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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

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. o

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. o

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. o


(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f) of the rules and regulations under the Securities Act of 1933, as amended.

(2)	Pursuant to Rule 457(n) of the rules and regulations under the Securities Act of 1933, as amended, no separate fee for the guarantees is payable.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant 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 this Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

The information in this Preliminary Prospectus is not complete and may be changed without notice. This Preliminary Prospectus is not an offer to sell these notes and is not a solicitation of an offer to buy these notes in any state where such offer or sale is not permitted.

We are offering to exchange all of our outstanding unregistered 10 1/4% senior notes due 2011 for registered 10 1/4% senior notes due 2011. We refer to the unregistered senior notes as the outstanding notes and the registered senior notes as the exchange notes. We issued the outstanding notes on June 6, 2003. As of the date of this prospectus, an aggregate principal amount of $600,000,000 million outstanding notes is outstanding. Please consider the following:


	•	Our offer to exchange the outstanding notes for the exchange notes expires at 5:00 p.m., New York City time, on , 2003, unless we extend the offer.

	•	You should carefully review the procedures for tendering the outstanding notes beginning on page 60 of this prospectus. If you do not follow these procedures, we may not exchange your outstanding notes for exchange notes.

	•	We will not receive any proceeds from the exchange offer.

	•	If you do not tender your outstanding notes, you will continue to hold unregistered securities and your ability to transfer them could be adversely affected.

	•	You may withdraw tendered outstanding notes at any time before the expiration of the exchange offer.

The terms of the exchange notes will be substantially identical to the outstanding notes, except for the elimination of some transfer restrictions, registration rights and liquidated damages provisions relating to the outstanding notes. We will pay interest on the exchange notes semi-annually in cash in arrears on June 15 and December 15 of each year, starting on December 15, 2003. We may redeem the exchange notes, in whole or in part, on or after June 15, 2007, at the redemption prices described in this prospectus, plus accrued interest. All of our existing and future domestic restricted subsidiaries will guarantee the exchange notes on a senior basis, other than our accounts receivable facility subsidiary and our capital trust subsidiary.

There is currently no public market for the exchange notes. We do not intend to list the exchange notes on any securities exchange. Therefore, we do not anticipate that an active public market for the exchange notes will develop.

You should read the section titled “Risk Factors” beginning on page 14 for a discussion of specific factors that you should consider before participating in this exchange offer.

These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. 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 notes received in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the consummation of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

This prospectus incorporates important business and financial information about Texas Industries, Inc. That is not included in or delivered with this prospectus. See “Where You Can Find More Information” for further information regarding this important business and financial information.

WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AS IF WE HAD AUTHORIZED IT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, NOR DOES THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.

We make no representation to any purchaser of the notes regarding the legality of any investment in the notes by the purchaser under any legal investment or similar laws or regulations. You should not consider any information in this prospectus to be legal, business or tax advice. You should consult your own attorney, business advisor and tax advisor for legal, business and tax advice regarding an investment in the notes.

This prospectus summarizes documents and other information in a manner we believe to be accurate, but we refer you to the actual documents for a more complete understanding of the information we discuss in this prospectus. In making an investment decision, you must rely on your own examination of these

The data included in this prospectus regarding markets and ranking, including the size of certain markets and our position and the position of our competitors within these markets, and other data, are based on independent industry publications, reports of government agencies or other published industry sources, and our estimates are based on our management’s knowledge and experience in the markets in which we operate. Our estimates have been based on information obtained from our customers, suppliers, trade and business organizations and other contacts in the markets in which we operate. However, this information may prove to be inaccurate because of the method by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in data gathering. As a result, you should be aware that market, ranking and other similar data included in this prospectus, and estimates and beliefs based on that data, may not be reliable. You should also be aware that Melvin G. Brekhus, our Executive Vice President, Cement, Aggregate and Concrete, is the Chairman Emeritus and former Chairman of the Portland Cement Association, an industry group whose publications we reference in this prospectus and that Tommy A. Valenta, our Executive Vice President, Steel, is a member of the board of the American Institute of Steel Construction and the Steel Manufacturers Association, industry groups whose research data is used in this prospectus. Neither we nor the initial purchasers can guarantee the accuracy or completeness of the information contained in this prospectus.

This prospectus contains “forward-looking statements.” All statements other than statements of historical fact are “forward-looking statements.” Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words. Such forward-looking statements may be contained in the sections “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Industry Overview” and “Business,” among other places. Forward-looking statements include statements concerning:


	•	future results of operations;

	•	future cash flows and liquidity;

	•	future capital expenditures;

	•	competitive pressures and general economic and financial conditions;

	•	levels of construction activity;

	•	levels of import activity;

	•	inclement weather;

	•	the occurrence of unanticipated equipment failures and plant outages;

	•	cost and availability of raw materials, fuel and energy;

	•	environmental conditions and regulations; and

	•	any assumptions underlying the foregoing.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in this prospectus. We do not intend, and we undertake no obligation, to update any forward-looking statement. Currently known risk factors include, but are not limited to, the factors described in this prospectus in the section “Risk Factors.” We urge you to review carefully the section “Risk Factors” in this prospectus for a more complete discussion of the risks of an investment in the notes.

This summary highlights the information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all the information that may be important to you. For a more complete understanding of this offering, we encourage you to read this entire prospectus and documents to which we refer you. You should read the following summary together with the more detailed information and consolidated financial statements and the notes to those statements included elsewhere in this prospectus. Except as noted herein or as the context may otherwise require, the words “TXI,” “we,” “our” and “us” refer to Texas Industries, Inc. and its subsidiaries. The phrase “fiscal year” refers to the twelve months ended May 31st of the relevant year and the term “ton” means 2,000 pounds.

We are the largest producer of cement in Texas, a major cement producer in California and the second largest supplier of structural steel products in North America. We are also a major supplier of construction aggregates, ready-mix concrete, concrete products and steel bar products. We are the only North American producer of both cement and steel. We derive significant benefits from operating in both the cement and steel industries, primarily in lowering production costs, enhancing productivity through the innovative recycling of co-products of manufacturing and diversifying end-use markets and customers for our products. As of February 28, 2003, we operated 106 manufacturing facilities in 7 states. For the twelve months ended February 28, 2003, we had net sales of $1,267.4 million, of which $664.1 million (52.4% of net sales) was generated by our cement, aggregate and concrete segment and $603.3 million (47.6% of net sales) was generated by our steel segment. For the same period, we had EBITDA of $145.8 million. See “Selected Consolidated Financial And Other Data” for a discussion of EBITDA.

During the last four years we completed two major projects to add significant capacity to our cement and steel operations that we believe strengthened our competitive position, increased our operating efficiencies and broadened our product lines.


	•	In May 2001, we completed the expansion of our Midlothian, Texas cement manufacturing plant. We invested $243.3 million to add state-of-the-art dry process cement manufacturing capability to our facility. This expansion added approximately 1.5 million tons of capacity, which increased our total cement production capacity by over 40% to 5.0 million tons.

	•	In August 1999, we began operation of our new state-of-the-art, low-cost structural steel facility in Dinwiddie County, Virginia. We invested $543.2 million to construct our Virginia facility, which is designed to use recycled steel scrap to produce a large variety of structural steel products, including sheet piling products. This expansion added approximately 1.2 million tons of capacity, which increased our total steel production capacity by over 60% to 3.0 million tons.

We financed these expansion projects through cash from operations and long-term financings. Since completing these two major projects, we have successfully focused on reducing our debt. Total debt (including current portion) decreased by $155.8 million from $623.5 million at May 31, 2001, to $467.7 million at February 28, 2003.

Cement, Aggregate and Concrete. For the twelve months ended February 28, 2003, our cement, aggregate and concrete segment, which we refer to as our CAC segment, generated $664.1 million in net sales. We produce cement, stone, sand and gravel, ready-mix concrete and other products, which represented approximately 42%, 11%, 31% and 16%, respectively, of segment net sales for the twelve months ended February 28, 2003. As of February 28, 2003, we operated 104 facilities that supplied such products. Our cement production and distribution facilities are concentrated primarily in Texas and California, the two largest cement markets in the United States. In the twelve months ended February 28, 2003, we shipped 4.9 million tons of finished cement, 18.7 million tons of stone, sand and gravel and 3.6 million cubic yards of ready-mix concrete. We primarily market our CAC segment products in the southwestern United States to contractors and distributors who participate in public works, residential and non-residential construction.

Steel. For the twelve months ended February 28, 2003, our steel segment generated $603.3 million in net sales. Our two steel facilities, located in Midlothian, Texas and Dinwiddie County, Virginia, produce structural steel, steel bar products, and other steel products, which represented approximately 78%, 19% and 3%, respectively, of segment net sales for the twelve months ended February 28, 2003. Our non-union workforce manufactures steel from recycled steel scrap, utilizing electric arc furnaces, continuous casting and automated rolling mills. Our structural and bar mills shipped 1.8 million tons of finished products in the twelve months ended February 28, 2003. We manufacture over 230 different types, sizes and grades of structural steel and steel bar products and market these products throughout the United States and, to a limited extent, in Canada and Mexico. Our structural steel products include wide flange beams, channels, piling products and other shapes and our steel bar products include reinforcing bar and specialty bar products. We market our products to steel service centers and steel fabricators for use in the construction industry, as well as to cold finishers, forgers and original equipment manufacturers for use in the railroad, defense, automotive, manufactured housing and energy industries.

Cement, Aggregate and Concrete. According to the Portland Cement Association, consumption of portland cement in the United States in 2001 approximated 124 million tons and domestic capacity approximated 103 million tons during the same period. A favorable consumption to capacity imbalance has existed since 1994, with excess consumption met by imported cement. Approximately half of the cement consumed in the United States is in public works projects. The remaining amount is consumed approximately equally by non-residential and residential construction projects. Given the high transportation costs of cement relative to its value, cement is typically sold within a 300 mile radius from the producing plant. Consequently, even cement producers with global operations compete on a regional basis and the ability to compete is based largely upon location, operating costs, prices and quality of service. Construction aggregates, such as crushed stone, sand and gravel, are consumed in virtually all types of construction. The concrete business involves the mixing of cement, sand, gravel or crushed stone and water to form concrete that is subsequently marketed and distributed to numerous construction contractors. Consumption of aggregates and concrete products largely depends on regional levels of construction activity, and therefore tends to follow consumption patterns similar to those of cement.

Structural Steel. The U.S. steel industry is composed generally of two major types of producers: integrated mills and mini-mills. Integrated mills, which use blast furnaces to make molten steel from iron ore and coke, are more energy and capital-intensive than mini-mills, which melt recycled steel scrap with electric arc furnaces. As mini-mill production technologies have evolved, mini-mill producers have displaced integrated mill producers as manufacturers of numerous steel products. Today in the United States, the primary producers of structural steel and steel bar products utilize the mini-mill process. The market for structural steel, our primary steel market, is a niche market in the U.S. steel industry, with consumption totaling 7.4 million tons in 2002, or approximately 6% of total U.S. steel consumed. Structural steel products include wide flange beams, channels, piling and other shapes that are primarily used in commercial, retail, industrial, institutional, public and warehouse construction. Steel bar products include reinforcing bar, which is used in concrete structures to increase tensile strength, and specialty bar products. Specialty bar products include merchant bar products and products made of engineering steels that are used in applications where the service conditions or component design requirements are exacting. Such applications include oil country goods, automotive components, industrial hardware and tools.

believe that our Texas cement manufacturing facilities, recently enhanced by the Midlothian plant expansion, are among the lowest cost cement manufacturing facilities in our region. Our low operating costs are primarily a result of our efficient plant designs and operations, high productivity rate and innovative manufacturing processes. For example, we manufactured 5.2 tons of cement per man hour at our new Midlothian cement facility during the nine months ended February 28, 2003, which we believe is well above the industry average for dry process plants with pre-heater pre-calciners. Also, our patented CemStar^SM technology, which utilizes a co-product of steel making, allows us to increase production of cement by approximately 6% with little additional cost.

Another way we focus on lowering our operating costs is through the use of alternative fuels in our Texas cement facilities and co-generation of electricity at our California cement facility. The Texas cement facilities replace approximately 13% of our fossil fuel requirements with waste-derived fuels and tires in order to reduce overall energy costs. Waste heat from our California portland cement plant, supplemented with natural gas, is used to generate electricity for cement manufacturing, giving us a reliable supply of electricity at low cost.

In contrast to integrated steel producers, our steel facilities use electric arc furnaces to directly melt recycled steel scrap thus entirely eliminating the more energy and capital-intensive blast furnace. We use our patented near-net shape casting technology at both of our steel facilities to cast molten steel into a shape that is closer to a product’s final shape than traditional casting methods. This technology provides energy and capital cost savings in manufacturing wide flange beams and other structural steel products. Further, when building our Virginia plant, we installed a vertical shaft electric arc furnace that enables us to pre-heat our recycled steel scrap prior to melting, thus reducing our energy costs. Our Texas steel facility benefits from our operation of one of the largest steel shredders in the world, which currently supplies approximately 32% of its total steel raw material needs. The shredder enables us to purchase lower cost, readily available, unprocessed recycled steel scrap rather than higher cost, preprocessed recycled steel scrap.

Leading Market Positions. We strive to be the number one or two supplier in desirable markets. We are the largest producer of cement in Texas (with 30% of the total capacity in the state) and a major cement producer in California. We are also the second largest supplier of structural steel products in North America and the largest supplier of expanded shale and clay specialty aggregate products west of the Mississippi River. We believe we are the second largest supplier of stone, sand and gravel aggregate products and one of the largest suppliers of ready-mix concrete in North Texas and one of the largest suppliers of sand and gravel aggregate products and ready-mix concrete in Louisiana. We believe our leadership in these markets enhances our competitive position.

Strategic Locations and Markets. The strategic locations of our facilities near our customer base and sources of raw materials allows us to access the largest cement and steel consuming markets in the United States. Our cement manufacturing facilities are located in California and Texas, the two largest U.S. cement markets. During 2002, California and Texas accounted for 28.4 million tons of cement consumption or approximately 24% of total U.S. cement consumption. Consumption of cement has exceeded domestic capacity over the last several years in Texas and the California region, which includes California, Arizona, Nevada and Utah, and continues to do so today. In 2002, California and Texas had significant capital dedicated towards highway construction and maintenance under the federal Transportation Equity Act for the 21st Century (“TEA-21”). In 2003, California and Texas were allocated $2.5 billion and $2.2 billion, respectively, in highway funding under the Fiscal Year 2003 Omnibus Appropriations Bill, approved by the House and Senate on February 13, 2003, making these two states the largest funding recipients in the United States. In addition, our steel facilities are located in Texas and Virginia, which affords broad U.S. coverage ranging from the Northeast corridor to the West Coast.

downturns in any one product, end-user market or operating segment. As a result, our revenue streams are derived from multiple end-use markets, including the public works, residential, commercial, retail, industrial and institutional construction sectors, as well as the railroad, defense, automotive, manufactured housing and energy industries. Accordingly, we have a broad and diverse customer base with no one customer accounting for more than 2.3% of our total net sales for the twelve months ended February 28, 2003.

We believe that it is important to diversify selectively into profitable markets that have long-term growth potential. For example, at our Virginia steel facility we have begun making PZ piling products, which are used primarily in public works projects as an interlocking retaining wall system. This product is difficult to make and subject to less competition and, as such, offers an opportunity to generate higher margins than can be made on other structural steel and piling products.

Long-Standing Customer Relationships. We have established a solid base of long-standing customer relationships. We strive to achieve customer loyalty by delivering superior customer service and maintaining an experienced sales force with in-depth market knowledge. We believe our long-standing relationships and our leading market positions help to provide additional stability to our operating performance and make us a preferred supplier.

Experienced Management Team. Our four senior managers, Robert D. Rogers, Richard M. Fowler, Melvin G. Brekhus and Tommy A. Valenta, have 135 years of combined experience in our business segments including a combined 118 years service at TXI. Members of this team have led our company through several industry cycles. Over the course of our history, they have demonstrated successful management techniques with positive operating and shareholder results.

On June 6, 2003, we entered into the following transactions to improve our liquidity and provide us with more financial and operating flexibility. In this prospectus, we refer to these transactions as the “Refinancing.”

New Senior Secured Revolving Credit Facility. On June 6, 2003, certain of our subsidiaries entered into a new senior secured revolving credit facility providing for borrowings up to $200.0 million, subject to a borrowing base. We, each of the borrowers and certain of our other subsidiaries have guaranteed the obligations of the borrowers under the facility. The facility is secured by first priority liens on all of the borrowers’ and some or all of the guarantors’ existing and future acquired accounts receivable, inventory, deposit accounts and certain of their general intangibles.

Notes Offering. On June 6, 2003, we issued $600.0 million in aggregate principal amount of outstanding notes in a private placement under Rule 144A of the Securities Act. We used the net proceeds from the sale of the outstanding notes, together with borrowings under our new senior secured credit facility, to repurchase $283.0 million principal amount of our previously issued senior notes, repay all debt outstanding under our old credit facility and repurchase our interests in the defined pool of trade receivables previously sold under our account receivable facility. In addition, we will use a portion of the net proceeds from the sale of the outstanding notes, together with borrowings under our new senior secured credit facility, to retire all $95.5 million of our variable rate industrial development revenue bonds on or before August 5, 2003.

The outstanding senior notes are fully and unconditionally guaranteed by each of our existing and future domestic restricted subsidiaries, other than our accounts receivable facility subsidiary and our capital trust subsidiary. The outstanding notes are general unsecured senior obligations of Texas Industries, Inc. and, accordingly, they rank:


	•	equally with all of its existing and future unsecured un-subordinated debt;

	•	effectively behind all of its existing and future secured debt to the extent of the assets securing such debt, including the new senior secured credit facility;


	•	ahead of any of its existing and future subordinated debt, including its 5.5% convertible subordinated debentures due 2028 that underlie its capital trust subsidiary’s company-obligated mandatorily redeemable preferred securities; and

	•	structurally behind all of the existing and future liabilities of its subsidiaries that are not guarantors, including trade payables.

The guarantees of the outstanding notes are general unsecured senior obligations of the guarantors. Accordingly, they rank equally with all unsecured unsubordinated debt of the guarantors, effectively behind all secured debt of the guarantors to the extent of the assets securing such debt, and ahead of all future subordinated debt of the guarantors.

We are incorporated under the laws of the state of Delaware. We maintain our principal executive headquarters at 1341 West Mockingbird Lane, Suite 700W, Dallas, Texas 75247. Our telephone number is (972) 647-6700.

Following is a summary of the principal terms of the exchange offer. A more detailed description is contained in the prospectus under the heading “The Exchange Offer.”


		exchange for any reason without expense to you promptly after the exchange offer expires or terminates.

Accrued interest on the exchange notes and the outstanding notes		Interest on the exchange notes will accrue from the last interest payment date on which interest was paid on the outstanding notes or, if no interest was paid on the outstanding notes, from the date of issuance of the outstanding notes, which was June 6, 2003. Holders whose outstanding notes are accepted for exchange will be deemed to have waived the right to receive any interest on the outstanding notes.

Conditions of the exchange offer		The exchange offer is subject to customary conditions that may be waived by us; however, the exchange offer is not conditioned upon any minimum aggregate principal amount of outstanding notes being tendered for exchange. We currently anticipate that each of the conditions will be satisfied and that we will not need to waive any conditions. We reserve the right to terminate or amend the exchange offer at any time before the expiration date. For additional information, see “The Exchange Offer — Conditions of the Exchange Offer.”

Procedures for tendering the outstanding notes		If you are a holder of outstanding notes who wishes to accept the exchange offer:

		• complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal, and mail or otherwise deliver the letter of transmittal, together with your outstanding notes, to the exchange agent at the address set forth under “The Exchange Offer — Exchange Agent;” or

		• arrange for the Depository Trust Company (“DTC”) to transmit certain required information, including an agent’s message forming part of a book-entry transfer in which you agree to be bound by the terms of the letter of transmittal, to the exchange agent in connection with a book-entry transfer.

		By tendering your outstanding notes in either manner, you will be representing, among other things, that:

		• the exchange notes you receive pursuant to the exchange offer are being acquired in the ordinary course of your business;

		• you are not currently participating in, do not intend to participate in, and have no arrangement or understanding with any person to participate in, the distribution of the exchange notes issued to you in the exchange offer; and

		• you are not an “affiliate” of ours, or if you are an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act.

Tenders by beneficial owners		If your outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your outstanding notes, you should contact the registered holder promptly and instruct the registered holder to tender your outstanding notes on your behalf. If you wish to tender on your own behalf, you must, prior to completing and


		executing the letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date.

Guaranteed delivery procedures		If you wish to tender your outstanding notes and cannot cause the outstanding notes, the letter of transmittal or any other required documents to be transmitted to, and received by, the exchange agent prior to the expiration of the exchange offer, you may tender your outstanding notes according to the guaranteed delivery procedures described in this prospectus under the heading “The Exchange Offer — Exchange Offer Procedures; Guaranteed Delivery Procedures.”

Acceptance of the outstanding notes and delivery of the exchange notes		Subject to the satisfaction or waiver of the conditions to the exchange offer, we will accept for exchange any and all outstanding notes that are properly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the expiration date. The exchange notes will be delivered promptly following the expiration date. For additional information, see “The Exchange Offer — Terms of the Exchange Offer.”

Federal income tax considerations		The exchange of outstanding notes for exchange notes in the exchange offer should not be a taxable event for U.S. federal income tax purposes. See “Certain United States Income Tax Consequences.”

Use of proceeds		We will not receive any proceeds from the issuance of the exchange notes. We will pay for all expenses incident to the exchange offer.

Consequences of failing to exchange your outstanding notes		Any of the outstanding notes that are not tendered or that are tendered but not accepted will remain subject to restrictions on transfer. Since the outstanding notes have not been registered under the federal securities laws, they bear a legend restricting their transfer absent registration or the availability of an exemption from registration. Upon completion of the exchange offer, we will have no further obligation, except under limited circumstances, to provide for registration of the outstanding notes under the federal securities laws.

Registration Rights Agreement		If we fail to complete the exchange offer as required by the Registration Rights Agreement, we may be obligated to pay additional interest to holders of outstanding notes. See “Description of Exchange Notes — Registration Rights; Liquidated Damages” for more information regarding rights to holders of outstanding notes.

Exchange Agent		Wells Fargo Bank, N.A. is serving as the Exchange Agent for the registered exchange offer. The address for the Exchange Agent is listed under “The Exchange Offer — Exchange Agent.”

The summary below describes the principal terms of the exchange notes. The financial terms and covenants of the exchange notes are the same as the outstanding notes. Some of the terms and conditions descried below are subject to important limitations and exceptions. The “Description of Exchange Notes” section of this prospectus contains a more detailed description of the terms and conditions of the exchange notes.

You should carefully consider all of the information contained in this prospectus, including the discussion under the caption “Risk Factors” regarding specific risks involved in an investment in the notes.

Set forth below are summary consolidated financial and operating data for the three fiscal years ended May 31, 2002, for the nine months ended February 28, 2002 and February 28, 2003, and for the twelve months ended February 28, 2003. The statement of operations, balance sheet and other financial data for the three fiscal years ended May 31, 2002, have been derived from our audited consolidated financial statements. The statement of operations, balance sheet and other financial data for the nine months ended February 28, 2002 and February 28, 2003, and the last twelve months ended February 28, 2003 have been derived from our unaudited consolidated financial statements. Our unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and have included all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the data for such periods. The results for the nine months ended February 28, 2003, are not necessarily indicative of the results for the full fiscal year. You should read the information presented below in conjunction with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.


(1)	Excludes capitalized interest of $12.7 million in fiscal year 2000 and $15.6 million in fiscal year 2001.

(2)	The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. Earnings consist of net income to which has been added income taxes, amortization of capitalized interest and fixed charges (excluding capitalized interest and dividends on preferred securities). Fixed charges consist of interest on all indebtedness (including capitalized interest) plus amortization of debt issuance costs, approximately one-third of rental expense and dividends on preferred securities. For the nine months ended February 28, 2003, we had a deficiency of earnings to cover fixed charges of $27.6 million. Assuming the completion of the Refinancing at the beginning of the respective periods, our ratio of earnings to fixed charges would have been 2.0x for the year ended May 31, 2002 and 1.1x for the twelve months ended February 28, 2003. For the nine months ended February 28, 2003, on the same pro forma basis, we would have had a ratio of earnings to fixed charges of 0.5x and a deficiency of earnings to cover fixed charges of $27.6 million.

(3)	Net income (loss) divided by net sales.

(4)	Accounts receivable facility fees are recorded as selling, general and administrative expenses in our statement of operations data and are not included in interest.

(5)	Amounts utilized under our accounts receivable facility are deducted from accounts receivable on our balance sheet and are not reflected as part of total debt.

(6)	EBITDA represents income before interest, income taxes, depreciation, depletion and amortization, and dividends on preferred securities — net of tax. EBITDA includes income from litigation settlements against certain graphite electrode suppliers ($6.3 million in fiscal year 2000, $400,000 in fiscal year 2001, $9.6 million in fiscal year 2002 and $9.6 million for the nine months ended February 28, 2002) and income from sales of real estate. EBITDA is presented because we believe it is a useful indicator of our performance and our ability to meet debt service and capital expenditure requirements. It is not, however intended as an alternative measure of operating results or cash flow from operations as determined in accordance with generally accepted accounting principles. EBITDA, subject to certain adjustments, is also used to measure the covenants of our debt agreements. EBITDA is not necessarily comparable to similarly titled measures used by other companies.


(7)	EBITDA divided by net sales.

(8)	Total capitalization equals total debt (including current portion) plus company-obligated mandatorily redeemable preferred securities of our subsidiary holding solely company convertible debentures plus total shareholders’ equity, in each case at the end of the period.

(9)	Units shipped includes intercompany shipments.

You should carefully consider the following risks and all of the information set forth in this prospectus before participating in the exchange offer.

We will only issue exchange notes in exchange for outstanding notes that are timely received by the exchange agent, together with all required documents, including a properly completed and signed letter of transmittal. Therefore, you should allow sufficient time to ensure timely delivery of the outstanding notes and you should carefully follow the instructions on how to tender your outstanding notes. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your tender of the outstanding notes. If you do not tender your outstanding notes or if we do not accept your outstanding notes because you did not tender your outstanding notes properly, then, after we consummate the exchange offer, you may continue to hold outstanding notes that are subject to the existing transfer restrictions. In addition, if you tender your outstanding notes for the purpose of participation in a distribution of the exchange notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes. If you are a broker-dealer that receives exchange notes for your own account in exchange for outstanding 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 such exchange notes. After the exchange offer is consummated, if you continue to hold any outstanding notes, you may have difficulty selling them because there will be less outstanding notes outstanding. In addition, if a large amount of outstanding notes are not tendered or are tendered improperly, the limited amount of exchange notes that would be issued and outstanding after we consummate the exchange offer could lower the market price of such exchange notes.

We have a significant amount of debt. The following table sets forth our total debt (including current portion), company-obligated mandatorily redeemable preferred securities, shareholders’ equity and total capitalization on a pro forma basis, as adjusted for the Refinancing:

In addition, approximately $17.7 million of letters of credit would have been outstanding under the new senior secured credit facility to support insurance and other obligations.

Our substantial debt could have important consequences to you. For example, it could:


	•	make it more difficult for us to satisfy our obligations with respect to the exchange notes;

	•	increase our vulnerability to general adverse economic and industry conditions;


	•	require us to dedicate a substantial portion of our cash flow from operations to service our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, investments and other general corporate purposes;

	•	limit our flexibility in planning for, or reacting to, changes in our business, the cement, aggregates and concrete industry, the steel industry or the markets in which we operate;

	•	place us at a competitive disadvantage compared to our competitors that have less debt; and

	•	limit, among other things, our ability to borrow additional funds, even when necessary to maintain adequate liquidity.

We would have had up to $180.7 million of additional availability under our new senior secured credit facility, subject to a borrowing base. See “Description of Certain Debt and Preferred Securities — New Senior Secured Credit Facility.” The terms of the indenture governing the exchange notes, our new senior secured credit facility and our other debt agreements allow us to issue and incur additional debt upon satisfaction of certain conditions. If new debt is added to current debt levels, the related risks described above could increase.

The exchange notes, and each guarantee of the exchange notes, are unsecured and therefore will be effectively subordinated to any secured indebtedness we, or the relevant guarantor, may incur to the extent of the assets securing such indebtedness. In the event of a bankruptcy or similar proceeding involving us or a guarantor, the assets which serve as collateral for any secured indebtedness will be available to satisfy the obligations under the secured indebtedness before any payments are made on the exchange notes. At February 28, 2003, as adjusted to give effect to the Refinancing, we would have had $606.4 million of debt outstanding, $1.6 million of which would have been secured debt under our new senior secured credit facility, and up to $180.7 million of additional availability under our new senior secured credit facility, subject to a borrowing base. The exchange notes will be effectively subordinated to any borrowings under our new senior secured credit facility. See the section “Description of Certain Debt and Preferred Securities — New Senior Secured Credit Facility.”

Our present and future domestic restricted subsidiaries, other than our accounts receivable facility subsidiary and our capital trust subsidiary, will guarantee the exchange notes. Payments on the exchange notes are only required to be made by us and the subsidiary guarantors. As a result, no payments are required to be made from assets of subsidiaries that do not guarantee the exchange notes, unless those assets are transferred by dividend or otherwise to us or a subsidiary guarantor. As of February 28, 2003, our accounts receivable subsidiary had $29.8 million in assets and our capital trust subsidiary held solely our 5.5% convertible subordinated debentures due 2028 that were purchased by the capital trust from us with the proceeds from the issuance of the capital trust subsidiary’s company-obligated mandatorily redeemable preferred securities. Our foreign subsidiaries are inactive.

In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries, holders of their liabilities, including their trade creditors, will be entitled to payment of their claims from the assets of those subsidiaries before any assets of these subsidiaries are made available for distribution to us. As a result, the exchange notes are effectively subordinated to all debt and other liabilities of the non-guarantor subsidiaries. As of February 28, 2003, the total liabilities of our accounts receivable, capital trust and foreign subsidiaries, excluding intercompany liabilities, were $2.0 million.

Our ability to make payments on, or repay or refinance, our debt, including the notes, and to fund planned capital expenditures, will depend largely upon the availability of financing through our new senior secured credit facility and our future operating performance. Our future operating performance, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. In addition, our ability to borrow funds in the future to make payments on our debt will depend on our satisfaction of the covenants in our new senior secured credit facility and our other debt agreements, including the indenture governing the exchange notes, and other agreements we may enter into in the future. Specifically, we will need to maintain certain financial ratios, including a fixed charge coverage ratio, if the excess available under our new senior secured credit facility falls below $30.0 million. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our new senior secured credit facility or from other sources in an amount sufficient to enable us to pay our debt, including the exchange notes, or to fund our other liquidity needs. If we are unable to generate sufficient cash flow to meet our debt service requirements, we may have to renegotiate the terms of our debt or obtain additional financing.

Some of our indebtedness, including all indebtedness under our new senior secured credit facility, will mature prior to the maturity date of the exchange notes. See “Description of Certain Debt and Preferred Securities — New Senior Secured Credit Facility.” We cannot assure you that we will be able to refinance any of our debt, including our new senior secured credit facility or the exchange notes, or obtain additional financing on commercially reasonable terms or at all. If we were unable to obtain new financing under the circumstances, we would have to consider other options, such as:


	•	sales of certain assets to meet our debt service obligations;

	•	sales of equity; and

	•	negotiations with our lenders to restructure the applicable debt.

Our new senior secured credit facility, the indenture governing the exchange notes and the terms of our other debt may restrict, or market or business conditions may limit, our ability to do any of these things.

Our existing financing agreements, including our new senior secured credit facility and the indenture governing the exchange notes, impose operating and financial restrictions on our activities. Our new senior secured credit facility requires us to comply with or maintain certain financial tests and ratios, including a fixed charge coverage ratio, if the excess availability falls below $30.0 million. Our new senior secured credit facility also limits our ability to prepay or repurchase the exchange notes. Restrictions contained in these financing agreements also limit or prohibit our ability and certain of our subsidiaries ability to, among other things:


	•	make certain investments;

	•	incur additional debt or sell preferred stock;

	•	create liens;

	•	restrict dividend payments or other payments from subsidiaries to us;

	•	engage in consolidations and mergers or sell or transfer assets;


	•	engage in transactions with our affiliates; and

	•	sell stock in our subsidiaries.

Various risks and events beyond our control could affect our ability to comply with these covenants and maintain financial tests and ratios. If we cannot comply with the financial covenants in our new senior secured credit facility, we may not be able to borrow under this facility. In addition, failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements and to foreclose upon any collateral securing that debt. In addition, lenders may be able to terminate any commitments they made to supply us with further funds. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations, including our obligations under the exchange notes. In addition, the limitations imposed by our financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing. We cannot assure you that we will be able to obtain waivers or amendments of our financing agreements, if necessary, at acceptable terms or at all.

If a bankruptcy case or lawsuit is initiated by unpaid creditors of any guarantor, the debt represented by the guarantees entered into by the guarantors may be reviewed under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws. Under these laws, a guarantee could be voided, or claims in respect of the guarantee could be subordinated to certain obligations of a guarantor if, among other things, the guarantor, at the time it entered into the guarantee:


	•	received less than reasonably equivalent value or fair consideration for entering into the guarantee; and

	•	either:


	•	was insolvent or rendered insolvent by reason of entering into a guarantee;

	•	was engaged in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or

	•	intended to incur, or believed that it would incur, debts or contingent liabilities beyond its ability to pay them as they become due.

In addition, any payment by a guarantor could be voided and required to be returned to the guarantor or to a fund for the benefit of the guarantor’s creditors under those circumstances.

If a guarantee of a subsidiary were voided as a fraudulent conveyance or held unenforceable for any other reason, holders of the exchange notes would be solely creditors of our company and creditors of our other subsidiaries that have validly guaranteed the notes. The exchange notes then would be effectively subordinated to all liabilities of the subsidiary whose guarantee was voided.

The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if:


	•	the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets;

	•	the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

	•	it could not pay its debts or contingent liabilities as they become due.

If the claims of the holders of the exchange notes against any subsidiary were subordinated in favor of other creditors of the subsidiary, the other creditors would be entitled to be paid in full before any payment could be made by the subsidiary on the exchange notes. If one or more of the guarantees is voided or subordinated, we cannot assure you that after providing for all prior claims there would be sufficient assets remaining to satisfy the claims of the holders of the exchange notes.

Based upon financial and other information, we believe that the guarantees are being incurred for proper purposes and in good faith and that we, and our subsidiaries that are guarantors, on a consolidated basis, are solvent and will continue to be solvent after this offering is completed, will have sufficient capital for carrying on our business after the issuance of the exchange notes and will be able to pay our debts as they mature. We cannot assure you, however, as to the standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.

The terms of the exchange notes will require us to make an offer to repurchase the exchange notes upon the occurrence of certain specific kinds of change of control events. In addition, the terms of our new senior secured credit facility and other financing agreements may require repayment of amounts outstanding in the event of a change of control and limit our ability to fund the purchase of your exchange notes in certain circumstances. It is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of exchange notes or that restrictions in our new senior secured credit facility and other financing agreements will not allow the repurchases.

Under the terms of the exchange notes, a variety of acquisition, refinancing, recapitalization or other highly leveraged transactions may not be considered change in control transactions. As a result, we could enter into any such transaction without being required to make an offer to repurchase the exchange notes even though the transaction could increase the total amount of our outstanding debt, adversely affect our capital structure or credit ratings or otherwise adversely affect the holders of the exchange notes.

The exchange notes are a new issue of securities with no established trading market, and we do not intend to list them on any securities exchange. We cannot assure you that an active trading market will develop for the exchange notes.

In addition, the liquidity of the trading market for the exchange notes, if any, and the market price quoted for the exchange notes may be adversely affected by changes in interest rates in the market for high yield securities and by changes in our financial performance or prospects, as well as by declines in the prices of securities, or the financial performance or prospects of similar companies.

All of the markets in which we participate are highly competitive. We compete in each of our cement, aggregate and concrete products markets with several other domestic suppliers of these products as well as with importers of foreign cement. Competition in this segment is based largely on price and, to a lesser extent, quality and service due to the lack of product differentiation and the commodity nature of

our products. As a result, the prices that we charge our customers are not likely to be materially different from the prices charged by other producers in the same markets. Accordingly, our profitability is generally dependent on the level of demand for cement, aggregates and concrete products as a whole and on our ability to control operating costs. Prices in this segment are subject to material changes in response to relatively minor fluctuations in supply and demand, general economic conditions and other market conditions beyond our control. We cannot assure you that we will not face price or volume declines in the future.

We compete in our steel markets with domestic and international producers of steel products. We compete on the basis of price, quality and the ability to meet our customers’ product needs and delivery schedules. Competition within the steel industry, both domestically and worldwide, is intense and is expected to remain so. The highly competitive nature of the steel industry has exerted downward pressure on prices. The U.S. steel industry continues to be adversely impacted by excess world steel capacity resulting from the construction of new mini-mills, including the construction of mini-mills by our direct domestic competitors, expansion and improved production by integrated mills and substantial expansion of foreign steel capacity. This excess capacity, including high levels of steel imports into the United States, has in the past decreased our prices and resulted in a narrowing of gross margins. Depressed pricing and overcapacity may continue or worsen, which would negatively affect our operating results.

We have recently made significant capital expenditures to expand our facilities that are intended to strengthen our competitive position in both our CAC and steel segments. However, we cannot assure you that these or any future expansionary capital expenditures will improve our competitive position and business prospects as anticipated, and if they do not, our results of operations may be adversely affected. Further, due to the high fixed cost nature of our businesses, our operating results may be significantly affected by relatively small changes in production volumes. In addition, in each of our segments, some of our competitors are larger, have greater financial resources and/or have less financial leverage than we do. As a result, these competitors may better weather downward pricing pressure and adverse economic or industry conditions.

A significant percentage of our sales of both CAC and steel products is attributable to the level of construction activity. Historically, construction spending and cement consumption have been cyclical. Demand for steel is derived primarily from non-residential construction. Demand for cement is derived primarily from public (infrastructure), residential and non-residential construction. Construction activity in each of these segments is cyclical and is influenced by prevailing economic conditions, including availability of public funds, interest rate levels, inflation, consumer spending habits and employment.

In particular, customers in our CAC segment are engaged in a substantial amount of construction in which government funding is a component and, as a result, can be subject to government budget constraints and political shifts resulting in fund reallocation. For example, Governor Gray Davis of California has proposed a $2.6 billion reduction, compared to the prior year proposal, in transportation funding for the State of California in his 2003 to 2004 budget proposal. TEA-21 provided $2.8 billion and $2.4 billion in highway construction and maintenance funding to California and Texas in 2002, respectively. In 2003, California and Texas were allocated $2.5 billion and $2.2 billion, respectively, in highway funding under the Fiscal Year 2003 Omnibus Appropriations Bill. We cannot assure you that TEA-21 or other public works funding will be available in the future at levels commensurate with prior years. A significant decline in the level of construction activity in our markets would negatively affect our operating results.

The cement, aggregates and concrete markets are also generally regional because transportation costs are high relative to the value of the product. Regional markets in particular are highly cyclical. Sales in regional markets are dependent on regional demand, which is tied to local economic factors that may fluctuate more widely than those of the United States as a whole. As a result, even though we sell in more than one area of the country, our operating results are subject to significant fluctuation. The regional

nature of our CAC segment also makes us vulnerable to changes in regional weather and its impact on the regional construction industry. Our CAC operating profit is generally lower in our fiscal quarter ended February 28 than it is in our other three fiscal quarters because of the impact of winter weather on construction activity. Extended periods of inclement weather can adversely impact construction activity at other times of the year as well.

The demand for steel products is generally affected by macroeconomic fluctuations in the U.S. and global economies. Future economic downturns, stagnant economies or currency fluctuations could decrease the demand for our products or increase imports, which could have a material adverse effect on our volume of shipments, sales and profitability. Steel results are also affected by our shut-downs scheduled every 12 to 24 months to refurbish our steel production facilities.

We are dependent upon purchased recycled steel scrap as a raw material and upon energy sources, including electricity and fossil fuels. We have not entered into any long-term contracts to satisfy our fuel and electricity needs or recycled steel scrap requirements. If we are unable to meet our requirements for fuel, electricity or recycled steel scrap, we may experience interruptions in our production. In addition, the prices of these raw materials and energy sources are subject to market forces largely beyond our control and, in the past, have fluctuated significantly. We may not be able to adjust our product prices to reflect any increase in costs. Accordingly, in the past our results of operations and financial condition have been, and may again in the future be, adversely affected by increases in raw material costs or energy costs, or their lack of availability.

CAC Segment. A group of domestic cement producers, including our company, filed antidumping petitions that have resulted in the imposition of significant antidumping duty cash deposits on gray portland cement and clinker imported from Mexico and Japan. In addition, the U.S. Department of Commerce signed agreements with the Venezuelan Government and Venezuelan cement producers designed to eliminate the dumping and illegal subsidization of gray portland cement and clinker from Venezuela. On an annual basis, the antidumping duties are subject to review by the Department of Commerce to determine whether the current antidumping duty deposit rates should be adjusted upward or downward.

In 1995, the Antidumping Code of the General Agreement on Tariffs and Trade was substantially altered pursuant to the Uruguay Round of multilateral trade negotiations. U.S. legislation approving and implementing the Uruguay Round agreements requires the Department of Commerce and the U.S. International Trade Commission (“ITC”) to conduct “sunset” reviews of all outstanding antidumping and countervailing duty orders and suspension agreements, including the antidumping orders against gray portland cement and clinker from Mexico and Japan and the suspension agreements on gray portland cement and clinker from Venezuela, to determine whether they should be terminated or remain in effect. In 2000, the Department of Commerce and the ITC conducted sunset reviews of the antidumping orders and suspension agreements and determined that the antidumping orders against Mexico and Japan should remain in effect until 2005 when the ITC is scheduled to conduct another sunset review. However, the ITC determined that the suspension agreements with Venezuela were no longer necessary. Mexican cement producers have appealed the ITC sunset review determination regarding imports from Mexico to a dispute settlement panel established under the North American Free Trade Agreement. The Government of Mexico has also requested consultations with the United States regarding the Mexican cement antidumping order under World Trade Organization (“WTO”) dispute settlement rules. The consultations could lead to Mexico filing a WTO complaint challenging the Department of Commerce’s and the ITC’s determinations in the sunset reviews and the annual determinations of the amount of antidumping duties. Domestic cement producers have appealed the ITC sunset review determinations regarding imports from

Venezuela to the U.S. Court of International Trade. Although to date Venezuelan imports have not competed in our markets to any significant degree, we cannot assure you that they will not in the future. A substantial reduction or elimination of the existing antidumping duties could materially adversely affect our results of operations.

While the average cost of imported cement rose during 2001, the cost of cement imports from some countries, particularly those from Southeast Asia, are less. Moreover, independently owned cement operators could undertake to construct new import facilities and begin to purchase large quantities of low-priced cement from countries not yet subject to antidumping orders, such as those in Asia, which could compete with domestic producers. An influx of low-priced cement or clinker products from countries not subject to antidumping orders could materially adversely affect our results of operations.

Steel Segment. Excessive imports of steel into the United States have in recent years, and may again in the future, exert downward pressure on U.S. steel prices and significantly reduce our sales, margins and profitability. Competition from foreign producers has greatly increased as a result of excess foreign steel making capacity and a weakening of certain foreign economies, particularly in Eastern Europe, Asia and Latin America. In addition, we believe the downward pressure on, and depressed levels of, U.S. steel prices in recent years have been further exacerbated by imports of steel involving dumping and subsidy abuses by foreign steel producers. Some foreign steel producers are owned, controlled or subsidized by foreign governments. As a result, decisions by these producers with respect to their production, sales and pricing are often influenced to a greater degree by political and economic policy considerations than by prevailing market conditions, realities of the marketplace or consideration of profit or loss.

In July 1999, complaints were filed with the ITC and the U.S. Department of Commerce by us, Northwestern Steel & Wire Co., Nucor-Yamato Steel Co. and the United Steelworkers of America seeking to impose antidumping and countervailing duties against imports of structural steel beams from Germany, Japan, South Korea and Spain. In June and July 2000, the ITC made respective determinations that an industry in the United States is materially injured or threatened with material injury by reason of such imports from Japan and Korea that the Department of Commerce has determined are subsidized and sold in the United States at less than fair value. As a result of the ITC’s affirmative determinations, the Department of Commerce directed the U.S. Customs Service to impose countervailing and antidumping duties on imports of certain structural steel beams from these two countries. However, imports of structural steel beams from other countries increased significantly and the Committee for Fair Beam Imports (composed of Northwestern Steel & Wire Co., Nucor Corp., Nucor-Yamato Steel Co. and our company) again petitioned the ITC and the U.S. Department of Commerce concerning imports of certain structural steel beams from China, Germany, Luxembourg, Russia, South Africa, Spain and Taiwan. On June 17, 2002, the ITC determined that, although the Department of Commerce had determined that these imports were being sold in the United States at less than fair value, such imports did not materially injure or threaten with material injury an industry in the United States, and no antidumping duties were imposed on imports of structural steel beams from these countries. The Committee for Fair Beam Imports has appealed the ITC’s negative determination.

Existing duties are subject to annual review upon request. A substantial reduction or elimination of the existing antidumping duties, or an influx of low-priced steel products from countries not subject to antidumping orders, could again create downward pressure on U.S. steel prices and, in turn, materially adversely affect our results of operations.

Our operations and those of our subsidiaries are subject to various federal, state and local environmental, health and safety laws and regulations. These laws and regulations govern the generation, use, handling, storage, transportation and disposal of hazardous substances and wastes, and provide for the investigation and remediation of contamination existing at current and former properties, and at third-party waste disposal sites. They have tended to become increasingly stringent over time. As with others in our

business, we expend substantial amounts to comply with these laws and regulations, including amounts for pollution control equipment required to monitor and regulate wastewater discharges and air emissions. The U.S. Environmental Protection Agency (“EPA”) and state agencies are charged with enforcing these laws and regulations, and these agencies can impose substantial fines and penalties, as well as curtail and/or suspend our operations, for violations and non-compliance. Moreover, certain of these laws and regulations permit private parties to bring actions against us for injuries to persons and damages to property allegedly caused by our operations.

Emissions sources at our facilities are regulated by a combination of permit limitations and emission standards of national and statewide application. We believe that we are in substantial compliance with our permit limitations and emission standards and regulations applicable to our existing facilities. There can be no assurance, however, that future changes in permit limitations and emission standards will not result in prolonged production interruption, significant costs of compliance or adversely affect our ability to build new or expand existing production facilities.

Many of the raw materials, products and by-products associated with the operation of any industrial facility, including those for the production of steel, cement or concrete products, contain chemical elements or compounds that can be designated as hazardous. Such raw materials, products and by-products may also exhibit characteristics that result in their being classified as a hazardous substance or waste. Some examples are the metals present in cement kiln dust (“CKD”), electric arc furnace dust (“EAF dust”) generated by our steel facilities and the ignitability of the waste derived fuels that we use as a primary or supplementary fuel substitute for nonrenewable coal and natural gas to fire certain of our cement kilns.

Currently, CKD is exempt from hazardous waste management standards under the Resource Conservation and Recovery Act (“RCRA”) if certain tests are satisfied. We have demonstrated that the CKD we generate satisfies these tests. However, the EPA plans to apply site-specific waste-management standards to CKD under the Clean Air Act and RCRA to assure that the environment is protected. We have established operating practices and are implementing waste management programs that we believe will comply with these anticipated standards, but there can be no assurances that such practices and programs will continue to comply in the future if regulations become more restrictive.

We utilize hazardous materials such as gasoline, acids, solvents and chemicals as well as materials that have been designated or characterized as hazardous waste by the EPA, which we utilize for energy recovery. This necessitates us to familiarize our work force with the more exacting requirements of applicable environmental laws and regulations with respect to human health and the environment related to these activities. The failure to observe these exacting requirements could jeopardize our hazardous waste management permits and, under certain circumstances, expose us to significant liabilities and costs of cleaning up releases of hazardous substances into the environment or claims by employees or others alleging exposure to hazardous substances.

Our steel facilities generate, in the same manner as other similar steel plants in the industry, EAF dust that contains lead, chromium and cadmium. The EPA has listed this EAF dust, which is collected in baghouses, as hazardous waste. We have contracts with reclamation facilities in the United States and Mexico pursuant to which such facilities receive the EAF dust generated by us and recover the metals from the dust for reuse, thus rendering the dust non-hazardous. In addition, we are continually investigating alternative reclamation technologies and have implemented processes for diminishing the amount of EAF dust generated.

We intend to comply with all legal requirements regarding the environment and health and safety matters, but since many of these requirements are subjective and therefore not quantifiable, are presently not determinable, or are likely to be affected by future legislation or rule making by government agencies, it is not possible to accurately predict the aggregate future costs of compliance and their effect on our operations, future net income or financial condition. Notwithstanding our intentions to comply with all legal requirements, if injury to persons or damage to property or contamination of the environment has been or is caused by the conduct of our business or hazardous substances or wastes used in, generated or

disposed of by us, we may be liable for such injuries and damages, and be required to pay the cost of investigation and remediation of such contamination. The amount of such liability could be material and there can be no assurance that we will not incur material liability in connection with possible claims related to our operations and properties under environmental, health and safety laws.

