior to the Conversion Date, such Lender's Acquisition Commitment at such time minus the aggregate principal amount of ----- all Acquisition Advances made by such Lender and outstanding at such time. "Unused Canadian Commitment" means, with respect to any Canadian -------------------------- Lender at any time, (a) such Lender's Canadian Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Canadian ----- Borrower Advances made by such Lender at such time, plus (ii) the aggregate ---- Face Amount of all Bankers' Acceptances created and purchased by such Lender and outstanding at such time. "Unused Working Capital Commitment" means, with respect to any --------------------------------- Working Capital Lender at any time, (a) such Lender's Working Capital Commitment at such time minus (b) the sum of (i) the aggregate principal ----- amount of all Working Capital Advances, Letter of Credit Advances and Swing Line Advances made by such Lender (in its capacity as a Lender) and outstanding at such time, plus (ii) such Lender's Pro Rata Share of (A) the ---- aggregate Available Amount of all Letters of Credit outstanding at such time, (B) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Bank pursuant to Section 2.03(c) and outstanding at such time, and (C) the aggregate principal amount of all Swing Line Advances made by the Swing Line Bank pursuant to Section 2.01(f) and outstanding at such time. "U.S. Dollars" and the sign "$" each means lawful money of the ------------ - United States of America. "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. "Welfare Plan" means a welfare plan, as defined in Section 3(1) ------------ of ERISA, that is maintained for employees of any Loan Party or in respect of which any Loan Party could have a liability. "Withdrawal Liability" has the meaning specified in Part I of -------------------- Subtitle E of Title IV of ERISA. "Working Capital Advance" has the meaning specified in Section ----------------------- 2.01(c). 33 "Working Capital Borrowing" means a borrowing consisting of ------------------------- simultaneous Working Capital Advances of the same Type made by the Working Capital Lenders, made, converted or continued on the same date and, in the case of Eurodollar Rate Advances, as to which a single Interest Period is in effect. "Working Capital Commitment" means, with respect to any Working -------------------------- Capital Lender at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Working Capital Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register maintained by the Agent pursuant to Section 8.07(e) as such Lender's "Working Capital Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Working Capital Facility" means, at any time, the aggregate ------------------------ amount of the Working Capital Lenders' Working Capital Commitments at such time. "Working Capital Lender" means any Lender that has a Working ---------------------- Capital Commitment. "Working Capital Note" means a promissory note of the Borrower -------------------- payable to the order of any Working Capital Lender, in substantially the form of Exhibit A-3 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Working Capital Advances made by such Lender, to the extent required to be issued pursuant to Section 2.17. "Year 2000 Compliant" means the (a) ability of the computer ------------------- systems, software, equipment containing embedded microchips (including systems and equipment supplied by others) and other processing capabilities of the Parent Guarantor and its Subsidiaries correctly to interpret and manipulate all data, in whatever form, including printed form, screen displays, financial records, calculations and loan-related data, so as to avoid errors in processing that may otherwise occur because of the inability of such computer systems, software, equipment or other processing capabilities to recognize accurately the year 2000 or subsequent dates, (b) the completion of the testing of such ability of such computer systems, software, equipment and other processing capabilities and (c) the absence of any reasonably foreseeable consequences (including reprogramming errors) of the occurrence of the year 2000 to the Parent Guarantor and its Subsidiaries resulting from the inability of such computer systems, software, equipment and other processing capabilities to recognize accurately the year 2000 or subsequent dates that would result in a Material Adverse Effect. 34 SECTION 1.02. Computation of Time Periods; Other Definitional ----------------------------------------------- Provisions. In this Agreement and the other Loan Documents, 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". References in the Loan Documents to any agreement or contract "as amended" shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms. SECTION 1.03. Accounting Terms. All accounting terms not ---------------- specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States ("GAAP") as in effect from ---- time to time; provided, however, that for purposes of determining any financial -------- ------- ratio contained herein, including in the definition of the term "Applicable Margin" and in Sections 2.16, 5.02(f) and 5.04, all accounting terms herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP as in effect on the date hereof and applied on a basis consistent with the application used in the financial statements referred to in Section 5.03. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT SECTION 2.01. The Advances and the Letters of Credit. (a) The Term -------------------------------------- -------- A Advances. Each Term A Lender severally agrees, on the terms and conditions - ---------- hereinafter set forth, to make a single advance (a "Term A Advance") to the -------------- Borrower on the date of the Initial Extension of Credit in an amount not to exceed such Lender's Term A Commitment at such time. The Term A Borrowing shall consist of Term A Advances made simultaneously by the Term A Lenders ratably according to their Term A Commitments. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. (b) The Term B Advances. Each Term B Lender severally agrees, on the ------------------- terms and conditions hereinafter set forth, to make a single advance (a "Term B ------ Advance") to the Borrower on the date of the Initial Extension of Credit in an - ------- amount not to exceed such Lender's Term B Commitment at such time. The Term B Borrowing shall consist of Term B Advances made simultaneously by the Term B Lenders ratably according to their Term B Commitments. Amounts borrowed under this Section 2.01(b) and repaid or prepaid may not be reborrowed. (c) The Working Capital Advances. Each Working Capital Lender ---------------------------- severally agrees, on the terms and conditions hereinafter set forth, to make advances (each, a "Working Capital Advance") to the Borrower from time to time ----------------------- on any Business Day during the period 35 from the date of the Initial Extension of Credit until the Termination Date in an amount for each such Advance not to exceed such Lender's Unused Working Capital Commitment at such time. Each Working Capital Borrowing shall be in an aggregate amount of $500,000 or an integral multiple of $100,000 in excess thereof (other than a Borrowing the proceeds of which shall be used solely to repay or prepay in full outstanding Letter of Credit Advances made by the Issuing Bank) and shall consist of Working Capital Advances made simultaneously by the Working Capital Lenders ratably according to their Working Capital Commitments. Within the limits of each Working Capital Lender's Unused Working Capital Commitment in effect from time to time, the Borrower may borrow under this Section 2.01(c), prepay pursuant to Section 2.07(a) and reborrow under this Section 2.01(c). (d) The Canadian Borrower Advances; Drawings. Each Canadian Lender ---------------------------------------- severally agrees, on the terms and conditions hereinafter set forth, either (A) to make a single advance (a "Canadian Borrower Advance") in Canadian Dollars to ------------------------- the Canadian Borrower on the date of the Initial Extension of Credit in an amount not to exceed such Lender's Unused Canadian Commitment at such time, or (B) to accept a single Draft (such Draft so accepted, a "Bankers' Acceptance") ------------------- for the account of the Canadian Borrower, and to purchase such Bankers' Acceptance on the date of the Initial Extension of Credit, having a Face Amount not to exceed such Lender's Unused Canadian Commitment at such time. The Canadian Borrowing, if any, shall consist of Canadian Borrower Advances made simultaneously by the Canadian Lenders ratably according to their Canadian Commitments. Each Drawing, if any, shall be comprised solely of Canadian Dollars, and shall consist of the creation and purchase of Bankers' Acceptances at or about the same time by the Canadian Lenders ratably in accordance with their respective Canadian Commitments. Amounts borrowed under this Section 2.01(d) and repaid or prepaid may not be reborrowed. (e) The Acquisition Advances. Subject to Section 2.16(c), each ------------------------ Acquisition Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each, an "Acquisition Advance") to the Borrower from ------------------- time to time on any Business Day during the period from the date of the Initial Extension of Credit until the Conversion Date in an amount for each such Advance not to exceed such Lender's Unused Acquisition Commitment at such time. Each Acquisition Borrowing shall be in an aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess thereof and shall consist of Acquisition Advances made simultaneously by the Acquisition Lenders ratably according to their Acquisition Commitments. Amounts borrowed under this Section 2.01(e) and repaid or prepaid may not be reborrowed. (f) The Swing Line Advances. The Borrower may request the Swing Line ----------------------- Bank to make, and the Swing Line Bank agrees on the terms and conditions hereinafter set forth, to make advances to the Borrower (each, a "Swing Line ---------- Advance") from time to time on any Business Day during the period from the date - ------- of the Initial Extension of Credit until the Termination Date (i) in an aggregate amount not to exceed at any time outstanding $3,000,000 (the "Swing ----- Line Facility") and (ii) in an amount for each such Swing Line Borrowing not to - ------------- 36 exceed the aggregate of the Unused Working Capital Commitments of the Working Capital Lenders at such time. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $100,000 or an integral multiple of $50,000 in excess thereof and shall be made as a Base Rate Advance. Within the limits of the Swing Line Facility and within the limits referred to in clause (ii) above, the Borrower may borrow under this Section 2.01(f), repay pursuant to Section 2.05(d) or prepay pursuant to Section 2.07(a) and reborrow under this Section 2.01(f). (g) Letters of Credit. The Issuing Bank severally agrees, on the ----------------- terms and conditions hereinafter set forth, to issue letters of credit for the account of the Borrower from time to time on any Business Day during the period from the date of the Initial Extension of Credit until 60 days before the Termination Date (i) in an aggregate Available Amount for all Letters of Credit issued by the Issuing Bank not to exceed at any time the Issuing Bank's Letter of Credit Commitment at such time and (ii) in an Available Amount for each such Letter of Credit not to exceed the lesser of (x) the Letter of Credit Facility at such time and (y) the Unused Working Capital Commitments of the Working Capital Lenders at such time. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the earlier of 60 days before the Termination Date and (A) in the case of a Standby Letter of Credit, one year after the date of issuance thereof and (B) in the case of a Trade Letter of Credit, 180 days after the date of issuance thereof. Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Borrower may request the issuance of Letters of Credit under this Section 2.01(g), repay any Letter of Credit Advances resulting from drawings thereunder pursuant to Section 2.05(e) and request the issuance of additional Letters of Credit under this Section 2.01(g). SECTION 2.02. Making the Advances. (a) Except as otherwise provided ------------------- in Sections 2.02(b), 2.03 and 2.04, each 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 Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances under the Term A Facility, the Term B Facility, the Working Capital Facility or the Acquisition Facility, (y) 11:00 A.M. (New York City time) on the first Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, or (z) 11:00 A.M. (New York City time) on the first Canadian Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Canadian Prime Rate Advances by the Applicable Borrower to the Agent, which shall give to each Appropriate Lender prompt notice thereof by telecopier. Each such notice of a Borrowing (a "Notice of Borrowing") shall be in writing, by ------------------- telecopier, in substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such Borrowing, (ii) Facility under which such Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such Borrowing and (v) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Appropriate Lender shall, before 11:00 A.M. (New York City time) on the date of such Borrowing, make available for the account of its Applicable Lending 37 Office to the Agent at the applicable Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing in accordance with the respective Commitments under the applicable Facility of such Lender and the other Appropriate Lenders. 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 (in like funds as received by the Agent) available to the Applicable Borrower by crediting the relevant Borrower's Account; provided, -------- however, that, in the case of any Working Capital Borrowing, the Agent shall - ------- first make a portion of such funds equal to the aggregate principal amount of any Letter of Credit Advances made by any Issuing Bank and by any other Working Capital Lender and outstanding on the date of such Working Capital Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to such Issuing Bank and such other Working Capital Lenders for repayment of such Letter of Credit Advances. (b) Each Swing Line Borrowing shall be made on notice, given not later than 11:00 A.M. (New York City time) on the date of the proposed Swing Line Borrowing, by the Borrower to the Swing Line Bank and the Agent. Each such notice, which shall be delivered by a Notice of Borrowing, shall be in writing, by telecopier, in substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such Borrowing (which shall be a Business Day), (ii) amount of such Borrowing and (iii) maturity of such Borrowing (which maturity shall be no later than the seventh day after the requested date of such Borrowing). The Swing Line Bank will make the amount thereof available to the Agent at the Agent's Account, in same day funds. 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 by crediting the relevant Borrower's Account. Upon written demand by the Swing Line Bank with a copy of such demand to the Agent, each other Working Capital Lender shall purchase from the Swing Line Bank, and the Swing Line Bank shall sell and assign to each such other Working Capital Lender, such other Lender's Pro Rata Share of such outstanding Swing Line Advance as of the date of such demand, by making available for the account of its Applicable Lending Office to the Agent for the account of the Swing Line Bank, by deposit to the Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Swing Line Advance to be purchased by such Lender. The Borrower hereby agrees to each such sale and assignment. Each Working Capital Lender agrees to purchase its Pro Rata Share of an outstanding Swing Line Advance on (i) the Business Day on which demand therefor is made by the Swing Line Bank, provided that notice of such demand is given not later than 11:00 -------- A.M. (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by the Swing Line Bank to any other Working Capital Lender of a portion of a Swing Line Advance, the Swing Line Bank represents and warrants to such other Lender that the Swing Line Bank is the legal and beneficial owner of such interest being assigned by it, but makes no other representation or warranty and assumes no responsibility with respect to such Swing Line Advance, the Loan Documents or any Loan Party. If and to the extent that any Working Capital Lender shall not have so made the amount of such Swing Line Advance available to the Agent, such Working Capital Lender 38 agrees to pay to the Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by the Swing Line Bank until the date such amount is paid to the Agent, at the Federal Funds Rate. If such Lender shall pay to the Agent such amount for the account of the Swing Line Bank on any Business Day, such amount so paid in respect of principal shall constitute a Swing Line Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Swing Line Advance made by the Swing Line Bank shall be reduced by such amount on such Business Day. (c) Anything in subsection (a) above to the contrary notwithstanding, (i) neither the Borrower, nor the Canadian Borrower, may select any Eurodollar Rate Advances for the initial Borrowing hereunder and for the period from the date of such initial Borrowing to the earlier of (x) a date agreed upon by the Agent and such Borrower or such Canadian Borrower, as the case may be, (but, in any event, not exceeding three months from the date of such initial Borrowing) and (y) the completion of syndication of the Facilities (as shall be specified by the Agent in a written notice to the Borrower and the Canadian Borrower) or for any Borrowing if the aggregate amount of such Borrowing is less than $1,000,000 (or the Equivalent thereof in Canadian Dollars) or if the obligation of the Appropriate Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.10 or 2.12 and (ii) with respect to Borrowings consisting of Eurodollar Rate Advances, the Term A Advances, the Term B Advances and the Working Capital Advances may not be outstanding as part of more than ten separate Borrowings in the aggregate, the Acquisition Advances may not be outstanding as part of more than three separate Borrowings and the Canadian Borrower Advances may not be outstanding as part of more than two separate Borrowings. (d) Each Notice of Borrowing shall be irrevocable and binding on the Applicable Borrower giving such notice. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Applicable Borrower giving such notice shall indemnify each Appropriate 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 Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date (but, in any event, excluding any loss of profits and the Applicable Margin applicable to such Advances). (e) Unless the Agent shall have received notice from an Appropriate Lender prior to the date of any Borrowing under a Facility under which such Lender has a Commitment that such Lender will not make available to the Agent such Lender's ratable portion of such Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Borrowing in accordance with subsection (a) or (b) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Applicable 39 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 Applicable Borrower severally agree to repay or pay to the Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date such amount is made available to such Applicable Borrower until the date such amount is repaid or paid to the Agent, at (i) in the case of the Borrower or the Canadian Borrower, the interest rate applicable at such time under Section 2.08 to Advances comprising such Borrowing and (ii) in the case of such Lender, the higher of (A) the Federal Funds Rate and (B) the cost of funds incurred by the Agent in respect of such amount. If such Lender shall pay to the Agent such corresponding amount, such amount so paid in respect of principal shall constitute such Lender's Advance as part of such Borrowing for all purposes. (f) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. Issuance of and Drawings and Reimbursement Under ------------------------------------------------ Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be - ----------------- -------------------- issued upon notice, given not later than 11:00 A.M. (New York City time) on the fifth Business Day prior to the date of the proposed issuance of such Letter of Credit, by the Borrower to the Issuing Bank, which shall give to the Agent prompt notice thereof by telecopier. Each such notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be in writing, by telecopier, ------------------ specifying therein the requested (A) date of such issuance (which shall be a Business Day), (B) Available Amount of such Letter of Credit, (C) expiration date of such Letter of Credit, (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit, and shall be accompanied by such application and agreement for letter of credit as the Issuing Bank may specify to the Borrower for use in connection with such requested Letter of Credit (a "Letter of Credit Agreement"). If the requested form of such Letter -------------------------- of Credit is acceptable to the Issuing Bank in its sole discretion, the Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Borrower at its office referred to in Section 8.02 or as otherwise agreed with the Borrower in connection with such issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern. (b) Letter of Credit Reports. The Issuing Bank shall furnish (A) to ------------------------ the Agent on the first Business Day of each week a written report summarizing issuance and expiration dates of Letters of Credit issued during the previous week and drawings during such week under all Letters of Credit, (B) to each Working Capital Lender on the first Business Day of the first two months of each quarterly period a written report summarizing issuance and expiration dates of Letters of Credit during the preceding month and drawings during such month under all 40 Letters of Credit and (C) to the Agent and each Working Capital Lender on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit. (c) Drawing and Reimbursement. The payment by the Issuing Bank of a ------------------------- draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by the Issuing Bank of a Letter of Credit Advance, which shall be a Base Rate Advance, in the amount of such draft. In the event of any drawing under a Letter of Credit, the Issuing Bank shall promptly notify the Agent, and the Agent shall promptly notify each Working Capital Lender and each Working Capital Lender shall purchase from the Issuing Bank, and the Issuing Bank shall sell and assign to each such Working Capital Lender, such Lender's Pro Rata Share of such outstanding Letter of Credit Advance as of the date of such purchase, by making available for the account of its Applicable Lending Office to the Agent for the account of the Issuing Bank, by deposit to the applicable Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Letter of Credit Advance to be purchased by such Lender. Promptly after receipt thereof, the Agent shall transfer such funds to the Issuing Bank. The Borrower hereby agrees to each such sale and assignment. Each Working Capital Lender agrees to purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i) the Business Day on which notice of the drawing under the related Letter of Credit is given by the Issuing Bank, provided such notice is given not later than 1:00 P.M. (New -------- York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if such notice is given after such time. Upon any such assignment by the Issuing Bank to any other Working Capital Lender of a portion of a Letter of Credit Advance, the Issuing Bank represents and warrants to such other Lender that the Issuing Bank is the legal and beneficial owner of such interest being assigned by it, free and clear of any liens, but makes no other representation or warranty and assumes no responsibility with respect to such Letter of Credit Advance, the Loan Documents or any Loan Party. If and to the extent that any Working Capital Lender shall not have so made the amount of such Letter of Credit Advance available to the Agent, such Working Capital Lender agrees to pay to the Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by the Issuing Bank until the date such amount is paid to the Agent, at the Federal Funds Rate for its account or the account of the Issuing Bank, as applicable. If such Lender shall pay to the Agent such amount for the account of the Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute a Letter of Credit Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Letter of Credit Advance made by the Issuing Bank shall be reduced by such amount on such Business Day. (d) Failure to Make Letter of Credit Advances. The failure of any ----------------------------------------- Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.03(c) shall not relieve any other Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Letter of Credit Advance to be made by such other Lender on such date. 41 SECTION 2.04. Drawings of Bankers' Acceptances. (a) Request for -------------------------------- ----------- Drawing. Each Drawing shall be made on notice, given not later than 12:00 noon - ------- (New York City time) on a Canadian Business Day at least two Canadian Business Days prior to the date of the proposed Drawing, by the Canadian Borrower to the Agent, which shall give each Canadian Lender prompt notice thereof by telecopier. Each notice of a Drawing (a "Notice of Drawing") shall be in ----------------- writing (including by telecopier), in substantially the form of Exhibit B-2 hereto, specifying therein the requested (i) date of such Drawing (which shall be a Canadian Business Day), (ii) aggregate Face Amount of such Drawing and (iii) initial Maturity Date for each Bankers' Acceptance comprising part of such Drawing; provided, however, that, if the Agent determines in good faith (which -------- ------- determination shall be conclusive and binding upon the Canadian Borrower) that the Drafts to be accepted and purchased as part of any Drawing cannot, due solely to the requested aggregate Face Amount thereof, be accepted and/or purchased ratably by the Canadian Lenders in accordance with Section 2.01(d), then the aggregate Face Amount of such Drawing (or the Face Amount of Bankers' Acceptances to be created and purchased by any Canadian Lender) shall be reduced to such lesser amount as the Agent determines will permit such Drafts comprising part of such Drawing to be so accepted and purchased and, unless the Canadian Borrower shall have given written notice to the contrary to the Agent, each Canadian Lender shall fund the difference between such Lender's ratable portion of the original aggregate Face Amount of such Drawing and the Face Amount of the Bankers' Acceptances to be created by such Lender after giving effect to such reduction in the form of a Canadian Prime Rate Advance, which shall be deemed for all purposes hereof to be a Canadian Borrower Advance made pursuant to Section 2.01(d). The Agent agrees that it will, as promptly as practicable, notify the Canadian Borrower of the unavailability of Bankers' Acceptances and, if applicable, of the date and the amount of each Canadian Prime Rate Advance to be made or actually made in accordance with the immediately preceding sentence. Each Draft in connection with any requested Drawing (A) shall be in a minimum amount of CN$100,000 or an integral multiple of CN$100,000 in excess thereof, and (B) shall be dated the date of the proposed Drawing. Each Canadian Lender shall, before 1:00 P.M. (Toronto time) on the date of each Drawing, complete one or more Drafts in accordance with the related Notice of Drawing, accept such Drafts and purchase the Bankers' Acceptances created thereby for the Drawing Purchase Price and shall, before 1:00 P.M. (Toronto time) on such date, make available for the account of its Applicable Lending Office to the Agent at its appropriate Agent's Account, in same day funds, the Drawing Purchase Price payable by such Lender for such Drawing less the Stamping Fee payable to such Lender with respect thereto under Section 2.09(d). Upon the fulfillment of the applicable conditions set forth in Article III, the Agent will make the funds it has received from the Canadian Lenders available to the Canadian Borrower by crediting the relevant Borrower's Account. (b) Limitations on Drawings. Anything in Section 2.04(a) to the ----------------------- contrary notwithstanding, the Canadian Borrower may not select a Drawing if the obligation of the 42 Canadian Lenders to purchase and accept Bankers' Acceptances shall then be suspended pursuant to Section 2.04(d) or 2.12. (c) Binding Effect of Notices of Drawing. Each Notice of Drawing ------------------------------------ shall be irrevocable and binding on the Canadian Borrower. In the case of any proposed Drawing, the Canadian Borrower shall indemnify each Canadian 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 Notice of Drawing for such Drawing the applicable conditions set forth in Article III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Drawing Purchase Price to be paid by such Lender as part of such Drawing when, as a result of such failure, such Drawing is not made on such date (but, in any event, excluding any loss of profit and the Stamping Fee applicable to such Drawing). (d) Circumstances Making Bankers' Acceptances Unavailable. (i) If, ----------------------------------------------------- with respect to any proposed Drawing, the Agent determines in good faith that circumstances affecting the money markets at the time any related Notice of Drawing is delivered or is outstanding will result in no market for the Bankers' Acceptances to be created in connection with such Drawing or an insufficient demand for such Bankers' Acceptances to allow the Lenders creating such Bankers' Acceptances to sell or trade the Bankers' Acceptances to be created and purchased or discounted by them hereunder in connection with such Drawing, then, upon notice to the Canadian Borrower and the Canadian Lenders thereof, (A) the Notice of Drawing with respect to such proposed Drawing shall be canceled and the Drawing requested therein shall not be made and (B) the right of the Canadian Borrower to request a Drawing shall be suspended until the Agent shall notify such Borrower that the circumstances causing such suspension no longer exist. In the case of any such cancelation of a Notice of Drawing, unless the Canadian Borrower shall give written notice to the contrary to the Agent, the cancelation of any such Notice of Drawing shall be deemed to be the giving by the Canadian Borrower of a Notice of Borrowing for Canadian Borrower Advances consisting of Canadian Prime Rate Advances in an aggregate principal amount equal to the aggregate Face Amount of such proposed Drawing and the Canadian Lenders shall, subject to the terms and conditions hereof applicable to the making of Canadian Borrower Advances, make such Advances available to the Canadian Borrower, if practicable, on the same Business Day as the date of the requested Drawing, and otherwise on the next Business Day. The Agent agrees that it will, as promptly as practicable, notify the Canadian Borrower of the unavailability of Bankers' Acceptances and, if applicable, of the date and the amount of each Canadian Prime Rate Advance to be made or actually made in accordance with the immediately preceding sentence. (ii) Upon the occurrence and during the continuance of any Default, the obligation of the Canadian Lenders to create and purchase Bankers' Acceptances shall be suspended. 43 (e) Assumptions of the Agent. Unless the Agent shall have received ------------------------ notice from a Canadian Lender prior to the date of any Drawing that such Lender will not make available to it such Lender's ratable share of the proceeds of such Drawing in accordance with Section 2.04(a), the Agent may assume that such Lender has made such ratable share available to it on the date of such Drawing in accordance with Section 2.04(a) and the Agent may, in reliance upon such assumption, make available to the Canadian Borrower on such date a corresponding amount. If and to the extent that any such Lender shall not have so made such ratable share available to the Agent, such Lender and the Canadian Borrower severally agree to repay or pay 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 Canadian Borrower until the date such amount is repaid or paid to the Agent, at (i) in the case of the Canadian Borrower, a rate per annum equal to the BA Rate used in calculating the Drawing Purchase Price with respect to such Drawing, and (ii) in the case of such Lender, the Canadian Interbank Rate. If such Lender shall pay to the Agent such corresponding amount, such amount so paid shall constitute such Lender's ratable share of the proceeds of such Drawing for all purposes under this Agreement. (f) Presigned Draft Forms. To enable the Canadian Lenders to create --------------------- Bankers' Acceptances in accordance with Section 2.01(d) and this Section 2.04, the Canadian Borrower shall supply each Canadian Lender, upon the Canadian Borrower's execution of this Agreement and from time to time thereafter, with such number of Drafts provided to the Canadian Borrower by the Agent as the Agent may from time to time reasonably request, duly endorsed and executed on behalf of the Canadian Borrower by any one or more of its duly authorized officers. Each Canadian Lender shall exercise such care in the custody and safekeeping of any Drafts in its possession from time to time as it would exercise in the custody and safekeeping of similar property owned by it. The signatures of officers of the Canadian Borrower on Drafts may be mechanically reproduced in facsimile and Bankers' Acceptances bearing such facsimile signatures shall be binding upon the Canadian Borrower as if they had been manually signed by such officers. Notwithstanding that any of the individuals whose manual or facsimile signature appears on any Draft as one of such officers may no longer hold office at the date of such draft or at the date of its acceptance by a Lender hereunder or at any time thereafter, any Draft or Bankers' Acceptance so signed shall be valid and binding upon, and enforceable against, the Canadian Borrower. The Canadian Borrower hereby appoints each Canadian Lender holding a Draft with respect to a Drawing made under this Agreement, as its attorney-in-fact to, from time to time, complete such Draft to adequately reflect such Drawing made by such Canadian Lender. (g) Distribution of Bankers' Acceptances. Bankers' Acceptances ------------------------------------ purchased by a Canadian Lender in accordance with the terms of Section 2.01(d) and this Section 2.04 may, in such Lender's sole discretion, be held by such Lender for its own account until the applicable Maturity Date or sold, rediscounted or otherwise disposed of by it at any time prior thereto in any relevant market therefor. 44 (h) Failure to Fund in Respect of Drawings. The failure of any -------------------------------------- Canadian Lender to fund the Drawing Purchase Price to be funded by it as part of any Drawing shall not relieve any other Canadian Lender of its obligation hereunder to fund its Drawing Purchase Price on the date of such Drawing, but no Canadian Lender shall be responsible for the failure of any other Canadian Lender to fund the Drawing Purchase Price to be funded by such other Canadian Lender on the date of any Drawing. SECTION 2.05. Repayment of Advances. (a) Term Advances, Canadian --------------------- ----------------------- Borrower Advances and Drawings under the Canadian Facility. The Borrower shall - ---------------------------------------------------------- repay to the Agent for the ratable account of the Term A Lenders and Term B Lenders the aggregate outstanding principal amount of the Term A Advances and Term B Advances, respectively, and the Canadian Borrower shall repay to the Agent for the ratable account of the Canadian Lenders the aggregate outstanding principal amount of the Canadian Borrower Advances and the aggregate Face Amount of the Banker's Acceptances, as applicable, on the following dates in the amounts indicated (which amounts shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.07):
Date Amount - ---------------- ------------------ Term A Facility Term B Facility Canadian Facility ------------------ --------------------- ----------------------- December 31, 1999 - $ 250,000 - March 31, 2000 - 250,000 CN $146,000 June 30, 2000 $1,195,400 250,000 CN $146,000 September 30, 2000 1,195,400 250,000 CN $146,000 December 31, 2000 1,552,300 500,000 CN $146,000 March 31, 2001 1,552,300 500,000 CN $146,000 June 30, 2001 1,552,300 500,000 CN $146,000 September 30, 2001 1,552,300 500,000 CN $146,000 December 31, 2001 2,150,000 500,000 CN $146,000 March 31, 2002 2,150,000 500,000 CN $117,120 June 30, 2002 2,150,000 500,000 CN $117,120 September 30, 2002 2,150,000 500,000 CN $117,120 December 31, 2002 2,150,000 500,000 CN $117,120 March 31, 2003 2,150,000 500,000 CN $117,120 June 30, 2003 2,150,000 500,000 CN $117,120 September 30, 2003 2,150,000 500,000 CN $117,120 December 31, 2003 2,150,000 500,000 CN $117,120
45
Amount ------------------ Date Term A Facility Term B Facility Canadian Facility - ---------------- ------------------ --------------------- ----------------------- March 31, 2004 2,150,000 500,000 CN $117,120 June 30, 2004 2,150,000 500,000 CN $117,120 September 30, 2004 2,150,000 500,000 CN $117,120 December 31, 2004 2,150,000 500,000 CN $117,120 March 31, 2005 2,150,000 500,000 CN $117,120 June 30, 2005 2,150,000 500,000 CN $117,120 September 30, 2005 2,150,000 500,000 CN $117,120 December 31, 2005 - 9,000,000 - March 31, 2006 - 9,000,000 - June 30, 2006 - 9,000,000 - September 30, 2006 - 9,000,000 - December 31, 2006 - 12,000,000 - March 31, 2007 - 12,000,000 - June 30, 2007 - 12,000,000 - September 30, 2007 - 12,000,000 -
provided, however, that the final principal installment of the Term A Facility, - -------- ------- the Term B Facility and the Canadian Facility, respectively, shall in any event and in each case be in an amount equal to the aggregate principal amount of the Term A Advances, the Term B Advances, the Canadian Borrower Advances and the Bankers' Acceptances, respectively, then outstanding. Any payment by the Canadian Borrower of any Bankers' Acceptances in accordance with this Section 2.05(a) shall, to the extent of such payment, satisfy the obligations of the Canadian Borrower under the Bankers' Acceptances to which it relates and, in the case of a Bankers' Acceptance, the Canadian Lender that has accepted such Bankers' Acceptance shall, to the extent of such payment to such Canadian Lender, thereafter be solely responsible for the payment thereof. (b) Working Capital Advances. The Borrower shall repay to the Agent ------------------------ for the ratable account of the Working Capital Lenders on the Termination Date the aggregate outstanding principal amount of the Working Capital Advances then outstanding. (c) Acquisition Advances. The Borrower shall repay to the Agent for -------------------- the ratable account of the Acquisition Lenders (x) on each March 31, June 30, September 30 and December 31, commencing December 31, 2002, an amount equal to 1/12 of the aggregate principal balance of Acquisition Advances outstanding on the Conversion Date (after giving effect to any prepayments on the Conversion Date required by Section 2.07(b)(i) or (ii) and 46 which amount shall be reduced as a result of the application of further prepayments in accordance with the order of priority set forth in the applicable paragraph of Section 2.07) or (y) on September 30, 2005 an amount equal to the aggregate principal amount of the Acquisition Advances then outstanding. (d) Swing Line Advances. The Borrower shall repay to the Agent, for ------------------- the account of the Swing Line Bank and each other Working Capital Lender which has made a Swing Line Advance, the outstanding principal amount of each Swing Line Advance made by each of them on the earlier of the maturity date specified in the applicable Notice of Borrowing (which maturity shall be no later than the seventh day after the requested date of such Borrowing) and the Termination Date. (e) Letter of Credit Advances. (i) The Borrower shall repay to the ------------------------- Agent for the account of the Issuing Bank and each other Working Capital Lender that has made a Letter of Credit Advance on the earlier of the Termination Date and on demand the outstanding principal amount of each Letter of Credit Advance made by each of them. (ii) The Obligations of the Borrower under this Agreement, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances: (A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the "L/C Related Documents"); --------------------- (B) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (C) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (D) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; 47 (E) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; (F) any exchange, release or non-perfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the Obligations of the Borrower in respect of the L/C Related Documents; or (G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. SECTION 2.06. Termination or Reduction of the Commitments. (a) ------------------------------------------- Optional. (i) The Borrower may, upon at least five Business Days' notice to - -------- the Agent, terminate in whole or reduce in part the unused portions of the Term A Commitments and the Term B Commitments, the Unused Acquisition Commitments and the Unused Working Capital Commitments; provided, however, that each partial -------- ------- reduction of a Facility (i) shall be in an aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess thereof and (ii) shall be made ratably among the Appropriate Lenders in accordance with their Commitments with respect to such Facility. (ii) The Canadian Borrower may, upon at least five Canadian Business Days' notice to the Agent, terminate in whole or reduce in part the Unused Canadian Commitments; provided, however, that each partial reduction of the -------- ------- Canadian Facility (i) shall be in an aggregate amount of CN$500,000 or an integral multiple of CN$100,000 in excess thereof and (ii) shall be made ratably among the Canadian Lenders in accordance with their Canadian Commitments. (b) Mandatory. (i) On the date of the Term A Borrowing, after --------- giving effect to such Term A Borrowing, and from time to time thereafter upon each repayment or prepayment of the Term A Advances, the aggregate Term A Commitments of the Term A Lenders shall be automatically and permanently reduced, on a pro rata basis, by an amount equal to the amount by which the aggregate Term A Commitments immediately prior to such reduction exceed the aggregate unpaid principal amount of the Term A Advances then outstanding. (ii) On the date of the Term B Borrowing, after giving effect to such Term B Borrowing, and from time to time thereafter upon each repayment or prepayment of the Term B Advances, the aggregate Term B Commitments of the Term B Lenders shall be automatically and permanently reduced, on a pro rata basis, by an amount equal to the amount by which the aggregate Term B Commitments immediately prior to such reduction exceed the aggregate unpaid principal amount of the Term B Advances then outstanding. 48 (iii) On the date of the Canadian Borrowing, after giving effect to such Canadian Borrowing, and from time to time thereafter upon each repayment or prepayment of the Canadian Borrower Advances and upon each repayment or prepayment of any outstanding Bankers' Acceptances, the aggregate Canadian Commitments shall be automatically and permanently reduced, on a pro rata basis, by an amount equal to the amount by which the aggregate Canadian Commitments immediately prior to such reduction exceed the sum of the aggregate principal amount of the Canadian Borrower Advances outstanding at such time, and the aggregate Face Amount of all Bankers' Acceptances created and purchased and outstanding at such time. (iv) The Working Capital Facility shall be automatically and permanently reduced on the date on which any prepayment thereof is required to be made pursuant to Section 2.07(b)(i) or (ii) by an amount equal to the applicable Reduction Amount, provided that each such reduction of the Working -------- Capital Facility shall be made ratably among the Working Capital Lenders in accordance with their Working Capital Commitments. (v) The Acquisition Facility shall be automatically and permanently reduced on the date on which any prepayment thereof is required to be made pursuant to Section 2.07(b)(i) or (ii) by an amount equal to the Acquisition Reduction Amount, provided that each such reduction of the Acquisition Facility -------- shall be made ratably among the Acquisition Lenders in accordance with their Acquisition Commitments. In addition, from and after the Conversion Date, upon each repayment or prepayment of the Acquisition Advances, the Acquisition Commitments of the Acquisition Lenders shall be automatically and permanently reduced, on a pro rata basis, by an aggregate amount equal to the amount by which the aggregate Acquisition Commitments immediately prior to such reduction exceed the aggregate unpaid principal amount of the Acquisition Advances then outstanding. (vi) The Swing Line Facility and the Letter of Credit Facility shall each be automatically and permanently reduced from time to time on the date of each reduction in the Working Capital Facility by the amount, if any, by which each such Facility exceeds the Working Capital Facility after giving effect to such reduction of the Working Capital Facility. SECTION 2.07. Prepayments. (a) Optional. Each Applicable Borrower ----------- -------- may, upon at least one Business Day's notice in the case of Base Rate Advances or Canadian Prime Rate Advances and three Business Days' notice in the case of Eurodollar Rate Advances, in each case to the Agent (received not later than 11:00 A.M. (New York City time)) stating the proposed date, whether the prepayment will be of Working Capital Advances or of Term Advances and Acquisition Advances and the aggregate principal amount of the prepayment, and if such notice is given the Applicable Borrower shall, prepay (i) Working Capital Advances or (ii) Term Advances and Acquisition Advances, as set forth in the notice described above, comprising part of the same Borrowings, in whole or ratably in part, in an aggregate principal amount equal to 49 the amount set forth in the notice described above, together with accrued interest to the date of such prepayment on the aggregate principal amount prepaid unless such prepayment is with respect to a Swing Line Advance or a Working Capital Advance which is a Base Rate Advance; provided, however, that -------- ------- (x) each partial prepayment (other than a prepayment of Swing Line Advances) shall be in an aggregate principal amount of $500,000 (or its Equivalent in Canadian Dollars) or an integral multiple of $100,000 (or its Equivalent in Canadian Dollars) in excess thereof (or, with respect to Swing Line Advances, shall be in an aggregate principal amount of $100,000 or an integral multiple of $50,000 in excess thereof) and (y) if any prepayment of a Eurodollar Rate Advance is made on a date other than the last day of an Interest Period for such Advance the Applicable Borrower shall also pay any amounts owing pursuant to Section 8.04(c). Each such prepayment that is made with respect to the Term Advances and the Acquisition Advances shall be allocated, subject to Section 2.07(c), among the Term A Facility, the Term B Facility and the Acquisition Facility ratably (based on the then-outstanding aggregate principal amount of the Advances under each such Facility) and, within each such Facility, applied (i) first, in order of maturity to the remaining principal installments thereof due in the next twelve months and (ii) second, ratably to the remaining principal installments thereof. Each such prepayment which is made with respect to Canadian Borrower Advances shall be applied to the Canadian Facility, ratably to the remaining principal installments thereof. The Canadian Borrower may not prepay the amount of any Drawing pursuant to this Section 2.07(a), except on the Maturity Date thereof. (b) Mandatory. (i) The Borrower shall, no later than the 30th day --------- following the date on which it delivers the financial statements referred to in Section 5.03(d) for the Fiscal Year ending on or about December 31, 2000 and for each Fiscal Year thereafter (but in any event within 120 days after the end of each Fiscal Year), prepay an aggregate principal amount of Advances comprising part of the same Borrowings equal to 75% of the amount of Excess Cash Flow of the Borrower and its Subsidiaries for such Fiscal Year, provided that the amount -------- of such prepayment shall be reduced to 50% of the amount of Excess Cash Flow of the Borrower and its Subsidiaries for such Fiscal Year if the Leverage Ratio of the Parent Guarantor and its Subsidiaries as of the end of such Fiscal Year is equal to or less than 4.00 to 1.00. Each such prepayment of Advances shall be allocated as follows: first, subject to Section 2.07(c), among the Term A Facility, the Term ----- B Facility and the Acquisition Facility ratably (based on the then- outstanding aggregate principal amount of the Advances under each such Facility) and, within each such Facility, applied ratably to the remaining principal installments thereof, and second, to the extent that no Term Advances remain outstanding and the ------ Acquisition Facility has been fully repaid and permanently reduced in full, to the Working Capital Facility as set forth in clause (v) below. 50 (ii) (x) The Borrower shall, on the date of receipt of the Net Cash Proceeds by the Parent Guarantor or any of its Domestic Subsidiaries from (A) the sale, lease, transfer or other disposition of (1) any shares of capital stock of a Subsidiary of the Borrower (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Borrower or a Subsidiary of the Borrower), (2) all or substantially all the assets of any division or line of business of the Borrower or any Subsidiary of the Borrower or (3) any other assets of the Borrower or any Subsidiary of the Borrower outside of the ordinary course of business of the Borrower or such Subsidiary of the Borrower (other than any sale, lease, transfer or other disposition permitted pursuant to Section 5.02(e)(vi), Section 5.02(e)(xi) or Section 5.02(e)(xii)), (B) the incurrence or issuance by the Parent Guarantor or any of its Domestic Subsidiaries of any Debt (other than Debt incurred or issued pursuant to Section 5.02(b)), (C) (1) the sale or issuance by the Parent Guarantor or any of its Domestic Subsidiaries to any Person (other than the Parent Guarantor or any of its Domestic Subsidiaries) of any capital stock or other ownership or profit interest, any securities convertible into or exchangeable for capital stock or other ownership or profit interest or any warrants, rights or options to acquire capital stock or other ownership or profit interest, in each case of the Parent Guarantor or any of its Domestic Subsidiaries or (2) without duplication of clause (1) of this sub-clause (C), the receipt by the Parent Guarantor or any of its Domestic Subsidiaries of any capital contribution (other than from the Parent Guarantor or any of its Domestic Subsidiaries), other than (aa) in each case any such issuance or sale of such equity interests by or to, or receipt of any such capital contribution by, the Parent Guarantor or any of its Domestic Subsidiaries for the sole purpose of financing a Permitted Acquisition (including any issuance to one or more sellers in a Permitted Acquisition), (bb) Net Cash Proceeds from sales and issuances of such equity interests by or to, and the receipt of such capital contributions by, the Parent Guarantor or any of its Domestic Subsidiaries in an aggregate amount not to exceed $750,000 during the term of this Agreement and (cc) the Equity Contributions, or (D) any Extraordinary Receipt received by or paid to or for the account of the Parent Guarantor or any of its Domestic Subsidiaries and not otherwise included in clause (A), (B) or (C) above, prepay an aggregate principal amount of Advances comprising part of the same Borrowings equal to the amount of such Net Cash Proceeds; provided that, in the case of any -------- event described in clause (A) of this Section 2.07(b)(ii)(x), if the Borrower shall deliver to the Agent a certificate of a Responsible Officer of the Borrower to the effect that the Borrower and its Subsidiaries intend to apply the Net Cash Proceeds from such event (or a portion thereof specified in such certificate), within 270 days after receipt of such Net Cash Proceeds, to acquire (xx) property or assets (other than Debt (which, for purposes of this parenthetical, shall be deemed to exclude Cash Equivalents and Working Capital Advances) or capital stock) to be used in the business of the Borrower or any of its Subsidiaries, (yy) the capital stock of a Person that becomes a Subsidiary of the Borrower as a result of the acquisition of such capital stock by the Borrower or any of its Subsidiaries or (zz) capital stock constituting a minority interest in any Person that at such time is a Subsidiary of the Borrower (provided that any such Subsidiary described in clauses (yy) or (zz) -------- above is primarily engaged in the business of the Borrower or any of its Subsidiaries), then no prepayment shall be required pursuant to this Section 2.07(b)(ii)(x) in respect of the Net Cash Proceeds in 51 respect of such event (or the portion of such Net Cash Proceeds specified in such certificate, if applicable) except to the extent of any such Net Cash Proceeds therefrom that have not been so applied by the end of such 270-day period, at which time a prepayment shall be required in an amount equal to the amount of such Net Cash Proceeds that have not been so applied; provided, -------- however, that the Borrower shall not be required to prepay Advances pursuant to - ------- clause (A) of this Section 2.07(b)(ii)(x) to the extent that the aggregate amount of Net Cash Proceeds from events described in such clause (A) received during the term of this Agreement and not applied to acquire assets, property or capital stock in accordance with and within the period prescribed by the first proviso of this Section 2.07(b)(ii)(x) is less than $7,500,000. Each such prepayment shall be allocated as follows: first, subject to Section 2.07(c), among the Term A Facility, the Term ----- B Facility and the Acquisition Facility ratably (based on the then- outstanding aggregate principal amount of the Advances under each such Facility) and, within each such Facility, applied ratably to the remaining principal installments thereof, and second, to the extent that no Term Advances remain outstanding and the ------ Acquisition Facility has been fully repaid and permanently reduced in full, to the Working Capital Facility as set forth in clause (v) below; and (y) The Canadian Borrower shall, on the date of receipt of the Net Cash Proceeds by the Canadian Borrower or any of its Subsidiaries from (A) the sale, lease, transfer or other disposition of any assets of the Canadian Borrower or any of its Subsidiaries (other than any sale, lease, transfer or other disposition of assets pursuant to Section 5 02 (e)), (B) the incurrence or issuance by the Canadian Borrower or any of its Subsidiaries of any Debt (other than Debt incurred or issued pursuant to Section 5.02 (b)), (C) the sale or issuance by the Canadian Borrower or any of its Subsidiaries to any Person (other than the Canadian Borrower or any of its Subsidiaries) of any capital stock or other ownership or profit interest, any securities convertible into or exchangeable for capital stock or other ownership or profit interest or any warrants, rights or options to acquire capital stock or other ownership or profit interest, in each case of the Canadian Borrower or any of its Subsidiaries, or (D) any Extraordinary Receipt received by or paid to or for the account of the Canadian Borrower or any of its Subsidiaries and not otherwise included in clause (A), (B) or (C) above, prepay an aggregate principal amount of the Canadian Borrower Advances or Drawings comprising part of the same Borrowing, equal to the amount of such Net Cash Proceeds. (iii) The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Working Capital Advances comprising part of the same Borrowings, the Swing Line Advances and the Letter of Credit Advances equal to the amount by which (A) the sum of the aggregate principal amount of (x) the Working Capital Advances, (y) the Swing Line Advances and (z) the Letter of Credit Advances then outstanding, plus the aggregate Available Amount of all Letters of Credit then outstanding, exceeds (B) the Working Capital Facility. 52 (iv) The Borrower shall, on each Business Day, pay to the Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in such Account to equal the amount by which the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on such Business Day. (v) Prepayments of the Working Capital Facility made pursuant to clause (i) or (ii) above shall be first applied to prepay Letter of Credit ----- Advances then outstanding until such Advances are paid in full, second applied ------ to prepay Swing Line Advances then outstanding until such Advances are paid in full, third applied to prepay Working Capital Advances then outstanding ----- comprising part of the same Borrowings (in the order designated by the Borrower) until such Advances are paid in full and fourth deposited in the L/C Cash ------ Collateral Account to cash collateralize 100% of the Available Amount of the Letters of Credit then outstanding; and the amount remaining (if any) after the prepayment in full of the Letter of Credit Advances, Swingline Advances and Working Capital Advances then outstanding and the cash collateralization of the aggregate Available Amount of Letters of Credit then outstanding (the sum of such prepayment amounts, cash collateralization amounts and remaining amount being referred to herein as the "Reduction Amount") may be retained by the ---------------- Borrower and the Working Capital Facility shall be permanently reduced as set forth in Section 2.06(b)(iv). Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the Issuing Bank or Working Capital Lenders, as applicable. (vi) Prepayments of the Acquisition Facility pursuant to Section 2.07(a) or 2.07(b)(i) or (ii) shall be applied to prepay Acquisition Advances then outstanding comprising part of the same Borrowings until such Acquisition Advances are paid in full, and thereafter the Acquisition Facility shall be permanently reduced, in accordance with Section 2.06(b)(v), by the amount of any prepayment of the Term Facilities and the Acquisition Facility pursuant to Section 2.07(b)(i) or (ii) remaining (if any) after the prepayment in full of the Term Advances and the Acquisition Advances then outstanding (the sum of the aggregate amount applied to prepay Acquisition Advances and such remaining amount being referred to herein as the "Acquisition Reduction Amount"). ---------------------------- (vii) The Canadian Borrower shall, on each Canadian Business Day, pay to the Agent for deposit in a cash collateral account an amount sufficient to cause the aggregate amount on deposit in such account to equal the amount by which the aggregate Face Amount of all Bankers' Acceptances then outstanding under the Canadian Facility exceeds the Canadian Facility on such Canadian Business Day. (viii) All prepayments under this subsection (b), other than prepayments of Base Rate Advances pursuant to clause (iii), shall be made together with accrued interest to the date of 53 such prepayment on the principal amount prepaid, together with any amounts owing pursuant to Section 8.04(c). (ix) No prepayment shall be required to be made under subsections (b)(i) and (ii) of this Section 2.07 unless the amount of such prepayment exceeds $500,000 in the aggregate. (c) Term B Opt-Out. With respect to any prepayment of the Term -------------- Advances and Acquisition Advances pursuant to Section 2.07(b), the Agent shall ratably pay the Term A Lenders, Term B Lenders and Acquisition Lenders as provided in Section 2.07; provided, however, that any Term B Lender, at its -------- ------- option, may, to the extent that Term A Advances or Acquisition Advances are outstanding at the time of such prepayment, elect not to accept such prepayment, in which event the provisions of the next sentence shall apply. Any Term B Lender may, to the extent that Term A Advances or Acquisition Advances are outstanding at the time of any prepayment referred to in any Prepayment Notice, elect not to accept its ratable share of such prepayment, by notice given to the Agent not later than 11:00 A.M. (New York City time) on the first Business Day prior to the scheduled Prepayment Date (such Term B Lender being a "Declining --------- Lender"). On the Prepayment Date an amount equal to that portion of the - ------ Prepayment Amount available to prepay Term B Advances (less any amounts that would otherwise be payable to the Declining Lenders) shall be applied to prepay Term B Advances owing to Term B Lenders other than Declining Lenders and any amounts that would otherwise have been applied to prepay Term B Advances owing to Declining Lenders shall instead be applied to prepay the remaining Term A Advances and Acquisition Advances as provided in Sections 2.07(a) and 2.07(b), provided that on prepayment in full of all Term A Advances and all Acquisition - -------- Advances, the remainder of any Prepayment Amount shall be applied ratably to prepay Term B Advances owing to the Declining Lenders. SECTION 2.08. Interest. (a) Availability of Types of Advances. -------- --------------------------------- Subject to the provisions of Sections 2.10 and 2.13, Canadian Borrower Advances may be Canadian Prime Rate Advances only. (b) Scheduled Interest. The Applicable Borrower shall pay interest ------------------ on the unpaid principal amount of each Advance owing to each Lender from the date of such 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 Advance is a ------------------ Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time plus (B) (1) in the case of any ---- Term B Advance, 2.50% or (2) in the case of any other Advance, the Applicable Margin in effect from time to time, payable in arrears quarterly on the last Business Day of each March, June, September and December during such periods, on the date such Base Rate Advance shall be Converted, on the date 54 of any repayment thereof pursuant to Section 2.05, on the date of any prepayment thereof to the extent required under Section 2.07 and on the Termination Date. (ii) Eurodollar Rate Advances. During such periods as such Advance ------------------------ is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurodollar Rate for such Interest Period for such Advance plus (B) (1) in ---- the case of any Term B Advance, 3.50% or (2) in the case of any other Advance, the Applicable Margin in effect on the first day of such Interest Period, 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, on the date such Eurodollar Rate Advance shall be Converted, on the date of any repayment thereof pursuant to Section 2.05, on the date of any prepayment thereof to the extent required under Section 2.07 and on the Termination Date. (iii) Canadian Prime Rate Advances. During such periods as such ---------------------------- Advance is a Canadian Prime Rate Advance, a rate per annum equal at all times to the sum of (A) the Canadian Prime Rate in effect from time to time plus (B) the Applicable Margin for Canadian Prime Rate Advances in effect ---- from time to time, payable in arrears quarterly on the last Business Day of each March, June, September and December during such periods, on the date such Canadian Prime Rate Advance shall be Converted, on the date of any repayment thereof pursuant to Section 2.05, on the date of any prepayment thereof to the extent required under Section 2.07 and on the Termination Date. (c) Default Interest. Upon the occurrence and during the ---------------- continuance of an Event of Default, the Agent may, and upon the request of the Required Lenders shall, require that the Applicable Borrower shall pay interest on (i) the unpaid principal amount of each Advance made to such Applicable Borrower and owing to each Lender, payable in U.S. Dollars or Canadian Dollars, as the case may be, in arrears on the dates referred to in clauses (b)(i) through (b)(iii) above or 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 such Advance pursuant to clauses (b)(i) through (b)(iii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable under the Loan Documents that is not paid when due, from the date such amount shall be due (or, with respect to amounts other than principal, interest and fees, from 30 days after such amount is due) until such amount shall be paid in full, payable in U.S. Dollars or Canadian Dollars, as the case may be, in arrears on the date such amount shall be paid in full or on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid, in the case of interest, on the Type of Advance on which such interest has accrued pursuant to clauses (b)(i) through (b)(iii) above, and, in all other cases, on Base Rate Advances pursuant to clause (b)(i) above. 55 (d) Notice of Interest Rate. Promptly after receipt of a Notice of ----------------------- Borrowing pursuant to Section 2.02(a), the Agent shall give notice to the Applicable Borrower and each Appropriate Lender of the applicable interest rate determined by the Agent for purposes of clause (b) above. (e) BA Rate Determination. If the Reuters Screen CDOR Page is not --------------------- available for the timely determination of the BA Rate, and the BA Rate for any Bankers' Acceptances can not otherwise be determined in a timely manner in accordance with the definition of "BA Rate", the Agent shall forthwith notify the Canadian Borrower and the Canadian Lenders that such interest rate cannot be determined for such Bankers' Acceptances, and the obligation of the Canadian Lenders to make, or to renew, Bankers' Acceptances shall be suspended until the Agent shall notify the Canadian Borrower and the Canadian Lenders that the circumstances causing such suspension no longer exist. (f) Interest Act (Canada). Whenever a rate of interest hereunder is --------------------- calculated on the basis of a year (the "deemed year") which contains fewer days ----------- than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for purposes of the Interest Act (Canada) by multiplying such rate of interest by the number of days in the deemed year and dividing it by the actual number of days in the calendar year of calculation. (g) Nominal Rates; No Deemed Reinvestment. The principle of deemed ------------------------------------- reinvestment of interest shall not apply to any interest calculation under this Agreement; all interest payments to be made hereunder shall be paid without allowance or deduction for reinvestment or otherwise, before and after maturity, default and judgment. The rates of interest specified in this Agreement are intended to be nominal rates and not effective rates. Interest calculated hereunder shall be calculated using the nominal rate method and not the effective rate method of calculation. (h) Interest Paid by the Canadian Borrower. Notwithstanding any -------------------------------------- provision of this Agreement, in no event shall the aggregate "interest" (as defined in Section 347 of the Criminal Code (Canada)) payable by the Canadian Borrower under this Agreement exceed the effective annual rate of interest on the "credit advanced" (as defined in Section 347 of the Criminal Code (Canada)) under this Agreement lawfully permitted by that Section and, if any payment, collection or demand pursuant to this Agreement in respect of "interest" (as defined in Section 347 of the Criminal Code (Canada)) is determined to be contrary to the provisions of that Section, such payment, collection or demand shall be deemed to have been made by mutual mistake of the Canadian Borrower and the Canadian Lenders and the amount of such payment or collection shall be refunded to the Canadian Borrower. For the purposes of this Agreement, the effective annual rate of interest shall be determined in accordance with generally accepted actuarial practices and principles over the relevant term and, in the event of a dispute, a 56 certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Canadian Lenders will be prima facie evidence of such rate. SECTION 2.09. Fees. (a) Commitment Fees. (x) The Borrower shall ---- --------------- pay to the Agent for the account of the Working Capital Lenders a commitment fee, from the date hereof in the case of each Initial Lender that is a Working Capital Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Working Capital Lender in the case of each other Lender until the Termination Date, payable in arrears quarterly on the last Business Day of each March, June, September and December, commencing December 31, 1999, and on the Termination Date, at a rate per annum equal to the Applicable Margin on the average daily Unused Working Capital Commitment of such Lender; and (y) the Borrower shall pay to the Agent for the account of the Acquisition Lenders a commitment fee, from the date hereof in the case of each Initial Lender that is an Acquisition Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became an Acquisition Lender in the case of each other Lender until the Conversion Date, payable in arrears quarterly on the last Business Day of each March, June, September and December, commencing December 31, 1999, and on the Conversion Date, at a rate per annum equal to the Applicable Margin on the average daily Unused Acquisition Commitment of such Lender. (b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the -------------------------- Agent for the account of each Working Capital Lender a commission, payable in arrears quarterly on the last Business Day of each March, June, September and December, commencing December 31, 1999, and on the Termination Date, on such Lender's Pro Rata Share of the average daily aggregate Available Amount during such quarter of all Letters of Credit outstanding from time to time at the rate per annum equal to the Applicable Margin for Eurodollar Rate Borrowings under the Working Capital Facility as in effect from time to time. (ii) The Borrower shall pay to the Issuing Bank, for its own account, such commissions, issuance fees, fronting fees, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Borrower and the Issuing Bank shall agree. (c) Agent's Fees. Each Applicable Borrower shall pay to the Agent ------------ for its own account such fees as may from time to time be agreed between such Applicable Borrower and the Agent. (d) Stamping Fees. The Canadian Borrower shall, on the date of each ------------- Drawing and on the date of each renewal of any outstanding Bankers' Acceptances, pay to the Agent, in Canadian Dollars, for the ratable account of the Canadian Lenders accepting Drafts and purchasing Bankers' Acceptances, the Stamping Fee with respect to such Bankers' Acceptances. The Canadian Borrower irrevocably authorizes each such Canadian Lender to deduct the Stamping Fee payable with respect to each Bankers' Acceptance of such Canadian Lender from 57 the Drawing Purchase Price payable by such Canadian Lender in respect of such Bankers' Acceptance in accordance with Section 2.04 and to apply such amount so withheld to the payment of such Stamping Fee for the account of the Canadian Borrower and, to the extent such Stamping Fee is so withheld and legally permitted to be so applied, the Canadian Borrower's obligations under the preceding sentence in respect of such Stamping Fee shall be satisfied. SECTION 2.10. Conversion of Advances. (a) Optional. (X) 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 or any portion of the Advances of one Type comprising the same Borrowing into Advances of the other Type; provided, however, that if any -------- ------- Conversion of Eurodollar Rate Advances into Base Rate Advances is made other than on the last day of an Interest Period for such Eurodollar Rate Advances the Borrower shall also pay any amounts owing pursuant to Section 8.04(c), 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(c), no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(c) and each Conversion of Advances comprising part of the same Borrowing under any Facility shall be made ratably among the Appropriate Lenders in accordance with their Commitments under such Facility. Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the Borrower; and (Y) The Canadian Borrower may on --- any Business Day, upon notice given to the Agent not later than 12:00 noon (New York City time) on a Business Day at least two Canadian Business Days prior to the date of the proposed conversion and subject to the provisions of Sections 2.08 or 2.12, convert all or any portion of the Canadian Prime Rate Advances comprising part of the same Borrowing to Drawings in accordance with Section 2.04(a) hereof. Each such notice of Conversion shall specify (A) the date of such Conversion, (B) the Canadian Prime Rate Advances to be Converted, (C) if less than all of the Canadian Prime Rate Advances comprising part of any Borrowing are to be Converted, the aggregate amount of Canadian Prime Rate Advances to be so Converted and (D) the initial term to maturity of the Bankers' Acceptances (which shall comply with the definition of "Maturity Date" in Section 1.01); provided, however, that, if the Agent determines in good faith -------- ------- (which determination shall be conclusive and binding upon the Canadian Borrower) that the Bankers' Acceptances cannot be Converted ratably by the Canadian Lenders, due solely to the requested aggregate Face Amount thereof, the aggregate Face Amount of Bankers' Acceptances to be created and purchased by any Canadian Lender shall be reduced to such lesser amount as the Agent determines will permit such Conversion to be so made and each Canadian Lender shall continue to maintain a Canadian Prime Rate Advance in the amount of the difference between such Canadian Lender's ratable portion of the original aggregate amount of the Canadian Prime Rate Advances to be Converted and the Face Amount of the Bankers' Acceptances to be created 58 by such Canadian Lender after giving effect to such Conversion. Each notice of Conversion under this Section 2.10 shall be irrevocable and binding on the Canadian Borrower. (b) Mandatory. (i) 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 $1,000,000, such Advances shall automatically Convert into Base Rate Advances. (ii) 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 Appropriate Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance. (iii) Upon the occurrence and during the continuance of any Event of Default and the determination of the Agent, or the Required Lenders, that any or all Eurodollar Rate Advances and any or all Conversions are not appropriate, (x) the applicable Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (y) the obligation of the Lenders to make, or to Convert the applicable Advances into, Eurodollar Rate Advances shall be suspended. SECTION 2.11. Renewal and Conversion of Bankers' Acceptances. (a) ---------------------------------------------- Optional Renewal. The Canadian Borrower may on any Business Day, upon notice - ---------------- given to the Agent not later than 12:00 noon (New York City time) on a Business Day at least two Canadian Business Days prior to the date of the proposed renewal and subject to the provisions of Section 2.12, renew all or any portion of the Bankers' Acceptances comprising part of the same Drawing; provided, -------- however, that: - ------- (i) any renewal of Bankers' Acceptances shall be made only on the then existing Maturity Date for such Bankers' Acceptances; (ii) each renewal of Bankers' Acceptances comprising part of the same Drawing shall be made ratably among the Lenders holding such Bankers' Acceptances in accordance with the respective amount of such Bankers' Acceptances so held; and (iii) upon the occurrence and during the continuance of any Event of Default and the determination of the Agent, or Canadian Lenders owning or holding at least 51% of the sum of (x) the aggregate principal amount of the Canadian Borrower Advances outstanding at such time, (y) the aggregate Face Amount of all Bankers' Acceptances outstanding at such time and (z) the aggregate Unused Canadian Commitments at such time, that any or all Bankers' Acceptances and any or all renewals of any Bankers' Acceptances are not appropriate, no renewal of any Bankers' Acceptance may be made. 59 Each such notice of renewal shall, within the restrictions set forth above, specify (A) the date of such renewal (which shall be the then existing Maturity Date of such Bankers' Acceptances and shall be a Canadian Business Day), (B) the Bankers' Acceptances to be renewed, (C) if less than all of the Bankers' Acceptances comprising part of any Drawing are to be renewed, the aggregate Face Amount for such renewal and (D) the term to maturity of the renewed Bankers' Acceptances (which shall comply with the definition of "Maturity Date" in Section 1.01); provided, however, that, if the Agent determines in good faith -------- ------- (which determination shall be conclusive and binding upon the Canadian Borrower) that the Bankers' Acceptances cannot, due solely to the requested aggregate Face Amount thereof, be renewed ratably by the Canadian Lenders, the aggregate Face Amount of such renewal (or the Face Amount of Bankers' Acceptances to be created by any Canadian Lender) shall be reduced to such lesser amount as the Agent determines will permit such renewal to be so made and each Canadian Lender shall fund the difference between such Canadian Lender's ratable portion of the original aggregate Face Amount of such renewal and the Face Amount of the Bankers' Acceptances to be created by such Canadian Lender after giving effect to such reduction in the form of a Canadian Prime Rate Advance, which shall be deemed for all purposes hereof to be a Canadian Borrower Advance made pursuant to Section 2.01(d). Each notice of renewal under this Section 2.11 shall be irrevocable and binding on the Canadian Borrower. Upon any renewal of Bankers' Acceptances comprising part of any Drawing in accordance with this Section 2.11(a), the Canadian Lenders holding the Bankers' Acceptances to be renewed shall exchange such maturing Bankers' Acceptances for new Bankers' Acceptances containing the terms set forth in the applicable notice of renewal, and the Drawing Purchase Price payable for each such renewal shall be applied, together with other funds, if necessary, available to the Canadian Borrower, to reimburse the Bankers' Acceptances otherwise maturing on such date. The Canadian Borrower hereby irrevocably authorizes and directs each Canadian Lender to apply the proceeds of each renewed Bankers' Acceptance owing to it to the reimbursement, in accordance with this Section 2.11(a), of the Bankers' Acceptances owing to such Canadian Lender and maturing on such date. (b) Optional Conversion. The Canadian Borrower may on any Business ------------------- Day, upon notice given to the Agent not later than 12:00 noon (New York City time) on a Business Day at least two Canadian Business Days prior to the date of the proposed Conversion and subject to the provisions of Section 2.12, Convert all or any portion of the Bankers' Acceptances comprising part of the same Drawing to a Canadian Borrowing comprised of Canadian Prime Rate Advances; provided, however, that: - -------- ------- (i) any Conversion of Bankers' Acceptances shall be made only on the then existing Maturity Date for such Bankers' Acceptances; (ii) each Conversion of Bankers' Acceptances comprising part of the same Drawing shall be made ratably among the Lenders holding such Bankers' Acceptances in accordance with the respective amounts of such Bankers' Acceptances so held; and 60 (iii) no Conversion may be made if (A) the amount of the Advance to be made by any Canadian Lender in connection with such Conversion would exceed such Canadian Lender's unused portion of its Canadian Commitment under the Canadian Facility in effect at the time of such Conversion, or (B) after giving effect to such Conversion, the sum of the aggregate principal amount of outstanding Canadian Borrower Advances plus the ---- aggregate Face Amount of Bankers' Acceptances then outstanding would exceed the Canadian Facility. Each such notice of Conversion shall, within the restrictions set forth above, specify (A) the date of such Conversion (which shall be the then existing Maturity Date of such Bankers' Acceptances and shall be a Canadian Business Day), (B) the Bankers' Acceptances to be Converted and (C) if less than all of the Bankers' Acceptances comprising part of any Drawing are to be Converted, the aggregate Face Amount of such Conversion. Each notice of Conversion under this Section 2.11 shall be irrevocable and binding on the Canadian Borrower. Upon any Conversion of Bankers' Acceptances comprising part of the same Drawing in accordance with this Section 2.11(b), the obligation of the Canadian Borrower to reimburse the Lenders under Section 2.13 in respect of the Bankers' Acceptances otherwise maturing on such date shall, to the extent of such conversion, be Converted to an obligation to reimburse the Lenders making the Canadian Borrower Advances made in respect of such maturing Bankers' Acceptances on such date ratably in accordance with the amount of the Advances held by such Lender at the time of reimbursement. The Canadian Borrower hereby irrevocably authorizes and directs each Canadian Lender to apply the net proceeds of each Canadian Prime Rate Advance made by such Lender pursuant to this Section 2.11(b) to the reimbursement of the Bankers' Acceptances owing to such Lender and maturing on such date. (c) Mandatory Conversion. Upon the occurrence and during the -------------------- continuance of any Event of Default and the determination of the Agent, or Canadian Lenders owning or holding at least 51% of the sum of (x) the aggregate principal amount of the Canadian Borrower Advances outstanding at such time, (y) the aggregate Face Amount of all Bankers' Acceptances outstanding at such time and (z) the aggregate Unused Canadian Commitments at such time, that any or all Bankers' Acceptances and any or all renewals of any Bankers' Acceptances are not appropriate, or if the Canadian Borrower shall fail (i) to deliver a properly completed notice of renewal under Section 2.11(a) or a properly completed notice of Conversion under Section 2.11(b) indicating its intention to renew or to Convert any maturing Bankers' Acceptances or (ii) to reimburse the Canadian Lenders for any Bankers' Acceptances comprising part of the same Drawing pursuant to Section 2.05, the Agent will forthwith so notify the Canadian Borrower and the Canadian Lenders, whereupon each such Bankers' Acceptance will automatically, on the then existing Maturity Date of such Bankers' Acceptances, Convert into a Canadian Prime Rate Advance. 61 SECTION 2.12. Increased Costs, Etc. (a) If, due to either (i) the -------------------- introduction of or any change in or in the interpretation of any law or regulation made following the date hereof or (ii) the compliance with any guideline or request (whether or not having the force of law) from any central bank or other governmental authority or the National Association of Insurance Commissioners introduced or made following the date hereof, there shall be: (A) any increase in the cost to any Lender Party of agreeing to make or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to issue or of issuing or maintaining Letters of Credit or of agreeing to make or of making or maintaining Letter of Credit Advances; (B) any increase in the cost to any Lender Party of agreeing to perform or of performing its obligations under this Agreement under or in respect of Bankers' Acceptances; or (C) any reduction in any amount payable to, or any increase in any payment required to be made by, or any forgiveness or reduction of effective return to, any Lender Party under this Agreement under or in respect of any Bankers' Acceptances; (excluding for purposes of this Section 2.12(a) any such increased cost resulting from (x) taxes (as to which Section 2.14 shall govern) and (y) the imposition of, or a change in the rate of, taxes described in clauses (i) and (ii) of the first sentence of Section 2.14(a)) then the Applicable Borrower shall from time to time, upon demand, and notice of the event by reason of which such Lender Party has become entitled to compensation hereunder, by such Lender Party (with a copy of such demand and notice to the Agent), pay (without duplication) to the Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased cost. A certificate as to the amount of such increased cost, submitted to the Applicable Borrower by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender Party determines that compliance with any law or regulation or any guideline or request (whether or not having the force of law) from any central bank or other governmental authority or the National Association of Insurance Commissioners introduced or made following the date hereof affects the amount of capital required to be maintained by such Lender Party or any corporation controlling such Lender Party and that the amount of such capital is increased by or based upon the existence of such Lender Party's commitment to lend, to accept, purchase and/or discount Bankers' Acceptances or to issue Letters of Credit hereunder and other commitments of such type or the purchase and/or acceptance and maintenance of Bankers' Acceptances or the issuance or maintenance of the Letters of Credit (or similar contingent obligations) hereunder, then, upon demand, and notice of the event by reason of which such Lender Party has become entitled to compensation hereunder, by such Lender Party (with a copy of such demand to the Agent), the Applicable Borrower shall pay (without 62 duplication) to the Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party in the light of such circumstances, to the extent that such Lender Party reasonably determines such increase in capital to be allocable to the existence of such Lender Party's commitment to lend, to accept, purchase and/or discount Bankers' Acceptances or to issue Letters of Credit hereunder or to the purchase and/or acceptance and maintenance of Bankers' Acceptances or the issuance or maintenance of any Letters of Credit hereunder. A certificate as to such amounts submitted to the Applicable Borrower by such Lender Party shall be conclusive and binding for all purposes, absent manifest error. (c) If, with respect to any Eurodollar Rate Advances under any Facility, Lenders owed at least 50% of the then-outstanding aggregate principal amount thereof notify the Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Lenders of making, funding or maintaining their Eurodollar Rate Advances for such Interest Period, the Agent shall forthwith so notify the Applicable Borrower and the Lenders, whereupon (i) each such Eurodollar Rate Advance under any Facility 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 until the Agent shall notify the Applicable Borrower that such notifying Lenders have determined that the circumstances causing such suspension no longer exist. (d) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation made following the date hereof shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Applicable Borrower through the Agent, (i) such Lender's Eurodollar Rate Advance under each Facility under which such Lender has a Commitment will automatically, upon such demand, Convert into a Base Rate Advance, on the respective last days of the then current Interest Periods with respect to such Advances or within such earlier period as required by law and (ii) the obligation of such Lender to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Applicable Borrower that such Lender has determined that the circumstances causing such suspension no longer exist. (e) Notwithstanding any other provision of this Agreement, if the introduction of or any change in the interpretation of any law or regulation made following the date hereof shall make it unlawful, or any central bank or other governmental authority shall assert following the date hereof that it is unlawful, for any Canadian Lender or its BA Lending Office to perform its obligations hereunder to complete and accept Drafts, to purchase Bankers' Acceptances or to continue to fund or maintain Bankers' Acceptances hereunder, then, on notice thereof and 63 demand therefor by such Canadian Lender to the Canadian Borrower through the Agent (i) an amount equal to the aggregate Face Amount of all Bankers' Acceptances outstanding at such time shall, upon such demand (which shall only be made if deemed necessary by the applicable Canadian Lender to comply with applicable law), be deposited by the Canadian Borrower into the Canadian Cash Collateral Account until the Maturity Date of each such Bankers' Acceptance, (ii) upon the Maturity Date of any Bankers' Acceptance in respect of which any such deposit has been made, the Agent shall be, and hereby is, authorized (without notice to or any further action by the Canadian Borrower) to apply, or to direct the Agent to apply, such amount (or the applicable portion thereof) to the reimbursement of such Bankers' Acceptance and (iii) the obligation of the Canadian Lenders to complete and accept Drafts and purchase Bankers' Acceptances shall be suspended until the Agent shall notify the Canadian Borrower that such Lender has determined that the circumstances causing such suspension no longer exist. (f) Failure or delay on the part of any Lender Party to demand compensation pursuant to this Section shall not constitute a waiver of such Lender Party's right to demand such compensation; provided that the Borrower -------- shall not be required to compensate a Lender Party pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender Party, as the case may be, notifies the Borrower of the circumstances giving rise to such increased costs or reductions and of such Lender Party's intention to claim compensation therefor; provided further that, -------- ------- if the circumstances giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.13. Payments and Computations. (a) The Borrower shall make ------------------------- each payment hereunder irrespective of any right of counterclaim or set-off, not later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the Agent at the Agent's Account in same day funds. The Canadian Borrower shall make each payment hereunder irrespective of any right or counterclaim or set-off, not later than 11:00 A.M. (New York City time) on the day when due in like funds as advanced to the Agent in same day funds by deposit of such funds to the applicable Agent's Account. The Agent will promptly thereafter cause like funds to be distributed (i) if such payment by the Borrower or the Canadian Borrower, as applicable, is in respect of principal, interest, commitment fees or any other Obligation then payable hereunder to more than one Lender Party, to such Lender Parties for the account of their respective Applicable Lending Offices ratably in accordance with the amounts of such respective Obligations then payable to such Lender Parties and (ii) if such payment by the Borrower or the Canadian Borrower, as applicable, is in respect of any Obligation then payable hereunder to one Lender Party, to such Lender Party 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(e), from and after the effective date of such Assignment and Acceptance, the Agent shall make all payments hereunder in respect of the interest assigned thereby to the Lender Party assignee thereunder, and the parties to such Assignment and 64 Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) Subject to subsection (g) of this Section 2.13, if the Agent receives funds for application to the Obligations under the Loan Documents under circumstances for which the Loan Documents do not specify the Advances or the Facility to which, or the manner in which, such funds are to be applied, the Agent may, but shall not be obligated to, elect to distribute such funds to each Lender Party ratably in accordance with such Lender Party's proportionate share of the principal amount of all outstanding Advances, the Face Amount of all outstanding Bankers' Acceptances and the Available Amount of all Letters of Credit then outstanding, in repayment or prepayment of such of the outstanding Advances or other Obligations owed to such Lender Party, and for application to such principal installments, as the Agent shall direct. (c) Subject to subsection (g) of this Section 2.13, each of the Borrower and the Canadian Borrower hereby authorizes each Lender Party, if and to the extent payment owed to such Lender Party is not made when due hereunder, to charge from time to time against any or all of the accounts of the Borrower or the Canadian Borrower, as the case may be, with such Lender Party any amount so due. (d) Subject to Section 2.08(f), all computations of interest, fees and Letter of Credit commissions 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, fees or commissions are payable. Each determination by the Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error. At the request of the Applicable Borrower, the Agent shall deliver to the Applicable Borrower a statement showing quotations used by the Agent in determining such interest rate, fee and commission. (e) Whenever any payment hereunder or in respect of Bankers' Acceptances shall be stated to be due on a day other than a Business Day or a Canadian Business Day, as the case may be, such payment shall be made on the next succeeding Business Day or Canadian Business Day, as applicable, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided, however, that, if -------- ------- such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (f) Unless the Agent shall have received notice from the Borrower or the Canadian Borrower prior to the date on which any payment is due to any Lender Party hereunder that the Borrower or the Canadian Borrower, as the case may be, will not make such payment in full, the Agent may assume that the Applicable 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 65 to each such Lender Party on such due date an amount equal to the amount then due such Lender Party. If and to the extent any Applicable Borrower shall not have so made such payment in full to the Agent, each such Lender Party shall repay to the Agent forthwith on demand such amount distributed to such Lender Party together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date such Lender Party repays such amount to the Agent, at the higher of (A) the Federal Funds Rate and (B) the cost of funds incurred by the Agent in respect of such amount. (g) Notwithstanding any other provision of this Agreement or the other Loan Documents to the contrary (including, without limitation, this Section 2.13 and Sections 2.08, 2.09, 2.12, 2.14 and 8.04 hereof) the liability of the Canadian Borrower under this Agreement shall be several and not joint or joint and several. In no event shall the Canadian Borrower be liable for the payment of any principal of or interest on any Advances other than Advances borrowed by it hereunder, any commitment fees other than such fees payable with respect to the maximum amount of the Canadian Facility, or any costs and expenses under Section 8.04 hereof other than any such costs and expenses relating to its indebtedness hereunder or the enforcement of its obligations under this Agreement and the other Loan Documents. Any payment made by, or on behalf of, the Canadian Borrower to the Agent's Account shall be deemed a payment in respect of the Canadian Borrower Advances or any interest, fees, costs or expenses, as applicable, payable with respect thereto. SECTION 2.14. Taxes. (a) Any and all payments by the Borrower or the ----- Canadian Borrower hereunder or in respect of any Bankers' Acceptance shall be made, in accordance with Section 2.13, free and clear of and without deduction or withholding for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, (i) in the case of each Lender Party and the Agent, taxes imposed - --------- on the overall net income of such Lender Party or Agent by any jurisdiction, and franchise taxes imposed on such Lender Party or the Agent in lieu of net income taxes by the jurisdiction under the laws of which such Lender Party or the Agent (as the case may be) is organized or any political subdivision thereof or therein and, in the case of each Lender Party, taxes imposed on its overall net income and franchise taxes imposed on such Lender Party in lieu of net income taxes by the state or foreign jurisdiction of such Lender Party's Applicable Lending Office or any political subdivision thereof or therein and in the case of the Agent, taxes imposed on its overall net income and franchise taxes imposed on the Agent in lieu of net income taxes by the state or foreign jurisdiction of the office or offices through which the Agent performs its services pursuant to this Agreement and (ii) any tax, levies, imposts, deductions, charges, withholdings and liabilities that would not have been imposed but for the existence of any present or former connection between the Agent or any Lender Party, as applicable (or between the shareholder of the Agent or such Lender Party), and the taxing authority imposing such tax, levy, impost, deduction, charge, withholding or liability including, without limitation, the Agent or Lender Party, as relevant (or shareholders thereof) being or having been a citizen or resident thereof, being or having been present therein, being or having been engaged in a trade or business therein, 66 or having had a permanent establishment therein (but excluding in each case a connection arising from the Agent's or any Lender Party's execution or enforcement of or performance of its obligations under or receipt of payment under this Agreement) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). ----- If the Borrower or the Canadian Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or in respect of any Bankers' Acceptance to any Lender Party or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions applicable to additional sums payable under this Section 2.14) such Lender Party or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) the Borrower or the Canadian Borrower, as the case may be, shall make such deductions or withholdings and (iii) the Borrower or the Canadian Borrower, as the case may be, shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower and the Canadian Borrower shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made by it hereunder or in respect of any Bankers' Acceptances or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any Bankers' Acceptances (hereinafter referred to as "Other Taxes"). ----------- (c) The Borrower and the Canadian Borrower shall indemnify each Lender Party and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.14) paid by such Lender Party or the Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or the Agent (as the case may be) makes written demand therefor and provides the Borrower and the Canadian Borrower with evidence of such liability reasonably satisfactory to the Borrower and the Canadian Borrower. (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 receipt of payment thereof, a certified copy of such receipt or other evidence of payment reasonably acceptable to the Agent. In the case of any payment hereunder by or on behalf of the Borrower through an account or branch outside the United States 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 its address referred to in Section 8.02, 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. Within 30 days after the date of any payment of Taxes, the Canadian 67 Borrower shall furnish to the Agent, at such address, the original receipt of payment thereof, a certified copy of such receipt or other evidence of payment reasonably acceptable to the Agent. In the case of any payment hereunder or in respect of any Bankers' Acceptances by or on behalf of the Canadian Borrower through an account or branch outside Canada or on behalf of the Canadian Borrower by a payor that is not a corporation organized under the laws of Canada, if the Canadian Borrower determines that no Taxes are payable in respect thereof, the Canadian 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. (e) Each Lender Party organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender or the Initial Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance pursuant to which it became a Lender Party in the case of each other Lender Party, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long thereafter as such Lender Party remains lawfully able to do so and in any event prior to the date of the first payment to such Lender Party hereunder), provide the Agent and the Borrower with two duly completed and executed copies of Internal Revenue Service (the "IRS") Form --- 1001 or 4224, as appropriate, or any successor form prescribed by the IRS, certifying (if it is the case) that such Lender Party is exempt from or is entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or in respect of any Bankers' Acceptances or to the extent permitted by law, as an alternative to such Form 1001 or 4224, each such Lender Party may provide the Borrower and the Agent with two duly completed and executed copies of IRS Form W-8, or any successor form prescribed by the IRS, certifying that such Lender Party is exempt from United States federal withholding tax pursuant to Section 871(h) or Section 881(c) of the Internal Revenue Code, together with an annual certificate in form and substance satisfactory to the Borrower or the Agent stating that such Lender Party is not a "person" described in Section 871(h)(3) or 881(c)(3) of the Internal Revenue Code. In addition, each Canadian Lender shall provide the Agent and the Canadian Borrower with any form or certificate certifying that such Canadian Lender is exempt from or is entitled to a reduced rate of Canadian withholding tax; provided, however, that each Canadian Lender shall have been advised in -------- ------- writing by the Canadian Borrower (including at the time any renewal form is due) of the form or certificate applicable to it, determined by reference to the jurisdiction of organization and Applicable Lending Office of such Canadian Lender set forth on Schedule I hereto, in the case of each Initial Lender, or to the jurisdiction of organization and Applicable Lending Office of such Canadian Lender set forth in the Assignment and Acceptance pursuant to which it became a Canadian Lender, in the case of each other Lender Party, or such other branch or office of any Canadian Lender designated by such Canadian Lender from time to time. If the forms provided by a Lender Party at the time such Lender Party first becomes a party to this Agreement indicates a tax rate with respect to Home Jurisdiction Withholding Tax in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate form certifying that a lesser rate applies, whereupon such withholding tax at such lesser rate only shall be considered excluded from Taxes 68 for periods governed by such form; provided, however, that, if at the date of -------- ------- the Assignment and Acceptance pursuant to which a Lender Party becomes a party to this Agreement, the Lender Party assignor was entitled to payments under subsection (a) in respect of Home Jurisdiction Withholding Tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) Home Jurisdiction Withholding Tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information not substantially similar to the information necessary to compute the tax payable and information required on the date hereof by IRS Form 1001 or 4224, and which a Lender Party reasonably considers to be confidential, the Lender Party shall give notice thereof to the Borrower or the Canadian Borrower, as the case may be, 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 Party has failed to provide the Borrower or the Canadian Borrower, as applicable, with the appropriate form described in subsection (e) above duly completed and executed (other than if such failure is due to a change in law occurring after 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 Party shall not be entitled to indemnification under subsection (a) or (c) of this Section 2.14 with respect to Taxes imposed by the United States or Canada, as applicable, by reason of such failure; provided, however, that should a Lender Party become -------- ------- subject to Taxes because of its failure to deliver a form required hereunder, the Borrower or the Canadian Borrower, as applicable, shall take such steps as such Lender Party shall reasonably request at such Lender Party's sole expense to assist such Lender Party to recover such Taxes. (g) Any Lender Party claiming additional amounts payable pursuant to this Section 2.14 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to file any certificate or document requested by the Borrower or the Canadian Borrower, as the case may be, or to change the jurisdiction of its Applicable Lending Office if the making of such filing or change would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue and would not, in the sole judgment of such Lender Party, be disadvantageous to such Lender Party. (h) If any Lender Party receives a refund of any Taxes or Other Taxes paid by the Borrower or the Canadian Borrower, as the case may be, pursuant to Section 2.14(a), Section 2.14(b), or Section 2.14(c), such Lender Party shall, within 30 days of such receipt, pay to the Borrower or the Canadian Borrower, as applicable, the amount so received, net of all out-of-pocket expenses of such Lender Party with respect thereto; provided, however, that such Lender Party -------- ------- shall (i) be required to pay to such Borrower or Canadian Borrower only such amounts as such Lender Party, in its sole discretion, determines is attributable to Taxes or Other Taxes paid by such Borrower or Canadian Borrower pursuant to Section 2.14(a), Section 2.14(b) or Section 2.14(c), and (ii) have the sole discretion to determine whether to contest the 69 imposition of any Taxes or Other Taxes, regardless of whether such Taxes or Other Taxes were correctly or legally asserted. SECTION 2.15. Sharing of Payments, Etc. If any Lender Party shall ------------------------ obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) (a) on account of Obligations due and payable to such Lender Party hereunder and under any Bankers' Acceptances at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender Party and under any Bankers' Acceptances at such time to (ii) the aggregate amount of the Obligations due and payable to all Lender Parties hereunder and under any Bankers' Acceptances at such time) of payments on account of the Obligations due and payable to all Lender Parties hereunder and under any Bankers' Acceptances at such time obtained by all the Lender Parties at such time or (b) on account of Obligations owing (but not due and payable) to such Lender Party hereunder and under any Bankers' Acceptances at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing (but not due and payable) to such Lender Party and under any Bankers' Acceptances at such time to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under any Bankers' Acceptances at such time) of payments on account of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under any Bankers' Acceptances at such time obtained by all of the Lender Parties at such time, such Lender Party shall forthwith purchase from the other Lender Parties such participations in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender Party 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 Party, such purchase from each other Lender Party shall be rescinded and such other Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such Lender Party's ratable share (according to the proportion of (i) the purchase price paid to such Lender Party to (ii) the aggregate purchase price paid to all Lender Parties) of such recovery together with an amount equal to such Lender Party's ratable share (according to the proportion of (i) the amount of such other Lender Party's required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. The Borrower and the Canadian Borrower agree that any Lender Party so purchasing a participation from another Lender Party 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 Party were the direct creditor of such Borrower or Canadian Borrower in the amount of such participation. SECTION 2.16. Use of Proceeds. (a) The proceeds of the Term Advances --------------- shall be available (and the Borrower agrees that it shall use such proceeds) solely (i) to finance the Acquisition, (ii) to refinance the Existing Debt and (iii) to pay transaction fees and expenses; 70 (b) The proceeds of the Working Capital Advances and the issuances of Letters of Credit shall be available (and the Borrower agrees that it shall use such proceeds and Letters of Credit) solely (i) to provide for working capital for the Borrower and the Canadian Borrower and (ii) for other general corporate purposes permitted under this Agreement (other than Permitted Acquisitions); (c) The proceeds of the Acquisition Advances shall be available (and the Borrower agrees that it shall use such proceeds) solely to finance (i) Permitted Acquisitions and (ii) to the extent not constituting Permitted Acquisitions, the development and construction of asphalt production plants and related facilities, provided that (A) immediately after giving effect to each -------- Acquisition Advance made to finance such development and construction, on a pro forma basis for the Rolling Period ended as of the end of the most recent period for which financial statements were required to be furnished to the Agent pursuant to Sections 5.03(b), (c) or (d), the Total Leverage Ratio of the Parent Guarantor and its Subsidiaries shall be not more than 5.00 to 1.00, (B) prior to each such Acquisition Advance, the Borrower shall have furnished to the Agent a schedule in form satisfactory to the Agent of the computations used by the Parent Guarantor in determining compliance with the requirement of clause (A) above and (C) the Borrower shall have furnished to the Agent a certificate signed by the chief financial officer or treasurer of the Parent Guarantor, substantially in the form of Exhibit M-3, attesting to the Solvency of the Parent Guarantor and its Subsidiaries as of the date of such Acquisition Borrowing; and (d) The proceeds of the Canadian Borrower Advances and the Drawings under the Bankers' Acceptances shall be available (and the Canadian Borrower agrees that it shall use such proceeds and Drawings) solely for general corporate purposes of the Canadian Borrower permitted under this Agreement. SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain in ---------------- accordance with its usual practice an account or accounts evidencing the indebtedness of the Applicable Borrower to such Lender resulting from each 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. The Applicable Borrower agrees that upon notice by any Lender Party to such Applicable Borrower (with a copy of such notice to the Agent) to the effect that a Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Advances owing to, or to be made by, such Lender Party, the Applicable Borrower shall promptly execute and deliver to such Lender a Term A Note, a Term B Note, a Working Capital Note, a Canadian Borrower Note and an Acquisition Note, as applicable, payable to the order of such Lender Party in a principal amount equal to the Term A Commitment, the Term B Commitment, the Working Capital Commitment, the Canadian Commitment or the Acquisition Commitment, respectively, of such Lender Party at the time of such request. All references to Notes in the Loan Documents shall mean Notes, if any, to the extent issued hereunder. 71 (b) The Register maintained by the Agent pursuant to Section 8.07(e) 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 Applicable Borrower to each Lender Party hereunder, and (iv) the amount of any sum received by the Agent from the Applicable Borrower hereunder and each Lender Party's share thereof. (c) Entries made in good faith by the Agent in the Register pursuant to subsection (b) above, and by each Lender Party 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 Applicable Borrower to, in the case of the Register, each Lender Party and, in the case of such account or accounts, such Lender Party, under this Agreement, absent manifest error; provided, however, that the failure of the Agent or such -------- ------- Lender Party 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 Applicable Borrower under this Agreement. (d) References herein to Notes shall mean and be references to the Term A Notes, the Term B Notes, the Working Capital Notes, the Canadian Borrower Notes and the Acquisition Notes, unless otherwise specifically indicated, in each case to the extent issued hereunder. SECTION 2.18. Replacement of Lenders. If any Lender requests ---------------------- compensation under Section 2.12, if any Lender exercises its rights under Section 2.12(d) or (e), if the Borrower is required to pay any additional amount to any Lender or any taxing authority for the account of any Lender pursuant to Section 2.14 or if any Lender shall abstain from approving or disapproving any amendment, waiver or consent requested by the Borrower, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 8.07), all its interests, rights and obligations under this Agreement to one or more Eligible Assignees that shall assume such obligations, provided that (i) the Borrower shall have -------- received the prior written consent of the Agent (and, if a Working Capital Commitment is being assigned, the Issuing Bank and the Swingline Bank), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder (including all losses, costs and expenses payable pursuant to Section 8.04 (c)) from such Eligible Assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under 72 Section 2.12 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Conditions Precedent to Initial Extension of Credit. --------------------------------------------------- The obligation of each Lender to make an Advance, of the Issuing Bank to issue a Letter of Credit and of the Canadian Lenders to accept and/or purchase Bankers' Acceptances on the occasion of the Initial Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent before or concurrently with the Initial Extension of Credit: (a) The Purchase Agreement shall be in full force and effect and the Acquisition and the other transactions contemplated by this Agreement shall have been consummated strictly in accordance with the terms of the Purchase Agreement and all other related documentation without any waiver or amendment not consented to by the Lender Parties of any term, provision or condition set forth therein, and in compliance with all applicable laws, and the Agent shall be satisfied (i) with the terms and conditions of the Related Documents in all material respects and (ii) that the assets and earnings of the Borrower and the Canadian Borrower are sufficient to support the Obligations of the Borrower and the Canadian Borrower under this Agreement and the timely amortization of all Debt and other Obligations of the Borrower and the Canadian Borrower. (b) The Lender Parties shall be satisfied with the corporate and legal structure and capitalization of the Loan Parties, including the terms and conditions of the charter, bylaws and each class of capital stock of the Loan Parties and of each agreement or instrument relating to such structure or capitalization. (c) There shall have been no event, condition or circumstance that has resulted in or is reasonably likely to result in a Material Adverse Change with respect to the Borrower and its Subsidiaries, taken as a whole, since December 31, 1998, or with respect to the Acquired Businesses, taken as a whole, since March 31, 1999. (d) There shall exist no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its properties or any of its Subsidiaries or any of their properties pending or threatened before any court, governmental agency or arbitrator that (i) could have a Material Adverse Effect or (ii) purports to affect the legality, validity or 73 enforceability of this Agreement, any other Loan Document, any Related Document or the consummation of the transactions contemplated hereby and thereby. (e) [Intentionally Omitted]. (f) The Agent shall be satisfied that all Existing Debt, other than the Debt identified on Schedule 3.01(f) (the "Surviving Debt"), has been -------------- prepaid, redeemed or defeased in full or otherwise satisfied and extinguished and that all such Surviving Debt shall be on terms and conditions satisfactory to the Agent. All accrued fees and expenses of the Agent and the Lender Parties (including the accrued fees and expenses of counsel to the Agent and of local counsel to the Lender Parties) payable by the Borrower hereunder and all fees and expenses payable or otherwise borne by the Borrower in connection with the issuance of the Subordinated Notes shall have been paid, and the Agent shall be satisfied that the amount of such fees and expenses shall not exceed $15,000,000. (g) The Agent shall have received on or before the date of the Initial Extension of Credit, the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Agent (unless otherwise specified) and (except for any Notes or Drafts) in sufficient copies for each Lender Party: (i) Notes payable to the order of the Lenders to the extent requested by any Lender pursuant to Section 2.17. (ii) Presigned Drafts delivered pursuant to Section 2.04(f) hereof. (iii) A Notice of Borrowing. (iv) Certified copies of the resolutions (or analogous authorizations) of the Board of Directors (or other authorized legal representatives) of the Borrower, the Canadian Borrower, the Parent Guarantor, each Subsidiary Guarantor and each other Loan Party approving this Agreement, each other Loan Document and each Related Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to this Agreement, each other Loan Document and each Related Document. (v) A copy of a certificate of the Secretary of State of the jurisdiction of its incorporation, dated reasonably near the date of the Initial Extension of Credit, in each case listing the charter of the Borrower, the Parent Guarantor, each Subsidiary Guarantor and each other Loan Party and each amendment thereto on file in his office and certifying that (A) such charter is a true and correct copy 74 thereof, (B) such amendments are the only amendments to such charter on file in his office, (C) such Person has paid all franchise taxes to the date of such certificate and (D) such Person is duly incorporated and in good standing under the laws of the State of the jurisdiction of its incorporation. (vi) (A) A certificate of the Canadian Borrower certifying as to a true and correct copy of the articles of incorporation or amalgamation of the Canadian Borrower, together with any amendments thereto, and (B) a certificate of status of the Province of Ontario stating that the Canadian Borrower is a corporation incorporated, amalgamated or continued under the laws of the Province of Ontario and has not been dissolved. (vii) A copy of a certificate of the Secretary of State of the states listed on Schedule 3.01(g)(vii) with respect to the Borrower and each Subsidiary Guarantor, dated reasonably near the date of the Initial Extension of Credit, stating that the Borrower and each such Subsidiary Guarantor is duly qualified and in good standing as a foreign corporation in such State and has filed all annual reports required to be filed to the date of such certificate. (viii) A certificate of each of the Borrower, the Canadian Borrower, the Parent Guarantor, each Subsidiary Guarantor and each other Loan Party, signed on behalf of such Person by any two officers of such Person, dated the date of the Initial Extension of Credit (the statements made in which certificate shall be true on and as of the date of the Initial Extension of Credit), certifying as to (A) the absence of any amendments to the charter of such Person since, in the case of the Canadian Borrower, the date of the certificate of status of the Province of Ontario referred to in Section 3.01(g)(vi)(B) and, in the case of each other Loan Party, the date of the Secretary of State's certificate referred to in Section 3.01(g)(v), (B) a true and correct copy of the bylaws of such Person as in effect on the date of the Initial Extension of Credit, (C) the due incorporation and good standing of such Person as a corporation organized under the laws of the jurisdiction of its incorporation and the absence of any proceeding for the dissolution or liquidation of such Person, (D) the completeness and accuracy of the representations and warranties made by such Loan Party contained in the Loan Documents as though made on and as of the date of the Initial Extension of Credit and (E) the absence of any event occurring and continuing that constitutes a Default. (ix) A certificate of an officer of each of the Borrower, the Canadian Borrower, the Parent Guarantor, each Subsidiary Guarantor and each other Loan Party certifying the names and true signatures of the officers of such Persons authorized to sign this Agreement, each other Loan Document and each Related 75 Document to which they are or are to be parties and the other documents to be delivered hereunder and thereunder. (x) A security agreement in substantially the form of Exhibit D (together with each other security agreement delivered pursuant to Section 5.01(m), in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Security -------- Agreement"), duly executed by the Borrower and each Subsidiary --------- Guarantor, together with: (A) certificates representing the Existing Pledged Shares referred to therein accompanied by undated stock powers executed in blank, (B) copies of proper financing statements, under the Uniform Commercial Code of the states listed in Schedule 3.01(g)(x)(A) and all other jurisdictions that the Agent may deem necessary or desirable in order to perfect and protect the Liens created under the Collateral Documents, covering the Collateral described in the Security Agreement, (C) completed requests for information, dated on or before the date of the Initial Extension of Credit, listing all effective financing statements filed in the jurisdictions listed in Schedule 3.01(g)(x)(B) that name the Borrower and each Subsidiary Guarantor as debtor, together with copies of such other financing statements, (D) evidence of the completion of all other recordings and filings of or with respect to the Security Agreement that the Agent may deem necessary or desirable in order to perfect and protect the Liens created thereby, (E) evidence of the insurance required by the terms of the Security Agreement, naming the Agent as additional insured and loss payee, in such amounts and covering such risks, as is satisfactory to the Agent, including, without limitation, business interruption insurance together with a certificate from a representative of an insurance company or from an independent insurance consultant confirming that the coverages are normal and customary for corporations comparable to the Borrower and each Subsidiary Guarantor, (F) copies of the Assigned Agreements referred to in the Security Agreement, 76 (G) executed termination statements (Form UCC-3 or a comparable form), in proper form to be duly filed on the date of the Initial Extension of Credit under the Uniform Commercial Code of all jurisdictions that the Agent may deem desirable in order to terminate or amend existing Liens on the Collateral described in the Security Agreement and the Parent Guarantor Security Agreement, (H) evidence that all other action that the Agent may deem necessary or desirable in order to perfect and protect the liens and security interests created under the Security Agreement has been taken, and (I) the Blocked Account Letters referred to in the Security Agreement, duly executed by each Blocked Account Bank referred to in the Security Agreement. (xi) A security agreement in substantially the form of Exhibit G (as such agreement may be amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Canadian Security Agreement"), duly executed by the Canadian Borrower, together with evidence that all other action that the Agent may deem necessary or desirable in order to perfect and protect the liens and security interests created under the Canadian Security Agreement has been taken. (xii) A security agreement in substantially the form of Exhibit E (as such agreement may be amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Parent Guarantor ---------------- Security Agreement"), duly executed by the Parent Guarantor, together ------------------ with: (A) certificates representing the Pledged Shares referred to therein accompanied by undated stock powers executed in blank, and (B) evidence that all other action that the Agent may deem necessary or desirable in order to perfect and protect the liens and security interests created under the Parent Guarantor Security Agreement has been taken. (xiii) An intellectual property security agreement in substantially the form of Exhibit F (together with each other intellectual property security agreement delivered pursuant to Section 5.01(m), as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Intellectual Property Security ------------------------------ Agreement"), duly executed by the Borrower and each Subsidiary --------- Guarantor, together with evidence that all action that the Agent may deem 77 necessary or desirable in order to perfect and protect the first priority lien and security interests created under the Intellectual Property Security Agreement has been taken. (xiv) Deeds of trust, trust deeds, mortgages, leasehold mortgages and leasehold deeds of trust in substantially the form of Exhibit J and covering the properties and Material Leases listed on Schedule 4.01(gg) (other than the properties listed on Schedule 5.01(m)) and Schedule 4.01(hh) (together with each other mortgage delivered pursuant to Section 5.01(m), in each case as amended, supplemented or otherwise modified from time to time in accordance with their terms, the "Mortgages"), duly executed by the applicable Loan Party, together --------- with: (A) fully paid American Land Title Association Lender's Extended Coverage title insurance policies (the "Mortgage Policies") or commitments in writing to issue such ----------------- policies in form and substance, with endorsements and in amount acceptable to the Agent, issued, coinsured and reinsured by title insurers acceptable to the Agent, insuring the Mortgages as of the time of the date of the Initial Extension of Credit to be valid first and subsisting Liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics' and materialmen's Liens) and encumbrances, excepting only Permitted Encumbrances, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents and for mechanics' and materialmen's Liens) and such coinsurance and direct access reinsurance as the Agent may deem necessary or desirable, (B) boundary surveys of the properties set forth on Schedule 3.01(g)(xiv)(B) prepared in accordance with American Land Title Insurance standards (except where surveys prepared to state standards are acceptable to the title insurer), dated no more than 30 days before the date of the Initial Extension of Credit, certified to the Agent and the issuer of the Mortgage Policies in a manner satisfactory to the Agent by a land surveyor duly registered and licensed in the States in which the property described in such surveys is located and acceptable to the Agent, showing recorded easements and rights of way, unrecorded uses and occupancies observed by the surveyor, encroachments onto the boundary lines and onto the easements and rights of way otherwise shown on the survey, any building setback lines and other dimensional regulations that are set forth in covenants and restrictions that may be of record and certifying that such property is not in a flood hazard area and identifying 78 the flood classification thereof, or, as applicable, locating any portion of such property that is in a flood hazard area, (C) an affidavit of the applicable Loan Party delivered for the benefit of the issuer of the Mortgage Policies stating that, since the date of the survey referenced in the Mortgage Policies in respect of the properties set forth on Schedule 3.01(g)(xiv)(C), (1) the applicable survey shows the property in its present condition, (2) there have been no changes in the boundary lines of the property and (3) no other improvements have been constructed on or next to the property, and stating such other matters as the issuer of the Mortgage Policies may require to omit any exception in the Mortgage Policies relating to changes in the property since the date of the survey, (D) evidence of the insurance required by the terms of the Mortgages, and (E) evidence that all other action that the Agent may deem necessary or desirable in order to create valid first and subsisting Liens on the property described in the Mortgages has been taken. (xv) A guaranty agreement in substantially the form of Exhibit H (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Parent Guaranty"), duly executed by --------------- the Parent Guarantor. (xvi) A guaranty agreement in substantially the form of Exhibit I (together with each other guaranty and guaranty supplement delivered pursuant to Section 5.01(n), as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Subsidiary Guaranty"), duly executed by the Subsidiary Guarantors. ------------------- (xvii) Certified copies of each of the Related Documents, duly executed by the parties thereto and in form and substance satisfactory to the Agent, together with all agreements, instruments and other documents delivered in connection therewith. (xviii) [Intentionally Omitted.] (xix) A letter, in form and substance satisfactory to the Agent, from the Parent Guarantor to PriceWaterhouseCoopers, its independent certified public accountants, advising such accountants that the Agent (on its own account or at the request of the Lender Parties) has been authorized (upon an Event of Default 79 or upon reasonable notice to the Borrower) to exercise all rights of the Parent Guarantor to require such accountants to disclose any and all financial statements and any other information of any kind that they may have with respect to the Parent Guarantor and its Subsidiaries and directing such accountants to comply with any reasonable request of the Agent for such information. (xx) A solvency certificate from the chief financial officer or treasurer of the Parent Guarantor, substantially in the form of Exhibit M-2, together with such other evidence reasonably requested by the Agent, attesting to the Solvency of the Parent Guarantor and its Subsidiaries after giving effect to the Acquisition, the Initial Extension of Credit and the other transactions contemplated hereby. (xxi) A favorable opinion of Winthrop, Stimson, Putnam & Roberts, counsel for the Borrower, the Parent Guarantor and each Subsidiary Guarantor, in substantially the form of Exhibit L-1 hereto and as to such other matters as the Agent may reasonably request. (xxii) A favorable opinion of the local counsel to the Borrower listed on Schedule 3.01(g)(xxii), in substantially the form of Exhibit L-2 hereto. (xxiii) A favorable opinion of Fasken, Campell & Godfrey, Canadian counsel for the Canadian Borrower, in substantially the form of Exhibit L-3 hereto and as to such other matters as the Agent may reasonably request. (xxiv) A reliance letter from Reed Smith Shaw & McClay, counsel to the seller under the Purchase Agreement, addressed to the Agent. (xxv) Landlord consents with respect to leased properties listed in Schedule 3.01(g)(xxv) in form and substance satisfactory to the Agent. (xxvi) A letter appointing the Borrower as agent for service of process for the Canadian Borrower. (xxvii) A counterpart of this Agreement duly executed by each party hereto. (xxviii) A certificate of the chief financial officer or the treasurer of the Parent Guarantor with respect to the pro forma Consolidated EBITDA of the Parent Guarantor and its Subsidiaries (after giving effect to the Acquisition) for the twelve month period ending June 30, 1999, demonstrating that such pro forma Consolidated EBITDA is not less than $60,300,000. 