Our manufacturing processes are dependent upon critical pieces of equipment, such as our cement kilns, grinding mills, stone crushers, steel furnaces, continuous casters and rolling equipment, as well as electrical equipment, such as transformers. This equipment may, on occasion, be out of service as a result of unanticipated failures or damaged during accidents. In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or violent weather conditions. We have experienced two fires in fiscal year 2003, and may in the future experience material plant shutdowns or periods of reduced production as a result of equipment failures or catastrophic events. Due to the high fixed cost nature of our business, interruptions in our production capabilities may cause our productivity and results of operations to decline significantly during the affected period.

Our operations in California are susceptible to damage from earthquakes. We maintain only a limited amount of earthquake insurance and, therefore, we are not fully insured against earthquake risk. Any significant earthquake damage could materially adversely affect our results of operations.

We intend the exchange offer to satisfy our obligations under the registration rights agreement that we entered into in connection with the offering of the outstanding notes. We will not receive any cash proceeds from the issuance of the exchange notes pursuant to the exchange offer. Outstanding notes surrendered in exchange for the exchange notes will be retired and canceled and cannot be reissued. As a result, the issuance of the exchange notes will not result in any increase or decrease in our indebtedness. We have agreed to bear the expenses of the exchange offer. No underwriter is being used in connection with the exchange offer.

The net proceeds from the issuance and sale of the outstanding notes was approximately $585.8 million, after deducting the discount payable to the initial purchasers and estimated offering expenses payable by us. We used the net proceeds from offering of the outstanding notes, together with borrowings under our new senior secured credit facility, to repurchase $283.0 million principal amount of our previously issued senior notes, repay all debt outstanding under our then-existing credit facility and repurchase our interests in the defined pool of trade receivables previously sold under our accounts receivable facility. In addition, we will use a portion of the net proceeds from the sale of the outstanding notes, together with borrowings under our new senior secured credit facility, to retire all $95.5 million of our variable rate industrial development revenue bonds on or before August 5, 2003.

The following table sets forth our consolidated capitalization and usage under our accounts receivable facility as of February 28, 2003, on an actual basis and as adjusted to give effect to the Refinancing as if it had occurred on February 28, 2003. Concurrently with the offering of the outstanding notes, we entered into a new senior secured credit facility, which provided us with up to $200.0 million of available borrowings, subject to a borrowing base. We intend to use the availability remaining under our new senior secured credit facility after the Refinancing for working capital purposes.

You should read the following table in conjunction with “Use of Proceeds,” “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Certain Debt and Preferred Securities,” and our consolidated financial statements and the related notes included elsewhere in this prospectus.


(1)	As of June 20, 2003, $21.3 million in letters of credit were subject to our new senior secured credit facility.

(2)	We will retire our variable-rate industrial development revenue bonds on or before August 5, 2003. Until such retirement, we will use approximately $96.7 million of the proceeds from the sale of the outstanding notes to cash collateralize the letters of credit supporting these bonds.

(3)	Shareholders’ equity, as adjusted, reflects an estimated $7.3 million of after tax charges to be incurred in connection with the Refinancings as of May 31, 2003, including the writeoff of $1.8 million of debt issuance costs associated with the debt to be repaid and an estimated $5.5 million of expenses for consent payments and premiums to be paid on the previously issued senior notes.

(4)	On June 6, 2003, we repurchased all of our interests in the defined pool of trade receivables previously sold under this facility and terminated the facility.

Set forth below are selected consolidated financial and operating data for the five fiscal years ended May 31, 2002, for the nine months ended February 28, 2002 and February 28, 2003, and for the twelve months ended February 28, 2003. The statement of operations, balance sheet and other financial data for the five fiscal years ended May 31, 2002, have been derived from our audited consolidated financial statements. The statement of operations, balance sheet and other financial data for the nine months ended February 28, 2002 and February 28, 2003, and the last twelve months ended February 28, 2003, have been derived from our unaudited consolidated financial statements. Our unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and have included all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the data for such periods. The results for the nine months ended February 28, 2003, are not necessarily indicative of the results for the full fiscal year. You should read the information presented below in conjunction with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.


(1)	Excludes capitalized interest of $4.6 million in fiscal year 1998, $23.2 million in fiscal year 1999, $12.7 million in fiscal year 2000 and $15.6 million in fiscal year 2001.

(2)	The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. Earnings consist of net income to which has been added income taxes, amortization of capitalized interest, fixed charges (excluding capitalized interest and dividends on preferred securities) and minority interest in our subsidiary, Chaparral Steel Company. Fixed charges consist of interest on all


	indebtedness (including capitalized interest) plus amortization of debt issuance costs, approximately one- third of rental expense and dividends on preferred securities. For the nine months ended February 28, 2003, we had a deficiency of earnings to cover fixed charges of $27.6 million. Assuming the completion of the Refinancing at the beginning of the respective periods, our ratio of earnings to fixed charges would have been 2.0x for the year ended May 31, 2002 and 1.1x for the twelve months ended February 28, 2003. For the nine months ended February 28, 2003, on the same pro forma basis, we would have had a ratio of earnings to fixed charges of 0.5x and a deficiency of earnings to cover fixed charges of $27.6 million.

(3)	Net income (loss) divided by net sales.

(4)	Accounts receivable facility fees are recorded as selling, general and administrative expenses in our statement of operations data and are not included in interest.

(5)	Amounts utilized under our accounts receivable facility are deducted from accounts receivable on our balance sheet and are not reflected as part of long-term debt.

(6)	EBITDA represents income before interest, income taxes, depreciation, depletion and amortization, dividends on preferred securities — net of tax and minority interest in Chaparral. EBITDA includes income from litigation settlements against certain graphite electrode suppliers ($6.3 million in 1999, $6.3 million in fiscal year 2000, $400,000 in fiscal year 2001, $9.6 million in fiscal year 2002 and $9.6 million for the nine months ended February 28, 2002) and income from sales of real estate. EBITDA is presented because we believe it is a useful indicator of our performance and our ability to meet debt service and capital expenditure requirements. It is not, however intended as an alternative measure of operating results or cash flow from operations as determined in accordance with generally accepted accounting principles. EBITDA, subject to certain adjustments, is also used to measure the covenants of our debt agreements. EBITDA is not necessarily comparable to similarly titled measures used by other companies.


(1)	EBITDA divided by net sales.

(2)	Total capitalization equals total debt (including current portion) plus company-obligated mandatorily redeemable preferred securities of subsidiary holding solely company convertible debentures plus total shareholders’ equity, in each case at the end of the period.

(3)	Units shipped includes intercompany shipments.

You should read the following discussion together with the financial statements, including the related notes and the other financial information appearing elsewhere in this prospectus, as well as the risks described in the “Risk Factors” section. The following discussion contains forward looking statements. See “Forward-Looking Statements.”

We are the largest producer of cement in Texas, a major cement producer in California and the second largest supplier of structural steel products in North America. We are also a major supplier of construction aggregates, ready-mix concrete, concrete products and steel bar products. We are the only North American producer of both cement and steel. Our two business segments consist of cement, aggregate and concrete products, which we refer to as our CAC segment, and structural steel and steel bar products, which we refer to as our steel segment. Through our CAC segment, we produce and sell cement, stone, sand and gravel, ready-mix concrete and other products. Through our steel segment, we produce and sell structural steel products, which include wide flange beams, channels, piling products and other shapes, and steel bar products, which include reinforcing bar and specialty bar products.

Our CAC facilities are concentrated primarily in Texas, Louisiana and California and we market construction materials primarily to contractors and distributors in those regions. Our steel facilities, located in Midlothian, Texas and Dinwiddie County, Virginia, produce a wide variety of products utilizing recycled steel obtained from crushed automobiles and other sources as the principal raw material. Steel products, sold principally to steel service centers, fabricators, cold finishers, forgers and original equipment manufacturers, are distributed to markets in North America.

A number of major growth and improvement projects during the last five years have increased our annual capacity and geographic diversity. In 1998, we expanded our total cement capacity from 2.1 million tons to 3.5 million tons through the acquisition of Riverside Cement Company in California. This $115.4 million acquisition opened the California cement market to us. In 1999, we began operation of our new state-of-the-art structural steel facility in Dinwiddie County, Virginia. This $543.2 million investment added approximately 1.2 million tons, doubling our capacity to make structural steel products, and broadened our product lines. In May 2001, we completed the expansion of our Midlothian, Texas cement manufacturing plant, adding 1.5 million tons of capacity. This $243.3 million expansion increased production efficiencies, enhanced our position as the largest supplier of cement in Texas and brought our overall annual cement capacity to 5.0 million tons. With the Midlothian cement expansion, we substantially completed our planned program of major investments. In the future, we intend to expand and upgrade our California portland cement plant to make it one of the most efficient, low-cost facilities in the western United States. The timing for this expansion has not been determined and is dependent, among other things, upon improved operating cash flow and the level of construction activity in California.

These major expansion investments have increased our annual depreciation expense from approximately $62 million in fiscal year 1998 to approximately $100 million in recent years; however, our maintenance capital expenditure requirements have not increased proportionately. Removing the major expansion and other growth investments from the last five years of total capital spending, annual maintenance capital expenditures averaged slightly less than $50 million. The fiscal year 2003 capital expenditure budget for normal replacement and technological upgrades of existing equipment is estimated currently at $50 million.

This modest level of maintenance capital spending has provided us with the ability to generate free cash flow in excess of our net income. As a result, after completing the major investments discussed above, during a period of low earnings created primarily by an intensely competitive steel market, we have been able to reduce total debt (including current portion) by $155.8 million from $623.5 million as of May 31, 2001, to $467.7 million as of February 28, 2003.

Consumption of cement, aggregates and concrete products is generally determined by the level of public works (particularly highway construction), residential and non-residential construction activity. The consumption of structural steel, our main steel product, is primarily a function of non-residential construction.

Given the high transportation costs of cement relative to its value, we typically sell cement within a 300-mile radius from our production facilities. Aggregates and ready-mix concrete are generally marketed within a 100-mile radius of a plant site for the same reason. These transportation limitations serve to make the markets for these products very regional in nature. Transportation costs are not as critical to our steel operations as they are to our CAC segment and, as a result, we market steel products throughout the United States and, to a limited extent, in Canada and Mexico.

Our CAC customers inventory very little of our products. As a result, inclement weather that slows or even stops construction has an immediate impact on our CAC shipments. For this reason, our third fiscal quarter ending February is generally the low quarter of the year for CAC shipments and operating results. Our steel customers and end users maintain higher levels of inventory that tend to lessen the impact that weather might have on consumption of structural steel, making our steel shipments and operating results much less dependent on the weather.

While we strive to excel in providing service and quality to our customers, the commodity nature of our products makes price the most important factor in generating sales. As a result, supply and demand determine the general price level for products of both our CAC and steel segments.

For the twelve months ended February 28, 2003, our ready-mix and other concrete operations consumed approximately 18% of our cement sales and approximately 30% of our aggregate sales with the rest of our sales going to outside customers. Practically all of our steel shipments are made to outside customers.

We extract limestone, the primary raw material in the manufacture of cement, principally from our own quarries where we estimate we have approximately 100 years of reserves. Other raw materials, such as iron ore and gypsum, are purchased from outside suppliers. Energy comprises approximately 30% of the cost to make a ton of cement, depending on the type of manufacturing process. Fossil fuels and other alternative fuels fire the chemical process that changes the limestone raw material into clinker. Electricity powers the machinery that grinds both the raw material at the beginning of the process and the clinker into finished cement (a fine powder).

We extract aggregates from owned or leased property and then clean, crush and separate the materials according to required specifications using automated equipment and machinery. Ready-mix concrete is a mixture of cement, aggregates and water. The mixing primarily takes place in the rotating drum of a concrete delivery truck while en route to a construction site.

Taken as a whole, our CAC operations are energy intensive. Labor, repair and maintenance costs, depreciation and depletion make up most of the remainder of production expenses. A large portion of our cost is fixed. As a result, relatively small changes in production volumes can cause significant changes in unit costs.

We make all of our steel products from recycled steel scrap, which accounts for approximately 34% of our steel unit cost of production. We purchase recycled steel scrap from outside suppliers on a spot basis, a portion of which we shred ourselves for our Texas plant’s requirements. The recycled steel scrap is melted in arc furnaces powered by electricity. Additives and alloys supplement the steel raw material depending on product specifications. The molten steel is formed by a caster into an intermediate product that is then rolled into a finished product to exact specifications for size and quality.

Energy costs are the next major cost component in steel-making. Electricity powers the arc furnaces and the heavy machinery used to roll finished products; natural gas is used to reheat the intermediate product before it is shaped in the rolling mill. Labor, depreciation, repair and maintenance make up the remaining costs of production.

As in our CAC operations, a large portion of our steel cost is fixed. As a result, relatively small changes in production volumes can cause significant changes in unit costs.

Selling, general and administrative expenses are comprised of all costs associated with our sales, finance and accounting, materials and transportation, and administrative departments. These costs include labor and benefits (including incentive compensation), professional services, accounts receivable facility fees, property taxes, and bad debt expense. Selling, general and administrative expenses relating to our CAC segment or our steel segment are expenses that are directly attributable to sales in each segment.

Other income includes sales of surplus operating assets and real estate. Also included in other income during some periods were settlements we received as a result of our litigation against certain graphite electrode suppliers.

We believe a decline in non-residential construction that began in 2000 has resulted in a softening of overall demand for cement, aggregate and concrete that first became apparent in our results in the summer of 2002. The softening has been modest because residential and public works construction, which accounts for three-quarters of cement consumption, has remained relatively stable. Despite this softening, consumption of cement continues to exceed cement production capacity in our markets.

Even though cement consumption continues to exceed capacity, some downward price adjustments for cement and likewise for aggregate and concrete products occurred during the last year through the end of February 2003 as a result of the transition to a lower level of overall demand. In addition, recent increased energy costs after the first of the calendar year reduced CAC margins. Abnormal inclement weather in Texas during the recent winter also slowed construction activity in our markets and significantly reduced the number of shipping days. Finally, scheduled downtime at our Midlothian cement plant was extended by two weeks due to an outside contractor accident. Production at the plant was curtailed for an extended period of time and costs for repairs were incurred. All these conditions were reflected in our CAC operating results for the quarter ended February 28, 2003, where we had an operating profit of $6.7 million compared to an operating profit of $20.9 million for the previous year quarter.

We expect that softness in demand and high energy costs will continue through our May 31, 2003 quarter. These factors will likely reduce CAC operating results for the quarter ending May 31, 2003 compared to the operating profit of $29.7 million for the quarter ended May 31, 2002. However, we expect CAC operating profit will be above results for the quarter ended February 28, 2003.

We announced price increases for all major CAC products early in the spring of 2003. While it is too early to determine the extent to which the price increases will be realized, we believe the announcements signal the end of the price declines encountered during the last year.

The slowing of general U.S. economic activity has resulted in reduced levels of non-residential construction. Our steel operations have been impacted most by this reduction because demand for structural steel is primarily driven by non-residential construction activity. At the current low levels of

Imports of structural products have declined from a year ago as the dollar has weakened against major currencies, but actions by U.S. producers to maintain market share versus imports, combined with overall demand and supply conditions, created intense competitive pressures on structural steel prices. Prices for structural steel products were near $300 per ton in the February 2003 quarter, a level similar to the previous three low points for structural product prices over the last decade. Steel margins have also been negatively impacted by increased recycled steel scrap costs over the last twelve months and higher energy costs since the beginning of the calendar year. All of these conditions were reflected in our steel operating results for the quarter ended February 28, 2003, where we had an operating loss of $12.5 million compared to an operating profit of $9.8 million (including income of $1.1 million from litigation settlements) for the previous year quarter.

Recent price increases for structural products instituted to offset higher scrap and energy costs appear to be holding and should begin to positively impact realized prices in the quarter ended May 31, 2003. On April 14, 2003 our Virginia facility had a fire that was contained in the electrical room of the rolling mill and was unable to produce steel for approximately two weeks. Production has returned to pre-fire levels. We expect recycled steel scrap and energy cost levels existing at the end of the February 2003 quarter to generally continue unchanged for our steel segment during the quarter ending May 31, 2003. We expect our operating results for the May 2003 quarter to be at least $5 million lower than the quarter ended February 28, 2003 because of the Virginia fire.

We expect a net loss for the quarter ending May 31, 2003 as a result of the combined expectations for our CAC and steel operations. Combining our expected May quarter results with those of the first three quarters of the fiscal year should result in EBITDA for the year ending May 31, 2003, being in a range of $95 million to $105 million. This range reflects a total of $7 million in costs associated with the accident at our Midlothian cement plant in January and the fire at our Virginia steel facility in April. In addition, EBITDA is after the expense associated with accounts receivable facility fees, which we expect to be approximately $3 million for the year ending May 31, 2003. Our ability to achieve these results may be impacted by the factors discussed in “Forward-Looking Statements.”

EBITDA is presented because we believe it is a useful indicator of our performance and our ability to meet debt service and capital expenditure requirements. It is not, however, intended as an alternative measure of operating results or cash flow from operations as determined in accordance with generally accepted accounting principles. EBITDA, subject to certain adjustments, is also used to measure the covenants of our debt agreements. EBITDA is not necessarily comparable to similarly titled measures used by other companies.

The following table reconciles estimated EBITDA for the year ending May 31, 2003 to “income (loss) before the following items” (income tax and dividends on preferred securities — net of tax):

Estimated EBITDA is after the costs associated with the accident at our Midlothian cement plant and the fire at our Virginia steel facility and the fees associated with our accounts receivable facility. These items, which will significantly reduce our estimated EBITDA, are summarized as follows (in millions):


(1)	Corporate resources include administration, financial, legal, environmental, human resources and real estate activities that are not allocated to operations and are excluded from operating profit.

Nine Months Ended February 28, 2003 Compared to Nine Months Ended February 28, 2002

Operating profit for the nine months ended February 28, 2003, was $27.2 million, compared to $105.1 million for the prior year period. CAC profit declined $32.8 million for the nine-months ended February 28, 2003. Abnormally poor winter weather and softening demand in our north Texas markets reduced ready-mix and aggregate shipments. Higher costs due to a planned maintenance shutdown at our Midlothian cement plant, which was extended due to an independent contractor accident, and increased energy costs reduced margins. Steel operating profit declined $45.2 million for the nine-months ended February 28, 2003. Prior year operating profit included pre-tax income from our litigation against certain graphite electrode suppliers of $9.6 million for the nine months ended February 28, 2002. The decline in nonresidential construction has resulted in a very competitive structural steel market. Realized prices for structural steel have declined significantly as we have sought to maintain market share. Increased raw material and energy costs also contributed to reduced margins.

Consolidated net sales for the nine months ended February 28, 2003 were $923.1 million, compared to $1,000.6 million for the prior year period. CAC net sales in the nine months ended February 28, 2003 were down 8% from the prior year period, reflecting lower cement prices and decreased ready-mix and aggregate shipments. Total cement sales decreased from the prior year period as average trade prices declined 2% in the nine-months ended February 28, 2003, on lower shipments. Ready-mix sales decreased from the prior year period as volumes declined 12% in the nine-months ended February 28, 2003. Average trade prices declined 2% in the nine months ended February 28, 2003. Aggregate sales decreased from the prior year period as shipments declined 16% in the nine months ended February 28, 2003. Aggregate trade prices were slightly lower in the nine months ended February 28, 2003, due to the product mix.

Steel sales for the nine months ended February 28, 2003 were down 7% from the prior year period, primarily reflecting lower realized prices. Structural steel sales decreased from the prior year period as realized prices declined 6% in the nine months ended February 28, 2003. Bar mill sales in the nine months ended February 28, 2003 increased as 7% higher prices offset 6% lower shipments.

Consolidated cost of products sold, including depreciation, depletion and amortization, for the nine months ended February 28, 2003 was $850.3 million, an increase of $2.2 million from the prior year period. CAC costs decreased $4.8 million in the nine months ended February 28, 2003 due to lower ready-mix volume offset by the impact of higher maintenance and energy costs. Steel costs increased from the prior year period $7.0 million in the nine months ended February 28, 2003, despite lower shipments due to higher scrap and energy costs and the effect of lower realized prices on structural steel inventory valuations.

CAC selling, general and administrative expenses including depreciation and amortization decreased from the prior year period, $7.4 million in the nine months ended February 28, 2003 primarily due to lower incentive compensation and bad debt expense. Steel expenses decreased from the prior year, $7.9 million in the nine months ended February 28, 2003 primarily due to lower bad debt expense and general expenses.

CAC other income includes routine sales of surplus operating assets. Sales decreased from the prior year period $700,000 in the nine months ended February 28, 2003. Steel other income includes losses from disposal of assets of $900,000 in the nine months ended February 28, 2003. In the prior year, Steel other income included $9.6 million in the nine months ended February 28, 2002 from our litigation against certain graphite electrode suppliers.

Selling, general and administrative expenses including depreciation and amortization decreased from the prior year $100,000 in the nine months ended February 28, 2003 as lower costs associated with our agreement to sell receivables were offset by higher bad debt expense. Other income increased from the prior year period due to higher interest income.

Interest expense for the nine months ended February 28, 2003 at $25.9 million decreased $7.3 million from the prior year period due primarily to lower average borrowings under our revolving credit facility and to a lesser extent lower interest rates.

Federal income taxes for the interim periods ended February 28, 2003 and 2002, were based on an estimated annual rate. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible and state income tax expense. Applying these differences

Dividends on preferred securities of subsidiary net of tax benefit amounted to $5.4 million in the nine months ended February 28, 2003 and 2002.

Operating profit at $150.6 million increased 34% from fiscal year 2001. CAC profit declined $15.5 million on reduced cement margins and lower other income. Steel operating profit including pre-tax income from our litigation against certain graphite electrode suppliers improved $53.9 million over the prior year on increased shipments and improved margins. In June 2002, the U.S. International Trade Commission failed to impose anti-dumping protection for certain future steel beams imported into the United States. During the months of May and June 2002 the Euro strengthened 9.6% in relation to the U.S. dollar. Both of these factors suggest uncertainty as to the level of future European steel beam sales into the United States.

Consolidated net sales at $1,344.9 million, increased $92.7 million from fiscal year 2001. CAC net sales at $708.6 million were 5% above the prior year as demand for building materials in our CAC markets remained solid. Total cement sales increased $23.3 million on 7% higher shipments. Average trade prices were comparable to the prior year. Ready-mix sales declined $3.7 million on somewhat lower volume and average prices. Aggregate sales increased $3.4 million on somewhat higher volumes and average prices. Wet weather in our Texas markets limited ready-mix and aggregate shipments in the May 2002 quarter. Ready-mix volume declined 15% and aggregate shipments declined 17% from the prior year quarter.

Steel sales at $636.3 million were 11% above the prior year. Reduced imports improved our market share. Structural steel sales increased $49.3 million on 16% higher shipments. Average realized prices, although 5% lower than the prior year, have increased 9% from the May 2001 quarter. Bar sales increased 9% for the year on 18% higher shipments at 8% lower realized prices.

Consolidated cost of products sold including depreciation, depletion and amortization was $1,134.2 million, an increase of $52.2 million from fiscal year 2001. CAC costs were $542.9 million, an increase of $36.0 million as a result of increased cement shipments and aggregate production and the impact of higher cement plant maintenance costs. Steel costs were $591.3 million, an increase of $16.2 million. Higher shipments increased costs $91.1 million offset by lower unit production costs due to improving efficiencies at our Virginia plant and lower recycled steel scrap costs.

CAC selling, general and administrative expense including depreciation and amortization at $48.7 million decreased $4.1 million primarily due to lower incentive compensation and insurance expense offset in part by a $4.4 million increase in bad debt expense. Steel expense increased $2.8 million primarily due to a $4.1 million increase in bad debt expense offset by lower administrative and general expenses.

CAC other income includes routine sales of surplus operating assets which decreased $14.3 million from the prior year. Steel other income includes $9.6 million from our litigation against certain graphite electrode suppliers.

Selling, general and administrative expenses including depreciation and amortization at $32.8 million in fiscal year 2002 decreased $0.4 million. This reflects a decrease of $3.4 million in costs associated with our agreement to sell receivables offset by higher administrative and general expenses. Other income in fiscal year 2002 increased $1.8 million primarily due to $2.7 million higher real estate income offset by lower investment income.

Interest expense at $42.7 million in fiscal year 2002, increased $5.6 million. This reflects a $10.0 million decrease in interest incurred as a result of lower average outstanding debt at lower interest rates offset by a $15.6 million decrease in interest capitalized. With the completion of our major plant expansions no interest was capitalized in fiscal year 2002.

Our effective tax rate was 29.3% in fiscal year 2002 compared to 30.2% in fiscal year 2001. The primary reason that the current tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible and state income tax expense.

Dividends on preferred securities of our subsidiary net of tax benefit amounted to $7.2 million in fiscal year 2002 and fiscal year 2001.

Operating profit at $112.2 million decreased 39% from fiscal year 2000. CAC profits declined $35.0 million. Lower realized prices and higher energy costs reduced margins. Steel operating profit declined $37.8 million. The impact of imports and growth in customer inventories on sales and higher energy costs reduced margins. Higher unit costs in the May quarter due to lower production to reduce inventories further reduced margins.

Consolidated net sales at $1,252.2 million, declined $54.2 million from fiscal year 2000. CAC net sales, at $678.0 million, were comparable to the prior year. Demand remained solid for building materials in our CAC markets. Total cement sales increased $14.1 million on 11% higher shipments. Average trade prices, which declined 6% from the prior year due to the impact of imports on supply, stabilized in the May 2001 quarter. Ready-mix sales declined $28.2 million on 6% lower volumes at 5% lower average prices. With the return to more normal weather conditions, volumes in the May 2001 quarter were up 5% from the prior year quarter. Aggregate sales increased $8.0 million on 6% higher shipments.

Steel sales at $574.2 million were $52.4 million below the prior year. Competition from imports and higher levels of customer inventories resulted in a decline in both shipments and prices of structural products. Structural steel shipments were 13% below the prior year. Although average realized prices for the year were up 3%, prices that had been increasing during the prior year peaked in the August 2000 quarter. Since the August quarter, prices have declined 21%. Bar sales declined 5% for the year on 2% lower shipments and 3% lower realized prices.

Consolidated cost of products sold including depreciation, depletion and amortization was $1,082.0 million, an increase of $17.5 million from fiscal year 2000. CAC costs were $506.9 million, an

increase of $40.9 million as a result of increased cement shipments and aggregate production and the impact of higher energy costs on unit costs. Steel costs were $575.1 million, a decrease of $23.4 million. Lower shipments reduced costs $56.3 million offset by higher unit production costs resulting from increased energy costs and lower production levels.

CAC selling, general and administrative expense including depreciation and amortization at $52.8 million increased $5.3 million due primarily to additional administrative expenses attributed to operations offset somewhat by $2.5 million lower incentive compensation. CAC other income increased due to gains from the disposal of surplus real estate amounting to $14.3 million in fiscal year 2001. Steel expenses at $24.9 million decreased $0.5 million due to $0.8 million lower incentive compensation offset by increased selling costs. Steel other income in the prior year included $6.3 million from our litigation against certain graphite electrode suppliers.

Selling, general and administrative expenses including depreciation and amortization at $33.2 million decreased $7.6 million. This decrease is due to additional administrative expense attributed to operations and $3.9 million lower incentive accruals offset by a $1.4 million increase in costs associated with our agreement to sell receivables. Other income increased $3.0 million primarily due to higher real estate income.

Interest expense at $37.1 million was $4.3 million higher than prior year due to a $7.2 million increase in interest incurred as a result of higher average outstanding debt offset by a $2.9 million increase in interest capitalized.

Our fiscal year 2001 effective tax rate was 30.2% compared to 32.8% in fiscal year 2000. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to goodwill expense that is not tax deductible, percentage depletion that is tax deductible and state income tax expense.

Dividends on preferred securities of our subsidiary net of tax benefit amounted to $7.2 million in fiscal year 2001 and fiscal year 2000.

The preparation of financial statements and accompanying notes in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported. Changes in the facts and circumstances could have a significant impact on the resulting financial statements. We believe the following critical accounting policies affect our more complex judgments and estimates.

We review long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable and would record an impairment charge if necessary. Such evaluations compare the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset and are significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors.

We test goodwill for impairment at least annually. If the carrying amount of the goodwill exceeds its fair value an impairment loss is recognized. In applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from the applicable reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors.

We are subject to environmental laws and regulations established by federal, state and local authorities, and makes provision for the estimated costs related to compliance when it is probable that a reasonably estimable liability has been incurred.

We evaluate the ability to collect accounts receivable based on a combination of factors. A reserve for doubtful accounts is maintained based on the length of time receivables are past due or the status of a customer’s financial condition. If we are aware of a specific customer’s inability to make required payments, specific amounts are added to the reserve.

Our historical sources of liquidity, in addition to cash from operations, include a $350 million revolving credit facility, and an accounts receivable facility pursuant to which we had an agreement to sell, on a revolving basis, an interest in a defined pool of eligible trade accounts receivables of up to $125 million. We repaid all outstanding indebtedness under the $350 million revolving credit facility and terminated the accounts receivable facility in connection with the Refinancing. At February 28, 2003, $76.5 million was outstanding under the revolving credit facility and an additional $114.4 million of our capacity under our existing revolving credit facility had been utilized to support letters of credit. Provisions of the revolving credit facility and accounts receivable facility required us to maintain certain ratios at the end of each fiscal quarter including a fixed charge ratio, which limited the aggregate amount of our annual fixed charges, and a leverage ratio, which limited the amount of our total debt. As a result of our fiscal 2003 third quarter results, we did not meet the required leverage ratio under our existing revolving credit facility. However, our banks agreed to increase the permissible leverage ratio through July 11, 2003, which allowed us to complete the recent Refinancing. We reclassified our revolving credit facility debt as debt due within one year.

Sales of receivables under our accounts receivable facility are reflected in our financial statements as reductions of accounts receivable and as operating cash flows. As collections reduce previously sold interests, we may sell new eligible accounts receivable. Fees and expenses related to the facility are included in selling, general and administrative expenses. We, as agent, retain collection and administration responsibilities with respect to the pool of eligible receivables.

We historically have financed our major capital expansion projects with cash from operations and long-term borrowing. Working capital requirements and capital expenditures for normal replacement and technological upgrades of existing equipment and expansions of its operations are funded with cash from operations. The fiscal year 2003 capital expenditure budget for these activities is estimated currently at approximately $50 million. In addition, we lease certain mobile and other equipment used in our operations under operating leases that in the normal course of business are renewed or replaced by other leases.

During the nine month period ended February 28, 2003, we used cash from operations and $11.0 million in proceeds from disposal of assets to repay $16.5 million of debt and to fund $41.1 million of capital expenditures. During the nine months ended February 28, 2002, cash from operations funded debt reductions of $87.9 million and capital expenditures of $19.0 million.

Our total debt to total capitalization ratio was reduced from 40.6% to 33.5% during fiscal year 2002 and was further reduced to 33.2% at February 28, 2003, excluding in each case our accounts receivable facility.

As of February 28, 2003, without taking into account the Refinancing, our estimated future payments under our contractual obligations were as follows:

As part of the Refinancing, we entered into a new senior secured credit facility, which provides us with up to $200.0 million of available borrowings, subject to a borrowing base. We used the net proceeds from the sale of the outstanding notes, together with borrowings under our new senior secured credit facility, to repurchase $283.0 million principal amount of our previously issued senior notes, repay all debt outstanding under our then-existing credit facility and repurchase our interests in the defined pool of trade receivables previously sold under our accounts receivable facility. In addition, we will use a portion of the net proceeds from the sale of the outstanding notes, together with borrowings under our new senior secured credit facility, to retire all $95.5 million of our variable rate industrial development revenue bonds on or before August 5, 2003.

We have $96.7 million of cash collateralized letters of credit to support our variable-rate industrial development revenue bonds, which will remain outstanding until such bonds are retired and $21.3 million in letters of credit, which are subject to our new senior secured credit facility. In connection with the Refinancing, we wrote off $2.7 million of debt issuance costs associated with the debt which was repaid and incurred $8.5 million of expenses relating to consent payments and premiums, which were paid on the previously issued senior notes.

After giving effect to the Refinancing, at February 28, 2003 we would have been able to borrow an additional $180.7 million (after letters of credit) under our new senior secured credit facility, subject to a borrowing base. For a description of our new senior secured credit facility, see “Description of Certain Debt and Preferred Securities — New Senior Secured Credit Facility.”

We expect cash from operations, the net proceeds from this offering and borrowings under our new credit facility to be sufficient to provide funds for capital expenditure commitments, scheduled debt repayments and working capital needs.

Net cash provided by operating activities for the nine months ended February 28, 2003 was $51.0 million, a decrease of $61.5 million from the prior year period. The decrease in operating cash flow was primarily the result of lower operating profit and the related increase in deferred taxes. In the nine months ended February 28, 2003, a scheduled shutdown to refurbish the steel production facilities increased prepaid expenses $6.9 million. CAC inventories grew $6.7 million and receivables declined $23.7 million on lower sales. Accounts payable and accrued expenses increased $6.7 million primarily due to higher trade accounts payable. In the prior year period, increased steel shipments reduced inventories $7.2 million and increased trade receivables $11.8 million.

Net cash provided by operations was $171.0 million in fiscal year 2002, compared to $151.2 million in the prior year. Increased net income and deferred taxes were offset in part by changes in working capital

items. Higher steel shipments increased receivables $8.6 million. CAC receivables declined $14.1 million and raw material and supply inventories grew $7.1 million as wet weather in our Texas markets reduced ready-mix and aggregate sales in the May 2002 quarter. Collection of tax refund claims reduced receivables $14.2 million in 2002. Accounts payable and accrued expenses decreased $19.7 million primarily due to lower trade accounts payable as a result of the completion of the Midlothian cement plant expansion.

Net cash used by investing activities for the nine months ended February 28, 2003 was $30.8 million, compared to $20.7 million during the prior year period, consisting principally of capital expenditures for normal replacement and technological upgrades of existing equipment and expansion of our operations. Capital expenditures for these activities were $41.1 million, an increase of $22.1 million from the prior year period. Proceeds from disposal of assets increased $5.7 million. Lower current sales of surplus assets were offset by the collection of notes receivable related to disposals that occurred in prior years.

Net cash used by investing activities was $29.5 million in fiscal year 2002, compared to $125.1 million in the prior year, consisting principally of capital expenditure items. Capital expenditures for normal replacement and technological upgrades of existing equipment and expansions of our operations excluding major plant expansions were $29.7 million, down $59.0 million from fiscal year 2001. The fiscal year 2003 capital expenditure budget is estimated currently at approximately $50 million, including the $41.1 million invested through February 28, 2003. In fiscal year 2001, $48.3 million was incurred in completing the expansion of our Midlothian, Texas cement plant.

Net cash used by financing activities for the nine months ended February 28, 2003 was $22.1 million, compared to $91.4 million during the prior year period. The outstanding balance on our revolving credit facility was reduced $13.5 million. Net cash used by financing activities was $142.7 million in fiscal year 2002, compared to $24.3 million in the prior year. Long-term debt was reduced $139.3 million. In fiscal year 2001, we purchased, at a cost of $7.8 million, approximately 339,000 shares of our common stock for general corporate purposes. Our quarterly cash dividend of $.075 per common share remained unchanged from the prior year period.

We do not enter into derivatives or other financial instruments for trading or speculative purposes. Because of the short duration of our investments, changes in market interest rates would not have a significant impact on their fair value. The current fair value of our long-term debt, including current maturities, does not exceed its carrying value. Market risk, when estimated as the potential increase in fair value resulting from a hypothetical 10% decrease in our weighted average long-term borrowing rate, would not have a significant impact on the carrying value of long-term debt.

On April 15, 2003, we declared our quarterly cash dividend of $.075 per common share, totaling $1.6 million, payable on May 30, 2003.

Effective June 1, 2001, we adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which establishes a comprehensive standard for the recognition and measurement of derivatives and hedging activities. Due to our limited use of derivatives, the impact was not material.

Effective June 1, 2002, we adopted Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” Its adoption did not have an immediate effect on our financial statements.

Effective June 1, 2003, we will adopt Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations,” which establishes standards for accounting for legal obligations associated with the retirement of long-lived assets. We have not yet determined the impact of this adoption.

We anticipate that the costs associated with early extinguishment of debt will not be treated as an extraordinary item under Financial Accounting Standard No. 145. Instead, in connection with the Refinancing, we expect to write off $2.7 million of debt issuance costs associated with the debt to be repaid and incur an estimated $8.5 million of expenses relating to consent payments and premiums to be paid on the previously issued senior notes.

We do not enter into derivatives or other financial instruments for trading or speculative purposes. Because of the short duration of our investments, changes in market interest rates would not have a significant impact on their fair value. The current fair value of our long-term debt, including current maturities, does not exceed its carrying value. Market risk, when estimated as the potential increase in fair value resulting from a hypothetical 10% decrease in our weighted average long-term borrowing value, would not have a significant impact on the carrying value of long-term debt.

The following discussion is intended to provide background information concerning the industries in which we operate. You are cautioned, however, that our businesses are not necessarily affected by the industry trends or other factors discussed below in the same manner or to the same degree as the industry generally. Some of the information included in the following discussion is based on predictions and projections. These predictions and projections are subject to inherent uncertainties. Consequently, actual results may differ materially from those expressed in or implied by these predictions and projections. See “Forward-Looking Statements.” For specific information about our business and operating results, see “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other information contained in this prospectus.

Cement is manufactured through a closely controlled chemical process to meet specific quality standards. The manufacturing process begins with the mining and crushing of limestone, clay and other raw materials. The crushed raw materials are fed in pre-established proportions, which vary depending on the type of cement to be produced, into a grinding process, which mixes the various materials more thoroughly and reduces them further in size in preparation for the kiln. In the kiln, the raw materials are processed at a very high temperature to produce clinker. Clinker generally is produced utilizing either of two basic methods, a “wet” or a “dry” process. In a wet process plant, raw materials are mixed with water to form a slurry that is fed into the kiln. This process has the advantage of greater ease in the handling and mixing of the raw materials; however, additional heat, and therefore fuel, is required to evaporate the moisture before the raw materials can react to form clinker. The dry process excludes the addition of water into the process. Dry process plants with pre-heater pre-calciners, like our Texas dry process plants, have separate burners to accomplish a significant portion of the chemical reaction of the raw materials before they are fed into the kiln and are therefore more energy efficient.

Cement is the essential binding material used in making concrete, which is widely used in public works, residential, and non-residential construction activity. Gray portland cement is largely a commodity product, and due to this lack of product differentiation, cement producers compete with domestic and international sources of cement largely on the basis of price. Given the high transportation costs of cement relative to its value, cement is typically sold within a 300 mile radius from the producing plant. Consequently, even cement producers with global operations compete on a regional basis in each market in which that company manufactures and distributes products. No single cement company in the United States has a production and distribution system extensive enough to serve all U.S. markets. The ability of a company to compete in a given market depends largely on location, operating costs of its plants and associated distribution terminals, price and service in that market.

According to the Portland Cement Association, consumption of portland cement in the United States in 2001 totaled approximately 124 million tons and domestic capacity approximated 103 million tons during the same period. A favorable consumption to capacity imbalance has existed since 1994 in the United States, with excess consumption met by imported cement.

Cement consumption is driven by expenditures for federal and state infrastructure programs, public works projects, residential construction, and non-residential construction. Approximately half of the cement consumed in the United States is in public works projects. The remaining amount is consumed approximately equally in non-residential and residential construction projects. On the federal level, infrastructure funds are appropriated by Congress, through programs such as the Transportation Equity Act of the 21st Century (TEA-21), which has allocated an average of $28 billion annually to transportation projects for the six-year period through 2003. In 2002, California and Texas received $2.8 billion and 2.4 billion, respectively, in funding under TEA-21. In 2003, California and Texas were allocated $2.5 billion and $2.2 billion, respectively, in highway funding under the Fiscal Year 2003 Omnibus Appropriations Bill, making these two states the largest funding recipients in the United States. In fall 2003, TEA-21 is scheduled for re-authorization for an additional six-year period.

Both California and Texas have favorable long-term indicators for increased highway and infrastructure spending. California is the largest state by population, followed by Texas, and California and Texas were ranked one and two respectively by absolute population growth over the last decade (California’s population grew over 4 million, or approximately 14%, and Texas’ population grew over 3.8 million, or approximately 23%). Texas is expected to grow approximately 60% faster than the rest of the United States from 2000 to 2025, increasing its population by 55% to 32 million. California is expected to grow 45% from 2000 to 2020. We believe these population trends will create increased pressure to boost transportation spending and to increase residential, commercial, industrial, medical and educational construction spending.

The construction aggregates business consists of the mining, extraction, production and sale of stone, sand and gravel. Construction aggregates, such as crushed stone, sand and gravel, are consumed in virtually all types of construction, including highway construction and maintenance. The concrete business involves the mixing of cement, sand, gravel or crushed stone and water to form concrete that is subsequently marketed and distributed to numerous construction contractors.

Consumption of aggregates and concrete products largely depends on regional levels of construction activity and tends to follow consumption patterns similar to those of cement. Both the aggregates and concrete industries are highly fragmented, with numerous participants operating in localized markets. The cost of transportation of both aggregates and concrete products is high relative to their value, and consequently, producers are typically limited to a market area within 100 miles of their production facilities.

The U.S. steel industry is generally composed of two major types of producers: integrated mills and mini-mills. Integrated mills, which use blast furnaces to make molten steel from iron ore and coke, are more energy and capital-intensive than mini-mills, which melt recycled steel scrap with electric arc

furnaces. As a group, mini-mills are generally characterized by a lower cost of production and higher productivity than integrated mills. This is due, in part, to lower capital costs and to lower operating costs resulting from a more streamlined melting process, technological advances in casting and smaller, more efficient plant layouts. Moreover, mini-mills have tended to employ a management culture that emphasizes flexible, incentive-oriented non-union labor practices designed to encourage productivity and efficiency. The smaller plant size of a mini-mill also permits greater flexibility in the choice of location for the mini-mill to optimize scrap supply, energy costs, infrastructure and distribution. As mini-mill production technologies have evolved, mini-mill producers have displaced integrated producers as manufacturers of numerous steel products. Today in the United States the primary producers of structural steel and steel bar products utilize the mini-mill process.

The market for structural steel, our primary steel product, is a niche market in the U.S. steel industry, with consumption totaling 7.4 million tons in 2002, or approximately 6% of total U.S. steel consumed. Structural steel products include wide flange beams, standard beams, channels and other shapes that are primarily used in commercial, retail, industrial, institutional and warehouse construction. Additional markets include manufactured housing and public works.

Because the demand for structural steel products in North America is driven primarily by non-residential construction, structural steel consumption has been, and continues to be, highly cyclical, influenced by periods of economic growth or recession. The slowing of the U.S. economy has resulted in reduced levels of non-residential construction activity since 2000. As a result, structural steel consumption has declined and structural steel capacity currently exceeds demand. Competition from foreign producers is typically strong, but imports of structural products have declined from a year ago. Actions by U.S. producers to maintain market share versus imports have combined with overall demand and supply conditions to create intense competitive pressures on structural steel prices.

The following chart highlights the cyclical nature of the non-residential construction industry and the correlation between the usage of structural steel and non-residential construction activity.


Source:	FW Dodge for nonresidential construction; AISA for U.S. structural steel comparison.

Steel bar products consist of reinforcing bar, a commodity product, and specialty bar products. Reinforcing bar is used in concrete structures to increase tensile strength. It is relatively easy to make and is therefore made by a large number of producers. As a result, the market for this product is very regional. Specialty bar products include merchant bar products and products made of engineering steels that are used in applications where the service conditions or component design requirements are exacting. Such applications include oil country goods, automotive components, industrial hardware and tools. Because higher quality specifications are required to make these products, fewer producers compete for this market.


	•	In May 2001, we completed the expansion of our Midlothian, Texas cement manufacturing plant. We invested $243.3 million to add state-of-the-art dry process cement manufacturing capability to our facility. This expansion added approximately 1.5 million tons of capacity, which increased our total cement production capacity by over 40% to 5.0 million tons.

	•	In August 1999, we began operation of our new state-of-the-art, low-cost structural steel facility in Dinwiddie County, Virginia. We invested $543.2 million to construct our Virginia facility, which is designed to use recycled steel scrap to produce a large variety of structural steel products, including sheet piling products. This expansion added approximately 1.2 million tons of capacity, which increased our total steel production capacity by over 60% to 3.0 million tons.

piling products and other shapes and our steel bar products include reinforcing bar and specialty bar products. We market our products to steel service centers and steel fabricators for use in the construction industry, as well as to cold finishers, forgers and original equipment manufacturers for use in the railroad, defense, automotive, manufactured housing and energy industries.

Low Cost Supplier. We believe we have one of the lowest operating cost structures in the cement and structural steel industries. In order to maintain this low operating cost structure, we strive to optimize the use of our equipment, enhance our productivity and explore new technologies to further improve our unit cost of production at each of our facilities. To support these efforts, we have established incentive compensation programs designed to reward employees for improving productivity and profitability. We believe that our Texas cement manufacturing facilities, recently enhanced by the Midlothian plant expansion, are among the lowest cost cement manufacturing facilities in our region. Our low operating costs are primarily a result of our efficient plant designs and operations, high productivity rate and innovative manufacturing processes. For example, we manufactured 5.2 tons of cement per man hour at our new Midlothian cement facility during the nine months ended February 28, 2003, which we believe is well above the industry average for dry process plants with pre-heater pre-calciners. Also, our patented CemStar^SM technology, which utilizes a co-product of steel making, allows us to increase production of cement by approximately 6% with little additional cost.

California, Arizona, Nevada and Utah, and continues to do so today. In 2002, California and Texas had significant capital dedicated towards highway construction and maintenance under the TEA-21. In 2003, California and Texas were allocated $2.5 billion and $2.2 billion, respectively, in highway funding under the Fiscal Year 2003 Omnibus Appropriations Bill, making these two states the largest funding recipients in the United States. In addition, our steel facilities are located in Texas and Virginia, which affords broad U.S. coverage ranging from the Northeast corridor to the West Coast.

Diversified Product Mix and End-User Markets. We are the only producer of both cement and steel in North America. We manufacture 17 different types of cement and over 230 different types, sizes and grades of structural steel and steel bar products. This diversified mix of products allows us to access a broad range of end-user markets, serve a broad customer base and mitigate our exposure to cyclical downturns in any one product, end-user market or operating segment. As a result, our revenue streams are derived from multiple end-use markets, including the public works, residential, commercial, retail, industrial and institutional construction sectors, as well as the railroad, defense, automotive, manufactured housing and energy industries. Accordingly, we have a broad and diverse customer base with no one customer accounting for more than 2.3% of our total net sales for the twelve months ended February 28, 2003.

Our cement operations produce gray portland cement as its principal product. We also produce specialty cements such as white portland, masonry and oil well.

Cement production facilities are located at four sites in Texas and California: Midlothian, Texas, south of Dallas/ Fort Worth, the largest cement plant in Texas; Hunter, Texas, south of Austin; and Oro Grande and Crestmore, California, both near Los Angeles. Except for the Crestmore facility, the limestone reserves used as the primary raw material are located on fee-owned property adjacent to each of the plants. Raw material for the Crestmore facility is purchased from multiple outside suppliers. Information regarding each of our facilities is as follows:

We use our patented CemStar^SM process in both of our Texas facilities and our Oro Grande, California facility to increase combined annual production by 6%. The CemStar^SM process adds “slag,” a co-product of steel-making, into a cement kiln along with the regular raw material feed. The slag is added to the feedstock materials fed into the kiln and serves to increase the production of clinker with little additional cost. The primary fuel source for all of our facilities is coal; however, we displace approximately 15% of our coal needs at our Midlothian plant and approximately 8% of our coal needs at our Hunter plant by utilizing alternative fuels such as waste-derived fuels and tires. Our facilities also consume large amounts of electricity obtained primarily under fixed-price firm supply contracts of short duration. We believe that adequate supplies of both fuel and electricity are readily available.

We produced approximately 4.7 million tons of finished cement in fiscal year 2002, 4.1 million tons in fiscal year 2001 and 3.6 million tons in fiscal year 2000. Total annual shipments of finished cement were approximately 4.9 million tons in fiscal year 2002, 4.6 million tons in fiscal year 2001 and 4.1 million tons in fiscal year 2000 of which 3.9 million tons in fiscal year 2002, 3.5 million tons in fiscal year 2001 and 3.1 million tons in fiscal year 2000 were shipped to outside trade customers. The difference between production and shipments of cement is purchased cement. We purchased for resale large amounts of cement during fiscal years 2000 and 2001 to prepare the market for our Midlothian, Texas expansion.

We market our cement products in the southwestern United States. The principal marketing area includes the states of Texas, Louisiana, Oklahoma, California, Nevada, Arizona and Utah. Sales offices are maintained throughout the marketing area and sales are made primarily to numerous customers in the construction industry, no one of which accounted for more than 2.9% of the trade sales for the twelve months ended February 28, 2003.

Cement is distributed by rail or truck to eight distribution terminals located throughout the marketing area.

The cement industry is highly competitive with suppliers differentiating themselves based on price, service and quality.