80 (xxix) A certificate of the chief financial officer or the treasurer of the Parent Guarantor with respect to the ratio of Funded Debt of the Parent Guarantor and its Subsidiaries as of June 30, 1999, to the pro forma Consolidated EBITDA of the Parent Guarantor and its Subsidiaries (after giving effect to the Acquisition) for the twelve month period ending on such date, demonstrating that such ratio does not exceed 5.50 to 1.00. (xxx) Consolidated and consolidating financial projections for the Parent Guarantor and its Subsidiaries for the period of ten years following the Initial Extension of Credit, which projections shall reflect the Acquisition and the other transactions contemplated hereby and include the written assumptions upon which such projections are based, and be reasonably satisfactory in all respects to the Agent. (xxxi) A Consolidated pro forma balance sheet and a related statement of income of the Parent Guarantor and its Subsidiaries as of and for the four fiscal quarter period ending June 30, 1999, after giving effect to the Acquisition and the other transactions contemplated hereby, and an analysis of the adjustments necessary to reconcile the entries in such pro forma financial statements to those financial statements delivered for the Parent Guarantor and its Subsidiaries for such fiscal quarters pursuant to Section 4.01(f)(i)(y). (xxxii) (A) (x) The Consolidated balance sheet of the Acquired Businesses as at March 31, 1997, March 31, 1998 and March 31, 1999, and the related Consolidated statements of income, stockholders' equity and cash flow of the Acquired Businesses for the Fiscal Year then ended, accompanied, as to the Consolidated financial statements, by an unqualified opinion of Schneider Downs & Co., Inc., independent public accountants, and (y) the Consolidated balance sheet of the Acquired Businesses as at June 30, 1999, and the related Consolidated statements of income, stockholders' equity and cash flow of the Acquired Businesses for the three months ended on such date, in the case of the statements referred to in this clause (A)(y) duly certified by the chief financial officer or treasurer of the Borrower, which in each case fairly present, subject, in the case of the statements referred to in clause (A)(y), to year-end audit adjustments, the Consolidated financial condition of the Acquired Businesses as at such dates and the Consolidated results of the operations of the Acquired Businesses for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis, and (B) since March 31, 1999, there has occurred no Material Adverse Change with respect to the Acquired Businesses, taken as a whole. (h) [Intentionally Omitted]. 81 (i) The Borrower shall have received not less than $150,000,000 in gross cash proceeds from the issuance of the Subordinated Notes. The terms and conditions of the Subordinated Notes (including but not limited to terms and conditions relating to the interest rate, fees, amortization, maturity, subordination, covenants, events of default and remedies) and the provisions of the Subordinated Debt Documents shall be satisfactory in all material respects to the Agent. The Agent shall have received copies of the Subordinated Debt Documents, certified by an officer of the Borrower as true and correct. SECTION 3.02. Conditions Precedent to Each Borrowing, Drawing and --------------------------------------------------- Issuance. The obligation of each Appropriate Lender to make an Advance or a - -------- Drawing (other than a Letter of Credit Advance made by the Issuing Bank or a Working Capital Lender pursuant to Section 2.03(c) and other than a Swing Line Advance made by a Working Capital Lender pursuant to Section 2.02(f)) on the occasion of each Borrowing (including the Initial Extension of Credit), and the obligation of the Issuing Bank to issue a Letter of Credit (including the initial issuance), shall be subject to the further conditions precedent that on the date of such Borrowing, Drawing or issuance (a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing, Notice of Drawing or Notice of Issuance and the acceptance by the Applicable Borrower of the proceeds of such Borrowing, Drawing or Letter of Credit shall constitute a representation and warranty by the Borrower that both on the date of such notice and on the date of such Borrowing, Drawing or issuance such statements are true): (i) the representations and warranties contained in each Loan Document are correct on and as of such date, before and after giving effect to such Borrowing, Drawing or issuance and to the application of the proceeds therefrom, as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing, Drawing or issuance, in which case as of such specific date; and (ii) no event has occurred and is continuing, or would result from such Borrowing, Drawing or issuance 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 the Agent may reasonably request. SECTION 3.03. Determinations Under Section 3.01. For purposes of --------------------------------- determining compliance with the conditions specified in Sections 3.01, each Lender Party 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 Lender Parties unless an officer of the Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender Party prior to the date of the 82 Initial Extension of Credit specifying its objection thereto and if the initial extension of credit consists of a Borrowing or Drawing, such Lender Party shall not have made available to the Agent such Lender Party's ratable portion of such Borrowing or Drawing. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The ---------------------------------------------- Borrower represents and warrants as follows: (a) Each Loan Party (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably expected to have a Material Adverse Effect and (iii) has all requisite corporate power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted except to the extent the failure to do so is not reasonably expected to have a Material Adverse Effect. All of the outstanding capital stock of the Borrower has been validly issued, is fully paid and non-assessable and, as of the date of this Agreement, is owned by the Parent Guarantor in the amounts and types specified in Schedule 4.01(a) free and clear of any Liens except those created or permitted under the Loan Documents. (b) As of the date of this Agreement, set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Subsidiaries of each Loan Party, showing (as to each such Subsidiary) the jurisdiction of its incorporation, the number of shares of each class of capital stock authorized, and the number outstanding, on the date hereof and the percentage of the outstanding shares of each such class owned (directly or indirectly) by such Loan Party and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the date hereof. All of the outstanding capital stock of all of such Subsidiaries has been validly issued, is fully paid and non-assessable and is owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens, except those created or permitted under the Loan Documents. Each such Subsidiary (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably expected to 83 have a Material Adverse Effect and (iii) has all requisite corporate power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted except to the extent the failure to do so is not reasonably expected to have a Material Adverse Effect. (c) The execution, delivery and performance by each Loan Party of this Agreement, each other Loan Document and each Related Document to which it is or is to be a party, and the consummation of the transactions contemplated hereby and thereby, are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Loan Party's charter or bylaws, (ii) violate any law (including, without limitation, the Securities Exchange Act of 1934), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award applicable to such Loan Party, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which is reasonably expected to have a Material Adverse Effect. (d) 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 to be obtained by the Loan Parties for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of this Agreement, any other Loan Document or any Related Document to which it is or is to be a party, or for the consummation of the Acquisition or the other transactions contemplated hereby or thereby, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents (including the first priority nature thereof subject only to the Liens and security interests permitted in the Loan Documents) or (iv) the exercise by the Agent or any Lender Party of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for the authorizations, approvals, actions, notices and filings listed on Schedule 4.01(d), all of which have been duly obtained, taken, given or made and are in full force and effect. All applicable waiting periods in connection with the Acquisition and the other transactions contemplated hereby and thereby have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse conditions upon the Acquisition or the rights of the Loan 84 Parties or their Subsidiaries freely to transfer or otherwise to dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them. (e) This Agreement has been, and each other Loan Document and each Related Document when delivered hereunder will have been, duly executed and delivered by each Loan Party thereto. This Agreement is, and each other Loan Document and each Related Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or limiting creditors' rights or by equitable principles generally. (f) (i) (x) The Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 1996, December 31, 1997 and December 31, 1998, and the related Consolidated statements of income, stockholders' equity and cash flow of the Borrower and its Subsidiaries for the Fiscal Year then ended, accompanied, as to the Consolidated financial statements, by an unqualified opinion of PriceWaterhouseCoopers, independent public accountants, and (y) the Consolidated balance sheet of the Borrower and its Subsidiaries as at March 31, 1999, June 30, 1999, July 31, 1999 and August 31, 1999, and the related Consolidated statements of income, stockholders' equity and cash flow of the Borrower and its Subsidiaries for the three months (or, in the case of the financial statements for July 31, 1999 and August 31, 1999, the month) ended on each such date, in the case of the statements referred to in this clause (i)(y) duly certified by the chief financial officer or treasurer of the Borrower, in each case copies of which have been furnished to each Lender Party, fairly present, subject, in the case of the statements referred to in clause (i)(y), to year-end audit adjustments, the Consolidated financial condition of each 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 applied on a consistent basis, and (ii) there has occurred no Material Adverse Change with respect to the Borrower and its Subsidiaries, taken as a whole, since December 31, 1998. (g) The annual Business Plans of the Borrower and its Subsidiaries delivered to the Lender Parties pursuant to Section 5.03(e) and the projections prepared by the Borrower and delivered to the Lender Parties pursuant to Section 3.01(g)(xxx) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in the light of conditions existing at the time of delivery of such annual Business Plans and projections, and represented, at the time of delivery, the Borrower's best estimate of its future financial performance (it being recognized by the Lender Parties that such annual Business Plans and projections as to future events are not to be viewed as facts and that actual results during the period covered may differ from the plans). 85 (h) No information, exhibit or report (excluding any Business Plan or financial projections), taken as a whole, furnished on behalf of any Loan Party to the Agent or any Lender Party in connection with the negotiation of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading as of its date. (i) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries, including any Environmental Action, pending or threatened before any court, governmental agency or arbitrator that (i) individually or in the aggregate, is reasonably expected to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of the Acquisition, this Agreement, any other Loan Document or any Related Document or the consummation of the transactions contemplated hereby. There is no condemnation or similar proceeding pending or threatened affecting any part of the property subject to a Mortgage that is reasonably expected to have a Material Adverse Effect. (j) No proceeds of any Advance, any Drawing or drawings under any Letter of Credit will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934. (k) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and following application of the proceeds of each Advance, Drawing or drawing under each Letter of Credit, not more than 25% of the value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a Consolidated basis) subject to the provisions of Section 5.02(a) or 5.02(e) or subject to any restriction contained in any agreement or instrument between the Borrower and any Lender Party or any Affiliate of any Lender Party relating to Debt within the scope of Section 6.01(e) will be Margin Stock. For purposes of this Section 4.01(k), "assets" of the Borrower or any of its Subsidiaries includes, without limitation, treasury stock of the Borrower that has not been retired. (l) Set forth on Schedule 4.01(l) hereto is a complete and accurate list, as of the date hereof, of all Plans, Multiemployer Plans and Welfare Plans. (m) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan which is reasonably expected to have a Material Adverse Effect. (n) As of the last annual actuarial valuation date, the funded current liability percentage, as defined in Section 302(d)(8) of ERISA, of each Plan exceeds 90% except 86 in any case where the failure to exceed 90% is not reasonably expected to have a Material Adverse Effect, and there has been no change in the funding status of any such Plan since such date which is reasonably expected to have a Material Adverse Effect. (o) Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) for each Plan, copies of which have been filed with the Internal Revenue Service and furnished to the Lender Parties, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no change in such funding status which is reasonably expected to have a Material Adverse Effect. (p) Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan which is reasonably expected to have a Material Adverse Effect. (q) Neither any Loan Party nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no such Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA which, in any such case, is reasonably expected to result in a Material Adverse Effect. (r) Except as set forth in the financial statements referred to in this Section 4.01 or in Section 5.03, the Loan Parties and their respective Subsidiaries have no material liability with respect to "expected post retirement benefit obligations" within the meaning of Statement of Financial Accounting Standards No. 106. (s) Neither the business nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that could reasonably be expected to have a Material Adverse Effect. (t) Except as set forth on Schedule 4.01(t), (i) the operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, all past claims of non-compliance with such Environmental Laws and Environmental Permits have been resolved without material ongoing obligations or costs, and (ii) no circumstances exist that are reasonably expected to (A) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of its properties that are reasonably expected to have a Material Adverse Effect or (B) cause any such property to be subject 87 to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law. (u) Except as set forth on Schedule 4.01(u) and in each case to the extent not reasonably expected to have a Material Adverse Effect, (i) none of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; (ii) there are no underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any material property currently owned or operated by any Loan Party or any of its Subsidiaries; (iii) there is no asbestos or asbestos- containing material on any material property currently owned or operated by any Loan Party or any of its Subsidiaries; and (iv) to the best knowledge of any Loan Party, Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries. (v) Neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law that is reasonably expected to have a Material Adverse Effect. (w) Neither any Loan Party nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction that is reasonably expected to have a Material Adverse Effect. (x) The Collateral Documents create a valid and perfected security interest in the Collateral (subject in priority only to the Liens and security interests permitted under the Loan Documents) securing the payment of the Secured Obligations, and all filings and other actions necessary or prudent to perfect and preserve such security interest have been duly taken. The Loan Parties are the legal and beneficial owners of the Collateral free and clear of any Lien, except for the liens and security interests created or permitted under the Loan Documents. (y) Each Loan Party and each of its Subsidiaries has filed or has caused to be filed all material tax returns (Federal, state, local and foreign) which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties (other than any such taxes, interest and 88 penalties the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the applicable Loan Party). (z) Set forth on Schedule 4.01(z) hereto is a complete and accurate list, as of the date hereof, of each taxable year of each Loan Party and each of its Subsidiaries for which Federal income tax returns have been filed and for which the expiration of the applicable statute of limitations for assessment or collection has not occurred by reason of extension or otherwise (an "Open Year"). --------- (aa) Except as set forth on Schedule 4.01(aa), there is no unpaid amount, as of the date hereof, of adjustments to the Federal income tax liability of any Loan Party or any of its Subsidiaries proposed by the Internal Revenue Service with respect to Open Years and no issues have been raised by the Internal Revenue Service in respect of Open Years that, in the aggregate, are reasonably expected to have a Material Adverse Effect. (bb) Except as set forth on Schedule 4.01(bb), there is no material unpaid amount, as of the date hereof, of adjustments to the state, local and foreign tax liability of any Loan Party or any of its Subsidiaries proposed by any state, local and foreign taxing authorities (other than amounts arising from adjustments to Federal income tax returns, if any) with respect to Open Years. No issues have been raised by such taxing authorities that, in the aggregate, are reasonably expected to have a Material Adverse Effect. (cc) Neither any Loan Party nor any of its Subsidiaries is an "investment company", or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Advances, nor any Drawing, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Applicable Borrower, nor the consummation of the other transactions contemplated hereby, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (dd) Each Loan Party is, individually and together with its Subsidiaries, Solvent. (ee) Set forth on Schedule 4.01(ee) hereto is a complete and accurate list of all Existing Debt (other than Surviving Debt), showing as of the date hereof the principal amount outstanding thereunder. (ff) Set forth on Schedule 3.01(f) hereto is a complete and accurate list of all Surviving Debt as of the date hereof, showing the principal amount outstanding thereunder, the maturity date thereof and the amortization schedule therefore. 89 (gg) Set forth on Schedule 4.01(gg) hereto is a complete and accurate list of all material real property owned, as of the date hereof, by any Loan Party or any of its Subsidiaries, showing as of the date hereof the county or other relevant jurisdiction and the state thereof. Except to the extent the failure to do so is not reasonably expected to have a Material Adverse Effect, as of the date hereof, each Loan Party or such Subsidiary has good, marketable and insurable title to such real property, free and clear of all Liens, other than Liens created or permitted by the Loan Documents. (hh) Set forth on Schedule 4.01(hh) hereto is a complete and accurate list of all material leases of real property (the "Material Leases") under --------------- which any Loan Party or any of its Subsidiaries is the lessee, as of the date hereof, showing as of the date hereof the county or other relevant jurisdiction, state, lessor and expiration date thereof. Except to the extent the failure to do so is not reasonably expected to have a Material Adverse Effect, as of the date hereof, each Material Lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms and the execution and delivery by the Loan Parties of the Mortgages does not terminate, or constitute a default under, any Material Lease and does not give the lessor under any Material Lease the right to terminate such Material Lease or declare a default thereunder. (ii) Set forth on Schedule 4.01(ii) hereto is a complete and accurate list of all Investments held as of the date hereof by any Loan Party or any of its Subsidiaries showing the amount, obligor or issuer and maturity, if any, thereof. (jj) As of the date of this Agreement, set forth on Schedule 4.01(jj) hereto is a complete and accurate list of all material patents, trademarks, trade names, service marks and copyrights, and all material applications therefor and material licenses thereof, of each Loan Party or any of its Subsidiaries showing the jurisdiction in which registered, the registration number, the date of registration and the expiration date. (kk) The Parent Guarantor and each of its Subsidiaries are Year 2000 Compliant, except where any failure to be Year 2000 Compliant is not, individually or in the aggregate, reasonably expected to have a Material Adverse Effect. 90 ARTICLE V COVENANTS OF THE BORROWER, OF THE CANADIAN BORROWER AND OF THE PARENT GUARANTOR SECTION 5.01. Affirmative Covenants. So long as any Advance shall --------------------- remain unpaid, any Letter of Credit or Bankers' Acceptance shall be outstanding or any Lender Party shall have any Commitment hereunder, the Parent Guarantor 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. (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 material amounts of taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, could reasonably be expected by law to become a Lien upon its property; provided, however, that neither the Parent Guarantor nor any -------- ------- of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim (x) that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained or (y) in respect of which any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors to the extent that the aggregate amount of all such taxes, assessments, charges and claims does not exceed $300,000. (c) Compliance with Environmental Laws. Comply, and cause each of ---------------------------------- its Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew and cause each of its Subsidiaries to obtain and renew all material Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws, unless the failure to so comply with the foregoing is not reasonably expected to have a Material Adverse Effect; provided, however, that neither -------- ------- the Parent Guarantor nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. (d) Maintenance of Insurance. Maintain, and cause each of its ------------------------ Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations 91 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 Parent Guarantor or such Subsidiary operates. Each such insurance policy shall be on terms as provided for in Section 11(a) of the Security Agreement. (e) 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 all material permits, licenses, approvals, privileges and franchises necessary or desirable in the normal conduct of its business; provided, however, that any of the -------- ------- Parent Guarantor's Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(d). (f) Visitation Rights. Upon 5 Business Days' notice to the Parent ----------------- Guarantor, permit the Agent or any of the Lender Parties 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 Parent Guarantor and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Parent Guarantor and any of its Subsidiaries with any of their officers or directors and, as to the Agent only and with reasonable notice to the Parent Guarantor, with their independent certified public accountants. (g) Preparation of Environmental Reports. At the request of the ------------------------------------ Agent at the following times: (i) upon and during the continuance of an Event of Default and (ii) upon the acquisition or sale of real property by any Loan Party or any of its Subsidiaries, provide to the Agent within 60 days after such request, at the expense of the Borrower, a Phase I environmental site assessment report for properties to be acquired and described in such request, prepared by an environmental consulting firm reasonably acceptable to the Agent (and, if based upon the recommendation of such environmental consulting firm upon and during the continuance of an Event of Default, a Phase II environmental site assessment report) indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties; without limiting the generality of the foregoing, if the Agent determines at any time upon and during the continuance of an Event of Default that a material risk exists that any such report will not be provided within the time referred to above, the Agent may retain an environmental consulting firm to prepare such report at the expense of the Borrower, and the Borrower hereby grants and agrees to cause any Subsidiary that owns any property described in such request to grant at the time of such request, to the Agent, the Lender Parties, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto their respective properties to undertake such an assessment. (h) Keeping of Books. Keep, and cause each of its Subsidiaries to ---------------- keep, proper books of record and account, in which entries which are full and correct in all 92 material respects shall be made of all financial transactions and the assets and business of the Parent Guarantor and each such Subsidiary in accordance with generally accepted accounting principles in the United States. (i) Maintenance of Properties, Etc. Maintain and preserve, and cause ------------------------------ each of its Subsidiaries to maintain and preserve, all of its properties that are reasonably required in the conduct of its business in good working order and condition, ordinary wear, tear and depletion excepted. (j) Compliance with Terms of Leaseholds. Cause each of its ----------------------------------- Subsidiaries to make all payments and otherwise perform all obligations in respect of all leases of real property to which any such Subsidiary is a party, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or canceled, notify the Agent of any material default by any party with respect to such leases and cooperate with the Agent in all respects to cure any such default, and cause each such Subsidiary to do so, unless the failure to so comply with the foregoing is not reasonably expected to have a Material Adverse Effect. (k) Performance of Related Documents. Unless the failure to so -------------------------------- comply (other than the failure to comply with the Purchase Agreement) could not reasonably be expected to have a Material Adverse Effect, perform and observe, and cause each of its Subsidiaries to perform and observe, all of the terms and provisions of each Related Document to be performed or observed by it, maintain each such Related Document in full force and effect, enforce such Related Document in accordance with its terms, and upon and during the continuance of an Event of Default, (i) take all such action to such end as may be from time to time requested by the Agent and (ii) upon request of the Agent, make to each other party to each such Related Document such demands and requests for information and reports or for action as it is entitled to make under such Related Document. (l) Transactions with Affiliates. (i) Conduct, and cause each of its ---------------------------- Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are no less favorable to the Parent Guarantor or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate; provided, however, that the Borrower may make payments to D. George Harris -------- ------- & Associates, LLC or any of its designees in an amount not to exceed one percent (1%) of the consideration paid in connection with (x) any Permitted Acquisition or (y) the Acquisition; and provided further that transactions -------- ------- otherwise permitted under the Loan Documents among the Parent Guarantor and its Subsidiaries and those transactions contemplated by the Tax Sharing Agreement, the Harris Management Agreement and the Investments contemplated by Section 5.02(f)(x) shall not be subject to the requirements of this Section 5.01(l). Without in any way limiting 93 the generality of the foregoing, any consents or waivers of or amendments, supplements or modifications to the Harris Management Agreement shall require the approval of the Compensation Committee constituted by the Board of Directors of USS Holdings, Inc. (ii) The foregoing paragraph (i) shall not prohibit, to the extent otherwise permitted under this Agreement, (A) any Restricted Payment permitted to be paid pursuant to Section 5.02(g), (B) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the board of directors of the Borrower, (C) the grant of stock options or similar rights to employees and directors of the Borrower pursuant to plans approved by the board of directors of the Borrower, (D) loans or advances to employees in the ordinary course of business in accordance with past practices of the Borrower or any of its Subsidiaries and (E) the payment of reasonable fees to directors of the Parent Guarantor and its Subsidiaries who are not employees of the Parent Guarantor or its Subsidiaries. (m) Covenant to Give Security. Upon the request of the Agent (i) ------------------------- following the occurrence and during the continuance of an Event of Default with respect to any parcel of real property in any one county with a fair market value that is equal to or greater than $125,000 but less than $250,000 or (ii) upon the acquisition by the Parent Guarantor or any of its Subsidiaries of real property in any one county with an aggregate fair market value, at the time of any such acquisition, equal to or greater than $250,000, take all or any of the following actions, in all cases at the expense of the Borrower, (A) within 10 days after such request, furnish to the Agent a description of the real and personal property of the Parent Guarantor and its Subsidiaries which are not subject to the Collateral Documents and which meet the criteria of clause (i) or (ii) above, as the case may be, in detail reasonably satisfactory to the Agent, (B) within 15 days after receipt of such documents, duly execute and deliver mortgages, pledges, assignments and other security agreements, as specified by and in form and substance reasonably satisfactory to the Agent, securing payment of all the Obligations of the Loan Parties under the Loan Documents and constituting Liens on all such properties, (C) within 30 days after receipt of such documents, take whatever action (including, without limitation, the recording of mortgages, the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) that may be reasonably necessary or advisable in the opinion of the Agent to vest in the Agent (or in any representative of the Agent designated by it) valid and subsisting Liens on the properties purported to be subject to the security agreements delivered pursuant to this Section 5.01(m), enforceable against all third parties in accordance with their terms, (D) within 60 days after receipt of such documents, deliver to the Agent a signed copy of a favorable opinion, addressed to the Agent, of counsel for the Borrower reasonably acceptable to the Agent, as to such security agreements creating legal, valid and subsisting Liens enforceable in accordance with their terms and as to such other matters 94 as the Agent may reasonably request, (E) as promptly as is practicable after such request in respect of property subject to clause (ii) above, deliver to the Agent surveys meeting the criteria specified in Section 3.01(g)(xiv)(B) and Mortgage Policies as to each parcel of real property subject to such request, (F) as soon as reasonably practicable, and in no event later than 9 months after the Initial Extension of Credit, cause the provisions of clauses (A), (B), (C), (D) and (E) above to be satisfied with respect to each property listed on Schedule 5.01(m), and (G) at any time and from time to time, promptly execute and deliver any and all further instruments and documents and take all such other action as the Agent may deem reasonably desirable in obtaining the full benefits of, or in preserving the Liens of, such security agreements. (n) Covenant to Guarantee and Secure Obligations. Unless otherwise -------------------------------------------- agreed to by the Agent, upon the formation or acquisition of any new direct or indirect wholly owned Domestic Subsidiary of the Borrower, within 10 days after such formation or acquisition, (i) cause each such Domestic Subsidiary to duly execute and deliver to the Agent a guaranty or guaranty supplement, in form and substance satisfactory to the Agent, guaranteeing the other Loan Parties' obligations under the Loan Documents, and each applicable Collateral Document in the manner provided therein, (ii) promptly take such actions to create and perfect Liens on such Domestic Subsidiary's assets to secure the Obligations as the Agent shall reasonably request and (iii) if any capital stock or other ownership or profit interest, warrants, rights, options or Debt of such Subsidiary are owned by any Loan Party (other than the Canadian Borrower), cause such capital stock or other ownership or profit interest, warrants, rights, options and promissory notes evidencing such Debt to be pledged pursuant to the Security Agreement. (o) Interest Rate Hedging. Cause the Borrower to enter into prior to --------------------- March 31, 2000, and thereafter to maintain for successive periods of not less than three years, Bank Hedge Agreements on such terms as shall be reasonably satisfactory to the Agent, the effect of which is to fix or limit the interest cost to the Borrower, during the three-year period immediately following the date on which the Borrower enters into the applicable Bank Hedge Agreement, with respect to at least 60% of the Term Advances outstanding during such three-year period. (p) Year 2000 Compliance. Be, and cause each of its Subsidiaries to -------------------- be, Year 2000 Compliant at all times, except where failure to do so is not reasonably expected to have a Material Adverse Effect. SECTION 5.02. Negative Covenants. So long as any Advance shall ------------------ remain unpaid, any Letter of Credit or Bankers' Acceptance shall be outstanding or any Lender Party shall have any Commitment hereunder, the Parent Guarantor will not, at any time: 95 (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit ---------- any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien of any character on or with respect to any of its properties (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist, or permit any of its Subsidiaries to sign or file or suffer to exist, under the Uniform Commercial Code of any jurisdiction, a financing statement that names the Parent Guarantor or any of its Subsidiaries as debtor, or sign or suffer to exist, or permit any of its Subsidiaries to sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any of its Subsidiaries to assign, any accounts or other right to receive income, excluding, however, --------- ------- from the operation of the foregoing restrictions the following: (A) in the case of the Borrower and its Subsidiaries: (i) Liens created under the Loan Documents; (ii) Permitted Liens; (iii) Liens existing on the date hereof and described on Schedule 5.02(a)(iii) hereto or in the Mortgage Policies; (iv) Liens arising in connection with Capitalized Leases permitted under Section 5.02(b)(v), provided that no such Lien -------- shall extend to or cover any Collateral or assets other than the assets subject to such Capitalized Leases; (v) purchase money Liens upon or in real property or equipment acquired or held by the Borrower or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition of or construction on or improvement of any such property or equipment to be subject to such Liens, or Liens existing on any such property or equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), 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 property other than the property or equipment being acquired or constructed and any improvements thereon, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and provided further that the aggregate -------- ------- principal amount of the Debt secured by Liens permitted by this clause (v) shall not exceed the 96 amount permitted under Section 5.02(b)(B)(i) at any time outstanding and that any such Debt shall not otherwise be prohibited by the terms of the Loan Documents; (vi) the filing of financing statements solely as a precautionary measure in connection with operating leases permitted under Section 5.02(c); (vii) the replacement, extension or renewal of any Lien permitted by clause (iii) 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; (viii) Liens for unpaid royalties not then due and payable which Liens, in the aggregate, are not substantial in amount and do not, in any case, materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of business of the Borrower and its Subsidiaries; (ix) Liens in respect of judgments or decrees not constituting an Event of Default under Section 6.01(g); and (x) Permitted Liens as to which enforcement, execution, levy or foreclosure proceedings shall have been commenced in an amount not to exceed $500,000 in the aggregate; and (B) in the case of the Parent Guarantor: (i) Liens created under the Parent Guarantor Security Agreement; (ii) Permitted Liens; and (iii) Liens in respect of judgments or decrees not constituting an Event of Default under Section 6.01(g). (b) Debt. Create, incur, assume or suffer to exist, or permit any of ---- its Subsidiaries to create, incur, assume or suffer to exist, any Debt other than: (i) Debt in respect of Bank Hedge Agreements entered into pursuant to Section 5.01(o); 97 (ii) Debt in respect of Natural Gas Hedge Agreements designed to hedge against fluctuations in natural gas prices, incurred in the ordinary course of business and consistent with prudent business practice in an aggregate notional amount not to exceed at any one time 60% of the sum of (x) the aggregate amount of the natural gas requirements of the Loan Parties the preceding 12 months, and (y) the projected natural gas requirements of the Loan Parties for the next six months; (iii) Debt in respect of surety bonds fully supported by Letters of Credit; (iv) the Subordinated Debt; (v) Capitalized Leases, together with Debt secured by Liens permitted by Section 5.02(a)(v), the principal amount of which does not, in the aggregate, exceed $10,000,000 at any one time outstanding; (vi) Debt described on Schedule 3.01(f); (vii) Debt under the Loan Documents; (viii) indorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (ix) Debt in respect of trade payables in an amount not to exceed $1,000,000 in the aggregate; (x) Debt in respect of (A) Investments permitted under Sections 5.02(f)(i), (ii), (vi), (xii), (xiv), (xv), (xvi) and (xvii) hereof and (B) Restricted Payments permitted under Section 5.02(g) hereof; provided that Debt in respect of Investments -------- permitted under Section 5.02(f)(xii) shall be permitted under this Agreement only to the extent that the incurrence of such Debt is permitted under the Subordinated Debt Documents, and provided further that the aggregate principal amount of Debt in -------- ------- respect of Investments permitted under Section 5.02(f)(xvi) shall not exceed $15,000,000 in the aggregate at any one time outstanding; (xi) Debt of the type described in clauses (i) or (j) of the definition of "Debt" relating to the Debt of any Loan Party that is permitted under Section 5.02(b) (other than the Subordinated Debt); 98 (xii) unsecured Debt not to exceed $750,000 in the aggregate at any one time outstanding; and (xiii) the Nicks Silica Company Note. (c) Lease Obligations. Permit any of its Subsidiaries to create, ----------------- incur, assume or suffer to exist, any obligations as lessee for the rental or hire of real or personal property in connection with any operating leases or Capitalized Lease obligations having an original term of one year or more that would cause the annual rental obligations of the Borrower and its Subsidiaries, on a Consolidated basis, to exceed $5,000,000 payable in any period of 12 consecutive months. (d) Mergers, Etc. Merge into or consolidate with any Person or ------------ permit any Person to merge into it, or permit any of its Subsidiaries to do so, except that any Subsidiary of the Borrower may merge into or consolidate with (i) the Borrower in a transaction in which the Borrower is the surviving corporation or (ii) any other Subsidiary of the Borrower or any Person the capital stock of which is acquired in a Permitted Acquisition in a transaction in which the surviving corporation is a wholly owned (and, to the extent that a Subsidiary party to such merger or consolidation is a Domestic Subsidiary, Domestic) Subsidiary of the Borrower. (e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise ---------------------- dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets, except: (i) sales of Inventory (including, without limitation, sales of obsolete Inventory) in the ordinary course of its business; (ii) in a transaction authorized by subsection (d) of this Section; (iii) dispositions of used equipment for fair value in the ordinary course of business, provided that the proceeds thereof are -------- used in the ordinary course of business to purchase equipment to be used in the ordinary course of business; (iv) dispositions of worn out or obsolete tools or equipment no longer used or, in the Borrower's or the applicable Subsidiary of the Borrower's good faith judgment, useful in the ordinary course of business of the Borrower and its Subsidiaries; (v) upon notice to the Agent, the Borrower and its Subsidiaries may, in the ordinary course of business, sell, lease, transfer or otherwise dispose of up to 99 1,000 acres of owned real property in any period of 24 consecutive months; provided, however, notwithstanding anything provided for -------- ------- in the previous sentence, the Borrower may, in the ordinary course of business, upon notice to the Agent, sell, lease, transfer or otherwise dispose of the real property listed on Schedule 5.02(c)(v) hereof; provided that no sale, lease, transfer or disposition made pursuant to -------- this subsection (v) shall, individually or in the aggregate, materially interfere with the business of the Borrower and its Subsidiaries; (vi) dispositions of any asset by any Subsidiary of the Borrower to the Borrower or any wholly-owned Domestic Subsidiary; (vii) dispositions (other than sales) in the ordinary course of business of property that do not, in the aggregate, materially interfere with the business of the Borrower and its Subsidiaries; (viii) sales or other dispositions of capital stock of USS Holdings, Inc. to management of the Parent Guarantor, its Subsidiaries and D. George Harris & Associates Persons; (ix) sales in the ordinary course of business and on a basis substantially consistent with prior business practice of timber or the right to harvest timber; (x) sales in the ordinary course of business and on a basis substantially consistent with prior business practice of limestone, the right to mine limestone, waste products and by-products; (xi) transfers of assets by the Borrower or any of its Subsidiaries in connection with Investments by the Borrower or any of its Subsidiaries permitted by Section 5.02(f)(x) in an aggregate amount (based on the fair market value of such assets as determined by the Board of Directors of the Borrower) not to exceed, together with Investments permitted by Section 5.02(f)(x), an amount equal to $7,000,000, provided that, at the time each such transfer of assets is -------- made, no Default shall have occurred and be continuing; and (xii) transfers of real property to a state, county, local or municipal governmental agency in exchange for the granting of a permit or the taking of other regulatory action by such governmental agency to the extent that such transfers (x) do not, individually or in the aggregate, materially interfere with the business of the Borrower and its Subsidiaries and (y) enhance the value of mining properties owned by the Borrower or one of its Subsidiaries, provided that in the case -------- of each such exchange, the board of directors of the Borrower has determined in good faith that such exchange is in the best interest of the Borrower. 100 (f) Investments in Other Persons. Make or hold, or permit any of its ---------------------------- Subsidiaries to make or hold, any Investment in any Person other than: (i) Investments by the Borrower or its Subsidiaries in the Borrower or wholly-owned Domestic Subsidiaries of the Borrower outstanding on the date hereof, and additional Investments from time to time hereafter by the Borrower or its Subsidiaries in the Borrower or wholly-owned Domestic Subsidiaries of the Borrower, constituting advances made by the Borrower or such Subsidiary for working capital purposes of the Borrower or such wholly-owned Domestic Subsidiaries, for so long as such advances are being evidenced by demand notes from the Borrower or such wholly-owned Domestic Subsidiaries, substantially in the form of Exhibit N-1 or N-2 hereto, as applicable, that constitute Pledged Debt under the Security Agreement; (ii) Investments by the Borrower or its Subsidiaries in its wholly-owned Subsidiary, George F. Pettinos (Canada) Limited, in an aggregate amount invested not to exceed $1,000,000 from time to time outstanding, for so long as such investments are being evidenced by a demand note from George F. Pettinos (Canada) Limited, substantially in the form of Exhibit O hereto, that constitutes Pledged Debt under the Security Agreement; (iii) loans and advances to employees in the ordinary course of the business of the Borrower and its Subsidiaries as presently conducted in an aggregate principal amount not to exceed $300,000 at any time outstanding; (iv) Investments by the Loan Parties (x) in Cash Equivalents deposited in a Blocked Account (as defined in the Security Agreement) in an aggregate amount at any time invested not to exceed $5,000,000, (y) in other Cash Equivalents in an aggregate amount at any time invested not to exceed $1,500,000, and (z) any further Cash Equivalents deposited pursuant to a deferred compensation plan in the ordinary course of business of the Loan Parties; (v) Investments in (x) Hedge Agreements permitted under Section 5.02(b)(i), and in (y) Natural Gas Hedge Agreements permitted under Section 5.02(b)(ii); (vi) other Investments existing on the date hereof and described on Schedule 4.01(b) or Schedule 4.01(ii) hereto; 101 (vii) Investments in the ordinary course of business of the Borrower and its Subsidiaries and on a basis substantially consistent with prior business practice in the form of extensions of trade credit; (viii) Investments (x) in the form of loans and advances to employees of the Borrower and its Subsidiaries the proceeds of which are applied to the purchase of capital stock of USS Holdings, Inc. and (y) by the Borrower or its Subsidiaries in capital stock of USS Holdings, Inc. arising as a result of acquisition of such capital stock from management or other employees, and their respective transferees, of the Borrower and its Subsidiaries, provided that the -------- aggregate outstanding principal amount of all such Investments shall at no time exceed a total of $600,000; (ix) Investments in the ordinary course of business in an insurer required as a condition to the provision by such insurer of insurance coverage contemplated by Section 5.01(d); (x) Investments by the Borrower or any of its wholly-owned Domestic Subsidiaries in a joint venture with Sylvania Company Limited Partnership to process and sell silica from a deposit in Rockwood, Michigan in an aggregate amount invested not to exceed, together with any transfer of assets permitted by Section 5.02(e)(xi), an amount equal to $7,000,000, provided that, at the time each such Investment -------- is made, no Default shall have occurred and be continuing; (xi) Investments in the form of loans to D. George Harris & Associates, LLC pursuant to the Harris Management Agreement, provided -------- that (A) the aggregate principal amount of all such Investments made in any calendar year shall not exceed $1,000,000 and (B) the aggregate principal amount of all such investments at any one time outstanding shall not exceed $3,000,000; (xii) Investments by the Borrower or any of its Subsidiaries, made either directly or through a wholly-owned Subsidiary specially organized for the purpose of such Investment, in Permitted Acquisitions, provided that -------- (A) before and after giving effect to any such Investment, on a pro forma basis for the Rolling Period ended as at the end of the most recent period for which financial statements were required to be furnished to the Agent pursuant to Sections 5.03(b), (c) or (d), the Total Leverage Ratio of the Parent Guarantor and its Subsidiaries (calculated to include all Investments made after the last day of such Rolling Period as if such Investments were made on the last day of such Rolling Period) shall be not more than 5.00 to 1.00, 102 (B) the Borrower shall have furnished to the Agent a schedule in form satisfactory to the Agent of the computations used by the Parent Guarantor in determining compliance with such requirements, (C) the Borrower shall have furnished to the Agent a certificate, signed by the chief financial officer or treasurer of the Parent Guarantor, substantially in the form of Exhibit M- 1, attesting to the Solvency of the Parent Guarantor and its Subsidiaries as of the effective date of the Investment (taking into effect such Investment), and (D) immediately before and after giving effect thereto, no Default shall have occurred and be continuing or would result therefrom; (xiii) Investments made by the Borrower or any of its wholly- owned Domestic Subsidiaries in the publicly traded securities of a Person engaged in a similar line of business as the Borrower and its Subsidiaries, such Investments at any one time not to exceed $250,000; (xiv) Investments made by any Loan Party in any wholly-owned Domestic Subsidiary of the Parent Guarantor; (xv) Investments made by the Borrower or any of its Subsidiaries in the Parent Guarantor in order to permit the repurchase or redemption of the capital stock of USS Holdings, Inc. described in Section 5.02(g); (xvi) Investments made by any Subsidiary of the Borrower incorporated under the laws of Canada or any political subdivision thereof (a "Canadian Subsidiary") in another Canadian Subsidiary of ------------------- the Borrower; and (xvii) Investments made by any Loan Party in the form of the incurrence of Debt of the type referred to in clause (i) or (j) of the definition of "Debt" (a "Guaranty") in respect of the Debt of any Loan ---- -------- Party that is permitted under Section 5.02(b); provided that (A) the -------- Parent Guarantor shall not Guaranty the Subordinated Debt and (B) no Subsidiary of the Borrower shall Guaranty the Subordinated Debt unless (x) such Subsidiary has also Guaranteed the Obligations of the Loan Parties under the Loan Documents pursuant to a Subsidiary Guaranty, (y) such Guaranty of the Subordinated Debt is subordinated to such Guaranty of the Obligations of the Loan Parties under the Loan Documents on terms no less favorable to the Lenders than the subordination provisions of the Subordinated Debt and (z) such Guaranty of the Subordinated Debt provides for the release and termination thereof, without any action by any party, upon any sale by the Borrower or any of its other Subsidiaries of the capital stock of such Subsidiary to 103 the extent that (A) after giving effect to such sale, such Subsidiary will cease to be a Subsidiary and (B) such sale is permitted under the Subordinated Debt Documents. (g) Restricted Payments. Declare or pay any dividends (other than ------------------- paid-in-kind preferred dividends), purchase, redeem, retire, defease or otherwise acquire for value any of its capital stock or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding, return any capital to its stockholders as such, make any distribution of assets, capital stock, warrants, rights, options, obligations or securities to its stockholders as such or issue or sell any capital stock or any warrants, rights or options to acquire such capital stock (each, a "Restricted Payment"), or permit any of its Subsidiaries to ------------------ do any of the foregoing or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of the Borrower or any warrants, rights or options to acquire such capital stock or to issue or sell any capital stock or any warrants, rights or options to acquire such capital stock, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom: (i) this Section 5.02(g) shall not apply to Restricted Payments made by any Subsidiary of the Borrower, provided -------- that if any such Subsidiary of the Borrower is not a wholly-owned Subsidiary of the Borrower, any Restricted Payment made by such Subsidiary to a Person other than the Borrower or a wholly-owned Subsidiary of the Borrower shall be no greater than such Person's share of such Restricted Payment if distributed to the holders of such Subsidiary's capital securities held by such holders immediately prior to the making of such Restricted Payment and (ii) this Section 5.02(g) shall not apply to Restricted Payments made by the Borrower or any of its Subsidiaries constituting (A) payments to the Parent Guarantor pursuant to the Tax Sharing Agreement, which payments (x) shall be made not earlier than three Business Days prior to the date upon which USS Holdings, Inc.'s related liability to the relevant governmental authority for tax (including, without limitation, estimated taxes) is paid (or, if no such taxes are payable, ordinarily would have been due) and (y) shall not exceed the amount of income taxes which is to be paid by the Loan Parties to USS Holdings, Inc. pursuant to such Tax Sharing Agreement, (B) payments to the Parent Guarantor for operating expenses of the Parent Guarantor and USS Holdings, Inc. in an annual aggregate amount not to exceed $200,000, (C) Restricted Payments made by the Borrower in any Fiscal Year with 50% of its portion of Excess Cash Flow for the immediately preceding Fiscal Year in connection with the repurchase of any of the outstanding capital stock of USS Holdings, Inc. for cash from employees, former employees, officers, former officers, directors or former directors of the Borrower or any of its Subsidiaries (or permitted transferees of such employees, former employees, officers, former officers, directors or former directors), pursuant to the terms of agreements (including employment agreements) or plans (or amendments thereto) approved by the board of directors of the Borrower, the Parent Guarantor or USS Holdings, Inc. under which such individuals purchase or sell or are granted the option to 104 purchase or sell, shares of such common stock, in an amount not to exceed $2,000,000 in such Fiscal Year, and (D) payments contemplated under the first proviso to Section 5.01(l). (h) Change in Nature of Business. (i) Engage in any business or ---------------------------- activity other than the ownership, directly or indirectly, of capital stock of the Borrower and activities incidental thereto, (ii) own or acquire any assets (other than capital stock of the Borrower, cash and Cash Equivalents and other assets incidental to maintaining its existence and ownership of the foregoing assets) or incur any liabilities (other than liabilities under the Loan Documents, liabilities imposed by law, including tax liabilities, and other liabilities incidental to its existence and permitted business and activities), (iii) permit any of its Subsidiaries to make any material change in the nature of its business as carried on at the date hereof or (iv) permit any of its Subsidiaries to engage in any business not engaged in, or acquire any assets not owned (other than in the ordinary course of business or as otherwise permitted under this Agreement), on the date hereof. (i) Charter Amendments. Amend, or permit any of its Subsidiaries to ------------------ amend, its certificate of incorporation or any provision of its bylaws in any manner that is adverse to the Lenders in any material respect. (j) Accounting Changes. Make or permit, or permit any of its ------------------ Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required by generally accepted accounting principles. (k) Amendment, Etc., of Related Documents. Cancel or terminate any ------------------------------------- Related Document or consent to or accept any cancelation or termination thereof, amend, modify or change in any manner any term or condition of any Related Document or give any consent, waiver or approval thereunder, waive any default under or any breach of any term or condition of any Related Document, or take any other action in connection with any Related Document to the extent that any such action would (i) impair in any material manner the value of the interest or rights of the Borrower under such Related Document, (ii) impair in any material manner the rights or interests of the Agent or any Lender Party or (iii) increase any amount payable by the Borrower under the Harris Management Agreement (other than as contemplated by such Agreement as in effect on the date hereof), or permit any of its Subsidiaries to do any of the foregoing in any such case without the prior written consent of the Required Lenders which shall not be unreasonably withheld. (l) Negative Pledge; Restrictive Agreements. Enter into or suffer to --------------------------------------- exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning (a) the payment of dividends or the making of any other distributions on its capital stock or the payment of any Debt or other obligations owed to the Borrower, 105 (b) the making of loans or advances to the Borrower, (c) the transfer of any of its property or assets to the Borrower or (d) the creation or assumption of any Lien upon any of its property or assets, other than (i) in favor of the Secured Parties, (ii) in connection with (A) any Surviving Debt, or (B) any Debt secured by purchase money Liens and Capitalized Leases with respect to the specific assets subject to such Liens or Capitalized Leases, (iii) in connection with operating leases or other commercial agreements entered into in the ordinary course of business of the Borrower and its Subsidiaries on a basis consistent with past practice (other than any such agreements pursuant to which the Borrower or its Subsidiaries incur Debt) and (iv) in the case of clauses (a), (b) and (c) above, (A) any encumbrance or restriction pursuant to applicable law or an agreement in effect at or entered into on the date hereof, (B) any encumbrance or restriction with respect to a Subsidiary of the Borrower pursuant to an agreement relating to any Debt incurred by such Subsidiary prior to the date on which such Subsidiary was acquired by the Borrower or another Subsidiary of the Borrower (other than Debt incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary of the Borrower or was otherwise acquired by the Borrower or any of its Subsidiaries) and outstanding on such date, (C) in the case of clause (c) above, any encumbrance or restriction (1) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract or (2) contained in security agreements securing Debt of the Borrower or any of its Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject to such security agreements, (D) with respect to a Subsidiary of the Borrower, any restriction imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the capital stock or assets of such Subsidiary pending the closing of such sale or disposition and (E) any encumbrance or restriction existing or created pursuant to Debt permitted to be incurred by a Subsidiary of the Borrower after the date hereof pursuant to Section 5.02(b); provided, however, that any such encumbrance or restrictions are reasonable and customary with respect to the type of Debt being incurred (under the relevant circumstances). (m) Partnerships. Become a general partner in any general or limited ------------ partnership or joint venture, or permit any of its Subsidiaries to do so. (n) Prepayments of Subordinated Debt, Etc. (i) Prepay, redeem, -------------------------------------- purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, the Subordinated Debt, other than the payment of regularly scheduled interest and principal payments as and when due in respect thereof, or (ii) amend, modify or waive any of its rights under any Subordinated Debt Document. 106 (o) Other Transactions. Engage or permit any of its Subsidiaries to ------------------ engage in any Hedge Agreements or any transaction involving commodity options or futures contracts or any similar speculative transactions (including, without limitation, take-or-pay contracts for speculative purposes) except for (x) Bank Hedge Agreements permitted under Section 5.02(b)(i) and (y) Natural Gas Hedge Agreements permitted under Section 5.02(b)(ii). SECTION 5.03. Reporting Requirements. So long as any Advance shall ---------------------- remain unpaid, any Letter of Credit or Bankers' Acceptance shall be outstanding or any Lender Party shall have any Commitment hereunder, the Parent Guarantor, and to the extent applicable, the Canadian Borrower, will furnish to the Agent: (a) Default and Prepayment Notice. (i) As soon as possible and in any ----------------------------- event within two days after the occurrence of each Default, a statement of the chief financial officer or treasurer of the Parent Guarantor or the Canadian Borrower, as the case may be, setting forth the nature of such Default and the action that such Borrower or Canadian Borrower has taken and proposes to take with respect thereto, and (ii) as soon as possible and in any event no later than 11:00 A.M. (New York City time) at least three Business Days before any prepayment of Term Advances and Acquisition Advances is to be made by the Borrower pursuant to Section 2.07(b) (the "Prepayment Date"), written notice of the principal amount of such ---------------- prepayment (the "Prepayment Amount") and the applicable Prepayment Date. ----------------- Each such notice (a "Prepayment Notice") shall be by telecopier or ----------------- otherwise as provided in Section 8.02. (b) Monthly Financials. As soon as available and in any event within ------------------ 30 days after the end of each month, commencing October 31, 1999, an unaudited Consolidated balance sheet of the Parent Guarantor and its consolidated Subsidiaries as of the end of such month and unaudited Consolidated statements of income, stockholders' equity and cash flows of the Parent Guarantor and its consolidated Subsidiaries for the period commencing at the end of the previous month and ending with the end of such month and unaudited Consolidated statements of income, stockholders' equity and cash flows of the Parent Guarantor and its consolidated Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding month of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments) by the chief financial officer or treasurer of the Parent Guarantor, together with (i) a certificate of said officer stating that such officer has obtained no knowledge that a Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent Guarantor has taken and proposes to take with respect thereto, (ii) in the event of any change from GAAP in the accounting principles used in the preparation of such financial statements, a 107 statement of reconciliation conforming such financial statements to GAAP and (iii) copies of any management discussions relating to the Borrower or any of its Subsidiaries distributed to Chase Capital. (c) Quarterly Financials. (x) 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, unaudited Consolidated balance sheets of the Parent Guarantor and its consolidated Subsidiaries as of the end of such quarter and unaudited Consolidated statements of income and an unaudited Consolidated statement of stockholders' equity and cash flows of the Parent Guarantor and its consolidated Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and unaudited Consolidated statements of income and an unaudited Consolidated statement of stockholders' equity and cash flows of the Parent Guarantor and its consolidated Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to year-end audit adjustments) by the chief financial officer or treasurer of the Parent Guarantor as having been prepared in accordance with accounting principles consistent with those applied in the most recent annual audit, together with (i) a certificate of said officer stating that such officer has obtained no knowledge that a Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent Guarantor has taken and proposes to take with respect thereto and (ii) in the event of any change from GAAP in the accounting principles used in the preparation of such financial statements, a statement of reconciliation conforming such financial statements to GAAP and (y) within 45 days after the end of each of the first three quarters of each Fiscal Year, a schedule in form reasonably satisfactory to the Agent of the computations used by the Parent Guarantor in determining compliance with the covenants contained in Sections 5.04(a) through (c). (d) Annual Financials. As soon as available and in any event within ----------------- 90 days after the end of each Fiscal Year, a copy of the annual audit report for such year for the Parent Guarantor and its consolidated Subsidiaries, including therein Consolidated balance sheets of the Parent Guarantor and the Borrower as of the end of such Fiscal Year and Consolidated statements of income and consolidated statements of stockholders' equity and cash flows of the Parent Guarantor and the Borrower and their consolidated Subsidiaries for such Fiscal Year, in each case reported on without qualification arising out of the scope of the audit or with respect to the change in Fiscal Year by independent public accountants of nationally recognized standing, together with (i) a certificate of such accounting firm to the Lender Parties stating that in the course of the regular audit of the business of the Parent Guarantor and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such 108 accounting firm has obtained no knowledge that a Default has occurred and is continuing, or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, (ii) a schedule in form reasonably satisfactory to the Agent of the computations used by the Parent Guarantor to determine, and confirmed by such accountants to be correct in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Sections 5.04(a) through (c), (iii) a certificate of the chief financial officer or treasurer of the Parent Guarantor stating that such officer has obtained no knowledge that a Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent Guarantor has taken and proposes to take with respect thereto and (iv) in the event of any change from GAAP in the accounting principles used in the preparation of such financial statements, a statement of reconciliation conforming such financial statements to GAAP. (e) Annual Business Plans. As soon as available and in any event no --------------------- later than 30 days from the end of each Fiscal Year, the annual Business Plans prepared by management of the Borrower. (f) ERISA Events and ERISA Reports. (i) Promptly and in any event ------------------------------ within 10 Business Days after any Loan Party or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a statement of the chief financial officer or treasurer of the Borrower describing such ERISA Event and the action, if any, that such Loan Party or such ERISA Affiliate has taken and proposes to take with respect thereto and (ii) on the date any records, documents or other information must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA, a copy of such records, documents and information. (g) Plan Terminations. Promptly and in any event within five Business ----------------- Days after receipt thereof by any Loan Party or any ERISA Affiliate, copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan. (h) Actuarial Reports. Promptly upon receipt thereof by any Loan ----------------- Party or any ERISA Affiliate, a copy of the annual actuarial valuation report of each Plan. (i) Plan Annual Reports. Promptly and in any event within 10 days ------------------- after the failure to file by the required deadline, including extensions, with the Internal Revenue Service a required annual report (Form 5500 Series), including required schedules, with respect to any Plan, a statement of the chief financial officer or treasurer of the Borrower describing such failure and the action, if any, that the Borrower, or any Loan Party or ERISA Affiliate, has taken and proposes to take with respect thereto. 109 (j) Multiemployer Plan Notices. Promptly and in any event within ten -------------------------- Business Days after receipt thereof by any Loan Party or any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice concerning (i) the imposition of Withdrawal Liability by any such Multiemployer Plan, (ii) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the amount of liability incurred, or that may be incurred, by such Loan Party or any ERISA Affiliate in connection with any event described in clause (i) or (ii). (k) Litigation. Promptly after the commencement thereof, notice of ---------- all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(i). (l) Securities Reports. Promptly after the sending or filing thereof, ------------------ copies of all proxy statements, financial statements and reports that any Loan Party or any of its Subsidiaries sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange. (m) Agreement Notices. Promptly upon receipt thereof, copies of all ----------------- notices, requests and other documents received by any Loan Party or any of its Subsidiaries under or pursuant to any Related Document regarding or related to any breach or default by any party thereto or any other event that could materially impair the value of the interests or the rights of any Loan Party or any of its Subsidiaries or otherwise have a Material Adverse Effect and copies of any amendment, modification or waiver of any provision of any Related Document and, from time to time upon request by the Agent, such information and reports regarding the Related Documents as the Agent may reasonably request. (n) Revenue Agent Reports. Within 15 days after receipt, copies of --------------------- all Revenue Agent Reports (Internal Revenue Service Form 886-A or any successor form prescribed by the Internal Revenue Service), that propose, determine or otherwise set forth positive adjustments to the Federal income tax liability of the affiliated group (within the meaning of Section 1504(a)(1) of the Internal Revenue Code) of which the Borrower is a member aggregating $500,000 or more. (o) Environmental Conditions. Promptly after receipt, notice thereof ------------------------ any Environmental Action against, or the occurrence of any condition on any property of any Loan Party or any of its Subsidiaries that results in a material noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental 110 Permit, that could (i) be reasonably expected to have a Material Adverse Effect or (ii) cause any property described in the Mortgages to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law. (p) Real Property. As soon as available and in any event within 30 ------------- days after the end of each Fiscal Year, a report supplementing Schedules 4.01(gg) and 4.01(hh) hereto, including an identification of all material real and leased property disposed of by the Borrower or any of its Subsidiaries during such Fiscal Year, a list and description (including the county or other relevant jurisdiction, state, record owner, and in the case of leases of property, lessor, lessee, expiration date and annual rental cost thereof) of all material real property acquired or leased during such Fiscal Year and a description of such other changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete; provided, however, that the Borrower shall notify -------- ------- the Agent within 15 days following any acquisition of real property which permits the Agent to request security on such property pursuant to Section 5.01(m)(ii). (q) Material Adverse Change. Prompt notice of any development that ----------------------- results in, or could reasonably be expected to result in, a material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Parent Guarantor and its Subsidiaries, taken as a whole, since December 31, 1998. (r) Other Information. Such other information respecting the ----------------- business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as any Lender Party (through the Agent) may from time to time reasonably request. SECTION 5.04. Financial Covenants. So long as any Advance shall ------------------- remain unpaid, any Letter of Credit or Bankers' Acceptance shall be outstanding or any Lender Party shall have any Commitment hereunder, the Parent Guarantor will: (a) Leverage Ratio. Maintain on a Consolidated basis for itself and -------------- its Subsidiaries a Leverage Ratio for each Rolling Period set forth below of not more than the amount set forth below for such Rolling Period: ================================================================================ Rolling Period Ending On or About Ratio - --------------------------------- ----- - -------------------------------------------------------------------------------- Quarter Ending - -------------- - -------------------------------------------------------------------------------- December 31, 1999 5.50 to 1.00 - -------------------------------------------------------------------------------- March 31, 2000 5.25 to 1.00 June 30, 2000 5.00 to 1.00 111 ================================================================================ Rolling Period Ending On or About Ratio - --------------------------------- ----- Quarter Ending - -------------- - -------------------------------------------------------------------------------- September 30, 2000 5.00 to 1.00 December 31, 2000 5.00 to 1.00 - -------------------------------------------------------------------------------- March 31, 2001 4.50 to 1.00 June 30, 2001 4.50 to 1.00 September 30, 2001 4.25 to 1.00 December 31, 2001 4.00 to 1.00 - -------------------------------------------------------------------------------- March 31, 2002 3.75 to 1.00 June 30, 2002 3.75 to 1.00 September 30, 2002 3.50 to 1.00 December 31, 2002 3.50 to 1.00 - -------------------------------------------------------------------------------- March 31, 2003; 3.25 to 1.00 and each fiscal quarter thereafter ================================================================================ (b) Interest Coverage Ratio. Maintain on a Consolidated basis ----------------------- for itself and its Subsidiaries an Interest Coverage Ratio for each Rolling Period set forth below of not less than the amount set forth below for such Rolling Period: ================================================================================ Rolling Period Ending On or About Ratio - --------------------------------- ----- Quarter Ending - -------------------------------------------------------------------------------- March 31, 2000 1.75 to 1.00 June 30, 2000 1.75 to 1.00 September 30, 2000 1.75 to 1.00 December 31, 2000 1.75 to 1.00 - -------------------------------------------------------------------------------- March 31, 2001 1.75 to 1.00 June 30, 2001 1.75 to 1.00 September 30, 2001 1.75 to 1.00 December 31, 2001 2.00 to 1.00 - -------------------------------------------------------------------------------- March 31, 2002 2.00 to 1.00 June 30, 2002 2.00 to 1.00 September 30, 2002 2.00 to 1.00 December 31, 2002 2.25 to 1.00 - -------------------------------------------------------------------------------- March 31, 2003 2.25 to 1.00 June 30, 2003 2.25 to 1.00 - -------------------------------------------------------------------------------- 112 ================================================================================ Rolling Period Ending On or About Ratio - --------------------------------- ----- September 30, 2003 2.25 to 1.00 December 31, 2003 2.50 to 1.00 - -------------------------------------------------------------------------------- March 31, 2004 2.50 to 1.00 June 30, 2004 2.50 to 1.00 September 30, 2004 2.50 to 1.00 December 31, 2004 2.75 to 1.00 - -------------------------------------------------------------------------------- March 31, 2005 2.75 to 1.00 June 30, 2005 2.75 to 1.00 September 30, 2005 2.75 to 1.00 December 31, 2005; and for each fiscal quarter thereafter 3.00 to 1.00 ================================================================================ (c) Capital Expenditures. In addition to any amount excluded from -------------------- the definition of "Extraordinary Receipts" by virtue of the proviso in such definition, make, or permit any of its Subsidiaries to make, any Capital Expenditures that would cause the aggregate of all such Capital Expenditures made by the Borrower and its Subsidiaries in any Fiscal Year set forth below to exceed the amount set forth below for such Fiscal Year. Fiscal Year Amount ----------- ------ 1999 $20,000,000 2000 $32,000,000 2001 $22,500,000 2002 $15,000,000 2003 $15,000,000 2004 $15,000,000 2005 $15,000,000 2006 $15,000,000 2007 $15,000,000 provided, however, that 50% of the amount of Capital Expenditures permitted -------- ------- hereunder to be made in any Fiscal Year listed above in this subsection (c) or permitted to be made pursuant to the third proviso to this subsection (c) that are not made in such Fiscal Year plus (i) any amount of Excess ---- Cash Flow retained by the Parent Guarantor and its Subsidiaries from the prior Fiscal Year and (ii) the amount of Capital Expenditures permitted to be made in any Fiscal Year listed above in this subsection (c) pursuant to the fourth proviso to this subsection (c) that are not made in such Fiscal Year (such amounts being referred to herein as the "Carryover Amount") may ---------------- be carried forward to the next (but not any subsequent) Fiscal Year, provided further that for purposes of this -------- ------- 113 Section 5.04(c), Capital Expenditures made in any Fiscal Year shall be deemed to be made first as a use of Capital Expenditures permitted to be made pursuant to the first proviso of this Section 5.04(c), second as a use of the limit of Capital Expenditures set forth above for such Fiscal Year, third as a use of Capital Expenditures permitted to be made pursuant to the fourth proviso of this Section 5.04(c), and subsequently, as a use of Capital Expenditures permitted to be made pursuant to the third proviso of this Section 5.04(c), provided further upon the consummation of a Permitted -------- ------- Acquisition, the Borrower and its Subsidiaries will be permitted to make additional Capital Expenditures in an aggregate amount not to exceed 9% of the total consideration paid for such Permitted Acquisition in each Fiscal Year, commencing in the Fiscal Year in which such Permitted Acquisition is made, and provided further upon the consummation of any disposition of real -------- ------- property permitted pursuant to Section 5.02(e)(v), the Borrower and its Subsidiaries will be permitted to make additional Capital Expenditures in the Fiscal Year in which such disposition is consummated in an aggregate amount not to exceed the Net Cash Proceeds received by the Borrower and its Subsidiaries in connection with such disposition. SECTION 5.05. Covenants of the Canadian Borrower. So long as any ---------------------------------- Advance shall remain unpaid, any Letter of Credit or Bankers' Acceptance shall be outstanding or any Lender Party shall have any Commitment hereunder, the Canadian Borrower will at all times perform or observe, and will cause each of its Subsidiaries to perform or observe, all of the terms, covenants and agreements that the Loan Documents state that the Parent Guarantor or the Borrower, as applicable, is to cause such Canadian Borrower or such Subsidiaries to perform or observe. 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 or the Canadian Borrower shall fail to pay any principal of, or interest on, any Advance or any portion of any Bankers' Acceptance when the same becomes due and payable, whether at the due date thereof or at a date fixed for prepayment or otherwise, or any Loan Party shall fail to make any other payment in excess of $10,000 under any Loan Document within 10 days from when the same becomes due and payable; or 114 (b) any representation or warranty made or deemed made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect as of the time when made or deemed made; or (c) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.16, 5.01(e), (f), (g), (l), (m) or (n), 5.02, 5.03 or 5.04; or (d) any Loan Party shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 10 days after the earlier of the date on which (A) a Responsible Officer of the Borrower or the Canadian Borrower becomes aware of such failure or (B) written notice thereof shall have been given to the Borrower or the Canadian Borrower, as the case may be, by the Agent or any Lender Party; or (e) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Debt that is outstanding in a principal or notional amount of at least $1,000,000 either individually or in the aggregate (but excluding Debt outstanding hereunder) of such Loan Party 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 otherwise to cause, or to permit the holder thereof to cause, such Debt to mature; 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 (f) any Loan Party or any of its 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 any Loan Party or any of its 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, 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) that is being diligently contested by it in good faith, 115 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 any substantial part of its property) shall occur; or any Loan Party or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or (g) any judgment or order for the payment of money in excess of $1,000,000 (to the extent not fully paid or discharged) shall be rendered against any Loan Party 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 15 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 (h) any non-monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries that is reasonably expected to have a Material Adverse Effect, and there shall be any period of 15 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 (i) any provision of any Loan Document after delivery thereof pursuant to Section 3.01, 5.01(m) or 5.01(n) shall for any reason cease to be valid and binding on or enforceable against any Loan Party to it, or any such Loan Party shall so state in writing; or (j) any Collateral Document after delivery thereof pursuant to Section 3.01 or 5.01(m) shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority lien on and security interest in the Collateral purported to be covered thereby (except as contemplated by the Security Agreement); or (k) Chase Capital and D. George Harris & Associates Persons, or entities directly or indirectly controlled by them, shall together (A) cease to be the record and beneficial owners of at least 51% of the aggregate voting power represented by the outstanding capital stock (including the Series B Preferred Stock) of USS Holding, Inc., (B) cause or permit any of such shares to be subject to any Lien (other than a Lien in favor of a Loan Party permitted by this Agreement) or (C) cease to control, directly or indirectly, the Board of Directors of USS Holdings, Inc., the Parent Guarantor or the Borrower; or (l) the Borrower shall cease to own, directly or indirectly, 100% of the capital stock of each of Silica and Stone Materials Company LLC, the Parent Guarantor shall cease to own, directly or indirectly, 100% of the capital stock of the Borrower or USS 116 Holdings, Inc. shall cease to own, directly or indirectly, 100% of the capital stock of the Parent Guarantor; or (m) any ERISA Event shall have occurred with respect to a Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Loan Parties and the ERISA Affiliates related to such ERISA Event) exceeds $1,000,000 and is reasonably expected to have a Material Adverse Effect; or (n) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $1,000,000 or requires payments exceeding $200,000 per annum and is reasonably expected to have a Material Adverse Effect; or (o) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Loan Parties and the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $200,000 and is reasonably expected to have a Material Adverse Effect; or (p) the occurrence of a "Change of Control" as defined in the Subordinated Debt Documents; 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 or the Canadian Borrower, as applicable, declare the obligation of each Appropriate Lender to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Working Capital Lender pursuant to Section 2.03(c) and Swing Line Advances by a Working Capital Lender pursuant to Section 2.02 (f)), of each Canadian Lender to create and/or purchase Bankers' Acceptances and of each Issuing Bank to issue Letters of Credit 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 or the Canadian Borrower, as applicable, declare the Advances, all interest thereon and all other amounts payable under this Agreement, the Notes, if any, and the other Loan Documents to be forthwith due and payable, whereupon the Advances, all such interest and all 117 such amounts shall 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 and the Canadian Borrower; provided, however, that in the -------- ------- event of an actual or deemed entry of an order for relief with respect to any Loan Party or any of its Subsidiaries under the Federal Bankruptcy Code, (x) the obligation of each Lender to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Working Capital Lender pursuant to Section 2.03(c) and Swing Line Advances by a Working Capital Lender pursuant to Section 2.02(f)), of each Canadian Lender to create and/or purchase Bankers' Acceptances and of each Issuing Bank to issue Letters of Credit shall automatically be terminated and (y) 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 and the Canadian Borrower. 118 SECTION 6.02. Actions in Respect of the Letters of Credit and ----------------------------------------------- Bankers' Acceptances upon Default. If any Event of Default shall have occurred - --------------------------------- and be continuing, the Agent may, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, (a) make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the Agent on behalf of the Lender Parties in same day funds at the Agent's office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding and (b) make demand upon the Canadian Borrower to, and forthwith upon such demand, the Canadian Borrower will, pay to the Agent on behalf of the Canadian Lenders in same day funds at the Agent's office designated in such demand, for deposit in the Canadian Cash Collateral Account, an amount equal to the aggregate Face Amount of all Bankers' Acceptances then outstanding. If at any time the Agent determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Agent and the Lender Parties or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Agent, pay to the Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Agent determines to be free and clear of any such right and claim. If at any time the Agent determines that any funds held in the Canadian Cash Collateral Account are subject to any right or claim of any Person other than the Agent and the Canadian Lenders or that the total amount of such funds is less than the aggregate Face Amount of all Bankers' Acceptances, the Canadian Borrower will, forthwith upon demand by the Agent, pay to the Agent, as additional funds to be deposited and held in the Canadian Cash Collateral Account, an amount equal to the excess of (a) such aggregate Face Amount over (b) the total amount of funds, if any, then held in the Canadian Cash Collateral Account that the Agent determines to be free and clear of any such right and claim. ARTICLE VII THE AGENT 119 SECTION 7.01. Authorization and Action. Each Lender Party (in its ------------------------ capacities as a Lender, an Issuing Bank (if applicable), the Swing Line Bank (if applicable) and a potential Hedge Bank) hereby appoints and authorizes the Agent and any Sub-Agent appointed by the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Agent and the Sub-Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of Debt resulting from the Advances), the Agent and the Sub-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 Lender Parties and all holders of Notes; provided, however, that the Agent and the Sub-Agent shall not be required to - -------- ------- take any action that exposes the Agent or the Sub-Agent, as the case may be, to personal liability or that is contrary to this Agreement or applicable law. The Agent agrees to give to each Lender Party prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. The Agent further agrees to deliver to each Lender Party copies of each financial statement, Business Plan or other document furnished to the Agent pursuant to Section 5.03(b), (c), (d) or (e). SECTION 7.02. Agent's Reliance, Etc. Neither the Agent, the Sub- --------------------- 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 the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent and the Sub-Agent: (a) 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; (b) may consult with legal counsel (including counsel for any Loan Party), 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; (c) makes no warranty or representation to any Lender Party and shall not be responsible to any Lender Party for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (d) 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 any Loan Document on the part of any Loan Party or to inspect the property (including the books and records) of any Loan Party; (e) shall not be responsible to any Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (f) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or telex) believed by it to be genuine and signed or sent by the proper party or parties. 120 SECTION 7.03. BNP and Affiliates. With respect to its Commitments, ------------------ the Advances made by it and any Notes issued to it, BNP shall have the same rights and powers under the Loan Documents as any other Lender Party and may exercise the same as though it were not the Agent; and the term "Lender Party" or "Lenders Parties" shall, unless otherwise expressly indicated, include BNP in its individual capacity. BNP 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, any Loan Party, any of its Subsidiaries and any Person who may do business with or own securities of any Loan Party or any such Subsidiary, all as if BNP were not the Agent and without any duty to account therefor to the Lender Parties. SECTION 7.04. Lender Party Credit Decision. Each Lender Party ---------------------------- acknowledges that it has, independently and without reliance upon the Agent or any other Lender Party 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 Party also acknowledges that it will, independently and without reliance upon the Agent, the Sub-Agent or any other Lender Party 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. SECTION 7.05. Indemnification. (a) Each Lender Party severally --------------- agrees to indemnify the Agent and the Sub-Agent (to the extent not promptly reimbursed by the Borrower or the Canadian Borrower) from and against such Lender Party's ratable share (determined as provided below) of 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 or the Sub-Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by the Agent under the Loan Documents; provided, however, that no Lender -------- ------- Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's or the Sub-Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender Party agrees to reimburse the Agent and the Sub-Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 8.04, to the extent that the Agent or the Sub-Agent is not promptly reimbursed for such costs and expenses by the Borrower or the Canadian Borrower. For purposes of this Section 7.05, the Lender Parties' respective ratable shares of any amount shall be determined, at any time, according to the sum of (a) the aggregate principal amount of the Advances outstanding at such time and owing to the respective Lender Parties, (b) their respective Pro Rata Shares of the aggregate Available Amount of all Letters of Credit outstanding at such time, (c) their respective pro rata shares of the aggregate Face Amount of all Bankers' Acceptances outstanding at such time, (d) the aggregate unused portions of their respective Term 121 Commitments at such time and (e) their respective Unused Working Capital Commitments, Unused Acquisition Commitments and Unused Canadian Commitments at such time. The failure of any Lender Party to reimburse the Agent or the Sub- Agent promptly upon demand for its ratable share of any amount required to be paid by the Lender Party to the Agent as provided herein shall not relieve any other Lender Party of its obligation hereunder to reimburse the Agent for its ratable share of such amount, but no Lender Party shall be responsible for the failure of any other Lender Party to reimburse the Agent or the Sub-Agent for such other Lender Party's ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender Party hereunder, the agreement and obligations of each Lender Party contained in this Section 7.05(a) shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents. (b) Each Lender Party severally agrees to indemnify each Issuing Bank (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party's ratable share (determined as provided below) of 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 such Issuing Bank in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Issuing Bank under the Loan Documents; provided, however, that no Lender -------- ------- Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Issuing Bank's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender Party agrees to reimburse such Issuing Bank promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 8.04, to the extent that such Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrower. For purposes of this Section 7.05(b), the Lender Parties' respective ratable shares of any amount shall be determined, at any time, according to the sum of (a) the aggregate principal amount of the Advances outstanding at such time and owing to the respective Lender Parties, (b) their respective Pro Rata Shares of the aggregate Available Amount of all Letters of Credit outstanding at such time, (c) their respective pro rata shares of the aggregate Face Amount of all Bankers' Acceptances outstanding at such time, (d) the aggregate unused portions of their respective Term Commitments at such time and (e) their respective Unused Working Capital Commitments and Unused Acquisition Commitments at such time. The failure of any Lender Party to reimburse such Issuing Bank promptly upon demand for its ratable share of any amount required to be paid by the Lender Parties to such Issuing Bank as provided herein shall not relieve any other Lender Party of its obligation hereunder to reimburse such Issuing Bank for its ratable share of such amount, but no Lender Party shall be responsible for the failure of any other Lender Party to reimburse such Issuing Bank for such other Lender Party's ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender Party hereunder, the agreement and obligations of each Lender Party contained in this Section 7.05(b) shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents. 122 SECTION 7.06. Successor Agents. (a) The Agent. The Agent may resign ---------------- --------- at any time by giving written notice thereof to the Lender Parties, the Borrower and the Canadian 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 with the consent (unless a Default has occurred and is continuing) of the Borrower and the Canadian Borrower (not to be unreasonably withheld). 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 Lender Parties, appoint a successor Agent with the consent (unless a Default has occurred and is continuing) of the Borrower and the Canadian Borrower (not to be unreasonably withheld), which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent and upon the execution and filing or recording of such financing statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Agent shall 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 the Loan Documents. 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. 123 (b) The Sub-Agent. The Sub-Agent may resign at any time by giving ------------- written notice thereof to the Agent and may be removed at any time with or without cause by written request of the Agent. The Agent shall be entitled to appoint a successor Sub-Agent, which shall be a resident in Canada for purposes of the Income Tax Act (Canada) and which shall be, so long as no Default has occurred and is continuing, subject to the approval of the Borrower, which approval shall not be unreasonably withheld or delayed. The Sub-Agent has been designated under this Agreement to carry out duties of the Agent with respect of the Canadian Facility. The Sub-Agent shall be subject to each of the obligations in this Agreement and the Collateral Documents to be performed by the Sub-Agent, and each of the Borrower, the Canadian Borrower and the Lenders agrees that the Sub-Agent shall be entitled to exercise each of the rights and shall be entitled to each of the benefits of the Agent under this Agreement and the Collateral Documents as relate to the performance of its obligations hereunder and thereunder. ARTICLE VIII MISCELLANEOUS 124 SECTION 8.01. Amendments, Etc. No amendment or waiver of any --------------- provision of this Agreement or any Notes or any other Loan Document, nor any consent to any departure by the Borrower or the Canadian Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed (or, in the case of the Collateral Documents, consented to) 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 -------- ------- (a) no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, do any of the following at any time: (i) waive any of the conditions specified in Section 3.01 or, in the case of the initial extension of credit hereunder, Section 3.02, (ii) change any of the provisions of this Section or the definition of the term "Required Lenders" or any other provisions of any Loan Document to the extent that such change changes the percentage of (w) the Commitments, (x) the aggregate unpaid principal amount of the Advances, (y) the aggregate Available Amount of outstanding Letters of Credit or (z) the aggregate Face Amount of outstanding Bankers' Acceptances that, in each case, shall be required for the Lenders or any of them to take any action hereunder, (iii) release all or substantially all of the Collateral in any transaction or series of related transactions, permit the creation, incurrence, assumption or existence of any senior Lien on all or substantially all of the Collateral in any transaction or series of related transactions to secure any Obligations other than Obligations owing to the Secured Parties under the Loan Documents or release all or substantially all the Subsidiary Guarantors from their obligations under the Subsidiary Guaranties (or limit substantially all their liability in respect thereof), as applicable (other than in accordance with the Subsidiary Guaranties, as applicable), or (iv) amend this Section 8.01, (b) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and each Lender that has a Commitment under the Term A Facility, the Term B Facility, the Working Capital Facility, the Canadian Facility or the Acquisition Facility if affected by such amendment, waiver or consent, (i) increase the Commitments of such Lender or subject such Lender to any additional obligations, (ii) reduce the principal of, or interest on, the Advances payable to such Lender or any fees or other amounts payable hereunder to such Lender or (iii) postpone any date fixed for any scheduled payment of principal of, or interest on, the Advances payable to such Lender or any fees or other amounts payable hereunder to such Lender, (c) no amendment, waiver or consent shall change the allocation among the Facilities of any prepayment set forth in Section 2.07, or the order of application of any such prepayment to the remaining principal installments thereof, unless in writing and, with respect to each Facility adversely affected thereby, signed by Lenders owed or holding at least 51% of the aggregate principal amount of the Advances under such Facility (plus, if such Facility is the Working Capital Facility, the Unused Working Capital Commitments, or if such Facility is the Acquisition Facility, the Unused Acquisition Commitments) outstanding at such time and (d) no amendment, waiver or consent shall change the rights of the Term B Lenders to decline prepayments as provided in Section 2.07(c), unless in writing and signed by Term B Lenders holding at least 51% of the Term B Advances outstanding at such time; provided -------- further that no amendment, waiver or consent shall, unless in writing and signed - ------- by each Issuing Bank and the Swing Line Bank, as the case may be, in addition to the Lenders required above to take such action, affect the rights or obligations of the Issuing Banks or the Swing Line Bank, as the case may be, under this 125 Agreement; 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. Upon any sale, lease, transfer or other disposition of any item of real or personal property in accordance with the terms of the Loan Documents, the Agent, Mortgagee, Grantee or Beneficiary (each as defined in the Mortgages), as the case may be, will, at the Borrower's expense, execute and deliver to the Borrower such documents as the Borrower shall reasonably request to evidence the release of such item of real or personal property from the Collateral Documents. SECTION 8.02. Notices, Etc. All notices and other communications ------------ provided for hereunder shall be in writing (including telegraphic or telecopy communication) and mailed, telegraphed, telecopied or delivered, if to the Parent Guarantor, BMAC Holdings, Inc., c/o Better Minerals & Aggregates Company, Route 522 North, P.O. Box 187, Berkeley Springs, WV 25411; if to the Borrower, Better Minerals & Aggregates Company, Route 522 North, P.O. Box 187, Berkeley Springs, WV 25411; if to the Canadian Borrower, George F. Pettinos (Canada) Limited, c/o Better Minerals & Aggregates Company, Route 522 North, P.O. Box 187, Berkeley Springs, WV 25411, Attention: Chief Financial Officer/Treasurer, telecopier number (304) 258-3500, with a copy to USS Holdings, Inc., c/o D. George Harris & Associates, Inc., 399 Park Avenue, 32nd Floor, New York, NY 10022, Attention: Treasurer, telecopier number (212) 207-6440; if to any Initial Lender or the Initial Issuing Bank, at its Domestic Lending Office or Canadian Domestic Lending Office, as applicable, specified opposite its name on Schedule I hereto; if to any other Lender Party, at its Domestic Lending Office or Canadian Domestic Lending Office, as applicable, specified in the Assignment and Acceptance pursuant to which it became a Lender Party; and if to the Agent, at its address at 499 Park Avenue, New York, New York 10022, Attention: Structured Finance Group, telecopier number (212) 418-8269; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telegraphed, telecopied or delivered, be effective when received by the addressee, 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 Party 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. 126 SECTION 8.04. Costs and Expenses. (a) The Borrower and the Canadian ------------------ Borrower hereby agree to pay on demand (i) all reasonable out-of-pocket costs and expenses of Chase Securities Inc., the Agent and the Sub-Agent in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all reasonable due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses and (B) the reasonable fees and expenses of counsel for Chase Securities Inc., the Agent and the Sub-Agent with respect thereto, with respect to advising Chase Securities Inc., the Agent or the Sub- Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents (and with respect to the Mortgages, the granting and recording of the Mortgages and the administration thereof), with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto relating to any Loan Party or any of its Subsidiaries) and (ii) all costs and expenses of the Agent, the Sub-Agent and the Lender Parties in connection with the enforcement (upon and during the continuance of an Event of Default) of the Loan Documents, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally relating to any Loan Party or any of its Subsidiaries (including, without limitation, the reasonable fees and expenses of counsel for the Agent, the Sub-Agent and each Lender Party with respect thereto); provided that, in the case of fees and expenses of counsel for -------- Chase Securities Inc., the Agent, the Sub-Agent and the Lender Parties, the Borrower and the Canadian Borrower shall be obligated to pay only the fees and expenses of a single counsel in any one jurisdiction as to which no conflict of interest exists. (b) The Borrower and the Canadian Borrower hereby agree to indemnify and hold harmless the Agent, the Sub-Agent, each Lender Party and each of their Affiliates and their officers, trustees, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, ----------------- damages, losses, liabilities and reasonable expenses (including, without limitation, reasonable fees and expenses of counsel; provided that, in the case -------- of fees and expenses of counsel for the Indemnified Parties, the Borrower and the Canadian Borrower shall be obligated to pay only the fees and expenses of a single counsel in any one jurisdiction) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) the Facilities, the actual or proposed use of the proceeds of the Advances, the Bankers' Acceptances or the Letters of Credit, the Loan Documents or any of the transactions contemplated thereby, including, without limitation, any acquisition or proposed acquisition (including, without limitation, any Permitted Acquisition and any of the other transactions contemplated hereby) by the Borrower, the Canadian Borrower or any of their Subsidiaries or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or 127 any of its Subsidiaries or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, in each case whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct; provided that neither the Borrower nor -------- the Canadian Borrower shall be liable for any waiver, release or settlement of any litigation or proceeding entered into by any Indemnified Party without the Borrower's or the Canadian Borrower's prior written consent, as applicable, which shall not be unreasonably withheld and provided further that to the extent -------- ------- any such Indemnified Party shall be required to refund to the Borrower or the Canadian Borrower any amount as a result of such judgment, the Agent or any Lender Party, as the case may be, shall be responsible for the amount of any such refund required to be made on behalf of each of its respective Affiliates and their officers, directors, employees, agents and advisors. The Parent Guarantor, the Borrower and the Canadian Borrower also agree not to assert any claim against the Agent, the Sub-Agent, any Lender Party or any of their Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances, the Bankers' Acceptances or the Letters of Credit, the Loan Documents or any of the transactions contemplated thereby or for any damages arising from the use by others of information or other materials obtained through electronic, telecommunications or other information transmission systems, except to the extent such damages result from the gross negligence or wilful misconduct of the Agent, the Sub- Agent, any Lender Party or any of their Affiliates. (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.10(b)(i) or 2.12(d), or acceleration of the maturity of the Advances pursuant to Section 6.01 or for any other reason, the Borrower shall, upon demand by such Lender Party (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional losses, costs or expenses that it may reasonably incur as a result of such payment, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance (but, in any event, excluding any loss of profits and the Applicable Margin applicable to such Advances). (d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Agent, the Sub-Agent or any Lender Party, in its sole discretion. 128 (e) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Borrower contained in Sections 2.12 and 2.14 and this Section 8.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents. SECTION 8.05. Right of Set-off. Upon (a) the occurrence and during ---------------- the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Advances due and payable pursuant to the provisions of Section 6.01, each Lender Party and each of its respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise 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 Party or such Affiliate to or for the credit or the account of the Borrower or the Canadian Borrower, as the case may be, against any and all of the Obligations of such Borrower or Canadian Borrower now or hereafter existing under this Agreement and the Note or Notes (if any) held by such Lender Party, irrespective of whether such Lender Party shall have made any demand under this Agreement or such Note or Notes and although such obligations may be unmatured. Each Lender Party agrees promptly to notify the Borrower or the Canadian Borrower, as the case may be, after any such set-off and application; provided, however, that the failure to give such notice shall not -------- ------- affect the validity of such set-off and application. The rights of each Lender Party and its respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender Party and its respective Affiliates may have. SECTION 8.06. Binding Effect. This Agreement shall become effective -------------- when it shall have been executed by the Borrower, the Canadian Borrower and the Agent and when the Agent shall have been notified by each Initial Lender and the initial Issuing Bank hereunder that such Initial Lender and such initial Issuing Bank has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender Party 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 Lender Parties. SECTION 8.07. Assignments and Participations. (a) Each Lender may ------------------------------ assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it and any Note or Notes held by it); provided, however, that (i) each such assignment shall be -------- ------- of a uniform, and not a varying, percentage of all rights and obligations under and in respect of one or more Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an Affiliate or Related Fund of a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the aggregate 129 amount of the Commitments being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 and shall be in an integral multiple of $500,000, (iii) each such assignment shall be to an Eligible Assignee, (iv) no such assignments shall be permitted without the consent of the Agent and, in the case of any assignment to an Eligible Assignee other than a Lender or an Affiliate or Related Fund of a Lender or a Federal Reserve Bank and so long as no Event of Default has occurred and is continuing, the Borrower (which consent shall not be unreasonably withheld), (v) no such assignment shall be effective before the earlier of (A) October 30, 1999 and (B) such time as Chase Securities Inc. shall have notified the Lender Parties, the Borrower and the Canadian Borrower that syndication of the Commitments hereunder has been completed, and (vi) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes, if any, subject to such assignment and, except in the case of any assignment to a Lender, an Affiliate of a Lender or a Related Fund of a Lender, a processing and recordation fee of $2,500. (b) With the consent of the Borrower, which shall not be unreasonably withheld, the Issuing Bank may assign to an Eligible Assignee all of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) each such assignment shall be to an -------- ------- Eligible Assignee and (ii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $2,500. (c) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such 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 or Issuing Bank, as the case may be, hereunder and (y) the Lender or Issuing Bank 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 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 or Issuing Bank's rights and obligations under this Agreement, such Lender or Issuing Bank shall cease to be a party hereto). (d) By executing and delivering an Assignment and Acceptance, each Lender Party assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender Party 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 any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or 130 security interest created or purported to be created under or in connection with, this Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (ii) such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, the Canadian Borrower or any other Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (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 Party or any other Lender Party 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 the Loan Documents 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 which by the terms of this Agreement are required to be performed by it as a Lender or Issuing Bank, as the case may be. (e) 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 Lender Parties and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender Party 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 Canadian Borrower, the Agent and the Lender Parties shall treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, the Canadian Borrower or any Lender Party at any reasonable time and from time to time upon reasonable prior notice. (f) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender Party and an assignee, together with any Note or Notes requested by the Assignee 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. No assignment shall be effective unless the Assignment and Acceptance has been registered in the Register as provided in this Section 8.07(f). (g) Each Lender Party may sell participations in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and any Note or Notes held by it) to any Person other 131 than any Loan Party or any of its Subsidiaries or Affiliates; provided, -------- however, that (i) such Lender Party's obligations under this Agreement - ------- (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of such Advances and any such Note for all purposes of this Agreement, (iv) the Borrower, the Canadian Borrower, the Agent and the other Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party's rights and obligations under this Agreement, (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would increase any Commitment subject to such participation or subject such participant to any additional obligations, reduce the principal of, or interest on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or release all or substantially all of the Collateral and (vi) no participant under any such participation shall be entitled to amounts otherwise payable to it with respect to its participations under Sections 2.12, 2.14 or 8.04(c), unless such amount would have been payable to the Lender Party that sold such participation if such participation had not been sold. (h) Any Lender Party 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 or the Canadian Borrower furnished to such Lender Party by or on behalf of such Borrower or such Canadian Borrower; provided, however, 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 received by it from such Lender Party. (i) Notwithstanding any other provision set forth in this Agreement, any Lender Party 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, and any Lender Party that is a fund that invests in commercial loans may, without the consent of the Borrower or the Agent, pledge or assign 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) to any trustee or any other representative of holders of obligations owed or securities issued by such fund as security for such obligations or securities, provided that no such pledge or assignment shall release a Lender Party from any - -------- of its obligations hereunder, substitute any such pledgee or assignee for such Lender Party as party hereto or increase the obligations of the Borrower hereunder. 132 SECTION 8.08. 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 8.09. No Liability of the Issuing Bank. The Borrower assumes -------------------------------- all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, fraudulent or forged; (c) payment by the Issuing Bank against presentation of documents that do not strictly comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit as long as any such documents shall substantially so comply; or (d) any other similar circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the ------ Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) the Issuing Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. SECTION 8.10. Confidentiality. Neither the Agent nor any Lender --------------- Party shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (a) (i) to the Agent's or such Lender Party's Affiliates or any Related Fund of such Lender Party and their officers, directors, employees, agents and advisors, (ii) in the case of any Lender Party that is a fund that invests in commercial loans, to representatives of holders of obligations owed or securities issued by such Lender Party or to ratings agencies that rate the portfolio of such Lender Party and (iii) to actual or prospective Eligible Assignees and participants, and in each case only on a confidential basis, (b) as required by any law, rule or regulation or judicial process and (c) as requested or required by any state, federal or foreign authority or examiner regulating insurance companies, banks or banking (including the National Association of Insurance Commissioners). 133 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 any of the other Loan Documents to which it is a party, 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 Canadian Borrower hereby agrees that service of process in any such action or proceeding brought in any such New York State court or in such federal court may be made upon the Borrower at its address for notices as provided for in Section 8.02 and the Canadian Borrower hereby irrevocably appoints the Borrower its authorized agent to accept such service of process, and agrees that the failure of the Borrower 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 Canadian Borrower hereby further irrevocably consents to the service of process in any action or proceeding to such Canadian Borrower at its address specified pursuant to Section 8.02. 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 Agreement shall affect any right that any party may otherwise have (x) to serve legal process in any other manner permitted by law, or (y) to bring any action or proceeding relating to this Agreement or any of the other Loan Documents 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 any of the other Loan Documents to which it is a party 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. Judgment. (a) To the extent permitted by applicable -------- law, if for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in U.S. Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase U.S. Dollars with such other currency at BNP's principal office in New York City at 11:00 A.M. (New York City) time on the Business Day preceding that on which final judgment is given. (b) To the extent permitted by applicable law, if for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in a foreign currency into U.S. Dollars, the parties agree to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent 134 could purchase such foreign currency with U.S. Dollars at BNP's principal office in BNP at 11:00 A.M. (New York City) time on the Business Day preceding that on which final judgment is given. (c) To the extent permitted by applicable law, the obligation of the Borrower or the Canadian Borrower in respect of any sum due in U.S. Dollars from it to any Lender Party or the Agent hereunder shall, notwithstanding any judgment in a currency other than U.S. Dollars, be discharged only to the extent that on the Business Day following receipt by such Lender Party or the Agent (as the case may be) of any sum adjudged to be so due in such other currency, such Lender Party or the Agent (as the case may be) may in accordance with normal banking procedures purchase U.S. Dollars with such other currency; if the U.S. Dollars so purchased are less than such sum due to such Lender Party or the Agent (as the case may be) in U.S. Dollars, such Borrower or such Canadian Borrower, as the case may be, agrees, to the extent permitted by applicable law, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender Party or the Agent (as the case may be) against such loss, and if the U.S. Dollars so purchased exceed such sum due to any Lender Party or the Agent (as the case may be) in U.S. Dollars, such Lender Party or the Agent (as the case may be) agrees to remit to such Borrower or such Canadian Borrower, as the case may be, such excess. SECTION 8.13. Governing Law. This Agreement and the Notes, if any, ------------- shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.14. Waiver of Jury Trial. Each of the Loan Parties, the -------------------- Agent and the Lender Parties 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 any of the Loan Documents, the Advances or the actions of the Agent or any Lender Party in the negotiation, administration, performance or enforcement thereof. SECTION 8.15. Power of Attorney. The Canadian Borrower may from time ----------------- to time authorize and appoint the Borrower as its attorney-in-fact to execute and deliver (a) any amendment, waiver or consent in accordance with Section 8.01 on behalf of and in the name of the Canadian Borrower and (b) any notice or other communication hereunder, on behalf of and in the name of the Canadian Borrower. Such authorization shall become effective as of the date on which the Canadian Borrower delivers to the Agent a power of attorney enforceable under applicable law and any additional information to the Agent as necessary to make such power of attorney the legal, valid and binding obligation of the Canadian Borrower. 135 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. BMAC HOLDINGS, INC., as Parent Guarantor By /s/ Richard Nick ---------------------------------------- Name: Richard Nick Title: Vice President BETTER MINERALS & AGGREGATES COMPANY, as Borrower By /s/ Richard Nick ---------------------------------------- Name: Richard Nick Title: Vice President GEORGE F. PETTINOS (CANADA) LIMITED, as Canadian Borrower By /s/ Richard Nick ---------------------------------------- Name: Richard Nick Title: Vice Presiden THE CHASE MANHATTAN BANK, By /s/ Thomas H. Kozlark ---------------------------------------- Name: Thomas H. Kozlark Title: Vice President 136 CHASE SECURITIES INC., By /s/ Thomas H. Kozlark ------------------------------------ Name: Thomas H. Kozlark Title: Vice President BANQUE NATIONALE DE PARIS, as Agent, Initial Lender, Swing Line Bank and Initial Issuing Bank By /s/ Richard Cushing ------------------------------------- Name: Richard Cushing Title: Director By /s/ Paul Barnes ------------------------------------- Name: Paul Barnes Title: Assistant Vice President BANQUE NATIONALE DE PARIS (CANADA), as Canadian Lender and Sub-Agent By /s/ Lee Chin Hock ------------------------------------- Name: Lee Chin Hock Title: Senior Vice President General Manager Ontario, Manitoba, Saskatchewan By /s/ Don R. Lee ------------------------------------- Name: Don. R. Lee Title: Vice President Corporate Banking BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Clifford L. Wells ------------------------------------ Name: Clifford L. Wells Title: Vice President By: /s/ William W. Hunter ------------------------------------ Name: William W. Hunter Title: Vice President MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC. By: /s/ Paul Travers -------------------------------------- Name: Paul Travers Title: Authorized Signatory PRINCIPAL LIFE INSURANCE COMPANY By: Principal Capital Management LLC, a Delaware limited liability company, its authorized signatory By: /s/ Jon C. Heiny -------------------------------------- Name: Jon C. Heiny Title: Counsel By: /s/ Jody J. Lamberth -------------------------------------- Name: Jody J. Lamberth Title: Authorized Signatory MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST By: /s/ Peter Gewirtz -------------------------------------- Name: Peter Gewirtz Title: Authorized Signatory NATIONAL BANK OF CANADA By: /s/ Eric L. Moore -------------------------------------- Name: Eric L. Moore Title: Vice President By: /s/ Donald P. Haddad -------------------------------------- Name: Donald P. Haddad Title: Vice President/Manager FIRST SOURCE FINANCIAL LLP By: First Source Financial, Inc., its Agent/Manager By: /s/ Pamela D. Eskin -------------------------------------- Name: Pamela D. Eskin Title: Vice President BOEING CAPITAL CORPORATION By: /s/ James C. Hammersmith -------------------------------------- Name: James C. Hammersmith Title: Senior Documentation Officer BANK POLSKA KASA OPIEKI S.A. NEW YORK BRANCH By: /s/ Hussein El Tavzel -------------------------------------- Name: Hussein El Tavzel Title: Vice President THE TRAVELERS INSURANCE COMPANY By: /s/ Allen R. Cantrell ------------------------------------ Name: Allen R. Cantrell Title: Investment Officer TRAVELERS CORPORATE LOAN FUND INC. By: Travelers Asset Management International Corporation By: /s/ Allen R. Cantrell ------------------------------------ Name: Allen R. Cantrell Title: Investment Officer ABN AMRO BANK N.V. By: /s/ Louis K. McLinden, Jr. ------------------------------------ Name: Louis K. McLinden, Jr. Title: Vice President By: /s/ Gregory D. Amoroso ------------------------------------ Name: Gregory D. Amoroso Title: Senior Vice President HELLER FINANCIAL, INC. By: /s/ Scott Ziemke ------------------------------------ Name: Scott Ziemke Title: Assistant Vice President ARCHIMEDES FUNDING, L.L.C. By: ING Capital Advisors LLC, as its Collateral Manager By: /s/ Helen Y. Rhee --------------------------------------- Name: Helen Y. Rhee Title: Vice President and Portfolio Manager ARCHIMEDES FUNDING II, LTD. By: ING Capital Advisors LLC, as its Collateral Manager By: /s/ Helen Y. Rhee --------------------------------------- Name: Helen Y. Rhee Title: Vice President and Portfolio Manager KZH-ING-1 LLC By: /s/ Peter Chin --------------------------------------- Name: Peter Chin Title: Authorized Agent KZH-ING-2 LLC By: /s/ Peter Chin --------------------------------------- Name: Peter Chin Title: Authorized Agent BALANCED HIGH-YIELD FUND I LTD. By: BHF (USA) Capital Corporation, as Attorney-In-Fact By: /s/ John Zapalac --------------------------------------- Name: John Zapalac Title: Associate By: /s/ Ralph Della Rocca --------------------------------------- Name: Ralph Della Rocca Title: Assistant Vice President NATIONAL CITY BANK By: /s/ Wilmer J. Jacobs ----------------------------------------- Name: Wilmer J. Jacobs Title: Assistant Vice President FIRST UNION NATIONAL BANK By: /s/ W. Garreth Horan ----------------------------------------- Name: W. Gareth Horan Title: Vice President METROPOLITAN LIFE INSURANCE COMPANY By: /s/ James Dingler ----------------------------------------- Name: James Dingler Title: Director FRANKLIN FLOATING RATE TRUST By: /s/ Chauncey Lufkin ----------------------------------------- Name: Chauncey Lufkin Title: Vice President PPM SPYGLASS FUNDING TRUST By: /s/ Kelly C. Walker ------------------- Name: Kelly C. Walker Title: Authorized Agent EX-10.5 60 SECURITY AGREEMENT, DATED AS OF SEPTEMBER 15, 1999 EXHIBIT 10.5 EXECUTION COPY SECURITY AGREEMENT Dated as of September 30, 1999 From BETTER MINERALS & AGGREGATES COMPANY, and THE OTHER GRANTORS REFERRED TO HEREIN, as Grantors, ----------- to BANQUE NATIONALE DE PARIS, as Agent -------- TABLE OF CONTENTS -----------------
Page SECTION 1. Grant of Security...................................................... 1 SECTION 2. Security for Obligations............................................... 5 SECTION 3. Grantors Remain Liable................................................. 6 SECTION 4. Delivery and Control of Security Collateral and Account Collateral..... 6 SECTION 5. Maintaining the L/C Cash Collateral Account............................ 7 SECTION 6. Maintaining the Blocked Accounts....................................... 7 SECTION 7. Investing of Amounts in the L/C Cash Collateral Account................ 8 SECTION 8. Representations and Warranties......................................... 8 SECTION 9. Further Assurances..................................................... 9 SECTION 10. As to Equipment and Inventory.......................................... 10 SECTION 11. Insurance.............................................................. 11 SECTION 12. Place of Perfection; Records; Collection of Receivables................ 11 SECTION 13. Voting Rights; Dividends; Etc.......................................... 12 SECTION 14. As to the Assigned Agreements.......................................... 13 SECTION 15. Transfers and Other Liens; Additional Shares........................... 13 SECTION 16. Agent Appointed Attorney-in-Fact....................................... 14 SECTION 17. Agent May Perform...................................................... 14 SECTION 18. The Agent's Duties..................................................... 14 SECTION 19. Remedies............................................................... 15 SECTION 20. Registration Rights.................................................... 16
i SECTION 21. Indemnity and Expenses...................................................... 17 SECTION 22. Security Interest Absolute.................................................. 17 SECTION 23. Amendments; Waivers; Etc.................................................... 17 SECTION 24. Addresses for Notices....................................................... 18 SECTION 25. Continuing Security Interest; Assignments Under the Credit Agreement........ 18 SECTION 26. Release and Termination..................................................... 18 SECTION 27. Mortgages................................................................... 19 SECTION 28. Execution in Counterparts................................................... 19 SECTION 29. Governing Law............................................................... 19
ii SCHEDULES Schedule I - ...................................... Pledged Shares, Pledged Debt Schedule II - ...................................... Assigned Agreements Schedule III - ...................................... Locations of Equipment and Inventory Schedule IV - ...................................... Blocked Accounts Schedule V - ...................................... Trade Names