Our aggregate operations, which include sand, gravel, crushed limestone and expanded shale and clay (a specialty aggregate product), are conducted from facilities primarily serving the Dallas/ Fort Worth, Austin and Houston areas in Texas; the southern Oklahoma area; the Alexandria, New Orleans, Baton Rouge and Monroe areas in Louisiana; the Oakland/ San Francisco and Los Angeles areas in California;


(1)	Operations started in August 2002.

(2)	Net Sales of expanded shale and clay are included within CAC other products.

Reserves identified with the facilities shown above and additional reserves available to support future plant sites are contained on approximately 59,000 acres of land, of which approximately 41,000 acres are owned in fee and the remainder leased. The expanded shale and clay plants operated at 90% of rated annual productive capacity for fiscal year 2002 with sales of approximately 1.7 million cubic yards. Production for the remaining aggregate facilities during fiscal year 2002 was 96% of rated annual productive capacity and sales for the year totaled 21.2 million tons, of which approximately 15.7 million tons were shipped to outside trade customers. In addition, we own and operate three industrial sand plants and an aggregate blending facility.

The cost of transportation limits the marketing of these various aggregates to the areas within 100 miles of the plant sites. Consequently, sales of these products are related to the level of construction activity near these plants. These products are marketed by our sales organization located in the areas served by the plants and are sold to numerous customers, no one of which would be considered significant to our business. The distribution of these products is provided to trade customers principally by contract or customer-owned haulers, and a limited amount of these products is distributed by rail for affiliated usage.

Our ready-mix concrete operations are situated in three areas in Texas (Dallas/ Fort Worth/ Denton, Houston and East Texas), in north and central Louisiana, and at one location in southern Arkansas. The following table summarizes various information concerning these facilities:

The plants listed above are located on sites we own or lease. We manufacture and supply a substantial amount of the cement and aggregates used by the ready-mix plants with the remainder being purchased from outside suppliers. Ready-mix concrete is sold to various contractors in the construction industry, no one of which would be considered significant to our business.

The major concrete and brick products we manufacture and market are summarized below:

We own the plant or distribution sites in the above locations. The products are marketed by our sales force in each of these locations, and are primarily delivered by trucks we own. Because the cost of delivery is significant to the overall cost of most of these products, the market area is generally restricted to within approximately 100 miles of the plant locations. These products are sold to various contractors, owners and distributors, no one of which would be considered significant to our business.

In most of our principal markets for concrete products, we compete vigorously with at least three other vertically integrated concrete companies. We believe that we are a significant participant in each of the Texas and Louisiana concrete products markets. The principal methods of competition in concrete products markets are quality and service at competitive prices.

Our steel facilities, located in Midlothian, Texas and Dinwiddie County, Virginia, produce a broader array of steel products than a traditional mini-mill. We use our patented near net shape casting technology at both facilities. This process involves casting molten steel into a shape that is closer to a product’s final shape than traditional casting methods. This technology provides energy and capital cost savings in the making of wide flange beams and other structural steel products. The Texas facility has two electric arc furnaces with continuous casters that feed melted steel to a bar mill, a structural mill and a large beam mill. Finished (rolled) products produced include beams up to twenty-four inches wide, merchant bar-quality rounds, special bar quality rounds, reinforcing bar and channels. The Virginia facility has one electric arc furnace and in-line processing units consisting of two near-net shape casters and a sophisticated rolling mill. Finished products produced include beams up to thirty-six inches wide, sheet piling, H-piling and channels.

The bar and structural mills produced approximately 1.9 million tons of finished products in fiscal year 2002, 1.7 million tons in fiscal year 2001 and 1.7 million tons in fiscal year 2000.

The principal raw material is recycled steel scrap. Shredded steel represents approximately 40% of the raw material mix. A major portion of the shredded steel requirements of the Texas facility is produced by an on-site shredder operation utilizing primarily crushed auto bodies purchased on the open market. We purchase shredded steel on the open market to meet the requirements of the Virginia facility. Another grade of recycled steel scrap, #1 Heavy, representing approximately 30% of the raw material mix is also purchased on the open market. The purchase price of recycled steel scrap is subject to market forces largely beyond our control. The supply of recycled steel scrap is expected to be adequate to meet future requirements.

The steel mini-mills consume large amounts of electricity and natural gas. Electricity for the Texas facility is obtained from a local utility under fixed-price firm supply contracts typically of short duration. Electricity for the Virginia facility is obtained from a local utility under an interruptible supply contract with price adjustments that reflect increases or decreases in the utility’s fuel costs. Natural gas is obtained from local gas utilities under supply contracts. We believe that adequate supplies of both electricity and natural gas are readily available.

Our steel products are marketed by our sales organization throughout the United States and to a limited extent in Canada and Mexico. Sales are primarily to steel service centers and steel fabricators for use in the construction industry, as well as to cold finishers, forgers and original equipment manufacturers for use in the railroad, defense, automotive, mobile home and energy industries. We do not place heavy reliance on franchises, licenses or concessions. None of our customers accounted for more than 4.9% of our steel sales for the twelve months ended February 28, 2003. Sales to affiliates are minimal. Orders are generally filled within 45 days and are cancelable. Delivery of finished products is accomplished by common carrier, customer-owned trucks, rail or barge.

We compete with steel producers, including foreign producers, on the basis of price, quality and service. Certain of the foreign and domestic competitors, including both large integrated steel producers and mini-mills, have substantially greater assets and larger sales organizations than ours. Intense sales competition exists for substantially all of our steel products.

At February 28, 2003, we had 4,166 employees of which 2,625 are employed in our CAC segment, 1,369 in our steel segment and the balance in our corporate offices. Approximately 200 employees at our Oro Grande, California cement facility are covered by a collective bargaining agreement that expires in September 2005. We believe our relationship with our employees is good.

We are defendants in lawsuits that arose in the ordinary course of business. In our judgment, the ultimate liability, if any, from such legal proceedings will not have a material effect on our consolidated financial position or results of operations.

We received a complaint from the California air regulatory authorities in connection with one of our aggregate plants in California. The plant makes lightweight clay aggregate by heating clay pellets in two natural gas-fired kilns. The complaint alleges violations of the plant’s air emissions permit and seeks monetary sanctions. The amount of any possible sanctions is not currently estimable. We believe that the plant is in substantial compliance with its permit limitations.

In November 1998, Chaparral Steel Company, our wholly owned subsidiary, filed an action in the District Court of Ellis County, Texas against certain graphite electrode suppliers seeking damages for illegal restraints of trade in the sale of graphite electrodes. We have obtained settlements from the major producers of graphite electrodes named in the action and received income from these settlements in fiscal year 2002. We do not expect to continue to receive significant income from these settlements in the future.

We are subject to federal, state and local environmental, health and safety laws and regulations concerning, among other matters, air emissions, electric arc furnace dust disposal and wastewater discharge. We believe we are in substantial compliance with applicable environmental laws and regulations, however, from time to time we receive claims from federal, state and local regulatory agencies and entities, as well as from private parties, asserting that we are or may be in violation of certain of these laws and regulations. Based on our experience and the information currently available to us, we believe that such claims will not have a material impact on our financial condition or results of operations. Despite our compliance and experience, it is possible that we could be held liable for future charges that might be material but are not currently known or estimable. In addition, changes in applicable laws, regulations or requirements or discovery of currently unknown conditions could require us to make additional expenditures. See “Risk Factors” for a further discussion of environmental regulations applicable to us.

While we maintain trademarks such as TXI® and Maximizer® and process patents such as CemStar^SM and near-net shape casting, we believe that none of our active trademarks or patents are essential to our business as a whole.

We are involved in the development of our surplus real estate and real estate acquired for development of high quality industrial, office and multi-use parks in the metropolitan areas of Dallas/ Fort Worth and Houston, Texas.

Our directors and executive officers and certain biographical information about each of these individuals are set forth below:

Gerald R. Heffernan has been a director since 1986. He has been President of G.R. Heffernan & Associates, Ltd., an investment company in Toronto, Ontario, Canada since 1989.

Robert D. Rogers has been a director since 1970. He joined TXI in 1963 as General Manager/European Operations and has since served in various positions including Vice President-Operations and Vice President-Finance. Since 1970, he has been President and Chief Executive Officer. He received his degree in Economics in 1958 from Yale University and his M.B.A. at Harvard University in 1962, where he was a Baker Scholar. Prior to joining TXI, he was Secretary for Oklahoma Cement Company and later became Assistant to the Vice President of the George A. Fuller Company. His industry and community service positions have included Chairman, Federal Reserve Bank of Dallas (1984-1986), Chairman, Greater Dallas Chamber of Commerce (1986-1988) and director, American Business Conference (1989-1994). He is currently a Director on the boards of CNF, Inc. and National Recreation Foundation.

Robert Alpert has been a director since 1975. Since 1998, he has been President and Chairman of the Board of Angelholm Corp. d/ b/ a The Alpert Companies, a financial services and real estate company in Dallas, Texas and Chairman of the Board of Argo Funding Co. L.L.C., a venture capital fund in Dallas, Texas. Mr. Alpert is also a director of CNF Inc.

John M. Belk has been a director since 1998. Since 1998, he has been Chairman of the Board and Chief Executive Officer of Belk, Inc. and Chairman of the Board of Belk Stores Services, Inc., department

Gordon E. Forward has been a director since 1991. Since June 2001, he has managed his private investments and was Chairman of Applied Sustainability, LLC, in Austin, Texas from June 1999 through May 2001, Vice Chairman of the Board of TXI from July 1998 through May 2000 and President and Chief Executive Officer of Chaparral Steel Company until July 1998. Mr. Forward is also a director of Nexfor Inc.

James M. Hoak, Jr. has been a director since 1995. He has been Chairman and a Principal of Hoak Capital Corporation, a private equity investment firm in Dallas, Texas, since 1991. Mr. Hoak is also a director of PanAmSat Corporation and Pier 1 Imports, Inc.

David A. Reed has been a director since 2000. He is currently the Managing Partner of Causeway Capital Partners, L.P., a private family investment partnership in Dallas, Texas and, prior to his retirement in September 2000, was Senior Vice Chair — Global Accounts, Industries, Sales and Marketing, and a Member of Management Committee, Ernst & Young LLP, Dallas, Texas since 1991. Mr. Reed is also director of Extensity Inc.

Eugenio Clariond Reyes has been a director since 1998. He has been President and Chief Executive Officer of Grupo IMSA, S.A., a steel processor, auto parts, aluminum and plastic construction products company in Monterrey, Mexico, since 1981.

Ian Wachtmeister has been a director since 1977. He has served as Chief Executive Officer and Chairman of The Empire, AB, a metals dealer in Stockholm, Sweden, since 1997.

Elizabeth C. Williams has been a director since 1995. She has been the Treasurer of Southern Methodist University in Dallas, Texas, since 1991.

Melvin G. Brekhus was elected to his current position as Executive Vice President, Cement, Aggregate & Concrete in 1998. He joined TXI in 1989 as Vice President, Cement Production and within a short period became Vice President, Cement. His career in the cement industry began in 1972, after graduating from Montana Tech of the University of Montana with a Bachelor’s degree in Engineering Science, when he joined Lehigh Portland Cement Company (1972-1983). While at Lehigh, he held various positions as Chemist, Production Manager and Plant Manager throughout the United States. From there, he became Technical Manager and Plant Manager for Missouri Portland Cement Company (1984-1989) in their Midwest operation. His professional affiliations include the American Portland Cement Alliance, Past Chairman and present director and the Portland Cement Association, Chairman (2001-2002) and current Chairman Emeritus.

Tommy A. Valenta joined TXI in 1970. He has held various positions in the organization including General Manager, Division Vice President for Aggregate Development, North Texas Ready-Mix, Transportation and Cement Marketing. His most recent position was Vice President, Concrete until his appointment to his current position of Executive Vice President, Steel in 1998. He has a degree in Business from Midwestern University and a M.B.A. from Southern Methodist University. Throughout his career, he has served as a director for various industry associations including the National Ready-Mix Concrete Association, the American Institute of Steel Construction and the Steel Manufacturers Association.

Richard M. Fowler has been with TXI since 1972. Prior to being named Executive Vice President-Finance in July 2000, he was Vice President-Controller (1972-1984), Vice President Finance-Steel (1985-1987) and Vice President Finance-TXI (1987-2000). A native of Louisiana, he graduated from Louisiana Tech University in 1965. As a Certified Public Accountant (CPA), he maintains membership in both the Texas Society and the American Institute of CPAs, is a member of the Financial Executive Institute and serves on the Advisory Board of FM Global and the Board of Directors of Dee Brown, Inc.

Barry M. Bone was elected Vice President — Real Estate in 1995 and President of Brookhollow Corporation, our real estate subsidiary, in 1991.

William J. Durbin was elected Vice President — Human Resources in 2000. From 1996 to 2000, he served as Vice President — Human Resources and Administration for USI Bath & Plumbing Products.

Robert C. Moore was elected Vice President — General Counsel and Secretary in 1985.

The table below reflects the annual and long-term compensation for those person who were, at May 31, 2002, (i) the Chief Executive Officer and (ii) our other four most highly compensated executive officers, for the fiscal years ended May 31, 2002, 2001 and 2000.


(1)	Vested and non-vested portion of amounts contributed and allocated by employer to employee benefit plans.

Under an employment contract that has been extended, under certain conditions, through May 31, 2004, Robert D. Rogers, our President and Chief Executive Officer, receives an annual salary consisting of $300,000 plus an annual award of 21,632 shares of our common stock, or the market value thereof in cash. In the event the annual salary earned in a year is greater than $900,000, our Board of Directors may, in its discretion, defer payment of salary earned in excess of $900,000 until termination of employment. Such deferred amounts shall be treated in the same manner as the deferred incentive compensation discussed below. The extended contract also has a long term incentive component previously approved by our shareholders that provides that in the event our consolidated average return on equity for the three consecutive fiscal year periods ending May 31, 2002, 2003 and 2004, respectively, equals or exceeds a return on equity objective of 16%, Mr. Rogers will receive an incentive payment in respect of each year in which such objective is achieved as follows: if the average return on equity is equal to or greater than 16% but less than 21%, an incentive payment equal to 80% of salary or if 21% or greater, the incentive payment will equal 160% of salary. Fifty percent of this latter incentive will be paid in cash and 50% deferred until

termination of employment and distributed in three equal annual installments. Deferred incentive compensation is denominated in shares of our common stock determined by reference to the fair market value of the stock (as defined in the employment contract) at the time of deferral and dividends are credited to the deferred account in the form of common stock at a value equal to the fair market value of the stock on the date of payment of such dividend. The shares of common stock credited to the account are adjusted to reflect any increase or decrease in the number of shares outstanding as a result of stock splits, combination of shares, recapitalizations, mergers or consolidations. Following a change in control that is not approved by our board of directors, Mr. Rogers may, in his sole discretion, elect to terminate his services for any reason (or for no reason) upon 30 days written notice. Upon such a voluntary termination (i) Mr. Rogers will receive two times the annual base compensation and incentive compensation for the immediately preceding fiscal year, (ii) all outstanding options held by Mr. Rogers will be immediately accelerated and vested and (iii) Mr. Rogers will no longer be subject to the non-competition provisions contained in the agreement.

The following discussion summarizes the terms of the material debt and preferred securities that are outstanding following the Refinancing. You should read the following summary together with the other information and our consolidated financial statements and the notes to those statements included elsewhere in this prospectus.

On June 6, 2003, certain of our subsidiaries entered into a $200.0 million new senior secured revolving credit facility provided by a syndicate of lenders led by Bank of America, N.A., an affiliate of Banc of America Securities LLC. The new senior secured credit facility replaced our prior $350.0 million amended and restated credit agreement. The obligations of the borrowers under the new senior secured credit facility have been guaranteed by us, each of the borrowers and certain of our other subsidiaries, and is secured by first priority liens on all of the borrowers’ and some or all of the guarantors’ existing and future acquired accounts receivable, inventory, deposit accounts and certain of their general intangibles.

The new senior secured credit facility will mature four years after its closing date, which was June 6, 2003. Amounts drawn under the new senior secured credit facility will be limited to (1) 85% of the net amount of eligible accounts receivable of the borrowers, plus (2) the lesser of (a) 60% of eligible inventory, (b) 80% of the appraised net liquidation value of the borrowers’ eligible inventory or (c) $75.0 million (or $90.0 million from December 1 through March 31 of any year), minus (3) such reserves as Bank of America may reasonably establish. The new senior secured credit facility included a $40.0 million sub-limit for letters of credit and any outstanding letters of credit will be deducted from the borrowing availability under the facility. Amounts drawn under the new senior secured credit facility initially bear annual interest at either the LIBOR based rate plus 2.50% or the prime rate plus 0.50%. These interest rate margins are subject to performance price adjustments. The unused line fee calculated on the unused portion of the new senior secured credit facility is 0.375% per year. The borrowers may terminate the new senior secured credit facility anytime, and upon the payment of a termination fee in the first two years.

The new senior secured credit facility contains a number of negative covenants restricting, among other things, prepayment or redemption of the exchange notes, distributions, dividends and repurchases of capital stock and other equity interests, acquisitions and investments, indebtedness, liens and affiliate transactions. We will be required to comply with certain financial tests and to maintain certain financial ratios if the excess availability under the new senior secured credit facility falls below $30 million, including maintaining a fixed charge coverage ratio and meeting a minimum tangible net worth test. The new senior secured credit facility also contains customary events of default.

TXI Capital Trust I issued 5.5% Shared Preference Redeemable Securities to the public on June 5, 1998. The preferred securities represent undivided beneficial interests in the assets of the trust. We own all of the common securities of the trust and appoint the trustees that conduct the affairs of the trust. We have guaranteed, on an unsecured and subordinated basis, distributions, redemption prices and other payments due on the preferred securities of the trust, to the extent the trust has assets available for such purposes.

The trust used the proceeds from the sale of its common equity and the preferred securities to purchase our unsecured 5.5% convertible subordinated debentures on June 5, 1998. The debentures are due June 30, 2028 and are the only asset of the trust. The debentures are subordinated to our senior debt and will be subordinated to the exchange notes.

Our debentures are redeemable at our option (in whole or in part) or upon the occurrence of certain events relating to federal income tax matters for cash, at par plus accrued and unpaid interest. Upon any redemption of the debentures, a like amount of preferred securities of the trust will be redeemed. In

addition, the trust would be dissolved upon the occurrence of any such tax event or if there is more than an insubstantial risk that it would be considered an investment company under the Investment Company Act of 1940, as amended. If the trust were dissolved or otherwise liquidated, the convertible subordinated debentures may be distributed to holders of the preferred securities. This distribution would be deemed an incurrence of debt under certain of our debt agreements and, if not permitted at the time of incurrence, would constitute an event of default.

The agreement governing our subordinated debentures contains restrictions on our ability to merge or consolidate, voluntarily terminate, wind-up or terminate the trust, declare or pay dividends; pay indebtedness that is equal with or junior to the debentures, pay under any guarantee that is equal with or junior to the debentures, and transfer the common securities of the trust.

Each preferred security of the trust and each $50 in aggregate principal of our debentures is convertible at the option of the holder of such security into our common stock on or before June 30, 2028. The conversion rate is ..72218 shares of our common stock for each preferred security or $50 in aggregate principal amount of debentures, subject to certain adjustments.

This section of the prospectus describes the proposed exchange offer. While we believe that the description covers the material terms of the exchange offer, this section may not contain all of the information that is important to you. You should carefully read this entire document and the other documents referred to herein for a more complete understanding of the exchange offer.

We sold the outstanding notes to Banc of America Securities LLC, UBS Warburg LLC, Banc One Capital Markets, Inc., Wells Fargo Securities, LLC, SunTrust Capital Markets, Inc., Comerica Securities, Inc., Credit Lyonnais Securities (USA) Inc. and Hibernia Southcoast Capital, Inc., or the “initial purchasers,” on June 6, 2003. The initial purchasers subsequently resold the outstanding notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act. In connection with the issuance of the outstanding notes, TXI, the subsidiary guarantors and the initial purchasers entered into a Registration Rights Agreement. The Registration Rights Agreement requires us to, among other things, at our cost, file a registration statement with the SEC with respect to our offer to exchange the outstanding notes for the exchange notes. The exchange notes will have terms substantially identical in all material respects to the outstanding notes (except that the exchange notes will not contain terms with respect to transfer restrictions and with respect to the payment of additional interest under circumstances relating to breaches of the Registration Rights Agreement by TXI and the subsidiary guarantors). We are effecting the exchange offer to comply with the Registration Rights Agreement. We have filed a copy of the Registration Rights Agreement as an exhibit to the registration statement of which this prospectus is a part, and a description of the registration rights agreement appears in “Description of the Exchange Notes — Registration Rights; Liquidated Damages.” The term “holder” with respect to the exchange offer means any person in whose name the outstanding notes are registered on our books or any other person who has obtained a properly completed bond power from the registered holder.

Because the exchange offer is for any and all outstanding notes, the number of outstanding notes tendered and exchanged in the exchange offer will reduce the principal amount of outstanding notes outstanding. Following the completion of the exchange offer, holders of the outstanding notes who did not tender their outstanding notes generally will not have any further registration rights under the Registration Rights Agreement, and such outstanding notes will continue to be subject to restrictions on transfer. Accordingly, the liquidity of the market for such outstanding notes could be adversely affected. The outstanding notes are currently eligible for sale pursuant to Rule 144A through the PORTAL Market®. Because we anticipate that most holders of outstanding notes will elect to exchange them for exchange notes, we anticipate that the liquidity of the market for any outstanding notes remaining after the completion of the exchange offer may be substantially limited.

Based on an interpretation of the Securities Act by the staff of the SEC in several no-action letters issued to third parties unrelated to us, we believe that you, or any other person receiving exchange notes, may offer for resale, resell or otherwise transfer such notes without complying with the registration and prospectus delivery requirements of the federal securities laws, if:


	•	you, or the person or entity receiving such exchange notes, is acquiring such notes in the ordinary course of business;

	•	neither you nor any such person or entity is engaging in or intends to engage in a distribution of the exchange notes within the meaning of the federal securities laws;

	•	neither you nor any such person or entity has an arrangement or understanding with any person or entity to participate in any distribution of the exchange notes;


	•	neither you nor any such person or entity is an “affiliate” of us or the guarantors, as such term is defined under Rule 405 under the Securities Act; and

	•	you are not acting on behalf of any person or entity who could not truthfully make these statements.

To participate in the exchange offer, you must represent as the holder of outstanding notes that each of these statements is true.

Any holder of outstanding notes who is our affiliate or who intends to participate in the exchange offer for the purpose of distributing the exchange notes:


	•	will not be able to rely on the interpretation of the staff of the SEC set forth in the no-action letters described above; and

	•	must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the exchange notes, unless the sale or transfer is made pursuant to an exemption from those requirements.

Broker-dealers receiving exchange notes in exchange for outstanding notes acquired for their own account through market-making or other trading activities may not rely on this interpretation by the SEC. Such broker-dealers may be deemed to be “underwriters” within the meaning of the Securities Act and must therefore acknowledge, by signing the letter of transmittal, that they will deliver a prospectus meeting the requirements of the Securities Act in connection with resale of the exchange notes. 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. The SEC has taken the position that participating broker-dealers may fulfill their prospectus delivery requirements with respect to the exchange notes, other than a resale of an unsold allotment from the original sale of the outstanding notes, with the prospectus contained in the exchange offer registration statement. As described above, under the Registration Rights Agreement, we have agreed to allow participating broker-dealers and other persons, if any, subject to similar prospectus delivery requirements to use the prospectus contained in the exchange offer registration statement in connection with the resale of the exchange notes. See “Plan of Distribution.”

This prospectus, together with the letter of transmittal, is first being sent on or about , 2003, to all holders of outstanding notes known to us. Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept any and all outstanding notes validly tendered and not withdrawn prior to 5:00 p.m. New York City time on , 2003. We will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding notes accepted in the exchange offer. Holders may tender some or all of their outstanding notes pursuant to the exchange offer. However, outstanding notes may be tendered only in integral multiples of $1,000.

The form and terms of the exchange notes are the same as the form and terms of the outstanding notes except that:


	•	the exchange notes have been registered under the federal securities laws and will not bear any legend restricting their transfer;

	•	the exchange notes will bear a different CUSIP number from the outstanding notes; and

	•	the holders of the exchange notes will not be entitled to certain rights under the Registration Rights Agreement.

The exchange notes will evidence the same debt as the outstanding notes. Holders of exchange notes will be entitled to the benefits of the indenture.

Holders of outstanding notes do not have any appraisal or dissenter’s rights under the General Corporation Law of Delaware or the indenture in connection with the exchange offer. We intend to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the SEC under the Exchange Act.

We shall be deemed to have accepted validly tendered outstanding notes when and if we have given written notice to the exchange agent of our acceptance. The exchange agent will act as agent for the tendering holders for the purpose of receiving the exchange notes from us.

If any tendered outstanding notes are not accepted for exchange because of an invalid tender, the occurrence of other events described in this prospectus or otherwise, the certificates for any such unaccepted outstanding notes wills be returned, without expense, to the tendering holder thereof as promptly as practicable after the expiration of the exchange offer.

Holders who tender outstanding notes in the exchange offer will not be required to pay brokerage commission or fees, or subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of outstanding notes pursuant to the exchange offer. We will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the exchange offer. See “— Fees and Expenses.”

The exchange offer will expire at 5:00 p.m., New York City time, on , 2003, which is the expiration date, unless we extend it. To extend the exchange offer, we will notify the exchange agent of any extension by oral or written notice, followed by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.

We reserve the right, in our reasonable judgment, (a) to delay accepting any outstanding notes, to extend the exchange offer or to terminate the exchange offer if any of the conditions set forth below under “— Conditions” shall not have been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent, or (b) 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 a public announcement. If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders, and, depending upon the significance of the amendment and the manner of disclosure to the registered holders, we will extend the exchange offer for a period of five to ten business days if the exchange offer would otherwise expire during this five to ten business-day period.

Only a holder of outstanding notes may tender outstanding notes in the exchange offer. To tender in the exchange offer, you must:


	•	complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal;

	•	have the signatures guaranteed if required by the letter of transmittal; and

	•	mail or otherwise deliver the letter of transmittal or such facsimile, together with the outstanding notes and any other required documents, to the exchange agent prior to 5:00 p.m., New York City time, on the expiration date.

To tender outstanding notes effectively, you must complete the letter of transmittal and other required documents and the exchange agent must receive all the documents prior to 5:00 p.m., New York City time, on the expiration date. Delivery of the outstanding notes may be made by book-entry transfer in accordance with the procedures described below. The exchange agent must receive confirmation of book-entry transfer prior to the expiration date.

By executing the letter of transmittal you will make to us the representations set forth under the heading “— Resale of Exchange Notes.”

All tenders not withdrawn before the expiration date and the acceptance of the tender by us will constitute an agreement between you and us under the terms and subject to the conditions in this prospectus and in the letter of transmittal, including an agreement to deliver good and marketable title to all tendered outstanding notes prior to the expiration date free and clear of all liens, charges, claims, encumbrances, adverse claims and rights and restrictions of any kind.

The method of delivery of outstanding notes and the letter of transmittal and all other required documents to the exchange agent is at your election and at your sole risk. Instead of delivery by mail, you should use an overnight or hand delivery service. In all cases, you should allow for sufficient time to ensure delivery to the exchange agent before the expiration of the exchange offer. You may request your broker, dealer, commercial bank, trust company or nominee to effect these transactions for you. You should not send any note, letter of transmittal or other required document to us.

If your outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you desire to tender, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf.

The exchange of outstanding notes will be made only after timely receipt by the exchange agent of certificates for outstanding notes, a letter of transmittal and all other required documents, or timely completion of a book-entry transfer. If any tendered outstanding notes are not accepted for any reason or if outstanding notes are submitted for a greater principal amount than the holder desires to exchange, the exchange agent will return such unaccepted or non-exchanged outstanding notes to the tendering holder promptly after the expiration or termination of the exchange offer. In the case of outstanding notes tendered by book-entry transfer, the exchange agent will credit the non-exchanged outstanding notes to an account maintained with The Depository Trust Company.

Holders must obtain a guarantee of all signatures on a letter of transmittal or a notice of withdrawal unless the outstanding notes are tendered:


	•	by a registered holder who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the letter of transmittal; or

	•	for the account of an “eligible guarantor institution.”

An “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Exchange Act, comprises namely, banks; brokers and dealers; credit unions; national securities exchanges; registered securities associations; clearing agencies; and savings associations.

If a person other than the registered holder of the outstanding notes signs the letter of transmittal, the registered holder must endorse the outstanding notes or provide a properly completed bond power. Any such endorsement or bond power must be signed by the registered holder as that registered holder’s name appears on the outstanding notes. Signatures on such outstanding notes and bond powers must be guaranteed by an “eligible guarantor institution.”

If you sign the letter of transmittal or any outstanding notes or bond power as a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, fiduciary or in any other representative capacity, you must so indicate when signing. You must submit satisfactory evidence to the exchange agent of your authority to act in such capacity.

We understand that the exchange agent will make a request promptly after the date of this prospectus to establish accounts with respect to the outstanding notes at the book-entry transfer facility, The Depository Trust Company (“DTC”), for the purpose of facilitating the exchange offer. Subject to the establishment of the accounts, any financial institution that is a participant in DTC’s system may make book-entry delivery of outstanding notes by causing DTC to transfer the notes into the exchange agent’s account in accordance with DTC’s procedures for such transfer. However, although delivery of outstanding notes may be effected through book-entry transfer into the exchange agent’s account at DTC, the letter of transmittal (or a manually signed facsimile of the letter of transmittal) with any required signature guarantees, or an “agent’s message” in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to and received by the exchange agent, or the guaranteed delivery procedures set forth below must be complied with, in each case, prior to the expiration date. Delivery of documents to DTC does not constitute delivery to the exchange agent.

The exchange agent and DTC have confirmed that the exchange offer is eligible for the DTC Automated Tender Offer Program. Accordingly, DTC participants may electronically transmit their acceptance of the exchange offer by causing DTC to transfer outstanding notes to the exchange agent in accordance with DTC’s Automated Tender Offer Program procedures for transfer. Upon receipt of such holder’s acceptance through the Automated Tender Offer Program, DTC will edit and verify the acceptance and send an “agent’s message” to the exchange agent for its acceptance. Delivery of tendered outstanding notes must be made to the exchange agent pursuant to the book-entry delivery procedures set forth above, or the tendering DTC participant must comply with the guaranteed delivery procedures set forth below.

The term “agent’s message” means a message transmitted by DTC, and received by the exchange agent and forming part of the confirmation of a book-entry transfer, which states that:


	•	DTC has received an express acknowledgment from the DTC participant tendering outstanding notes subject to the book-entry confirmation;

	•	the participant has received and agrees to be bound by the terms of the letter of transmittal; and

	•	we may enforce such agreement against such participant.

In the case of an agent’s message relating to guaranteed delivery, the term means a message transmitted by DTC and received by the exchange agent, which states that DTC has received an express acknowledgment from the DTC participant tendering outstanding notes that such participant has received and agrees to be bound by the notice of guaranteed delivery.

We will determine all questions as to the validity, form, eligibility, time of receipt, acceptance and withdrawal of tendered outstanding notes in our sole discretion, and our determination will be final and binding on all parties. We expressly reserve the absolute right, in our sole discretion, to reject any or all outstanding notes not properly tendered or any outstanding notes the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the absolute right in our sole discretion to waive or amend any conditions of the exchange offer or to waive any defects or irregularities of tender for any particular outstanding note, whether or not similar defects or irregularities are waived in the case of other outstanding notes. Our interpretation of the terms and conditions of the exchange offer will be final and binding on all parties. No alternative, conditional or contingent tenders will be accepted. Unless waived, any defects or irregularities in connection with tenders of outstanding notes must be cured by the tendering holder within such time as we determine.

Although we intend to notify holders of defects or irregularities in tenders of outstanding notes, neither we, the exchange agent or any other person shall be under any duty to give notification of defects or irregularities in such tenders or will incur any liability to holders for failure to give such notification.

Holders will be deemed to have tendered outstanding notes only when such defects or irregularities have been cured or waived. The exchange agent will return to the tendering holder, after the expiration of the exchange offer, any outstanding notes that are not properly tendered and as to which the defects have not been cured or waived.

If you desire to tender outstanding notes pursuant to the exchange offer and (1) certificates representing such outstanding notes are not immediately available, (2) time will not permit your letter of transmittal, certificates representing such outstanding notes and all other required documents to reach the exchange agent on or prior to the expiration date, or (3) the procedures for book-entry transfer (including delivery of an agent’s message) cannot be completed on or prior to the expiration date, you may nevertheless tender your outstanding notes with the effect that your tender will be deemed to have been received on or prior to the expiration date if all the following conditions are satisfied:


	•	you must effect your tender through an “eligible guarantor institution,” which is defined above under the heading “— Guarantee of Signatures;”

	•	a properly completed and duly executed notice of guaranteed delivery, substantially in the form provided by us with the letter of transmittal, or an agent’s message with respect to guaranteed delivery that is accepted by us, is received by the exchange agent on or prior to the expiration date as provided below; and

	•	the certificates for the tendered outstanding notes, in proper form for transfer (or a book-entry confirmation of the transfer of such outstanding notes into the exchange agent account at DTC as described above), together with a letter of transmittal (or a manually signed facsimile of the letter of transmittal) properly completed and duly executed, with any signature guarantees and any other documents required by the letter of transmittal or a properly transmitted agent’s message, are received by the exchange agent within three New York Stock Exchange, Inc. trading days after the date of execution of the notice of guaranteed delivery.

The notice of guaranteed delivery may be sent by hand delivery, facsimile transmission or mail to the exchange agent and must include a guarantee by an eligible guarantor institution in the form set forth in the notice of guaranteed delivery.

Except as otherwise provided in this prospectus, you may withdraw tendered outstanding notes at any time before 5:00 p.m., New York City time, on , 2003. For a withdrawal of tendered outstanding notes to be effective, a written or facsimile transmission notice of withdrawal must be received by the exchange agent on or prior to the expiration of the exchange offer. For DTC participants, a written notice of withdrawal may be made by electronic transmission through DTC’s Automated Tender Offer Program. Any notice of withdrawal must:


	•	specify the name of the person having tendered the outstanding notes to be withdrawn;

	•	identify the notes to be withdrawn, including the certificate number(s) and principal amount of such outstanding notes, or, in the case of outstanding notes transferred by book-entry transfer, the name and number of the account at DTC;

	•	be signed by the holder in the same manner as the original signature on the letter of transmittal by which such outstanding notes were tendered, with any required signature guarantees, or be accompanied by documents of transfer sufficient to have the trustee with respect to the outstanding notes register the transfer of such outstanding notes into the name of the person withdrawing the tender and a properly completed irrevocable proxy authorizing such person to effect such withdrawal on behalf of such holder; and


	•	specify the name in which any such outstanding notes are to be registered, if different from that of the registered holder.

You may not rescind a proper withdrawal of outstanding notes. Any outstanding notes properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the exchange offer. The exchange agent will return any withdrawn outstanding notes without cost to the holder promptly after withdrawal of the outstanding notes. Holders may retender properly withdrawn outstanding notes at any time before the expiration of the exchange offer by following one of the procedures described above under the heading “— Exchange Offer Procedures.”

Notwithstanding any other term of the exchange offer, we are not required to accept for exchange, or issue any exchange notes for, any outstanding notes, and may terminate or amend the exchange offer as provided in this prospectus before the acceptance of the outstanding notes, if we determine that the exchange offer violates any law, statute, rule, regulation or interpretation by the staff of the SEC or any order of any governmental agency or court of competent jurisdiction.

These conditions are for the sole benefit of us and the subsidiary guarantors, and we may assert them or waive them in whole or in part at any time and from time to time in our sole discretion. Our failure to exercise any of these rights at any time will not be deemed a waiver of these rights, and each of these rights shall be deemed an ongoing right which we may assert at any time and from time to time.

In addition, we will accept for exchange any outstanding notes tendered, but no exchange notes will be issued in exchange for those outstanding notes, if at any time any stop order is threatened or issued with respect to the registration statement for the exchange offer and the exchange notes or the qualification of the Indenture under the Trust Indenture Act of 1939. In any such event, we must use our best efforts to obtain the withdrawal or lifting of any stop order at the earliest possible moment.

Wells Fargo, N.A. 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, the letter of transmittal or any other documents to the exchange agent. You should send certificates for outstanding notes, letters of transmittal and any other required documents to the exchange agent addressed as follows:

Delivery of the letter of transmittal to an address other than as shown above or transmission via facsimile other than as set forth above does not constitute a valid delivery of the letter of transmittal.

We will bear the expenses of the exchange offer. We are mailing the principal solicitation. However, our and our affiliates’ officers and regular employees may make additional solicitation by telegraph, telephone, facsimile or in person.

We have not retained any dealer-manager in connection with the exchange offer. We will not make any payments to brokers or other persons soliciting acceptances of the exchange offer. We, however, will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses.

We will pay the cash expenses incurred in connection with the exchange offer. These expenses include fees and expenses of the trustee, accounting and legal fees, and printing and distribution costs, among others.

We will pay all transfer taxes, if any, applicable to the exchange of the outstanding notes pursuant to the exchange offer. If, however, certificates representing the exchange notes or the outstanding 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 the outstanding notes tendered, or if tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal, or if a transfer tax is imposed for any reason other than the exchange of the notes pursuant to the exchange offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder.

The exchange notes will be recorded at the same carrying value as the outstanding notes. Accordingly, we will recognize no gain or loss for accounting purposes. We will amortize the expenses of the exchange offer over the term of the exchange notes.

As a result of making this exchange offer, we will have fulfilled one of our obligations under the Registration Rights Agreement, and holders who do not tender their outstanding notes generally will not have any further registration rights under the Registration Rights Agreement or otherwise. Accordingly, any holder of outstanding notes that does not exchange those notes for exchange notes will continue to hold the untendered outstanding notes and will be entitled to all the rights and limitations applicable thereto under the indenture, except to the extent that such rights or limitations, by their terms, terminate or cease to have further effectiveness as a result of the exchange offer.

The outstanding notes that are not exchanged for exchange notes pursuant to the exchange offer will remain restricted securities. Accordingly, such outstanding notes may be offered, resold, pledged or otherwise transferred only:


	•	to us (upon redemption thereof or otherwise);

	•	pursuant to an effective registration statement under the Securities Act;

	•	inside the United States to a person whom the seller reasonably believes is a qualified institutional buyer (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A;

	•	outside the United States in an offshore transaction in accordance with Rule 904 under the Securities Act; or

	•	pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available), in each case in accordance with any applicable securities laws of any state of the United States.

Other than the federal securities laws, there are no federal or state regulatory requirements that we must comply with and there are no approvals that we must obtain in connection with the exchange offer.

Participation in the exchange offer is voluntary. You should carefully consider whether to accept the exchange offer. You should 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 outstanding notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any outstanding notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered outstanding notes.

The outstanding notes were issued under the Indenture (the “Indenture”) among itself, the Guarantors and Wells Fargo Bank, N.A., as trustee (the “Trustee”), in a private transaction that is not subject to the registration requirements of the Securities Act. Upon the issuance of the exchange notes, the Indenture will be subject to and governed by the provisions of Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).

The following description is a summary of the material provisions of the Indenture and the Registration Rights Agreement. It does not restate those agreements in their entirety. We urge you to read the Indenture and the Registration Rights Agreement because they, and not this description, define your rights as holders of the exchange notes. Anyone who receives this Prospectus may obtain a copy of the Indenture and Registration Rights Agreement without charge by writing to Texas Industries, Inc., 1341 West Mockingbird Lane, Dallas, Texas, 75247, Attention: Investor Relations Department.

Certain defined terms used in this description but not defined below under “— Certain Definitions” have the meanings assigned to them in the Indenture. In this description, the word “Company” refers only to Texas Industries, Inc. and not to any of its subsidiaries. Unless the context requires otherwise, for all purposes of the Indenture and this “Description of Exchange Notes,” references to the “Notes” shall mean the exchange notes.


	•	will be general unsecured obligations of the Company;

	•	will be effectively subordinated to any secured Indebtedness of the Company, including the Indebtedness of the Company under the Credit Agreement;

	•	will be pari passu in right of payment with any existing and future unsecured Unsubordinated Indebtedness of the Company;

	•	will be senior in right of payment to any existing or future subordinated Indebtedness of the Company, including the 5.5% Convertible Subordinated Debentures due 2028 of the Company; and

	•	are guaranteed by the Guarantors as described under “— Note Guarantees.”

As of the date of the Indenture, all of our subsidiaries are “Restricted Subsidiaries.” However, under the circumstances described below under the subheading “— Certain Covenants — Designation of Restricted and Unrestricted Subsidiaries,” we are permitted to designate certain of our subsidiaries as “Unrestricted Subsidiaries.” Any Unrestricted Subsidiaries will not be subject to any of the restrictive covenants in the Indenture and will not guarantee the Notes.

The Notes will mature on June 15, 2011 and are limited in aggregate principal amount to $600.0 million. The Company may issue additional notes (the “Additional Notes”) from time to time after this offering. Any offering of Additional Notes is subject to the covenant described below under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock.” The Notes and any Additional Notes subsequently issued under the Indenture would be treated as a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The Company will issue Notes in denominations of $1,000 and integral multiples of $1,000.

Interest on the Notes will accrue at the rate of 10 1/4% per annum and will be payable semi-annually in arrears on June 15 and December 15, and commencing on December 15, 2003. The Company will make each interest payment to the Holders of record on the immediately preceding June 1 and December 1.

Interest on the Notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

If a Holder of $1.0 million or more of Notes has given wire transfer instructions to the Company, the Company will pay all principal, interest and premium and Liquidated Damages, if any, on that Holder’s Notes in accordance with those instructions. All other payments on Notes will be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless the Company elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders.

The Trustee will initially act as Paying Agent and Registrar. The Company may change the Paying Agent or Registrar without prior notice to the Holders, and the Company or any of its Subsidiaries may act as Paying Agent or Registrar.

A Holder may transfer or exchange Notes in accordance with the Indenture. 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 and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed.

The registered Holder of a Note will be treated as the owner of it for all purposes.

The Notes will be guaranteed, jointly and severally, by all of the Domestic Subsidiaries of the Company existing on the date of the Indenture other than TXI Receivables Corporation and TXI Capital Trust I. Each Note Guarantee of the Notes:


	•	will be a general unsecured obligation of the Guarantor;

	•	will be effectively subordinated to any secured Indebtedness of the Guarantor, including the Indebtedness of the Guarantor under the Credit Agreement;

	•	will be pari passu in right of payment with any existing or future unsecured Unsubordinated Indebtedness of the Guarantor; and

	•	will be senior in right of payment to any future subordinated Indebtedness of the Guarantor.

The obligations of each Guarantor under its Note Guarantee will be limited as necessary to prevent that Note Guarantee from constituting a fraudulent conveyance under applicable law. See “Risk Factors — Risks Relating to Our Notes — Federal and state statutes allow courts, under specific circumstances, to void guarantees and require noteholders to return payments received from guarantors.”

The Notes will rank equal in right of payment to all existing and future unsecured Unsubordinated Indebtedness and senior in right of payment to all subordinated Indebtedness of the Company. The Notes, however, will be effectively subordinated to the Company’s secured obligations to the extent of the collateral securing such obligations. Additionally, the Notes will be effectively subordinated to all liabilities, including trade payables, of the Company’s subsidiaries that are not Guarantors. The Note Guarantees will rank equal in right of payment will all existing and future unsecured Unsubordinated Indebtedness of the Guarantors. In addition, the Note Guarantees will be effectively subordinated to all of the Guarantors’ secured obligations to the extent of the collateral securing such obligations.

Assuming we had completed the Refinancing, at February 28, 2003, on a consolidated basis, we and our subsidiaries would have had $606.4 million of Indebtedness outstanding, $1.6 million of which would have been secured Indebtedness and none of which would have been subordinated to the Notes. In addition, we would have had $199.9 million of 5.5% convertible subordinated debentures due 2028 outstanding that underlie our capital trust subsidiary’s company-obligated mandatorily redeemable preferred securities.

At any time or times prior to June 15, 2006 the Company may redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of 110.250% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that:


	(1) at least 65% of the aggregate principal amount of Notes originally issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and

	(2) the redemption must occur within 45 days of the date of the closing of such Equity Offering.

In addition, at any time on or prior to June 15, 2007, the Company may redeem all or part of the Notes at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) accrued and unpaid interest, if any to the applicable date of redemption, plus (iii) the Make-Whole Premium.

Except pursuant to the preceding paragraphs, the Notes will not be redeemable at the Company’s option prior to June 15, 2007.

After June 15, 2007, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below:

If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption as follows:


	(1) if the Notes are listed, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or

	(2) if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate.

No Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional.

If any Note is to be redeemed in part only, the notice of redemption that relates to that Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption.

The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.

If a Change of Control occurs, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that Holder’s Notes pursuant to a Change of Control Offer on the terms set forth in the Indenture. In the Change of Control Offer, the Company will offer a Change of Control Payment in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase. Within ten days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the Change of Control Payment Date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the Indenture by virtue of such compliance.


	(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;

	(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and

	(3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company.

The Paying Agent will promptly mail or wire transfer to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof.

The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

The Credit Agreement prohibits the Company from prepaying or redeeming any Notes. The Credit Agreement also provides that certain change of control events with respect to the Company would constitute a default thereunder. Any future credit agreements or other agreements relating to Indebtedness to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when the Company is prohibited from purchasing Notes, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company’s failure to purchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, constitute a default under such other agreements.

The provisions described above that require the Company to make a Change of Control Offer following a Change of Control will be applicable regardless of whether any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.

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.

The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of the Company and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain.

The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:


	(1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of;

	(2) such fair market value is determined by the Company’s Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers’ Certificate delivered to the Trustee; and

	(3) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Replacement Assets or a combination of both. For purposes of this provision, each of the following shall be deemed to be cash:


	(a) any liabilities (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities, liabilities that are by their terms subordinated to the Notes or any Note Guarantee and liabilities to the extent owed to the Company or any Affiliate of the Company) that are assumed by the transferee of any such assets pursuant to a customary written agreement that releases the Company or such Restricted Subsidiary from further liability; and

	(b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary


	settlement periods) converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion).

Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds at its option:


	(1) to repay Indebtedness under the Credit Facilities or Unsubordinated Indebtedness secured by such assets and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; or

	(2) to purchase Replacement Assets or make a capital expenditure in or that is used or useful in a Permitted Business.

Pending the final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute “Excess Proceeds.” Within 10 days after the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will make an Asset Sale Offer to all Holders of Notes and all holders of other Unsubordinated Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase with the proceeds of sales of assets, to purchase the maximum principal amount of Notes and such other Unsubordinated Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other Unsubordinated Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, Notes and such other Unsubordinated Indebtedness to be purchased shall be selected on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sales provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the Indenture by virtue of such compliance.

The Credit Agreement prohibits the Company from prepaying or redeeming any Notes, and also provides that certain asset sales with respect to the Company would constitute a default thereunder. Any future credit agreements or other agreements relating to Indebtedness to which the Company becomes a party may contain similar restrictions and provisions. In the event an Asset Sale occurs at a time when the Company is prohibited from purchasing Notes, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company’s failure to purchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, constitute a default under such other agreements.

During any period of time that the Notes are rated Investment Grade by both Rating Agencies and no Default or Event of Default shall have occurred and then be continuing (the foregoing conditions being referred to collectively as the “Suspension Condition”), the Company and its Restricted Subsidiaries will

not be subject to the covenants described under “— Certain Covenants — Restricted Payments,” “— Incurrence of Indebtedness and Issuance of Preferred Stock,” clause (3) of “— Merger, Consolidation or Sale of Assets,” “— Transactions with Affiliates,” clauses (1) and (3) of “— Sale and Leaseback Transactions” and “— Limitation on Issuances and Sales of Equity Interests in Restricted Subsidiaries” and will not be subject to the provisions of the Indenture described under “— Repurchase at the Option of the Holders — Asset Sales” (collectively, the “Suspended Covenants”). As a result, if and while the Company meets the Suspension Condition, the Notes will be entitled to substantially less covenant protection. If the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants with respect to the Notes for any period of time as a result of the foregoing and, subsequently, one or both Rating Agencies withdraw their Investment Grade rating or downgrade the Investment Grade rating assigned to the Notes such that the Notes are no longer rated Investment Grade by both Rating Agencies, then the Company and each of its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants. Compliance with the Suspended Covenants with respect to Restricted Payments made after the time of such withdrawal or downgrade will be calculated in accordance with the terms of the covenant described above under “— Certain Covenants — Restricted Payments” as if such covenant had been in effect during the entire period of time from the date of the Indenture.

So long as the Notes are outstanding, including while the Company meets the Suspension Condition, the Company and its Restricted Subsidiaries will be subject to the provisions of the Indenture described under “— Repurchase at the Option of the Holders — Change of Control” and the covenants described under: “— Certain Covenants — Liens,” “— Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries,” “— Merger, Consolidation or Sale of Assets” (other than clause (3)), “— Guarantees,” “— Designation of Restricted and Unrestricted Subsidiaries,” “— Sale and Leaseback Transactions” (other than clauses (1) and (3)), “— Business Activities,” “— Payments for Consent” and “— Reports.”