EXHIBITS Exhibit A - Form of Blocked Account Letter Exhibit B - Security Agreement Supplement iii SECURITY AGREEMENT SECURITY AGREEMENT, dated as of September 30, 1999, made by Better Minerals & Aggregates Company, a Delaware corporation formerly known as "USS Intermediate Holdco, Inc." (the "Borrower"), and each other grantor listed on the signature pages hereof (together with the Borrower, the "Grantors" and, -------- individually, a "Grantor"), to Banque Nationale de Paris ("BNP"), as agent ------- --- (together with any successor agent appointed pursuant to Article VII of the Credit Agreement (as defined below), the "Agent") for the Secured Parties (as ----- defined in the Credit Agreement). PRELIMINARY STATEMENTS: (1) The Borrower, BMAC Holdings, Inc., a Delaware corporation, and George F. Pettinos (Canada) Limited, a corporation organized and existing under the laws of Ontario, Canada (the "Canadian Borrower"), have entered into a ----------------- Credit Agreement dated as of September 30, 1999 (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement"; the terms defined therein and not otherwise ---------------- defined herein being used herein as therein defined) with certain Lender Parties party thereto and Banque Nationale de Paris, as agent for such Lender Parties. (2) Each Grantor is the owner of the shares of stock or other ownership interests set forth opposite such Grantor's name and as otherwise described in Part A of Schedule I hereto and issued by the corporations or other entities indicated therein (collectively, the "Existing Pledged Shares"), the ----------------------- indebtedness (whether or not evidenced by instruments) set forth opposite such Grantor's name and as otherwise described in Part B of Schedule I hereto and issued by the obligors indicated therein (collectively, the "Existing Pledged ---------------- Debt"). - ---- (3) The Borrower has opened a non-interest bearing cash collateral account (the "L/C Cash Collateral Account") with BNP at its offices at 499 Park --------------------------- Avenue, New York, New York 10022, Account No. 200875-001-77, in the name of the Borrower but under the sole control and dominion of the Agent and subject to the terms of this Agreement. (4) It is a condition precedent to the making of Advances and Drawings and the issuance of Letters of Credit by the Lender Parties and the entry by the Hedge Banks into the Bank Hedge Agreements with the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement. (5) Unless otherwise defined in this Agreement or in the Credit Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code in effect in the State of New York ("N.Y. Uniform Commercial Code") are used in ---------------------------- this Agreement as such terms are defined in such Article 8 or 9. NOW, THEREFORE, in consideration of the premises and in order to induce the Lender Parties to make Advances and Drawings and to issue Letters of Credit under the Credit Agreement and to induce the Hedge Banks to enter into Bank Hedge Agreements with the Borrower from time to time, the Grantors hereby agree with the Agent for the ratable benefit of the Secured Parties as follows: SECTION 1. Grant of Security. Each of the Grantors hereby assigns ----------------- and pledges to the Agent for its benefit and the ratable benefit of the other Secured Parties, and hereby grants to the Agent for its benefit and the ratable benefit of the other Secured Parties, a lien on and security interest in the following, in each case, as to each type of property described below, whether now owned or hereafter acquired by such Grantor, wherever located and whether now or hereafter existing (collectively, the "Collateral"; provided, however, ---------- -------- ------- there shall be excluded from Collateral, any Margin Stock (as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System) held by any Grantor): (a) all of such Grantor's right, title and interest in and to all equipment in all of its forms (including, without limitation, dredges, dozers, loaders, forklift trucks, crushing equipment, rod mills, grinding mills, hydrosizers, air sizers, dust collectors, automated packaging equipment and bulk storage silos, but excluding any motor vehicle covered by a certificate of title and a 1979 Beechcraft King Air C90), all fixtures and all parts thereof and all accessions and additions thereto, parts and appurtenances thereof, substitutions therefor and replacements thereof (any and all such equipment, fixtures, parts, accessions, additions, appurtenances, substitutions and replacements being the "Equipment"); --------- (b) all of such Grantor's right, title and interest in and to all inventory (including, without limitation, silica sand, kaolin and aplite) in all of its forms (including, without limitation, (i) all raw materials, work in process therefor, parts, components, assemblies, supplies, materials, finished products and other goods and materials used or consumed in the manufacture or production thereof (including, without limitation, all wrapping, packaging, advertising, shipping materials, labels and other devices, names or marks affixed or to be affixed thereto for purposes of selling or of identifying the same or the seller or manufacturer thereof owned, consumed, used or held for use or sale, directly or indirectly, by, or on behalf of, or for the account of, such Grantor), (ii) goods in which such Grantor has an interest in mass or a joint or other interest or right of any kind (including, without limitation, goods in which such Grantor has an interest or right as consignee) and (iii) goods that are returned to or repossessed or stopped in transit by such Grantor) and all accessions thereto and products thereof and documents therefor (any and all such inventory, accessions, products and documents being the "Inventory"); --------- (c) all of such Grantor's right, title and interest in and to all accounts, contract rights, chattel paper, instruments, deposit accounts and general intangibles and all other rights and obligations of any kind, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights now or hereafter existing in and to all security agreements, leases and other contracts securing or otherwise relating to any such accounts, contract rights, chattel paper, instruments, deposit accounts, general intangibles, rights or obligations; provided, however, that in connection with any operating -------- ------- leases or other commercial agreements entered into in the ordinary course of business of such Grantor on a basis consistent with past practice, such grant shall only be effective to the extent the grant by such Grantor of a security interest in any such operating lease or other commercial agreement is not prohibited by such operating lease or other commercial agreement without the consent of any other party thereto or would not give any other party to such operating lease or other commercial agreement the right to terminate its obligations thereunder (any and all such accounts, contract rights, chattel paper, instruments, deposit accounts, general intangibles, rights and obligations, to the extent not referred to in clause (d), (e), (f) or (g) of this Section 1, being the "Receivables", and any and all such ----------- leases, security agreements and other contracts to the extent not referred to in clause (e) of this Section 1, being the "Related Contracts"); ----------------- (d) all of such Grantor's right, title and interest in and to all of the following (collectively, the "Security Collateral"): ------------------- (i) the Existing Pledged Shares, together with the certificates representing such Existing Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Existing Pledged Shares; (ii) the Existing Pledged Debt, together with the instruments evidencing such Existing Pledged Debt, all security therefor and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Existing Pledged Debt; (iii) all security entitlements from time to time carried in any securities account, and all dividends, interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such security entitlements; (iv) all securities accounts, all security entitlements from time to time carried in the securities accounts, and all dividends, interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such security entitlements; (v) all commodity contracts from time to time carried in any commodities account and all value, cash, instruments and other property from 3 time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such commodity contracts; (vi) all commodities accounts, all commodity contracts from time to time carried in the commodities accounts and all value, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such commodity contracts; (vii) all additional shares of stock of any issuer of any Existing Pledged Shares or of any other Person and all membership interests or other equity interests in any Person, from time to time acquired by the Grantors in any manner (with the exception of (i) partnership interests described in Section 5.02(f)(x) of the Credit Agreement, (ii) membership interests or other equity interests to the extent the underlying partnership or other agreement prohibits assignment and (iii) the shares of stock issued by any direct, non- Domestic Subsidiary of any Grantor to the extent the amount of such shares of stock exceeds 65% of the issued and outstanding shares of such non-Domestic Subsidiary), together with the certificates representing such additional shares, membership interests or other equity interests and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares, membership interests and other equity interests (together with the Existing Pledged Shares, the "Pledged Shares"); -------------- (viii) all additional indebtedness from time to time owed to the Grantors (other than loans and advances to employees permitted in the Loan Documents) by any obligor of the Existing Pledged Debt or any other Person (whether or not evidenced by instruments) and the instruments, if any, evidencing such indebtedness, all security therefor and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all such indebtedness (together with the Existing Pledged Debt, the "Pledged Debt"); and ------------ (ix) all additional investment property (including, without limitation, all (A) securities, whether certificated or uncertificated, (B) security entitlements, as defined in Section 8- 102(a)(17) of the N.Y. Uniform Commercial Code or, in the case of any U.S. Treasury book-entry securities, as defined in 31 C.F.R. Section 357.2, or, in the case of any U.S. federal agency book-entry securities, as defined in the corresponding U.S. federal regulations governing such book-entry securities, (C) securities accounts, (D) commodity contracts and (E) commodity accounts) in which such Grantor has or acquires from time to time any right, title or interest in any manner, and the certificates or instruments, if any, representing or evidencing such investment property, and all dividends, interest, distributions, value, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such investment property; 4 (e) all of such Grantor's right, title and interest in and to each Hedge Agreement to which such Grantor is now or may hereafter become a party and each other agreement listed on Schedule II hereto, in each case as such Hedge Agreement or other agreement may be amended, supplemented or otherwise modified from time to time (collectively, the "Assigned -------- Agreements"), including, without limitation, (i) all rights of such Grantor ---------- to receive moneys due and to become due under or pursuant to the Assigned Agreements, (ii) all rights of such Grantor to receive proceeds with respect to the Assigned Agreements or any instruments, opinions or documents delivered pursuant thereto, (iii) all rights of such Grantor in and to all mortgages, security agreements, leases or other contracts securing or otherwise relating to the Assigned Agreements, (iv) all claims of such Grantor for damages arising out of or for breach of or default under the Assigned Agreements and (v) all rights of such Grantor to terminate any Assigned Agreement, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder; provided, -------- however, that in connection with any Assigned Agreement entered into in the ------- ordinary course of business of such Grantor on a basis consistent with past practice, such grant shall only be effective to the extent (i) the grant by such Grantor of a security interest in any such Assigned Agreement is not prohibited by such Assigned Agreement without the consent of any other party thereto or would not give any other party to such Assigned Agreement the right to terminate its obligations thereunder or (ii) in the event that such grant is prohibited by such Assigned Agreement without the consent of such other party or would give such other party such right to terminate, such Grantor shall have obtained the consent of such other party to such grant, such Grantor hereby agreeing to use commercially reasonable efforts to obtain such consent (all such Collateral being the "Agreement --------- Collateral"); ---------- (f) all of such Grantor's right, title and interest in and to all of the following (collectively, the "Account Collateral"): ------------------ (i) the L/C Cash Collateral Account, all funds held therein and all certificates and instruments, if any, from time to time representing or evidencing the L/C Cash Collateral Account; (ii) all Blocked Accounts (as hereinafter defined), all funds held therein and all certificates and instruments, if any, from time to time representing or evidencing the Blocked Accounts; (iii) all other deposit accounts of such Grantor, all funds held therein and all certificates and instruments, if any, from time to time representing or evidencing such deposit accounts; (iv) all Collateral Investments (as hereinafter defined) from time to time and all certificates and instruments, if any, from time to time representing or evidencing the Collateral Investments; 5 (v) all notes, certificates of deposit, deposit accounts, checks and other instruments from time to time hereafter delivered to or otherwise possessed or required to be delivered to or otherwise possessed, by the Agent for or on behalf of such Grantor, including, without limitation, those delivered to or possessed in substitution for or in addition to any or all of the then existing Account Collateral; and (vi) all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Account Collateral; (g) all of such Grantor's right, title and interest in and to all general intangibles of such Grantor (other than general intangibles for money due or to become due and described in clause (c) of this Section 1) including, without limitation, all trademarks, trade names, trade styles, trade secrets, service marks, logos, copyrights, patents, patent applications and all licenses, license applications, registrations and good will relating to or associated with any of the foregoing; provided, -------- however, that in connection with any operating leases or other commercial ------- agreements entered into in the ordinary course of business of such Grantor on a basis consistent with past practice, such grant shall only be effective to the extent the grant by such Grantor of a security interest in any such operating lease or other commercial agreement is not prohibited by such operating lease or other commercial agreement without the consent of any other party thereto or would not give any other party to such operating lease or other commercial agreement the right to terminate its obligations thereunder; and (h) all proceeds of any and all of the foregoing Collateral (including, without limitation, proceeds that constitute property of the types described in clauses (a) through (g) of this Section 1) and, to the extent not otherwise included, all (i) payments under insurance (whether or not the Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral and (ii) cash. provided, however, that any or all of the property described in clauses (a) through (h) located in the State of Alabama shall not constitute Collateral unless so requested by the Agent under Section 5.01 of the Credit Agreement, provided that such exclusion shall not be deemed to limit any of the Agent's or the other Secured Parties' rights or interests in any such property arising under any mortgage executed by any of the Grantors in favor of the Agent and/or the Secured Parties and filed for record in Alabama. SECTION 2. Security for Obligations. This Agreement secures the ------------------------ payment of all Obligations of the Grantors now or hereafter existing under or in respect of the Loan Documents, whether direct or indirect, absolute or contingent, including, without limitation, any extensions, modifications, substitutions, amendments and renewals thereof, whether for principal, reimbursement obligations, interest, premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise (all such Obligations secured hereby being 6 the "Secured Obligations"). Without limiting the generality of the foregoing, ------------------- this Agreement secures the payment of all amounts that constitute part of the Secured Obligations and that would be owed by any Grantor to the Agent, or any of the other Secured Parties under the Loan Documents but for the fact that such Secured Obligations are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Grantor. SECTION 3. Grantors Remain Liable. Anything contained herein to the ---------------------- contrary notwithstanding, (a) each of the Grantors shall remain liable under the contracts and agreements included in the Collateral to which it is a party to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral to which it is a party and (c) neither of the Agent nor any of the other Secured Parties shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any other Loan Document, nor shall any of the Secured Parties be obligated to perform any of the obligations or duties of the Grantors thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 4. Delivery and Control of Security Collateral and Account ------------------------------------------------------- Collateral. (a) Subject to Section 9 hereof, all certificates or instruments - ---------- representing or evidencing Security Collateral or Account Collateral shall be delivered to and held by or on behalf of the Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Agent. Upon the occurrence and during the continuance of an Event of Default under the Credit Agreement, the Agent shall have the right, at any time in its discretion and without notice to the Grantors, to transfer to or register in the name of the Agent or any of its nominees any or all of the Security Collateral and the Account Collateral, subject only to the revocable rights specified in Section 13(a) and shall have the right at any time to exchange certificates or instruments representing or evidencing Security Collateral or Account Collateral for certificates or instruments of smaller or larger denominations. (b) With respect to any Security Collateral that constitutes a security and is not represented or evidenced by a certificate or an instrument, the Grantors shall cause the issuer thereof either (i) to register the Agent as the registered owner of such security or (ii) to agree in writing with the Grantors and the Agent that such issuer will comply with instructions with respect to such security originated by the Agent without further consent of the Grantors, such agreement to be in form and substance satisfactory to the Agent. (c) With respect to any Security Collateral that constitutes a security entitlement, each of the Grantors shall, within 15 days of the Agent's request therefor, cause the securities intermediary with respect to such security entitlement either (i) to identify in its records the Agent as having such security entitlement against such securities intermediary or (ii) to agree in writing with such Grantor and the Agent that such securities intermediary will comply with entitlement orders (that is, notifications communicated to such securities intermediary directing transfer or redemption of the financial asset to which the Grantors has a security entitlement) 7 originated by the Agent without further consent of the Grantors, such agreement to be in form and substance satisfactory to the Agent. (d) With respect to any Security Collateral that constitutes a commodity contract, each Grantor shall, within 15 days of the Agent's request therefor, cause the commodity intermediary with respect to such commodity contract to agree in writing with such Grantor and the Agent that such commodity intermediary will apply any value distributed on account of such commodity contract as directed by the Agent without further consent of the Grantors, such agreement to be in form and substance satisfactory to the Agent. (e) With respect to any Security Collateral that constitutes a securities account or a commodity account, each Grantor will, in the case of a securities account, comply with subsection (c) of this Section 4 with respect to all security entitlements carried in such securities account and, in the case of a commodity account, comply with subsection (d) of this Section 4 with respect to all commodity contracts carried in such commodity account. SECTION 5. Maintaining the L/C Cash Collateral Account. So long as ------------------------------------------- any Advance shall remain unpaid, any Letter of Credit, Bankers' Acceptance or Bank Hedge Agreement shall be outstanding or any Lender Party shall have any Commitment under the Credit Agreement: (a) The Borrower shall maintain the L/C Cash Collateral Account with the Agent. (b) It shall be a term and condition of the L/C Cash Collateral Account, notwithstanding any term or condition to the contrary in any other agreement relating to the L/C Cash Collateral Account, as the case may be, and except as otherwise provided by the provisions of Section 21, that no amount (including, without limitation, interest on Collateral Investments) shall be paid or released to or for the account of, or withdrawn by or for the account of, the Borrower or any other Person from the L/C Cash Collateral Account. The L/C Cash Collateral Account shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. 8 SECTION 6. Maintaining the Blocked Accounts. So long as any Advance -------------------------------- shall remain unpaid or any Letter of Credit, Bankers' Acceptance or Bank Hedge Agreement shall be outstanding or any Lender Party shall have any Commitment under the Credit Agreement: (a) The Borrower shall maintain blocked deposit accounts ("Blocked ------- Accounts") only with banks ("Blocked Account Banks") that have entered into -------- --------------------- letter agreements in substantially the form of Exhibit A (or such other form as the Agent shall agree) with such Grantor and the Agent ("Blocked ------- Account Letters"). As of the date hereof, the Borrower shall have --------------- delivered each Blocked Account Letter to the Agent, duly executed by the Borrower, the Agent and the Blocked Account Bank party thereto. (b) Each Grantor shall immediately instruct each Person obligated at any time to make any payment to such Grantor for any reason in respect of Receivables (an "Obligor") to make such payment to a Blocked Account and, ------- if (i) an Event of Default shall have occurred and be continuing and (ii) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances due and payable pursuant to the provisions of such Section 6.01 or the making of any demand by the Agent pursuant to Section 6.02 of the Credit Agreement requiring the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances shall have occurred, shall, at the request of the Agent, pay to the Agent for application as provided by the terms of the Credit Agreement, at the end of each Business Day, all proceeds of Collateral. So long as an Event of Default shall not have occurred and be continuing and the Agent shall not have given the notice referred to in the immediately preceding sentence, the Borrower may operate its Blocked Accounts in accordance with its past business practices. (c) Upon any termination of any Blocked Account Letter or other agreement with respect to the maintenance of a Blocked Account by the Borrower or any Blocked Account Bank, the applicable Grantor shall immediately notify all Obligors that were making payments to such Blocked Account to make all future payments to another Blocked Account. The Borrowers agrees to terminate any or all Blocked Accounts and Blocked Account Letters upon reasonable request of the Agent. SECTION 7. Investing of Amounts in the L/C Cash Collateral Account. ------------------------------------------------------- If requested by the Borrower, the Agent shall, subject to the provisions of Section 21, from time to time invest: (a) amounts on deposit in the L/C Cash Collateral Account in such Cash Equivalents in the name of the Agent as the Borrower may select and the Agent may approve, which approval shall not be unreasonably withheld; and (b) interest paid on the Cash Equivalents referred to in clause (a) above, and reinvest other proceeds of any such Cash Equivalents that may mature or be sold, in each case in such Cash Equivalents in the name of the Agent as the Borrower may select and 9 the Agent may approve, which approval shall not unreasonably withheld (the Cash Equivalents referred to in clause (a) above and in this clause (b) being, collectively, "Collateral Investments"). ---------------------- Interest and proceeds that are not invested or reinvested in Collateral Investments as provided above shall be deposited and held in the L/C Cash Collateral Account. SECTION 8. Representations and Warranties. The Grantors represent ------------------------------ and warrant as follows: (a) On the date hereof all of the Equipment and Inventory is located at the places specified beneath the Grantors' names on Schedule III hereto. The principal places of business and chief executive offices of the Grantors and the offices where the Grantors keep their records concerning the Receivables and all originals of all chattel paper that evidence Receivables, are, as of the date hereof, located at the addresses listed on Schedule V hereto. A complete copy of each Assigned Agreement has been delivered to the Agent. None of the Receivables or Agreement Collateral is evidenced by a promissory note or other instrument other than those which have been delivered to the Agent and others held by the Grantors pursuant to Section 9 hereof. (b) Each Grantor is the legal and beneficial owner of its Collateral free and clear of any Lien, except for the Liens permitted in the Loan Documents. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed in favor of the Agent relating to this Agreement, or as permitted in the Loan Documents. (c) Set forth on Schedule V hereto is a complete and accurate list as of the date hereof of all names under which the Grantors are doing business, including, without limitation, trade names, division names and fictitious names. (d) Except to the extent located on or in leased property or subject to operating leases, the Grantors have exclusive possession and control of the Equipment and Inventory other than Equipment and Inventory which in the ordinary course of business is not in the possession and control of the Grantors, the aggregate amount of which does not exceed $1,000,000. (e) All of the shares of stock that constitute Pledged Shares have been duly authorized and validly issued and are fully paid and non- assessable. The Pledged Debt held by the Grantors has been duly authorized, authenticated or issued and delivered, is the legal, valid and binding obligation of the issuers thereof and is not in default. (f) As of the date hereof the Pledged Shares constitute the percentage of the issued and outstanding shares of stock of the issuers thereof indicated on Part A of Schedule I hereto. The Pledged Debt constitutes all of the outstanding indebtedness owed to the Grantors by the issuers thereof. 10 (g) The Grantors have no Blocked Accounts or other deposit accounts other than the Blocked Accounts listed on Schedule IV hereto. (h) Except to the extent set forth on Schedule 4.01(d) to the Credit Agreement, all filings and other actions necessary or desirable to perfect and preserve the security interest in all material respects in the Collateral taken as a whole created under this Agreement have been duly made or taken, and this Agreement, the pledge of the Security Collateral pursuant hereto and the pledge and assignment of the Account Collateral pursuant hereto, together with such filings and other actions, create a valid and perfected security interest in all material respects in the Collateral taken as a whole, securing the payment of the Secured Obligations subject in priority only to the liens and security interests permitted in the Loan Documents. (i) Except to the extent set forth on Schedule 4.01(d) to the Credit Agreement, no consent of any other Person and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other third party is required (i) for the grant by the Grantors of the assignment and security interest granted hereunder, for the pledge by the Grantors of the Security Collateral pursuant hereto or for the execution, delivery or performance of this Agreement by the Grantors, (ii) for the perfection or maintenance of the pledge, assignment and security interest created hereunder (including the first priority nature of such pledge, assignment or security interest subject only to the liens and security interests permitted in the Loan Documents) in all material respects, except for the filing of financing and continuation statements under the Uniform Commercial Code, or (iii) for the exercise by the Agent of its voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with the disposition of any portion of the Security Collateral by laws affecting the offering and sale of securities generally. (j) All of the investment property owned by the Grantors on the date hereof is listed on Schedule I hereto. (k) Each of the Assigned Agreements listed on Schedule II hereto to which any Grantor is a party and each other Bank Hedge Agreement, if any, to which such Grantor is a party, true and complete copies of each of which have been furnished the Agent, (i) has been duly authorized, executed and delivered by each of the Grantors party thereto, (ii) has not been amended or otherwise modified and is in full force, and effect, and (iii) is binding upon and enforceable against each of the Grantors party thereto and each other Person party thereto in accordance with its terms. There exists no violation or default under any Assigned Agreement by any Grantor or, to the best of such Grantor's knowledge, any other Person party thereto. SECTION 9. Further Assurances. (a) Each Grantor agrees that from ------------------ time to time, at its own expense, it shall promptly execute and deliver all further instruments and 11 documents, and take all further action, that may be reasonably necessary, customary or that the Agent may reasonably request, in order to perfect and preserve any pledge, assignment or security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Grantor shall: (i) at the request of the Agent, mark conspicuously each chattel paper included in the Receivables in an individual amount in excess of $75,000 and each of its records pertaining to the Collateral with a legend, in form and substance reasonably satisfactory to the Agent, indicating that such chattel paper or Collateral is subject to the security interest granted hereby; (ii) if any Collateral shall be evidenced by a promissory note or other instrument or chattel paper, and such notes or instruments shall have an aggregate principal amount in excess of $75,000 individually, or $500,000 in the aggregate, each Grantor shall deliver and pledge to the Agent for its benefit and the ratable benefit of the other Secured Parties such note or instrument duly indorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance reasonably satisfactory to the Agent; provided, that so long as (A) no Event of Default -------- shall have occurred and be continuing and (B) the Required Lenders shall not have made the request or granted the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances due and payable pursuant to the provisions of such Section 6.01 and the Agent shall not have made the demand specified in Section 6.02 of the Credit Agreement requiring the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances, each Grantor may retain for collection in the ordinary course any instruments received by it in the ordinary course of business and the Agent shall, promptly upon reasonable request of the applicable Grantor, make appropriate arrangements for making any instrument pledged by such Grantor available to it for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate by the Agent, against trust receipt or like document); (iii) deliver and pledge to the Agent for its benefit and the ratable benefit of the other Secured Parties certificates representing the Pledged Shares accompanied by undated stock powers executed in blank and evidence that all other action that the Agent may deem reasonably necessary or customary in order to perfect and protect the liens and security interests created under this Agreement has been taken; (iv) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be reasonably necessary or customary as the Agent may request, in order to perfect and preserve the pledge, assignment and security interests granted or purported to be granted hereunder; and (v) promptly notify the Agent in writing of any change in the information set forth on Schedule V hereto. (b) Each Grantor hereby authorizes the Agent to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Collateral without the signature of such Grantor where permitted by law, upon which evidence of such filing shall be sent promptly to such Grantor. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. 12 (c) Each Grantor shall furnish to the Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent may reasonably request, all in reasonable detail. SECTION 10. As to Equipment and Inventory. (a) Each Grantor shall ----------------------------- keep its Equipment and Inventory (other than assets sold or otherwise disposed of as permitted by the Loan Documents) at the places therefore specified in Section 8(a) or, upon 30 days' prior written notice to the Agent, at such other places in a jurisdiction where all action required by Section 9 shall have been taken with respect to the Equipment and Inventory. (b) No Grantor shall keep in any warehouse Inventory of value of which exceeds $500,000 at any given time (other than any such warehouses with respect to which the Grantors have obtained landlord consents in form and substance reasonably satisfactory to the Agent). SECTION 11. Insurance. (a) Each Grantor shall, at its own expense, --------- maintain insurance in accordance with Section 5.01(d) of the Credit Agreement. Each policy for liability insurance shall provide for all losses to be paid on behalf of the Agent and the applicable Grantor as their interests may appear, and each policy for property damage insurance shall provide for all losses to be paid directly to the Agent, for the ratable benefit of the Secured Parties. Each such policy shall in addition (i) name the applicable Grantor and the Agent as insured parties thereunder (without any representation or warranty by or obligation upon the Agent) as their interests may appear, (ii) contain the agreement by the insurer that any loss thereunder with respect to damage to the Grantor's property in an amount in excess of $500,000 shall be payable to the Agent notwithstanding any action, inaction or breach of representation or warranty by such Grantor, (iii) provide that there shall be no recourse against the Agent for payment of premiums or other amounts with respect thereto and (iv) provide that at least ten days' prior written notice of cancellation or of lapse shall be given to the Agent by the insurer. Each Grantor shall, as often as the Agent reasonably requests, deliver to the Agent original or duplicate policies of such insurance. Further, each Grantor shall, at the request of the Agent, duly execute and deliver instruments of assignment of such insurance policies to comply with the requirements of Section 9 and use reasonable efforts to cause the insurers to acknowledge notice of such assignment. (b) Reimbursement under any liability insurance maintained by any Grantor pursuant to this Section 11 may be paid directly to the Person who shall have incurred liability covered by such insurance. In case of any loss involving damage to Equipment or Inventory when Section 11(c) is not applicable, the applicable Grantor shall be permitted to use any proceeds to make or cause to be made the necessary repairs to or replacements or substitutions of or additions to such Equipment, Inventory, fixed assets, real property or improvements relating to property covered by such payments (replacements or substitutions to be of such same type of property), and any proceeds of insurance maintained by such Grantor pursuant to this Section 11 shall be paid and applied pursuant to the terms of the Credit Agreement. 13 (c) Upon (i) the occurrence and during the continuance of any Event of Default and (ii) either the making of the request or the granting of the consent specified in Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances dues and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances, all insurance payments in respect of such Equipment or Inventory shall be paid to and applied by the Agent as specified in Section 19(b). SECTION 12. Place of Perfection; Records; Collection of Receivables. ------------------------------------------------------- (a) Each Grantor shall keep its chief places of business and chief executive offices and the offices where it keeps its records concerning the Collateral and all originals of all chattel paper that evidence Receivables, at the location therefor specified in Section 8(a) or, upon 30 days' prior written notice to the Agent, at such other locations in a jurisdiction where all actions required by Section 9 shall have been taken with respect to the Collateral. (b) Except as otherwise provided in this subsection (b), each Grantor shall continue to collect, at its own expense, all amounts due or to become due to such Grantor under the Receivables. In connection with such collections, each Grantor may take and, upon the occurrence and during the continuance of an Event of Default, at the Agent's direction, with the approval of the Required Lenders, shall take such action as the Agent may deem necessary or advisable to enforce collection of the Receivables including, without limitation, (i) extending or renewing the time or times of payment, or settling for less than the total unpaid balance, which such Grantor finds appropriate in accordance with sound judgment consistent with prior business practice and (ii) allowing a refund or credit due as a result of returned or damaged merchandise, in each such case in accordance with such Grantor's ordinary course of business consistent with its prior collection practices; provided, however, that the -------- ------- Agent shall have the right at any time, upon (i) the occurrence of and during the continuance of an Event of Default and (ii) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances due and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances, upon notice to such Grantor of its intention to do so, to notify the obligors under any Receivables of the assignment of such Receivables to the Agent and to direct such obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Agent and, upon such notification and at the expense of such Grantor, to enforce collection of any such Receivables, and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by any Grantor of the notice from the Agent referred to in the proviso to the immediately preceding sentence, (i) all amounts and proceeds ------- (including instruments) received by such Grantor in respect of the Receivables shall be received in trust for the benefit of the Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Agent in the same form as so received (with any necessary indorsement) to be applied as provided by the terms of the Credit Agreement and (ii) 14 such Grantor shall not adjust, settle or compromise the amount or payment of any Receivable, release wholly or partly any obligor thereof, or allow any credit or discount thereon. SECTION 13. Voting Rights; Dividends; Etc. (a) So long as no Event ----------------------------- of Default shall have occurred and be continuing: (i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Security Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the other Loan Documents; provided, however, that no Grantor -------- ------- shall exercise or refrain from exercising any such right if such action is reasonably expected to have a Material Adverse Effect. (ii) Each Grantor shall be entitled to receive and retain any and all dividends and interest paid in respect of the Security Collateral; provided, however, that any and all -------- ------- (A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, such Security Collateral, (B) dividends and other distributions paid or payable in cash in respect of such Security Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any Security Collateral, shall be, and shall be forthwith delivered to the Agent to hold as, Security Collateral and shall, if received by such Grantor, be received in trust for the benefit of the Agent, be segregated from other property or funds of such Grantor and be forthwith delivered to the Agent as Security Collateral in the same form as so received (with any necessary indorsement or assignment) in each case, except to the extent such distributions are permitted by the terms of the Credit Agreement. (iii) The Agent shall execute and deliver (or cause to be executed and delivered) to each Grantor all such proxies and other instruments as such Grantor may request for the purpose of enabling such Grantor to exercise the voting and other rights that it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to paragraph (ii) above. 15 (b) Upon the occurrence and during the continuance of an Event of Default: (i) All rights of any Grantor (A) to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 13(a)(i) shall, upon notice to such Grantor by the Agent, cease and (B) to receive the dividends and interest payments that such Grantor would otherwise be authorized to receive and retain pursuant to Section 13(a)(ii) shall automatically cease, and all such rights shall thereupon become vested in the Agent, which shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Security Collateral such dividends and interest payments. (ii) All dividends and interest payments that are received by any Grantor contrary to the provisions of paragraph (i) of this Section 13(b) shall be received in trust for the benefit of the Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Agent as Security Collateral in the same form as so received (with any necessary indorsement). SECTION 14. As to the Assigned Agreements. (a) Each Grantor shall, ----------------------------- at its expense, perform and observe all terms and provisions of each Assigned Agreement to be performed or observed by it, maintain the Assigned Agreements to which it is a party in full force and effect except to the extent otherwise permitted by the Credit Agreement and enforce each of the Assigned Agreements in accordance with the terms thereof except to the extent the failure so to perform, observe the terms and provisions of, or enforce, any such Assigned Agreement other than the Purchase Agreement could reasonably be expected to have a Material Adverse Effect; and (b) Each Grantor hereby consents on its behalf and on behalf of its Subsidiaries to the assignment and pledge to the Agent for its benefit and the ratable benefit of the other Secured Parties of each Assigned Agreement to which such Grantor or such Subsidiary is a party by any other Grantor hereunder. SECTION 15. Transfers and Other Liens; Additional Shares. (a) Each -------------------------------------------- Grantor agrees not (i) to sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral of such Grantor, except sales, assignments and dispositions otherwise permitted under Section 5.02(e) of the Credit Agreement, or (ii) to create or suffer to exist any Lien upon or with respect to any of the Collateral, except for the pledge, assignment and security interest created under this Agreement and the Liens permitted under Section 5.02(a) of the Credit Agreement. (b) Each Grantor shall for the Pledged Shares and all other shares of stock pledged hereunder that are issued by issuers which are controlled by such Grantor, cause each issuer of the Pledged Shares and each issuer of all other shares of stock pledged hereunder not to issue any stock or other securities in addition to or in substitution for the Pledged Shares or such other shares issued by any such issuer, except to such Grantor. 16 SECTION 16. Agent Appointed Attorney-in-Fact. Each Grantor hereby -------------------------------- irrevocably appoints the Agent as its attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise upon (i) the occurrence and during the continuance of an Event of Default and (ii) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances due and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances, and upon notice to such Grantor, to take any action and to execute any instrument that the Agent may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) to obtain and adjust insurance required to be paid to the Agent pursuant to Section 11, (b) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (c) to receive, indorse and collect any drafts or other instruments, documents and chattel paper in connection with Section 16(a) or 16(b) above, and (d) to file any claims, to take any action or to institute any proceedings that the Agent may deem reasonably necessary or desirable for the collection of any of the Collateral or otherwise to enforce compliance with the terms and conditions of any Assigned Agreement or the rights of the Agent with respect to any of the Collateral; provided, that the Agent shall act with -------- reasonable care in the exercise of the foregoing; and provided, further, that -------- ------- the Agent shall give the Grantors not less than ten Business Days' prior written notice of the time and place of any sale or other intended disposition of the Collateral, except any such Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. SECTION 17. Agent May Perform. Upon and during the continuance of an ----------------- Event of Default, if any Grantor fails to perform any agreement contained herein, the Agent may itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by the Grantors under Section 21(b). SECTION 18. The Agent's Duties. The powers conferred on the Agent ------------------ hereunder are solely to protect its and the other Secured Parties' interest in the Collateral and, beyond the exercise of reasonable care, shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Agent shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Security Collateral, whether or not the Agent or any other Secured 17 Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral in each case, beyond the exercise of reasonable care. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Agent accords its own property. Anything contained herein to the contrary notwithstanding, the Agent may from time to time, when the Agent deems it to be necessary, appoint one or more subagents (each a "Subagent") for the Agent hereunder with respect to all -------- or any part of the Collateral. In the event that the Agent so appoints any Subagent with respect to any Collateral, (1) the assignment and pledge of such Collateral and the security interest granted in such Collateral by the Grantors hereunder shall be deemed for purposes of this Security Agreement to have been made to such Subagent for the ratable benefit of the Secured Parties, as security for the Secured Obligations of the Grantors, (2) such Subagent shall automatically be vested with all rights, powers, privileges, interests and remedies of the Agent hereunder with respect to such Collateral and (3) the term "Agent," when used herein in relation to any rights, powers, privileges, interests and remedies of the Agent with respect to such Collateral, shall include such Subagent; provided, however, that no such Subagent shall be -------- ------- authorized to take any action with respect to any such Collateral unless and except to the extent expressly authorized in writing by the Agent. SECTION 19. Remedies. If (i) any Event of Default shall have -------- occurred and be continuing and (ii) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances due and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances shall have occurred: 18 (a) The Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the N.Y. Uniform Commercial Code (whether or not the N.Y. Uniform Commercial Code applies to the affected Collateral), and also may (i) require each Grantor to, and such Grantor hereby agrees that it will at its expense and upon request of the Agent forthwith, assemble all or part of the Collateral as directed by the Agent (to the extent permitted by applicable law and without breach of the peace) and make it available to the Agent at a place and time to be designated by the Agent that is reasonably convenient to both parties, (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Agent may deem commercially reasonable, (iii) occupy any premises owned or leased by any Grantor where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation, and (iv) exercise any and all rights and remedies of the Grantors under or in connection with the Assigned Agreements, the Receivables and the Related Contracts or otherwise in respect of the Collateral, including, without limitation, any and all rights of any Grantor to demand or otherwise require payment of any amount under, or performance of any provision of, the Assigned Agreements, the Receivables and the Related Contracts. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) All cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied (after payment of any amounts payable to the Agent pursuant to Section 21) in whole or in part by the Agent for its benefit and the ratable benefit of the other Secured Parties against, all or any part of the Secured Obligations in such order as the Agent shall elect. Any surplus of such cash or cash proceeds held by the Agent and remaining after payment in full of all of the Secured Obligations shall be paid over to the Grantors or their successors or assigns, or as a court of competent jurisdiction may direct. (c) All payments received by the Grantors under or in connection with any Assigned Agreement or otherwise in respect of the Collateral shall be received in trust for the benefit of the Agent, shall be segregated from other funds of the Grantors and shall be forthwith paid over to the Agent in the same form as so received (with any necessary indorsement). 19 (d) The Agent may, without notice to any Grantor, except as required by law, and at any time or from time to time, charge, set-off and otherwise apply all or any part of the L/C Cash Collateral Account against the Secured Obligations or any part thereof. (e) To the extent the Collateral is located in the State of Louisiana, upon (i) the occurrence and during the continuance of an Event of Default and (ii) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances due and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances, it shall be lawful for the Agent, and the Agent is hereby authorized by the Grantor without making a demand or putting in default (a putting in default being expressly waived), to cause all and singular the Collateral to be seized and sold by executory of ordinary process, at the Agent's sole option, with or without appraisement (appraisement being expressly waived), either as an entirety or in lots or parcels, all as the Agent may determine, to the highest bidder for cash (or such other terms as the Agent may elect), and otherwise exercise the rights, powers and remedies provided for herein and under applicable law. The Agent is hereby appointed agent and attorney-in-fact for the Grantor and is hereby authorized and empowered to carry out and enforce all incorporeal rights pledged by the Grantor hereunder. This power, being coupled with an interest, is irrevocable so long as any of the Secured Obligations remain outstanding. For purposes of Louisiana executory process, the Grantor acknowledges the liens, security interests and the Secured Obligations and does hereby confess judgment in favor of the Agent for the full amount of the Secured Obligations not paid when due. Any and all declarations of fact made by authentic act before a notary public in the presence of two witnesses by a person declaring that such facts lie within his knowledge shall constitute authentic evidence of such facts for the purpose of executory process. Upon (i) the occurrence and during the continuance of an Event of Default and (ii) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances due and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay the amounts in respect of Bankers' Acceptances, in addition to all other rights herein conferred on Agent, the Grantor hereby expressly designates the Agent, or any agents, servants, employees or other person named by the Agent at that time, as "Keeper" of each and all the Collateral pending the judicial sale thereof, with all the powers set forth in La. R.S. 9:5131 et seq. (as hereinafter amended). The designation of a Keeper made herein shall not be deemed to require the Agent to provoke the appointment of such a Keeper. The Grantor waives to the fullest extent permitted by law: (a) the benefit of appraisement provided for in Louisiana Code of Civil Procedure articles 2332, 2336, 2723, and 2724, and all other laws conferring the same; (b) the demand and three days' delay provided for in Louisiana Code of Civil Procedure articles 2639 and 2721; (c) the notice of seizure provided for in Louisiana Code of Civil Procedure articles 2293 and 2721; (d) the three days' delay provided for in Louisiana 20 Code of Civil Procedure articles 2331 and 2772; and (e) the other benefits provided in Louisiana Code of Civil Procedure articles 2331, 2722 and 2723. SECTION 20. Registration Rights. If the Agent shall determine to exercise ------------------- its right to sell all or any of the Security Collateral pursuant to Section 19, each Grantor agrees that, upon request of the Agent, such Grantors will, at its own expense: (a) execute and deliver, and cause each issuer of the Security Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be reasonably necessary or, in the opinion of the Agent, customary to register such Security Collateral under the provisions of the Securities Act of 1933, (as amended from time to time, the "Securities ---------- Act"), to cause the registration statement relating thereto to become effective - --- and to remain effective for such period as prospectuses are required by law to be furnished and to make all amendments and supplements thereto and to the related prospectus that, in the opinion of the Agent, are reasonably necessary or customary, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; (b) use its best efforts to qualify the Security Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Security Collateral, as reasonably requested by the Agent; (c) cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement that will satisfy the provisions of Section 11(a) of the Securities Act; (d) provide the Agent with such other information (including, without limitation, forward looking information) as may be reasonably necessary or, in the opinion of the Agent, customary to enable the Agent to effect the sale of such Security Collateral; and (e) do or cause to be done all such other acts and things as may be reasonably necessary to make such sale of the Security Collateral or any part thereof valid and binding and in compliance with applicable law. The Agent is authorized, in connection with any sale of the Collateral pursuant to Section 19, to deliver or otherwise disclose to any prospective purchaser of the Security Collateral (i) any registration statement or prospectus, and all supplements and amendments thereto, prepared pursuant to clause (a) above, (ii) any information and projections provided to it pursuant to clause (d) above and (iii) any other information in its possession relating to the Security Collateral (not subject to a confidentiality). SECTION 21. Indemnity and Expenses. (a) Each Grantor agrees jointly and ---------------------- severally to indemnify the Secured Parties in connection with any claims, losses and liabilities resulting from 21 this Agreement to the extent required by, and in accordance with the provisions of, Section 8.04(b) of the Credit Agreement as if such Grantor were a party to the Credit Agreement. (b) Each Grantor agrees jointly and severally to pay the Agent such amounts of any fees and expenses incurred by the Agent in connection with the administration of this Agreement as is required by, and in accordance with the provisions of, Sections 8.04(a) and (b) of the Credit Agreement as if such Grantor were a party to the Credit Agreement. SECTION 22. Security Interest Absolute. The obligations of the Grantors -------------------------- under this Agreement are independent of the Secured Obligations and a separate action or actions may be brought and prosecuted against any Grantor to enforce this Agreement, irrespective of whether any action is brought against any other Loan Party or whether any other Loan Party is joined in any such action or actions. All rights of the Agent and the pledge, assignment and security interest hereunder, and all obligations of the Grantors hereunder, shall be absolute and unconditional, irrespective of: (i) any lack of validity or enforceability of any Loan Document, any Bank Hedge Agreement or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document or any Bank Hedge Agreement, including, without limitation, any increase in the Secured Obligations resulting from the extension of additional credit to any Loan Party or otherwise; (iii) any taking, exchange, release or nonperfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations; (iv) any manner of application of collateral, or proceeds thereof, to all or any of the Secured Obligations, or any manner of sale or other disposition of any collateral for all or any of the Secured Obligations or any other assets of any Grantor or any of its Subsidiaries; (v) any change, restructuring or termination of the corporate structure or existence of any Grantor or any of its Subsidiaries; or (vi) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor or a third-party grantor of a security interest. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by any Secured Party or by any other Person upon the insolvency, bankruptcy or reorganization of any Loan Party or otherwise, all as though such payment had not been made. 22 SECTION 23. Amendments; Waivers; Etc. (a) No amendment or waiver of any ------------------------ provision of this Agreement, and no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) No failure on the part of the Agent, any Lender Party or any Hedge Bank to exercise, and no delay in exercising, any right, power or privilege hereunder shall operate as a waiver thereof or consent thereto; nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. (c) Upon the execution and delivery by any Person of a security agreement supplement in substantially the form of Exhibit B hereto (each a "Security -------- Agreement Supplement"), (i) such Person shall be referred to as an "Additional - -------------------- Grantor" and shall be and become a Grantor, and each reference in this Agreement to "Grantor" or "Grantors" shall also mean and be a reference to such Additional Grantor and (ii) the schedules attached to such Security Agreement Supplement shall be incorporated into and become a part of and supplement Schedules I through V hereto, and the Agent may attach such Schedules as supplements to such Schedules, and each reference to such Schedules shall mean and be a reference to such Schedules, as supplemented pursuant hereto. (d) Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Supplement or Schedule hereto shall be effective as delivery of a manually executed counterpart thereof. SECTION 24. Addresses for Notices. All notices and other communications --------------------- provided for hereunder shall be in writing (including telecopier, telegraphic or communication) and mailed, telecopied, telegraphed, cabled or delivered, if to any Grantor, c/o Better Minerals & Aggregates Company, Route 522 North, P.O. Box 187, Berkeley Springs, WV 25411, Attention: Chief Financial Officer, telecopier number (304) 258-3500, and if to the Agent, any Lender Party or any Hedge Bank, addressed to it at its address set forth in Section 8.02 of the Credit Agreement or, as to any party, at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section 24. All such notices and other communications shall, when mailed, telecopied or telegraphed, be effective when received by the addressee. SECTION 25. Continuing Security Interest; Assignments Under the Credit ---------------------------------------------------------- Agreement. This Agreement shall create a continuing security interest in the - --------- Collateral and shall (a) remain in full force and effect until the latest of the payment in full in cash of the Secured Obligations, constituting an Advance or other Secured Obligations then due and payable, the Termination Date and the termination or expiration of all Bank Hedge Agreements or as otherwise permitted under the Loan Documents, (b) be binding upon the Grantors, their successors and assigns and (c) inure, together with the rights and remedies of the Agent hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns. Without limiting the 23 generality of the foregoing clause (c), any Lender Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Advances owing to it and any Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender Party herein or otherwise, in each case as provided in Section 8.07 of the Credit Agreement. SECTION 26. Release and Termination. (a) Upon any sale, lease, transfer ----------------------- or other disposition of any item of Collateral in accordance with the terms of the Loan Documents, the Agent will, at the applicable Grantor's expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted hereby; provided, however, that (i) at the time of -------- ------- such request and such release, no Event of Default shall have occurred and be continuing, (ii) except to the extent such sale, lease or transfer or other disposition is permitted under Section 5.02(e) of the Credit Agreement, such Grantor shall have delivered to the Agent, at least ten Business Days prior to the date of the proposed release, a written request for release describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including, without limitation, the price thereof and any expenses in connection therewith, together with a form of release for execution by the Agent and a certification by such Grantor to the effect that the transaction is in compliance with the Loan Documents and as to such other matters as the Agent may reasonably request and (iii) the proceeds of any such sale, lease, transfer or other disposition required to be applied in accordance with Section 2.07 of the Credit Agreement shall be paid to, or in accordance with the instructions of, the Agent at the closing. (b) Upon the latest of the payment in full in cash of the Secured Obligations constituting an Advance or other Secured Obligations then due and payable, the Termination Date and the termination or expiration of all Bank Hedge Agreements, the pledge, assignment and security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Grantors. Upon any such termination, the Agent will, at the applicable Grantor's expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination and promptly release and return Collateral in its possession. SECTION 27. Mortgages. In the event that any of the Collateral hereunder --------- is also subject to a valid and enforceable Lien under the terms of any mortgage and the terms of such mortgage are inconsistent with the terms of this Agreement, then with respect to such Collateral, the terms of such mortgage shall be controlling in the case of fixtures and leases, letting and licenses of, and contracts and agreements relating to, the lease of real property, and the terms of this Agreement shall be controlling in the case of all other Collateral. SECTION 28. Execution in Counterparts. This Agreement may be executed in ------------------------- any number of 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. 24 SECTION 29. Governing Law. (a) This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of New York, except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Collateral are governed by the laws of a jurisdiction other than the State of New York. (b) Each Grantor 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 any other Loan Document or Bank Hedge Agreement to which it is or is to be a party, or for recognition and enforcement of any judgment, and each Grantor 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 or, to the extent permitted by law, in such federal court. Each Grantor irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection or defense 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 any of the other Loan Documents to which it is or is to be a party in any New York State or federal court. Each Grantor 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. Each Grantor 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 herein shall affect the right that any party may otherwise have to commence or participate in any action, suit or proceeding relating to this Agreement, any of the other Loan Documents or any Bank Hedge Agreement to which it is or is to be a party, or otherwise to proceed against any Grantor, in any other jurisdiction. (c) Each Grantor irrevocably consents to the service of any and all process in any such action, suit or proceeding at the address set forth below its name on the signature page hereof, by any method permitted by law. Each Grantor 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. (d) To the extent that any Grantor has or hereafter may acquire immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to themselves or their property, such Grantor hereby irrevocably waives such immunity in respect of its Obligations under this Agreement, any other Loan Document and any Bank Hedge Agreement to which it is or is to be a party. 25 (e) Each Grantor 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, any other Loan Document or any Bank Hedge Agreement or the actions of the Agent, any Lender Party or any Hedge Bank in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. BETTER MINERALS & AGGREGATES COMPANY By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President PENNSYLVANIA GLASS SAND CORPORATION By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President THE FULTON LAND AND TIMBER COMPANY By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President OTTAWA SILICA COMPANY By: /s/ John A. Ulizio ------------------------------- Name: Title: 26 GEORGE F. PETTINOS, INC. By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President ELLEN JAY, INC. By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President U.S. SILICA COMPANY By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President BETTER MATERIALS CORPORATION By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President BMC TRUCKING, INC. By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President 27 BUCKS COUNTY CRUSHED STONE COMPANY By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President CHIPPEWA FARMS CORPORATION By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President SHORE STONE COMPANY, INC. By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President COMMERCIAL STONE CO., INC. By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President STONE MATERIALS COMPANY, LLC By: Better Minerals & Aggregates Company, as Manager By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President 28 COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, LLC By: Stone Materials Company, LLC, as Manager By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President 29 BANQUE NATIONALE DE PARIS, as Agent By: /s/ Richard Cushing ------------------------------- Name: Richard Cushing Title: Director By: /s/ Paul Barnes ------------------------------- Name: Paul Barnes Title: Assistant Vice President 30 SCHEDULE I to Security Agreement Part A ------ Pledged Shares Percentage of Stock Issued and Class of Par Certificate Number Outstanding Grantor Issuer Stock Value Number of Shares Shares of Issuer Part B ------ Pledged Debt Outstanding Grantor Issuer Description of Debt Final Maturity Principal Amount SCHEDULE II to Security Agreement Assigned Agreements ------------------- SCHEDULE III to Security Agreement Locations of Equipment and Inventory ------------------------------------ SCHEDULE IV to Security Agreement Blocked Accounts ---------------- SCHEDULE V to Security Agreement Principal Places of Business, Trade Names, Etc. ----------------------------------------------- EXHIBIT A to Security Agreement BLOCKED ACCOUNT LETTER ______ __, [199_] [20__] [Blocked Account Bank Address] Attn: [ ] Better Minerals & Aggregates Company Ladies and Gentlemen: Reference is made to the deposit accounts listed on the attached Schedule I into which certain monies, instruments and other properties are deposited from time to time (the "Accounts") maintained with you by [Name of Grantor] (the -------- "Company"). Pursuant to the Security Agreement dated as of [September 30], ------- 1999 (the "Security Agreement"), the Company has granted to Banque Nationale de ------------------ Paris, as agent (the "Agent") for the Secured Parties referred to in the Credit ----- Agreement dated as of [September 30], 1999 (the "Credit Agreement") with Better ---------------- Minerals & Aggregates Company, BMAC Holdings, Inc. and George F. Pettinos (Canada) Limited, a security interest in certain property of the Company, including, among other things, the following (the "Account Collateral"): the ------------------ Accounts, all funds held therein and all certificates and instruments, if any, from time to time representing or evidencing the Accounts, all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Account Collateral and all proceeds of any and all of the foregoing Account Collateral and, to the extent not otherwise included, all (i) payments under insurance (whether or not the Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Account Collateral and (ii) cash. It is a condition to the continued maintenance of the Accounts with you that you agree to this letter agreement. By signing this letter agreement, you acknowledge notice of the Security Agreement as it pertains to this Blocked Account Letter and confirm to the Agent that you have received no notice of any other pledge or assignment of the Accounts at this time. Further, you hereby agree with the Agent that: (a) Notwithstanding anything to the contrary in any other agreement relating to the Accounts, the Accounts are and will be subject to the terms and conditions of the Security Agreement as it pertains to this Blocked Account Letter, will be maintained solely for the benefit of the Agent, will be entitled "[Name of Grantor], Banque Nationale de Paris, as Agent" and will be subject to written instructions only from an officer of the Agent. You are hereby permitted to follow the instructions of the Company until such time as you receive written instructions to the contrary from the Agent. (b) Upon the written request of the Agent to you, which request shall specify that an "Event of Default" under the Credit Agreement has occurred and is continuing (which writing may be by telex or telecopy and upon which you may conclusively rely, absent manifest error), you shall immediately transfer (at the cost and expense of the Company) subject to your usual deposit terms, all available funds then or thereafter deposited in the Accounts by wire transfer into the Agent's Account at the Federal Reserve Bank of New York, 33 Liberty Street, New York, NY, 10048, [ABA No. 026007689, for further credit to Account No. 750420-701-03]. (c) From and after the date that the Agent shall have sent to you a written notice (which writing may be by telex or telecopy and upon which you may conclusively rely, absent manifest error) that an "Event of Default" under the Credit Agreement has occurred and until the date, if any, that the Agent shall have advised you in writing (which writing may be by telex or telecopy and upon which you may conclusively rely, absent manifest error) that no Event of Default is continuing, you shall not honor any withdrawal or transfer from, or any check, draft or other item of payment on, the Accounts, other than any withdrawal, transfer, check, draft or other item made in writing by the Agent or bearing the written consent of the Agent, and, to the extent of available funds in the Accounts, you shall honor each such withdrawal, transfer, check, draft or other item made in writing by the Agent or bearing the written consent of the Agent. (d) You will follow your usual operating procedures for the handling of the Accounts, including any remittance received in the Accounts that contains restrictive endorsements, irregularities (such as a variance between the written and numerical amounts), undated or postdated items, missing signatures, incorrect payees, etc. (e) You shall furnish to the Agent, promptly upon the reasonable written request of the Agent in each instance, all information regarding the Accounts, to the extent the same is provided to the Company, for the period of time specified in such written notice, and the Company hereby authorizes you to furnish same. (f) You agree that you will not make, and you hereby waive all of your rights to make, any charge, debit or offset to the Accounts for any reason whatsoever, and waive any and all liens, whether contractual or provided under law, which you may have or hereafter acquire on the Accounts or funds therein, in each case, other than any charge, offset, debit or lien in respect of your customary service charges, such as reversed or returned credits, items not collected or other charges, expenses and commissions incurred by you in providing the service, and returned items relating to the Accounts. (g) All service charges and fees with respect to the Accounts shall be payable by the Company. (h) After the giving of notice referred to in paragraphs (b) and (c) above, the Agent shall be entitled to exercise any and all rights of the Company in respect of the Accounts, and the undersigned shall comply in all respects with such exercise. (i) Notwithstanding any other provision contained herein, unless you are grossly negligent or engage in willful misconduct in performance or non- performance in connection with this letter agreement and the Accounts, the Agent and the Company agree to hold you harmless from any claims, damages, losses or expenses incurred by any party in connection herewith; in the event you breach the standard of care set forth herein, the Company and the Agent expressly agree that your liability shall be limited to damages directly caused by such breach and in no event shall you be liable for any incidental, indirect, punitive or consequential damages or attorneys' fees whatsoever. (j) Notwithstanding any other provision of this letter agreement, you shall not be liable for any failure, inability to perform, or delay in performance hereunder, if such failure, inability, or delay is due to acts of God, war, civil commotion, governmental action, fire, explosion, strikes, other industrial disturbances, equipment malfunction, action, non-action or delayed action on the part of the Company or the Agent or any other entity or any other causes that are beyond your reasonable control. (k) The Company and the Agent agree that you may debit the Account for any items (including, but not limited to, checks, drafts, Automatic Clearinghouse (ACH) credits or wire transfers) deposited or credit to the Accounts which may be returned or otherwise not collected and for all charges, fees, commissions and expenses incurred by you in providing services or otherwise in connection herewith; you may charge the Accounts as permitted herein at such times as are in accordance with your customary practices for the chargeback of returned items and expenses. In the event you are unable to obtain sufficient funds from such charges to cover returned items, or reversed or returned credits, or items not collected and any other charges, expenses, or commissions incurred by you in providing the services, the Company and the Agent shall indemnify you for all amounts described above incurred by you. (l) This letter agreement may not be modified or terminated by the Company unless the prior written consent of you and the Agent are obtained. This letter agreement may be terminated: (i) immediately for cause or (ii) upon thirty (30) days' prior written notice to the Company or the Agent, as the case may be, without cause. Upon such termination you shall close the Accounts and transfer all funds as they become available in the Accounts to the Agent's 3 Account specified in paragraph (b) above. Paragraph (k) above shall survive any such termination and closure of the Accounts for fifteen (15) days. This letter agreement shall be binding upon you and your successors and assigns and shall inure to the benefit of the Agent, the Lenders and their successors, transferees and assigns. This letter agreement shall become effective immediately upon its execution by all parties hereto. Any notice permitted or required hereunder shall be in writing and shall be deemed to have been duly given if sent by personal delivery, express or first class mail, or facsimile addressed, in the case of notice to you at your address listed on the signature page hereof. 4 This letter agreement shall be governed by and construed in accordance with the laws of the State of New York. Very truly yours, [NAME OF GRANTOR] Address: Attention: Telecopier Number: By:________________________________ Name: Title: BANQUE NATIONALE DE PARIS, as Agent 499 Park Avenue New York, NY 10022 Attention: Mr. Eric Deram Telecopier Number: (212) 418-8269 By:________________________________ Name: Title: Acknowledged and agreed to as of the date first above written: [BLOCKED ACCOUNT BANK NAME] By:____________________________ Name: Title: 5 SCHEDULE I to Blocked Account Letter Blocked Accounts: - ---------------- EXHIBIT B to Security Agreement FORM OF SECURITY AGREEMENT SUPPLEMENT ________________ __, ____ Banque National de Paris, New York Branch, as Agent 499 Park Avenue New York, New York 10022 Attention: Security Agreement dated as of September 30, 1999 among Better Minerals & Aggregates Company and additional grantors named therein, as Grantors, and Banque Nationale de Paris, as Agent Ladies and Gentlemen: Reference is made to the above-captioned Security Agreement (as amended, supplemented or otherwise modified from time to time, the "Security Agreement"). ------------------ Unless otherwise defined herein, terms defined in the Security Agreement are used herein as therein defined. The undersigned hereby agrees, as of the date first above written, to become a Grantor under the Security Agreement as if it were an original party thereto and agrees that each reference in the Security Agreement to a "Grantor" or the "Grantors" shall also mean and be a reference to the undersigned. The undersigned hereby assigns and pledges to the Agent for its benefit and the ratable benefit of the Secured Parties and hereby grants to the Agent for its benefit and the ratable benefit of the Secured Parties as collateral for the Secured Obligations a pledge and assignment of, and a security interest in, all of the right, title and interest of the undersigned in and to its Collateral, whether now owned or hereafter acquired. The undersigned has attached hereto supplements to Schedules I through V to the Security Agreement, and the undersigned hereby certifies that such supplements have been prepared by the undersigned in substantially the form of the Schedules to the Security Agreement and are accurate and complete as of the date first above written. The undersigned hereby makes each representation and warranty set forth in Section 8 of the Security Agreement as to itself and as to its Collateral to the same extent as each other Grantor and hereby agrees to be bound as a Grantor by all of the terms and provisions of the Security Agreement to the same extent as any other Grantor. This letter shall be governed by and construed in accordance with the laws of the State of New York. Very truly yours, [NAME OF ADDITIONAL GRANTOR] By_________________________________ Name: Title: Address: EX-10.6 61 INTELLECTUAL PROPERTY SECURITY AGREEMENT EXHIBIT 10.6 EXECUTION COPY INTELLECTUAL PROPERTY SECURITY AGREEMENT Dated as of September 30, 1999 Between BETTER MINERALS & AGGREGATES COMPANY, and THE OTHER GRANTORS REFERRED TO HEREIN, as Grantors, ----------- and BANQUE NATIONALE DE PARIS, as Agent -------- TABLE OF CONTENTS -----------------
SECTION Page Section 1. Grant of Security........................................................... 1 Section 2. Security for Obligations.................................................... 3 Section 3. Grantors Remain Liable...................................................... 3 Section 4. Representations and Warranties.............................................. 3 Section 5. Further Assurances.......................................................... 5 Section 6. Transfers and Other Liens................................................... 7 Section 7. Agent Appointed Attorney-in-Fact............................................ 7 Section 8. Agent May Perform........................................................... 8 Section 9. The Agent's Duties.......................................................... 8 Section 10. Remedies.................................................................... 8 Section 11. Indemnity and Expenses...................................................... 10 Section 12. Security Interest Absolute.................................................. 10 Section 13. Amendments; Waivers, Etc.................................................... 10 Section 14. Addresses for Notices....................................................... 11 Section 15. Continuing Security Interest, Assignments under the Credit Agreement........ 11 Section 16. Release and Termination..................................................... 12 Section 17. Execution in Counterparts................................................... 12 Section 18. Governing Law, Submission to Jurisdiction, Waiver of Jury Trial; Etc........ 12
Schedule I - Patents and Patent Applications Schedule II - Trademark Registrations, Trademark Applications and Common Law Trademarks Schedule III - Copyright Registrations and Applications i Schedule IV - Licenses Schedule V - Pending Litigation/Unauthorized Uses Exhibit A - Intellectual Property Security Agreement Supplement ii INTELLECTUAL PROPERTY SECURITY AGREEMENT INTELLECTUAL PROPERTY SECURITY AGREEMENT, dated as of September 30, 1999, made between Better Minerals & Aggregates Company, a Delaware corporation formerly known as "USS Intermediate Holdco, Inc." (the "Borrower"), each other -------- grantor listed on the signature pages hereto (together with the Borrower, the "Grantors" and, individually, a "Grantor"), and BANQUE NATIONALE DE PARIS -------- ("BNP"), as agent (together with any successor agent appointed pursuant to --- Article VII of the Credit Agreement (as hereinafter defined), the ("Agent") for the Lender Parties (as defined in the Credit Agreement) and as custodian for the Hedge Banks (as defined in the Credit Agreement). PRELIMINARY STATEMENTS (1) The Borrower, BMAC Holdings, Inc., a Delaware corporation, and George F. Pettinos (Canada) Limited, a corporation organized and existing under the laws of Canada (the "Canadian Borrower"), have entered into a Credit ----------------- Agreement dated as of September 30, 1999 (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit ------ Agreement"; the terms defined therein and not otherwise defined herein being - --------- used herein as therein defined) with certain Lender Parties party thereto and Banque Nationale de Paris, as Agent for such Lender Parties and as Swing Line Bank and Initial Issuing Bank. (2) It is a condition precedent to the making of Advances and Drawings and the issuance of Letters of Credit by the Lender Parties and the entry by the Hedge Banks into the Bank Hedge Agreements with the Loan Parties under the Credit Agreement that the Grantors shall have executed and delivered this Intellectual Property Security Agreement. NOW, THEREFORE, in consideration of the premises and in order to induce the Lender Parties to make Advances and Drawings and to issue Letters of Credit under the Credit Agreement and to induce the Hedge Banks to enter into Bank Hedge Agreements with the Loan Parties from time to time, the Grantors hereby agree with the Agent for the ratable benefit of the Secured Parties as follows: Section 1. Grant of Security. Each Grantor hereby assigns and pledges ----------------- to the Agent for the ratable benefit of the Secured Parties, and hereby grants to the Agent for the ratable benefit of the Secured Parties a security interest in, the following, in each case, as to each type of property described below, whether now owned or hereafter acquired, wherever located and whether now or hereafter existing (collectively, the "Intellectual Property Collateral"): -------------------------------- (a) all patents, patent applications and patentable inventions, including, without limitation, each patent and patent application identified in Schedule I attached hereto and made a part hereof, and including without limitation (i) all inventions and improvements described and claimed therein, (ii) the right to sue or otherwise recover for any infringements thereof, (iii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past and future infringements thereof), and (iv) all rights corresponding thereto throughout the world and all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (the "Patents"); ------- (b) all trademarks, service marks, trade names, trade dress or other indicia of trade origin, trademark and service mark registrations, and applications for trademark or service mark registrations and any renewals thereof, including, without limitation, each registration and application identified in Schedule II attached hereto and made a part hereof, and including without limitation (i) the right to sue or otherwise recover for any and all past, present and future infringements and dilutions thereof, (ii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (iii) all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark, service mark, trade name, trade dress or other indicia of trade origin (the "Trademarks"), provided, however, that the Trademarks shall not include any ---------- trademark applications filed in the United States Patent and Trademark Office under 15 U.S.C. (S) 1051(b) prior to the filing of a verified statement of use under 15 U.S.C. (S) 1051(d) to the extent that a valid security interest may not be taken in such an intent-to-use trademark application under applicable law; (c) all copyrights, whether statutory or common law, and whether or not the underlying works of authorship have been published, and all works of authorship and other intellectual property rights therein, all copyrights of works based on, incorporated in, derived from or relating to works covered by such copyrights, all right, title and interest to make and exploit all derivative works based on or adopted from works covered by such copyrights, and all copyright registrations and copyright applications, and any renewals or extensions thereof, including, without limitation, each copyright registration 3 and copyright application identified in Schedule III attached hereto and made a part hereof, and including, without limitation, (i) the right to print, publish and distribute any of the foregoing, (ii) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (iv) all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (the "Copyrights"); ---------- (d) all license agreements with any other person in connection with any of the Patents or Trademarks or Copyrights, or such other person's patents, trade names, trademarks or copyrights, whether such Grantor is a licensor or licensee under any such license agreement, in each case, to the extent such license agreements do not prohibit such Grantor from granting a security interest in its rights thereunder, including, without limitation, the license agreements listed on Schedule IV attached hereto and made a part hereof, and any right to prepare for sale, sell and advertise for sale, all Inventory (as defined in the Security Agreement) now or hereafter owned by such Grantor and now or hereafter covered by such licenses (the "Licenses"); -------- (e) confidential and proprietary information, including know-how, trade secrets, manufacturing and production processes and techniques, inventions, research and development information, technical data, financial, marketing and business data, pricing and cost information, business and marketing plans, and customer and supplier lists and information, and including, without limitation, (i) the right to sue or otherwise recover for any and all past, present and future misappropriations thereof, and (ii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future misappropriations thereof); provided, that such grant shall only be -------- effective to the extent the grant by such Grantor of a security interest pursuant to this Agreement in its right, title and interest in any of the foregoing is not prohibited by law, contract or otherwise without the consent of any person or would not give any other person the right to terminate its obligations with respect thereto (the "Trade Secrets"); and ------------- (f) all computer software programs and data bases (including source code, object code and all related applications and data files), firmware, and documentation and materials relating thereto, and all rights with respect to the foregoing, including, without limitation, any and all options, warranties, service contracts, program services, test rights, maintenance rights, improvement rights, renewal rights and indemnifications and any substitutions, replacements, additions or model conversions of any of the foregoing; 4 provided, that such grant shall only be effective to the extent the grant -------- by such Grantor of a security interest pursuant to this Agreement in its right, title and interest in any of the foregoing is not prohibited by law, contract or otherwise without the consent of any person or would not give any other person the right to terminate its obligations with respect thereto (the "Computer Software"). ----------------- Section 2. Security for Obligations. This Agreement secures the ------------------------ payment of all Obligations of each Grantor now or hereafter existing under the Loan Documents, whether for principal, interest, fees, expenses or otherwise (all such Obligations being the "Secured Obligations"). Without limiting the ------------------- generality of the foregoing, this Agreement secures the payment of all amounts that constitute part of the Secured Obligations and would be owed by such Grantor to the Secured Parties under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Grantor. Section 3. Grantors Remain Liable. Anything herein to the contrary ---------------------- notwithstanding, (a) each Grantor shall remain liable under the contracts and agreements included in the Intellectual Property Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Agent of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Intellectual Property Collateral and (c) no Secured Party shall have any obligation or liability under the contracts and agreements included in the Intellectual Property Collateral by reason of this Agreement or any other Loan Document, nor shall any Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. Section 4. Representations and Warranties. Each Grantor represents ------------------------------ and warrants as to itself and its Intellectual Property Collateral as follows: (a) Such Grantor is the legal, beneficial, sole and exclusive owner of the Intellectual Property Collateral free and clear of any Lien, except for the Liens permitted in the Loan Documents. No effective financing statement or other instrument similar in effect covering all or any part of the Intellectual Property Collateral is on file in any recording office, except such as may have been filed in favor of the Agent relating to this Agreement or as permitted in the Loan Documents. (b) Set forth in Schedule I hereto is a complete and accurate list as of the date hereof of all patents and all patent applications owned by such Grantor. Set forth in Schedule II hereto is a complete and accurate list as of the date hereof of all trademark and service mark registrations and all trademark and service mark applications owned by such Grantor. Set forth in Schedule III hereto is a complete and accurate list as of the date hereof of all copyright registrations and copyright applications owned by 5 such Grantor. Set forth in Schedule IV hereto is a complete and accurate list as of the date hereof of all Licenses owned by such Grantor in which such Grantor is (i) a licensor with respect to any of the Patents, Trademarks or Copyrights, or (ii) a licensee of any other person's patents, trade names, trademarks, or copyrights. (c) As of the date of this Agreement, each patent, patent application, trademark or service mark registration, trademark or service mark application, copyright registration and copyright application of such Grantor set forth in Schedules I, II and III is subsisting and has not been adjudged invalid, unregistrable or unenforceable, in whole or in part, and is valid, registrable and enforceable. As of the date of this Agreement, each License of such Grantor identified in Schedule IV is validly subsisting and has not been adjudged invalid or unenforceable, in whole or in part, and is valid and enforceable. Such Grantor has notified the Agent in writing of all uses of which it is aware, as of the date of this Agreement, of any item of Intellectual Property Collateral which could reasonably be expected to lead to such item becoming invalid or unenforceable, including unauthorized uses by third parties and uses which were not supported by the goodwill of the business connected with such Intellectual Property Collateral. (d) As of the date of this Agreement, such Grantor has not made a previous assignment, transfer or agreement constituting a present or future assignment, transfer or encumbrance of any of the Intellectual Property Collateral. As of the date of this Agreement, such Grantor has not granted any license (other than those listed on Schedule IV hereto), release, covenant not to sue, or non-assertion assurance to any person with respect to any part of the Intellectual Property Collateral. (e) Such Grantor has used its sound business judgment in utilizing statutory notice in a commercially reasonable manner in connection with its use of each patent, each registered trademark and registered service mark and each copyright contained in Schedules I, II and III. (f) Except to the extent set forth on Schedule 4.01(d) to the Credit Agreement, all filings and other actions necessary or desirable to perfect and preserve the security interest in the United States Intellectual Property Collateral created under this Agreement have been duly made or taken. This Agreement, together with such filings and other actions, upon the filing of financing and continuation statements under the Uniform Commercial Code and the recording of the security interest and lien provisions of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, creates a valid and perfected security interest in the Intellectual 6 Property Collateral, securing the payment of the Secured Obligations subject in priority only to the liens and security interests permitted in the Loan Documents. (g) Except to the extent set forth on Schedule 4.01(d) to the Credit Agreement, no consent of any Person and no authorization, 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 (i) for the grant by such Grantor of the assignment and security interest granted hereunder, for the pledge by such Grantor of the Intellectual Property Collateral pursuant hereto or for the execution, delivery or performance of this Agreement by such Grantor, (ii) for the perfection or maintenance of the pledge, assignment and security interest created hereunder (including the first priority nature of such pledge, assignment or security interest subject only to the liens and security interests permitted in the Loan Documents) or (iii) for the exercise by the Agent of its rights provided for in this Agreement or the remedies in respect of the Intellectual Property Collateral pursuant to this Agreement, in each case other than the filing of financing and continuation statements under the Uniform Commercial Code and the recording of the security interest and lien provisions of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office which shall be duly filed promptly following the execution of this Agreement. (h) Except for the Licenses set forth in Schedule IV and except as set forth in Schedule V hereto, as of the date of this Agreement, such Grantor has no knowledge of the existence of any right or any claim that is likely to be made by any third party relating to any item of Intellectual Property Collateral. (i) Except as set forth in Schedule V, as of the date of this Agreement, no claim has been made and is continuing or threatened that any item of Intellectual Property Collateral is invalid or unenforceable or that the use by such Grantor of any Intellectual Property Collateral does or may violate the rights of any Person. Except as set forth in Schedule V, as of the date of this Agreement, to the best of such Grantor's knowledge, there is no infringement or unauthorized use of any item of Intellectual Property Collateral. Section 5. Further Assurances. (a) Each Grantor agrees that from ------------------ time to time, at its own expense, it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary or customary that the Agent may request, in order to perfect and preserve any pledge, assignment or security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce its rights and remedies hereunder with respect to any Intellectual Property Collateral. Without limiting the generality of the foregoing, each Grantor will execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be reasonably necessary or customary as the Agent may request, in order to perfect and preserve the pledge, 7 assignment and security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce its rights and remedies hereunder with respect to the Intellectual Property Collateral. (b) Each Grantor hereby authorizes the Agent to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Intellectual Property Collateral without the signature of such Grantor where permitted by law upon which evidence of such filing shall be sent promptly to such Grantor. A photocopy or other reproduction of this Agreement or any financing statement covering the Intellectual Property Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (c) Each Grantor shall furnish to the Agent from time to time statements and schedules further identifying and describing the Intellectual Property Collateral and such other reports in connection with the Intellectual Property Collateral as the Agent may reasonably request, all in reasonable detail. (d) Each Grantor agrees that, should it obtain an ownership interest in any patent, patent application, patentable invention, trademark, service mark, trade name, trade dress, other indicia of trade origin, trademark or service mark registration, trademark or service mark application, copyright, work of authorship, copyright registration, copyright application or License, which is not now a part of the Intellectual Property Collateral, (i) the provisions of Section 1 will automatically apply thereto, and (ii) any such patent, patent application, patentable invention, trademark, service mark, trade name, trade dress, indicia of trade origin, trademark or service mark registration or trademark or service mark application (together with the goodwill of the business connected with the use of same and symbolized by same), copyright, work of authorship, copyright registration, copyright application or License will automatically become part of the Intellectual Property Collateral. Each Grantor shall provide to the Agent on a semi-annual basis, beginning on March 31, 2000, a written report indicating any ownership interest in any patent, patent application, trademark or service mark registration, trademark or service mark application, copyright registration or copyright application, or License that it should obtain (or License that it should grant) during the immediately previous six month period. Each Grantor authorizes the Agent to modify this Agreement by amending Schedules I, II, III, IV and V (and will cooperate with the Agent in effecting any such amendment) to include any patent, patent application, trademark or service mark registration, trademark or service mark application, copyright registration, copyright application or License which becomes part of the Intellectual Property Collateral under this Section. (e) With respect to each patent, patent application, trademark or service mark registration, trademark or service mark application, copyright registration, copyright application and License, each Grantor agrees to take all steps it deems necessary or appropriate, including, without limitation, in the United States Patent and Trademark Office, the United States 8 Copyright Office or in any court, to (i) maintain each such patent, trademark or service mark registration, copyright registration and License, and (ii) pursue each such patent application, trademark or service mark application, and copyright application now or hereafter included in the Intellectual Property Collateral, including, without limitation, the filing of responses to office actions issued by the United States Patent and Trademark Office and the United States Copyright Office, the filing of applications for renewal or extension, the filing of affidavits under Sections 8 and 15 of the United States Trademark Act, the filing of divisional, continuation, continuation-in-part and substitute applications, the filing of applications for re-issue, renewal or extensions, the payment of maintenance fees, and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation proceedings. Each Grantor agrees to take corresponding steps with respect to each new or acquired patent, patent application, trademark or service mark registration, trademark or service mark application, copyright registration, copyright application or License to which it is now or later becomes entitled. Any expenses incurred in connection with such activities will be borne by such Grantor. The Grantors shall not discontinue use of or otherwise abandon any patent, patent application, trademark or service mark registration, trademark or service mark application, copyright registration or copyright application now owned or hereafter acquired or filed, or abandon any right to file any application for any patent, trademark or copyright, unless the applicable Grantor shall have previously determined using its sound business judgment that such use or pursuit or maintenance of the same is no longer desirable in the conduct of such Grantor's business, in which case, such Grantor will give notice of any such abandonment or discontinuance to the Agent pursuant to the semi- annual reporting requirement contained in Section 5(d) above, provided that, in no event, shall such Grantor discontinue use or otherwise abandon any of the Intellectual Property Collateral now owned or hereafter acquired or filed, or abandon any right to file any application to obtain any Intellectual Property Collateral, if such act, either alone or in aggregation with other such acts, is reasonably expected to have a Material Adverse Effect. (f) Each Grantor agrees to notify the Agent promptly and in writing if it learns (i) that any item of the Intellectual Property Collateral has been determined to have become abandoned or dedicated or (ii) of any adverse determination or the institution of any proceeding (including, without limitation, the institution of any proceeding in the United States Patent and Trademark Office or any court) regarding any item of the Intellectual Property Collateral, and such abandonment, dedication, adverse determination or proceeding is reasonably expected to have a Material Adverse Effect. (g) In the event that any Grantor becomes aware that any of the patents, patent applications, trademark and service mark registrations, trademark and service mark applications, copyright registrations and copyright applications contained on Schedules I, II and III to this Agreement is infringed or misappropriated by a third party, such Grantor will promptly notify the Agent and will take such actions, if any, as such Grantor in its sound business judgment deems reasonable and appropriate under the circumstances to protect the same, including, without 9 limitation, suing for infringement or misappropriation and for an injunction against such infringement or misappropriation. Any expense incurred in connection with such activities will be borne by such Grantor. (h) Each Grantor will continue to use its sound business judgment in utilizing statutory notice in a commercially reasonable manner in connection with its use of each of its patents, registered trademarks and service marks, and copyrights contained in Schedules I, II and III. (i) Each Grantor will take all steps which it in its sound business judgment deems reasonable and appropriate under the circumstances to preserve and protect its Intellectual Property Collateral, including, without limitation, maintaining the quality of any and all products or services used or provided in connection with any of the registered trademarks or registered service marks contained on Schedule II hereto, consistent with sound business practices, and taking all steps it deems necessary or appropriate to ensure that all licensed users of any of such registered trademarks or registered service marks use such consistent standards of quality. Section 6. Transfers and Other Liens. Each Grantor agrees not (i) to ------------------------- sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Intellectual Property Collateral, except sales, assignments and dispositions otherwise permitted under Section 5.02(e) of the Credit Agreement or in Section 5(e) hereof, or (ii) to create or suffer to exist any Lien upon or with respect to any of the Intellectual Property Collateral except for the pledge, assignment and security interest created under this Agreement and the Liens permitted under Section 5.02(a) of the Credit Agreement. Section 7. Agent Appointed Attorney-in-Fact. Each Grantor hereby -------------------------------- irrevocably appoints the Agent such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, upon (i) the occurrence and during the continuance of an Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances and any amounts otherwise due and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances, and upon notice to such Grantor, to take any action and to execute any instrument that the Agent may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Intellectual Property Collateral, 10 (b) to receive, indorse and collect any drafts or other instruments, documents and chattel paper, in connection with clause (a) above, and (c) to file any claims or take any action or institute any proceedings that the Agent may deem reasonably necessary or desirable for the collection of any payments relating to any of the Intellectual Property Collateral or otherwise to enforce the rights of the Agent with respect to any of the Intellectual Property Collateral; provided that the Agent shall -------- act with reasonable care in the exercise of the foregoing; and provided, -------- further, that the Agent shall give such Grantor not less than ten Business ------- Days prior written notice of the time and place of any sale or other intended disposition of the Intellectual Property Collateral. Section 8. Agent May Perform. Upon and during the continuance of an ----------------- Event of Default, if any Grantor fails to perform any agreement contained herein, the Agent may itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by such Grantor under Section 11(b). Section 9. The Agent's Duties. The powers conferred on the Agent ------------------ hereunder are solely to protect its interest in the Intellectual Property Collateral and, beyond the exercise of reasonable care, shall not impose any duty upon it to exercise any such powers. Except for the safe custody of the certificates of registration for any of the Trademarks or Copyrights or the letters patent for any of the Patents in its possession and the accounting for moneys actually received by it hereunder, the Agent shall have no duty as to any Intellectual Property Collateral, whether or not the Agent or any other Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Intellectual Property Collateral, in each case, beyond the exercise of reasonable care. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of the certificates of registration for any of the Trademarks or Copyrights or the letters patent for any of the Patents in its possession if such certificates of registration and letters patent are accorded treatment substantially equal to that which it accords its own property. 11 Section 10. Remedies. If (i) any Event of Default shall have -------- occurred and be continuing and (ii) the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances due and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances shall have occurred: (a) The Agent may exercise in respect of the Intellectual Property Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of New York at such time (the "N.Y. Uniform Commercial Code") (whether or not ---------------------------- the N.Y. Uniform Commercial Code applies to the affected Intellectual Property Collateral), and also may (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Agent forthwith, assemble all or part of the documents and things embodying any part of the Intellectual Property Collateral as directed by the Agent (to the extent permitted by applicable law and without breach of the peace) and make them available to the Agent at a place and time to be designated by the Agent that is reasonably convenient to both parties and (ii) without notice except as specified below, sell the Intellectual Property Collateral or any part thereof in one or more parcels at public or private sale, at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Agent may deem commercially reasonable. In the event of any sale, assignment, or other disposition of any of the Intellectual Property Collateral, the goodwill of the business connected with and symbolized by any Trademarks subject to such disposition will be included, and each Grantor will supply to the Agent or its designee such Grantor's know-how and expertise, and the documents and things embodying the same, relating to the manufacture, distribution, advertising and sale of products or the provision of services relating to any Intellectual Property Collateral subject to such disposition, and such Grantor's customer lists and other records and documents relating to such Intellectual Property Collateral and to the manufacture, distribution, advertising and sale of such products and services. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale of Intellectual Property Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. 12 (b) All cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon, all or any part of the Intellectual Property Collateral shall be applied (after payment of any amounts payable to the Agent pursuant to Section 11) by the Agent for the ratable benefit of the Secured Parties against the Secured Obligations in such order as the Agent shall elect. Any surplus of such cash or cash proceeds held by the Agent and remaining after payment in full of all the Secured Obligations shall be paid over to the applicable Grantor or its successor or assigns, or as a court of competent jurisdiction may direct. (c) The Agent may exercise any and all rights and remedies of each Grantor in respect of the Intellectual Property Collateral. (d) All payments received by any Grantor under or in connection with any Intellectual Property Collateral shall be received in trust for the benefit of the Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Agent in the same form as so received (with any necessary endorsement). Section 11. Indemnity and Expenses. (a) Each Grantor agrees jointly ---------------------- and severally to indemnify the Secured Parties in connection with any claims, losses and liabilities resulting from this Agreement to the extent required by, and in accordance with the provisions of, Section 8.04(b) of the Credit Agreement as if such Grantor were a party to the Credit Agreement. (b) Each Grantor agrees jointly and severally to pay to the Agent such amounts of any fees and expenses incurred by the Agent in connection with the administration of the Agreement as is required by, and in accordance with the provisions of, Sections 8.04(a) and (b) of the Credit Agreement as if such Grantor were a party to the Credit Agreement. Section 12. Security Interest Absolute. The obligations of each -------------------------- Grantor under this Agreement are independent of the Secured Obligations, and a separate action or actions may be brought and prosecuted against any Grantor to enforce this Agreement. All rights of the Agent and the pledge, assignment and security interest hereunder, and all obligations of each Grantor hereunder, shall be absolute and unconditional, irrespective of: (i) any lack of validity or enforce ability of any Loan Document, any Bank Hedge Agreement or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document or any Bank Hedge Agreement, 13 including, without limitation, any increase in the Secured Obligations resulting from the extension of additional credit to any Grantor or any of its Subsidiaries or otherwise; (iii) any taking, exchange, release or non-perfection of any other collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations; (iv) any manner of application of collateral, or proceeds thereof, to all or any of the Secured Obligations, or any manner of sale or other disposition of any collateral for all or any of the Secured Obligations or any other assets of any Grantor or any of its Subsidiaries; (v) any change, restructuring or termination of the corporate structure or existence of any Grantor or any of its Subsidiaries; or (vi) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor or a third-party grantor of a security interest. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by any Secured Party or by any other Person upon the insolvency, bankruptcy or reorganization of any Loan Party or otherwise, all as though such payment had not been made. Section 13. Amendments; Waivers, Etc. (a) No amendment or waiver of ------------------------ any provision of this Agreement, and no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) No failure on the part of the Agent, any Lender Party or any Hedge Bank to exercise, and no delay in exercising, any right, power or privilege hereunder shall operate as a waiver thereof or consent thereto; nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. (c) Upon the execution and delivery by any Person of an intellectual property security agreement supplement in substantially the form of Exhibit A hereto (each an "Intellectual Property Security Agreement Supplement"), (i) such --------------------------------------------------- Person shall be referred to as an "Additional Grantor" and shall be and become a Grantor, and each reference in this Agreement to "Grantor" or "Grantors" shall also mean and be a reference to such Additional Grantor and (ii) the schedules attached to such Intellectual Property Security Agreement 14 Supplement shall be incorporated into and become a part of and supplement Schedules I through IV hereto, and the Agent may attach such Schedules as supplements to such Schedules, and each reference to such Schedules shall mean and be a reference to such Schedules, as supplemented pursuant hereto. (d) Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Supplement or Schedule hereto shall be effective as delivery of a manually executed counterpart thereof. Section 14. Addresses for Notices. All notices and other --------------------- communications provided for hereunder shall be in writing (including telecopier or telegraphic communication) and mailed, telecopied, telegraphed, cabled or delivered, if to a Grantor, c/o Better Minerals & Aggregates Company, Route 522 North, P.O. Box 187, Berkeley Springs, WV 25411, Attention: Chief Financial Officer, telecopier number (304) 258-3500, and if to the Agent, any Lender Party, the Issuing Bank or any Hedge Bank, addressed to it at its address set forth in Section 8.02 of the Credit Agreement, or, as to any party at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section 14. All such notices and other communications shall, when mailed, telecopied or telegraphed, be effective when received by the addressee. Section 15. Continuing Security Interest, Assignments under the --------------------------------------------------- Credit Agreement. This Agreement shall create a continuing security interest in - ---------------- the Intellectual Property Collateral and shall (a) remain in full force and effect until the latest of the payment in full in cash of the Secured Obligations constituting an Advance or other Secured Obligations then due and payable, the Termination Date and the termination or expiration of all Bank Hedge Agreements or as otherwise permitted thereunder, (b) be binding upon each Grantor, its successors and assigns and (c) inure, together with the rights and remedies of the Agent hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in Section 8.07 of the Credit Agreement. Section 16. Release and Termination. (a) Upon any sale, lease, ----------------------- transfer or other disposition of any item of Intellectual Property Collateral in accordance with the terms of the Loan Documents, the Agent will, at the applicable Grantor's expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the release of such item of Intellectual Property Collateral from the assignment and security interest granted hereby; provided, however, that (i) at the time of such request and such -------- ------- release, no Event of Default shall 15 have occurred and be continuing, (ii) except to the extent such sale, lease or transfer or other disposition is permitted under Section 5.02(e) of the Credit Agreement, such Grantor shall have delivered to the Agent, at least ten Business Days prior to the date of the proposed release, a written request for release describing the item of the Intellectual Property Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including, without limitation, the price thereof and any expenses in connection therewith, together with a form of release for execution by the Agent and a certification by such Grantor to the effect that the transaction is in compliance with the Loan Documents and as to such other matters as the Agent may reasonably request and (iii) the proceeds of any such sale, lease, transfer or other disposition required to be applied in accordance with Section 2.07 of the Credit Agreement shall be paid to, or in accordance with the instructions of, the Agent at the closing. (b) Upon the latest of the payment in full in cash of the Secured Obligations constituting an Advance or other Secured Obligations then due and payable, the Termination Date and the termination or expiration of all Bank Hedge Agreements, the pledge, assignment and security interest granted hereby shall terminate and all rights to the Intellectual Property Collateral shall revert to the Grantors. Upon any such termination, the Agent will, at the Grantors' expense, execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination and promptly release and return the Intellectual Property Collateral in its possession. Section 17. 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 18. Governing Law, Submission to Jurisdiction, Waiver of Jury --------------------------------------------------------- Trial; Etc. (a) This Agreement shall be governed by and construed in accordance - ---------- with the laws of the State of New York, except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Intellectual Property Collateral are governed by the laws of a jurisdiction other than the State of New York. Unless otherwise defined herein or in the Credit Agreement, terms used in Article 9 of the Code are used herein as therein defined. (b) Each Grantor 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 any other Loan Document or Bank Hedge Agreement to which it is or is to be a party, or for recognition and 16 enforcement of any judgment, and each Grantor 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 or, to the extent permitted by law, in such federal court. Each Grantor irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection or defense 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 any of the other Loan Documents to which it is or is to be a party in any New York State or federal court. Each Grantor 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. Each Grantor 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 herein shall affect the right that any party may otherwise have to commence or participate in any action, suit or proceeding relating to this Agreement, any of the other Loan Documents or any Bank Hedge Agreement to which it is or is to be a party, or otherwise proceed against any Grantor, in any other jurisdiction. (c) Each Grantor irrevocably consents to the service of any and all process in any such action, suit or proceeding at the address set forth below its name on the signature page hereof by any method permitted by law. (d) To the extent that any Grantor has or hereafter may acquire immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such Grantor hereby irrevocably waives such immunity in respect of its Obligations under this Agreement, any other Loan Document and any Bank Hedge Agreement to which it is or is to be a party. (e) Each Grantor 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, any other Loan Document or any Bank Hedge Agreement, the transactions contemplated hereby or thereby or the actions of the Agent, any Lender Party or any Hedge Bank in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. BETTER MINERALS & AGGREGATES COMPANY 17 By: /s/ Richard Nick -------------------------------- Name: Richard Nick Title: Vice President PENNSYLVANIA GLASS SAND CORPORATION By: /s/ Richard Nick -------------------------------- Name: Richard Nick Title: Vice President THE FULTON LAND AND TIMBER COMPANY By: /s/ Richard Nick -------------------------------- Name: Richard Nick Title: Vice President OTTAWA SILICA COMPANY By:________________________________ Name: Title: GEORGE F. PETTINOS, INC. By: /s/ Richard Nick -------------------------------- Name: Richard Nick Title: Vice President ELLEN JAY, INC. By: /s/ Richard Nick -------------------------------- 18 Name: Richard Nick Title: Vice President U.S. SILICA COMPANY By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President BETTER MATERIALS CORPORATION By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President BMC TRUCKING, INC. By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President BUCKS COUNTY CRUSHED STONE COMPANY By: /s/ Richard Nick ------------------------------- Name: Richard Nick Title: Vice President CHIPPEWA FARMS CORPORATION By: /s/ Richard Nick ------------------------------- Name: Richard Nick 19 Title: Vice President SHORE STONE COMPANY, INC. By: /s/ Richard Nick --------------------------------- Name: Richard Nick Title: Vice President COMMERCIAL STONE CO., INC. By: /s/ Richard Nick --------------------------------- Name: Richard Nick Title: Vice President STONE MATERIALS COMPANY, LLC By: Better Minerals & Aggregates Company, as Manager By: /s/ Richard Nick --------------------------------- Name: Richard Nick Title: Vice President COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, LLC By: Stone Materials Company, LLC, as Manager By: /s/ Richard Nick --------------------------------- Name: Richard Nick Title: Vice President 20 BANQUE NATIONALE DE PARIS, as Agent By: /s/ Paul Barnes ---------------------- Name: Title: AVP EXHIBITA to Intellectual Property Security Agreement FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT ________ ____, _________ Banque National de Paris, New York Branch, as Agent 499 Park Avenue New York, New York 10022 Attention: Intellectual Property Security Agreement dated as of September 30, 1999 among Better Minerals & Aggregates Company and additional grantors named therein, as Grantors, and Banque Nationale de Paris, as Agent Ladies and Gentlemen: Reference is made to the above-captioned Intellectual Property Security Agreement (as amended, supplemented or otherwise modified from time to time, the "Security Agreement"). Unless otherwise defined herein, terms defined in the ------------------ Security Agreement are used herein as therein defined. The undersigned hereby agrees, as of the date first above written, to become a Grantor under the Security Agreement as if it were an original party thereto and agrees that each reference in the Security Agreement to a "Grantor" or the "Grantors" shall also mean and be a reference to the undersigned. The undersigned hereby assigns and pledges to the Agent for its benefit and the ratable benefit of the Secured Parties and hereby grants to the Agent for its benefit and the ratable benefit of the Secured Parties as collateral for the Secured Obligations a pledge and assignment of, and a security interest in, all of the right, title and interest of the undersigned in and to its Intellectual Property Collateral, whether now owned or hereafter acquired. The undersigned has attached hereto supplements to Schedules I through IV to the Security Agreement, and the undersigned hereby certifies that such supplements have been prepared by the undersigned in substantially the form of the Schedules to the Security Agreement and are accurate and complete as of the date first above written. The undersigned hereby makes each representation and warranty set forth in Section 4 of the Security Agreement as to itself and as to its Intellectual Property Collateral to the same extent as each other Grantor and hereby agrees to be bound as a Grantor by all of the terms and provisions of the Security Agreement to the same extent as any other Grantor. This letter shall be governed by and construed in accordance with the laws of the State of New York. Very truly yours, [NAME OF ADDITIONAL GRANTOR] By _______________________________ Name: Title: Address: EX-10.7 62 PARENT GUARANTOR SECURITY AGREEMENT EXHIBIT 10.7 EXECUTION COPY PARENT GUARANTOR SECURITY AGREEMENT Dated as of September 30, 1999 Between BMAC HOLDINGS, INC., as Guarantor, ------------ and BANQUE NATIONALE DE PARIS, as Agent -------- T A B L E O F C O N T E N T S - - - - - - - - - - - - - - -
SECTION Page SECTION 1. Grant of Security....................... 1 SECTION 2. Incorporation of Security Agreement..... 2 Schedule I - Pledged Shares
i PARENT GUARANTOR SECURITY AGREEMENT PARENT GUARANTOR SECURITY AGREEMENT, dated as of September 30, 1999, made by BMAC Holdings, Inc., a Delaware corporation (the "Guarantor"), to Banque --------- Nationale de Paris ("BNP"), as agent (together with any successor agent --- appointed pursuant to Article VII of the Credit Agreement (as hereinafter defined), the "Agent") for the Lender Parties (as defined in the Credit ----- Agreement). PRELIMINARY STATEMENTS. (1) Better Minerals & Aggregates Company, a Delaware corporation formerly known as "USS Intermediate Holdco, Inc." (the "Borrower"), the Guarantor and -------- George F. Pettinos (Canada) Limited, a corporation organized and existing under the laws of Ontario, Canada (the "Canadian Borrower"), have entered into a ----------------- Credit Agreement dated as of September 30, 1999 (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement"; the terms defined therein and not otherwise ---------------- defined herein being used herein as therein defined) with certain Lender Parties party thereto and Banque Nationale de Paris, as Agent for such Lender Parties and as Swing Line Bank and Initial Issuing Bank. (2) The Guarantor is the owner of the shares (the "Pledged Shares") of -------------- stock described in Schedule I hereto and issued by the corporations named therein. (3) It is a condition precedent to the making of Advances and Drawings and the issuance of Letters of Credit by the Lender Parties and the entry by the Hedge Banks into the Bank Hedge Agreements with the Loan Parties under the Credit Agreement that the Guarantor shall have executed and delivered this Parent Guarantor Security Agreement. NOW, THEREFORE, in consideration of the premises and in order to induce the Lender Parties to make Advances and Drawings and to issue Letters of Credit under the Credit Agreement and to induce the Hedge Banks to enter into Bank Hedge Agreements with the Loan Parties from time to time, the Guarantor hereby agrees with the Agent for the ratable benefit of the Secured Parties as follows: Section 1. Grant of Security. The Guarantor hereby assigns and ----------------- pledges to the Agent for the ratable benefit of the Secured Parties, and hereby grants to the Agent for the ratable benefit of the Secured Parties a security interest in, the following, in each case, as to each type of property described below, whether now owned or hereafter acquired, wherever located and whether now or hereafter existing (collectively, the "Collateral"): ---------- (a) all of the following (the "Security Collateral"): ------------------- (i) the Pledged Shares and the certificates representing the Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; (ii) all additional shares of stock from time to time acquired by the Guarantor in any manner, and the certificates representing such additional shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares; and (b) all proceeds of any and all of the foregoing Collateral (including, without limitation, proceeds that constitute property of the types described in clause (a) of this Section 1) and, to the extent not otherwise included, all (i) payments under insurance (whether or not the Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral and (ii) cash. Section 2. Incorporation of Security Agreement. The Guarantor and ----------------------------------- the Agent hereby agree that Sections 2 through 29 of the Security Agreement as in effect on the date hereof (including all cross-referenced sections and definitions to the extent necessary) are hereby incorporated into this Agreement by this reference and for all purposes have the same effect as if set forth in full in this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. BMAC HOLDINGS, INC. By: /s/ Richard Nick --------------------------- Name: Richard Nick Title: Vice President BANQUE NATIONALE DE PARIS, as Agent By: /s/ Richard Cushing -------------------------- Name: Title: Director By: /s/ Paul Barnes -------------------------- Name: Title: AVP Schedule I PLEDGED SHARES
- -------------------------------------------------------------------------------------------------- Percentage of Stock Certificate Number Outstanding Stock Issuer Class of Stock Par Value No(s) of Shares Shares - -------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------- ==================================================================================================
EX-10.8 63 CANADIAN SECURITY AGREEMENT, DATED 09/15/99 EXHIBIT 10.8 EXECUTION COPY CANADIAN SECURITY AGREEMENT Dated as of September 30, 1999 From GEORGE F. PETTINOS (CANADA) LIMITED, as Debtor, to BANQUE NATIONALE DE PARIS (CANADA), as Canadian Sub-Agent for the Canadian Lenders TABLE OF CONTENTS
Page ---- ARTICLE I SECURITY 1.1 Terms Incorporated by Reference......................................... 1 1.2 Grant of Security....................................................... 1 1.3 Obligations Secured..................................................... 2 1.4 Attachment.............................................................. 2 1.5 Accounts................................................................ 3 1.6 Scope of Security Interest.............................................. 3 1.7 Care and Custody of Collateral.......................................... 3 1.8 Debtor's Dealings with Collateral....................................... 4 1.9 Insurance............................................................... 4 1.10 Leases.................................................................. 5 ARTICLE II ENFORCEMENT 2.1 Default................................................................. 5 2.2 Remedies................................................................ 5 2.3 Additional Rights....................................................... 6 2.4 Concerning the Receiver................................................. 7 2.5 Appointment of Attorney................................................. 7 2.6 Dealing with the Collateral and the Security Interest................... 7 2.7 Standards of Sale....................................................... 8 2.8 Dealings by Third Parties............................................... 8 2.9 Indemnity and Expenses.................................................. 8 ARTICLE III GENERAL 3.1 Release and Discharge................................................... 9 3.2 No Merger, Etc.......................................................... 9 3.3 Waivers, Etc............................................................ 9 3.4 Further Assurances......................................................10 3.5 Successors and Assigns..................................................10 3.6 Headings, Etc...........................................................10 3.7 Severability............................................................10 3.8 Governing Law...........................................................10