(A) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:


	(1) declare or pay any dividend or make any other payment or distribution on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends, payments or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary of the Company);

	(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any Guarantor (other than a Wholly Owned Restricted Subsidiary or such purchases, redemptions or other acquisitions of Equity Interests of a Guarantor from the Company or another Guarantor);

	(3) make any voluntary payment on or with respect to, or voluntarily purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Note Guarantees; or

	(4) make any Restricted Investment (all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as “Restricted Payments”),


	(1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and

	(2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption “— Incurrence of Indebtedness and Issuance of Preferred Stock;” and

	(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5) and (6) of the next succeeding paragraph (B)), is less than the sum, without duplication, of:


	(a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus

	(b) 100% of the aggregate net cash proceeds received by the Company since the date of the Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company); plus

	(c) with respect to Restricted Investments made by the Company and its Restricted Subsidiaries after the date of the Indenture, an amount equal to (x) the amount returned in cash to the Company or any Restricted Subsidiary of the Company on or with respect to such Restricted Investments, whether resulting from payments of interest on Indebtedness, dividends or distributions, repayments of loans or advances in cash or other payments, or from the net cash proceeds from the sale of any such Investment, or (y) upon the designation of any Unrestricted Subsidiary to be a Restricted Subsidiary, the fair market value of the Company’s or its Restricted Subsidiary’s equity interest in such Subsidiary at the time of such designation, in each case, but only if and to the extent such amounts are not included in the calculation of Consolidated Net Income and not to exceed the amount of the Restricted Investment previously made by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary; plus

	(d) $20.0 million.

(B) So long as no Default has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit:


	(1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture;

	(2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company or any Guarantor in exchange for, or out of the net cash proceeds of a contribution to the common equity of the Company or a substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(b) of the preceding paragraph (A);


	(3) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Guarantor in exchange for, or with the net cash proceeds from, an Incurrence of Permitted Refinancing Indebtedness;

	(4) the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of its common Equity Interests, or the redemption by a Restricted Subsidiary of the Company of its common Equity Interests, in each case on a pro rata basis;

	(5) the repurchase of Capital Stock deemed to occur upon the exercise of options or warrants if such Capital Stock represents all or a portion of the exercise price thereof;

	(6) the payment of dividends on the 5.5% Shared Preference Redeemable Securities of TXI Capital Trust I as in effect and outstanding as of the date of the Indenture in an aggregate annual amount not to exceed $11.0 million; or

	(7) dividends paid by the Company on its common stock in an annual amount not to exceed (a) $7.0 million plus (b) an amount equal to 3% of net cash proceeds received by the Company or reduction of Indebtedness of the Company from the issuance, exchange or sale of the Company’s common stock after the date of the Indenture.

The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors’ determination must be based upon an opinion or appraisal issued by an independent accounting, appraisal or investment banking firm if the fair market value exceeds $10.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers’ Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this “Restricted Payments” covenant were computed, together with a copy of any fairness opinion or appraisal required by the Indenture.

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness (including Acquired Debt), and the Company will not permit any of its Restricted Subsidiaries to issue any preferred stock; provided, however, that the Company or any Guarantor may Incur Indebtedness, if the Fixed Charge Coverage Ratio for the Company’s most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is Incurred would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been Incurred at the beginning of such four-quarter period.

The first paragraph of this covenant will not prohibit the Incurrence of any of the following items of Indebtedness (collectively, “Permitted Debt”):

(1) the Incurrence by the Company or any Guarantor of Indebtedness under Credit Facilities in an aggregate principal amount at any one time outstanding pursuant to this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed the greater of (a) $200.0 million, less the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any Restricted Subsidiary to permanently repay any such Indebtedness (and, in the case of any revolving credit Indebtedness, to effect a corresponding commitment reduction thereunder) pursuant to the covenant “— Repurchase at the Option of Holders — Asset Sales” and (b) the sum of the amounts equal to (x) 40% of the consolidated book value of the inventory of the Company and the Guarantors and (y) 70% of the consolidated book value of the accounts receivable of the Company and the


	Guarantors, in each case as set forth on the most recent available quarterly or annual consolidated balance sheet of the Company and its Restricted Subsidiaries, prepared in conformity with GAAP;

	(2) the Incurrence of Existing Indebtedness;

	(3) the Incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Note Guarantees to be issued on the date of the Indenture and the Exchange Notes and the related Note Guarantees to be issued pursuant to the Registration Rights Agreement;

	(4) the Incurrence by the Company or any Restricted Subsidiary of the Company of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the Indenture to be Incurred under the first paragraph of this covenant or clauses (2), (3), (4) or (7) of this paragraph;

	(5) the Incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness owing to and held by the Company or any of its Restricted Subsidiaries; provided, however, that:


	(a) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and

	(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof, shall be deemed, in each case, to constitute an Incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (5);


	(6) the Guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be Incurred by another provision of this covenant; or

	(7) the Incurrence by the Company or any Guarantor of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness Incurred to refund, refinance or replace any Indebtedness Incurred pursuant to this clause (7), not to exceed $10.0 million.

For purposes of determining compliance with this “Incurrence of Indebtedness and Issuance of Preferred Stock” covenant, in the event that any proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (7) above, or is entitled to be Incurred pursuant to the first paragraph of this covenant, the Company will be permitted to classify at the time of its Incurrence such item of Indebtedness in any manner that complies with this covenant. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued under the Indenture shall be deemed to have been Incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt.

Notwithstanding any other provision of this “Limitation on Indebtedness” covenant, the maximum amount of Indebtedness that may be Incurred pursuant to this “Limitation on Indebtedness” covenant will not be deemed to be exceeded, with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies.

The Company will not Incur any Indebtedness that is subordinate or junior in right of payment to any other Indebtedness of the Company unless it subordinate in right of payment to the Notes. No Guarantor will Incur any Indebtedness that is subordinate or junior in right of payment to any other Indebtedness of such Guarantor unless it is subordinate in right of payment to such Guarantor’s Note Guarantee.

The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under the Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien.

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create 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 with respect to any other interest or participation in, or measured by, its profits) to the Company or any of its Restricted Subsidiaries or pay any liabilities owed to the Company or any of its Restricted Subsidiaries;

	(2) make loans or advances to the Company or any of its Restricted Subsidiaries; or

	(3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.

However, the preceding restrictions will not apply to such encumbrances or restrictions existing under, by reason of or with respect to:


	(1) the Existing Indebtedness, the Credit Agreement, the Accounts Receivable Facility or any other agreements in effect on the date of the Indenture and any amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings thereof, provided that the encumbrances and restrictions in any such amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings are no more restrictive, taken as a whole, than those contained in such Existing Indebtedness, the Indenture, the Credit Agreement, the Accounts Receivable Facility or such other agreements as in effect on the date of the Indenture;

	(2) the Indenture, the Notes and the Note Guarantees;

	(3) applicable law;

	(4) any agreement or arrangement applicable to any Person or the property or assets of such Person acquired by the Company or any of its Restricted Subsidiaries, existing at the time of such acquisition and not entered into in connection with or in contemplation of such acquisition; provided that the encumbrance or restriction therein is not applicable to any Person or the properties or assets of any Person, other than the Person, or the property or assets of such Person, so acquired and any amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings thereof, provided that the encumbrances and restrictions in any such amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, than those in effect on the date of the acquisition;

	(5) in the case of clause (3) of the first paragraph of this covenant:


	(a) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance, joint venture, partnership interest or contract or similar property or asset,

	(b) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by the Indenture or

	(c) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of


	the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary;


	(6) any agreement for the sale or other disposition of all or substantially all of the capital stock of, or property and assets of, a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending such sale or other disposition;

	(7) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

	(8) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and

	(9) Standard Securitization Undertakings related to a Receivables Subsidiary in connection with a Qualified Receivables Transaction.

The Company will not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation) or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties and assets of the Company and its Subsidiaries taken as a whole, in one or more related transactions, to another Person unless:


	(1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made (i) is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia and (ii) assumes all the obligations of the Company under the Notes, the Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee;

	(2) immediately after giving effect to such transaction no Default or Event of Default exists;

	(3) immediately after giving effect to such transaction on a pro forma basis, the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition shall have been made, will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “— Incurrence of Indebtedness and Issuance of Preferred Stock”; and

	(4) each Guarantor, unless such Guarantor is the Person with which the Company has entered into a transaction under this “Consolidation, Merger or Sale of Assets” covenant, shall have by amendment to its Note Guarantee confirmed that its Note Guarantee shall apply to the obligations of the Company or the surviving Person in accordance with the Notes and the Indenture.

In addition, the Company may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. Clause (3) above of this “Merger, Consolidation or Sale of Assets” covenant will not apply to any merger, consolidation or sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of its Restricted Subsidiaries.

The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into, make, amend, renew or extend any transaction, contract, agreement,


	(1) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable arm’s-length transaction by the Company or such Restricted Subsidiary with a Person that is not an Affiliate of the Company; and

	(2) the Company delivers to the Trustee:


	(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the Board of Directors set forth in an Officers’ Certificate certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with this covenant and that such Affiliate Transaction or series of related Affiliate Transactions has been approved by a majority of the disinterested members of the Board of Directors; and

	(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction or series of related Affiliate Transactions from a financial point of view issued by an independent accounting, appraisal or investment banking firm.

The following items shall not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:


	(1) transactions between or among the Company and/or its Restricted Subsidiaries;

	(2) payment of reasonable fees and compensation to, and indemnity provided on behalf of, the executive officers and directors of the Company and its Restricted Subsidiaries;

	(3) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption “— Restricted Payments;”

	(4) transfers of accounts receivable and related assets to a Receivables Subsidiary in connection with a Qualified Receivables Transaction and the charging of fees and expenses in the ordinary course of business in connection with such transfers; and

	(5) any sale of Capital Stock (other than Disqualified Stock) of the Company.

The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary; provided that:


	(1) any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated will be deemed to be an Incurrence of Indebtedness by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation, and such Incurrence of Indebtedness would be permitted under the covenant described above under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock;”

	(2) the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary being so designated (including any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the such Subsidiary) will be deemed to be a Restricted Investment made as of the time of such designation and that such Investment would be permitted under the covenant described above under the caption “— Certain Covenants — Restricted Payments;”

	(3) such Subsidiary does not own any Equity Interests of, or hold any Liens on any Property of, the Company or any Restricted Subsidiary;


	(a) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;

	(b) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results;

	(c) has not Guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries, except to the extent such Guarantee or credit support would be released upon such designation; and

	(d) other than in the case of a Receivables Subsidiary, has at least one director on its Board of Directors that is not a director or officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or officer of the Company or any of its Restricted Subsidiaries; and


	(5) no Default or Event of Default would be in existence following such designation.

Any designation of a Restricted Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the preceding conditions and was permitted by the Indenture. If, at any time, any Unrestricted Subsidiary (x) would fail to meet any of the preceding requirements described in subclauses (a), (b) and (c) of clause (4) above or (y) fails to meet the requirement described in clause 4(d) above and such failure continues for a period of 60 days, such Subsidiary shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness, Investments, or Liens on the property, of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness, Investments or Liens are not permitted to be incurred as of such date under the Indenture, the Company shall be in default under the Indenture.

The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that:


	(1) such designation shall be deemed to be an Incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if such Indebtedness is permitted under the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock,” calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period;

	(2) all outstanding Investments owned by such Unrestricted Subsidiary will be deemed to be made as of the time of such designation and such Investments shall only be permitted if such Investments would be permitted under the covenant described above under the caption “— Certain Covenants — Restricted Payments;”

	(3) all Liens upon property or assets of such Unrestricted Subsidiary existing at the time of such designation would be permitted under the caption “— Certain Covenants — Liens;” and

	(4) no Default or Event of Default would be in existence following such designation.

The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company or any Restricted Subsidiary may enter into a sale and leaseback transaction if:


	(1) the Company or that Restricted Subsidiary, as applicable, could have Incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction under the Fixed Charge Coverage Ratio test in the first paragraph of the covenant described above under the caption “— Incurrence of Indebtedness and Issuance of Preferred Stock;”

	(2) the gross cash proceeds of that sale and leaseback transaction are at least equal to the fair market value, as determined in good faith by the Board of Directors and set forth in an Officers’ Certificate delivered to the Trustee, of the property that is the subject of that sale and leaseback transaction; and

	(3) the transfer of assets in that sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales.”

The Company will not transfer, convey, sell, lease or otherwise dispose of, and will not permit any of its Restricted Subsidiaries to, issue, transfer, convey, sell, lease or otherwise dispose of any Equity Interests in any Restricted Subsidiary of the Company to any Person (other than the Company or a Restricted Subsidiary of the Company or, if necessary, shares of its Capital Stock constituting directors’ qualifying shares or issuances of shares of Capital Stock of foreign Restricted Subsidiaries to foreign nationals, to the extent required by applicable law), except:


	(1) if, immediately after giving effect to such issuance, transfer, conveyance, sale, lease or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under the “Restricted Payments” covenant if made on the date of such issuance or sale; or

	(2) sales of Common Stock of a Restricted Subsidiary by the Company or a Restricted Subsidiary, provided that the Company or such Restricted Subsidiary complies with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales.”

If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary (other than a Receivables Subsidiary) on or after the date of the Indenture, then that newly acquired or created Domestic Subsidiary must become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel to the Trustee. The Company will not permit any of its Restricted Subsidiaries, directly or indirectly, to Guarantee the payment of any other Indebtedness of the Company, unless such Restricted Subsidiary is a Guarantor or simultaneously executes and delivers a supplemental indenture providing for the Guarantee of the payment of the Notes by such Restricted Subsidiary, which Guarantee shall be senior to or pari passu with such Subsidiary’s Guarantee of such other Indebtedness. The form of the Note Guarantee will be attached as an exhibit to the Indenture.

A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than the Company or another Guarantor, unless:


	(1) immediately after giving effect to that transaction, no Default or Event of Default exists; and

	(2) either:


	(a) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger (if other than the Guarantor) is a corporation or limited liability company organized or existing under the laws of the United States, any state thereof or the District of Columbia and assumes all the obligations of that Guarantor under the Indenture, its Note Guarantee and the Registration Rights Agreement pursuant to a supplemental indenture reasonably satisfactory to the Trustee; or

	(b) such sale or other disposition complies with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales.”


	(1) in connection with any sale or other disposition of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) an Affiliate of the Company, if the sale of all such Capital Stock of that Guarantor complies with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales;”

	(2) if the Company properly designates that Guarantor as an Unrestricted Subsidiary under the Indenture; or

	(3) upon the release or discharge of the Guarantee which resulted in the creation of such Note Guarantee pursuant to this covenant “— Certain Covenants — Guarantees,” except a discharge or release by or as a result of payment under such Guarantee.

The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole.

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Whether or not required by the Commission, so long as any Notes are outstanding, the Company will prepare, within the time periods specified in the Commission’s rules and regulations, and furnish to the Holders of Notes upon request:

(1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by the Company’s certified independent accountants; and


	(2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports.

In addition, whether or not required by the Commission, the Company will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission’s rules and regulations (unless the Commission will not accept such a filing) and make such information available to prospective investors upon request. In addition, the Company and the Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraphs shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company.


	(1) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes;

	(2) default in payment when due (whether at maturity, upon acceleration, redemption or otherwise) of the principal of, or premium, if any, on the Notes;

	(3) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions described under the captions “— Repurchase at the Option of Holders — Change of Control,” “— Repurchase at the Option of Holders — Asset Sales” or “— Certain Covenants — Merger, Consolidation or Sale of Assets” or the provisions described in the second paragraph under the caption “— Guarantees”;

	(4) failure by the Company or any of its Restricted Subsidiaries for 30 days after written notice by the Trustee or Holders representing 25% or more of the aggregate principal amount of Notes outstanding to comply with any of the other agreements in the Indenture;

	(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, if that default:


	(a) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”); or

	(b) results in the acceleration of such Indebtedness prior to its express maturity,


	and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more;


	(6) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;


	(7) except as permitted by the Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Note Guarantee; and

	(8) certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary of the Company (or any Restricted Subsidiaries that together would constitute a Significant Subsidiary).

In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company or any Significant Subsidiary of the Company (or any Restricted Subsidiaries that together would constitute a Significant Subsidiary), all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately.

Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium, interest or Liquidated Damages) if it determines that withholding notice is in their interest.

The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Liquidated Damages on, or the principal or premium, if any, of the Notes. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders of Notes. A Holder may not pursue any remedy with respect to the Indenture or the Notes unless:


	(1) the Holder gives the Trustee written notice of a continuing Event of Default;

	(2) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy;

	(3) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense;

	(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and

	(5) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request.

However, such limitations do not apply to the right of any Holder of a Note to receive payment of the principal of, premium or Liquidated Damages, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which right shall not be impaired or affected without the consent of the Holder.

In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be

immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs during any time that the Notes are outstanding, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes, then the premium specified in the Indenture that would have been payable upon redemption at the time the Event of Default occurs shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes.

The Company is required to deliver to the Trustee annually within 90 days after the end of each fiscal year a statement regarding compliance with the Indenture. Upon becoming aware of any Default or Event of Default, the Company is required to deliver to the Trustee a statement specifying such Default or Event of Default.

No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes and all obligations of the Guarantors discharged with respect to their Note Guarantees (“Legal Defeasance”) except for:


	(1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Liquidated Damages, if any, on such Notes when such payments are due from the trust referred to below;

	(2) the Company’s obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;

	(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Company’s and the Guarantor’s obligations in connection therewith; and

	(4) the Legal Defeasance provisions of the Indenture.

In addition, the Company may, at its option and at any time, elect to have the obligations of the Company and the Guarantors released with respect to certain covenants that are described in the Indenture (“Covenant Defeasance”) and thereafter any omission to comply with those covenants shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under “Events of Default” will no longer constitute Events of Default with respect to the Notes.


	(1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of


	independent public accountants, to pay the principal of, or interest and premium and Liquidated Damages, if any, on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date;

	(2) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the 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 of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal 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 Legal Defeasance had not occurred;

	(3) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes 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;

	(4) no Default or Event of Default shall have occurred and be continuing either: (a) on the date of such deposit; or (b) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit;

	(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

	(6) the Company must have delivered to the Trustee an Opinion of Counsel to the effect that, (1) assuming no intervening bankruptcy of the Company or any Guarantor between the date of deposit and the 91st day following the deposit and assuming that no Holder is an “insider” of the Company under applicable bankruptcy law, after the 91st day following the deposit, the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code and (2) the creation of the defeasance trust does not violate the Investment Company Act of 1940;

	(7) the Company must deliver to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others;

	(8) if the Notes are to be redeemed prior to their stated maturity, the Company must deliver to the Trustee irrevocable instructions to redeem all of the Notes on the specified redemption date; and

	(9) the Company must deliver to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal

Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder):


	(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

	(2) reduce the principal of or change the fixed maturity of any Note or alter the provisions, or waive any payment, with respect to the redemption of the Notes;

	(3) reduce the rate of or change the time for payment of interest on any Note;

	(4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Liquidated Damages, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);

	(5) make any Note payable in money other than U.S. dollars;

	(6) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Liquidated Damages, if any, on the Notes;

	(7) release any Guarantor from any of its obligations under its Note Guarantee or the Indenture, except in accordance with the terms of the Indenture;

	(8) impair the right to institute suit for the enforcement of any payment on or with respect to the Notes or the Note Guarantees;

	(9) amend, change or modify the obligation of the Company to make and consummate an Asset Sale Offer with respect to any Asset Sale in accordance with the “Repurchase at the Option of Holders — Asset Sales” covenant after the obligation to make such Asset Sale Offer has arisen or the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control in accordance with the “Repurchase at the Option of Holders — Change of Control” covenant after such Change of Control has occurred, including, in each case, amending, changing or modifying any definition relating thereto;

	(10) except as otherwise permitted under the “Merger, Consolidation and Sale of Assets” covenant, consent to the assignment or transfer by the Company or any Guarantor of any of their rights or obligations under the Indenture; and

	(11) make any change in the preceding amendment and waiver provisions.

Notwithstanding the preceding, without the consent of any Holder of Notes, the Company, the Guarantors and the Trustee may amend or supplement the Indenture or the Notes:


	(1) to cure any ambiguity, defect or inconsistency;

	(2) to provide for uncertificated Notes in addition to or in place of certificated Notes and to provide for the issuance of Additional Notes in accordance with the limitations in the Indenture;

	(3) to provide for the assumption of the Company’s or any Guarantor’s obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company’s or such Guarantor’s assets;

	(4) to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder;

	(5) to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act;


	(6) to comply with the provision described under “Certain Covenants — Guarantees”; or

	(7) to evidence and provide for the acceptance of appointment of a successor Trustee.

The Indenture will be discharged and will cease to be of further effect as to all Notes issued thereunder, when:


	(a) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or

	(b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the sending of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to the date of maturity or redemption;


	(2) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound;

	(3) the Company or any Guarantor has paid or caused to be paid all sums payable by it under the Indenture; and

	(4) the Company has delivered irrevocable instructions to the Trustee under the Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.

In addition, the Company must deliver an Officers’ Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

If the Trustee becomes a creditor of the Company or any Guarantor, the Indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign.

The Indenture provides that in case an Event of Default shall occur and be continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

We will issue the exchange notes in the form of one or more global notes (the “Global Exchange Note”). The Global Exchange Note will be deposited upon issuance with the Trustee as custodian for

DTC, in New York, New York, and registered in the name of DTC or its nominee. Except as set forth below, the Global Exchange Note may be transferred, in whole and not in part, only to DTC or another nominee of DTC. Investors may hold their beneficial interests in the Global Exchange Notes directly through DTC if they have an account with DTC or indirectly through organizations that have accounts with DTC, including Morgan Guaranty Trust Company, Brussels office, as operator of Euroclear and Citibank N.A., as operator of Clearstream.

Beneficial interests in the Global Exchange Notes may not be exchanged for notes in certificated form except in the limited circumstances described below. See “— Exchange of Global Exchange Notes for Certificated Notes.” Except in the limited circumstances described below, owners of beneficial interests in the Global Exchange Notes will not be entitled to receive physical delivery of notes in certificated form.

Transfers of beneficial interests in the DTC Global Exchange Notes will be subject to the applicable rules and procedures of DTC and its direct or indirect participants (including, if applicable, those of Euroclear and Clearstream), which may change from time to time.

The following description of the operations and procedures of DTC, Euroclear and Clearstream 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 changes by them. The Company takes no responsibility for these operations and procedures and urges investors to contact the system or their participants directly to discuss these matters.

DTC has advised the Company that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the “Participants”) and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. 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 (collectively, the “Indirect Participants”). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants.

DTC has also advised the Company that, pursuant to procedures established by it:


	(1) upon deposit of the Global Exchange Notes, DTC will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Exchange Notes; and

	(2) ownership of these interests in the Global Exchange Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interest in the Global Exchange Notes).

Investors in the Global Exchange Notes who are Participants in DTC’s system may hold their interests therein directly through DTC. Investors in the Global Exchange Notes who are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Clearstream) which are Participants in such system. All interests in a Global Exchange Note, 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 such systems. The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Exchange Note to such Persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a

Except as described below, owners of interest in the Global Exchange Notes will not have Notes registered in their names, will not receive physical delivery of Notes in certificated form and will not be considered the registered owners or “Holders” thereof under the Indenture for any purpose.

Payments in respect of the principal of, and interest and premium and Liquidated Damages, if any, on a Global Exchange Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee will treat the Persons in whose names the Notes, including the Global Exchange Notes, are registered as the owners thereof for the purpose of receiving payments and for all other purposes. Consequently, neither the Company, the Trustee nor any agent of the Company or the Trustee has or will have any responsibility or liability for:


	(1) any aspect of DTC’s records or any Participant’s or Indirect Participant’s records relating to or payments made on account of beneficial ownership interest in the Global Exchange Notes or for maintaining, supervising or reviewing any of DTC’s records or any Participant’s or Indirect Participant’s records relating to the beneficial ownership interests in the Global Exchange Notes; or

	(2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants.

DTC has advised the Company that its current practice, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee or the Company. Neither the Company nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the Notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.

Transfers between Participants in DTC will be effected in accordance with DTC procedures, and will be settled in same-day funds, and transfers between participants in Euroclear and Clearstream will be effected in accordance with their respective rules and operating procedures.

Subject to compliance with the transfer restrictions, if applicable, to the Notes described herein, 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 Clearstream, as the case may be, by the counterparty 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 Exchange Note 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 depositories for Euroclear or Clearstream.

DTC has advised the Company that it will take any action permitted to be taken by a Holder of Notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Exchange Notes and only in respect of such portion of the aggregate principal amount of the

Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Global Exchange Notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. Neither the Company nor the Trustee nor any of their respective agents 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.

A Global Exchange Note will be exchanged for definitive Notes in registered certificated form (“Certificated Notes”) if:


	(1) DTC (a) notifies the Company that it is unwilling or unable to continue as depositary for the Global Exchange Notes, or (b) has ceased to be a clearing agency registered under the Exchange Act, and in each case the Company fails to appoint a successor depositary;

	(2) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Certificated Notes; or

	(3) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes.

In addition, beneficial interests in a Global Exchange Note may be exchanged for Certificated Notes upon prior written notice given to the Trustee by or on behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes delivered in exchange for any Global Exchange Note or beneficial interests in Global Exchange Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures).

Certificated Notes may not be exchanged for beneficial interests in any Global Exchange Note unless the transferor first delivers to the Trustee a written certificate (in the form provided in the Indenture) to the effect that such transfer will comply with the appropriate transfer restrictions, if applicable, to such Notes.

The Company will make payments in respect of the Notes represented by the Global Exchange Notes (including principal, premium, if any, interest and Liquidated Damages, if any) by wire transfer of immediately available funds to the accounts specified by the Global Exchange Note Holder. If a Holder of $1.0 million or more of the Notes has given wire transfer instructions to the Company, the Company will make all payments of principal, interest and premium and Liquidated Damages, if any, with respect to such Certificated Notes by wire transfer of immediately available funds to the accounts specified by the Holders. All other payments on Notes will be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless the Company elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders. The Notes represented by the Global Exchange Notes are expected to be eligible to trade in the PORTAL market and to trade in DTC’s Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. The Company expects that secondary trading in any Certificated Notes will also be settled in immediately available funds.

Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Exchange 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. DTC has advised the Company that cash received in Euroclear or Clearstream as a result of sales of interests in a Global Exchange 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.

The following description is a summary of the material provisions of the Registration Rights Agreement. It does not restate that agreement in its entirety. We urge you to read the proposed form of Registration Rights Agreement in its entirety because it, and not this description, defines your registration rights as Holders of these outstanding notes.

The Company, the Guarantors and the Initial Purchasers entered into the Registration Rights Agreement on or prior to the closing of this offering. Pursuant to the Registration Rights Agreement, the Company and the Guarantors agreed to file with the Commission the Exchange Offer Registration Statement on the appropriate form under the Securities Act with respect to the Exchange Notes. Upon the effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors will offer to the Holders of outstanding notes pursuant to the Exchange Offer who are able to make certain representations the opportunity to exchange their outstanding notes for exchange notes.


	(1) the Company and the Guarantors are not permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy; or

	(2) any Holder of outstanding notes notifies the Company prior to the 20th day following consummation of the Exchange Offer that:


	(a) it is prohibited by law or Commission policy from participating in the Exchange Offer; or

	(b) it may not resell the exchange notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales; or

	(c) it is a broker-dealer and owns outstanding notes acquired directly from the Company or an affiliate of the Company,

the Company and the Guarantors will file with the Commission a Shelf Registration Statement to cover resales of the outstanding notes by the Holders thereof who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement.

The Company and the Guarantors will use their best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission.


	(1) the Company and the Guarantors will file an Exchange Offer Registration Statement with the Commission on or prior to 60 days after the closing of this offering;

	(2) the Company and the Guarantors will use their best efforts to have the Exchange Offer Registration Statement declared effective by the Commission on or prior to 180 days after the closing of this offering;


	(3) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company and the Guarantors will


	(a) commence the Exchange Offer; and

	(b) issue Exchange Notes in exchange for all outstanding notes tendered prior thereto in the Exchange Offer; and


	(4) if obligated to file the Shelf Registration Statement, the Company and the Guarantors will file the Shelf Registration Statement with the Commission on or prior to 45 days after such filing obligation arises and use their best efforts to cause the Shelf Registration to be declared effective by the Commission on or prior to 135 days after such obligation arises.


	(1) the Company and the Guarantors fail to file any of the registration statements required by the Registration Rights Agreement on or before the date specified for such filing; or

	(2) any of such registration statements is not declared effective by the Commission on or prior to the date specified for such effectiveness (the “Effectiveness Target Date”); or

	(3) the Company and the Guarantors fail to consummate the Exchange Offer within 30 business days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement; or

	(4) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales or exchanges of Notes during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (1) through (4) above, a “Registration Default”),

then the Company and the Guarantors will pay Liquidated Damages to each Holder of outstanding notes, with respect to the first 90-day period immediately following the occurrence of the first Registration Default in an amount equal to one-half of one percent (0.50%) per annum on the principal amount of outstanding notes held by such Holder.

The amount of the Liquidated Damages will increase by an additional one-half of one percent (0.50%) per annum on the principal amount of outstanding notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages for all Registration Defaults of 1.5% per annum.

All accrued Liquidated Damages will be paid by the Company and the Guarantors on each interest payment date to the Global Exchange Note Holder by wire transfer of immediately available funds or by federal funds check and to Holders of outstanding Certificated Notes by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified.

Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease.

Holders of outstanding notes will be required to make certain representations to the Company (as described in the Registration Rights Agreement) in order to participate in the Exchange Offer and will be required to deliver certain information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their outstanding notes included in the Shelf Registration Statement and benefit from the provisions regarding Liquidated Damages set forth above. By acquiring outstanding notes, a Holder will be deemed to have agreed to indemnify the Company and the Guarantors against certain losses arising out of information furnished by such Holder in writing for inclusion in any Shelf Registration Statement. Holders of outstanding notes will also be required to suspend their use of the prospectus included in the Shelf Registration Statement under certain circumstances upon receipt of written notice to that effect from the Company.

Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided.

“Accounts Receivable Facility” means the accounts receivable purchase arrangements established pursuant to the Receivables Purchase Agreement dated as of March 11, 1999 among the Company, TXI Receivables Corporation, the Financial Institutions listed on Schedule A thereto, Falcon Asset Securitization Corporation (together with the Financial Institutions, the “Purchasers”) and the First National Bank of Chicago, as Agent for the Purchasers, including any related notes, Guarantees, documents, instruments and agreements executed in connection therewith.


	(1) Indebtedness of any other Person existing at the time such other Person is merged with or into, or becomes a Subsidiary of, such specified Person, whether or not such Indebtedness is Incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and

	(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Affiliate” of any specified Person means (1) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (2) any executive officer or director of such specified Person. For purposes of this definition, “control,” as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” shall have correlative meanings.


	(1) the sale, lease, conveyance or other disposition of any property or assets; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption “— Repurchase at the Option of Holders — Change of Control” and/or the provisions described above under the caption “— Certain Covenants — Merger, Consolidation or Sale of Assets” and not by the provisions of the Asset Sale covenant; and

	(2) the issuance of Equity Interests by any of the Company’s Restricted Subsidiaries or the sale by the Company or any Restricted Subsidiary of Equity Interests in any of its Subsidiaries.

Notwithstanding the preceding, the following items shall be deemed not to be Asset Sales:


	(1) any single transaction or series of related transactions that involves assets having a fair market value of less than $2.0 million;

	(2) a transfer of assets between or among the Company and its Restricted Subsidiaries;

	(3) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary;

	(4) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business, including sales of accounts receivable and related assets under any Qualified Receivables Transaction;

	(5) the sale or other disposition of Cash Equivalents;

	(6) a Restricted Payment that is permitted by the covenant described above under the caption “— Certain Covenants — Restricted Payments;” and

“Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” shall have a corresponding meaning.


	(1) with respect to a corporation, the board of directors of the corporation; and

	(2) with respect to any other Person, the board or committee of such Person serving a similar function.

“Capital Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.


	(1) in the case of a corporation, corporate stock;

	(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

	(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

	(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.


	(1) United States dollars;

	(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition;

	(3) certificates of deposit and eurodollar time deposits with maturities of twelve months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of “B” or better;

	(4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

	(5) commercial paper having the highest rating obtainable from Moody’s or S&P and in each case maturing within six months after the date of acquisition; and


	(6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.


	(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act);

	(2) the adoption of a plan relating to the liquidation or dissolution of the Company;

	(3) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) becomes the ultimate Beneficial Owner, directly or indirectly, of 35% or more of the voting power of the Voting Stock of the Company;

	(4) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or

	(5) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where (A) the Voting Stock of the Company outstanding immediately prior to such transaction remains outstanding and constitutes or is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person that constitutes a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance) and (B) immediately after such transaction, no “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) becomes, directly or indirectly, the beneficial owner (as defined above) of 35% or more of the voting power of the Voting Stock of the Company.

“Consolidated Cash Flow” means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus:


	(1) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

	(2) Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that any such Fixed Charges were deducted in computing such Consolidated Net Income; plus

	(3) depreciation, depletion, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Subsidiaries for such period to the extent that such depreciation, depletion, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus

	(4) net losses of any Unrestricted Subsidiary or any other Person that is not a Restricted Subsidiary of the Company and is accounted for by the equity method of accounting, to the extent that such net losses were deducted in computing such Consolidated Net Income; minus

	(5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue consistent with past practice and any items that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period, in each case, on a consolidated basis and determined in accordance with GAAP.

Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation, depletion and amortization and other non-cash expenses of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute Consolidated Cash Flow of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended, distributed or lent to the Company by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders.

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:


	(1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary thereof;

	(2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that both the declaration or payment of dividends or similar distributions and the making of loans by that Restricted Subsidiary of that Net Income are not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its equityholders;

	(3) the Net Income of any Person acquired during the specified period for any period prior to the date of such acquisition shall be excluded;

	(4) the cumulative effect of a change in accounting principles shall be excluded; and

	(5) the Net Income (but not loss) of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the specified Person or one of its Subsidiaries.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the Company who:


	(1) was a member of such Board of Directors on the date of the Indenture; or

	(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

“Credit Agreement” means the Credit Agreement dated as of the date of the Indenture, by and among the Company, the Company’s Subsidiaries party thereto, Bank of America, N.A., as Administrative Agent, Banc of America Securities LLC, as Sole Lead Arranger and Book Manager, and the other Lenders named therein presently providing for up to $200.0 million of revolving credit borrowings, including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced, decreased, increased or refinanced from time to time, regardless of whether such amendment, modification, renewal, refunding, replacement, decrease, increase or refinancing is with the same financial institutions or otherwise.

“Credit Facilities” means, one or more debt or receivables facilities (including, without limitation, the Credit Agreement and the Accounts Receivable Facility) or commercial paper facilities, in each case with banks, vendors or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced, decreased, increased or refinanced in whole or in part from time to time.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is one year after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption “— Certain Covenants — Restricted Payments.” The term “Disqualified Stock” shall also include any options, warrants or other rights that are convertible into Disqualified Stock or that are redeemable at the option of the holder, or required to be redeemed, prior to the date that is one year after the date on which the Notes mature.

“Domestic Subsidiary” means any Restricted Subsidiary of the Company other than a Subsidiary that is (1) a “controlled foreign corporation” under Section 957 of the Internal Revenue Code or (2) a Subsidiary of any such controlled foreign corporation.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Equity Offering” means a public or private offer and sale of Capital Stock (other than Disqualified Stock) of the Company.

“Existing Indebtedness” means the aggregate principal amount of Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement and the Accounts Receivable Facility) in existence on the date of the Indenture.

“Fair Market Value” means the price that would be paid in an arm’s-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution.

“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:


	(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations; plus

	(2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus

	(3) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

	(4) any accounts receivable facility fees or discounts paid under the Accounts Receivable Facility or any other receivables financing; plus


	(5) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock or preferred stock of such Person or any of its Restricted Subsidiaries that are not tax deductible for such Person or such Restricted Subsidiary, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP; plus

	(6) all dividends, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock or preferred stock of such Person or any of its Restricted Subsidiaries that are tax deductible for such Person or such Restricted Subsidiary, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company.

“Fixed Charge Coverage Ratio” means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Subsidiaries Incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such Incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period.


	(1) acquisitions and dispositions of business entities or property and assets constituting a division or line of business of any Person that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act, but without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income;

	(2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP shall be excluded;

	(3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Subsidiaries following the Calculation Date; and

	(4) consolidated interest expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Calculation Date (taking into account any interest rate option, swap, cap or similar agreement applicable to such Indebtedness if such agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the opinions and pronouncements of the Public Company Accounting Oversight Board and in the statements and

pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Closing Date. All ratios and computations contained or referred to in the Indenture shall be computed in conformity with GAAP and shall be made without giving effect to the write off of debt issuance costs or payment of consent fees or premiums on or prior to the date of the Indenture.

“Guarantee” means, as to any Person, a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness of another Person.


	(1) each direct or indirect Domestic Subsidiary of the Company on the date of the Indenture, other than TXI Receivables Corporation and TXI Capital Trust I; and

	(2) any other subsidiary that executes a Note Guarantee in accordance with the provisions of the Indenture;

and their respective successors and assigns until released from their obligations under their Note Guarantees and the Indenture in accordance with the terms of the Indenture.

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:


	(1) interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and other agreements or arrangements designed for the purpose of fixing, hedging or swapping interest rate risk;

	(2) commodity swap agreements, commodity option agreements, forward contracts and other agreements or arrangements designed for the purpose of fixing, hedging or swapping commodity price risk; and

	(3) foreign exchange contracts, currency swap agreements and other agreements or arrangements designed for the purpose of fixing, hedging or swapping foreign currency exchange rate risk.

“Incur” means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become directly or indirectly liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness; provided that (1) any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary of the Company and (2) neither the accrual of interest nor the accretion of original issue discount nor the payment of interest in the form of additional Indebtedness (to the extent provided for when the Indebtedness on which such interest is paid was originally issued) shall be considered an Incurrence of Indebtedness.

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent, in respect of:


	(1) borrowed money;

	(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof), but excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations described in clause (5) below entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement; provided, however, that the foregoing exclusion shall not apply to letters of credit outstanding under the Credit Agreement;

	(3) banker’s acceptances;


	(4) Capital Lease Obligations and Attributable Debt;

	(5) the balance deferred and unpaid of the purchase price of any property which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto, except any such balance that constitutes an accrued expense or trade payable;

	(6) Hedging Obligations, other than Hedging Obligations that are Incurred in the ordinary course of business for the purpose of fixing, hedging or swapping interest rate, commodity price or foreign currency exchange rate risk (or to reverse or amend any such agreements previously made for such purposes), and not for speculative purposes, and that do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in interest rates, commodity prices or foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; or

	(7) Disqualified Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued dividends.

In addition, the term “Indebtedness” includes (x) for purposes of the covenants in the Indenture, any Obligations Incurred in connection with the Accounts Receivable Facility or any other receivables financing, (y) all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person), provided that the amount of such Indebtedness 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, and (z) to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person. For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value shall be determined in good faith by the Board of Directors of the issuer of such Disqualified Stock.

The amount of any Indebtedness outstanding as of any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, and shall be:


	(1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and

	(2) the principal amount thereof or, in the case of the Accounts Receivable Facility or any other receivables financing, an equivalent amount, together with any interest or accounts receivable facility fees thereon that are more than 30 days past due, in the case of any other Indebtedness;


	(i) any liability for federal, state, local or other taxes,

	(ii) performance, surety or appeal bonds provided in the ordinary course of business, and letters of credit supporting any such bonds or provided to serve the purpose of any such bonds to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement, or

	(iii) agreements providing for indemnification, adjustment of purchase price or similar obligations, or Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), so long as the


	principal amount does not exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition.

“Investment Grade” means (1) BBB- or above, in the case of S&P (or its equivalent under any successor Rating Categories of S&P) and Baa3 or above, in the case of Moody’s (or its equivalent under any successor Rating Categories of Moody’s), or (2) the equivalent in respect of the Rating Categories of any Rating Agencies.

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans or other extensions of credit (including Guarantees, but excluding advances to customers or suppliers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of the Company or its Restricted Subsidiaries and endorsements for collection or deposit arising in the ordinary course of business), advances (excluding commission, travel and similar advances to officers and employees made consistent with past practices), capital contributions, purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP.

If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Investments in such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption “— Certain Covenants — Restricted Payments.” The acquisition by the Company or any Restricted Subsidiary of the Company of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of the covenant described above under the caption “— Certain Covenants — Restricted Payments.”

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

“Make-Whole Premium” means, with respect to a Note on any date of redemption, the greater of (x) 1% of the principal amount of such Note or (y) the excess of (A) the present value at such date of redemption of (1) the redemption price of such Note at June 15, 2007 (such redemption price being described under “— Optional Redemption”) plus (2) all remaining required interest payments (exclusive of interest accrued and unpaid to the date of redemption) due on such Note through June 15, 2007, computed using semi-annual discounting and a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the then outstanding principal amount of such Note.

“Net Income” means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends (other than reductions in respect of preferred stock dividends on the 5.5% Shared Preference Redeemable Securities of TXI Capital Trust I outstanding on the date of the indenture), excluding, however:


	(1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any sales of assets outside the ordinary course of business of the Company and its Restricted Subsidiaries; or (b) the disposition of any securities by such Person


	or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and

	(2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss).

“Net Proceeds” means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness or other liabilities, secured by a Lien on the asset or assets that were the subject of such Asset Sale, or required to be paid as a result of such sale, and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.

“Obligations” means any principal (or, in the case of the Accounts Receivable Facility or any other receivables financing, an equivalent amount), interest, penalties, fees (including accounts receivable facility fees or discounts), indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Permitted Business” means any business conducted or proposed to be conducted (as described in the prospectus) by the Company and its Restricted Subsidiaries on the date of the Indenture and other businesses reasonably related or ancillary thereto.


	(1) any Investment in the Company or in a Restricted Subsidiary of the Company that is a Guarantor;

	(2) any Investment in Cash Equivalents;

	(3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment:


	(a) such Person becomes a Restricted Subsidiary of the Company and a Guarantor; or

	(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Guarantor;


	(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales”;

	(5) Investments to the extent acquired in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company;

	(6) Hedging Obligations that are Incurred in the ordinary course of business for the purpose of fixing, hedging or swapping interest rate, commodity price or foreign currency exchange rate risk (or to reverse or amend any such agreements previously made for such purposes), and not for speculative purposes, and that do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in interest rates, commodity prices or foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder;

	(7) other Investments in any Person (other than a Person that controls the Company) having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (7) since the date of the Indenture, not to exceed 10% of the Tangible Assets


	of the Company and its Restricted Subsidiaries (determined as of the end of the most recent fiscal quarter of the Company), plus, to the extent that any Investment made pursuant to this clause (7) since the date of the Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (a) the cash return of capital with respect to such Investment (less the cost of disposition, if any) and (b) the initial amount of such Investment; provided that, at the time such Investment is made pursuant to this clause (7) and after giving pro forma effect thereto as if such Investment had been made at the beginning of the applicable four-quarter period, the Company would have been permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock;”

	(8) stock, obligations or securities received in satisfaction of judgments; and

	(9) Investments in a Receivables Subsidiary in connection with the Accounts Receivable Facility or any Qualified Receivables Transaction.


	(1) Liens on the assets of the Company and any Guarantor securing Indebtedness (and all Obligations related thereto) Incurred under clause (1) of the “Incurrence of Indebtedness and Issuance of Preferred Stock” covenant;

	(2) Liens in favor of the Company or any Restricted Subsidiary that is a Guarantor;

	(3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company or at the time such Person becomes a Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such transaction and do not extend to any other assets of the Company or any Restricted Subsidiary (other than additions and accessions to such property of such Person);

	(4) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such acquisition and do not extend to any property other than the property so acquired by the Company or the Restricted Subsidiary (and additions and accessions thereto);

	(5) Liens existing on the date of the Indenture;

	(6) Liens on cash or Cash Equivalents securing Hedging Obligations of the Company or any of its Restricted Subsidiaries that do not constitute Indebtedness or securing letters of credit that support such Hedging Obligations;

	(7) Liens securing Permitted Refinancing Indebtedness (and all Obligations related thereto); provided, that such Liens do not extend to or cover any property or assets other than the property or assets that secure the Indebtedness being refinanced (and additions and accessions to such property or assets);

	(8) Liens for taxes, assessments and governmental charges not yet delinquent or being contested in good faith and for which adequate reserves have been established to the extent required by GAAP;

	(9) carriers, warehousemen’s, mechanics’, worker’s, materialmen’s, operators’, landlords’ or similar Liens arising in the ordinary course of business;

	(10) Liens incurred or deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other social security obligations;

	(11) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of Indebtedness), leases, or other similar obligations arising in the ordinary course of business;


	(12) survey exceptions, encumbrances, easements or reservations of, or rights of others for, rights of way, zoning or other restrictions as to the use of properties, and defects in title which, in the case of any of the foregoing, were not incurred or created to secure the payment of Indebtedness, and which in the aggregate do not materially adversely affect the value of such properties or materially impair the use for the purposes of which such properties are held by the Company or any Restricted Subsidiaries;

	(13) judgment and attachment Liens not giving rise to an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings and for which adequate reserves have been made;

	(14) Liens, deposits or pledges to secure public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds or obligations; and Liens, deposits or pledges in lieu of such bonds or obligations, or to secure such bonds or obligations, or to secure letters of credit in lieu of or supporting the payment of such bonds or obligations;

	(15) Liens on property or assets used to defease Indebtedness that was not Incurred in violation of the Indenture;

	(16) Liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of the Company or any Subsidiary on deposit with or in possession of such bank;

	(17) purchase money Liens granted in connection with the acquisition of assets in the ordinary course of business, provided, that (A) such Liens attach only to the property so acquired with the purchase money indebtedness secured thereby (and to additions and accessions thereto) and (B) the principal amount of the Indebtedness secured by such Liens does not exceed 100% of the purchase price of such assets;

	(18) any interest or title of a lessor in the property subject to any lease; and

	(19) Liens (not otherwise permitted hereunder) with respect to obligations that do not exceed $15.0 million at any one time outstanding.

“Permitted Refinancing Indebtedness” means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:


	(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of any reasonably determined premium necessary to accomplish such refinancing and such reasonable expenses incurred in connection therewith);

	(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

	(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes or the Note Guarantees, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and

	(4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is pari passu in right of payment with the Notes or any Note Guarantees, such Permitted Refinancing


	Indebtedness is pari passu with, or subordinated in right of payment to, the Notes or such Note Guarantees; and

	(5) such Indebtedness is Incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Qualified Receivables Transaction” means any transaction or series of transactions that may be entered into by the Company or any of its Restricted Subsidiaries pursuant to which the Company or such Restricted Subsidiary may sell, convey or otherwise transfer to a Receivables Subsidiary accounts receivable (whether now existing or arising in the future) and any assets related thereto, including without limitation, all collateral securing such accounts receivable, all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and all other assets that are customarily transferred, or in respect of which security interests are customarily granted, in connection with an asset securitization transaction involving accounts receivable and pursuant to which such Receivables Subsidiary may sell, convey or otherwise transfer interests in such accounts receivable and related assets to any Person other than an Affiliate of the Company; provided that:


	(1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of a Receivables Subsidiary:


	(a) is guaranteed by the Company or any Restricted Subsidiary of the Company (excluding guarantees of obligations pursuant to Standard Securitization Undertakings),

	(b) is recourse to or obligates the Company or any Restricted Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings, or

	(c) subjects any property or asset of the Company or any Restricted Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction of obligations incurred in such transactions, other than pursuant to Standard Securitization Undertakings;


	(2) neither the Company nor any Restricted Subsidiary of the Company has any material contract, agreement, arrangement or understanding with a Receivables Subsidiary other than on terms no less favorable to the Company or any Restricted Subsidiary of the Company than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing accounts receivable; provided that all of the agreements, arrangements and understandings entered into by the Company or any Restricted Subsidiary with a Receivables Subsidiary in connection with any transaction or series of transactions shall be considered as a whole for purposes of determining compliance with this clause (2), and

	(3) neither the Company nor any Restricted Subsidiary of the Company (other than such Receivables Subsidiary) has any obligation to maintain or preserve the financial condition of a Receivables Subsidiary or cause such entity to achieve certain levels of operating results.

“Rating Agencies” means (1) S&P and Moody’s or (2) if S&P or Moody’s or both of them are not making ratings publicly available, a nationally recognized U.S. rating agency or agencies, as the case may be, selected by the Company, which will be substituted for S&P or Moody’s or both, as the case may be.

“Rating Category” means (1) with respect to S&P, any of the following categories (any of which may include a “+” or “-”: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories), (2) with respect to Moody’s, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories), and (3) the equivalent of any such categories of S&P or Moody’s used by another Rating Agency, if applicable.