Schedule I - Intellectual Property Schedule II - Collateral Locations Schedule III - Deposit Accounts Schedule IV - Financing Statements i CANADIAN SECURITY AGREEMENT Canadian Security Agreement dated as of September 30, 1999 made by George F. Pettinos (Canada) Limited (the "Debtor"), a corporation duly ------ incorporated under the laws of Ontario, Canada, to and in favor of Banque Nationale de Paris (Canada), as Canadian Sub-Agent (the "Sub-Agent") pursuant to --------- a Credit Agreement dated as of September 30, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"; unless otherwise ---------------- defined herein, the terms used herein and not otherwise defined herein having the respective meanings set forth in the Credit Agreement) by and among Better Minerals & Aggregates Company, a Delaware corporation formerly known as "USS Intermediate Holdco, Inc.", as Borrower, the Debtor, as Canadian Borrower, BMAC Holdings, Inc., the Initial Lenders named therein, and Banque Nationale de Paris, as Agent, Swing Line Bank and Initial Issuing Bank. WHEREAS, the Canadian Lenders will either make a Canadian Borrower Advance or accept Bankers' Acceptances (collectively, the "Advances") as -------- provided in the Credit Agreement; and WHEREAS, the Debtor has agreed to execute and deliver this security agreement to and in favour of the Sub-Agent, for the benefit of the Canadian Lenders as security for the payment and performance of the obligations, present or future, direct or indirect, absolute or contingent, matured or unmatured, of the Debtor to the Canadian Lenders pursuant to the Credit Agreement; NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Debtor hereby agrees with the Sub-Agent for the benefit of the Canadian Lenders as follows: ARTICLE I SECURITY 1.1 Terms Incorporated by Reference. Terms defined in the Personal Property Security Act (Ontario) (as amended from time to time, the "PPSA") and ---- used in this security agreement shall have the same meaning herein. 2 1.2 Grant of Security. (1) Subject to Section 1.6, the Debtor hereby (i) mortgages and charges to the Sub-Agent, for the benefit of the Canadian Lenders, as and by way of a fixed mortgage and charge; (ii) pledges to the Sub-Agent, for the benefit of the Canadian Lenders; (iii) assigns and transfers to the Sub-Agent, for the benefit of the Canadian Lenders, as and by way of a specific transfer and assignment; and (iv) grants to the Sub-Agent, for the benefit of the Canadian Lenders, a security interest in all of the Debtor's right, title and interest in and to the personal property and undertaking of the Debtor now owned or hereafter acquired (collectively, the "Collateral"), ---------- including, without limitation, any and all of the Debtor's: (a) inventory, including goods held for sale or lease, goods furnished or to be furnished to third parties under contracts of lease, consignment or service, goods which are raw materials or work in process, goods used in or procured for packing, and materials used or consumed in the business of the Debtor (collectively, the "Inventory"); --------- (b) equipment, fixtures and other goods of every kind and description, all licenses and other rights and all records, files, charts, plans, drawings, specifications, manuals and comments relating thereto (collectively, the "Equipment"); --------- (c) accounts, due or accruing, and all agreements, books, accounts, invoices, letters, documents and papers recording, evidencing or relating thereto; (d) deposit accounts, including, without limitation, the Deposit Accounts and the Canadian Cash Collateral Account (as such terms are hereinafter defined), all funds held therein and all certificates and instruments, if any, from time to time, representing any such deposit accounts, together with all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such deposit accounts; (e) money, documents of title, chattel paper, instruments and securities; (f) intangibles including all security interests, goodwill, choses in action and other contractual benefits (including, without limitation, all benefits under insurance policies and any hedge agreements) and all trade marks, trade mark registrations and pending trade mark applications, patents and pending patent applications and copyrights and other intellectual property (collectively, the "Intellectual Property") including --------------------- the Intellectual Property described in Schedule I hereto; (g) substitutions and replacements of and increases, additions and, where applicable, accessions to the property described in Sections 1.2(l)(a)-(f) inclusive; and (h) proceeds in any form derived directly or indirectly from any dealing with all or any part of the property described in Sections 1.2(l)(a)-(g) inclusive or the proceeds therefrom. (2) Without limiting the generality of the foregoing, the Collateral shall include all personal property of the Debtor now or hereafter located on or about or in transit to or 3 from the locations set out in Schedule II hereto. The Debtor shall promptly inform the Sub-Agent in writing of any other location at which the Collateral consisting of tangible personal property may in the future be located. 1.3 Obligations Secured. The mortgages, charges, pledges, transfers, assignments and security interest granted hereby (collectively, the "Security --------- Interest") by the Debtor secure payment to the Canadian Lenders and - --------- performance of all Obligations of the Debtor now or hereafter existing under or in respect of the Loan Documents, whether direct or indirect, absolute or contingent, matured or unmatured, at any time due or accruing, owing by the Debtor to the Canadian Lenders pursuant to the Credit Agreement. 1.4 Attachment. (1) The Debtor and the Sub-Agent hereby acknowledge that (i) value has been given; (ii) the Debtor has rights in the Collateral; (iii) they have not agreed to postpone the time of attachment of the Security Interest; and (iv) the Debtor has received a duplicate original copy of this security agreement. (2) If at any time the Debtor acquires Collateral consisting of chattel paper, instruments, securities or negotiable documents of title (collectively, "Negotiable Collateral"), the Debtor will, forthwith upon receipt --------------------- by the Debtor, deliver to the Sub-Agent, for the benefit of the Canadian Lenders, such Negotiable Collateral and shall, at the request of the Sub-Agent, (i) cause the transfer thereof to the Sub-Agent to be registered wherever, in the reasonable opinion of the Sub-Agent, such registration may be required or advisable; (ii) duly endorse the same for transfer in blank or as the Sub-Agent may reasonably direct; and (iii) forthwith deliver to the Sub-Agent any and all consents or other instruments or documents which may be necessary to effect the transfer of the Negotiable Collateral to the Sub-Agent or any third party. 1.5 Accounts. So long as any Advance shall remain outstanding under the Credit Agreement, the Debtor shall maintain deposit accounts in the Province of Ontario ("Deposit Accounts") only with banks that are listed on ---------------- Schedule III (as such Schedule may be amended or supplemented from time to time) and shall maintain with one of the banks listed on Schedule III a concentration account into which all cash receipts and from which all cash disbursements of its business in the normal course shall flow (the "Canadian Cash Collateral ------------------------ Account"). - ------- 1.6 Scope of Security Interest. (1) To the extent that the creation of the Security Interest would constitute a breach or permit the acceleration of any agreement, right, license or permit to which the Debtor is a party, the Security Interest shall not attach thereto but the Debtor shall hold its interest therein in trust for the Sub-Agent and the Canadian Lenders, and shall assign such agreement, right, license or permit to the Sub-Agent, for the benefit of the Canadian Lenders, or as it may direct forthwith upon obtaining the consent of the other party thereto. 4 (2) Subject to Section 2.2, the grant of the Security Interest in the Intellectual Property shall not affect in any way the Debtor's rights to commercially exploit the Intellectual Property, to defend the Intellectual Property, to enforce the Debtor's rights therein or with respect thereto against third parties in any court or to the claim and be entitled to receive any damages with respect to any infringement thereof. 1.7 Care and Custody of Collateral. (1) The Sub-Agent shall not be bound to collect, dispose of, realize, protect or enforce any of the Debtor's right, title and interest in and to the Collateral or to institute proceedings for the purpose thereof and, without limiting the generality of the foregoing, the Sub-Agent shall not be required to take any steps necessary to preserve rights against prior parties in respect of any Negotiable Collateral. (2) The Sub-Agent shall not have any obligation to keep Collateral in its possession identifiable. (3) The Sub-Agent may, at any time upon (a) the occurrence and during the continuance of an Event of Default and (b) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the "Advances" under and as defined therein due and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Debtor to pay amounts in respect of Bankers' Acceptances (i) notify any person obligated on an account or on chattel paper or any obligor on an instrument to make payment thereunder to the Sub-Agent whether or not the Debtor was theretofore making collections thereon; and (ii) assume control of any proceeds arising from the Collateral. 1.8 Debtor's Dealings with Collateral. (1) The Debtor shall not, without the prior written consent of the Sub-Agent, sell, exchange, lease, release or abandon or otherwise dispose of the Collateral except as permitted under the Credit Agreement. (2) The Debtor represents and warrants as follows: (a) All of the Equipment and Inventory are located on or about or in transit to or from the locations specified in Schedule II hereto. (b) The Debtor is the legal and beneficial owner of the Collateral free and clear of any Liens, except for the Liens permitted in the Loan Documents and for the security interests created by this security agreement. Except for the Financing Statements listed on Schedule IV hereto, no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed in favour of the Sub- Agent, for the benefit of the Canadian 5 Lenders, relating to this security agreement or as otherwise permitted in the Loan Documents. (c) Except to the extent located on or in leased property or subject to operating leases, the Debtor has exclusive possession and control of the Equipment and Inventory other than Inventory in transit to the Debtor from locations outside Canada. (d) This security agreement creates a valid security interest in the Collateral of the Debtor, securing the payment of the Obligations of the Debtor. 1.9 Insurance. (1) The Debtor shall, at its own expense, maintain insurance in accordance with Section 5.01(d) of the Credit Agreement. Each policy for liability insurance shall provide for all losses to be paid on behalf of the Sub-Agent and the Debtor as their interests may appear, and each policy for property damage insurance shall provide for all losses to be paid directly to the Sub-Agent, for the ratable benefit of the Canadian Lenders. Each such policy shall in addition (i) name the Debtor and the Sub-Agent as insured parties thereunder (without any representation or warranty by or obligation upon the Sub-Agent) as their interests may appear, (ii) contain the agreement by the insurer that any loss thereunder with respect to damage to the Debtor's property in an amount in excess of $500,000 shall be payable to the Sub-Agent notwithstanding any action, inaction or breach of representation or warranty by the Debtor, (iii) provide that there shall be no recourse against the Sub-Agent for payment of premiums or other amounts with respect thereto and (iv) provide that at least ten days' prior written notice of cancellation or of lapse shall be given to the Sub-Agent by the insurer. The Debtor shall, as often as the Sub-Agent reasonably requests, deliver to the Sub-Agent original or duplicate policies of such insurance. Further, the Debtor shall, at the reasonable request of the Sub-Agent, duly execute and deliver instruments of assignment of such insurance policies to comply with the requirements of Section 3.4 and use reasonable efforts to cause the insurers to acknowledge notice of such assignment. (2) Reimbursement under any liability insurance maintained by the Debtor pursuant to this Section 1.9 may be paid directly to the Person who shall have incurred liability covered by such insurance. In case of any loss involving damage to Equipment or Inventory when Section 1.9(3) is not applicable, the Debtor shall be permitted to use any proceeds to make or cause to be made the necessary repairs to or replacements or substitutions of or additions to such Equipment, Inventory, fixed assets, real property or improvements relating to property covered by such payments (replacements or substitutions to be of such same type of property), and any proceeds of insurance maintained by the Debtor pursuant to this Section 1.9 shall be paid and applied pursuant to the terms of the Credit Agreement. (3) Upon (i) the occurrence and during the continuance of any Event of Default and (ii) either the making of the request or the granting of the consent specified in Section 6.01 of the Credit Agreement to authorize the Agent to declare the "Advances" under and 6 as defined therein due and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Debtor to pay amounts in respect of Bankers' Acceptances, all insurance payments in respect of such Equipment or Inventory shall be paid to and applied by the Sub-Agent as specified in Section 2.2. 1.10 Leases. The last day of the term of any lease, oral or written, or any agreement therefor, now held or hereafter acquired by the Debtor shall be excepted from the Security Interests and shall not form part of the Collateral but the Debtor shall stand possessed of such one day remaining upon trust to assign and dispose of the same as the Sub-Agent directs. If any such lease or agreement therefor entered into by the Debtor in the ordinary course of business of such Debtor contains a provision which provides in effect that such lease or agreement may not be assigned, sub-leased, charged or made the subject of any encumbrance without the consent of the lessor, the application of the Security Interests to any such lease or agreement shall be conditional upon such consent being obtained. ARTICLE II ENFORCEMENT 2.1 Default. The Security Interest shall be and become enforceable against the Debtor upon (i) the occurrence and during the continuance of an Event of Default and (ii) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the "Advances" under and as defined therein due and payable pursuant to the provisions of such Section 6.01 or the making of the demand specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Debtor to pay amounts in respect of Bankers' Acceptances. 2.2 Remedies. Whenever the Security Interest has become enforceable, the Sub-Agent may, for the benefit of the Canadian Lenders, realize upon the Collateral and enforce the rights of the Sub-Agent and the Canadian Lenders by: (a) entry onto any premises where Collateral consisting of tangible personal property may be located; (b) taking possession of the Collateral by any method permitted by law; (c) sale or lease of the Collateral; (d) collection of any proceeds arising in respect of the Collateral; 7 (e) collection, realization or sale of or other dealing with the accounts; (f) the appointment by instrument in writing of a receiver (which term as used in this security agreement includes a receiver and manager) or agent of the Collateral; (g) the institution of proceedings in any court of competent jurisdiction for the appointment of a receiver of the Collateral; (h) the institution of proceedings in any court of competent jurisdiction for sale or foreclosure of the Collateral; (i) filing proofs of claim and other documents to establish claims in any proceeding relating to the Debtor; and (j) any other remedy or proceeding authorized or permitted under the PPSA or otherwise by law or equity. Such remedies may be exercised from time to time separately or in combination and are in addition to and not in substitution for any other rights of the Sub- Agent and the Canadian Lenders however created. Neither the Sub-Agent nor any Canadian Lender shall be bound to exercise any such right or remedy, and the exercise of such rights and remedies shall be without prejudice to the rights of the Sub-Agent or any Canadian Lender in respect of the Obligations including the right to claim for any deficiency. 2.3 Additional Rights. In addition to the remedies of the Sub- Agent and the Canadian Lenders set forth in Section 2.2, the Sub-Agent may, whenever the Security Interest has become enforceable, (a) require the Debtor, at the Debtor's expense, to assemble the Collateral at a place or places designated by notice in writing given by the Sub-Agent to the Debtor; (b) require the Debtor, by notice in writing given by the Sub-Agent to the Debtor, to disclose to the Sub-Agent the location or locations of the Collateral; (c) repair, process, modify, complete or otherwise deal with the Collateral and prepare for the disposition of the Collateral, whether on the premises of the Debtor or otherwise; (d) carry on all or any part of the business or businesses of the Debtor and, to the exclusion of all others including the Debtor, enter upon, occupy and use all of any of the premises, buildings, plant, undertaking and other property of or used by the Debtor for such time as the Sub-Agent sees fit, free of charge, and neither the Sub-Agent nor any 8 Canadian Lender shall be liable to the Debtor for any act, omission or negligence in so doing or for any rent, charges, depreciation or damages incurred in connection therewith or resulting therefrom; (e) borrow for the purpose of carrying on the business of the Debtor or for the maintenance, preservation of protection of the Collateral and mortgage, charge, pledge or grant a security interest in the Collateral, whether or not in priority to the Security Interest, to secure repayment; and (f) demand, commence, continue or defend any judicial or administrative proceedings for the purpose of protecting, seizing, collecting, realizing or obtaining possession or payment of the Collateral, and give valid and effectual receipts and discharges therefor and compromise or give time for the payment or performance of all or any part of the accounts or any other obligation of any third party to the Debtor. 2.4 Concerning the Receiver. (1) Any receiver appointed by the Sub-Agent, for the benefit of the Canadian Lenders, shall be vested with the rights and remedies which could have been exercised by the Sub-Agent or the Canadian Lenders in respect of the Debtor or the Collateral and such other powers and discretions as are granted in the instrument of appointment and any instrument or instruments supplemental thereto. The identity of the receiver, any replacement thereof and any remuneration thereof shall be within the sole and unfettered discretion of the Sub-Agent. (2) Any receiver appointed by the Sub-Agent for the benefit of the Canadian Lenders shall act as agent for the Sub-Agent for the purposes of taking possession of the Collateral, but otherwise and for all other purposes (except as provided below), as agent for the Debtor. The receiver may sell, lease, or otherwise dispose of Collateral as agent for the Debtor or as agent for the Sub- Agent, for the benefit of the Canadian Lenders, as the Sub-Agent may determine in its discretion. The Debtor agrees to ratify and confirm all actions of the receiver acting as agent for the Debtor, and to release and indemnify the receiver in respect of all such actions. (3) The Sub-Agent, in appointing or refraining from appointing any receiver, shall not incur liability to the receiver, the Debtor or otherwise and shall not be responsible for any misconduct or negligence of such receiver. 2.5 Appointment of Attorney. The Debtor hereby irrevocably appoints the Sub-Agent (and any officer thereof) as attorney of the Debtor (with full power of substitution) upon (i) the occurrence and during the continuance of an Event of Default and (ii) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the "Advances" under and as defined therein due and payable pursuant to the provisions of such Section 6.01 or the making of the demand 9 specified in Section 6.02 of the Credit Agreement to require the Borrower to pay amounts in respect of Letters of Credit or the Debtor to pay amounts in respect of Bankers' Acceptances, to exercise in the name of and on behalf of the Debtor any of the Debtor's right (including the right of disposal), title and interest in and to the Collateral including the execution, endorsement and delivery of any agreements, documents, instruments, securities, documents of title and chattel paper and any notices, receipts, assignments or verifications of the accounts. All acts of any such attorney are hereby ratified and approved, and such attorney shall not be liable for any act, failure to act or any other matter or thing in connection therewith, except for its own negligence or wilful misconduct. 2.6 Dealing with the Collateral and the Security Interest . (1) The Sub-Agent, for the benefit of the Canadian Lenders, shall not be obliged to exhaust its recourse against the Debtor or any other Person or Persons or against any other security it may hold in respect of the Obligations before realizing upon or otherwise dealing with the Collateral in such manner as the Sub-Agent may consider desirable. (2) The Sub-Agent may grant extensions or other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the Debtor and with other parties, sureties or securities as the Sub-Agent may see fit without prejudice to the Obligations or the rights of the Sub-Agent and the Canadian Lenders in respect of the Collateral. (3) Subject to section 2.7, the Sub-Agent shall not be (i) liable or accountable for any failure to collect, realize or obtain payment in respect of the Collateral; (ii) bound to institute proceedings for the purpose of collecting, enforcing, realizing or obtaining payment of the Collateral or for the purpose of preserving any rights of the Sub-Agent, the Canadian Lenders, the Debtor or any other parties in respect thereof; (iii) responsible for any loss occasioned by any sale or other dealing with the Collateral or by the retention of or failure to sell or otherwise deal therewith; or (iv) bound to protect the Collateral from depreciating in value or becoming worthless. 2.7 Standards of Sale. Without prejudice to the ability of the Sub-Agent to dispose, for the benefit of the Canadian Lenders, of the Collateral in any manner which is commercially reasonable, the Debtor acknowledges that a disposition of Collateral by the Sub-Agent which takes place substantially in accordance with the following provisions shall be deemed to be commercially reasonable: (a) Collateral may be disposed of in whole or in part; (b) Collateral may be disposed of by public auction, public tender or private contract, with or without advertising and without any other formality; 10 (c) any purchaser or lessee of such Collateral may be a customer of the Sub-Agent or any Canadian Lender or a permitted assignee hereunder, provided that the Collateral is purchased or leased by such customer on the basis of fair market value with regard to existing circumstances; (d) a disposition of Collateral may be on such terms and conditions as to credit or otherwise as the Sub-Agent, in its sole discretion, may deem advantageous; and (e) the Sub-Agent may establish an upset or reserve bid or price in respect of the Collateral; but in no event shall any sale of Collateral be inconsistent with the standards that are generally used by reasonable persons in dispositions of like Collateral. 2.8 Dealings by Third Parties. No person dealing with the Sub- Agent or its agent or a receiver shall be required (i) to determine whether the Security Interest has become enforceable; (ii) to determine whether the powers which the Sub-Agent or its agent is purporting to exercise have become exercisable; (iii) to determine whether any money remains due to the Sub-Agent by the Debtor; (iv) to determine the necessity or expediency of the stipulations and conditions subject to which any sale or lease shall be made; (v) to determine the propriety or regularity of any sale or of any other dealing by the Sub-Agent with the Collateral; or (vi) to see to the application of any money paid to the Sub-Agent. 2.9 Indemnity and Expenses. (1) Subject to Section 2.13(g) of the Credit Agreement, the Debtor agrees to indemnify the Sub-Agent and each Canadian Lender in connection with any claims, losses and liabilities resulting from this security agreement to the extent required by, and in accordance with the provisions of, Section 8.04(b) of the Credit Agreement. (2) Subject to Section 2.13(g) of the Credit Agreement, the Debtor agrees to pay the Sub-Agent such amounts of any fees and expenses incurred by the Sub-Agent in connection with the administration of this security agreement as is required by, and in accordance with the provisions of, Sections 8.04(a) and (b) of the Credit Agreement. 11 ARTICLE III GENERAL 3.1 Release and Discharge. (1) Upon any sale, lease, transfer or other disposition of any item of any item of Collateral in accordance with the terms of the Loan Documents, the Sub-Agent will, at the Debtor's expense, execute and deliver to the Debtor such documents as the Debtor shall reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted hereby; provided, however, that (i) at the time of -------- ------- such request and such release, no Event of Default shall have occurred and be continuing, (ii) except to the extent such sale, lease or transfer or other disposition is permitted under Section 5.02(e) of the Credit Agreement, the Debtor shall have delivered to the Sub-Agent, at least ten Business Days prior to the date of the proposed release, a written request for release describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including, without limitation, the price thereof and any expenses in connection therewith, together with a form of release for execution by the Sub-Agent and a certification by the Debtor to the effect that the transaction is in compliance with the Loan Documents and as to such other matters as the Sub-Agent may reasonably request and (iii) the proceeds of any such sale, lease, transfer or other disposition required to be applied in accordance with Section 2.07 of the Credit Agreement shall be paid to, or in accordance with the instructions of, the Sub-Agent at the closing. (2) The Security Interest shall be discharged, and all rights to the Collateral shall revert to the Debtor, at the expense of the Debtor upon, but only upon, the latest of the payment in full in cash of the Obligations constituting an Advance or other Obligations then due and payable, the Termination Date and the Termination or expiration of all Bank Hedge Agreements. The Sub-Agent and the Canadian Lenders shall, at the Debtor's expense, execute and deliver to the Debtor such releases and discharges as the Debtor or its counsel may reasonably require to evidence such termination and promptly release and return Collateral in its possession. 3.2 No Merger, Etc. No judgment recovered by the Sub-Agent or any Canadian Lender in connection herewith shall operate by way of merger of or in any way affect the Security Interest, which is in addition to and not in substitution for any other security now or hereafter held by the Sub-Agent or any Canadian Lender on its behalf in respect of the Obligations. 3.3 Waivers, Etc. No amendment, consent or waiver by the Sub-Agent shall be effective unless made in writing and signed by an authorized officer of the Sub-Agent and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 12 3.4 Further Assurances. The Debtor shall from time to time, whether before or after the Security Interest shall have become enforceable, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Sub-Agent may reasonably require to protect the Collateral or perfect the Security Interest or to enable the Sub-Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral, and the Debtor shall, from time to time after the Security Interest has become enforceable, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Sub-Agent may reasonably require for facilitating the sale of the Collateral in connection with any realization thereof. 3.5 Successors and Assigns. This security agreement shall be binding upon the Debtor and its respective successors and assigns, and shall enure, together with the rights and remedies of each of the Sub-Agent and the Debtor hereunder and their respective successors and assigns, to the benefit of the Sub-Agent and the Canadian Lenders and the Debtor, respectively, and their respective successors and assigns. 3.6 Headings, Etc. The division of this security agreement into sections and subsections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation thereof. 3.7 Severability. If any provisions of this security agreement shall be deemed by any court of competent jurisdiction to be invalid or void, the remaining provisions shall remain in full force and effect. 3.8 Governing Law. This security agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and shall be treated in all respects as an Ontario contract. 13 IN WITNESS WHEREOF the Debtor has duly executed this security agreement under the hands of its proper officers duly authorized in that behalf as of the day and year first above written. GEORGE F. PETTINOS (CANADA) LIMITED Per: /s/ ---------------------------- Authorized Signing Officer SCHEDULE I INTELLECTUAL PROPERTY --------------------- GEORGE F. PETTINOS (CANADA) LIMITED ----------------------------------- SCHEDULE II COLLATERAL, LOCATIONS --------------------- GEORGE F. PETTINOS (CANADA) LIMITED ----------------------------------- Street Address County and Lessor Expiration Annual Rental State Date Loss SCHEDULE III DEPOSIT ACCOUNTS ---------------- GEORGE F. PETTINOS (CANADA) LIMITED ----------------------------------- NAME AND ADDRESS OF BANK ACCOUNT NUMBER - ------------------------ -------------- SCHEDULE IV FINANCING STATEMENTS -------------------- GEORGE F. PETTINOS (CANADA) LIMITED ----------------------------------- EXHIBIT G TO THE CREDIT AGREEMENT AS SEPARATELY EXECUTED CANADIAN SECURITY AGREEMENT Dated as of September 30, 1999 From GEORGE F. PETTINOS (CANADA) LIMITED, as Debtor, to BANQUE NATIONALE DE PARIS (CANADA), as Canadian Sub-Agent for the Canadian Lenders TABLE OF CONTENTS
Page ---- ARTICLE I SECURITY 1.1 Terms Incorporated by Reference......................................... 1 1.2 Grant of Security....................................................... 1 1.3 Obligations Secured..................................................... 2 1.4 Attachment.............................................................. 2 1.5 Accounts................................................................ 3 1.6 Scope of Security Interest.............................................. 3 1.7 Care and Custody of Collateral.......................................... 3 1.8 Debtor's Dealings with Collateral....................................... 4 1.9 Insurance............................................................... 4 1.10 Leases.................................................................. 5 ARTICLE II ENFORCEMENT 2.1 Default................................................................. 5 2.2 Remedies................................................................ 5 2.3 Additional Rights....................................................... 6 2.4 Concerning the Receiver................................................. 7 2.5 Appointment of Attorney................................................. 7 2.6 Dealing with the Collateral and the Security Interest................... 7 2.7 Standards of Sale....................................................... 8 2.8 Dealings by Third Parties............................................... 8 2.9 Indemnity and Expenses.................................................. 8 ARTICLE III GENERAL 3.1 Release and Discharge................................................... 9 3.2 No Merger, Etc.......................................................... 9 3.3 Waivers, Etc............................................................ 9 3.4 Further Assurances......................................................10 3.5 Successors and Assigns..................................................10 3.6 Headings, Etc...........................................................10 3.7 Severability............................................................10 3.8 Governing Law...........................................................10
Schedule I - Intellectual Property Schedule II - Collateral Locations Schedule III - Deposit Accounts Schedule IV - Financing Statements i EX-10.9 64 PARENT GUARANTY, DATED SEPTEMBER 15, 1999 EXHIBIT 10.9 EXECUTION COPY PARENT GUARANTY Dated as of September 30, 1999 From BMAC HOLDINGS, INC., as Guarantor, -- --------- in favor of THE SECURED PARTIES REFERRED TO IN THE CREDIT AGREEMENT REFERRED TO HEREIN TABLE OF CONTENTS -----------------
Section Page Section 1. Guaranty 1 Section 2. Guaranty Absolute 1 Section 3. Waivers and Acknowledgments 2 Section 4. Subrogation 3 Section 5. Payments Free and Clear of Taxes, Etc 3 Section 6. Representations and Warranties 5 Section 7. [Intentionally Omitted.] 6 Section 8. [Intentionally Omitted.] 6 Section 9. Amendments, Etc 6 Section 10. Notices, Etc 6 Section 11. No Waiver; Remedies 6 Section 12. Right of Set-off 7 Section 13. Continuing Guaranty; Assignments under the Credit Agreement 7 Section 14. Execution in Counterparts 7 Section 15. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc 7
i PARENT GUARANTY PARENT GUARANTY dated as of September 30, 1999 made by BMAC Holdings, Inc., a Delaware corporation (the "Guarantor"), in favor of the Secured Parties --------- (as defined in the Credit Agreement referred to below). PRELIMINARY STATEMENT. Better Minerals & Aggregates Company, a Delaware corporation formerly known as "USS Intermediate Holdco, Inc." (the "Borrower"), the Guarantor and George F. Pettinos (Canada) Limited, a - --------- corporation organized and existing under the laws of Ontario Canada (the "Canadian Borrower"), have entered into a Credit Agreement dated as of September - ------------------ 30, 1999 (said agreement, as it may hereafter be amended or otherwise modified from time to time, being the "Credit Agreement"; the terms defined therein and ---------------- not otherwise defined herein being used herein as therein defined), with certain Lender Parties party thereto and Banque Nationale de Paris, as Agent for such Lender Parties and as Swing Line Bank and Initial Issuing Bank. It is a condition precedent to the making of Advances, the purchasing, accepting or renewing of a Bankers' Acceptance and the issuance of Letters of Credit by the Lender Parties under the Credit Agreement and the entry by the Hedge Banks into Bank Hedge Agreements with the Loan Parties from time to time that the Guarantor shall have executed and delivered this Guaranty. NOW, THEREFORE, in consideration of the premises and in order to induce the Lender Parties to make Advances and Drawings and to issue Letters of Credit under the Credit Agreement from time to time and the Hedge Banks to enter into Bank Hedge Agreements with the Loan Parties from time to time, the Guarantor hereby agrees as follows: Section 1. Guaranty. The Guarantor hereby unconditionally and -------- irrevocably guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of the Loan Parties now or hereafter existing under the Loan Documents, whether for principal, interest, fees, expenses or otherwise (such Obligations being the "Guaranteed ---------- Obligations"). Without limiting the generality of the foregoing, the - ----------- Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrower or the Canadian Borrower to the Agent or any other Secured Party under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Borrower or such Canadian Borrower. Section 2. Guaranty Absolute. The Guarantor guarantees that the ----------------- Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or any other Secured Party with respect thereto. The Obligations of the Guarantor under this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower, the Canadian Borrower or any other Loan Party or whether the Borrower, the Canadian Borrower or any other Loan Party is joined in any such action or actions. The liability of the Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and the Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following: (a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower, the Canadian Borrower or any of their Subsidiaries or otherwise; (c) any taking, exchange, release or non-perfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) any manner of application of Collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral for all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents or any other assets of the Borrower, the Canadian Borrower or any of their Subsidiaries; (e) any change, restructuring or termination of the corporate structure or existence of the Borrower, the Canadian Borrower or any of their Subsidiaries; (f) any failure of any Secured Party to disclose to the Borrower, the Canadian Borrower, the Guarantor or any other Loan Party any information relating to the financial condition, operations, properties or prospects of any other Loan Party now or in the future known to any Secured Party (the Guarantor waiving any duty on the part of the Secured Parties to disclose such information); or (g) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Agent or any other Secured Party that might otherwise constitute a defense available to, or a discharge 2 of, the Borrower, the Canadian Borrower, the Guarantor, any other Loan Party or any other guarantor or surety. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Secured Party or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower, the Canadian Borrower or any other Loan Party or otherwise, all as though such payment had not been made. Section 3. Waivers and Acknowledgments. (a) The Guarantor hereby --------------------------- waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Agent or any other Secured Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against the Borrower, the Canadian Borrower or any other Person or any Collateral. (b) The Guarantor hereby waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. (c) The Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in this Section 3 are knowingly made in contemplation of such benefits. Section 4. Subrogation. The Guarantor will not exercise any rights ----------- that it may now or hereafter acquire against the Borrower, the Canadian Borrower or any other insider guarantor that arise from the existence, payment, performance or enforcement of the Guarantor's Obligations under this Guaranty or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Agent or any other Secured Party against any Loan Party or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Obligations constituting an Advance or Drawing and all other Guaranteed Obligations or amounts payable under this Guaranty shall have been paid in full in cash, all Bank Hedge Agreements shall have expired or terminated and the Commitments shall have expired or terminated. If any amount shall be paid to the Guarantor in violation of the preceding sentence at any time prior to the later of the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and the later of (i) the Termination Date and (ii) the expiration or termination of all Bank Hedge Agreements, such amount shall be held in trust for the benefit of the Agent and the other Secured Parties and shall forthwith be paid to the Agent to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents. If (i) the Guarantor shall make payment to the Agent or any other Secured Party of all or any part of the Guaranteed Obligations, (ii) all of the 3 Guaranteed Obligations payable under this Guaranty shall be paid in full in cash and (iii) the Termination Date shall have occurred and all Bank Hedge Agreements shall have expired or terminated, the Agent and the other Secured Parties will, at the Guarantor's request and expense, execute and deliver to the Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Guarantor of an interest in the Guaranteed Obligations resulting from such payment by the Guarantor. Section 5. Payments Free and Clear of Taxes, Etc. (a) Any and all ------------------------------------- payments by the Guarantor hereunder shall be made, in accordance with Section 2.14 of the Credit Agreement, free and clear of and without deduction or withholding for any and all Taxes. If the Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender Party or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions applicable to additional sums payable under this Section 5) such Lender Party or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) the Guarantor shall make such deductions or withholdings and (iii) the Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Guarantor shall pay any Other Taxes. (c) The Guarantor shall indemnify each Lender Party and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 5 paid by such Lender Party or the Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or the Agent (as the case may be) makes written demand therefor and provides the Guarantor with evidence of such liability reasonably satisfactory to the Guarantor. (d) Within 30 days after the date of any payment of Taxes, the Guarantor shall furnish to the Agent, at its address referred to in Section 8.02 of the Credit Agreement, the original receipt of payment thereof, a certified copy of such receipt or other evidence of payment reasonably acceptable to the Agent. In the case of any payment hereunder by or on behalf of the Guarantor through an account or branch outside the United States or on behalf of the Guarantor by a payor that is not a United States person, if the Guarantor determines that no Taxes are payable in respect thereof, the Guarantor 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 Party organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of the Credit Agreement in the case of each Initial Lender or the Initial Issuing Bank, as the case may be, and on the date 4 of the Assignment and Acceptance pursuant to which it became a Lender Party in the case of each other Lender Party, and from time to time thereafter if requested in writing by the Guarantor or the Agent (but only so long thereafter as such Lender Party remains lawfully able to do so and in any event prior to the date of the first payment to such Lender Party hereunder), provide the Agent and the Guarantor with two duly completed and executed copies of Internal Revenue Service (the "IRS") Form 1001 or 4224, as appropriate, or any successor --- form prescribed by the IRS, certifying (if it is the case) that such Lender Party is exempt from or is entitled to a reduced rate of United States withholding tax on payments pursuant to this Guaranty or in respect of any Bankers' Acceptances or to the extent permitted by law, as an alternative to such Form 1001 or 4224, each such Lender Party may provide the Guarantor and the Agent with two duly completed and executed copies of IRS Form W-8, or any successor form prescribed by the IRS, certifying that such Lender Party is exempt from United States federal withholding tax pursuant to Section 871(h) or Section 881(c) of the Internal Revenue Code, together with an annual certificate in form and substance satisfactory to the Guarantor or the Agent stating that such Lender Party is not a "person" described in Section 871(h)(3) or 881(c)(3) of the Internal Revenue Code. If the forms provided by a Lender Party at the time such Lender Party first becomes a party to the Credit Agreement indicate a tax rate with respect to Home Jurisdiction Withholding Tax in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate form certifying that a lesser rate applies, whereupon such 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 Party becomes a party to this Guaranty, the Lender Party assignor was entitled to payments under subsection (a) in respect of Home Jurisdiction Withholding Tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) Home Jurisdiction Withholding Tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information not substantially similar to the information necessary to compute the tax payable and information required on the date hereof by IRS Form 1001 or 4224, and which a Lender Party reasonably considers to be confidential, the Lender Party shall give notice thereof to the Guarantor 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 Party has failed to provide the Guarantor with the appropriate form described in subsection (e) duly completed and executed (other than if such failure is due to a change in law occurring after 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 Party shall not be entitled to indemnification under subsection (a) or (c) of this Section 5 with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender Party become -------- ------- subject to Taxes because of its failure to deliver a form required hereunder, the Guarantor shall take such steps as such Lender Party shall reasonably request at such Lender Party's sole expense to assist such Lender Party to recover such Taxes. 5 (g) Any Lender Party claiming additional amounts payable pursuant to this Section 5 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to file any certificate or document requested by the Guarantor or to change the jurisdiction of its Applicable Lending Office if the making of such filing or change would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue and would not, in the sole judgment of such Lender Party, be disadvantageous to such Lender Party. (h) If any Lender Party receives a refund of any Taxes or Other Taxes paid by the Guarantor pursuant to Section 5(a), Section 5(b), or Section 5(c), such Lender Party shall, within 30 days of such receipt, pay to the Guarantor the amount so received, net of all out-of-pocket expenses of such Lender Party with respect thereto, provided, however, that such Lender Party shall (i) be -------- ------- required to pay to the Guarantor only such amounts as such Lender Party, in its sole discretion, determines is attributable to Taxes or Other Taxes paid by the Guarantor pursuant to Section 5(a), Section 5(b) or Section 5(c), and (ii) have the sole discretion to determine whether to contest the imposition of any Taxes or Other Taxes, regardless of whether such Taxes or Other Taxes were correctly or legally asserted. Section 6. Representations and Warranties. The Guarantor hereby ------------------------------- represents and warrants as follows: (a) The Guarantor (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably expected to have a Material Adverse Effect and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted, except to the extent that the failure to do so is not reasonably expected to have a Material Adverse Effect. (b) The execution, delivery and performance by the Guarantor of this Guaranty are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene the Guarantor's charter or bylaws, (ii) violate any law (including, without limitation, the Securities Exchange Act of 1934), rule, regulation (including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any loan agreement, contract, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting the Guarantor, any of its Subsidiaries or any of its or their properties, the effect of which conflict, breach or default is reasonably likely to have a Material Adverse Effect or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of the Guarantor or any of its Subsidiaries. The Guarantor is not in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, 6 determination or award, or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which is reasonably expected to have a Material Adverse Effect. (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 (i) the due execution, delivery, recordation, filing or performance by the Guarantor of this Guaranty and (ii) the exercise by the Agent, any Lender Party or any Hedge Bank or any Lender Party of its rights under this Guaranty. (d) This Guaranty has been duly executed and delivered by the Guarantor. This Guaranty is the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or limiting creditors' rights or by equitable principles generally. (e) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived. (f) The Guarantor has, independently and without reliance upon the Agent, any Lender Party or any Hedge Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty. (g) The Guarantor owns no material assets other than the Pledged Shares (as defined in the Parent Guarantor Security Agreement). Section 7. [Intentionally Omitted.] Section 8. [Intentionally Omitted.] . Section 9. Amendments, Etc. No amendment or waiver of any provision ---------------- of this Guaranty and no consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Agent and the Guarantor, 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 any provision of this Guaranty may be amended or -------- ------- waived in accordance with Section 8.01 of the Credit Agreement. Section 10. Notices, Etc. All notices and other communications ------------- provided for hereunder shall be in writing (including telegraphic or telecopy communication) and mailed, telegraphed, telecopied or delivered to it, if to the Guarantor, addressed to it at c/o D. George Harris & Associates, Inc., 399 Park Avenue, 32nd Floor, New York, NY 10022, Attention: Treasurer, telecopier number (212) 207-6440, if to the Agent or any Lender Party, at its address specified in the Credit Agreement, if to any Hedge Bank, at its address specified in the Bank Hedge Agreement to which it is a party, or as to any party at such other address as shall be 7 designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed, telegraphed, telecopied or delivered, be effective when received by the addressee. Section 11. No Waiver; Remedies. No failure on the part of the -------------------- Agent or any other Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder 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 12. Right of Set-off. Upon (a) the occurrence and during ---------------- the continuance of any Event of Default and (b) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances and all other amounts payable under the Credit Agreement and the other Loan Documents to be due and payable pursuant to the provisions of said Section 6.01 or making of the demand specified by Section 6.02 of the Credit Agreement requiring the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances, each Lender Party and each of its respective 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 Party or such Affiliate to or for the credit or the account of the Guarantor against any and all of the Obligations of the Guarantor now or hereafter existing under this Guaranty, whether or not such Lender Party shall have made any demand under this Guaranty and although such Obligations may be unmatured. Each Lender Party agrees promptly to notify the Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender Party and its respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender Party and its respective Affiliates may have. Section 13. Continuing Guaranty; Assignments under the Credit ------------------------------------------------- Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full - --------- force and effect until the later of the payment in full in cash of the Guaranteed Obligations constituting an Advance and all other Guaranteed Obligations or amounts payable under this Guaranty and the later of (i) the Termination Date and (ii) the expiration or termination of all Bank Hedge Agreements, (b) be binding upon the Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Agent and the other Secured Parties and their successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Secured Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party herein or otherwise, in each case as and to the extent provided in Section 8.07 of the Credit Agreement. 8 Section 14. Execution in Counterparts. This Guaranty 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 Guaranty by telecopier shall be effective as delivery of a manually executed counterpart of this Guaranty. Section 15. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. ------------------------------------------------------ (a) This Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York. (b) The Guarantor 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 Guaranty or any of the other Loan Documents to which it is or is to be a party, or for recognition or enforcement of any judgment, and the Guarantor 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 Guarantor 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 Guaranty shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Guaranty or any of the other Loan Documents to which it is or is to be a party in the courts of any jurisdiction. (c) The Guarantor 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 Guaranty or any of the other Loan Documents to which it is or is to be a party in any New York State or federal court. The Guarantor 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. 9 (d) The Guarantor 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 any of the Loan Documents, the transactions contemplated thereby or the actions of the Agent or any other Secured Party in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. BMAC HOLDINGS, INC. By: /s/ Richard Nick ---------------------------------- Name: Richard Nick Title: Vice President 10 EXHIBIT H TO THE CREDIT AGREEMENT AS SEPARATELY EXECUTED PARENT GUARANTY Dated as of September 30, 1999 From BMAC HOLDINGS, INC., as Guarantor, -- --------- in favor of THE SECURED PARTIES REFERRED TO IN THE CREDIT AGREEMENT REFERRED TO HEREIN TABLE OF CONTENTS -----------------
Section Page Section 1. Guaranty 1 Section 2. Guaranty Absolute 1 Section 3. Waivers and Acknowledgments 2 Section 4. Subrogation 3 Section 5. Payments Free and Clear of Taxes, Etc 3 Section 6. Representations and Warranties 5 Section 7. [Intentionally Omitted.] 6 Section 8. [Intentionally Omitted.] 6 Section 9. Amendments, Etc 6 Section 10. Notices, Etc 6 Section 11. No Waiver; Remedies 6 Section 12. Right of Set-off 7 Section 13. Continuing Guaranty; Assignments under the Credit Agreement 7 Section 14. Execution in Counterparts 7 Section 15. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc 7
i EX-10.10 65 SUBSIDIARY GUARANTY, DATED SEPTEMBER 15, 1999 EXHIBIT 10.10 EXECUTION COPY SUBSIDIARY GUARANTY Dated as of September 30, 1999 From THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF as Subsidiary Guarantors in favor of THE SECURED PARTIES REFERRED TO IN THE CREDIT AGREEMENT REFERRED TO HEREIN TABLE OF CONTENTS -----------------
Section Page SECTION 1. SUBSIDIARY GUARANTY; LIMITATION OF LIABILITY 1 SECTION 2. SUBSIDIARY GUARANTY ABSOLUTE SECTION 3. WAIVERS AND ACKNOWLEDGMENTS SECTION 4. SUBROGATION SECTION 5. PAYMENTS FREE AND CLEAR OF TAXES, ETC SECTION 6. REPRESENTATIONS AND WARRANTIES SECTION 7. COVENANTS SECTION 8. AMENDMENTS, ETC SECTION 9. NOTICES, ETC SECTION 10. NO WAIVER; REMEDIES SECTION 11. RIGHT OF SET-OFF SECTION 12. CONTINUING SUBSIDIARY GUARANTY; ASSIGNMENTS UNDER THE CREDIT AGREEMENT SECTION 13. EXECUTION IN COUNTERPARTS
SECTION 14. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL, ETC 11
SUBSIDIARY GUARANTY SUBSIDIARY GUARANTY dated as of September 30, 1999 made by the Persons listed on the signature pages hereof under the caption "Subsidiary Guarantors" (together with the Additional Subsidiary Guarantors as defined in Section 8(b), each a "Subsidiary Guarantor"), in favor of the Secured Parties (as defined in -------------------- the Credit Agreement referred to below). PRELIMINARY STATEMENT. The Lender Parties and Banque Nationale de Paris, as Agent for the Lender Parties, are parties to a Credit Agreement dated as of September 30, 1999 (said Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the "Credit ------ Agreement"; the terms defined therein and not otherwise defined herein being - --------- used herein as therein defined) with Better Minerals & Aggregates Company, a Delaware corporation formerly known as "USS Intermediate Holdco, Inc." (the "Borrower"), BMAC Holdings, Inc., a Delaware corporation, and George F. Pettinos (Canada) Limited, a corporation organized and existing under the laws of Ontario, Canada. Each Subsidiary Guarantor may receive a portion of the proceeds of the Advances under the Credit Agreement and will derive substantial direct and indirect benefit from the transactions contemplated by the Credit Agreement. It is a condition precedent to the making of Advances and Drawings and the issuance of Letters of Credit by the Lender Parties under the Credit Agreement and the entry by the Hedge Banks into Bank Hedge Agreements with the Loan Parties from time to time that each Subsidiary Guarantor shall have executed and delivered this Subsidiary Guaranty. NOW, THEREFORE, in consideration of the premises and in order to induce the Lender Parties to make Advances and Drawings and to issue Letters of Credit under the Credit Agreement and the Hedge Banks to enter into Bank Hedge Agreements with the Loan Parties from time to time, each Subsidiary Guarantor, jointly and severally with each other Subsidiary Guarantor, hereby agrees as follows: SECTION 1. Subsidiary Guaranty; Limitation of Liability. (a) Each -------------------------------------------- Subsidiary Guarantor hereby unconditionally and irrevocably guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of each other Loan Party now or hereafter existing under the Loan Documents, whether for principal, interest, fees, expenses or otherwise (such Obligations being the "Guaranteed Obligations"). Without ---------------------- limiting the generality of the foregoing, each Subsidiary Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any Loan Party to the Agent or any other Secured Party under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Loan Party. (b) (i) Each Subsidiary Guarantor and by the Agent's acceptance of this Subsidiary Guaranty, the Agent and each other Secured Party, hereby confirms that it is the intention of all such parties that this Subsidiary Guaranty not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to this Subsidiary Guaranty. To effectuate the foregoing intention, the Agent, the other Secured Parties and the Subsidiary Guarantors hereby irrevocably agree that the Obligations of each Subsidiary Guarantor under this Subsidiary Guaranty shall not exceed the greater of (A) the net benefit realized by such Subsidiary Guarantor from the proceeds of the Advances and Drawings made from time to time by the Borrower and the Canadian Borrower, respectively, to such Subsidiary Guarantor or any subsidiary of such Subsidiary Guarantor and (B) the maximum amount that will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Subsidiary Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the Obligations of such other Subsidiary Guarantor under this Subsidiary Guaranty, result in the Obligations of such Subsidiary Guarantor under this Subsidiary Guaranty not constituting a fraudulent transfer or conveyance. For purposes hereof, "Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal or -------------- state law for the relief of debtors. (ii) Each Subsidiary Guarantor agrees that in the event any payment shall be required to be made to the Secured Parties under this Subsidiary Guaranty or any other guaranty, such Subsidiary Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Subsidiary Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Secured Parties under the Loan Documents. SECTION 2. Subsidiary Guaranty Absolute . Each Subsidiary Guarantor ---------------------------- guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or any other Secured Party with respect thereto (but subject, however, to the provisions of Section 1 hereof). The Obligations of each Subsidiary Guarantor under this Subsidiary Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents, and a separate action or actions may be brought and prosecuted against such Subsidiary Guarantor to enforce this Subsidiary Guaranty, irrespective of whether any action is brought against the Borrower or any other Loan Party or whether the Borrower or any other Loan Party is joined in any such action or actions. The liability of each Subsidiary Guarantor under this Subsidiary Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Subsidiary Guarantor hereby irrevocably waives to the fullest extent it may legally and effectively do so any defenses it may now or hereafter have in any way relating to, any or all of the following: (a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise; (c) any taking, exchange, release or non-perfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) any manner of application of Collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral for all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under the Loan Documents or any other assets of any Loan Party or any of its Subsidiaries; (e) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries; (f) any failure of any Secured Party to disclose to such Subsidiary Guarantor or any other Loan Party any information relating to the financial condition, operations, properties or prospects of any other Loan Party now or in the future known to any Secured Party (such Subsidiary Guarantor waiving any duty on the part of the Secured Parties to disclose such information); or (g) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Agent or any other Secured Party that might otherwise constitute a defense available to, or a discharge of, the Borrower, any Subsidiary Guarantor, any other Loan Party or any other guarantor or surety. This Subsidiary Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Secured Party or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise, all as though such payment had not been made. SECTION 3. Waivers and Acknowledgments. (a) Each Subsidiary Guarantor --------------------------- hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Subsidiary Guaranty and any requirement that the Agent or any other Secured Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Loan Party or any other Person or any Collateral. (b) Each Subsidiary Guarantor hereby waives any right to revoke this Subsidiary Guaranty, and acknowledges that this Subsidiary Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. (c) Each Subsidiary Guarantor acknowledges that the Agent may, without notice to or demand upon such Subsidiary Guarantor and without affecting the liability of such Subsidiary Guarantor under this Subsidiary Guaranty, foreclose under any Mortgage by nonjudicial sale, and such Subsidiary Guarantor hereby waives any defense to the recovery by the Agent and the other Secured Parties against such Subsidiary Guarantor of any deficiency after such nonjudicial sale and any defense or benefits that may be afforded by applicable law. (d) Each Subsidiary Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in this Section 3 are knowingly made in contemplation of such benefits. SECTION 4. Subrogation. No Subsidiary Guarantor will exercise any rights ----------- that it may now or hereafter acquire against any Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Subsidiary Guarantor's Obligations under this Subsidiary Guaranty or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Agent or any other Secured Party against any Loan Party or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Obligations constituting an Advance or Drawing and all other Guaranteed Obligations or amounts payable under this Subsidiary Guaranty shall have been paid in full in cash, all Bank Hedge Agreements shall have expired or terminated and the Commitments shall have expired or terminated. If any amount shall be paid to any Subsidiary Guarantor in violation of the preceding sentence at any time prior to the later of the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Subsidiary Guaranty and the later of (i) the Termination Date and (ii) the expiration or termination of all Bank Hedge Agreements, such amount shall be held in trust for the benefit of the Agent and the other Secured Parties and shall forthwith be paid to the Agent to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Subsidiary Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents. If (i) any Subsidiary Guarantor shall make payment to the Agent or any other Secured Party of all or any part of the Guaranteed Obligations, (ii) all of the Obligations and constituting an Advance or Drawing and all other Guaranteed Obligations payable under this Subsidiary Guaranty shall be paid in full in cash and (iii) the Termination Date shall have occurred and all Bank Hedge Agreements shall have expired or terminated, the Agent and the other Secured Parties will, at such Subsidiary Guarantor's request and expense, execute and deliver to such Subsidiary Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Subsidiary Guarantor of an interest in the Guaranteed Obligations resulting from such payment by such Subsidiary Guarantor. SECTION 5. Payments Free and Clear of Taxes, Etc . (a) Any and all ------------------------------------- payments by the Subsidiary Guarantors hereunder shall be made, in accordance with Section 2.14 of the Credit Agreement, free and clear of and without deduction or withholding for any and all Taxes. If any Subsidiary Guarantor hereunder shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender Party or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions applicable to additional sums payable under this Section 5) such Lender Party or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) such Subsidiary Guarantor shall make such deductions or withholdings and (iii) such Subsidiary Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, each Subsidiary Guarantor shall pay any Other Taxes. (c) Each Subsidiary Guarantor shall indemnify each Lender Party and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section), paid by such Lender Party or the Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or the Agent (as the case may be) makes written demand therefor and provides such Subsidiary Guarantor with evidence of such liability reasonably satisfactory to such Subsidiary Guarantor. (d) Within 30 days after the date of any payment of Taxes, such Subsidiary Guarantor shall furnish to the Agent, at its address referred to in Section 8.02 of the Credit Agreement, the original receipt of payment thereof, a certified copy of such receipt or other evidence of payment reasonably acceptable to the Agent. In the case of any payment hereunder by or on behalf of such Subsidiary Guarantor through an account or branch outside the United States or on behalf of such Subsidiary Guarantor by a payor that is not a United States person, if such Subsidiary Guarantor determines that no Taxes are payable in respect thereof, such Subsidiary Guarantor 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 Party organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of the Credit Agreement in the case of each Initial Lender or the Initial Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance pursuant to which it became a Lender Party in the case of each other Lender Party, and from time to time thereafter if requested in writing by any Subsidiary Guarantor or the Agent (but only so long thereafter as such Lender Party remains lawfully able to do so and in any event prior to the date of the first payment to such Lender Party hereunder), provide the Agent and such Subsidiary Guarantor with two duly completed and executed copies of Internal Revenue Service (the "IRS") Form 1001 or 4224, as appropriate, or any successor --- form prescribed by the IRS, certifying (if it is the case) that such Lender Party is exempt from or is entitled to a reduced rate of United States withholding tax on payments pursuant to this Subsidiary Guaranty or to the extent permitted by law, as an alternative to such Form 1001 or 4224, each such Lender Party may provide such Subsidiary Guarantor and the Agent with two duly completed and executed copies of IRS Form W-8, or any successor form prescribed by the IRS, certifying that such Lender Party is exempt from United States federal withholding tax pursuant to Section 871(h) or Section 881(c) of the Internal Revenue Code, together with an annual certificate in form and substance satisfactory to such Subsidiary Guarantor or the Agent stating that such Lender Party is not a "person" described in Section 871(h)(3) or 881(c)(3) of the Internal Revenue Code. If the forms provided by a Lender Party at the time such Lender Party first becomes a party to the Credit Agreement indicate a tax rate with respect to Home Jurisdiction Withholding Tax in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate form certifying that a lesser rate applies, whereupon such 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 Party becomes a party to the Credit Agreement, the Lender Party assignor was entitled to payments under subsection (a) in respect of Home Jurisdiction Withholding Tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) Home Jurisdiction Withholding Tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information not substantially similar to the information necessary to compute the tax payable and information required on the date hereof by IRS Form 1001 or 4224, and which a Lender Party reasonably considers to be confidential, the Lender Party shall give notice thereof to each Subsidiary Guarantor 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 Party has failed to provide each Subsidiary Guarantor with the appropriate form described in subsection (e) duly completed and executed (other than if such failure is due to ----- ---- a change in law occurring after 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 Party shall not be entitled to indemnification under subsection (a) or (c) of this Section 5 with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, such Subsidiary Guarantor shall take such steps as such Lender Party shall reasonably request at such Lender Party's sole expense to assist such Lender Party to recover such Taxes. (g) Any Lender Party claiming additional amounts payable pursuant to this Section 5 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to file any certificate or document requested by any Subsidiary Guarantor or to change the jurisdiction of its Applicable Lending Office if the making of such filing or change would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue and would not, in the sole judgment of such Lender Party, be disadvantageous to such Lender Party. (h) If any Lender Party receives a refund of any Taxes or Other Taxes paid by such Subsidiary Guarantor pursuant to Section 5(a), Section 5(b), or Section 5(c), such Lender Party shall, within 30 days of such receipt, pay to such Subsidiary Guarantor the amount so received, net of all out-of-pocket expenses of such Lender Party with respect thereto, provided, however, that such Lender -------- ------- Party shall (i) be required to pay to such Subsidiary Guarantor only such amounts as such Lender Party, in its sole discretion, determines is attributable to Taxes or Other Taxes paid by such Subsidiary Guarantor pursuant to Section 5(a), Section 5(b) or Section 5(c), and (ii) have the sole discretion to determine whether to contest the imposition of any Taxes or Other Taxes, regardless of whether such Taxes or Other Taxes were correctly or legally asserted. SECTION 6. Representations and Warranties. Each Subsidiary Guarantor ------------------------------ hereby represents and warrants as follows: (a) Such Subsidiary Guarantor (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably expected to have a Material Adverse Effect and (iii) has all requisite corporate power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted except to the extent that the failure to do so is not reasonably expected to have a Material Adverse Effect. All of the outstanding capital stock of such Subsidiary Guarantor has been validly issued, is fully paid and non-assessable and each Subsidiary Guarantor is owned by a Loan Party, free and clear of all Liens, except those created or permitted under the Loan Documents. (b) The execution, delivery and performance by such Subsidiary Guarantor of this Subsidiary Guaranty are within such Subsidiary Guarantor's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Subsidiary Guarantor's charter or bylaws, (ii) violate any law (including, without limitation, the Securities Exchange Act of 1934), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any loan agreement, contract, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting such Subsidiary Guarantor, any of its Subsidiaries or any of its or their properties the effect of which conflict, breach or default is reasonably likely to have a Material Adverse Effect or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of such Subsidiary Guarantor or any of its Subsidiaries. Neither such Subsidiary Guarantor nor any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which is reasonably expected to have a Material Adverse Effect. (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 (i) the due execution, delivery, recordation, filing or performance by such Subsidiary Guarantor of this Subsidiary Guaranty or any other Loan Document to which such Subsidiary Guarantor is a party or (ii) the exercise by the Agent or any Secured Party or any Hedge Bank of its rights under this Subsidiary Guaranty or any other Loan Document to which such Subsidiary Guarantor is a party. (d) There is no action, suit, investigation, litigation or proceeding affecting such Subsidiary Guarantor, including any Environmental Action, pending or threatened before any court, governmental agency or arbitrator that (i) is reasonably expected to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Subsidiary Guaranty or any other Loan Document to which such Subsidiary Guarantor is a party. (e) Each of this Subsidiary Guaranty and each other Loan Document to which it is a party has been duly executed and delivered by such Subsidiary Guarantor. Each of this Subsidiary Guaranty and each other Loan Document to which it is a party is the legal, valid and binding obligation of such Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in accordance with its terms. (f) There are no conditions precedent to the effectiveness of this Subsidiary Guaranty that have not been satisfied or waived. (g) Such Subsidiary Guarantor has, independently and without reliance upon the Agent, any Lender Party or any Hedge Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Subsidiary Guaranty, and such Subsidiary Guarantor has established adequate means of obtaining from each of the other Loan Parties on a continuing basis information pertaining to, and is now, and on a continuing basis will be, completely familiar with, the financial condition, operations, properties and prospects of such other Loan Parties. SECTION 7. Covenants. Each Subsidiary Guarantor covenants and agrees --------- that, so long as any part of the Guaranteed Obligations constituting an Advance or any other Guaranteed Obligation shall remain unpaid, any Letter of Credit or Bankers' Acceptance shall be outstanding, any Lender Party shall have any Commitment or any Hedge Bank shall have any obligation under any Bank Hedge Agreement, such Subsidiary Guarantor will at all times perform or observe, and will cause each of its Subsidiaries to perform or observe, all of the terms, covenants and agreements that the Loan Documents state that the Borrower is to cause such Subsidiary Guarantor or such Subsidiaries to perform or observe. SECTION 8. Amendments, Etc. (a) No amendment or waiver of any provision --------------- of this Subsidiary Guaranty and no consent to any departure by any Subsidiary Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Agent and 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 any provision of this -------- ------- Subsidiary Guaranty may be amended or waived in accordance with Section 8.01 of the Credit Agreement. (b) Upon the execution and delivery by any Person of a guaranty supplement in substantially the form of Exhibit A hereto (each a "Guaranty Supplement"), ------------------- such Person shall be referred to as an "Additional Subsidiary Guarantor" and ------------------------------- shall be and become a Subsidiary Guarantor, and each reference in this Agreement to "Subsidiary Guarantor" shall also mean and be a reference to such Additional Subsidiary Guarantor. SECTION 9. Notices, Etc . All notices and other communications provided ------------ for hereunder shall be in writing (including telegraphic or telecopy communication) and mailed, telegraphed, telecopied or delivered to it, if to any Subsidiary Guarantor, addressed to it at c/o D. George Harris & Associates, Inc., 399 Park Avenue, 32nd Floor, New York, NY 10022, Attention: Treasurer, telecopier number (212) 207-6440, or, in the case of any Additional Subsidiary Guarantor, at the address set forth below such Additional Subsidiary Guarantor's signature on the applicable Guaranty Supplement, if to the Agent or any Lender Party, at its address specified in the Credit Agreement, if to any Hedge Bank, at its address specified in the Bank Hedge Agreement to which it is a party, or as to any party at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed, telegraphed, telecopied or delivered, be effective when received by the addressee. Delivery by telecopier of an executed counterpart of any supplement to or any amendment or waiver of any provision of this Subsidiary Guaranty shall be effective as delivery of a manually executed counterpart thereof. SECTION 10. No Waiver; Remedies . No failure on the part of the Agent or ------------------- any other Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder 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 11. Right of Set-off . Upon (a) the occurrence and during the ---------------- continuance of any Event of Default and (b) either the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Agent to declare the Advances due and payable pursuant to the provisions of said Section 6.01 or the making of the demand specified by Section 6.02 of the Credit Agreement requiring the Borrower to pay amounts in respect of Letters of Credit or the Canadian Borrower to pay amounts in respect of Bankers' Acceptances, each Lender Party and each of its respective 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 Party or such Affiliate to or for the credit or the account of any Subsidiary Guarantor against any and all of the Obligations of such Subsidiary Guarantor now or hereafter existing under this Subsidiary Guaranty, whether or not such Lender Party shall have made any demand under this Subsidiary Guaranty and although such Obligations may be unmatured. Each Lender Party agrees promptly to notify such Subsidiary Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender Party and its respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set- off) that such Lender Party and its respective Affiliates may have. SECTION 12. Continuing Subsidiary Guaranty; Assignments under the Credit ------------------------------------------------------------ Agreement . This Subsidiary Guaranty is a continuing guaranty and shall (a) - --------- remain in full force and effect until the later of the payment in full in cash of the Guaranteed Obligations constituting an Advance or Drawing and all other Guaranteed Obligations or amounts payable under this Subsidiary Guaranty and the later of (i) and the Termination Date and (ii) the expiration or termination of all Bank Hedge Agreements, (b) be binding upon each Subsidiary Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Agent and the other Secured Parties and their successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Secured Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitments, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party herein or otherwise, in each case as and to the extent provided in Section 8.07 of the Credit Agreement. No Subsidiary Guarantor shall have the right to assign its obligations hereunder or any interest herein without the prior written consent of the Secured Parties. SECTION 13. Execution in Counterparts . This Subsidiary Guaranty 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 Subsidiary Guaranty by telecopier shall be effective as delivery of a manually executed counterpart of this Subsidiary Guaranty. SECTION 14. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. (a) ------------------------------------------------------ This Subsidiary Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York. (b) Each Subsidiary Guarantor 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 Subsidiary Guaranty or any of the other Loan Documents to which it is or is to be a party, or for recognition or enforcement of any judgment, and each Subsidiary Guarantor 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. Each Subsidiary Guarantor 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 Subsidiary Guaranty shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Subsidiary Guaranty or any of the other Loan Documents to which it is or is to be a party in the courts of any jurisdiction. (c) Each Subsidiary Guarantor 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 Subsidiary Guaranty or any of the other Loan Documents to which it is or is to be a party in any New York State or federal court. Each Subsidiary Guarantor 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. (d) Each Subsidiary Guarantor 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 any of the Loan Documents, the transactions contemplated thereby or the actions of the Agent or any other Secured Party in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this Subsidiary Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. 1 PENNSYLVANIA GLASS SAND CORPORATION By: /s/ Richard Nick -------------------------------------- Name: Richard Nick Title: Vice President THE FULTON LAND AND TIMBER COMPANY By: /s/ Richard Nick -------------------------------------- Name: Richard Nick Title: Vice President OTTAWA SILICA COMPANY By: /s/ John A. Ulizio -------------------------------------- Name: Title: GEORGE F. PETTINOS, INC. By: /s/ Richard Nick -------------------------------------- Name: Richard Nick Title: Vice President ELLEN JAY, INC. By: /s/ Richard Nick -------------------------------------- Name: Richard Nick Title: Vice President U.S. SILICA COMPANY (a/k/a U.S. Silica Company, Inc.) By: /s/ Richard Nick -------------------------------------- Name: Richard Nick Title: Vice President 1 BETTER MATERIALS CORPORATION By: /s/ Richard Nick ------------------------------------ Name: Richard Nick Title: Vice President BMC TRUCKING, INC. By: /s/ Richard Nick ------------------------------------ Name: Richard Nick Title: Vice President BUCKS COUNTY CRUSHED STONE COMPANY By: /s/ Richard Nick ------------------------------------ Name: Richard Nick Title: Vice President CHIPPEWA FARMS CORPORATION By: /s/ Richard Nick ------------------------------------ Name: Richard Nick Title: Vice President SHORE STONE COMPANY, INC. By: /s/ Richard Nick ------------------------------------ Name: Richard Nick Title: Vice President COMMERCIAL STONE CO., INC. By: /s/ Richard Nick ------------------------------------ Name: Richard Nick Title: Vice President 1 STONE MATERIALS COMPANY, LLC By: Better Minerals & Aggregates Company, as Manager By: /s/ Richard Nick ------------------------------------ Name: Richard Nick Title: Vice President COMMERCIAL AGGREGATES TRANSPORTATION AND SALES, LLC By: Stone Materials Company, LLC, as Manager By: /s/ Richard Nick ------------------------------------ Name: Richard Nick Title: Vice President 1 EXHIBIT A to Subsidiary Guaranty FORM OF SUBSIDIARY GUARANTY SUPPLEMENT Banque Nationale de Paris, as Agent 499 Park Avenue New York, New York 10022 Attention: Structured Finance Group Subsidiary Guaranty dated as of September 30, 1999 made by ______________________ in favor of the Secured Parties referred to therein --------------------------------------- Ladies and Gentlemen: Reference is made to the above-captioned Subsidiary Guaranty (as amended, supplemented or otherwise modified, the "Subsidiary Guaranty"). ------------------- Unless otherwise defined herein, terms defined in the Subsidiary Guaranty and in the Credit Agreement referred to therein are used herein as therein defined. The undersigned affirms that it may receive a portion of the proceeds of the Advances under the Credit Agreement and will derive substantial direct and indirect benefit from the transactions contemplated by the Credit Agreement, in consideration for the execution and delivery of this Subsidiary Guaranty Supplement. The undersigned hereby agrees, as of the date first above written, to become a Subsidiary Guarantor under the Subsidiary Guaranty as if it were an original party thereto and agrees that each reference in the Subsidiary Guaranty to a "Subsidiary Guarantor" shall also mean and be a reference to the undersigned. The undersigned hereby unconditionally and irrevocably guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of each other Loan Party now or hereafter existing under the Loan Documents to the extent set forth therein. 1 The undersigned hereby makes each representation and warranty set forth in Section 6 of the Subsidiary Guaranty to the same extent as each other Subsidiary Guarantor and hereby agrees to be bound as a Subsidiary Guarantor by all of the terms and provisions of the Subsidiary Guaranty to the same extent as all other Subsidiary Guarantors. This letter shall be governed by and construed in accordance with the laws of the State of New York. Very truly yours, [NAME OF ADDITIONAL SUBSIDIARY GUARANTOR] By _______________________________________ Name: Title: Address: 1 EXHIBIT I TO THE CREDIT AGREEMENT FORM OF SUBSIDIARY GUARANTY Dated as of September 30, 1999 From THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF as Subsidiary Guarantors in favor of THE SECURED PARTIES REFERRED TO IN THE CREDIT AGREEMENT REFERRED TO HEREIN EXECUTION COPY SUBSIDIARY GUARANTY Dated as of September 30, 1999 From THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF as Subsidiary Guarantors -- ---------- ---------- in favor of THE SECURED PARTIES REFERRED TO IN THE CREDIT AGREEMENT REFERRED TO HEREIN TABLE OF CONTENTS -----------------
Section Page SECTION 1. SUBSIDIARY GUARANTY; LIMITATION OF LIABILITY 1 SECTION 2. SUBSIDIARY GUARANTY ABSOLUTE SECTION 3. WAIVERS AND ACKNOWLEDGMENTS SECTION 4. SUBROGATION SECTION 5. PAYMENTS FREE AND CLEAR OF TAXES, ETC SECTION 6. REPRESENTATIONS AND WARRANTIES SECTION 7. COVENANTS SECTION 8. AMENDMENTS, ETC SECTION 9. NOTICES, ETC SECTION 10. NO WAIVER; REMEDIES SECTION 11. RIGHT OF SET-OFF SECTION 12. CONTINUING SUBSIDIARY GUARANTY; ASSIGNMENTS UNDER THE CREDIT AGREEMENT SECTION 13. EXECUTION IN COUNTERPARTS
SECTION 14. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL, ETC 11
EX-12.1 66 STATEMENT RE: RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 BETTER MINERALS & AGGREGATES COMPANY RATIO OF EARNINGS TO FIXED CHARGES (Dollars in Thousands)
Predecessor(a) Successor ----------------------------------- ---------------------------------------------------------------- January 1 February 10 through through February 9 December 31 1995 1996 1996 1997 1998 1999 -------------------- ------------- --------------- ----------------- ---------------- ---------- Earnings - -------- Income (loss) before income taxes.......... $11,415 $517 $(3,621) $(1,961) $(16,871) $ 1,032 Fixed charges.......... 252 21 10,143 10,578 10,401 19,870 ----------------------------------------------------------------------------------------------------- Total earnings......... $11,667 $538 $ 6,522 $ 8,617 $ (6,470) $20,902 ===================================================================================================== Fixed Charges - ------------- Interest expense....... $ 162 $13 $10,074 $10,513 $ 10,269 $19,590 Estimated interest in 90 8 69 65 132 280 rental expense........ ----------------------------------------------------------------------------------------------------- Total fixed charges.... $ 252 $21 $10,143 $10,578 $10,401 $19,870 ===================================================================================================== Ratio of Earnings to Fixed Charges......... 46.3 25.6 0.6(b) 0.8(b) (0.6)(b) 1.1
(a) Amounts are not comparable to subsequent periods. (b) Earnings used in computing the ratio of earnings to fixed charges consist of income (loss) before income taxes plus fixed charges. Fixed charges consist of interest expense, including amortization of debt issuance costs and original issue discounts, and a portion of operating lease rental expense deemed to be representative of the interest factor. Earnings were insufficient to cover fixed charges by $3.6 million, $2.0 million and $16.9 million for the period from February 10, 1996 to December 31, 1996 and the years ended December 31, 1997 and 1998, respectively. EX-21.1 67 SUBSIDIARIES OF THE REGISTRANT Exhibit 21.1 ------------ Subsidiaries of the Registrant - ------------------------------------------------------------ Names of the Subsidiaries of the State of Registrant Formation - ------------------------------------------------------------ U.S. Silica Company Delaware Better Materials Corporation Pennsylvania BMC Trucking, Inc. Delaware Bucks County Crushed Stone Company Pennsylvania Chippewa Farms Corporation Pennsylvania Shore Stone Company, Inc. New Jersey Pennsylvania Glass Sand Corporation Delaware George F. Pettinos, Inc. Delaware Ottawa Silica Company Delaware The Fulton Land and Timber Company Pennsylvania Ellen Jay, Inc. New Jersey Stone Materials Company, LLC Delaware Commercial Stone Co., Inc. Pennsylvania Commercial Aggregates Transportation and Delaware Sales, LLC - ------------------------------------------------------------ EX-23.2 68 CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-4 of Better Minerals & Aggregates Company (formerly USS Intermediate Holdco, Inc.) of our reports dated March 9, 2000 relating to the financial statements and financial statement schedule of Better Mineral & Aggregates Company, which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement. PricewaterhouseCoopers LLP New York, New York March 14, 2000 ---------------- CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-4 of Better Materials Corporation of our report dated August 25, 1999 relating to the financial statements of Better Materials Corporation, which appears in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania March 14, 2000 EX-23.3 69 CONSENT OF SCHNEIDER DOWNS & CO., INC. Exhibit 23.3 [Letterhead of Schneider Downs] CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-4 (Registration No. 333- ) of our report dated September 8, 1999, on our audits of the financial statements and financial statement schedules of Commercial Stone Co., Inc. and Commercial Aggregates Transportation & Sales, L.P. We also consent to the references to our firm under the caption "Experts." /s/ Schneider Downs & Co., Inc. Pittsburgh, Pennsylvania March 13, 2000 EX-25.1 70 STATEMENT OF ELIGIBILITY AND QUALIFICATION EXHIBIT 25.1 =============================================================================== FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) BETTER MINERALS & AGGREGATES COMPANY (Exact name of obligor as specified in its charter) Delaware 55-0749125 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) U.S. Silica Company (Exact name of obligor as specified in its charter) Delaware 23-0958670 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Better Materials Corporation (Exact name of obligor as specified in its charter) Pennsylvania 23-1542403 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) BMC Trucking, Inc. (Exact name of obligor as specified in its charter) Delaware 23-2986246 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Bucks County Crushed Stone Company (Exact name of obligor as specified in its charter) Pennsylvania 23-1468333 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Chippewa Farms Corporation (Exact name of obligor as specified in its charter) Pennsylvania 23-2160463 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Shore Stone Company, Inc. (Exact name of obligor as specified in its charter) New Jersey 23-2243672 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Pennsylvania Glass Sand Corporation (Exact name of obligor as specified in its charter) Delaware 94-3024593 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) George F. Pettinos, Inc. (Exact name of obligor as specified in its charter) Delaware 23-0966840 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Ottawa Silica Company -2- (Exact name of obligor as specified in its charter) Delaware 94-3093543 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) The Fulton Land and Timber Company (Exact name of obligor as specified in its charter) Pennsylvania 23-1622540 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Ellen Jay, Inc. (Exact name of obligor as specified in its charter) New Jersey 22-2033676 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Stone Materials Company, LLC (Exact name of obligor as specified in its charter) Delaware 52-2205266 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Commercial Stone Co., Inc. (Exact name of obligor as specified in its charter) Pennsylvania 25-1225764 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Commercial Aggregates Transportation and Sales, LLC (Exact name of obligor as specified in its charter) Delaware 25-1846125 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Route 522 North, P.O. Box 187 Berkeley Springs, West Virginia 25411 (Address of principal executive offices) (Zip code) _____________ 13% Senior Subordinated Notes due 2009 (Title of the indenture securities) =============================================================================== -4- 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject.
- ------------------------------------------------ Name Address - ------------------------------------------------ Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a- 29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 10th day of March, 2000. THE BANK OF NEW YORK By: /s/ MICHAEL CULHANE -------------------------- Name: MICHAEL CULHANE Title: VICE PRESIDENT -6- EX-27.1 71 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED FINANCIAL STATEMENTS OF BETTER MINERAL AND AGGREGATES COMPANY AS CONTAINED IN THIS REGISTRATION STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. BETTER MINERALS & AGGREGATES CO 0001108673 1,000 YEAR YEAR YEAR DEC-31-1997 DEC-31-1998 DEC-31-1999 JAN-01-1997 JAN-01-1998 JAN-01-1999 DEC-31-1997 DEC-31-1998 DEC-31-1999 0 2,222 13,573 0 0 0 0 30,346 43,552 0 (1,060) (1,278) 0 15,844 23,058 0 56,443 91,405 0 235,075 482,117 0 (37,198) (59,248) 0 274,678 551,603 0 36,935 45,690 0 131,918 285,466 0 0 0 0 0 0 0 0 0 0 23,396 64,335 0 274,678 551,603 128,512 142,294 209,075 128,512 142,294 209,075 88,097 98,478 140,244 120,328 149,523 190,568 (1,742) (1,881) (2,171) 0 0 0 10,513 10,269 19,590 (1,961) (16,871) 1,032 (2,239) (2,204) (2,714) 278 (14,667) 3,746 0 0 0 0 (2,102) (2,747) 0 0 0 278 (16,769) 999 0 0 0 0 0 0
EX-99.1 72 FORM OF LETTER OF TRANSMITAL EXHIBIT 99.1 LETTER OF TRANSMITTAL FOR 13% Senior Subordinated Notes Due 2009 Of Better Minerals & Aggregates Company THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000 (THE "EXPIRATION DATE") UNLESS EXTENDED. The Exchange Agent is: The Bank Of New York For Overnight Delivery, Delivery by Hand or Delivery by Registered or Certified Mail: The Bank of New York 101 Barclay St. New York, NY 10286 Attention: Kin Lau, Reorg-7 EAST By Facsimile Transmission (for Eligible Institutions only): (212) 815-6339 Confirm facsimile by telephone only: (212) 815-3750 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated , 2000 (the "Prospectus") of Better Minerals & Aggregates Company (the "Issuer"), and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Issuer's offer (the "Exchange Offer") to exchange its 13% Senior Subordinated Notes due 2009 (the "New Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for an equal aggregate principal amount of its outstanding 13% Senior Subordinated Notes due 2009 (the "Old Notes" and, together with the New Notes, the "Notes") from the holders thereof. The terms of the New Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the New Notes are freely transferable by holders thereof (except as provided herein or in the Prospectus). Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus. YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. List below the Old Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and aggregate principal amounts should be listed on a separate signed schedule affixed hereto. The minimum permitted tender is $1,000 in principal amount. All tenders must be in integral multiples of $1,000. DESCRIPTION OF OLD NOTES TENDERED HEREWITH - -------------------------------------------------------------------------------
Aggregate Principal Amount Name(s) and Address(es) Certificate Represented Principal Amount of Registered Holder(s) Number(s)* by Old Notes* Tendered** - ------------------------------------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- Total - -------------------------------------------------------------------------------
* Need not be completed by holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Old Notes. See Instruction 2. Holders of Old Notes whose Old Notes are not immediately available or who cannot deliver their Old Notes, this Letter of Transmittal or any other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus. Unless the context otherwise requires, the term "holder" for purposes of this Letter of Transmittal means any person in whose name Old Notes are registered or any other person who has obtained a properly completed bond power from the registered holder or any person whose Old Notes are held of record by The Depository Trust Company ("DTC"). If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. A broker-dealer may not participate in the Exchange Offer with respect to Old Notes acquired other than as a result of market-making activities or other trading activities. Any holder who is an "affiliate" of the Issuer or who has an arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Old Notes from the Issuer to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act. 2 [_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) _______________________________________________ Window Ticket Number (if any) _________________________________________________ Date of Execution of Notice of Guaranteed Delivery ____________________________ Name of Eligible Institution that Guaranteed Delivery _________________________ [_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO AND COMPLETE THE FOLLOWING: Name(s) _______________________________________________________________________ Address _______________________________________________________________________ SPECIAL EXCHANGE INSTRUCTIONS (See Instructions 3, 4 and 5) SPECIAL DELIVERY INSTRUCTIONS To be completed ONLY if (see Instructions 3, 4 and 5) certificates for Old Notes in a principal amount not tendered, or New Notes issued in exchange for Old Notes accepted for exchange, are to be issued in the name of someone other than the undersigned. To be completed ONLY if certificates for Old Notes in a principal amount not tendered, or New Notes issued in exchange for Old Notes accepted for exchange, are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Issue certificates to: Name ______________________________ Deliver certificates to: (Please Print) Name ______________________________ Address ___________________________ (Please Print) ___________________________________ Address ___________________________ (Include Zip Code) ___________________________________ ___________________________________ (Include Zip Code) (Tax Identification or Social Security Number) ___________________________________ (Tax Identification or Social Security Number) 3 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuer the principal amount of the Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of all or any portion of the Old Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Old Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Issuer, in connection with the Exchange Offer) to cause the Old Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Old Notes and to acquire New Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Issuer will acquire good and unencumbered title to the tendered Old Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned and any beneficial owner of the Old Notes tendered hereby further represent and warrant that (i) the New Notes acquired by the undersigned and any such beneficial owner of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, (ii) neither the undersigned nor any such beneficial owner has an arrangement with any person to participate in the distribution of such New Notes, (iii) neither the undersigned nor any such beneficial owner nor any such other person is engaging in or intends to engage in a distribution of such New Notes and (iv) neither the undersigned nor any such other person is an "affiliate", as defined under Rule 405 promulgated under the Securities Act, of the Issuer. The undersigned and each beneficial owner acknowledge and agree that any person who is an affiliate of the Issuer or who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale transaction of the New Notes acquired by such person and may not rely on the position of the staff of the Securities and Exchange Commission set forth in the no-action letters discussed in the Prospectus under the caption "The Exchange Offer--Purpose and Effect of the Exchange Offer." The undersigned and each beneficial owner will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Issuer to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. For purposes of the Exchange Offer, the Issuer shall be deemed to have accepted validly tendered Old Notes when, as and if the Issuer has given oral notice (confirmed in writing) or written notice thereof to the Exchange Agent. If any tendered Old Notes are not accepted for exchange pursuant to the Exchange Offer because of an invalid tender, the occurrence of certain other events set forth in the Prospectus or otherwise, any such unaccepted Old Notes will be returned, without expense, to the undersigned at the address shown below or at a different address as may be indicated herein under "Special Delivery Instructions" as promptly as practicable after the Expiration Date. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. The undersigned understands that tenders of Old Notes pursuant to the procedures described under the caption "The Exchange Offer--Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Issuer upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal of Tenders." 4 Unless otherwise indicated under "Special Exchange Instructions," please cause the New Notes to be issued, and return any Old Notes not tendered or not accepted for exchange, in the name(s) of the undersigned (and, in the case of Old Notes tendered by book-entry transfer, by credit to the account at DTC). Similarly unless otherwise indicated under "Special Delivery Instructions," please mail any certificates for Old Notes not tendered or not accepted for exchange (and accompanying documents, as appropriate), and any certificates for New Notes, to the undersigned at the address shown below the undersigned's signatures). If both "Special Exchange Instructions" and "Special Delivery Instructions" are completed, please cause the New Notes to be issued, and return any Old Notes not tendered or not accepted for exchange, in the name(s) of, and deliver any certificates for such Old Notes or New Notes to, the person(s) so indicated (and in the case of Old Notes tendered by book-entry transfer, by credit to the account at DTC so indicated). The undersigned recognizes that the Issuer has no obligation, pursuant to the "Special Exchange Instructions," to transfer any Old Notes from the name of the registered holder(s) thereof if the Issuer does not accept for exchange any of the Old Notes so tendered. Holders of Old Notes whose Old Notes are not immediately available or who cannot deliver all other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus. 5 TENDERING HOLDER(S) SIGN HERE ----------------------------------------------------------- ----------------------------------------------------------- (SIGNATURE OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY) ----------------------------------------------------------- (Date) ----------------------------------------------------------- (Date) (MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S) FOR OLD NOTES HEREBY TENDERED OR IN WHOSE NAME OLD NOTES ARE REGISTERED ON THE BOOKS OF DTC OR ONE OF ITS PARTICIPANTS, OR BY ANY PERSON(S) AUTHORIZED TO BECOME THE REGISTERED HOLDER(S) BY ENDORSEMENTS AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH THE FULL TITLE OF SUCH PERSON. SEE INSTRUCTION 3.) Name(s): __________________________________________________ ----------------------------------------------------------- (Please Print) Capacity: _________________________________________________ Address: __________________________________________________ ----------------------------------------------------------- (Including Zip Code) Area Code and Telephone Number: ___________________________ Taxpayer Identification No.: ______________________________ GUARANTEE OF SIGNATURE(S) (If Required--See Instruction 3) Authorized Signature: _____________________________________ Name: _____________________________________________________ Title: ____________________________________________________ Address: __________________________________________________ ----------------------------------------------------------- (Including Zip Code) Name of Firm: _____________________________________________ Area Code and Telephone No.: ______________________________ Dated: , 2000 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. A holder of Old Notes may tender the same by (i) properly completing, signing and dating this Letter of Transmittal or a facsimile hereof (all references in the Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates, if applicable, representing the Old Notes being tendered and any required signature guarantees and any other documents required by this Letter of Transmittal, to the Exchange Agent at its address set forth above on or prior to the Expiration Date, or (ii) complying with the procedure for book-entry transfer described below, or (iii) complying with the guaranteed delivery procedures described below. Holders of Old Notes may tender Old Notes by book-entry transfer by crediting the Old Notes to the Exchange Agent's account at DTC in accordance with DTC's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer. DTC participants that are accepting the Exchange Offer should transmit their acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send a computer-generated message (an "Agent's Message") to the Exchange Agent for its acceptance in which the holder of the Old Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter of Transmittal, the DTC participant confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this Letter of Transmittal (including any representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent. Delivery of the Agent's Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent's Message. DTC participants may also accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through ATOP. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE ISSUER. Holders whose Old Notes are not immediately available or who cannot deliver their Old Notes and all other required documents to the Exchange Agent on or prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis must tender their Old Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) on or prior to the Expiration Date, the Exchange Agent must have received from such Eligible Institution either a properly completed and duly executed notice of guaranteed delivery by mail, hand delivery or facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or a properly transmitted agent's message and notice of guaranteed delivery setting forth the name and address of the tendering holder, the registered number(s) of the Old Notes, the principal amount of the Old Notes tendered and stating that the tender is being made thereby; and (iii) all tendered Old Notes (or a confirmation of any book-entry transfer of such Old Notes into the Exchange Agent's account at a book-entry transfer facility) as well as this Letter of Transmittal and all other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission, all as provided in the Prospectus. 7 No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Old Notes for exchange. 2.PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted only in integral multiples of $1,000. If less than the entire principal amount of Old Notes evidenced by a submitted certificate is tendered, the tendering holder must fill in the aggregate principal amount of Old Notes tendered in the box entitled "Description of Old Notes Tendered Herewith." A newly issued certificate for the Old Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated. Except as otherwise provided in the prospectus, holders of Old Notes may withdraw their tenders at any time on or prior to the expiration date. To be effective with respect to the tender of Old Notes, a written notice (which may be by telegram, telex, facsimile transmission or letter) of withdrawal must: (i) be received by the Exchange Agent at one of the addresses for the Exchange Agent set forth above; (ii) specify the name of the person who tendered the Old Notes to be withdrawn; (iii) identify the Old Notes to be withdrawn (including the principal amount of such Old Notes, or, if applicable, the certificate numbers shown on the particular certificates evidencing such Old Notes and the principal amount of Old Notes represented by such certificates); (iv) where certificates for Old Notes have been transmitted, specify the name in which those Old Notes were registered, if different from that of the withdrawing holder; (v) include a statement that such holder is withdrawing its election to have such Old Notes exchanged; and (vi) be signed by the holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantee). The Exchange Agent will return the properly withdrawn Old Notes promptly following receipt of notice of withdrawal. If Old Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Old Notes or otherwise comply with the book-entry transfer facility's procedures. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Issuer, and such determination will be final and binding on all parties. rAny Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described above, such Old Notes will be credited to an account with such book-entry transfer facility specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be re-tendered by following one of the procedures described under the caption "The Exchange Offer--Procedures for Tendering" in the Prospectus at any time on or prior to the Expiration Date. 3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Old Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. 8 If a number of Old Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Old Notes. When this Letter of Transmittal is signed by the registered holder or holders (which term, for the purposes described herein, shall include the book-entry transfer facility whose name appears on a security listing as the owner of the Old Notes) of Old Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required unless New Notes issued in exchange therefor are to be issued, or Old Notes are not tendered or not exchanged are to be returned, in the name of any person other than the registered holder. Signatures on any such certificates or separate written instruments of transfer or exchange must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Old Notes listed, such Old Notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder's name appears on the Old Notes and an eligible institution must guarantee the signature on the bond power. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuer, proper evidence satisfactory to the Issuer of their authority to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution (as defined below), unless Old Notes are tendered: (i) by a holder who has not completed the box entitled "Special Exchange Instructions" or "Special Delivery Instructions" on this Letter of Transmittal; or (ii) for the account of an Eligible Institution (as defined below). In the event that the exhibit signatures in this Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an eligible guarantor institution which is a member of a firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another "eligible institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible Institution"). If Old Notes are registered in the name of a person other than the signer of this Letter of Transmittal, the Old Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Issuer, in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. 4. SPECIAL EXCHANGE AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, as applicable, the name and address to which the New Notes or certificates for Old Notes not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the book- entry transfer facility as such holder may designate. 5. TRANSFER TAXES. The Issuer shall pay all transfer taxes, if any, applicable to the transfer and exchange of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes or Old Notes not tendered or accepted for exchange are to be delivered to, or are registered or issued in the name of any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other 9 than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer and exchange of Old Notes to the Issuer or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder. 6. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 7. MUTILATED, LOST, STOLEN OR DESTROYED SECURITIES. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated below for further instructions. 8. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of Letters of Transmittals or Old Notes will be resolved by the Issuer, whose determination will be final and binding. The Issuer reserves the absolute right to reject any or all Letters of Transmittal or tenders that are not in proper form or the acceptance of which would, in the opinion of the Issuer's counsel, be unlawful. The Issuer also reserves the right to waive any irregularities or conditions of tender as to the particular Old Notes covered by any Letter of Transmittal or tendered pursuant to such letter. None of the Issuer, the Exchange Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Issuer's interpretation of the terms and conditions of the Exchange Offer shall be final and binding. 9. SUBSTITUTE FORM W-9. Each holder of Old Notes whose Old Notes are accepted for exchange (or other payee) is required to provide a correct taxpayer identification number ("TIN"), generally the holder's Social Security or federal employer identification number, and certain other information, on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify that the holder (or other payee) is not subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the holder (or other payee) to a $50 penalty imposed by the Internal Revenue Service and 31% federal income tax backup withholding on payments made in connection with the Old Notes. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number indicated above. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY THEREOF (TOGETHER WITH CERTIFICATES OF OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 10 IMPORTANT TAX INFORMATION Under current United States federal income tax law, a holder of Old Notes whose tendered Old Notes are accepted for exchange is required to provide the Company (as payor), through the Exchange Agent, with such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 or otherwise establish a basis for exemption from backup withholding. If such holder of Old Notes is an individual, the TIN is such holder's social security number. If the Exchange Agent is not provided with the correct taxpayer identification number, the holder of Old Notes may be subject to a penalty imposed by the Internal Revenue Service. In addition, delivery of such holder's New Notes may be subject to backup withholding. Certain holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. Exempt holders of Old Notes should indicate their exempt status on Substitute Form W-9. A Canadian resident or other non-U.S. holder may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed Internal Revenue Service Form W-8 (which the Exchange Agent will provide upon request) signed under penalty of perjury, attesting to the holder's exempt status. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Company is required to withhold 31% of any payment made to the holder of Old Notes or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. Substitute Form W-9; Taxpayer Identification Number To prevent backup withholding on payments that are made with respect to Old Notes exchanged in the Exchange Offer, each holder of Old Notes is required to provide the Exchange Agent with either (i) the holder's correct TIN by completing the form below, certifying that the TIN provided on Substitute Form W-9 is correct (or that such holder of Old Notes is awaiting a TIN) and that (A) the holder of Old Notes has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (B) the Internal Revenue Service has notified the holder of Old Notes that he or she is no longer subject to backup withholding; or (ii) an adequate basis for exemption (by, in the case of a Canadian resident holder, submitting a completed Form W-8). The holder of Old Notes is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Old Notes. If the Old Notes are held in more than one name or are not held in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance regarding which number to report. - ------------------------------------------------------------------------------- Name of Holder (if joint, list first and circle the name of the person or entity whose number you enter in Part I below) - ------------------------------------------------------------------------------- Address (if Holder does not complete, signature below will constitute a certification that the above address is correct) 11 Dated: ______ (Not required by Canadian resident holders) PAYER'S NAME: Better Minerals and Aggregates Company Part 1--PLEASE PROVIDE YOUR SUBSTITUTE TIN IN THE BOX AT RIGHT AND ----------------------- Form W-9 CERTIFY BY SIGNING AND Social Security Number DATING BELOW. OR Department of ----------------------- the Treasury Internal Employer Revenue Identification Number Service -------------------------------------------------------- Part 2--Certification--Under Penalties of Perjury, I certify that: (1)The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me) and (2)I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. Payer's Request for Taxpayer Part 3 Identification Number (TIN) Awaiting TIN [_] Certificate instructions--You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup with- holding because of under-reporting interest or dividends on your tax re- turn. However, if after being noti- fied by the IRS that you were subject to backup withholding you receive an- other notification from the IRS stat- ing that you are no longer subject to backup withholding, do not cross out item (2). Signature: _____________ Date: ______ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver such an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide such a number. - ------------------------------------------------- Signature -------------------------- Date (DO NOT WRITE IN THE SPACE BELOW)
Certificate Surrendered Old Notes Tendered Old Notes Accepted ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Delivery Prepared by ______ Checked By ______ Date ______ 13 EX-99.2 73 FORM OF LETTER TO CLIENTS EXHIBIT 99.2 BETTER MINERALS AND AGGREGATES COMPANY OFFER TO EXCHANGE UP TO $150,000,000 OF THEIR 13% SENIOR SUBORDINATED NOTES DUE 2009 FOR ANY AND ALL OF THEIR OUTSTANDING 13% SENIOR SUBORDINATED NOTES DUE 2009 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000 UNLESS EXTENDED. To Our Clients: Enclosed for your consideration is a Prospectus dated , 2000 (the "Prospectus") and a Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by Better Minerals and Aggregates Company (the "Issuer") to exchange their 13% Senior Subordinated Notes due 2009 (the "New Notes") for an equal principal amount of their outstanding 13% Senior Subordinated Notes due 2009 (the "Old Notes" and together with the New Notes, the "Notes"). As set forth in the Prospectus, the terms of the New Notes are identical in all material respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Exchange and Registration Rights Agreement dated as of October 1, 1999 among the Issuer, its subsidiary guarantors, Chase Securities Inc. and BNP Capital Markets, LLC (the "Exchange and Registration Rights Agreement"). Old Notes may be tendered only in integral multiples of $1,000. The enclosed material is being forwarded to you as the beneficial owner of Old Notes carried by us for your account or benefit but not registered in your name. An exchange of any Old Notes may only be made by us as the registered holder and pursuant to your instructions. Therefore, the Issuer urge beneficial owners of Old Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such holder promptly if they wish to exchange Old Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to exchange any or all such Old Notes held by us for your account or benefit, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to exchange your Old Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to exchange Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer expires at 5:00 p.m., New York City time, on , 2000, unless extended. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 2000, unless the Exchange Offer is extended as provided in the Prospectus, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. A tender of Old Notes may be withdrawn at any time on or prior to 5:00 p.m., New York City time, on the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for the exchange of $1,000 principal amount of the New Notes for each $1,000 principal amount of the Old Notes, of which $150,000,000 aggregate principal amount was outstanding as of , 2000. The terms of the New Notes are identical in all respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Exchange and Registration Rights Agreement. 2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE "THE EXCHANGE OFFER--CERTAIN CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS. 3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on , , unless extended. 4. The Issuer has agreed to pay the expenses of the Exchange Offer. 5. Any transfer taxes incident to the transfer of Old Notes from the tendering holder to the Issuer will be paid by the Issuer, except as provided in the Prospectus and the Letter of Transmittal. The Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Old Notes residing in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. If you wish us to tender any or all of your Old Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the attached instruction form. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to exchange Old Notes held by us and registered in our name for your account or benefit. INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer of Better Minerals and Aggregates Company. This will instruct you to tender for exchange the aggregate principal amount of Old Notes indicated below (or, if no aggregate principal amount is indicated below, all Old Notes) held by you for the account or benefit of the undersigned, pursuant to the terms of and conditions set forth in the Prospectus and the Letter of Transmittal. Aggregate Principal Amount of Old Notes to be tendered for exchange: $ ___________________________ *I (we) understand that if I (we) sign this instruction form without indicating an aggregate principal amount of Old Notes in the space above, all Old Notes held by you for my (our) account will be tendered for exchange. - ------------------------------------------------------------------------------- Signature(s) - ------------------------------------------------------------------------------- Capacity (full title), if signing in a fiduciary or representative capacity - ------------------------------------------------------------------------------- Name(s) and address, including zip code Date: _________________________ - ------------------------------------------------------------------------------- Area Code and Telephone Number - ------------------------------------------------------------------------------- Taxpayer Identification or Social Security No. EX-99.3 74 FORM OF LETTER TO REGISTERED HOLDERS EXHIBIT 99.3 BETTER MINERALS AND AGGREGATES COMPANY OFFER TO EXCHANGE UP TO $150,000,000 OF THEIR 13% SENIOR SUBORDINATED NOTES DUE 2009 FOR ANY AND ALL OF THEIR OUTSTANDING 13% SENIOR SUBORDINATED NOTES DUE 2009 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000, UNLESS EXTENDED. , 2000 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Better Minerals and Aggregates Company (the "Issuer"), is offering, upon the terms and subject to the conditions set forth in the Prospectus dated , 2000 (the "Prospectus") and the accompanying Letter of Transmittal enclosed herewith (which together constitute the "Exchange Offer"), to exchange their 13% Senior Subordinated Notes due 2009 (the "New Notes") for an equal principal amount of their 13% Senior Subordinated Notes due 2009 (the "Old Notes" and together with the New Notes, the "Notes"). As set forth in the Prospectus, the terms of the New Notes are identical in all material respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Exchange and Registration Rights Agreement dated as of October 1, 1999 among the Issuer, its subsidiary guarantors, Chase Securities Inc. and BNP Capital Markets, LLC. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE "THE EXCHANGE OFFER--CERTAIN CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. the Prospectus, dated ; 2000. 2. the Letter of Transmittal for your use (unless Old Notes are tendered by an Agent's Message) and for the information of your clients (facsimile copies of the Letter of Transmittal may be used to tender Old Notes); 3. a form of letter which may be sent to your clients for whose accounts you hold Old Notes registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 4. a Notice of Guaranteed Delivery; 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. a return envelope addressed to The Bank of New York, the Exchange Agent. YOUR PROMPT ACTION IS REQUESTED. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000, UNLESS EXTENDED. PLEASE FURNISH COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR WHOM YOU HOLD OLD NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE AS QUICKLY AS POSSIBLE. In all cases, exchanges of Old Notes accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (a) certificates representing such Old Notes, or confirmation of book entry transfer of such Old Notes, as the case may be, (b) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, or an Agent's Message and (c) any other required documents. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, the Letter of Transmittal or an Agent's Message and in either case together with any other documents required by the Letter of Transmittal to the Exchange Agent on or prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth under the caption "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. The Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Old Notes residing in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. The Issuer will not pay any fees or commissions to brokers, dealers or other persons for soliciting exchanges of Notes pursuant to the Exchange Offer. The Issuer will, however, upon request, reimburse you for customary clerical and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. The Issuer will pay or cause to be paid any transfer taxes payable on the transfer of Notes to them, except as otherwise provided in Instruction 5 of the Letter of Transmittal. Questions and requests for assistance with respect to the Exchange Offer or for copies of the Prospectus and Letter of Transmittal may be directed to the Exchange Agent by telephone at (212) or by facsimile at (212) . Very truly yours, Better Minerals and Aggregates Company NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE ISSUER, OR ANY AFFILIATE THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. EX-99.4 75 FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.4 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ALL OUTSTANDING 13% SENIOR SUBORDINATED NOTES DUE 2009 IN EXCHANGE FOR NEW 13% SENIOR SUBORDINATED NOTES DUE 2009 OF BETTER MINERALS AND AGGREGATES COMPANY Registered holders of outstanding 13% Senior Subordinated Notes due 2009 (the "Old Notes") who wish to tender their Old Notes in exchange for a like principal amount of new 13% Senior Subordinated Notes due 2009 (the "New Notes") and whose Old Notes are not immediately available or who cannot deliver their Old Notes or the Letter of Transmittal (or any other required documents) to The Bank of New York (the "Exchange Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or mail to the Exchange Agent. See "The Exchange Offer--Procedures for Tendering" in the Prospectus dated [ ], 2000 of the Better Minerals and Aggregates Company (the "Prospectus"). The Exchange Agent for the Exchange Offer is: THE BANK OF NEW YORK For Overnight Delivery, Delivery by Hand or Delivery by Registered or Certified Mail: The Bank of New York 101 Barclay St. New York, NY 10286 Attention: Kim Lau, Reorg-7 EAST By Facsimile Transmission (for eligible institutions only): (212) 815-6339 Confirm facsimile by telephone only: (212) 815-3750 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an eligible institution (as defined in the Prospectus), such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. Ladies and Gentlemen: The undersigned hereby tenders for exchange to the Issuer, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." The undersigned understands and acknowledges that the Exchange Offer will expire at 5:00 p.m., New York City time, on , 2000, unless extended by the Issuer. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 2000 unless the Exchange Offer is extended as provided in the Prospectus, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. All authority conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death, incapacity or dissolution of the undersigned, and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. SIGNATURE - ------------------------------------------- Date: ____________________________ - ------------------------------------------- Date: ____________________________ (Signature(s) of Holder(s) or Authorized Signatory) Area Code and Telephone Number: - ------------------------------------------------------------------------------- Name(s): - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Please Print) Capacity (full title), if signing in a fiduciary or representative capacity: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security No.: - -------------------------------------------------------------------------------- Principal Amount of Old Notes Tendered (must be in integral multiples of $1,000): - -------------------------------------------------------------------------------- Certificate Number(s) of Old Notes (if available): - -------------------------------------------------------------------------------- Aggregate Principal Amount Represented by Certificate(s): - -------------------------------------------------------------------------------- IF OLD NOTES WILL BE TENDERED BY BOOK-ENTRY TRANSFER, PROVIDE THE FOLLOWING INFORMATION: DTC Account Number: - -------------------------------------------------------------------------------- Transaction Number: - -------------------------------------------------------------------------------- GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth on the reverse hereof, the certificates representing the Old Notes (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at the book-entry transfer facility), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the Expiration Date (as defined in the Letter of Transmittal). Name of Firm: -------------------------------------- --------------------------- (Authorized Signature) Address: ________________________________ ------------------------------------------ Title: ----------------------- Name: - -------------------------------------------------- --------------------- (Zip Code) Please Type or Print Area Code and Date: ____________________ Telephone No.: ------------------------------------- NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. -----END PRIVACY-ENHANCED MESSAGE-----