“Receivables Subsidiary” means (a) TXI Receivables Corporation and (b) any other special purpose wholly owned subsidiary of the Company created in connection with the transactions contemplated by a Qualified Receivables Transaction, which Subsidiary engages in no activities other than those incidental to

such Qualified Receivables Transaction and which is designated as a Receivables Subsidiary by the Company’s Board of Directors. Any such designation by the Board of Directors shall be evidenced by filing with the Trustee a Board Resolution giving effect to such designation and an Officers’ Certificate certifying, to the best of such officers’ knowledge and belief after consulting with counsel, such designation, and the transactions in which the Receivables Subsidiary will engage, comply with the requirements of the definition of Qualified Receivables Transaction. For purposes of the definition of “Unrestricted Subsidiary,” the making of Standard Securitization Undertakings by the Company or any of its Restricted Subsidiaries shall not be deemed inconsistent with qualifying as an Unrestricted Subsidiary.

“Replacement Assets” means (1) non-current tangible assets that will be used or useful in a Permitted Business or (2) substantially all the assets of a Permitted Business or a majority of the Voting Stock of any Person engaged in a Permitted Business that will become on the date of acquisition thereof a Restricted Subsidiary.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

“Sale And Leaseback Transaction” means, with respect to any Person, any transaction involving any of the assets or properties of such Person whether now owned or hereafter acquired, whereby such Person sells or transfers such assets or properties and then or thereafter leases such assets or properties or any part thereof or any other assets or properties which such Person intends to use for substantially the same purpose or purposes as the assets or properties sold or transferred.

“Significant Subsidiary” means any Subsidiary that would constitute a “significant subsidiary” within the meaning of Article 1 of Regulation S-X of the Securities Act.

“Standard Securitization Undertakings” means representations, warranties, covenants and indemnities entered into by the Company or any Restricted Subsidiary of the Company which, in the good faith judgment of the Board of Directors of the Company, are reasonably customary in accounts receivable transactions.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.


	(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock 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 such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

	(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof).

“Tangible Assets” means the total amount of assets of the Company and its Restricted Subsidiaries (less applicable depreciation, depletion, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most

“Treasury Rate” means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days prior to the date fixed for prepayment (or, if such Statistical Release is no longer published, any publicly available source for similar market data)) most nearly equal to the then remaining term of the Notes to June 15, 2007, provided, however, that if the then remaining term to June 15, 2007 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the then remaining term of the Notes to June 15, 2007 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

“Unrestricted Subsidiary” means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution in compliance with the covenant described under the caption “— Certain Covenants — Designation of Restricted and Unrestricted Subsidiaries,” and any Subsidiary of such Subsidiary.

“Unsubordinated Indebtedness” of a Person means any Indebtedness of such Person, unless such Indebtedness is contractually subordinate or junior in right of payment of principal, premium or interest to any other Indebtedness of such Person.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:


	(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

	(2) the then outstanding principal amount of such Indebtedness.

“Wholly Owned Restricted Subsidiary” of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares or Investments by foreign nationals mandated by applicable law) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

The following is a summary of material United States federal income and estate tax considerations relating to a holder’s purchase, ownership and disposition of the exchange notes, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), regulations, rulings and judicial decisions as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in United States federal income tax consequences different from those set forth below. We have not sought any ruling from the Internal Revenue Service (the “IRS”) or an opinion of counsel with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions.

This summary assumes that the exchange notes are held as capital assets and holders are investors in the notes who purchased the outstanding notes for cash at their initial offering price. This summary does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction. In addition, this discussion does not address tax considerations applicable to a holder’s particular circumstances or to holders that may be subject to special tax rules, including, without limitation:


	•	holders subject to the alternative minimum tax;

	•	banks;

	•	tax-exempt organizations;

	•	insurance companies;

	•	dealers in securities or commodities;

	•	traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

	•	financial institutions;

	•	holders whose “functional currency” is not the United States dollar;

	•	U.S. expatriates;

	•	persons that will hold the exchange notes as a position in a “straddle” or as part of a “hedging” or “conversion” transaction or other risk reduction transaction; or

	•	persons deemed to sell the exchange notes under the constructive sale provisions of the Code.

THIS SUMMARY OF CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE UNITED STATES FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

The following is a summary of the United States federal income tax consequences that will apply to you if you are a U.S. holder of the exchange notes. Certain consequences to “non-U.S. holders” of the exchange notes are described under “Consequences to Non-U.S. Holders” below.

“U.S. holder” means a beneficial owner of an exchange note for U.S. federal income tax purposes that is:


	•	a citizen or resident of the United States;

	•	a corporation (or an entity that is treated as a corporation for United States federal tax purposes) created or organized in or under the laws of the United States or of any state of the United States or the District of Columbia;

	•	an estate the income of which is subject to United States federal income taxation regardless of its source; or

	•	a trust that (1) is subject to the supervision of a court within the United States and that has one or more United States persons with authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable Treasury regulations to be treated as a United States person.

If a partnership holds exchange notes, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our exchange notes, you should consult your tax advisor.

The exchange notes do not differ materially in kind or extent from the outstanding notes and, as a result, your exchange of outstanding notes for exchange notes should not constitute a taxable disposition of the outstanding notes for United States federal income tax purposes. As a result, you should not recognize taxable income, gain or loss on such exchange, your holding period for the exchange notes should generally include the holding period for the outstanding notes so exchanged, and your adjusted tax basis in the exchange notes should generally be the same as your adjusted tax basis in the outstanding notes so exchanged.

Stated interest on the exchange notes will generally be taxable to you as ordinary income at the time it is paid or accrued in accordance with your method of accounting for tax purposes.

Generally, if a U.S. holder purchases an exchange note for an amount that exceeds the sum of all amounts payable on the exchange note after the purchase date other than stated interest, the note will be considered to have been purchased at a premium. This premium may be amortized over the remaining term (or an applicable call date as discussed below) of the exchange note on a yield to maturity basis if the U.S. holder so elects. The amortizable bond premium is treated as an offset to interest income on the exchange note for United States federal income tax purposes. A U.S. holder who elects to amortize bond premium must reduce its tax basis in the exchange note by the deductions allowable for amortizable bond premium. An election to amortize bond premium is revocable only with the consent of the IRS and applies to all obligations owned or acquired by the U.S. holder on or after the first day of the taxable year to which the election applies. We may redeem the exchange notes in certain circumstances as described in this prospectus under “Description of the Exchange Notes—Optional Redemption.” The amount of amortizable bond premium will be based on the amount payable at the applicable call date, but only if use of the call date (in lieu of the stated maturity date) results in a smaller amortizable bond premium for the period ending on the call date. If an exchange note purchased at a premium is redeemed before its maturity and a U.S. holder has elected to deduct the bond premium, the U.S. holder may be permitted to deduct any remaining unamortized bond premium as an ordinary loss in the taxable year of the redemption.

If a U.S. holder does not elect to amortize bond premium, that premium will decrease the gain or increase the loss the U.S. holder would otherwise recognize on disposition of the exchange note.

The resale of exchange notes may be affected by the market discount provisions of the Code. A note has market discount if a U.S. holder purchases an exchange note for less than its principal amount. A de minimis amount of market discount is ignored. Under the market discount rules, the U.S. holder will be required to treat any principal payment on an exchange note, or any gain on its sale, exchange, retirement or other disposition as ordinary income to the extent of the accrued market discount that was not previously included in gross income. If the exchange note is disposed of in a non-taxable transaction (other than a non-recognition transaction described in Section 1276 of the Code), accrued market discount will be taxable to the U.S. holder as ordinary income as if the U.S. holder had sold the exchange note at its fair market value. In addition, the U.S. holder may be required to defer, until the maturity of an exchange note or its earlier disposition (including a non-taxable transaction other than a transaction described in Section 1276 of the Code), the deduction of all or a portion of the interest expense in respect of any indebtedness incurred or maintained to purchase or carry the exchange note. Market discount will be considered to accrue on a straight-line basis during the period from the date of acquisition to the maturity date of the exchange note unless the U.S. holder elects to accrue market discount on a constant interest rate basis.

A U.S. holder may elect to include market discount in gross income as the discount accrues, either on a straight-line basis or on a constant interest rate basis. This current inclusion election, once made, applies to all market discount obligations acquired by the U.S. 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. If an election is made, the foregoing rules with respect to the recognition of ordinary income on sales and other dispositions of such debt instruments and on any partial principal payment with respect to the exchange notes, and the deferral of interest deductions on indebtedness incurred or maintained to purchase or carry such debt instruments, would not apply.

Subject to the discussion of the exchange offer above, you will generally recognize gain or loss upon the sale, exchange or other disposition of an exchange note equal to the difference between the amount realized upon the sale, exchange or other disposition (less an amount attributable to any accrued stated interest not previously included in income, which will be taxable as interest income) and your adjusted tax basis in the exchange note. Your adjusted tax basis in an exchange note will generally equal the amount you paid for the outstanding note, decreased by any repayments of principal received and increased by the amount of accrued unpaid interest that you have already included in gross income. Any gain or loss recognized on a disposition of the exchange note generally will be capital gain or loss. If you are an individual and have held the exchange note for more than one year, such capital gain will generally be subject to tax at current rates at a maximum rate of 15%. Your ability to deduct capital losses may be limited.

The following is a summary of the United States federal tax consequences that will apply to you if you are a non-U.S. holder of exchange notes. The term “non-U.S. holder” means a beneficial owner of an exchange note that is not a U.S. holder.

Special rules may apply to certain non-U.S. holders such as “controlled foreign corporations,” “passive foreign investment companies” and “foreign personal holding companies.” Such entities should consult their own tax advisors to determine the United States federal, state, local and other tax consequences that may be relevant to them.

The payment to you of interest on an exchange note generally will not be subject to a 30% United States federal withholding tax provided that:


	•	you do not actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock within the meaning of the Code and applicable Treasury regulations;

	•	you are not a controlled foreign corporation that is related to us through stock ownership as provided in the Code and applicable Treasury regulations;

	•	you are not a bank whose receipt of interest on the exchange notes is in connection with an extension of credit made pursuant to a loan agreement entered into in the ordinary course of your trade or business; and

	•	(1) you provide your name and address on an IRS Form W-8BEN and you certify under penalty of perjury that you are not a United States person or (2) a bank, brokerage house or other financial institution that holds the exchange notes on your behalf in the ordinary course of its trade or business certifies to us, under penalty of perjury, that it has received an IRS Form W-8BEN from you and furnishes us with a copy of the properly completed IRS Form W-8BEN.

If you cannot satisfy the requirements described in the immediately preceding paragraph, payments of interest made to you will be subject to a 30% United States federal withholding tax unless you provide us with a properly executed:


	•	IRS Form W-8BEN claiming an exemption from, or reduction in the rate of, withholding under the benefit of an applicable income tax treaty; or

	•	IRS Form W-8ECI stating that the interest paid on the exchange note is not subject to withholding tax because it is effectively connected with your conduct of a trade or business in the United States. In addition, you may, under certain circumstances, be required to obtain a United States taxpayer identification number (“TIN”).

If you are engaged in a trade or business in the United States and interest on the exchange note is effectively connected with the conduct of that trade or business, you will be subject to United States federal income tax on such interest in the same manner as if you were a U.S. holder, unless you can claim an exemption under the benefit of an applicable income tax treaty. In addition, if you are a foreign corporation, you may be subject to a branch profits tax equal to 30% (or lower applicable treaty rate) of your earnings and profits for the taxable year, subject to certain adjustments, that are effectively connected with your conduct of a trade or business in the United States including earnings from the exchange notes.

Generally, payments of interest to you would be subject to reporting requirements, even though these payments are not subject to a 30% United States federal withholding tax.

Generally, you will not be subject to United States federal income tax with respect to gain realized on the sale, exchange, redemption or other disposition of an exchange note unless:


	•	the gain is effectively connected with the conduct by you of a trade or business in the United States; or

	•	in the case of a non-U.S. holder who is a nonresident alien individual, such individual is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met.

Notwithstanding these two bullet points, you will not be subject to United States federal income tax if a treaty exemption applies and the appropriate documentation is provided.

The United States federal estate tax will not apply to the exchange notes owned by you at the time of your death, provided that (1) you do not own actually or constructively 10% or more of the total combined voting power of all classes of our voting stock (within the meaning of the Code and the Treasury regulations) and (2) interest on the exchange note would not have been, if received at the time of your death, effectively connected with your conduct of a trade or business in the United States.

U.S. holders, unless otherwise exempt as noted below, will be subject to information reporting with respect to payments of principal, interest and the gross proceeds from the sale, exchange, redemption or other disposition of an exchange note. Backup withholding at a rate equal to 28% may apply to payments of interest and to the gross proceeds from the sale, exchange, redemption or other disposition of a note if the U.S. holder:


	•	fails to furnish its taxpayer identification number (“TIN”) on an IRS Form W-9 within a reasonable time after we request this information;

	•	furnishes an incorrect TIN;

	•	is informed by the IRS that it failed to report properly any interest or dividends; or

	•	fails, under certain circumstances, to provide a certified statement signed under penalty of perjury that the TIN provided is its correct number and that it is not subject to backup withholding.

Certain persons are exempt from information reporting and backup withholding, including corporations and financial institutions. Holders of the exchange notes should consult their tax advisors as to their qualification for exemption and the procedure for obtaining such exemption.

Non-U.S. holders generally will not be subject to backup withholding with respect to payments of interest on the exchange notes if we do not have actual knowledge or reason to know that the non-U.S. holder is a United States person and such holder provides the requisite certification on IRS Form W-8BEN or otherwise establishes an exemption from backup withholding. Payments of interest, however, would generally be subject to reporting requirements.

Payments of the gross proceeds from the sale, exchange, redemption or other disposition of an exchange note effected by or through a United States office of a broker generally will be subject to backup withholding and information reporting unless the non-U.S. holder certifies as to its non-U.S. status on IRS Form W-8BEN or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds where the sale is effected outside the United States through a non-U.S. office of a non-U.S. broker and payment is not received in the United States.

However, information reporting will generally apply to a payment of disposition proceeds where the sale is effected outside the United States by or through an office outside the United States of a broker that fails to maintain documentary evidence that the holder is a non-U.S. holder or that the holder otherwise is entitled to an exemption, and the broker is:


	•	a United States person;

	•	a foreign person that derives 50% or more of its gross income for defined periods from the conduct of a trade or business in the United States;

	•	a controlled foreign corporation for United States federal income tax purposes; or


	•	a foreign partnership (1) more than 50% of the capital or profits interest of which is owned by United States persons or (2) that is engaged in a United States trade or business.

Backup withholding is not an additional tax. The amount of any backup withholding imposed on a payment to a holder of the exchange notes will be allowed as a refund or a credit against that holder’s United States federal income tax liability if the required information is furnished to the IRS.

Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange 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 exchange notes received in exchange for outstanding notes where the outstanding notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the exchange offer is completed, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any resale of exchange notes. In addition, until 90 days after the date of this prospectus, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus.

We will not receive any proceeds from any sales of the exchange notes by broker-dealers. Exchange 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 exchange notes or a combination of methods of resale, at market prices prevailing at the time of resale, at prices related to those prevailing market prices or at negotiated prices. Any resale may be made directly to the purchaser or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from the broker-dealer and/or the purchasers of the exchange notes. Any broker-dealer that resells the exchange 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 the exchange notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any resale of exchange notes and any commissions or concessions received by any of those 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 exchange offer is completed we 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. We have agreed to pay the expenses incident to the exchange offer, other than commissions or concessions of any brokers or dealers and the fees of any advisors or experts retained by the holders of outstanding notes, and will indemnify the holders of the outstanding notes (including any broker-dealers) against related liabilities, including liabilities under the Securities Act.

The validity of the exchange notes will be passed upon for us by Thompson & Knight L.L.P., Dallas, Texas.

The consolidated financial statements of Texas Industries, Inc. at May 31, 2002 and 2001 and for each of the three years in the period ended May 31, 2002, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report

We file annual, quarterly and special reports and other information with the Securities and Exchange Commission, or SEC. You can read and copy any materials we file with the SEC at its Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at 500 West Madison Street, Chicago, Illinois 60661. You can obtain information about the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web site that contains information we file electronically with the SEC, which you can access over the Internet at http://www.sec.gov. In addition, you can obtain information about us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. We have agreed that, if we are not subject to the informational requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934 at any time while the notes constitute “restricted securities” within the meaning of the Securities Act, we will furnish to holders and beneficial owners of the notes and to prospective purchasers designated by such holders the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in connection with resales of the notes. You may request a copy of our filings at no cost, by writing or telephoning us at the following address:

TO OBTAIN TIMELY DELIVERY OF ANY COPIES OF FILINGS REQUESTED, PLEASE WRITE OR TELEPHONE NO LATER THAN FIVE DAYS BEFORE THE EXPIRATION DATE.

This prospectus incorporates documents and important information, by reference that is not part of this prospectus or delivered with this prospectus. This means that we are disclosing important information to you by referring you to those documents. You should be aware that information in a document incorporated by reference may have been modified or superseded by information that is included in other documents that were filed at a later date and which are also incorporated by reference or included in this prospectus.


	•	Items 11 and 12 of Part III of our Annual Report on Form 10-K for the year ended May 31, 2002, previously filed with the SEC.

All documents and reports filed by Texas Industries, Inc. with the SEC after the date of this prospectus and before the termination of the exchange offer shall be deemed incorporated herein by reference and shall be deemed to be a part hereof from the date of filing of such documents and reports. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any subsequently filed document or report that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.

We have audited the accompanying consolidated balance sheets of Texas Industries, Inc. and subsidiaries (the Company) as of May 31, 2002 and 2001, the business segment information on pages 11 through 12 of the Annual Report on Form 10-K and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended May 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Texas Industries, Inc. and subsidiaries at May 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended May 31, 2002, in conformity with accounting principles generally accepted in the United States.

As discussed in the “Summary of Significant Accounting Policies” footnote to the consolidated financial statements, in fiscal year 2002 the Company changed its method of accounting for goodwill.

Texas Industries, Inc. (“TXI” or the “Company”) is a leading supplier of construction materials through two business segments: cement, aggregate and concrete products (the “CAC” segment); and structural steel and specialty bar products (the “Steel” segment). Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, expanded shale and clay aggregate and concrete products from facilities concentrated in Texas, Louisiana, and California, with several products marketed throughout the United States. Through its Steel segment, the Company produces and sells structural steel, piling products, specialty bar products, merchant bar-quality rounds, reinforcing bar and channels for markets in North America.

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and all subsidiaries. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

Estimates. The preparation of financial statements and accompanying notes in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.

Fair Value of Financial Instruments. The estimated fair value of each class of financial instrument as of May 31, 2002 approximates its carrying value except for long-term debt having fixed interest rates and mandatorily redeemable preferred securities of subsidiary. The fair value of long-term debt at May 31, 2002, estimated by applying discounted cash flow analysis based on interest rates currently available to the Company for such debt with similar terms and remaining maturities, is approximately $461.1 million compared to the carrying amount of $484.2 million. The fair value of mandatorily redeemable preferred securities of subsidiary at May 31, 2002, estimated based on NYSE quoted market prices, is approximately $151.0 million compared to the carrying amount of $200.0 million.

Cash Equivalents. For cash flow purposes, temporary investments which have maturities of less than 90 days when purchased are considered cash equivalents.

Property, Plant and Equipment. Property, plant and equipment is recorded at cost. Provisions for depreciation are computed generally using the straight-line method. Provisions for depletion of mineral deposits are computed on the basis of the estimated quantity of recoverable raw materials. Useful lives for the Company’s primary operating facilities range from 10 to 20 years. Maintenance and repairs are charged to expense as incurred. Costs incurred for scheduled shut-downs to refurbish the Steel facilities are amortized over the production period, typically 12 to 24 months.

Goodwill and Other Intangible Assets. Effective June 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (“SFAS No. 142”) which requires that goodwill not be amortized but instead be tested for impairment annually by each reporting unit. Goodwill identified with CAC resulted from the acquisition of Riverside Cement Company. Goodwill identified with Steel resulted from the acquisition of Chaparral Steel Company. Settlement of claims relating to the acquisition of the minority interest in Chaparral resulted in $3.4 million of additional goodwill in 2002. An independent evaluation determined that in each case the fair value of the respective

reporting unit exceeds its carrying value. The carrying value of goodwill by business segment is summarized as follows:

As required by SFAS No. 142, the results for periods prior to its adoption have not been restated. The following reconciles the reported net income and earnings per share to that which would have resulted had SFAS No. 142 been applied to the years ended May 31, 2001 and 2000.

Deferred charges and intangibles include non-compete agreements and other intangibles with finite lives being amortized in accordance with SFAS No. 142 on a straight-line basis over periods of 5 to 15 years. Their carrying value, adjusted for write-offs, totaled $3.5 million at May 31, 2002 and $4.6 million at May 31, 2001, net of accumulated amortization of $5.1 million at May 31, 2002 and $5.4 million at May 31, 2001. Amortization expense incurred was $1.2 million in 2002, $1.3 million in 2001 and $1.4 million in 2000. Estimated annual amortization for each of the five succeeding years is $900,000, $400,000, $400,000, $300,000 and $300,000.

Real Estate and Investments. Surplus real estate and real estate acquired for development of high quality industrial, office and multi-use parks totaled $14.3 million and $15.9 million at May 31, 2002 and 2001, respectively. Investments, composed primarily of life insurance contracts which may be used to fund certain Company benefit agreements, totaled $27.2 million and $23.8 million at May 31, 2002 and 2001, respectively.

Debt Issuance Cost. Debt issuance costs of $9.9 million and $11.4 million at May 31, 2002 and 2001, respectively, are associated with various debt issues and amortized over the terms of the related debt.

Other Credits. Other credits of $32.1 million at May 31, 2002, compared to $31.3 million at the prior year-end, are composed primarily of liabilities related to the Company’s retirement plans and deferred compensation agreements.

Net Sales. Sales are recognized when title has transferred and products are delivered and are presented net of delivery costs as follows:

Other Income. Other income includes routine sales of surplus operating assets and real estate in the amount of $8.6 million in 2002, $19.6 million in 2001 and $4.1 million in 2000. Also included in other income was $9.6 million in 2002, $400,000 in 2001 and $6.3 million in 2000 from the Company’s litigation against certain graphite electrode suppliers.

Income Taxes. Accounting for income taxes uses the liability method of recognizing and classifying deferred income taxes. The Company joins in filing a consolidated return with its subsidiaries. Current and deferred tax expense is allocated among the members of the group based on a stand-alone calculation of the tax of the individual member.

Earnings Per Share (“EPS”). Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period including certain contingently issuable shares. Diluted EPS adjusts net income for the net dividends on preferred securities of subsidiary and the outstanding shares for the dilutive effect of preferred securities, stock options and awards. Prior to the adoption of SFAS No. 142, net income was adjusted for the amortization of additional goodwill in connection with a contingent payment for the acquisition of Chaparral.

New Accounting Pronouncements. Effective June 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which establishes a comprehensive standard for the recognition and measurement of derivatives and hedging activities. Due to the Company’s limited use of derivatives, the impact was not material.

Effective June 1, 2002, the Company will adopt Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Its adoption is not expected to have an immediate effect on the financial statements of the Company.

Effective June 1, 2003, the Company will adopt Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations,” which establishes standards for accounting for legal obligations associated with the retirement of long-lived assets. Its adoption is not expected to have an immediate effect on the financial statements of the Company.

Working capital totaled $202.6 million at May 31, 2002, compared to $193.0 million at the prior year-end.

Accounts receivable are presented net of allowances for doubtful receivables of $4.7 million in 2002 and $2.6 million in 2001.

The Company has an agreement to sell, on a revolving basis, an interest in a defined pool of trade receivables of up to $125 million. The agreement is subject to annual renewal. The maximum amount outstanding varies based upon the level of eligible receivables. Fees are variable and follow commercial paper rates. The interest sold totaled $125 million at both May 31, 2002 and 2001. Sales are reflected as reductions of accounts receivable and as operating cash flows. As collections reduce previously sold interests, new accounts receivable are customarily sold. Fees and expenses of $4.2 million, $7.6 million and $6.2 million are included in selling, general and administrative expenses in 2002, 2001 and 2000, respectively. The Company, as agent for the purchaser, retains collection and administration responsibilities for the participating interests of the defined pool.

Inventories are stated at cost (not in excess of market) with approximately 59% of inventories using the last-in, first-out method (LIFO). If the average cost method (which approximates current replacement cost) had been used, inventory values would have been higher by $6.3 million in 2002 and $9.8 million in 2001.

Annual maturities of long-term debt for each of the five succeeding years are $9.2, $144.2, $41.2, $45.9 and $40.9 million.

The Company has available a bank-financed long-term revolving credit facility. As provided by the terms of the agreement, the Company has elected to reduce the borrowing capacity of the facility from $450 million to $350 million effective August 2, 2002. Commitment fees at a current annual rate of .375% are paid on the unused portion of the facility. An interest rate at the applicable margin above either prime or LIBOR is selected at the time of each borrowing. At May 31, 2002, $90.0 million was outstanding under the facility. In addition, $111.4 million was utilized to support letters of credit issued primarily to secure the Company’s variable-rate industrial development revenue bonds which allows the interest rates on these bonds to closely follow the tax-exempt commercial paper rates.

Loan agreements contain covenants that provide for restrictions on the payment of dividends on common stock and place limitations on incurring certain indebtedness, purchasing treasury stock, and making capital expenditures and certain investments. Under the most restrictive of these agreements, the Company’s total debt is limited based on the ratio of debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). At May 31, 2002, $181.0 million of additional debt could have been incurred. In addition, the aggregate amount of annual fixed charges which includes cash dividends on common stock is limited based on the ratio of EBITDA to fixed charges. At May 31, 2002, $44.2 million of additional fixed charges could have been incurred. The Company is in compliance with all loan covenant restrictions.

The amount of interest paid was $43.6 million in 2002, $50.9 million in 2001 and $40.6 million in 2000. No interest was capitalized in 2002. Interest capitalized in 2001 and 2000 totaled $15.6 million and $12.7 million, respectively.

The Company leases certain mobile and other equipment, office space and other items which in the normal course of business are renewed or replaced by other leases. Total expense for such operating leases (other than for mineral rights) amounted to $29.0 million in 2002, $32.0 million in 2001 and $24.3 million in 2000. Non-cancelable operating leases with an initial or remaining term of more than one year including leases for which delivery of equipment is pending totaled $76.8 million at May 31, 2002. Estimated annual lease payments for the five succeeding years are $24.4 million, $10.5 million, $10.6 million, $6.4 million and $4.2 million.

On June 5, 1998, TXI Capital Trust I (the “Trust”), a Delaware business trust wholly owned by the Company, issued 4,000,000 of its 5.5% Shared Preference Redeemable Securities (“Preferred Securities”) to the public for gross proceeds of $200 million. The combined proceeds from the issuance of the Preferred Securities and the issuance to the Company of the common securities of the Trust were invested by the Trust in $206.2 million aggregate principal amount of 5.5% convertible subordinated debentures due June 30, 2028 (the “Debentures”) issued by the Company. The Debentures are the sole assets of the Trust.

Holders of the Preferred Securities are entitled to receive cumulative cash distributions at an annual rate of $2.75 per Preferred Security (equivalent to a rate of 5.5% per annum of the stated liquidation amount of $50 per Preferred Security). The Company has guaranteed, on a subordinated basis, distributions and other payments due on the Preferred Securities, to the extent the Trust has funds available therefor and subject to certain other limitations (the “Guarantee”). The Guarantee, when taken together with the obligations of the Company under the Debentures, the Indenture pursuant to which the Debentures were issued, and the Amended and Restated Trust Agreement of the Trust (including its obligations to pay costs, fees, expenses, debts and other obligations of the Trust [other than with respect to the Preferred Securities and the common securities of the Trust]), provide a full and unconditional guarantee of amounts due on the Preferred Securities.

The Debentures are redeemable for cash, at par, plus accrued and unpaid interest, under certain circumstances relating to federal income tax matters or in whole or in part at the option of the Company. Upon any redemption of the Debentures, a like aggregate liquidation amount of Preferred Securities will be redeemed. The Preferred Securities do not have a stated maturity date, although they are subject to mandatory redemption upon maturity of the Debentures on June 30, 2028, or upon earlier redemption.

Each Preferred Security is convertible at any time prior to the close of business on June 30, 2028, at the option of the holder into shares of the Company’s common stock at a conversion rate of .72218 shares of the Company’s common stock for each Preferred Security (equivalent to a conversion price of $69.235 per share of TXI Common Stock).

There are authorized 100,000 shares of Cumulative Preferred Stock, no par value, of which 20,000 shares are designated $5 Cumulative Preferred Stock (Voting), redeemable at $105 per share and entitled to $100 per share upon dissolution. An additional 25,000 shares are designated Series B Junior Participating Preferred Stock. The Series B Preferred Stock is not redeemable and ranks, with respect to the payment of dividends and the distribution of assets, junior to (i) all other series of the Preferred Stock unless the terms of any other series shall provide otherwise and (ii) the $5 Cumulative Preferred Stock. Pursuant to a Rights Agreement, in November 1996, the Company distributed a dividend of one preferred share purchase right for each outstanding share of the Company’s Common Stock. Each right entitles the holder to purchase from the Company one two-thousandth of a share of the Series B Junior Participating Preferred Stock at a price of $122.50, subject to adjustment. The rights will expire on November 1, 2006 unless the date is extended or the rights are earlier redeemed or exchanged by the Company pursuant to the Rights Agreement.

The Company’s stock option plan as approved by shareholders provides that non-qualified and incentive stock options to purchase Common Stock may be granted to directors, officers and key employees at market prices at date of grant. Outstanding options become exercisable in installments beginning one year after date of grant and expire ten years later. The Company has elected to continue utilizing the accounting prescribed by APB No. 25 for stock issued under this plan. If compensation cost had been recognized based on the fair value at the date of grant consistent with the method prescribed by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), the Company’s net income and earnings per share would have been reduced to the following pro forma amounts:

The weighted-average fair value of options granted in 2002, 2001 and 2000 was $14.57, $11.77 and $17.39, respectively. The fair value of each option grant was estimated on the date of grant for purposes of the pro forma disclosures using the Black-Scholes option-pricing model based on the following weighted average assumptions:

A summary of option transactions for the three years ended May 31, 2002, follows:

Options exercisable as of May 31 were 1,567,983 shares in 2002, 1,401,705 shares in 2001 and 1,132,855 shares in 2000 at a weighted-average option price of $29.04; $27.29 and $25.29, respectively. The following table summarizes information about stock options outstanding as of May 31, 2002.

The Company received income tax refunds of $25.5 million in 2002 and made income tax payments of $2.2 million, $13.5 million and $3.9 million in 2002, 2001 and 2000, respectively.


*	Excludes $3.9 million in tax benefit related to preferred securities of subsidiary in each period.

A reconcilement from statutory federal taxes to the preceding provisions follows:

The components of the net deferred tax liability at May 31 are summarized below.

The $15.3 million alternative minimum tax credit carryforward does not expire and is available for offset against future regular income tax.

The Company is subject to federal, state and local environmental laws and regulations concerning, among other matters, air emissions, furnace dust disposal and wastewater discharge. The Company believes it is in substantial compliance with applicable environmental laws and regulations, however, from time to time the Company receives claims from federal and state environmental regulatory agencies and entities asserting that the Company is or may be in violation of certain environmental laws and regulations. Based on its experience and the information currently available to it, the Company believes that such claims will not have a material impact on its financial condition or results of operations. Despite the Company’s compliance and experience, it is possible that the Company could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by the Company.

The Company and subsidiaries are defendants in lawsuits which arose in the normal course of business. In management’s judgment (based on the opinion of counsel) the ultimate liability, if any, from such legal proceedings will not have a material effect on the consolidated financial position or results of operations of the Company.

In November 1998, Chaparral Steel Company, a wholly owned subsidiary, filed an action in the District Court of Ellis County, Texas against certain graphite electrode suppliers seeking damages for illegal restraints of trade in the sale of graphite electrodes. The Company has obtained settlements from the major producers of graphite electrodes named in the action.

Substantially all employees of the Company are covered by a series of defined contribution retirement plans. The amount of pension expense charged to costs and expenses for the above plans was $6.2 million in 2002, $5.5 million in 2001 and $3.2 million in 2000. It is the Company’s policy to fund the plans to the extent of charges to income.

Certain employees and retirees of an acquired subsidiary are covered by defined retirement and postretirement health benefit plans. The plan assets approximate the plan benefit obligations. The postretirement liability for these plans was $8.1 million at May 31, 2002. The amount of pension expense charged to costs and expenses was $1.5 million in 2002, $1.2 million in 2001 and $1.1 million in 2000. Payments under these plans amounted to $2.2 million in 2002, $1.4 million in 2001 and $200,000 in 2000.

All personnel employed as of May 31 share in the pretax income of the Company for the year then ended based on predetermined formulas. The duration of most of the plans is one year; certain executives are additionally covered under a three-year plan. All plans are subject to annual review by the Company’s Board of Directors. The expense included in selling, general and administrative was $3.5 million, $7.2 million and $13.6 million for 2002, 2001 and 2000, respectively.

Certain executives of Chaparral participate in a deferred compensation plan based on a five-year average of earnings. No expense was incurred in 2002. Amounts recorded as reductions to prior year accruals under the plan were $1.8 million in 2001 and $1.0 million in 2000.

The Company has two reportable segments: cement, aggregate and concrete products (the “CAC” segment) and steel (the “Steel” segment). The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because of significant differences in manufacturing processes, distribution and markets served. Through the CAC segment the Company produces and sells cement, stone, sand and gravel, expanded shale and clay aggregate and concrete products. Through its Steel segment, the Company produces and sells structural steel, piling products, specialty bar products, merchant bar-quality rounds, reinforcing bar and channels. Operating profit is net sales less operating costs and expenses, excluding general corporate expenses and interest expense. Identifiable assets by segment are those assets that are used in the Company’s operation in each segment. Corporate assets consist primarily of cash, real estate and other financial assets not identified with

a major business segment. Operating results and certain other financial data for the Company’s business segments are presented below.

The following is a summary of quarterly financial information (in thousands except per share).

Texas Industries, Inc. (“TXI” or the “Company”) is a leading supplier of construction materials through two business segments: cement, aggregate and concrete products (the “CAC” segment) and structural steel and specialty bar products (the “Steel” segment). Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, expanded shale and clay aggregate and concrete products from facilities concentrated in Texas, Louisiana, and California, with several products marketed throughout the United States. Through the Steel segment, the Company produces and sells structural steel, piling products, specialty bar products, merchant bar-quality rounds, reinforcing bar and channels from facilities located in Texas and Virginia, for markets in North America.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended February 28, 2003, are not necessarily indicative of the results that may be expected for the year ended May 31, 2003. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended May 31, 2002.

Cash Equivalents. For cash flow purposes, temporary investments which have maturities of less than 90 days when purchased are considered cash equivalents.

Property, Plant and Equipment. Property, plant and equipment is recorded at cost. Provisions for depreciation are computed generally using the straight-line method. Provisions for depletion of mineral deposits are computed on the basis of the estimated quantity of recoverable raw materials. Useful lives for the Company’s primary operating facilities range from 10 to 20 years. Maintenance and repairs are charged to expense as incurred. Costs incurred for scheduled shut-downs to refurbish Steel facilities are amortized over the production period, typically 12 to 24 months.

Goodwill. Goodwill identified with CAC resulted from the acquisition of Riverside Cement Company. Goodwill identified with Steel resulted from the acquisition of Chaparral Steel Company. Goodwill is tested for impairment annually by each reporting unit. An independent evaluation determined that in each case the fair value of the respective reporting unit exceeds its carrying value. The carrying value of goodwill by business segment is summarized as follows:

Real Estate and Investments. Surplus real estate and real estate acquired for development of high quality industrial, office and multi-use parks totaled $9.9 million and $14.3 million at February 28, 2003 and May 31, 2002, respectively. Investments, composed primarily of life insurance contracts which may be used to fund certain Company benefit agreements, totaled $33.4 million and $27.2 million at February 28, 2003 and May 31, 2002, respectively.

Debt Issuance Cost. Debt issuance costs totaling $8.7 million and $9.9 million at February 28, 2003 and May 31, 2002, respectively, are associated with various debt issues and amortized over the terms of the related debt.

Intangibles. Intangibles include non-compete agreements and other intangibles with finite lives being amortized on a straight-line basis over periods of 5 to 15 years. Their carrying value, adjusted for write-offs, totaled $2.7 million and $3.5 million, net of accumulated amortization of $5.8 million and $5.1 million at February 28, 2003 and May 31, 2002, respectively. Amortization expense of $700,000 and $900,000 was incurred in the nine-month periods ended February 28, 2003 and 2002, respectively. Annual amortization expense for each of the five succeeding years is $500,000, $400,000, $300,000, $300,000 and $300,000.

Other Credits. Other credits totaling $33.9 million and $32.1 million at February 28, 2003 and May 31, 2002, respectively, are composed primarily of liabilities related to the Company’s retirement plans and deferred compensation agreements.

Accumulated Other Comprehensive Loss. Accumulated other comprehensive loss represents a minimum pension liability adjustment related to a defined benefit retirement plan covering certain employees and retirees of an acquired subsidiary. The minimum pension liability adjustment was $600,000 net of tax of $300,000 at February 28, 2003. Comprehensive loss which consists of net loss and the minimum pension liability adjustment to shareholders’ equity was $17.3 million for the nine-month period ended February 28, 2003.

Net Sales. Sales are recognized when title has transferred and products are delivered. Sales are presented net of delivery costs as follows:

Working capital totaled $113.6 million at February 28, 2003 and $202.6 million at May 31, 2002.

Accounts receivable are presented net of allowances for doubtful receivables of $4.8 million at February and $4.7 million at May.

The Company has an agreement to sell, on a revolving basis, an interest in a defined pool of trade receivables of up to $125 million. The agreement is subject to renewal on May 31, 2003. The maximum amount outstanding varies based upon the level of eligible receivables. Fees are variable and follow commercial paper rates. The interest sold totaled $110.9 million at February and $125 million at May. The sales are reflected as accounts receivable reductions and as operating cash flows. As collections reduce previously sold interests, new accounts receivable are customarily sold. Fees and expenses of $2.2 million and $3.4 million are included in selling, general and administrative expenses in the nine-month periods ended February 28, 2003 and 2002, respectively. The Company, as agent for the purchaser, retains collection and administration responsibilities for the participating interests of the defined pool.

Inventories are stated at cost (not in excess of market) with a majority of inventories using the last-in, first-out method (LIFO). If the average cost method (which approximates current replacement cost) had been used, inventory values would have been higher by $8.9 million at February and $6.3 million at May.

Annual maturities of long-term debt for each of the five succeeding years are $85.2, $53.7, $40.7, $45.7 and $41.5 million.

The Company has available a bank-financed $350 million long-term revolving credit facility. An interest rate at the applicable margin above either prime or LIBOR is selected at the time of each borrowing. Commitment fees at a current annual rate of .375% are paid on the unused portion of this facility. At February 28, 2003, $76.5 million was outstanding under this facility. In addition, $114.4 million has been utilized to support letters of credit issued primarily to secure the Company’s variable-rate industrial development revenue bonds, which allows the interest rates on these bonds to closely follow the tax-exempt commercial paper rates.

Loan agreements contain covenants that place limitations on incurring certain indebtedness, purchasing treasury stock, and making capital expenditures and certain investments. The provisions of the revolving credit facility also require the Company to maintain certain ratios as of the end of each quarter. A fixed charge ratio defined as the ratio of earnings before interest, taxes depreciation and amortization (“EBITDA”) to fixed charges limits the aggregate amount of annual fixed charges, which includes cash dividends on common stock. At February 28, 2003, $11.4 million of additional fixed charges could have been incurred. A leverage ratio defined as the ratio of total debt to EBITDA limits the aggregate amount of total debt. As a result of its fiscal 2003 third quarter results, the Company’s leverage ratio did not meet this requirement at February 28, 2003. The Company received a waiver from its lenders addressing the current deficiency through May 30, 2003, however, the Company can not be certain that it will be able to meet this requirement in the future, and therefore, has classified its revolving credit facility debt as debt due within one year. The Company is in compliance with all other loan covenant restrictions.

The amount of interest paid for the nine-month periods presented was $20.5 million in 2003 and $28.9 million in 2002.

The Debentures are redeemable for cash under certain circumstances relating to federal income tax matters, or at the option of the Company, in whole or in part, at par, plus accrued and unpaid interest. Upon any redemption of the Debentures, a like aggregate liquidation amount of Preferred Securities will be redeemed. The Preferred Securities do not have a stated maturity date, although they are subject to mandatory redemption upon maturity of the Debentures on June 30, 2028, or upon earlier redemption.

unless the date is extended or the rights are earlier redeemed or exchanged by the Company pursuant to the Rights Agreement.

A summary of option transactions for the nine-month period ended February 28, 2003, follows:

At February 28, 2003, there were 1,809,393 shares exercisable and 581,060 shares available for future grants. Outstanding options expire on various dates to January 15, 2013.

Federal income taxes for the interim periods ended February 28, 2003 and 2002, have been included in the accompanying financial statements on the basis of an estimated annual rate. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible and state income tax expense. Applying these differences to the estimated current year pre-tax income resulted in an estimated annualized effective tax rate for 2003 of 43.9% compared to 31.3% for 2002. The tax benefit attributed to dividends on preferred securities is based on the incremental tax rate of 35%. The Company made income tax payments of $2.6 million and $1.7 million in the nine-month periods ended February 28, 2003 and 2002, respectively and received income tax refunds of $18.3 million in the nine-month period ended February 28, 2002.

The Company is subject to federal, state and local environmental laws and regulations concerning among other matters, air emissions, furnace dust disposal and wastewater discharge. The Company believes it is in substantial compliance with applicable environmental laws and regulations, however, from time to time the Company receives claims from federal and state environmental regulatory agencies and entities asserting that the Company is or may be in violation of certain environmental laws and regulations. Based on its experience and the information currently available to it, the Company believes that such claims will not have a material impact on its financial condition or results of operations. Despite the Company’s compliance and experience, it is possible that the Company could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by the Company.

A wholly owned subsidiary of the Company based in California received a complaint from the California air regulatory authorities in connection with its manufacturing operations. The subsidiary makes

lightweight clay aggregate by heating clay pellets in two natural gas-fired kilns. The complaint alleges violations of the subsidiary’s air emissions permit, but does not specify the amount of any monetary sanction which may be sought. The amount of any possible sanctions is not currently estimable. The Company believes that the subsidiary is in substantial compliance with its permit limitations.

The Company has two reportable segments: cement, aggregate and concrete products (the “CAC” segment) and steel (the “Steel” segment). The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because of significant differences in manufacturing processes, distribution and markets served. Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, expanded shale and clay aggregate and concrete products. Through the Steel segment, the Company produces and sells structural steel, piling products, specialty bar products, merchant bar-quality rounds, reinforcing bar and channels. Operating profit is net sales less operating costs and expenses, excluding general corporate expenses and interest expense. Operating results and certain other financial data for the Company’s business segments are presented on pages F-32 and F-33 under “Business Segments” of Management’s Discussion and Analysis of Financial Condition and Results of Operations, and are incorporated herein by reference.

The Company is a leading supplier of construction materials through two business segments: cement, aggregate and concrete products (the “CAC” segment); and structural steel and specialty bar products (the “Steel” segment). Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, expanded shale and clay aggregate and concrete products. Through the Steel segment, the Company produces and sells structural steel, piling products, specialty bar products, merchant bar-quality rounds, reinforcing bar and channels.

Corporate resources include administration, financial, legal, environmental, human resources and real estate activities that are not allocated to operations and are excluded from operating profit.

No person has been authorized to give any information or make any representations in connection with this offering other than those contained in this prospectus, and, if given or made, such other information or representations must not be relied upon as having been authorized by TXI. Neither the delivery of this prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of TXI since the date of this prospectus or that the information contained in this prospectus is correct as of any time subsequent to its date. This prospectus does not constitute an offer to sell nor or the solicitation of an offer to buy such securities in any circumstances in which such offer or solicitation is unlawful.

The following contains summaries of certain circumstances in which indemnification is provided pursuant to the Certificate of Incorporation and Bylaws of Texas Industries, Inc. (the “Company”) and the guarantor subsidiaries. Such summaries are qualified in their entirety by reference to the referenced statutes, Certificates or Articles of Incorporation and Bylaws.

Delaware Corporations — The Company; Chaparral Steel Company; Chaparral Steel Holdings, Inc.; Athens Brick Company; Brookhollow Corporation; Chaparral Steel Texas, Inc.; Chaparral (Virginia) Inc.; Creole Corporation; Riverside Cement Holdings Company; Texas Industries Holdings, Inc.; TXI California Inc.; TXI Cement Company; TXI Corp. and TXI Riverside Inc.

Section 145 of the Delaware General Corporation Law (the “DGCL”), under certain circumstances, provides for the indemnification of officers, directors, employees, and agents against liabilities, which they may incur in such capacities. Section 145 provides that a Delaware corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement in connection with specified actions, suits and proceedings, whether civil, criminal, administrative or investigative (other than action by or in the right of the corporation — a “derivative action”), if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys’ fees) incurred in connection with the defense or settlement of such action, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s certificate of incorporation, bylaws, disinterested director vote, stockholder vote, agreement, or otherwise. Under the DGCL, a corporation may advance funds to the person requesting indemnity, provided that the corporation receives an understanding that the person will repay the advanced funds if it is ultimately determined that he is not entitled to indemnification. The DGCL also permits corporations to provide that a director of such corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. The following information summarizes applicable provisions of the certificates of incorporation and bylaws of the Company and guarantor subsidiaries.

The Company. The Company’s Certificate of Incorporation provides that a director of such corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. It also provides that any director or officer seeking indemnification shall be indemnified for actions taken in good faith on behalf or for the benefit of the corporation to the fullest extent permitted by the laws of the state of Delaware. The Company’s Bylaws provide that any person seeking indemnification shall be indemnified to the fullest extent permitted by DGCL. The Company’s Bylaws provide that all expenses (including attorneys’ fees), costs, judgments, fines and amounts paid in settlement actually and reasonably incurred by a director or officer seeking indemnification shall be paid by the Company in advance of the final disposition of the action, suit or proceeding. However, as a condition to any such advance, the Company must receive an undertaking by or on behalf of such person to repay the amounts advanced if a final adjudication is made by a court of competent jurisdiction that such person was not entitled to indemnification.

Chaparral Steel Company. The Restated Certificate of Incorporation of Chaparral Steel Company provides that a director of such corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. It does provide for liability (i) for breach of

the 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 DGCL (governing distributions to stockholders), or (iv) for any transaction for which a director derives an improper personal benefit. The Restated Certificate of Incorporation provides that any director or officer seeking indemnification shall be indemnified for actions taken in good faith on behalf or for the benefit of the corporation to the fullest extent permitted by the DGCL. The Bylaws provide that any person seeking indemnification may be indemnified to the fullest extent permitted by laws of the state of Delaware.

Chaparral Steel Holdings, Inc. The Certificate of Incorporation of Chaparral Steel Holdings, Inc. provides that a director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. The Certificate of Incorporation and Bylaws provide that any director or officer seeking indemnification shall be indemnified to the fullest extent permitted by the laws of the state of Delaware.

Athens Brick Company. The Bylaws of Athens Brick Company provide that any director, officer or employee seeking indemnification shall be indemnified unless he is adjudged in the action brought against him to be liable for negligence or misconduct in the performance of his duties as director, officer or employee. If the action is settled, however, the right of indemnification shall be applicable only if a majority of the Board of Directors determines that the director, officer or employee seeking indemnification had not been substantially derelict in the performance of his duties as charged in the action.

Brookhollow Corporation. The Certificate of Incorporation of Brookhollow Corporation provides that any director, officer or employee seeking indemnification shall be indemnified unless he is adjudged in the action brought against him to be liable for negligence or misconduct in the performance of his duties as director, officer or employee. If the action is settled, however, the right of indemnification shall be applicable only if a majority of the Board of Directors determines that the director, officer or employee seeking indemnification had not been substantially derelict in the performance of his duties as charged in the action.

Chaparral Steel Texas, Inc. The Certificate of Incorporation of Chaparral Steel Texas, Inc. provides that a director of such corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. The Bylaws provide that any director or officer seeking indemnification shall be indemnified to the fullest extent permitted by the laws of the state of Delaware.

Chaparral (Virginia) Inc. The Certificate of Incorporation of Chaparral (Virginia) Inc. provides that a director of such corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. It does provide for liability (i) for breach of the 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 DGCL (governing distributions to stockholders), or (iv) for any transaction for which a director derives an improper personal benefit. The Bylaws provide that any person seeking indemnification may be indemnified to the fullest extent permitted by the laws of the state of Delaware.

Creole Corporation. The Certificate of Incorporation of Creole Corporation provides that any director or officer seeking indemnification shall be indemnified for actions taken in good faith on behalf or for the benefit of the corporation to the fullest extent permitted by the laws of the state of Delaware. The Bylaws provide that any director, officer or employee seeking indemnification shall be indemnified unless he is adjudged in the action brought against him to be liable for negligence or misconduct in the performance of his duties as director, officer or employee. If the action is settled, however, the right of indemnification shall be applicable only if a majority of the Board of Directors determines that the director, officer or employee seeking indemnification had not been substantially derelict in the performance of his duties as charged in the action.

Riverside Cement Holdings Company. Neither the Certificate of Incorporation nor the Bylaws of Riverside Cement Holdings Company contain any provisions dealing with the indemnification of officers and directors.

Texas Industries Holdings, Inc. The Certificate of Incorporation and Bylaws of Texas Industries Holdings, Inc. provide that any director or officer seeking indemnification shall be indemnified to the fullest extent permitted by the laws of the state of Delaware.

TXI California, Inc. The Certificate of Incorporation of TXI California, Inc. provides that a director of such corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. It does provide for liability (i) for breach of the 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 DGCL (governing distributions to stockholders), or (iv) for any transaction for which a director derives an improper personal benefit. The Bylaws provide that any person seeking indemnification may be indemnified to the fullest extent permitted by the laws of the state of Delaware.

TXI Cement Company. Neither the Certificate of Incorporation nor the Bylaws of TXI Cement Company contain any provisions dealing with the indemnification of officers and directors.

TXI Corp. The Certificate of Incorporation of TXI Corp. provides that a director of such corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. The Certificate of Incorporation and Bylaws provide that any director or officer seeking indemnification shall be indemnified to the fullest extent permitted by the laws of the state of Delaware.

TXI Riverside Inc. The Certificate of Incorporation of TXI Riverside Inc. provides that a director of such corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. It does provide for liability (i) for breach of the 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 DGCL (governing distributions to stockholders), or (iv) for any transaction for which a director derives an improper personal benefit. The Bylaws provide that any person seeking indemnification may be indemnified to the fullest extent permitted by the laws of the state of Delaware.

Delaware Statutory Trusts — Chaparral Steel Trust; Texas Industries Trust and TXI Operating Trust

Section 3817 of the Delaware Statutory Trust Act states that statutory trusts shall have the power to indemnify and hold harmless any trustee or beneficial owner or other person from and against all claims and demands, subject to standards and restrictions set forth in the governing instrument of such statutory trust. It also expressly states that the absence of provisions in the governing instrument of a statutory trust addressing indemnification does not deprive any trustee or beneficial owner or other person of the right to indemnity.

The Trust Agreements of Chaparral Steel Trust, Texas Industries Trust and TXI Operating Trust provide that no trustee or officer of such trust shall be liable to the trust or any trustee or the beneficiary for any act or omission, nor shall any such trustee be held to personal liability in connection with the affairs of the trust, except for those arising from his bad faith, willful misfeasance, gross negligence or reckless disregard of his duties. The Trust Agreements provide that trustees and officers shall be indemnified against expenses and liabilities incurred by such person as a result of his service in such capacity to the trust. Trustees and officers are not entitled to indemnification, however, with respect to any action initiated by a trustee or officer of the trust. The Trust Agreements also provide that expenses incurred by a trustee or officer seeking indemnification shall be paid by the trust in advance of the final disposition of the action, suit or proceeding. However, as a condition to any such advance, the trust must receive an undertaking by or on behalf of such person to repay the amounts advanced if a final adjudication is made by a court of competent jurisdiction that such person was not entitled to indemnification.

Delaware Limited Partnerships — Chaparral Steel Midlothian, LP; TXI Operations, LP and TXI Star Recycling, LP

Section 18-108 of the Delaware Revised Limited Partnership Act provides that Delaware limited partnerships shall have the power to indemnify and hold harmless any partner or other person from and against all claims and demands, subject to standards and restrictions set forth in the partnership agreement of such limited partnership.

The Agreements of Limited Partnership of Chaparral Steel Midlothian, LP; TXI Operations, LP and TXI Star Recycling, LP provide that, to the extent the partnership has assets legally available for that purpose, the partnership will indemnify and hold harmless the general partner and any partner, shareholder, director or officer from and against losses incurred in connection with the business of the partnership, except to the extent that such loss is due to the person’s gross negligence, willful misconduct, knowing violation of law or breach of fiduciary responsibilities to the partnership or the limited partner.

California Corporations — Pacific Custom Materials, Inc. and Partin Limestone Products, Inc.

Under Section 317 of the California Corporations Code (the “CCC”), a corporation may indemnify a director, officer, employee or agent of a corporation against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred if he acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In the case of an action brought by or in the right of a corporation, the corporation may indemnify a director, officer, employee or agent of the corporation against expenses (including attorneys’ fees) actually and reasonably incurred if he acted in good faith and in a manner reasonably believed to be in the best interests of the corporation, except that no indemnification shall be made: (1) in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless a court finds that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper, (2) for amounts paid in settling or otherwise disposing of a pending action without court approval, and (3) for expenses incurred in defending a pending action which is settled or otherwise disposed of without court approval.

Pacific Custom Materials. The Articles of Incorporation and the Bylaws of Pacific Custom Materials, Inc. state that the liability of directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. The Bylaws provide that the corporation shall indemnify any person seeking indemnity in the amount and in the manner provided by the CCC. The Bylaws further provide that if the person is successful on the merits, the corporation shall indemnify him for expenses actually and reasonably incurred. Unless indemnification is require because of the person’s successful defense on the merits, the Bylaws require that a determination of entitlement to indemnification be made in the manner proscribed by the Bylaws of the corporation.

Partin Limestone Products, Inc. Neither the Certificate of Incorporation nor the Bylaws of Partin Limestone Products, Inc. contain any provisions dealing with the indemnification of officers and directors.

Section 16401 of the California Corporations Code states that a partnership shall reimburse a partner for payments made and indemnify a partner for liabilities incurred by the partner in the ordinary course of the business of the partnership or for the preservation of its business or property.

The Joint Venture Agreement of Riverside Cement Company and the amendments thereto do not contain any provisions dealing with the indemnification of partners and officers of the partnership.

Texas Corporations — Brook Hollow Properties, Inc.; Southwestern Financial Corporation; TXI Transportation Company; TXI Aviation, Inc. and TXI Power Company

Under Art. 2.02-1 of the Texas Business Corporation Act, subject to the procedures and limitations stated therein, a corporation may indemnify any person who was, is or is threatened to be made a named defendant or respondent in a proceeding because the person is or was a director or officer against judgments, penalties (including excise and similar taxes), fines, settlements and reasonable expenses (including court costs and attorneys’ fees) actually incurred by the person in connection with the proceeding. Art. 2.02-1 requires a corporation to indemnify a director or officer against reasonable expenses (including court costs and attorneys’ fees) incurred by him in connection with a proceeding in which he is a named defendant or respondent because he is or was a director or officer if he has been wholly successful, on the merits or otherwise, in the defense of the proceeding. The statute provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise.

Brook Hollow Properties, Inc. and TXI Transportation Company. The Certificates of Incorporation and the Bylaws of Brook Hollow Properties, Inc. and TXI Transportation Company do not contain any provisions dealing with the indemnification of officers and directors.

Southwestern Financial Corporation; TXI Aviation, Inc. and TXI Power Company. The Bylaws of Southwestern Financial Corporation; TXI Aviation, Inc. and TXI Power Company provide that any person seeking indemnification may be indemnified to the fullest extent permitted by the laws of the state of Texas.

Under Section 13.1-697 of Chapter 9 of Title 13.1 of the Code of Virginia, a corporation may indemnify an individual made a party to a proceeding because he is or was a director against liability incurred in the proceeding if he conducted himself in good faith; and he believed: that his conduct was in its best interests of the corporation or at least not opposed to its best interests; and in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. In a proceeding by or in the right of the corporation, no indemnification shall be made in respect of any matter as to which an officer or director is adjudged to be liable to the corporation, unless the court in which the proceeding took place determines that, despite such liability, such person is reasonably entitled to indemnification in view of all the relevant circumstances. In any other proceeding, no indemnification shall be made if the director or officer is adjudged liable to the corporation on the basis that he improperly received personal benefit. Corporations are given the power to make any other or further indemnity, including advancement of expenses, to any director or officer that may be authorized by the articles of incorporation or any bylaw made by the shareholders, or any resolution adopted, before or after the event, by the shareholders, except an indemnity against willful misconduct or a knowing violation of the criminal law. Unless limited by its articles of incorporation, indemnification of a director or officer is mandatory when he entirely prevails in the defense of any proceeding to which he is a party because he is or was a director or officer.

Article ten of Chapter 9 of Title 13.1 of the Code of Virginia permits a Virginia corporation to indemnify any director or officer for reasonable expenses incurred in any legal proceeding in advance of final disposition of the proceeding, if the director or officer furnishes the corporation a written statement of his good faith belief that he has met the standard of conduct prescribed by the Code, and a determination is made by the board of directors that such standard has been met.

Neither the Certificate of Incorporation nor the Bylaws of Brookhollow of Virginia, Inc. contain any provisions dealing with the indemnification of officers and directors.

Section 83 of the Louisiana Business Corporation Law or the LBCL, provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another business, foreign or nonprofit corporation, partnership, joint venture or other enterprise. The indemnity may include expenses, including attorney fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 83 further provides that a Louisiana corporation may indemnify officers and directors in an action by or in the right of the corporation under the same conditions except that no indemnification is permitted without judicial approval if the director or officer shall have been adjudged to be liable for willful or intentional misconduct in the performance of his duty to the corporation. Where an officer or director is successful on the merits or otherwise in any defense of any action referred to above or any claim therein, the corporation must indemnify him against such expenses that such officer or directly actually incurred. Section 83 permits a corporation to pay expenses incurred by the officer or director in defending an action, suit or proceeding in advance of the final disposition thereof if approved by the board of directors.

The Bylaws of Brookhollow of Alexandria, Inc. provide that any person seeking indemnification may be indemnified to the fullest extent permitted by the laws of the state of Louisiana.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the an entity pursuant to the foregoing provisions, or otherwise, such entities have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

The information required by this Item 21(a) is set forth in the Index to Exhibits accompanying this Registration Statement and is incorporated herein by reference.


	(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:


	(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

	(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

	(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in

the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated by reference in the registration statement.


	(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

	(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b) The registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrants’ annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

(c) 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 foregoing provisions, 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 Act 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 and will be governed by the final adjudication of such issue.

(d) The undersigned registrants hereby undertake to respond to requests for information that are 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.

(e) 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.

Pursuant to the requirements of the Securities Act of 1933, each of the registrants has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on June 25, 2003.


	By:	/s/ ROBERT D. ROGERS



	Robert D. Rogers
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	By:	/s/ TOMMY A. VALENTA



	Tommy A. Valenta
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	By:	TXI CALIFORNIA INC., its general partner

	By:	/s/ MEL G. BREKHUS



	Mel G. Brekhus
	President and Chief Executive Officer


	By:	TXI RIVERSIDE INC., its general partner

	By:	/s/ MEL G. BREKHUS



	Mel G. Brekhus
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	By:	/s/ ROSCOE C. ARMSTRONG



	Roscoe C. Armstrong
	President and Chief Executive Officer


	Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	By:	/s/ JAMES R. MCCRAW



	James R. McCraw
	President and Chief Executive Officer


	Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	By:	/s/ RICHARD M. FOWLER



	Richard M. Fowler
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


	By:	/s/ J. CELTYN HUGHES



	J. Celtyn Hughes
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


*	Filed herewith.

EX-4.5 3 d06928exv4w5.txt EX-4.5 INDENTURE, DATED AS OF JUNE 6, 2003 Exhibit 4.5 EXECUTION COPY - -------------------------------------------------------------------------------- TEXAS INDUSTRIES, INC. 10 1/4% SENIOR NOTES DUE 2011 ------------------------------ INDENTURE Dated as of June 6, 2003 ------------------------------ WELLS FARGO BANK, NATIONAL ASSOCIATION TRUSTEE ------------------------------ - -------------------------------------------------------------------------------- CROSS-REFERENCE TABLE*

- ------------------------- N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. (c)..................................................................................... 12.14 317(a)(1).................................................................................. N.A. (a)(2).................................................................................. N.A. (b)..................................................................................... N.A. 318(a)..................................................................................... N.A. (b)..................................................................................... N.A. (c)..................................................................................... 12.01

TABLE OF CONTENTS
Page ---- ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions............................................................................... 1 Section 1.02. Other Definitions......................................................................... 25 Section 1.03. Incorporation by Reference of Trust Indenture Act......................................... 26 Section 1.04. Rules of Construction..................................................................... 26 ARTICLE TWO THE NOTES Section 2.01. Form and Dating........................................................................... 27 Section 2.02. Execution and Authentication.............................................................. 28 Section 2.03. Methods of Receiving Payments on the Notes................................................ 28 Section 2.04. Registrar and Paying Agent................................................................ 29 Section 2.05. Paying Agent to Hold Money in Trust....................................................... 29 Section 2.06. Holder Lists.............................................................................. 29 Section 2.07. Transfer and Exchange..................................................................... 30 Section 2.08. Replacement Notes......................................................................... 42 Section 2.09. Outstanding Notes......................................................................... 42 Section 2.10. Treasury Notes............................................................................ 42 Section 2.11. Temporary Notes........................................................................... 43 Section 2.12. Cancellation.............................................................................. 43 Section 2.13. Defaulted Interest........................................................................ 43 Section 2.14. CUSIP Numbers............................................................................. 43 ARTICLE THREE REDEMPTION AND OFFERS TO PURCHASE Section 3.01. Notices to Trustee........................................................................ 44 Section 3.02. Selection of Notes to Be Redeemed......................................................... 44 Section 3.03. Notice of Redemption...................................................................... 44 Section 3.04. Effect of Notice of Redemption............................................................ 45 Section 3.05. Deposit of Redemption Price............................................................... 45 Section 3.06. Notes Redeemed in Part.................................................................... 46 Section 3.07. Optional Redemption....................................................................... 46 Section 3.08. Repurchase Offers......................................................................... 47 Section 3.09. Application of Trust Money................................................................ 49
i ARTICLE FOUR COVENANTS Section 4.01. Payment of Notes.......................................................................... 49 Section 4.02. Maintenance of Office or Agency........................................................... 49 Section 4.03. Reports................................................................................... 50 Section 4.04. Compliance Certificate.................................................................... 50 Section 4.05. Taxes..................................................................................... 51 Section 4.06. Stay, Extension and Usury Laws............................................................ 51 Section 4.07. Restricted Payments....................................................................... 51 Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries................. 54 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock................................ 56 Section 4.10. Asset Sales............................................................................... 58 Section 4.11. Transactions with Affiliates.............................................................. 59 Section 4.12. Liens..................................................................................... 60 Section 4.13. Business Activities....................................................................... 60 Section 4.14. Offer to Repurchase upon a Change of Control.............................................. 60 Section 4.15. Limitation on Issuances and Sales of Equity Interests in Restricted Subsidiaries.......... 61 Section 4.16. Designation of Restricted and Unrestricted Subsidiaries................................... 62 Section 4.17. Payments for Consent...................................................................... 63 Section 4.18. Guarantees................................................................................ 64 Section 4.19. Sale and Leaseback Transactions........................................................... 64 Section 4.20. [INTENTIONALLY OMITTED]................................................................... 64 Section 4.21. Suspension of Certain Covenants and Agreements............................................ 64 ARTICLE FIVE SUCCESSORS Section 5.01. Merger, Consolidation or Sale of Assets................................................... 65 Section 5.02. Successor Corporation Substituted......................................................... 66 ARTICLE SIX DEFAULTS AND REMEDIES Section 6.01. Events of Default......................................................................... 66 Section 6.02. Acceleration.............................................................................. 68 Section 6.03. Other Remedies............................................................................ 68 Section 6.04. Waiver of Past Defaults................................................................... 68 Section 6.05. Control by Majority....................................................................... 69 Section 6.06. Limitation on Suits....................................................................... 69 Section 6.07. Rights of Holders of Notes to Receive Payment............................................. 70 Section 6.08. Collection Suit by Trustee................................................................ 70 Section 6.09. Trustee May File Proofs of Claim.......................................................... 70 Section 6.10. Priorities................................................................................ 71 Section 6.11. Undertaking for Costs..................................................................... 71

ii ARTICLE SEVEN TRUSTEE Section 7.01. Duties of Trustee......................................................................... 72 Section 7.02. Certain Rights of Trustee................................................................. 73 Section 7.03. Individual Rights of Trustee.............................................................. 73 Section 7.04. Trustee's Disclaimer...................................................................... 74 Section 7.05. Notice of Defaults........................................................................ 74 Section 7.06. Reports by Trustee to Holders of the Notes................................................ 74 Section 7.07. Compensation and Indemnity................................................................ 74 Section 7.08. Replacement of Trustee.................................................................... 75 Section 7.09. Successor Trustee by Merger, Etc.......................................................... 76 Section 7.10. Eligibility; Disqualification............................................................. 76 Section 7.11. Preferential Collection of Claims Against Company......................................... 76 ARTICLE EIGHT DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.................................. 77 Section 8.02. Legal Defeasance and Discharge............................................................ 77 Section 8.03. Covenant Defeasance....................................................................... 77 Section 8.04. Conditions to Legal or Covenant Defeasance................................................ 78 Section 8.05. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions........................................................................ 79 Section 8.06. Repayment to the Company.................................................................. 80 Section 8.07. Reinstatement............................................................................. 80 ARTICLE NINE AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes....................................................... 81 Section 9.02. With Consent of Holders of Notes.......................................................... 81 Section 9.03. Compliance with Trust Indenture Act....................................................... 83 Section 9.04. Revocation and Effect of Consents......................................................... 83 Section 9.05. Notation on or Exchange of Notes.......................................................... 84 Section 9.06. Trustee to Sign Amendments, Etc........................................................... 84 ARTICLE TEN NOTE GUARANTEES Section 10.01. Guarantee................................................................................ 84 Section 10.02. Limitation on Guarantor Liability........................................................ 85 Section 10.03. Execution and Delivery of Note Guarantee................................................. 86 Section 10.04. Guarantors May Consolidate, Etc., on Certain Terms....................................... 86 Section 10.05. Release of Guarantor..................................................................... 87

iii ARTICLE ELEVEN SATISFACTION AND DISCHARGE Section 11.01. Satisfaction and Discharge............................................................... 87 Section 11.02. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions........................................................................ 88 Section 11.03. Repayment to the Company................................................................. 89 ARTICLE TWELVE MISCELLANEOUS Section 12.01. Trust Indenture Act Controls............................................................. 89 Section 12.02. Notices.................................................................................. 89 Section 12.03. Communication by Holders of Notes with Other Holders of Notes............................ 90 Section 12.04. Certificate and Opinion as to Conditions Precedent....................................... 90 Section 12.05. Statements Required in Certificate or Opinion............................................ 91 Section 12.06. Rules by Trustee and Agents.............................................................. 91 Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders................. 91 Section 12.08. Governing Law............................................................................ 91 Section 12.09. Consent to Jurisdiction.................................................................. 92 Section 12.10. No Adverse Interpretation of Other Agreements............................................ 92 Section 12.11. Successors............................................................................... 92 Section 12.12. Severability............................................................................. 92 Section 12.13. Counterpart Originals.................................................................... 92 Section 12.14. Acts of Holders.......................................................................... 92 Section 12.15. Benefit of Indenture..................................................................... 94 Section 12.16. Table of Contents, Headings, Etc......................................................... 94

EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTATION OF GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE iv INDENTURE dated as of June 6, 2003 among Texas Industries, Inc., a Delaware corporation (the "COMPANY"), the initial Guarantors (as defined below) listed on the signature pages hereto and Wells Fargo Bank, National Association, a national banking association, as trustee. The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its 10 1/4% Senior Notes due 2011 to be issued in one or more series as provided in this Indenture. The initial Guarantors have duly authorized the execution and delivery of this Indenture to provide for a guarantee of the Notes and of certain of the Company's obligations hereunder. All things necessary to make this Indenture a valid agreement of the Company and the initial Guarantors, in accordance with its terms, have been done. The Company, the Guarantors and the Trustee (as defined below) agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined below) of the 10 1/4% Senior Notes due 2011: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. "144A GLOBAL NOTE" means a global note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that shall be issued in a denomination equal to the outstanding principal amount at maturity of the Notes sold in reliance on Rule 144A. "ACCOUNTS RECEIVABLE FACILITY" means the accounts receivable purchase arrangements established pursuant to the Receivables Purchase Agreement dated as of March 11, 1999 among the Company, TXI Receivables Corporation, the Financial Institutions listed on Schedule A thereto, Falcon Asset Securitization Corporation (together with the Financial Institutions, the "PURCHASERS") and the First National Bank of Chicago, as Agent for the Purchasers, including any related notes, Guarantees, documents, instruments and agreements executed in connection therewith. "ACQUIRED DEBT" means, with respect to any specified Person: (i) Indebtedness of any other Person existing at the time such other Person is merged with or into, or becomes a Subsidiary of, such specified Person, whether or not such Indebtedness is Incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "ADDITIONAL NOTES" means an unlimited maximum aggregate principal amount of Notes (other than the Notes issued on the date hereof) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof. "AFFILIATE" of any specified Person means (1) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (2) any executive officer or director of such specified Person. For purposes of this definition, "control," as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. "AGENT" means any Registrar, Paying Agent or co-registrar. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "ASSET SALE" means: (1) the sale, lease, conveyance or other disposition of any property or assets; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole shall be governed by Section 4.14 and/or Section 5.01 and not by Section 4.10; and (2) the issuance of Equity Interests by any of the Company's Restricted Subsidiaries or the sale by the Company or any Restricted Subsidiary of Equity Interests in any of its Subsidiaries. Notwithstanding the preceding, the following items shall be deemed not to be Asset Sales: (1) any single transaction or series of related transactions that involves assets having a fair market value of less than $2.0 million; (2) a transfer of assets between or among the Company and its Restricted Subsidiaries; (3) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (4) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business, including sales of accounts receivable and related assets under any Qualified Receivables Transaction; (5) the sale or other disposition of Cash Equivalents; (6) a Restricted Payment that is permitted by Section 4.07; and (7) a Permitted Investment. 2 "ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning. "BOARD OF DIRECTORS" means: (1) with respect to a corporation, the board of directors of the corporation; and (2) with respect to any other Person, the board or committee of such Person serving a similar function. "BOARD RESOLUTION" means a copy of a resolution 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 on the date of such certification. "BROKER-DEALER" has the meaning set forth in the Registration Rights Agreement. "BUSINESS DAY" means any day other than a Legal Holiday. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and 3 (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH EQUIVALENTS" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of twelve months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having the highest rating obtainable from Moody's or S&P and in each case maturing within six months after the date of acquisition; and (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition. "CHANGE OF CONTROL" means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act); (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (3) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) becomes the ultimate Beneficial Owner, directly or indirectly, of 35% or more of the voting power of the Voting Stock of the Company; (4) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or 4 (5) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where (A) the Voting Stock of the Company outstanding immediately prior to such transaction remains outstanding and constitutes or is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person that constitutes a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance) and (B) immediately after such transaction, no "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) becomes, directly or indirectly, the beneficial owner (as defined above) of 35% or more of the voting power of the Voting Stock of the Company. "CLEARSTREAM" means Clearstream Banking, societe anonyme, Luxembourg (formerly Cedel Bank, societe anonyme), and any successor thereto. "CLOSING DATE" means June 6, 2003. "COMPANY" means Texas Industries, Inc. until a successor replaces it pursuant to Section 5.01 hereof and thereafter means the successor. "CONSOLIDATED CASH FLOW" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (1) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (2) Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that any such Fixed Charges were deducted in computing such Consolidated Net Income; plus (3) depreciation, depletion, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Subsidiaries for such period to the extent that such depreciation, depletion, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus (4) net losses of any Unrestricted Subsidiary or any other Person that is not a Restricted Subsidiary of the Company and is accounted for by the equity method of accounting, to the extent that such net losses were deducted in computing such Consolidated Net Income; minus 5 (5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue consistent with past practice and any items that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation, depletion and amortization and other non-cash expenses of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute Consolidated Cash Flow of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended, distributed or lent to the Company by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "CONSOLIDATED NET INCOME" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary thereof; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that both the declaration or payment of dividends or similar distributions and the making of loans by that Restricted Subsidiary of that Net Income are not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its equityholders; (3) the Net Income of any Person acquired during the specified period for any period prior to the date of such acquisition shall be excluded; (4) the cumulative effect of a change in accounting principles shall be excluded; and (5) the Net Income (but not loss) of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the specified Person or one of its Subsidiaries. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of such Board of Directors on the date of this Indenture; or 6 (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "CREDIT AGREEMENT" means the Credit Agreement dated as of the date hereof by and among the Company and the Company's Subsidiaries party thereto, Bank of America, N.A., as Administrative Agent, Banc of America Securities LLC, as Sole Lead Arranger and Book Manager, and the other Lenders named therein presently providing for up to $200.0 million of revolving credit borrowings, including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced, decreased, increased or refinanced from time to time, regardless of whether such amendment, modification, renewal, refunding, replacement, decrease, increase or refinancing is with the same financial institutions or otherwise. "CREDIT FACILITIES" means, one or more debt or receivables facilities (including, without limitation, the Credit Agreement and the Accounts Receivable Facility) or commercial paper facilities, in each case with banks, vendors or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced, decreased, increased or refinanced in whole or in part from time to time. "CUSTODIAN" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "DEFAULT" means any event that is, or with the passage of time or the giving of notice or both, would be, an Event of Default. "DEFINITIVE NOTE" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.07 hereof, substantially in the form of Exhibit A hereto, and such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "DEPOSITARY" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.04 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is one year after the date on 7 which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07. The term "Disqualified Stock" shall also include any options, warrants or other rights that are convertible into Disqualified Stock or that are redeemable at the option of the holder, or required to be redeemed, prior to the date that is one year after the date on which the Notes mature. "DOMESTIC SUBSIDIARY" means any Restricted Subsidiary of the Company other than a Subsidiary that is (1) a "controlled foreign corporation" under Section 957 of the Internal Revenue Code or (2) a Subsidiary of any such controlled foreign corporation. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EQUITY OFFERING" means a public or private offer and sale of Capital Stock (other than Disqualified Stock) of the Company. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" means the Notes issued in the Exchange Offer in accordance with Section 2.07(f) hereof. "EXCHANGE OFFER" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "EXISTING INDEBTEDNESS" means the aggregate principal amount of Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement and the Accounts Receivable Facility) in existence on the date of this Indenture. "FAIR MARKET VALUE" means the price that would be paid in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution. "FIXED CHARGES" means, with respect to any specified Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest 8 component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges Incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations; plus (2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus (3) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus (4) any accounts receivable facility fees or discounts paid under the Accounts Receivable Facility or any other receivables financing; plus (5) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock or preferred stock of such Person or any of its Restricted Subsidiaries that are not tax deductible for such Person or such Restricted Subsidiary, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP; plus (6) all dividends, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock or preferred stock of such Person or any of its Restricted Subsidiaries that are tax deductible for such Person or such Restricted Subsidiary, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company. "FIXED CHARGE COVERAGE RATIO" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Subsidiaries Incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "CALCULATION DATE"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such Incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: 9 (1) acquisitions and dispositions of business entities or property and assets constituting a division or line of business of any Person that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act, but without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income; (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP shall be excluded; (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges shall not be obligations of the specified Person or any of its Subsidiaries following the Calculation Date; and (4) consolidated interest expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Calculation Date (taking into account any interest rate option, swap, cap or similar agreement applicable to such Indebtedness if such agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the opinions and pronouncements of the Public Company Accounting Oversight Board and in the statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Closing Date. All ratios and computations contained or referred to in this Indenture shall be computed in conformity with GAAP and shall be made without giving effect to the write off of debt issuance costs or payment of consent fees or premiums on or prior to the date of this Indenture. "GLOBAL NOTE LEGEND" means the legend set forth in Section 2.07(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "GLOBAL NOTES" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A hereto, issued in accordance with Section 2.01, 2.07(b), 2.07(d) or 2.07(f) of this Indenture. "GUARANTEE" means, as to any Person, a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or 10 reimbursement agreements in respect thereof, of all or any part of any Indebtedness of another Person. "GUARANTORS" means: (1) each direct or indirect Domestic Subsidiary of the Company on the date of this Indenture, other than TXI Receivables Corporation and TXI Capital Trust I; and (2) any other subsidiary that executes a Note Guarantee in accordance with the provisions of this Indenture; and their respective successors and assigns until released from their obligations under their Note Guarantees and this Indenture in accordance with the terms of this Indenture. "HEDGING OBLIGATIONS" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and other agreements or arrangements designed for the purpose of fixing, hedging or swapping interest rate risk; (2) commodity swap agreements, commodity option agreements, forward contracts and other agreements or arrangements designed for the purpose of fixing, hedging or swapping commodity price risk; and (3) foreign exchange contracts, currency swap agreements and other agreements or arrangements designed for the purpose of fixing, hedging or swapping foreign currency exchange rate risk. "HOLDER" means a Person in whose name a Note is registered. "INCUR" means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become directly or indirectly liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness; provided that (1) any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company shall be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary of the Company and (2) neither the accrual of interest nor the accretion of original issue discount nor the payment of interest in the form of additional Indebtedness (to the extent provided for when the Indebtedness on which such interest is paid was originally issued) shall be considered an Incurrence of Indebtedness. "INDEBTEDNESS" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent, in respect of: (1) borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof), but excluding obligations with 11 respect to letters of credit (including trade letters of credit) securing obligations described in clause (5) below entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement; provided, however, that the foregoing exclusion shall not apply to letters of credit outstanding under the Credit Agreement; (3) banker's acceptances; (4) Capital Lease Obligations and Attributable Debt; (5) the balance deferred and unpaid of the purchase price of any property which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto, except any such balance that constitutes an accrued expense or trade payable; (6) Hedging Obligations, other than Hedging Obligations that are Incurred in the ordinary course of business for the purpose of fixing, hedging or swapping interest rate, commodity price or foreign currency exchange rate risk (or to reverse or amend any such agreements previously made for such purposes), and not for speculative purposes, and that do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in interest rates, commodity prices or foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; or (7) Disqualified Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued dividends. In addition, the term "Indebtedness" includes (x) for purposes of Article Four, any Obligations Incurred in connection with the Accounts Receivable Facility or any other receivables financing, (y) all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person), provided that the amount of such Indebtedness 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, and (z) to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value shall be determined in good faith by the Board of Directors of the issuer of such Disqualified Stock. The amount of any Indebtedness outstanding as of any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, and shall be: 12 (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (2) the principal amount thereof or, in the case of the Accounts Receivable Facility or any other receivables financing, an equivalent amount, together with any interest or Accounts Receivable Facility fees thereon that are more than 30 days past due, in the case of any other Indebtedness; provided that Indebtedness shall not include: (i) any liability for federal, state, local or other taxes, (ii) performance, surety or appeal bonds provided in the ordinary course of business, and letters of credit supporting any such bonds or provided to serve the purpose of any such bonds to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement, or (iii) agreements providing for indemnification, adjustment of purchase price or similar obligations, or Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), so long as the principal amount does not exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Note through a Participant. "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "INVESTMENT GRADE" means (1) BBB- or above, in the case of S&P (or its equivalent under any successor Rating Categories of S&P) and Baa3 or above, in the case of Moody's (or its equivalent under any successor Rating Categories of Moody's), or (2) the equivalent in respect of the Rating Categories of any Rating Agencies. "INVESTMENTS" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans or other extensions of credit (including Guarantees, but excluding advances to customers or suppliers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of the Company or its Restricted 13 Subsidiaries and endorsements for collection or deposit arising in the ordinary course of business), advances (excluding commission, travel and similar advances to officers and employees made consistent with past practices), capital contributions, purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Investments in such Restricted Subsidiary not sold or disposed of in an amount determined as provided in Section 4.07 hereof. The acquisition by the Company or any Restricted Subsidiary of the Company of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in Section 4.07 hereof. "ISSUER" means the Company. "LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking institutions in The City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "LEGENDED REGULATION S GLOBAL NOTE" means a global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount at maturity of the Notes initially sold in reliance on Rule 903 of Regulation S. "LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. 14 "MAKE-WHOLE PREMIUM" means, with respect to a Note on any date of redemption, the greater of (x) 1% of the principal amount of such Note or (y) the excess of (A) the present value at such date of redemption of (1) the redemption price of such Note at June 15, 2007 (such redemption price as set forth under Section 3.07) plus (2) all remaining required interest payments (exclusive of interest accrued and unpaid to the date of redemption) due on such Note through June 15, 2007, computed using semi-annual discounting and a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the then outstanding principal amount of such Note. "MOODY'S" means Moody's Investors Service, Inc. "NET INCOME" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends (other than reductions in respect of preferred stock dividends on the 5.5% Shared Preference Redeemable Securities of TXI Capital Trust I outstanding on the date of this Indenture), excluding, however: (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any sales of assets outside the ordinary course of business of the Company and its Restricted Subsidiaries; or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness or other liabilities, secured by a Lien on the asset or assets that were the subject of such Asset Sale, or required to be paid as a result of such sale, and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "NON-U.S. PERSON" means a Person who is not a U.S. Person. "NOTE GUARANTEE" means a Guarantee of the Notes pursuant to this Indenture. "NOTES" means the 10 1/4% Senior Notes due 2011 of the Company issued on the date hereof and any Additional Notes, including any Exchange Notes. The Notes and the Additional Notes, if any, shall be treated as a single class for all purposes under this Indenture. 15 "OBLIGATIONS" means any principal (or, in the case of the Accounts Receivable Facility or any other receivables financing, an equivalent amount), interest, penalties, fees (including accounts receivable facility fees or discounts), indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "OFFERING" means the offering of the Notes by the Company. "OFFERING MEMORANDUM" means the offering memorandum of the Company for the offering of the Notes, dated May 30, 2003. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by at least two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.05 hereof. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee that meets the requirements of Section 12.05 hereof. "PARTICIPANT" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and with respect to DTC, shall include Euroclear and Clearstream). "PERMITTED BUSINESS" means any business conducted or proposed to be conducted (as described in the Offering Memorandum) by the Company and its Restricted Subsidiaries on the date of this Indenture and other businesses reasonably related or ancillary thereto. "PERMITTED INVESTMENTS" means: (1) any Investment in the Company or in a Restricted Subsidiary of the Company that is a Guarantor; (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of the Company and a Guarantor; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Guarantor; 16 (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10; (5) Investments to the extent acquired in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (6) Hedging Obligations that are Incurred in the ordinary course of business for the purpose of fixing, hedging or swapping interest rate, commodity price or foreign currency exchange rate risk (or to reverse or amend any such agreements previously made for such purposes), and not for speculative purposes, and that do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in interest rates, commodity prices or foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (7) other Investments in any Person (other than a Person that controls the Company) having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (7) since the date of this Indenture, not to exceed 10% of the Tangible Assets of the Company and its Restricted Subsidiaries (determined as of the end of the most recent fiscal quarter of the Company), plus, to the extent that any Investment made pursuant to this clause (7) since the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (a) the cash return of capital with respect to such Investment (less the cost of disposition, if any) and (b) the initial amount of such Investment; provided that, at the time such Investment is made pursuant to this clause (7) and after giving pro forma effect thereto as if such Investment had been made at the beginning of the applicable four-quarter period, the Company would have been permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof; (8) stock, obligations or securities received in satisfaction of judgments; and (9) Investments in a Receivables Subsidiary in connection with the Accounts Receivable Facility or any Qualified Receivables Transaction. "PERMITTED LIENS" means: (1) Liens on the assets of the Company and any Guarantor securing Indebtedness (and all Obligation related thereto) Incurred under Section 4.09(b)(i); (2) Liens in favor of the Company or any Restricted Subsidiary that is a Guarantor; (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company or at the time such Person becomes a Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such transaction 17 and do not extend to any other assets of the Company or any Restricted Subsidiary (other than additions and accessions to such property of such Person); (4) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such acquisition and do not extend to any property other than the property so acquired by the Company or the Restricted Subsidiary (and additions and accessions thereto); (5) Liens existing on the date of this Indenture; (6) Liens on cash or Cash Equivalents securing Hedging Obligations of the Company or any of its Restricted Subsidiaries that do not constitute Indebtedness or securing letters of credit that support such Hedging Obligations; (7) Liens securing Permitted Refinancing Indebtedness (and all Obligation related thereto); provided, that such Liens do not extend to or cover any property or assets other than the property or assets that secure the Indebtedness being refinanced (and additions and accessions to such property or assets); (8) Liens for taxes, assessments and governmental charges not yet delinquent or being contested in good faith and for which adequate reserves have been established to the extent required by GAAP; (9) carriers, warehousemen's, mechanics', worker's, materialmen's, operators', landlords' or similar Liens arising in the ordinary course of business; (10) Liens incurred or deposits made in the ordinary course of business in connection with worker's compensation, unemployment insurance or other social security obligations; (11) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of Indebtedness), leases, or other similar obligations arising in the ordinary course of business; (12) survey exceptions, encumbrances, easements or reservations of, or rights of others for, rights of way, zoning or other restrictions as to the use of properties, and defects in title which, in the case of any of the foregoing, were not incurred or created to secure the payment of Indebtedness, and which in the aggregate do not materially adversely affect the value of such properties or materially impair the use for the purposes of which such properties are held by the Company or any Restricted Subsidiaries; (13) judgment and attachment Liens not giving rise to an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings and for which adequate reserves have been made; (14) Liens, deposits or pledges to secure public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds or obligations; and Liens, 18 deposits or pledges in lieu of such bonds or obligations, or to secure such bonds or obligations, or to secure letters of credit in lieu of or supporting the payment of such bonds or obligations; (15) Liens on property or assets used to defease Indebtedness that was not Incurred in violation of this Indenture; (16) Liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of the Company or any Subsidiary on deposit with or in possession of such bank; (17) purchase money Liens granted in connection with the acquisition of assets in the ordinary course of business, provided, that (A) such Liens attach only to the property so acquired with the purchase money indebtedness secured thereby (and to additions and accessions thereto) and (B) the principal amount of the Indebtedness secured by such Liens does not exceed 100% of the purchase price of such assets; (18) any interest or title of a lessor in the property subject to any lease; and (19) Liens (not otherwise permitted hereunder) with respect to obligations that do not exceed $15.0 million at any one time outstanding. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of any reasonably determined premium necessary to accomplish such refinancing and such reasonable expenses incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes or the Note Guarantees, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and 19 (4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is pari passu in right of payment with the Notes or any Note Guarantees, such Permitted Refinancing Indebtedness is pari passu with, or subordinated in right of payment to, the Notes or such Note Guarantees; and (5) such Indebtedness is Incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.07(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of transactions that may be entered into by the Company or any of its Restricted Subsidiaries pursuant to which the Company or such Restricted Subsidiary may sell, convey or otherwise transfer to a Receivables Subsidiary accounts receivable (whether now existing or arising in the future) and any assets related thereto, including without limitation, all collateral securing such accounts receivable, all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and all other assets that are customarily transferred, or in respect of which security interests are customarily granted, in connection with an asset securitization transaction involving accounts receivable and pursuant to which such Receivables Subsidiary may sell, convey or otherwise transfer interests in such accounts receivable and related assets to any Person other than an Affiliate of the Company; provided that: (1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of a Receivables Subsidiary: (a) is guaranteed by the Company or any Restricted Subsidiary of the Company (excluding guarantees of obligations pursuant to Standard Securitization Undertakings), (b) is recourse to or obligates the Company or any Restricted Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings, or (c) subjects any property or asset of the Company or any Restricted Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction of obligations incurred in such transactions, other than pursuant to Standard Securitization Undertakings; 20 (2) neither the Company nor any Restricted Subsidiary of the Company has any material contract, agreement, arrangement or understanding with a Receivables Subsidiary other than on terms no less favorable to the Company or any Restricted Subsidiary of the Company than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing accounts receivable; provided that all of the agreements, arrangements and understandings entered into by the Company or any Restricted Subsidiary with a Receivables Subsidiary in connection with any transaction or series of transactions shall be considered as a whole for purposes of determining compliance with this clause (2), and (3) neither the Company nor any Restricted Subsidiary of the Company (other than such Receivables Subsidiary) has any obligation to maintain or preserve the financial condition of a Receivables Subsidiary or cause such entity to achieve certain levels of operating results. "RATING AGENCIES" means (1) S&P and Moody's or (2) if S&P or Moody's or both of them are not making ratings publicly available, a nationally recognized U.S. rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody's or both, as the case may be. "RATING CATEGORY" means (1) with respect to S&P, any of the following categories (any of which may include a "+" or "--": AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories), (2) with respect to Moody's, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories), and (3) the equivalent of any such categories of S&P or Moody's used by another Rating Agency, if applicable. "RECEIVABLES SUBSIDIARY" means (a) TXI Receivables Corporation and (b) any other special purpose wholly owned subsidiary of the Company created in connection with the transactions contemplated by a Qualified Receivables Transaction, which Subsidiary engages in no activities other than those incidental to such Qualified Receivables Transaction and which is designated as a Receivables Subsidiary by the Company's Board of Directors. Any such designation by the Board of Directors shall be evidenced by filing with the Trustee a Board Resolution giving effect to such designation and an Officers' Certificate certifying, to the best of such officers' knowledge and belief after consulting with counsel, such designation, and the transactions in which the Receivables Subsidiary will engage, comply with the requirements of the definition of Qualified Receivables Transaction. For purposes of the definition of "Unrestricted Subsidiary," the making of Standard Securitization Undertakings by the Company or any of its Restricted Subsidiaries shall not be deemed inconsistent with qualifying as an Unrestricted Subsidiary. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of the date hereof, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. 21 "REGULATION S" means Regulation S promulgated under the Securities Act. "REGULATION S GLOBAL NOTE" means a Legended Regulation S Global Note or a Unlegended Regulation S Global Note, as appropriate. "REPLACEMENT ASSETS" means (1) non-current tangible assets that will be used or useful in a Permitted Business or (2) substantially all the assets of a Permitted Business or a majority of the Voting Stock of any Person engaged in a Permitted Business that will become on the date of acquisition thereof a Restricted Subsidiary. "RESPONSIBLE OFFICER," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private Placement Legend. "RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private Placement Legend. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED PERIOD" means the 40-day restricted period as defined in Regulation S. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "RULE 144" means Rule 144 promulgated under the Securities Act. "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 903" means Rule 903 promulgated under the Securities Act. "RULE 904" means Rule 904 promulgated the Securities Act. "S&P" means Standard & Poor's Credit Market Services. "SALE AND LEASEBACK TRANSACTION" means, with respect to any Person, any transaction involving any of the assets or properties of such Person whether now owned or hereafter acquired, whereby such Person sells or transfers such assets or properties and then or thereafter leases such assets or properties or any part thereof or any other assets or properties which such Person intends to use for substantially the same purpose or purposes as the assets or properties sold or transferred. 22 "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would constitute a "significant subsidiary" within the meaning of Article 1 of Regulation S-X of the Securities Act. "STANDARD SECURITIZATION UNDERTAKINGS" means representations, warranties, covenants and indemnities entered into by the Company or any Restricted Subsidiary of the Company which, in the good faith judgment of the Board of Directors of the Company, are reasonably customary in accounts receivable transactions. "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "SUBSIDIARY" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock 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 such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "TANGIBLE ASSETS" means the total amount of assets of the Company and its Restricted Subsidiaries (less applicable depreciation, depletion, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most recent available quarterly or annual consolidated balance sheet of the Company and its Restricted Subsidiaries, prepared in conformity with GAAP. "TIA" means the Trust Indenture Act of 1939, as in effect on the date on which this Indenture is qualified under the TIA. "TREASURY RATE" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the 23 most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days prior to the date fixed for prepayment (or, if such Statistical Release is no longer published, any publicly available source for similar market data)) most nearly equal to the then remaining term of the Notes to June 15, 2007, provided, however, that if the then remaining term to June 15, 2007 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the then remaining term of the Notes to June 15, 2007 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "TRUSTEE" means Wells Fargo Bank, National Association, a national banking association, until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "UNLEGENDED REGULATION S GLOBAL NOTE" means a permanent global Note in the form of Exhibit A hereto bearing the Global Note Legend, deposited with or on behalf of and registered in the name of the Depositary or its nominee and issued upon expiration of the Restricted Period. "UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "UNRESTRICTED GLOBAL NOTE" means a permanent Global Note substantially in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes, and that does not bear the Private Placement Legend. "UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution in compliance with Section 4.16 hereof and any Subsidiary of such Subsidiary. "UNSUBORDINATED INDEBTEDNESS" of a Person means any Indebtedness of such Person, unless such Indebtedness is contractually subordinate or junior in right of payment of principal, premium or interest to any other Indebtedness of such Person. "U.S. PERSON" means a U.S. person as defined in Rule 902(o) under the Securities Act. "VOTING STOCK" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: 24 (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares or Investments by foreign nationals mandated by applicable law) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. Section 1.02. Other Definitions.
DEFINED IN TERM SECTION - ---- ------- "AFFILIATE TRANSACTION".................................................... 4.11 "ASSET SALE OFFER"......................................................... 4.10 "AUTHENTICATION ORDER"..................................................... 2.02 "CHANGE OF CONTROL OFFER".................................................. 4.14 "CHANGE OF CONTROL PAYMENT"................................................ 4.14 "CHANGE OF CONTROL PAYMENT DATE"........................................... 4.14 "COVENANT DEFEASANCE"...................................................... 8.03 "DTC"...................................................................... 2.01 "EVENT OF DEFAULT"......................................................... 6.01 "EXCESS PROCEEDS".......................................................... 4.10 "INSTITUTIONAL ACCREDITED INVESTOR"........................................ 2.07 "LEGAL DEFEASANCE"......................................................... 8.02 "OFFER AMOUNT"............................................................. 3.08 "OFFER PERIOD"............................................................. 3.08 "OFFSHORE TRANSACTION"..................................................... 2.07 "PAYING AGENT"............................................................. 2.04 "PAYMENT DEFAULT".......................................................... 6.01 "PERMITTED DEBT"........................................................... 4.09 "PURCHASE DATE"............................................................ 3.08 "REGISTRAR"................................................................ 2.04 "RELATED PROCEEDINGS"...................................................... 12.09 "REPURCHASE OFFER"......................................................... 3.08 "RESTRICTED PAYMENTS"...................................................... 4.07 "SPECIFIED COURTS"......................................................... 12.09 "SUSPENDED COVENANTS"...................................................... 4.21 "SUSPENSION CONDITION"..................................................... 4.21
25
DEFINED IN TERM SECTION - ---- -------
Section 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITY HOLDER" means a Holder of a Note; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and "OBLIGOR" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04. Rules of Construction. (a) Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and in the plural include the singular; (v) provisions apply to successive events and transactions; and (vi) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. 26 ARTICLE TWO THE NOTES Section 2.01. Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be issued in registered, global form without interest coupons and only shall be in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (and shall include the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.07 hereof. (c) Regulation S Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Legended Regulation S Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, as custodian for The Depository Trust Company ("DTC") in New York, New York, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided. Following the termination of the Restricted Period, beneficial interests in the Legended Regulation S Global Note shall be exchanged for beneficial interests in Unlegended Regulation S Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Unlegended Regulation S Global Notes, the Trustee shall cancel the Legended Regulation S Global Note. The aggregate principal amount of the Regulation S Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. 27 (d) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream. Section 2.02. Execution and Authentication. Two Officers of the Company shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. Such signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited. The Company may, subject to Article Four of this Indenture and applicable law, issue Additional Notes under this Indenture, including Exchange Notes. The Notes issued on the Closing Date and any Additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers of the Company (an "AUTHENTICATION ORDER"), authenticate Notes for original issue on the date hereof of $600 million. At any time and from time to time after the execution of this Indenture, the Trustee shall, upon receipt of an Authentication Order, authenticate Notes for original issue in aggregate principal amount specified in such Authentication Order. The Authentication Order shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes 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 an Agent to deal with Holders or an Affiliate of the Company. Section 2.03. Methods of Receiving Payments on the Notes. If a Holder of $1.0 million or more of Notes has given wire transfer instructions to the Company, the Company shall pay all principal, interest and premium and Liquidated Damages, if any, on that Holder's Notes in accordance with those instructions. All other payments on Notes shall be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless the Company elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders. 28 Section 2.04. Registrar and Paying Agent. (a) The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. (b) The Company initially appoints DTC to act as Depositary with respect to the Global Notes. (c) The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.05. Paying Agent to Hold Money in Trust. 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, premium or Liquidated Damages, if any, or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or one of its Subsidiaries) shall have no further liability for the money. If the Company or one of its Subsidiaries acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. Section 2.06. 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 all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven 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 the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). 29 Section 2.07. Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes shall be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Legended Regulation S Global Note be exchanged by the Company for Definitive Notes prior to the expiration of the Restricted Period; or (iii) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes. Upon the occurrence of either of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.08 and 2.11 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.07 or Section 2.08 or 2.11 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.07(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.07(b), (d) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.07(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.07(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant 30 given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Legended Regulation S Global Note prior to the expiration of the Restricted Period. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.07(f) hereof, the requirements of this Section 2.07(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount at maturity of the relevant Global Notes pursuant to Section 2.07(i) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.07(b)(ii) above and the Registrar receives the following: (A) if the transferee shall take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee shall take delivery in the form of a beneficial interest in a Legended Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any Holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.07(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder of the 31 beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Person participating in the distribution of the Exchange Notes or (2) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any Holder of a beneficial interest in a Restricted Global Note proposes to 32 exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than that listed in subparagraph (B) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(b) thereof, if applicable; or (D) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.07(i) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Legended Regulation S Global Note to Definitive Notes. A beneficial interest in the Legended Regulation S Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to the expiration of the Restricted Period, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A Holder of a beneficial interest in a Restricted Global Note may exchange such 33 beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Person participating in the distribution of the Exchange Notes or (2) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any Holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.07(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.07(i) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in 34 exchange for a beneficial interest pursuant to this Section 2.07(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.07(c)(iv) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; or (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Person participating in the distribution of the Exchange Notes or (2) a Person who is an affiliate (as defined in Rule 144) of the Company; 35 (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.07(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this 36 Section 2.07(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.07(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer shall be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) [INTENTIONALLY OMITTED]; and (C) if the transfer shall be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Person participating in the distribution of the Exchange Notes or (2) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate 37 from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not participating in a distribution of the Exchange Notes and (y) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Restricted Global Notes so accepted Unrestricted Global Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. Except as permitted below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM 38 REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT: (A) SUCH SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (i) (a) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR")) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), (ii) TO THE ISSUER, OR 39 (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.07 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. (h) [INTENTIONALLY OMITTED] (i) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.12 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, 40 such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (j) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.11, 3.06, 3.08, 4.10, 4.14 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid and legally binding obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.07 to effect a registration of transfer or exchange may be submitted by facsimile with the original to follow by first class mail. 41 Section 2.08. Replacement Notes. (a) If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. (b) Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.09. Outstanding Notes. (a) The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.10 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. (b) If a Note is replaced pursuant to Section 2.08 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. (c) If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. (d) If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any of the foregoing) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.10. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. 42 Section 2.11. Temporary Notes. (a) Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. (b) Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.12. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of canceled Notes in accordance with its procedures for the disposition of canceled securities in effect as of the date of such disposition (subject to the record retention requirement of the Exchange Act). Certification of the disposition of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.13. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. Section 2.14. CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such 43 numbers. The Company shall promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE THREE REDEMPTION AND OFFERS TO PURCHASE Section 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. Section 3.02. Selection of Notes to Be Redeemed. (a) If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. (b) The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount at maturity thereof to be redeemed. No Notes in amounts of $1,000 or less shall be redeemed in part. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03. Notice of Redemption. (a) At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (i) the redemption date; (ii) the redemption price; 44 (iii) if any Note is being redeemed in part, the portion of the principal amount at maturity of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion of the original Note shall be issued in the name of the Holder thereof upon cancellation of the original Note; (iv) the name and address of the Paying Agent; (v) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price and become due on the date fixed for redemption; (vi) that, unless the Company defaults in making such redemption payment, interest, if any, on Notes called for redemption ceases to accrue on and after the redemption date; (vii) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (viii) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. (b) At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. The notice, if mailed in the manner provided herein shall be presumed to have been given, whether or not the Holder receives such notice. Section 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05. Deposit of Redemption Price. (a) One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. (b) If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. 45 If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. No Notes in denominations of $1,000 or less shall be redeemed in part. Section 3.07. Optional Redemption. (a) Except as set forth in clause (b) of this Section 3.07, the Company shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to June 15, 2007. Thereafter, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below (subject to the right of Holders on the relevant record date to receive interest due on the related interest payment date):
YEAR PERCENTAGE - ---- ---------- ~~2007................................. 105.125% 2008................................. 102.563% 2009 and thereafter.................. 100.000%~~
(b) At any time prior to June 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of Notes originally issued hereunder at a redemption price of 110.250% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings of the Company; provided that (A) at least 65% of the aggregate principal amount of the Notes originally issued under this Indenture remains outstanding immediately after the occurrence of such redemption, excluding Notes held by the Company and its Subsidiaries; and (B) the redemption must occur within 45 days of the date of the closing of such Equity Offering. (c) In addition, at any time prior to June 15, 2007, the Company may redeem all or part of the Notes upon not less than 30 days' nor more than 60 days' notice at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) accrued and unpaid interest, if any, to the applicable date of redemption, plus (iii) the Make-Whole Premium. 46 (d) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. Section 3.08. Repurchase Offers. In the event that, pursuant to Section 4.10 or 4.14 hereof, the Company shall be required to commence an offer to all Holders to purchase their respective Notes (a "REPURCHASE OFFER"), it shall follow the procedures specified in such Sections and, to the extent not inconsistent therewith, the procedures specified below. The Repurchase Offer shall remain open for a period of no less than 30 days and no more than 60 days following its commencement, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than three Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 or 4.14 hereof (the "OFFER AMOUNT") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Repurchase Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Repurchase Offer. Upon the commencement of a Repurchase Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice, which shall govern the terms of the Repurchase Offer, shall state: (i) that the Repurchase Offer is being made pursuant to this Section 3.08 and Section 4.10 or Section 4.14 hereof, and the length of time the Repurchase Offer shall remain open; (ii) the Offer Amount, the purchase price and the Purchase Date; (iii) that any Note not tendered or accepted for payment shall continue to accrue interest and Liquidated Damages, if any; (iv) that, unless the Company defaults in making such payment, any Note (or portion thereof) accepted for payment pursuant to the Repurchase Offer shall cease to accrue interest and Liquidated Damages, if any, after the Purchase Date; (v) that Holders electing to have a Note purchased pursuant to a Repurchase Offer may elect to have Notes purchased in integral multiples of $1,000 only; (vi) that Holders electing to have a Note purchased pursuant to any Repurchase Offer shall be required to surrender the Note, with the form entitled "Option 47 of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (vii) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (viii) that, if the aggregate amount of Notes surrendered by Holders exceeds the Offer Amount, the Trustee shall, subject in the case of a Repurchase Offer made pursuant to Section 4.10 to the provisions of Section 4.10, select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (ix) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On the Purchase Date, the Company shall, to the extent lawful, subject in the case of a Repurchase Offer made pursuant to Section 4.10 to the provisions of Section 4.10, accept for payment on a pro rata basis to the extent necessary, the Offer Amount of Notes (or portions thereof) tendered pursuant to the Repurchase Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes (or portions thereof) were accepted for payment by the Company in accordance with the terms of this Section 3.08. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than three days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of Notes tendered by such Holder, as the case may be, and accepted by the Company for purchase, and the Company, shall promptly issue a new Note. The Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount at maturity equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the respective Holder thereof. The Company shall publicly announce the results of the Repurchase Offer on the Purchase Date. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to a Repurchase Offer and shall not be deemed to have breached its obligations under Section 3.08, 4.10 or 4.14 by virtue of such compliance. 48 Section 3.09. Application of Trust Money. All money deposited with the Trustee pursuant to Section 11.02 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. ARTICLE FOUR COVENANTS Section 4.01. Payment of Notes. (a) The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or one of its Subsidiaries, holds as of 11:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. (b) The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest, and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02. Maintenance of Office or Agency. (a) The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an agent of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. (b) The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The 49 Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. (c) The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.04 of this Indenture. Section 4.03. Reports. (a) Whether or not required by the SEC, so long as any Notes are outstanding, the Company will prepare, within the time periods specified in the SEC's rules and regulations, and furnish to the Holders of Notes upon request: (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. (b) In addition, whether or not required by the SEC, the Company will file a copy of all of the information and reports referred to in clauses (a)(i) and (ii) above with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to prospective investors upon request. In addition, the Company and the Note Guarantors shall, for so long as any Notes remain outstanding, furnish to the Holders and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. (c) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraphs shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company. Section 4.04. Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, the Company has kept, observed, 50 performed and fulfilled its obligations under this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (which shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four or Article Five hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, any taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06. Stay, Extension and Usury Laws. The Company and each of the Guarantors covenant (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they shall not, by resort to any such law, 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 has been enacted. Section 4.07. Restricted Payments. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: 51 (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends, payments or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any Guarantor (other than a Wholly Owned Restricted Subsidiary or such purchases, redemptions or other acquisitions of Equity Interests of a Guarantor from the Company or another Guarantor); (iii) make any voluntary payment on or with respect to, or voluntarily purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Note Guarantees; or (iv) make any Restricted Investment (all such payments and other actions set forth in Sections 4.07(a)(i) through (iv) above being collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after giving effect to such Restricted Payment: (A) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (B) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a); and (C) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by Sections (ii), (iii), (iv), (v) and (vi) of Section 4.07 (b) below), is less than the sum, without duplication, of: (1) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of this Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus 52 (2) 100% of the aggregate net cash proceeds received by the Company since the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company); plus (3) with respect to Restricted Investments made by the Company and its Restricted Subsidiaries after the date of this Indenture, an amount equal to (x) the amount returned in cash to the Company or any Restricted Subsidiary of the Company on or with respect to such Restricted Investments, whether resulting from payments of interest on Indebtedness, dividends or distributions, repayments of loans or advances in cash or other payments, or from the net cash proceeds from the sale of any such Investment, or (y) upon the designation of any Unrestricted Subsidiary to be a Restricted Subsidiary, the fair market value of the Company's or its Restricted Subsidiary's equity interest in such Subsidiary at the time of such designation, in each case, but only if and to the extent such amounts are not included in the calculation of Consolidated Net Income and not to exceed the amount of the Restricted Investment previously made by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary; plus (4) $20.0 million. (b) So long as no Default has occurred and is continuing or would be caused thereby, Section 4.07 (a) shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company or any Guarantor in exchange for, or out of the net cash proceeds of a contribution to the common equity of the Company or a substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from Section 4.07(a)(C)(2); (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Guarantor in exchange for, or with the net cash proceeds from, an Incurrence of Permitted Refinancing Indebtedness; 53 (iv) the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of its common Equity Interests, or the redemption by a Restricted Subsidiary of the Company of its common Equity Interests, in each case on a pro rata basis; (v) the repurchase of Capital Stock deemed to occur upon the exercise of options or warrants if such Capital Stock represents all or a portion of the exercise price thereof; (vi) the payment of dividends on the 5.5% Shared Preference Redeemable Securities of TXI Capital Trust I as in effect and outstanding as of the date of this Indenture in an aggregate annual amount not to exceed $11.0 million; or (vii) dividends paid by the Company on its common stock in an annual amount not to exceed (a) $7.0 million plus (b) an amount equal to 3% of net cash proceeds received by the Company or reduction of Indebtedness of the Company from the issuance, exchange or sale of the Company's common stock after the date of this Indenture. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.07 shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination shall be based upon an opinion or appraisal issued by an independent accounting, appraisal or investment banking firm if the fair market value exceeds $10.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (i) pay dividends or make any other distributions on its Capital Stock (or with respect to any other interest or participation in, or measured by, its profits) to the Company or any of its Restricted Subsidiaries or pay any liabilities owed to the Company or any of its Restricted Subsidiaries; (ii) make loans or advances to the Company or any of its Restricted Subsidiaries; or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. 54 (b) However, the preceding restrictions shall not apply to such encumbrances or restrictions existing under, by reason of or with respect to: (i) the Existing Indebtedness, the Credit Agreement, the Accounts Receivable Facility or any other agreements in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings thereof, provided that the encumbrances and restrictions in any such amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, than those contained in such Existing Indebtedness, this Indenture, the Credit Agreement, the Accounts Receivable Facility or such other agreements as in effect on the date of this Indenture; (ii) this Indenture, the Notes and the Note Guarantees; (iii) applicable law; (iv) any agreement or arrangement applicable to any Person or the property or assets of such Person acquired by the Company or any of its Restricted Subsidiaries, existing at the time of such acquisition and not entered into in connection with or in contemplation of such acquisition; provided that the encumbrance or restriction therein is not applicable to any Person or the properties or assets of any Person, other than the Person, or the property or assets of such Person, so acquired and any amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings thereof, provided that the encumbrances and restrictions in any such amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, than those in effect on the date of the acquisition; (v) in the case of Section 4.08(a)(iii): (A) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance, joint venture, partnership interest or contract or similar property or asset, (B) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Indenture or (C) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary; (vi) any agreement for the sale or other disposition of all or substantially all of the capital stock of, or property and assets of, a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending such sale or other disposition; 55 (vii) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (viii) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and (ix) Standard Securitization Undertakings related to a Receivables Subsidiary in connection with a Qualified Receivables Transaction. Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness (including Acquired Debt), and the Company shall not permit any of its Restricted Subsidiaries to issue any preferred stock; provided, however, that the Company or any Guarantor may Incur Indebtedness, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is Incurred would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been Incurred at the beginning of such four-quarter period. (b) Section 4.09(a) shall not prohibit the Incurrence of any of the following items of Indebtedness (collectively, "PERMITTED DEBT"): (i) the Incurrence by the Company or any Guarantor of Indebtedness under Credit Facilities in an aggregate principal amount at any one time outstanding pursuant to this Section 4.09(b)(i) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed the greater of (A) $200.0 million, less the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any Restricted Subsidiary to permanently repay any such Indebtedness (and, in the case of any revolving credit Indebtedness, to effect a corresponding commitment reduction thereunder) pursuant to Section 4.10 and (B) the sum of the amounts equal to (x) 40% of the consolidated book value of the inventory of the Company and the Guarantors and (y) 70% of the consolidated book value of the accounts receivable of the Company and the Guarantors, in each case as set forth on the most recent available quarterly or annual consolidated balance sheet of the Company and its Restricted Subsidiaries, prepared in conformity with GAAP; (ii) the Incurrence of Existing Indebtedness; (iii) the Incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Note Guarantees to be issued on the date of this Indenture and the Exchange Notes and the related Note Guarantees to be issued pursuant to the Registration Rights Agreement; 56 (iv) the Incurrence by the Company or any Restricted Subsidiary of the Company of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be Incurred under Section 4.09(a) or Section 4.09(b)(ii), (iii), (iv) or (vii); (v) the Incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness owing to and held by the Company or any of its Restricted Subsidiaries; provided, however, that: (A) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and (B) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof, shall be deemed, in each case, to constitute an Incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this Section 4.09(b)(v); (vi) the Guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be Incurred by this Section 4.09; or (vii) the Incurrence by the Company or any Guarantor of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness Incurred to refund, refinance or replace any Indebtedness Incurred pursuant to this Section 4.09(b)(vii), not to exceed $10.0 million. For purposes of determining compliance with this Section 4.09, in the event that any proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in Sections 4.09(b)(i) through (vii) above, or is entitled to be Incurred pursuant to Section 4.09(a), the Company shall be permitted to classify at the time of its Incurrence such item of Indebtedness in any manner that complies with this covenant. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued under this Indenture shall be deemed to have been Incurred on such date in reliance on the exception provided by 4.09(b)(i). (c) Notwithstanding any other provision of this Section 4.09, the maximum amount of Indebtedness that may be Incurred pursuant to this Section 4.09 shall not be deemed to be exceeded, with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies. (d) The Company shall not Incur any Indebtedness that is subordinate or junior in right of payment to any other Indebtedness of the Company unless it subordinate in 57 right of payment to the Notes. No Guarantor shall Incur any Indebtedness that is subordinate or junior in right of payment to any other Indebtedness of such Guarantor unless it is subordinate in right of payment to such Guarantor's Note Guarantee. For avoidance of doubt, Indebtedness will not be considered subordinate or junior in right of payment to any other Indebtedness solely by virtue of being unsecured or secured to a greater or lesser extent or with greater or lower priority. Section 4.10. Asset Sales. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (ii) such fair market value is determined by the Company's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee; and (iii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Replacement Assets or a combination of both. For purposes of this Section 4.10(a)(iii), each of the following shall be deemed to be cash: (A) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary (other than contingent liabilities, liabilities that are by their terms subordinated to the Notes or any Note Guarantee and liabilities to the extent owed to the Company or any Affiliate of the Company) that are assumed by the transferee of any such assets pursuant to a customary written agreement that releases the Company or such Restricted Subsidiary from further liability; and (B) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion). (b) Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds at its option: (i) to repay Indebtedness under the Credit Facilities or Unsubordinated Indebtedness secured by such assets and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; or (ii) to purchase Replacement Assets or make a capital expenditure in or that is used or useful in a Permitted Business. 58 Pending the final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. (c) Any Net Proceeds from Asset Sales that are not applied or invested as provided in Section 4.10(b) above shall constitute "EXCESS PROCEEDS." Within 10 days after the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall make an offer (an "ASSET SALE OFFER") to all Holders of Notes and all holders of other Unsubordinated Indebtedness containing provisions similar to those set forth in this Indenture with respect to offers to purchase with the proceeds of sales of assets, to purchase the maximum principal amount of Notes and such other Unsubordinated Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other Unsubordinated Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, Notes and such other Unsubordinated Indebtedness to be purchased shall be selected on a pro rata basis based on the principal amount of Notes and such other Unsubordinated Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. Section 4.11. Transactions with Affiliates. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into, make, amend, renew or extend any transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each, an "AFFILIATE TRANSACTION"), unless: (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable arm's-length transaction by the Company or such Restricted Subsidiary with a Person that is not an Affiliate of the Company; and (ii) the Company delivers to the Trustee: (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with this Section 4.11 and that such Affiliate Transaction or series of related Affiliate Transactions has been approved by a majority of the disinterested members of the Board of Directors; and (B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Company or such Restricted 59 Subsidiary of such Affiliate Transaction or series of related Affiliate Transactions from a financial point of view issued by an independent accounting, appraisal or investment banking firm. (b) The following items shall not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of Section 4.11(a): (i) transactions between or among the Company and/or its Restricted Subsidiaries; (ii) payment of reasonable fees and compensation to, and indemnity provided on behalf of, the executive officers and directors of the Company and its Restricted Subsidiaries; (iii) Restricted Payments that are permitted by the provisions of Section 4.07; (iv) transfers of accounts receivable and related assets to a Receivables Subsidiary in connection with a Qualified Receivables Transaction and the charging of fees and expenses in the ordinary course of business in connection with such transfers; and (v) any sale of Capital Stock (other than Disqualified Stock) of the Company. Section 4.12. Liens. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under this Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien. Section 4.13. Business Activities. The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. Section 4.14. Offer to Repurchase upon a Change of Control. (a) If a Change of Control occurs, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that Holder's Notes pursuant to an offer by the Company (a "CHANGE OF CONTROL OFFER") at an offer price (a "CHANGE OF CONTROL PAYMENT") in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase. Within ten days following any Change of Control, the Company shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on a date (the "CHANGE OF 60 CONTROL PAYMENT DATE") specified in such notice, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures described in Section 3.08. (b) By 11:00 a.m. Eastern Time on the Change of Control Payment Date, the Company shall, to the extent lawful: (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. (c) The Paying Agent shall promptly mail or wire transfer to each Holder of more than $1.0 million of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. (d) The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (e) Notwithstanding anything to the contrary in this Section 4.14, the Company shall 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 4.14 and all other provisions of this 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. Section 4.15. Limitation on Issuances and Sales of Equity Interests in Restricted Subsidiaries. (a) The Company shall not transfer, convey, sell, lease or otherwise dispose of, and shall not permit any of its Restricted Subsidiaries to issue, transfer, convey, sell, lease or otherwise dispose of, any Equity Interests in any Restricted Subsidiary of the Company to any Person (other than the Company or a Restricted Subsidiary of the Company or, if necessary, shares of its Capital Stock constituting directors' qualifying shares or issuances of shares of Capital Stock of foreign Restricted Subsidiaries to foreign nationals, to the extent required by applicable law), except: (i) if, immediately after giving effect to such issuance, transfer, conveyance, sale, lease or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to 61 such issuance or sale would have been permitted to be made under Section 4.07 hereof if made on the date of such issuance or sale; or (ii) sales of Common Stock of a Restricted Subsidiary by the Company or a Restricted Subsidiary, provided that the Company or such Restricted Subsidiary complies with Section 4.10. Section 4.16. Designation of Restricted and Unrestricted Subsidiaries. (a) The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary, provided that: (i) any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated shall be deemed to be an Incurrence of Indebtedness by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation, and such Incurrence of Indebtedness would be permitted under Section 4.09; (ii) the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary being so designated (including any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of such Subsidiary) shall be deemed to be a Restricted Investment made as of the time of such designation and such Investment would be permitted under Section 4.07; (iii) such Subsidiary does not own any Equity Interests of, or hold any Liens on any Property of, the Company or any Restricted Subsidiary; (iv) the Subsidiary being so designated: (A) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (B) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Equity Interests or (ii) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (C) has not Guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries, except to the extent such Guarantee or credit support would be released upon such designation; and 62 (D) other than in the case of a Receivables Subsidiary, has at least one director on its Board of Directors that is not a director or officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or officer of the Company or any of its Restricted Subsidiaries; and (v) no Default or Event of Default would be in existence following such designation. (b) Any designation of a Restricted Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by this Indenture. If, at any time, any Unrestricted Subsidiary (x) would fail to meet any of the preceding requirements described in Sections 4.16(a)(iv)(A), (B) and (C) above or (y) fails to meet the requirement described in Section 4.16(a)(iv)(D) above and such failure continues for a period of 60 days, such Subsidiary shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness, Investments, or Liens on the property, of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness, Investments or Liens are not permitted to be incurred as of such date under this Indenture, the Company shall be in Default under this Indenture. (c) The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary, provided that: (i) such designation shall be deemed to be an Incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if such Indebtedness is permitted under Section 4.09; calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; (ii) all outstanding Investments owned by such Unrestricted Subsidiary shall be deemed to be made as of the time of such designation and such Investments shall only be permitted if such Investments would be permitted under Section 4.07; (iii) all Liens upon property or assets of such Unrestricted Subsidiary existing at the time of such designation would be permitted under Section 4.12; and (iv) no Default or Event of Default would be in existence following such designation. Section 4.17. Payments for Consent. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. 63 Section 4.18. Guarantees. (a) If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary (other than a Receivables Subsidiary) on or after the date of this Indenture, then that newly acquired or created Domestic Subsidiary shall become a Guarantor and execute a supplemental indenture in the form of Exhibit F hereto and deliver an Opinion of Counsel to the Trustee as to the authorization and enforceability of such supplemental indenture and any other matters reasonably requested by the Trustee and in compliance with Section 12.05 hereof. The Company shall not permit any of its Restricted Subsidiaries, directly or indirectly, to Guarantee the payment of any other Indebtedness of the Company, unless such Restricted Subsidiary is a Guarantor or simultaneously executes and delivers a supplemental indenture in the form attached hereto as Exhibit F providing for a Note Guarantee of payment of the Notes by such Restricted Subsidiary, which Note Guarantee shall be senior to or pari passu with such Subsidiary's Guarantee of such other Indebtedness. (b) Notwithstanding the preceding paragraph, any Note Guarantee may provide by its terms that it will be automatically and unconditionally released and discharged under the circumstances described under Section 10.05 hereof. Section 4.19. Sale and Leaseback Transactions. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction, provided that the Company or any Restricted Subsidiary may enter into a sale and leaseback transaction if: (i) the Company or that Restricted Subsidiary, as applicable, could have Incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction under the Fixed Charge Coverage Ratio test in Section 4.09(a); (ii) the gross cash proceeds of that sale and leaseback transaction are at least equal to the fair market value, as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee, of the property that is the subject of that sale and leaseback transaction; and (iii) the transfer of assets in that sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with Section 4.10. Section 4.20. [INTENTIONALLY OMITTED] Section 4.21. Suspension of Certain Covenants and Agreements. (a) During any period of time that the Notes are rated Investment Grade by both Rating Agencies and no Default or Event of Default shall have occurred and then be continuing (the foregoing conditions being referred to collectively as the "SUSPENSION CONDITION"), the Company and its Restricted Subsidiaries will not be subject to Sections 4.07, 4.09, 4.10, 4.11, 4.15, clauses (i) and (iii) of Section 4.19 and clause (iii) of Section 5.01(a) (collectively, the "SUSPENDED COVENANTS"). 64 (b) If the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants with respect to the Notes for any period of time as a result of Section 4.21(a) and, subsequently, one or both Rating Agencies withdraw their Investment Grade rating or downgrade the Investment Grade rating assigned to the Notes such that the Notes are no longer rated Investment Grade by both Rating Agencies, then the Company and each of its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants. Compliance with the Suspended Covenants with respect to Restricted Payments made after the time of such withdrawal or downgrade will be calculated in accordance with the terms of Section 4.07 as if such covenant had been in effect during the entire period of time from the date of this Indenture. ARTICLE FIVE SUCCESSORS Section 5.01. Merger, Consolidation or Sale of Assets. (a) The Company shall not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation) or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties and assets of the Company and its Subsidiaries taken as a whole, in one or more related transactions, to another Person unless: (i) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made (i) is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia and (ii) assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; (iii) immediately after giving effect to such transaction on a pro forma basis, the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition shall have been made, will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a); and (iv) each Guarantor, unless such Guarantor is the Person with which the Company has entered into a transaction under this Section 5.01, shall have by amendment to its Note Guarantee confirmed that its Note Guarantee shall apply to the obligations of the Company or the surviving Person in accordance with the Notes and this Indenture. (b) The Company shall not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. 65 (c) Section 5.01(a)(iii) above shall not apply to any merger, consolidation or sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of its Restricted Subsidiaries. Section 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest and Liquidated Damages, if any, on the Notes except in the case of a sale, assignment, transfer, conveyance or other disposition of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE SIX DEFAULTS AND REMEDIES Section 6.01. Events of Default. (a) Each of the following is an "EVENT OF DEFAULT": (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes; (ii) default in payment when due (whether at maturity, upon acceleration, redemption or otherwise) of the principal of, or premium, if any, on the Notes; (iii) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions described under Sections 4.10, 4.14, 5.01 or 10.04; (iv) failure by the Company or any of its Restricted Subsidiaries for 30 days after written notice by the Trustee or Holders representing 25% or more of the aggregate principal amount of Notes outstanding to comply with any of the other agreements in this Indenture; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of this Indenture, if that default: 66 (A) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "PAYMENT DEFAULT"); or (B) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more; (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) except as permitted by this Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Note Guarantee; (viii) the Company or any Significant Subsidiary of the Company (or any Restricted Subsidiaries that together would constitute a Significant Subsidiary) pursuant to or within the meaning of Bankruptcy Law: (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) makes a general assignment for the benefit of its creditors, or (D) generally is not paying its debts as they become due; and (ix) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary (or Restricted Subsidiaries that together would constitute a Significant Subsidiary), in an involuntary case; or (B) appoints a custodian of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary (or Restricted Subsidiaries that together would constitute a Significant Subsidiary) or for all or substantially all of the property of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary (or Restricted Subsidiaries that together would constitute a Significant Subsidiary), or 67 (C) orders the liquidation of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary (or Restricted Subsidiaries that together would constitute a Significant Subsidiary); and the order or decree remains unstayed and in effect for 60 consecutive days. Section 6.02. Acceleration. (a) In the case of an Event of Default specified in clauses (viii) or (ix) of Section 6.01 hereof, with respect to the Company or any Significant Subsidiary of the Company (or any Restricted Subsidiaries that together would constitute a Significant Subsidiary), all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company specifying the Event of Default. (b) With respect to periods after June 15, 2007, in the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07(a) hereof, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. With respect to periods prior to June 15, 2007, if an Event of Default occurs during any time that the Notes are outstanding, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07(c) hereof, then the premium specified in Section 3.07(c) hereof as being payable upon an optional redemption prior to June 15, 2007 shall become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. Section 6.03. Other Remedies. (a) If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, interest, and Liquidated Damages, if any, with respect to, the Notes or to enforce the performance of any provision of the Notes or this Indenture. (b) The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note 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. All remedies are cumulative to the extent permitted by law. Section 6.04. Waiver of Past Defaults. Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of the Holders of all of the Notes, rescind and annul a declaration 68 of acceleration pursuant to Section 6.02 hereof, and its consequences, and waive any related existing Default or Event of Default if: (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses and disbursements and advances of the Trustee, it agents and counsel, (ii) all overdue interest and Liquidated Damages on all Notes, (iii) the principal of and premium, if any, on any Notes that have become due otherwise than by such declaration or occurrence of acceleration and interest and Liquidated Damages, if any, thereon at the rate prescribed therefor by such Notes, and (iv) to the extent that payment for such interest is lawful, interest upon overdue interest, if any, at the rate prescribed in Section 4.01 hereof, (b) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes that have become due solely by such declaration of acceleration, have been cured or waived and (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. The Company shall deliver to the Trustee an Officers' Certificate stating that the requisite percentage of Holders have consented to any such waiver and attaching copies of such consents. In case of any such waiver, the Company, the Trustee and the Holders shall be restored to their former positions and rights hereunder and under the Notes, respectively. This Section 6.04 and Section 9.02 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05. Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Section 6.06. Limitation on Suits. (a) A Holder may not pursue any remedy with respect to this Indenture or the Notes unless: (i) the Holder gives the Trustee written notice of a continuing Event of Default; 69 (ii) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer and, if requested, provide to the Trustee security and indemnity satisfactory to the Trustee against any costs, liability or expense that might be incurred by it in connection with the request or direction; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (v) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. (b) A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07. Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, interest on, and Liquidated Damages, if any, with respect to, the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), 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)(i) or (a)(ii) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, if any, interest, and Liquidated Damages, if any, remaining unpaid on the Notes and interest on overdue principal and premium, if any, and, to the extent lawful, interest and Liquidated Damages, if any, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to 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 (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company or any Guarantor (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other securities or property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly 70 to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. (a) If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, interest and Liquidated Damages, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, interest, and Liquidated Damages, if any, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. (b) The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. 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 a 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 of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than ten percent in principal amount of the then outstanding Notes. 71 ARTICLE SEVEN TRUSTEE Section 7.01. Duties of Trustee. Except to the extent, if any, provided otherwise in the Trust Indenture Act of 1939 (as from time to time in effect): (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its 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 duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, 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. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful 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 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 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, costs, liability or expense that might be incurred by it in connection with the request or direction. 72 (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02. Certain Rights of Trustee. (a) The Trustee may conclusively rely upon 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 or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of such event is sent to the Trustee in accordance with Section 12.02 hereof, and such notice references the Notes. Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may become a creditor of, or otherwise deal with, the Company or any of its Affiliates with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest as described in the Trust Indenture Act of 1939 (as in effect at such time), it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. 73 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, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal, premium, interest or Liquidated Damages on any Note, 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 the Holders of the Notes. Section 7.06. Reports by Trustee to Holders of the Notes. (a) Within 60 days after each May 31 beginning with the May 31 following the date hereof, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). (b) A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange or any delisting thereof. Section 7.07. Compensation and Indemnity. (a) The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder in accordance with a written schedule provided by the Trustee to the Company. 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 promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. (b) The Company shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any 74 claim (whether asserted by either of the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence, bad faith or willful misconduct. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. (c) The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture and resignation of removal of the Trustee. (d) To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture and resignation or removal of the Trustee. (e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(a)(viii) and (ix) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. (f) The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. Section 7.08. Replacement of Trustee. (a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. (b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (i) the Trustee fails to comply with Section 7.10 hereof; (ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (iii) a custodian or public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the 75 then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition at the expense of the Company any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) 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, 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, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another Person, the successor Person without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $150.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). Section 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. The Trustee hereby waives any right to set-off any claim that it may have against the Company in any capacity (other than as Trustee and Paying Agent) against any of the assets of the Company held by the Trustee; provided, however, that if the Trustee is or becomes a lender of any other Indebtedness permitted hereunder to be pari passu with the Notes, then such waiver shall not apply to the extent of such Indebtedness. 76 ARTICLE EIGHT DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of the Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. Section 8.02. Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and all obligations of the Guarantors shall be deemed to have been discharged with respect to their obligations under the Note Guarantees on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and Note Guarantees, respectively, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, interest and Liquidated Damages, if any, on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 concerning issuing temporary Notes, registration of Notes and mutilated, destroyed, lost or stolen Notes and the Company's obligations under Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03. Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19 and 4.20 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes 77 shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(a)(iii) through (vii) shall not constitute Events of Default. Section 8.04. Conditions to Legal or Covenant Defeasance. (a) The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and premium and Liquidated Damages, if any, on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) 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 of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal 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 Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes 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; (iv) no Default or Event of Default shall have occurred and be continuing either: (a) on the date of such deposit; or (b) insofar as Events of Default from bankruptcy 78 or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an Opinion of Counsel to the effect that, (1) assuming no intervening bankruptcy of the Company or any Guarantor between the date of deposit and the 91st day following the deposit and assuming that no Holder is an "insider" of the Company under applicable bankruptcy law, after the 91st day following the deposit, the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code and (2) the creation of the defeasance trust does not violate the Investment Company Act of 1940; (vii) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; (viii) if the Notes are to be redeemed prior to their stated maturity, the Company must deliver to the Trustee irrevocable instructions to redeem all of the Notes on the specified redemption date; and (ix) the Company must deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Section 8.05. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions. (a) Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. (b) The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. 79 (c) Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06. Repayment to the Company. Subject to applicable escheat laws, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. Section 8.07. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof and, in the case of a Legal Defeasance, the Guarantors' obligations under their respective Note Guarantees shall be revised and reinstated as though no deposit had occurred pursuant to Section 8.02 hereof, in each case until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. 80 ARTICLE NINE AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes. (a) Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors, and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (i) to cure any ambiguity, defect or inconsistency; (ii) to provide for uncertificated Notes in addition to or in place of certificated Notes; (iii) to provide for the assumption of the Company's or any Guarantor's obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's or such Guarantor's assets; (iv) to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under this Indenture of any such Holder; (v) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act; (vi) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of its date; (vii) to allow any Guarantor to execute a supplemental Indenture and a Note Guarantee with respect to the Notes; or (viii) to evidence and provide for the acceptance of appointment of a successor Trustee. (b) Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of any documents requested under Section 7.02(b) hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02. With Consent of Holders of Notes. (a) Except as otherwise provided in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding 81 (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). (b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed, the Holders on such record date, or its duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. (c) Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amendment or supplement to this Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amendment or supplement unless such amendment or supplement directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amendment or supplement. (d) It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. (e) After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) may waive compliance in a particular instance by the Company with any provision of this Indenture, or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions, or waive any payment, with respect to the redemption of the Notes; 82 (iii) reduce the rate of or change the time for payment of interest on any Note; (iv) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Liquidated Damages, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (v) make any Note payable in money other than U.S. dollars; (vi) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Liquidated Damages, if any, on the Notes; (vii) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture; (viii) impair the right to institute suit for the enforcement of any payment on or with respect to the Notes or the Note Guarantees; (ix) amend, change or modify the obligation of the Company to make and consummate an Asset Sale Offer with respect to any Asset Sale in accordance with Section 4.10 after the obligation to make such Asset Sale Offer has arisen or the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control in accordance with Section 4.14 after such Change of Control has occurred, including, in each case, amending, changing or modifying any definition relating thereto; (x) except as otherwise permitted under Section 5.01, consent to the assignment or transfer by the Company or any Guarantor of any of their rights or obligations under this Indenture; and (xi) make any change in the preceding amendment and waiver provisions. Section 9.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a document that complies with the TIA as then in effect. Section 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. 83 An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05. Notation on or Exchange of Notes. (a) The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. (b) Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06. Trustee to Sign Amendments, Etc. The Trustee shall sign any amendment or supplement to this Indenture or any Note authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture or Note until its Board of Directors approves it. In executing any amendment or supplement or Note, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that the execution of such amendment or supplement is authorized or permitted by this Indenture. ARTICLE TEN NOTE GUARANTEES Section 10.01. Guarantee. (a) Subject to this Article Ten, each of the Guarantors hereby, jointly and severally, and fully and unconditionally, guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of, this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes, if lawful (subject in all cases to any applicable grace period provided herein), and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. 84 (b) The Guarantors hereby agree that, to the maximum extent permitted under applicable law, their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Subject to Section 6.06 hereof, each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. (c) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to any of the Company or the Guarantors, any amount paid by any of them to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (d) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Note Guarantee. Section 10.02. Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor 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 such Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such 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 Guarantor in respect of the obligations of such other Guarantor under this Article Ten, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. 85 Section 10.03. Execution and Delivery of Note Guarantee. (a) To evidence its Note Guarantee set forth in Section 10.01, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President or one of its Vice Presidents. (b) Each Guarantor hereby agrees that its Note Guarantee set forth in Section 10.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. (c) If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless. (d) The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors. (e) If required by Section 4.20 hereof, the Company shall cause such Subsidiaries to execute supplemental indentures to this Indenture and Note Guarantees in accordance with Section 4.20 hereof and this Article Ten, to the extent applicable. Section 10.04. Guarantors May Consolidate, Etc., on Certain Terms. (a) A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than the Company or another Guarantor, unless: (i) immediately after giving effect to that transaction, no Default or Event of Default exists; and (ii) either: (A) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger (if other than the Guarantor) is a corporation or limited liability company organized or existing under the laws of the United States, any state thereof or the District of Columbia and assumes all the obligations of that Guarantor under this Indenture, its Note Guarantee and the Registration Rights Agreement pursuant to a supplemental indenture reasonably satisfactory to the Trustee; or (B) such sale or other disposition or consolidation or merger complies with Section 4.10 hereof. (b) In case of any such consolidation, merger, sale or conveyance governed by Section 10.04(a)(ii)(A), upon the assumption by the successor Person, by supplemental 86 indenture, executed and delivered to the Trustee and reasonably satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by a Guarantor, such successor Person shall succeed to and be substituted for a Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. Section 10.05. Release of Guarantor. (a) Any Guarantor will be released and relieved of any obligations under its Note Guarantee, (i) in connection with any sale or other disposition of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) an Affiliate of the Company, if the sale of all such Capital Stock of that Guarantor complies with Section 4.10 hereof; (ii) if the Company properly designates that Guarantor as an Unrestricted Subsidiary under this Indenture or (iii) upon the release or discharge of the Guarantee which resulted in the creation of such Note Guarantee pursuant to Section 4.18(b) hereof, except a discharge or release by or as a result of payment under such Guarantee. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that one of the foregoing requirements has been satisfied and the conditions to the release of a Guarantor under this Section 10.05 have been met, the Trustee shall execute any documents reasonably required in order to evidence the release of such Guarantor from its obligations under its Note Guarantee. (b) Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest and Liquidated Damages, if any, on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article Ten. ARTICLE ELEVEN SATISFACTION AND DISCHARGE Section 11.01. Satisfaction and Discharge. (a) This Indenture shall be discharged and shall cease to be of further effect as to all Notes issued thereunder, when: (i) either: (A) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or 87 (B) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the sending of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to the date of maturity or redemption; (ii) no Default or Event of Default shall have occurred and be continuing on the date of any deposit referred to in clause (a)(i)(B) or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (iii) the Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and (iv) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. (b) In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel (which opinion may be subject to customary assumptions and exclusions) to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. (c) Notwithstanding the above, the Trustee shall pay to the Company from time to time upon its request any cash or Government Securities held by it as provided in this section which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect a satisfaction and discharge under this Article Eleven. Section 11.02. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions. Subject to Section 11.03 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee pursuant to Section 11.01 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. 88 Section 11.03. Repayment to the Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium and Liquidated Damages, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium or Liquidated Damages, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times or The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. ARTICLE TWELVE MISCELLANEOUS Section 12.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. Section 12.02. Notices. (a) Any notice or communication by the Company or any Guarantor, on the one hand, or the Trustee on the other hand, to the other is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Guarantor: Texas Industries, Inc. 1341 West Mockingbird Lane Dallas, Texas 75247 Facsimile: 972-647-3320 Attention: General Counsel With copies to: Thompson & Knight LLP 1700 Pacific Avenue Suite 3300 Dallas, TX 75201 89 Facsimile: 214-880-3135 Attention: Joe Dannenmaier If to the Trustee: Wells Fargo Bank, National Association 505 Main Street, Suite 301 Fort Worth, TX 76102 Phone 817-334-7065 Fax 817-885-8650 Attention: Melissa Scott (b) The Company the Guarantors or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. (c) All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. (d) Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. 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. (e) If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. (f) If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 12.03. Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to its rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 12.04. Certificate and Opinion as to Conditions Precedent. (a) Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (i) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating 90 that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (ii) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel (who may rely upon and Officers' Certificate as to matters of fact), all such conditions precedent and covenants have been satisfied. Section 12.05. Statements Required in Certificate or Opinion. (a) Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (i) a statement that the Person making such certificate or opinion has read such covenant or condition; (ii) 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; (iii) a statement that, in the opinion of such Person, he or she 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 satisfied; and (iv) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 12.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. This waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. Section 12.08. Governing Law. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES. 91 Section 12.09. Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Indenture or the transactions contemplated hereby ("RELATED PROCEEDINGS") may be instituted in the federal courts of the United States of America located in the City of New York or the courts of the State of New York in each case located in the City of New York (collectively, the "SPECIFIED COURTS"), and each party irrevocably submits to the non-exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail (to the extent allowed under any applicable statute or rule of court) to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court has been brought in an inconvenient forum. Section 12.10. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or any of its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 12.11. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 10.04. Section 12.12. Severability. In case any provision in this Indenture or the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 12.13. Counterpart 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. Section 12.14. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by the Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes 92 referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company if made in the manner provided in this Section 12.14. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such witness, notary or officer the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) Notwithstanding anything to the contrary contained in this Section 12.14, the principal amount and serial numbers of Notes held by any Holder, and the date of holding the same, shall be proved by the register of the Notes maintained by the Registrar as provided in Section 2.04 hereof. (d) If the Company shall solicit from the Holders of the Notes any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a resolution of its Board of Directors, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith or the date of the most recent list of Holders forwarded to the Trustee prior to such solicitation pursuant to Section 2.06 hereof and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of the then outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the then outstanding Notes shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration or transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 93 (f) Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Note may do so itself with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. Section 12.15. Benefit of Indenture. Nothing, in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Registrar and its successors hereunder, and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 12.16. Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 94 SIGNATURES Very truly yours, TEXAS INDUSTRIES, INC. By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer ATHENS BRICK COMPANY By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer BROOKHOLLOW CORPORATION By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer BROOK HOLLOW PROPERTIES, INC. By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer BROOKHOLLOW OF ALEXANDRIA, INC. By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer 95 BROOKHOLLOW OF VIRGINIA, INC. By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer SOUTHWESTERN FINANCIAL CORPORATION By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer CHAPARRAL STEEL COMPANY By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer CHAPARRAL STEEL HOLDINGS, INC. By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer CHAPARRAL STEEL TRUST By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer CHAPARRAL STEEL TEXAS, INC. By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer 96 CHAPARRAL STEEL MIDLOTHIAN, LP By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer of its General Partner CHAPARRAL (VIRGINIA) INC. By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer CREOLE CORPORATION By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer PACIFIC CUSTOM MATERIALS, INC. By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer RIVERSIDE CEMENT COMPANY By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Assistant General Manager -- Treasurer PARTIN LIMESTONE PRODUCTS, INC. By: /s/ KENNETH R. ALLEN ------------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer RIVERSIDE CEMENT HOLDINGS COMPANY By: /s/ KENNETH R. ALLEN ------------------------------------- 97 Name: Kenneth R. Allen Title: Vice President - Treasurer TEXAS INDUSTRIES HOLDINGS, INC. By: /s/ KENNETH R. ALLEN ---------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer TEXAS INDUSTRIES TRUST By: /s/ KENNETH R. ALLEN ---------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer TXI AVIATION, INC. By: /s/ KENNETH R. ALLEN ---------------------------------- Name: Kenneth R. Allen Title: Vice President - Treasurer TXI CALIFORNIA INC. By: /s/ KENNETH R. ALLEN ---------------------------------- Name: Kenneth R. Allen Title: Vice President - Treasurer TXI CEMENT COMPANY By: /s/ KENNETH R. ALLEN ---------------------------------- Name: Kenneth R. Allen Title: Vice President - Treasurer TXI CORP. By: /s/ KENNETH R. ALLEN ---------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer TXI OPERATING TRUST By: /s/ KENNETH R. ALLEN ---------------------------------- 98 Name: Kenneth R. Allen Title: Vice President and Treasurer TXI OPERATIONS, LP By: /s/ KENNETH R. ALLEN ----------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer of its General Partner TXI POWER COMPANY By: /s/ KENNETH R. ALLEN ----------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer TXI RIVERSIDE INC. By: /s/ KENNETH R. ALLEN ----------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer TXI STAR RECYCLING LP By: /s/ KENNETH R. ALLEN ----------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer of its General Partner TXI TRANSPORTATION COMPANY By: /s/ KENNETH R. ALLEN ----------------------------------- Name: Kenneth R. Allen Title: Vice President -- Treasurer 99 Wells Fargo Bank, National Association, as Trustee By: /s/ MELISSA SCOTT -------------------------- Name: Melissa Scott Title: Trust Officer 100 EXHIBIT A [Face of Note] [INSERT APPROPRIATE LEGENDS] A1-1 CUSIP [ ] No. **$___________** TEXAS INDUSTRIES, INC. 10 1/4% Senior Notes due 2011 Issue Date: Texas Industries, Inc., a Delaware corporation (the "Company", which term includes any successor under this Indenture hereinafter referred to), for value received, promises to pay to CEDE & CO., or its registered assigns, the principal sum of [Amount of Note] ($________) on June 15, 2011. Interest Payment Dates: June 15 and December 15, commencing December 15, 2003. Record Dates: June 1 and December 1. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. [ATTACH NOTATION OF GUARANTEE FOR EACH GUARANTOR] A1-2 IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. TEXAS INDUSTRIES, INC. By:__________________________ Name: Title: By:__________________________ Name: Title: (Trustee's Certificate of Authentication) This is one of the 10 1/4% Senior Notes due 2011 described in the within-mentioned Indenture. Dated: WELLS FARGO, NATIONAL ASSOCIATION, as Trustee By:__________________________________ Authorized Signatory A1-3 [Reverse Side of Note] TEXAS INDUSTRIES, INC. 10 1/4% Senior Notes due 2011 Capitalized terms used herein shall have the meanings assigned to them in this Indenture referred to below unless otherwise indicated. 1. Interest. The Company promises to pay interest on the principal amount of this Note at 10 1/4% per annum from the date hereof until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on June 15 and December 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be December 15, 2003. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the record date immediately preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.13 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose in The City of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages, if any, on, all Global Notes and to any Holder of $1.0 million or more of Notes which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, the Trustee under the Indenture shall act as Paying Agent and Registrar. The Company may change any Paying Agent or A1-4 Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of June 6, 2003 ("Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Indenture pursuant to which this Note is issued provides that an unlimited aggregate principal amount of Additional Notes may be issued thereunder. 5. Optional Redemption. (a) Except as set forth in paragraph 5(b) below, the Company shall not have the option to redeem any Notes prior to June 15, 2007. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15, of the years indicated below (subject to the right of Holders on the relevant record date to receive interest due on the related interest payment date):
Year Percentage ---- ---------- ~~2007................................... 105.125% 2008................................... 102.563% 2009 and thereafter.................... 100.000%~~
(b) Notwithstanding the foregoing, at any time prior to June 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of Notes originally issued under the Indenture at a redemption price of 110.250% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings of the Company; provided that (A) at least 65% of the aggregate principal amount of the Notes originally issued under the Indenture remains outstanding immediately after the occurrence of such redemption, excluding Notes held by the Company and its Subsidiaries; and (B) the redemption must occur within 45 days of the date of the closing of such Equity Offering. (c) In addition, at any time prior to June 15, 2007, the Company may redeem all or part of the Notes upon not less than 30 days nor more than 60 days' notice at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) accrued and unpaid interest, if any, to the applicable date of redemption, plus (iii) the Make-Whole Premium. 6. Repurchase at Option of Holder. (a) If a Change of Control occurs, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to an offer by the Company (a "Change of Control Offer") at an offer price (a "Change of Control Payment") in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest A1-5 and Liquidated Damages, if any, thereon to the date of purchase. Within ten days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on a date (the "Change of Control Payment Date") specified in such notice, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the Indenture and described in such notice. (b) Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds at its option: (i) to repay Indebtedness under the Credit Facilities or Unsubordinated Indebtedness secured by such assets and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; or (ii) to purchase Replacement Assets or make a capital expenditure in or that is used or useful in a Permitted Business. Pending the final applications of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the next preceding sentence will constitute "Excess Proceeds." Within ten days after the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall make an offer (an "Asset Sale Offer") to all Holders of Notes and all holders of other Unsubordinated Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase with the proceeds of sales of assets, to purchase the maximum principal amount of Notes and such other Unsubordinated Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other Unsubordinated Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, Notes and such other Unsubordinated Indebtedness to be purchased shall be selected on a pro rata basis based on the principal amount of Notes and such other Unsubordinated Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. 7. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. 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 and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. Transfer may be restricted as provided in the Indenture. 8. Persons Deemed Owners. The registered Holder of a Note will be treated as its owner for all purposes. 9. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at A1-6 least a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes). Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to, among other things, cure any ambiguity, defect or inconsistency, or to make any change that does not adversely affect the legal rights under the Indenture of any such Holder. 10. Defaults and Remedies. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company or any Significant Subsidiary of the Company (or any Restricted Subsidiaries that together would constitute a Significant Subsidiary), all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company specifying the Event of Default. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium, interest or Liquidated Damages) if it determines that withholding notice is in their interest. Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of the Holders of all of the Notes, rescind and annul a declaration of acceleration pursuant to Section 6.02 hereof, and its consequences, and waive any related existing Default or Event of Default if certain conditions are satisfied. With respect to periods after June 15, 2007, in the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07(a) of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. With respect to periods prior to June 15, 2007, if an Event of Default occurs during any time that the Notes are outstanding, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07(c) of the Indenture, then the premium specified in Section 3.07(c) of the Indenture as being payable upon an optional redemption prior to June 15, 2007 shall become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. 11. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. A1-7 12. No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. 13. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 14. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of June 6, 2003, between the Company, the Guarantors and the parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Company, the Guarantors and the other parties thereto, relating to rights given by the Company and the Guarantors to the purchasers of Additional Notes (the "Registration Rights Agreement"). 15. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP 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 Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 16. Guarantee. The Company's obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors. 17. Copies of Documents. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Texas Industries, Inc. 1341 West Mockingbird Lane Dallas, TX 75247 Facsimile: 972-647-3320 Attention: Robert C. Moore, General Counsel A1-8 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to:___________________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Note 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 face of this Note) Signature Guarantee*:___________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-9 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box below: [ ] Section 4.10 [ ] Section 4.14 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $________________ Date:_____________ Your Signature:_________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.:_________________________ Signature Guarantee*:__________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-10 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount at Amount of Decrease in Amount of Increase in Maturity Signature of Principal Amount at Principal Amount at of this Global Note Authorized Officer Maturity Maturity Following such of Trustee or Date of Exchange of this Global Note of this Global Note decrease (or increase) Note Custodian ---------------- ------------------- ------------------- ---------------------- --------------
A1-11 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Texas Industries, Inc. 1341 West Mockingbird Lane Dallas, Texas 75247 Attention: General Counsel Wells Fargo Bank, National Association 505 Main Street, Suite 301 Fort Worth, TX 76102 Attention: Corporate Trust Administration Re: 10 1/4% Senior Notes due 2011 Reference is hereby made to the Indenture, dated as of June 6, 2003 (the "Indenture"), among Texas Industries, Inc., a Delaware corporation (the "Company"), the Guarantors, and Wells Fargo Bank, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________ (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount at maturity of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] [ ] 1. Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. [ ] 2. Check if Transferee will take delivery of a beneficial interest in a Legended Regulation S Global Note, or a Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the B-1 Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Legended Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. [ ] 3. Check and complete if Transferee will take delivery of a Restricted Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): [ ] (a) such Transfer is being effected to the Company or a subsidiary thereof; or [ ] (b) such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such transfer is in respect of an aggregate principal amount of Notes less than $100,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Definitive Notes and in the Indenture and the Securities Act. 4. Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note. [ ] (a) Check if Transfer is Pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities B-2 laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. [ ] (b) Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and, in the case of a transfer from a Restricted Global Note or a Restricted Definitive Note, the Transferor hereby further certifies that (a) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (b) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (c) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (d) the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person, and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. [ ] (c) Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. B-3 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. Dated:____________________ _____________________________________ [Insert Name of Transferor] By:_____________________________________ Name: Title: B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (A) OR (B)] [ ] (A) A BENEFICIAL INTEREST IN THE: (i) 144A Global Note (CUSIP __________); or (ii) Regulation S Global Note (CUSIP _______); or [ ] (B) A RESTRICTED DEFINITIVE NOTE. 2. After the Transfer the Transferee will hold: [CHECK ONE] [ ] (A) A BENEFICIAL INTEREST IN THE: (i) 144A Global Note (CUSIP __________); or (ii) Regulation S Global Note (CUSIP _______); or (iii) Unrestricted Global Note (CUSIP _______); or [ ] (B) A RESTRICTED DEFINITIVE NOTE; OR [ ] (C) AN UNRESTRICTED DEFINITIVE NOTE, in accordance with the terms of the Indenture. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Texas Industries, Inc. 1341 West Mockingbird Lane Dallas, Texas 75247 Attention: General Counsel Wells Fargo Bank, National Association 505 Main Street, Suite 301 Fort Worth, TX 76102 Attention: Corporate Trust Administration Re: 10 1/4% Senior Notes due 2011 Reference is hereby made to the Indenture, dated as of June 6, 2003 (the "Indenture"), among Texas Industries, Inc., a Delaware corporation (the "Company"), the Guarantors and Wells Fargo Bank, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________ (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount at maturity of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note [ ] (a) Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount at maturity, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. [ ] (b) Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the C-1 Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. [ ] (c) Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. [ ] (d) Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes [ ] (a) Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount at maturity, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. [ ] (b) Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, C-2 with an equal principal amount at maturity, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. Dated:_____________________ ___________________________________ [Insert Name of Transferor] By:________________________________ Name: Title: C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Texas Industries, Inc. 1341 West Mockingbird Lane Dallas, Texas 75247 Attention: General Counsel Wells Fargo Bank, National Association 505 Main Street, Suite 301 Fort Worth, TX 76102 Attention: Corporate Trust Administration Re: 10 1/4% Senior Notes due 2011 Reference is hereby made to the Indenture, dated as of June 6, 2003 (the "Indenture"), among Texas Industries, Inc., a Delaware corporation (the "Company"), the Guarantors and Wells Fargo Bank, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount at maturity of: (a) [ ] beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only: (i)(a) to a person whom we reasonably believe is a qualified institutional buyer (as defined in Rule 144A under the securities act) in a transaction meeting the requirements of Rule 144A, (b) in a transaction meeting the requirements of Rule 144 under the Securities Act, (c) outside the United States to a non-U.S. person in a transaction meeting the requirements of Rule 903 or 904 under the Securities Act, (d) to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2) (3) or (7) of the Securities Act (an D-1 "Institutional Accredited Investor")) that, prior to such transfer, furnishes the trustee a signed letter substantially in the form of this letter and, if such transfer is in respect of an aggregate principal amount of Notes less than $100,000, an Opinion of Counsel acceptable to the issuer that such transfer is in compliance with the Securities Act, or (e) in accordance with another exemption from the registration requirements of the Securities Act (and based upon an Opinion of Counsel if the Company so requests), (ii) to the Company, or (iii) pursuant to an effective registration statement and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction; and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and 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 Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Dated:_____________________ ______________________________________ [Insert Name of Accredited Investor] By:___________________________________ Name: Title: D-2 EXHIBIT E FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of June 6, 2003 (the "Indenture") among Texas Industries, Inc., the other Guarantors (as defined in the Indenture) and Wells Fargo Bank, National Association, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, and the due and punctual payment of interest on overdue principal premium, if any, and interest and Liquidated Damages, if any, on the Notes, if lawful(subject in all cases to any applicable grace period provided herein), and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and the Notes and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth in Article Ten of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions and (b) appoints the Trustee attorney-in-fact of such Holder for such purpose. E-1 IN WITNESS HEREOF, each Guarantor has caused this Notation of Guarantee to be signed manually or by facsimile by its duly authorized officer. [NAME OF GUARANTOR] By:______________________ Name: Title: E-2 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS Supplemental Indenture (this "Supplemental Indenture"), dated as of _____________, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of Texas Industries, Inc. (or its permitted successor), a Delaware corporation (the "Company"), and Wells Fargo Bank, National Association (or its permitted successor), as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company and the other Guarantors party thereto have heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of June 6, 2003 providing for the issuance of 10 1/4% Senior Notes due 2011 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Note Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is 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 Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Agreement to Guarantee. (a) The Guaranteeing Subsidiary, along with all other Guarantors, jointly and severally, and fully and unconditionally, guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes, if lawful (subject in all cases to any applicable grace period provided herein), and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in F-1 accordance with the terms hereof and thereof; and the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes, if lawful (subject in all cases to any applicable grace period provided herein) (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. The Guaranteeing Subsidiary agrees that this is a guarantee of payment and not a guarantee of collection. (b) The Guaranteeing Subsidiary hereby agrees that, to the maximum extent permitted under applicable law, its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a Guarantor. (c) The Guaranteeing Subsidiary, subject to Section 6.06 of the Indenture, hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (d) The Guaranteeing Subsidiary agrees that if any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any custodian, trustee, liquidator or other similar official acting in relation to any of the Company or the Guarantors, any amount paid by any of them to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (e) The Guaranteeing Subsidiary agrees that the Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (f) The Guaranteeing Subsidiary agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six of the Indenture for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article Six of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. F-2 (g) The Guaranteeing Subsidiary shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of Holders under the Note Guarantee. (h) The Guaranteeing Subsidiary confirms, pursuant to Section 10.02 of the Indenture, that it is the intention of such Guaranteeing Subsidiary that its Note Guarantee 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 its Note Guarantee and, to effectuate the foregoing intention, agrees hereby irrevocably that the obligations of such Guaranteeing Subsidiary will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guaranteeing Subsidiary 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 Guarantor in respect of the obligations of such other Guarantor under Article Ten of the Indenture, result in the obligations of such Guaranteeing Subsidiary under its Note Guarantee not constituting a fraudulent transfer or conveyance. 3. Execution and Delivery. The Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. 4. Guaranteeing Subsidiary May Consolidate, Etc., on Certain Terms. (a) A Guarantor may not sell or otherwise dispose of all or substantially all of its assets, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or another Guarantor, unless: (i) immediately after giving effect to that transaction, no Default or Event of Default exists; and (ii) either: (A) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger (if other than the Guarantor) is a corporation or limited liability company organized or existing under the laws of the United States, any state thereof or the District of Columbia and assumes all the obligations of that Guarantor under the Indenture, its Note Guarantee and the Registration Rights Agreement pursuant to a supplemental indenture reasonably satisfactory to the Trustee; or (B) such sale or other disposition or consolidation or merger complies with Section 4.10 of the Indenture. (b) In case of any such consolidation, merger, sale or conveyance governed by Section 4(a) hereof and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and reasonably satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance F-3 of all of the covenants and conditions of the Indenture to be performed by a Guarantor, such successor Person shall succeed to and be substituted for a Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. 5. Release. (a) Any Guarantor will be released and relieved of any obligations under its Note Guarantee, (i) in connection with any sale or other disposition of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) an Affiliate of the Company, if the sale of all such Capital Stock of that Guarantor complies with Section 4.10 of the Indenture; (ii) if the Company properly designates that Guarantor as an Unrestricted Subsidiary under the Indenture or (iii) upon the release or discharge of the Guarantee which resulted in the creation of such Note Guarantee pursuant to Section 4.18(b) of the Indenture, except a discharge or release by or as a result or payment under such Guarantee. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that one of the foregoing requirements has been satisfied and the conditions to the release of a Guarantor under this Section 5 have been satisfied, the Trustee shall execute any documents reasonably required in order to evidence the release of such Guarantor from its obligations under its Note Guarantee. (b) Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest and Liquidated Damages, if any, on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article Ten of the Indenture. 6. No Recourse Against Others. Pursuant to Section 12.07 of the Indenture, no director, officer, employee, incorporator or stockholder of the Guaranteeing Subsidiary shall have any liability for any obligations of such Guaranteeing Subsidiary under the Notes, the Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. 7. NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE. 8. 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. 9. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. F-4 10. Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. F-5 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, ____ [Guaranteeing Subsidiary] By:__________________________ Name: Title: TEXAS INDUSTRIES, INC. By:__________________________ Name: Title: Wells Fargo Bank, National Association , AS TRUSTEE By:__________________________ Name: Title: F-6 EX-4.6 4 d06928exv4w6.txt EX-4.6 FORM OF 10 1/4% SENIOR EXCHANGE NOTE EXHIBIT 4.6 FORM OF EXCHANGE NOTE [Include the following legend for Global Notes only: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN 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 SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS A GLOBAL SECURITY AS REFERRED TO IN THE INDENTURE HEREINAFTER REFERENCED. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE 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.] CUSIP [ ] No. [ ] **$ ** ------------ TEXAS INDUSTRIES, INC. 10 1/4% Senior Notes due 2011 Issue Date: Texas Industries, Inc., a Delaware corporation (the "Company", which term includes any successor under this Indenture hereinafter referred to), for value received, promises to pay to CEDE & CO., or its registered assigns, the principal sum of [Amount of Note] ($_______) on June 15, 2011. Interest Payment Dates: June 15 and December 15, commencing December 15, 2003. Record Dates: June 1 and December 1. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. TEXAS INDUSTRIES, INC. By: ------------------------------------ Name: Title: By: ------------------------------------ Name: Title: (Trustee's Certificate of Authentication) This is one of the 10 1/4% Senior Notes due 2011 described in the within-mentioned Indenture. Dated: [ ] WELLS FARGO, NATIONAL ASSOCIATION, as Trustee By: ------------------------------------ Authorized Signatory [Reverse Side of Note] TEXAS INDUSTRIES, INC. 10 1/4% Senior Notes due 2011 Capitalized terms used herein shall have the meanings assigned to them in this Indenture referred to below unless otherwise indicated. 1. Interest. The Company promises to pay interest on the principal amount of this Note at 10 1/4% per annum from the date hereof until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on June 15 and December 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be December 15, 2003. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the record date immediately preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.13 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose in The City of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages, if any, on, all Global Notes and to any Holder of $1.0 million or more of Notes which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, the Trustee under the Indenture shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of June 6, 2003 ("Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Indenture pursuant to which this Note is issued provides that an unlimited aggregate principal amount of Additional Notes may be issued thereunder. 5. Optional Redemption. (a) Except as set forth in paragraph 5(b) below, the Company shall not have the option to redeem any Notes prior to June 15, 2007. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15, of the years indicated below (subject to the right of Holders on the relevant record date to receive interest due on the related interest payment date):
Year Percentage ---- ---------- 2007.................................................................. 105.125% 2008.................................................................. 102.563% 2009 and thereafter................................................... 100.000%
(b) Notwithstanding the foregoing, at any time prior to June 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of Notes originally issued under the Indenture at a redemption price of 110.250% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings of the Company; provided that (A) at least 65% of the aggregate principal amount of the Notes originally issued under the Indenture remains outstanding immediately after the occurrence of such redemption, excluding Notes held by the Company and its Subsidiaries; and (B) the redemption must occur within 45 days of the date of the closing of such Equity Offering. (c) In addition, at any time prior to June 15, 2007, the Company may redeem all or part of the Notes upon not less than 30 days nor more than 60 days' notice at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) accrued and unpaid interest, if any, to the applicable date of redemption, plus (iii) the Make-Whole Premium. 6. Repurchase at Option of Holder. (a) If a Change of Control occurs, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to an offer by the Company (a "Change of Control Offer") at an offer price (a "Change of Control Payment") in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase. Within ten days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on a date (the "Change of Control Payment Date") specified in such notice, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the Indenture and described in such notice. (b) Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds at its option: (i) to repay Indebtedness under the Credit Facilities or Unsubordinated Indebtedness secured by such assets and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; or (ii) to purchase Replacement Assets or make a capital expenditure in or that is used or useful in a Permitted Business. Pending the final applications of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the next preceding sentence will constitute "Excess Proceeds." Within ten days after the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall make an offer (an "Asset Sale Offer") to all Holders of Notes and all holders of other Unsubordinated Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase with the proceeds of sales of assets, to purchase the maximum principal amount of Notes and such other Unsubordinated Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other Unsubordinated Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, Notes and such other Unsubordinated Indebtedness to be purchased shall be selected on a pro rata basis based on the principal amount of Notes and such other Unsubordinated Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. 7. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. 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 and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. Transfer may be restricted as provided in the Indenture. 8. Persons Deemed Owners. The registered Holder of a Note will be treated as its owner for all purposes. 9. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes). Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to, among other things, cure any ambiguity, defect or inconsistency, or to make any change that does not adversely affect the legal rights under the Indenture of any such Holder. 10. Defaults and Remedies. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company or any Significant Subsidiary of the Company (or any Restricted Subsidiaries that together would constitute a Significant Subsidiary), all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company specifying the Event of Default. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium, interest or Liquidated Damages) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Liquidated Damages on, or the principal or premium, if any, of, the Notes. With respect to periods after June 15, 2007, in the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07(a) of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. With respect to periods prior to June 15, 2007, if an Event of Default occurs during any time that the Notes are outstanding, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07(c) of the Indenture, then the premium specified in Section 3.07(c) of the Indenture as being payable upon an optional redemption prior to June 15, 2007 shall become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. 11. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 12. No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. 13. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 14. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP 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 Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 15. Guarantee. The Company's obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors. 16. Copies of Documents. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Texas Industries, Inc. 1341 West Mockingbird Lane Dallas, TX 75247 Facsimile: 972-647-3320 Attention: Robert C. Moore, General Counsel ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: ---------------------------------- (Insert assignee's legal name) - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer this Note 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 face of this Note) Signature Guarantee*: ------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box below: [ ] Section 4.10 [ ] Section 4.14 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $ ---------------------------- Date: ---------------- Your Signature: ------------------------------ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ---------------------- Signature Guarantee*: --------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). [To be attached to Global Notes only: SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE The following increases and decreases in this Global Note have been made: Date of Exchange Amount of decrease Amount of increase Principal Amount of Signature of in Principal Amount in Principal Amount Global Note authorized Officer, of Global Note of Global Note following decrease Trustee or Security (or increase) Custodian]

FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of June 6, 2003 (the "Indenture") among Texas Industries, Inc., the other Guarantors (as defined in the Indenture) and Wells Fargo Bank, National Association, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, and the due and punctual payment of interest on overdue principal, premium, if any, and interest and Liquidated Damages, if any, on the Notes, if lawful (subject in all cases to any applicable grace period provided herein), and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the indenture and the Notes and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth in Article Ten of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions and (b) appoints the Trustee attorney-in-fact of such Holder for such purpose. IN WITNESS HEREOF, each Guarantor has caused this Notation of Guarantee to be signed manually or by facsimile by its duly authorized officer. ATHENS BRICK COMPANY BROOKHOLLOW CORPORATION BROOKHOLLOW OF ALEXANDRIA, INC. BROOKHOLLOW OF VIRGINIA, INC. SOUTHWESTERN FINANCIAL CORPORATION CHAPARRAL STEEL COMPANY CHAPARRAL STEEL HOLDINGS, INC. CHAPARRAL STEEL TRUST CHAPARRAL STEEL TEXAS, INC. CHAPARRAL STEEL MIDLOTHIAN, LP CHAPARRAL (VIRGINIA) INC. CREOLE CORPORATION PACIFIC CUSTOM MATERIALS, INC. RIVERSIDE CEMENT COMPANY PARTIN LIMESTONE PRODUCTS, INC. RIVERSIDE CEMENT HOLDINGS COMPANY TEXAS INDUSTRIES HOLDINGS, INC. TEXAS INDUSTRIES TRUST TXI AVIATION, INC. TXI CALIFORNIA INC. TXI CEMENT COMPANY TXI CORP. TXI OPERATING TRUST TXI OPERATIONS, LP TXI POWER COMPANY TXI RIVERSIDE INC. TXI STAR RECYCLING LP TXI TRANSPORTATION COMPANY By: -------------------------------- Name: Title: EX-4.7 5 d06928exv4w7.txt EX-4.7 REGISTRATION RIGHTS AGREEMENT Exhibit 4.7 $600,000,000 10 1/4% SENIOR NOTES DUE 2011 REGISTRATION RIGHTS AGREEMENT BY AND AMONG TEXAS INDUSTRIES, INC., THE SUBSIDIARIES LISTED IN SCHEDULE A, AS GUARANTORS AND BANC OF AMERICA SECURITIES LLC UBS WARBURG LLC BANC ONE CAPITAL MARKETS, INC. WELLS FARGO SECURITIES, LLC SUNTRUST CAPITAL MARKETS, INC. COMERICA SECURITIES, INC. CREDIT LYONNAIS SECURITIES (USA) INC. HIBERNIA SOUTHCOAST CAPITAL, INC. DATED AS OF JUNE 6, 2003 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of June 6, 2003, by and among Texas Industries, Inc., a Delaware corporation (the "Company"), the Guarantors listed in Schedule A attached hereto (the "Guarantors") and Banc of America Securities LLC, UBS Warburg LLC , Banc One Capital Markets, Inc. Wells Fargo Securities, LLC, SunTrust Capital Markets, Inc., Comerica Securities, Inc., Credit Lyonnais Securities (USA) Inc. and Hibernia Southcoast Capital, Inc. (each an "Initial Purchaser" and, collectively, the "Initial Purchasers"), each of whom has agreed to purchase the Company's 10 1/4% Senior Notes due 2011 (the "Initial Securities") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated as of May 30, 2003 (the "Purchase Agreement"), by and among the Company, the Guarantors and the Initial Purchasers (i) for the benefit of each Initial Purchaser and (ii) for the benefit of the holders from time to time of the Securities (including each Initial Purchaser). In order to induce the Initial Purchasers to purchase the Initial Securities, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 5 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Advice: As defined in Section 6 hereof. Broker-Dealer: Any broker or dealer registered with the Commission under the Exchange Act. Closing Date: The date of this Agreement. Commission: The United States Securities and Exchange Commission. Consummate: A registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Securities to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of Exchange Securities in the same aggregate principal amount as the aggregate principal amount of Initial Securities that were tendered by Holders thereof pursuant to the Exchange Offer. Effectiveness Target Date: As defined in Sections 3(a) hereof with respect to the Exchange Offer Registration Statement and as defined in Section 4(a) hereof with respect to a Shelf Registration Statement. Exchange Act: The Securities Exchange Act of 1934, as amended. Exchange Offer: The registration by the Company and the Guarantors under the Securities Act of the Exchange Securities and the guarantees thereof pursuant to a Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Securities and the guarantees thereof in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Exchange Securities: The 10 1/4% Senior Notes due 2011, of the same series under the Indenture as the Initial Securities, to be issued to Holders in exchange for Transfer Restricted Securities pursuant to this Agreement. Exempt Resales: The transactions in which the Initial Purchasers propose to sell the Initial Securities to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Securities Act, and to non-U.S. persons pursuant to Regulation S under the Securities Act. Holder: As defined in Section 2(b) hereof. Indemnified Holder: As defined in Section 8(a) hereof. Indenture: The Indenture, dated as of June 6, 2003, among the Company, the Guarantors and Wells Fargo Bank, National Association, as trustee (the "Trustee"), pursuant to which the Securities are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. Initial Purchaser: As defined in the preamble hereto. Initial Securities: The 10 1/4% Senior Notes due 2011, of the same series under the Indenture as the Exchange Securities, for so long as such securities constitute Transfer Restricted Securities. Initial Placement: The issuance and sale by the Company of the Initial Securities to the Initial Purchasers pursuant to the Purchase Agreement. Liquidated Damages: As defined in Section 5 hereof. NASD: The National Association of Securities Dealers, Inc. Person: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Purchase Agreement: As defined in the preamble hereto. Registrar: As defined in the Indenture. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Company and the Guarantors relating to (a) an offering of Exchange Securities and the related guarantees pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities and the related guarantees pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Securities: The Initial Securities and the Exchange Securities, each individually, a "Security". Securities Act: The Securities Act of 1933, as amended. Shelf Filing Deadline: As defined in Section 4 hereof. 2 Shelf Registration Statement: As defined in Section 4 hereof. Trust Indenture Act: The Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa to 77bbbb) as in effect on the date of the Indenture. Transfer Restricted Security: Each Security, until the earliest to occur of (i) the date on which such Security is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (ii) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement, (iii) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein) and (iv) the date on which such security may be resold without restriction pursuant to Rule 144(k) under the Securities Act. Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 60 days after the Closing Date, a Registration Statement under the Securities Act relating to the Exchange Securities and the Exchange Offer, (ii) use its best efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 180 days after the Closing Date (as such date relates to the Exchange Offer Registration Statement, the "Effectiveness Target Date"), (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities Act and (C) all necessary filings in connection with the registration and qualification of the Exchange Securities to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Exchange Securities and the related guarantees to be offered in exchange for the Transfer Restricted Securities and to permit resales of Securities held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company shall cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 30 days after the date notice of the Exchange Offer is mailed to the Holders. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Securities shall be included in the Exchange Offer Registration Statement. The Company shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become 3 effective, but in no event later than 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement. (c) The Company shall indicate in a "Plan of Distribution" section contained in the Prospectus forming a part of the Exchange Offer Registration Statement that any Broker-Dealer who holds Initial Securities that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Initial Securities pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act ( a "Participating Broker-Dealer") and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Securities received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Securities held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. The Company and the Guarantors shall use their best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Securities and related guarantees acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective and (ii) the date on which a Broker-Dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities. The Company shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 180-day (or shorter as provided in the foregoing sentence) period in order to facilitate such resales. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company is not required to file an Exchange Offer Registration Statement or to Consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), (ii) for any reason the Exchange Offer is not Consummated within 210 days after the Closing Date, or (iii) any Holder of Transfer Restricted Securities shall notify the Company prior to the 20th day following the Consummation of the Exchange Offer that (A) such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) such Holder may not resell the Exchange Securities acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) such Holder is a Broker-Dealer and holds Initial Securities acquired directly from the Company or one of its affiliates, then, upon such Holder's request, the Company and the Guarantors shall: (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement") on or prior to the earliest to occur of (1) the 45th day after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement, and (2) the 45th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (iii) above (such earliest date being the "Shelf Filing 4 Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use their best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 90th day after the Shelf Filing Deadline (as such date relates to a Shelf Registration Statement, the "Effectiveness Target Date"). The Company and the Guarantors shall use their best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Securities by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years following the effective date of such Shelf Registration Statement (or shorter period that will terminate when all the Securities covered by such Shelf Registration Statement have been sold pursuant to such Shelf Registration Statement). (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 business days after receipt of a request therefor, such information as the Company may reasonably request (including, without limitation, the information specified in Items 507 or 508 of Regulation S-K of the Securities Act) for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the applicable Effectiveness Target Date, (iii) the Exchange Offer has not been Consummated within 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company hereby agrees that the interest rate borne by the Transfer Restricted Securities shall be increased by 0.50% per annum during the 90-day period immediately following the occurrence of any Registration Default and shall increase by 0.50% per annum with respect to each subsequent 90-day period, but in no event shall such increase exceed 1.50% per annum (any such interest assessed upon the occurrence of a Registration Default is referred to as "Liquidated Damages"). Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the interest rate borne by the relevant Transfer Restricted Securities shall be reduced to the original interest rate borne by such Transfer Restricted Securities; provided, however, that, if after any such reduction in interest rate, a different Registration Default occurs, the interest rate borne by the relevant Transfer Restricted Securities shall again be increased pursuant to the foregoing provisions. All obligations of the Company and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Security shall have been satisfied in full. 5 SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities and related guarantees being sold in accordance with the intended method or methods of distribution thereof, and shall comply with the following provisions: (i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Initial Securities. The Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. Each of the Company and the Guarantors hereby agrees, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted, and (C) diligently pursue a favorable resolution by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate (as defined in Rule 405 under the Securities Act) of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Securities to be issued in the Exchange Offer, (C) it is acquiring the Exchange Securities in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's preparations for the Exchange Offer, (D) at the time of the commencement of the Exchange Offer, such Holder will have no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities in violation of the provisions of the Securities Act, and (E) if such Holder is a Participating Broker Dealer that will receive Exchange Securities for its own account in exchange for Transfer Restricted Securities that were acquired as a result of market-making or other trading activities, that it will deliver a Prospectus in connection with any resale of such Exchange Securities. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (which may include any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Securities obtained by such Holder in exchange for Initial Securities acquired by such Holder directly from the Company. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company and the Guarantors will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which 6 form shall be available for the sale of the Transfer Restricted Securities and related guarantees in accordance with the intended method or methods of distribution thereof. (c) General Provisions. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities and related guarantees (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Securities by Broker-Dealers), the Company shall: (i) use its best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Securities Act or any regulation thereunder, financial statements of any Guarantor) for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities and related guarantees during the period required by this Agreement, the Company shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities and related guarantees covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities or related guarantees for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities and related guarantees under state securities or Blue Sky laws, the Company and the Guarantors shall use their best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish without charge to each of the Initial Purchasers, each selling Holder named in any Registration Statement, and each of the underwriter(s), if any, before filing with the 7 Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review of such Holders and underwriter(s) in connection with such sale, if any, for a period of at least five business days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which an Initial Purchaser of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s), if any, shall reasonably object in writing within five business days after the receipt thereof (such objection to be deemed timely made upon confirmation of telecopy transmission within such period). The objection of an Initial Purchaser or underwriter, if any, shall be deemed to be reasonable if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus (other than documents filed prior to the filing of the Registration Statement) , provide copies of such document to the Initial Purchasers, each selling Holder named in any Registration Statement, and to the underwriter(s), if any, make the Company's representatives available and representatives of the Guarantors for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (vi) make available at reasonable times for inspection by the Initial Purchasers, each selling Holder, any managing underwriter participating in any disposition pursuant to such Registration Statement and any attorney or accountant retained by such Initial Purchasers, managing underwriter or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (viii) furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including financial statements and schedules, all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (ix) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Company and the Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities and related guarantees covered by the Prospectus or any amendment or supplement thereto; 8 (x) enter into, and cause the Guarantors to enter into, such agreements (including an underwriting agreement), and make, and cause the Guarantors to make, such representations and warranties that are customary in such transactions and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities and related guarantees pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be reasonably requested by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Guarantors shall: (1) furnish to each selling Holder and each underwriter, if any, in such substance and scope as they may reasonably request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the Consummation of the Exchange Offer and, if applicable, the effectiveness of the Shelf Registration Statement: (A) a certificate, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of each of the Company and the Guarantors, confirming, as of the date thereof, the matters set forth in paragraphs (i), (ii) and (iii) of Section 5(f) of the Purchase Agreement, and such other matters as such parties may reasonably request; (B) opinions, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of outside counsel for the Company and general counsel for the Company and the Guarantors, covering the matters set forth in Sections 5(c) and (d) of the Purchase Agreement and such other matters as such parties may reasonably request, and in any event including a statement to the effect that each such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, the Initial Purchasers' representatives and the Initial Purchasers' counsel in connection with the preparation of such Registration Statement and the related Prospectus and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to a large extent upon facts provided to such counsel by officers and other representatives of the Company and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation, contained an 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, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, each such counsel may state further that each such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial 9 statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (C) a customary comfort letter, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 5(a) of the Purchase Agreement, without exception; (2) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (3) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company or the Guarantors pursuant to this clause (xi), if any. If at any time the representations and warranties of the Company and the Guarantors contemplated in this clause (xi) cease to be true and correct, the Company or the Guarantors shall so advise the Initial Purchasers and the underwriter(s), if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; (xi) prior to any public offering of Transfer Restricted Securities, cooperate with, and cause the Guarantors to cooperate with, the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities and related guarantees under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s) may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities and related guarantees covered by the Shelf Registration Statement; provided, however, that the Company and the Guarantors shall not be required to register or qualify as a foreign corporation where they are not then so qualified or to take any action that would subject them to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where they are not then so subject; (xii) shall issue, upon the request of any Holder of Initial Securities covered by the Shelf Registration Statement, Exchange Securities guaranteed by the Guarantors and having an aggregate principal amount equal to the aggregate principal amount of Initial Securities surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Exchange Securities to be registered in the name of such Holder or in the name of the purchaser(s) of such Securities, as the case may be; in return, the Initial Securities held by such Holder shall be surrendered to the Company for cancellation; (xiii) cooperate with, and cause the Guarantors to cooperate with, the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); 10 (xiv) use its best efforts to cause the Transfer Restricted Securities and the guarantees thereof covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xi) above; (xv) if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (xvi) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use its reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with The Depositary Trust Company; (xviii) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xix) cause the Indenture to be qualified under the Trust Indenture Act not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate, and cause the Guarantors to cooperate with, the Trustee and the Holders of Securities to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and to execute and use its best efforts to cause the Trustee to execute, and cause the Guarantors to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; (xx) cause all Transfer Restricted Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed if requested by the Holders of a majority in aggregate principal amount of Initial Notes or the managing underwriter(s), if any; and (xxi) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act. (d) Restrictions on Holders. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the 11 copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice; however, no such extension shall be taken into account in determining whether Liquidated Damages are due pursuant to Section 5 hereof or the amount of such Liquidated Damages, it being agreed that the Company's option to suspend use of a Registration Statement pursuant to this paragraph shall be treated as a Registration Default for purposes of Section 5. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne by the Company and the Guarantors, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Initial Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Securities to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Exchange Securities on a national securities exchange or automated quotation system pursuant to the requirements thereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Shearman & Sterling or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors, jointly and severally, agree to indemnify and hold harmless (i) each Holder and (ii) each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the persons referred to in this clause (ii) being hereinafter referred to as a "controlling person") and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (any person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to the fullest 12 extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing, settling, compromising, paying or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Holder), joint or several, directly or indirectly caused by, related to, based upon, or arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Company by any of the Holders expressly for use therein. This indemnity agreement shall be in addition to any liability which the Company and the Guarantors may otherwise have In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to which indemnity may be sought against the Company or the Guarantors, such Indemnified Holder (or the Indemnified Holder controlled by such controlling person) shall promptly notify the Company and the Guarantors in writing (provided, however, that the failure to give such notice shall not relieve the Company or the Guarantors of their respective obligations pursuant to this Agreement). Such Indemnified Holder shall have the right to employ its own counsel in any such action and the fees and expenses of such counsel shall be paid, as incurred, by the Company and the Guarantors (regardless of whether it is ultimately determined that an Indemnified Holder is not entitled to indemnification hereunder). The Company and the Guarantors shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for such Indemnified Holders, which firm shall be designated by the Holders. The Company shall be liable for any settlement of any such action or proceeding effected with the Company's prior written consent, which consent shall not be withheld unreasonably, and the Company agrees to indemnify and hold harmless any Indemnified Holder from and against any loss, claim, damage, liability or expense by reason of any settlement of any action effected with the written consent of the Company. The Company shall not, without the prior written consent of each Indemnified Holder, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Holder is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Holder from all liability arising out of such action, claim, litigation or proceeding. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors and their respective directors, officers of the Company who sign a Registration Statement, and any person controlling (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company, and the respective officers, directors, partners, employees, representatives and agents of each such person, to the same extent as the foregoing indemnity from the Company and the Guarantors to each of the Indemnified Holders, but only with respect to claims and actions based on information relating to such Holder furnished in writing by such Holder expressly for use in any Registration Statement. In case any action or proceeding shall be brought against the Company or its directors or officers or any such controlling person in respect of which indemnity may be sought against a Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given the Company and the Company or its directors or officers or such controlling person shall have the rights and duties given to each Holder by the preceding paragraph. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Securities giving rise to such indemnification obligation. 13 (c) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities, judgments, actions or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other hand, from the Initial Placement (which in the case of the Company shall be deemed to be equal to the total net proceeds from the Initial Placement received by the Company and the Guarantors), the amount of Liquidated Damages which did not become payable as a result of the filing of the Registration Statement resulting in such losses, claims, damages, liabilities, judgments actions or expenses, and such Registration Statement, or if such allocation is not permitted by applicable law, the relative fault of the Company and the Guarantors, on the one hand, and of the Indemnified Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors, on the one hand, and of the Indemnified Holder, on the other, 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 information supplied by the Company or by the Indemnified Holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company, the Guarantors and each Holder of Transfer Restricted Securities agree that it would not be just and equitable if contribution pursuant to this Section 8(c) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, none of the Holders (and its related Indemnified Holders) shall be required to contribute, in the aggregate, any amount in excess of the dollar amount by which the total discount received by any such Holder with respect to the Initial Securities exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such 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. The Holders' obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Initial Securities held by each of the Holders hereunder and not joint. SECTION 9. RULE 144A The Company and the Guarantors each hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, and during any period the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings required thereunder in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. 14 SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such 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 the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) Remedies. The Company and the Guarantors hereby agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not, and will cause the Guarantors not to, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor the Guarantors have entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Securities. The Company will not take any action, or permit any change to occur, with respect to the Securities that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered; provided that, with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser with respect to which such amendment, qualification, supplement, waiver, consent or departure is to be effective. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), facsimile, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and 15 (ii) if to the Company and the Guarantors: Texas Industries, Inc. 1341 West Mockingbird Lane Dallas, Texas 75247 Attention: General Counsel with a copy to: Thompson & Knight LLP 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Attention: Joe Dannenmaier All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if facsimiled; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) Counterparts. This Agreement may be executed in any number of counterparts 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. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the Purchase Agreement and the DTC Agreement, the Securities, and the Indenture (each as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 16 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TEXAS INDUSTRIES, INC. By: /s/ KENNETH R. ALLEN -------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer ATHENS BRICK COMPANY BROOKHOLLOW CORPORATION BROOK HOLLOW PROPERTIES, INC. BROOKHOLLOW OF ALEXANDRIA, INC. BROOKHOLLOW OF VIRGINIA, INC. SOUTHWESTERN FINANCIAL CORPORATION, CHAPARRAL STEEL COMPANY CHAPARRAL STEEL HOLDINGS, INC. CHAPARRAL STEEL TRUST CHAPARRAL STEEL TEXAS, INC. CHAPARRAL STEEL MIDLOTHIAN, LP CHAPARRAL (VIRGINIA) INC. CREOLE CORPORATION PACIFIC CUSTOM MATERIALS, INC. RIVERSIDE CEMENT COMPANY PARTIN LIMESTONE PRODUCTS, INC. RIVERSIDE CEMENT HOLDINGS COMPANY TEXAS INDUSTRIES HOLDINGS, INC. TEXAS INDUSTRIES TRUST TXI AVIATION, INC. TXI CALIFORNIA INC. TXI CEMENT COMPANY TXI CORP. TXI OPERATING TRUST TXI OPERATIONS, LP TXI POWER COMPANY TXI RIVERSIDE INC. TXI STAR RECYCLING LP, TXI TRANSPORTATION COMPANY By: /s/ KENNETH R. ALLEN -------------------------- Name: Kenneth R. Allen Title: Authorized Officer The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. BANC OF AMERICA SECURITIES LLC UBS WARBURG LLC BANC ONE CAPITAL MARKETS, INC. WELLS FARGO SECURITIES, LLC SUNTRUST CAPITAL MARKETS, INC. COMERICA SECURITIES, INC. CREDIT LYONNAIS SECURITIES (USA) INC. HIBERNIA SOUTHCOAST CAPITAL, INC. BY: BANC OF AMERICA SECURITIES LLC By: /s/ STEPHAN JAEGER ------------------------- Stephan Jaeger Principal SCHEDULE A LIST OF GUARANTORS Athens Brick Company Brookhollow Corporation Brook Hollow Properties, Inc. Brookhollow of Alexandria, Inc. Brookhollow of Virginia, Inc. Southwestern Financial Corporation Chaparral Steel Company Chaparral Steel Holdings, Inc. Chaparral Steel Trust Chaparral Steel Texas, Inc. Chaparral Steel Midlothian, LP Chaparral (Virginia) Inc. Creole Corporation Pacific Custom Materials, Inc. Riverside Cement Company Partin Limestone Products, Inc. Riverside Cement Holdings Company Texas Industries Holdings, Inc. Texas Industries Trust TXI Aviation, Inc. TXI California Inc. TXI Cement Company TXI Corp. TXI Operating Trust TXI Operations, LP TXI Power Company TXI Riverside Inc. TXI Star Recycling LP TXI Transportation Company EX-5.1 6 d06928exv5w1.txt EX-5.1 OPINION OF THOMPSON & KNIGHT LLP EXHIBIT 5.1 [Thompson & Knight LLP Letterhead] June 26, 2003 Texas Industries. Inc. 1341 West Mockingbird Lane, Suite 700W Dallas, Texas 75247 Dear Sirs: We have acted as special counsel for Texas Industries, Inc., a Delaware corporation (the "COMPANY"), in connection with the Company's offer (the "EXCHANGE OFFER") to exchange its 10.25% Senior Notes due 2011 to be registered under the Securities Act of 1933 (the "EXCHANGE NOTES") for any and all of its outstanding 10.25% Senior Notes due 2011 (the "OUTSTANDING NOTES"). The Outstanding Notes are, and the Exchange Notes will be, fully and unconditionally guaranteed (the "SUBSIDIARY GUARANTEES," and together with the Exchange Notes, the "SECURITIES") on a joint and several basis by Athens Brick Company, Brookhollow Corporation, Chaparral Steel Company, Chaparral Steel Holdings, Inc., Chaparral Steel Texas, Inc., Chaparral (Virginia) Inc., Creole Corporation, Riverside Cement Holdings Company, Texas Industries Holdings, Inc., TXI California Inc., TXI Cement Company, TXI Corp., and TXI Riverside Inc., each a Delaware corporation; Chaparral Steel Trust, Texas Industries Trust, TXI Operating Trust, each a Delaware statutory trust; TXI Operations, LP, TXI Star Recycling, LP and Chaparral Steel Midlothian, LP, each a Delaware limited partnership; Pacific Custom Materials, Inc. and Partin Limestone Products, Inc., each a California corporation; Riverside Cement Company, a California general partnership; Brook Hollow Properties, Inc., Southwestern Financial Corporation, TXI Aviation, Inc., TXI Power Company and TXI Transportation Company, each a Texas corporation, Brookhollow of Alexandria, Inc., a Louisiana corporation and Brookhollow of Virginia, Inc., a Virginia corporation (collectively, the "INITIAL SUBSIDIARY Guarantors"). The Outstanding Notes have been, and the Exchange Notes will be, issued pursuant to an Indenture dated as of June 6, 2003 (the "INDENTURE"), among the Company, the Initial Subsidiary Guarantors and Wells Fargo Bank, National Association, as Trustee. In connection with such matters, we have examined the Indenture (including the Subsidiary Guarantees contained therein), the registration statement on Form S-4 filed by the Company and the Initial Subsidiary Guarantors with the Securities and Exchange Commission for the registration of the Securities under the Securities Act of 1933 (the registration statement, as amended at the time it becomes effective, being referred to as the "REGISTRATION STATEMENT") and such corporate or partnership records of the Company and the Initial Subsidiary Guarantors, certificates of officials of the Company, the Initial Subsidiary Guarantors and public officials and such other documents as we have deemed necessary or appropriate for the purpose of this opinion. We have assumed the genuineness of all signatures, the authenticity of all documents Texas Industries, Inc. June 26, 2003 Page 2 submitted to us as originals, the conformity to authentic original documents of all copies submitted to us as conformed and certified or reproduced copies. Based upon the foregoing, subject to the qualifications hereinafter set forth, and having regard for such legal considerations as we deem relevant, we are of the opinion that the Securities proposed to be issued pursuant to the Exchange Offer have been duly authorized for issuance and, subject to the Registration Statement becoming effective under the Securities Act of 1933, and to compliance with any applicable state securities laws, when issued and delivered in accordance with the Exchange Offer and the Indenture, (i) the Exchange Notes will constitute valid and legally binding obligations of the Company, entitled to the benefits of the Indenture and the Subsidiary Guarantees contained therein, and (ii) the Subsidiary Guarantees will constitute valid and legally binding obligations of the Initial Subsidiary Guarantors. The opinions expressed above are limited by, subject to and based on the assumptions, limitations and qualifications set forth below: (a) The validity and binding effect of the Exchange Notes and the Subsidiary Guarantees may be limited or affected by bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other similar laws relating to or affecting creditors' rights generally and by general equitable principles (regardless of whether such validity and binding effect are considered in a proceeding in equity or at law), and except as rights to indemnity and contribution under the Indenture (including the Subsidiary Guarantees contained therein) may be limited by applicable laws or policies underlying such laws. (b) We express no opinion as to the enforceability of any provisions of the Exchange Notes or the Indenture providing for (i) the waiver of a right of immunity, stay, extension, or usury laws, or (ii) any party's consent to jurisdiction or venue. (c) This opinion is limited in all respects to the laws of the State of Texas, the federal laws of the United States, and, only as to the enforceability of the Exchange Notes and the Subsidiary Guarantees, the laws of the State of New York. We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to us under the caption "Legal Matters" in the Prospectus forming 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 Securities Act of 1933 and the rules and regulations of the Securities and Exchange Commission thereunder. Sincerely, /s/ THOMPSON & KNIGHT LLP EX-5.2 7 d06928exv5w2.txt EX-5.2 OPINION OF ROBERT C. MOORE Exhibit 5.2 [TEXAS INDUSTRIES, INC. LETTERHEAD] June 26, 2003 Texas Industries, Inc. 1341 West Mockingbird Lane, Suite 700W Dallas, Texas 75247 Ladies and Gentlemen: I am the General Counsel of Texas Industries, Inc., a Delaware corporation (the "COMPANY"). This letter is prepared in connection with the registration, pursuant to a registration statement on Form S-4 (as may be amended, the "REGISTRATION STATEMENT"), filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "ACT"), of (i) the proposed offer by the Company to exchange (the "EXCHANGE OFFER") all outstanding 10 1/4% Senior Notes due 2011 ($600 million aggregate principal amount outstanding) (the "OUTSTANDING NOTES") of the Company for new 10 1/4% Senior Notes due 2011 ($600 million aggregate principal amount) (the "EXCHANGE NOTES") of the Company and (ii) the guarantees of the Exchange Notes (the "SUBSIDIARY GUARANTEES") by each of Athens Brick Company, Brookhollow Corporation, Chaparral Steel Company, Chaparral Steel Holdings, Inc., Chaparral Steel Texas, Inc., Chaparral (Virginia) Inc., Creole Corporation, Riverside Cement Holdings Company, Texas Industries Holdings, Inc., TXI California Inc., TXI Cement Company, TXI Corp., and TXI Riverside Inc., each a Delaware corporation; Chaparral Steel Trust, Texas Industries Trust, TXI Operating Trust, each a Delaware statutory trust; TXI Operations, LP, TXI Star Recycling, LP and Chaparral Steel Midlothian, LP, each a Delaware limited partnership; Pacific Custom Materials, Inc. and Partin Limestone Products, Inc., each a California corporation; Riverside Cement Company, a California general partnership; Brook Hollow Properties, Inc., Southwestern Financial Corporation, TXI Aviation, Inc., TXI Power Company and TXI Transportation Company, each a Texas corporation, Brookhollow of Alexandria, Inc., a Louisiana corporation and Brookhollow of Virginia, Inc., a Virginia corporation (each, a "SUBSIDIARY GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS"). The Outstanding Notes have been, and the Exchange Notes will be, issued pursuant to an Indenture (the "INDENTURE") dated as of June 6, 2003 among the Company, Wells Fargo Bank, National Association, as Trustee, and the Subsidiary Guarantors party thereto. I have examined originals or certified copies of such corporate records of the Company and the Subsidiary Guarantors and other certificates and documents of officials of the Company, the Subsidiary Guarantors, public officials and others as I have deemed appropriate for purposes of this letter. I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, the conformity to authentic original documents of all copies submitted to me as conformed and certified or reproduced copies. Texas Industries, Inc. June 26, 2003 Page 2 Based upon the foregoing and subject to the assumptions, exceptions, qualifications and limitations set forth hereinafter, I am of the opinion that: 1. The Company is a corporation, validly existing and in good standing under the laws of the State of Delaware. 2. The Company has the power and authority to own its properties and conduct its business as described in the Registration Statement. 3. The Company has all power and authority necessary to execute and deliver the Indenture and the Exchange Notes and to perform its obligations thereunder. 4. The Company has duly authorized, executed and delivered the Indenture. 5. The Exchange Notes have been duly authorized by all necessary corporate action on the part of the Company and, when executed by the Company, properly authenticated and delivered by the Trustee pursuant to the Indenture, and exchanged for Outstanding Notes in accordance with the Indenture and the Exchange Offer, will be duly issued and delivered by the Company. 6. Each of Athens Brick Company, Brookhollow Corporation, Chaparral Steel Company, Chaparral Steel Holdings, Inc., Chaparral Steel Texas, Inc., Chaparral (Virginia) Inc., Creole Corporation, Riverside Cement Holdings Company, Texas Industries Holdings, Inc., TXI California Inc., TXI Cement Company, TXI Corp., and TXI Riverside Inc. is a corporation, validly existing and in good standing under the laws of Delaware. 7. Each of Chaparral Steel Trust, Texas Industries Trust and TXI Operating Trust is a statutory trust, validly existing and in good standing under the laws of Delaware. 8. Each of TXI Operations, LP, TXI Star Recycling, LP and Chaparral Steel Midlothian, LP is a limited partnership, validly existing and in good standing under the laws of Delaware. 9. Each of Pacific Custom Materials, Inc. and Partin Limestone Products, Inc. is a corporation, validly existing and in good standing under the laws of California. 10. Riverside Cement Company, is a general partnership, validly existing and in good standing under the laws of California. 11. Each of Brook Hollow Properties, Inc., Southwestern Financial Corporation, TXI Aviation, Inc., TXI Power Company and TXI Transportation Company is a corporation, validly existing and in good standing under the laws of Texas. Texas Industries, Inc. June 26, 2003 Page 3 12. Brookhollow of Alexandria, Inc. is a corporation, validly existing and in good standing under the laws of Louisiana. 13. Brookhollow of Virginia, Inc., is a corporation, validly existing and in good standing under the laws of Virginia. 14. The Subsidiary Guarantors have all power and authority necessary to execute and deliver the Indenture and to perform their obligations thereunder. 15. The Subsidiary Guarantors have duly authorized, executed and delivered the Indenture. The opinion and other matters in this letter are qualified in their entirety and subject to the following: A. I am a member of the bar of the State of Texas and do not hold myself out as being conversant with the laws of any jurisdiction other than those of the State of Texas, the United States of America and, to the extent relevant to the opinions expressed above, the applicable laws of the State of Delaware, the State of California, the State of Texas, the State of Louisiana and the State of Virginia, and I express no opinion herein with respect to the law of any such other jurisdiction. B. With respect to the opinion in paragraphs 6 through 13 that the Subsidiary Guarantors validly exist and are in good standing under the laws of the states of the jurisdiction of their incorporation or organization, I have given such opinion based solely on certificates to that effect issued by the Secretary of State of the states set forth on Exhibit A. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of my name in the prospectus forming a part of the Registration Statement under the caption "Legal Matters." In giving this consent, I do not thereby admit that I am within the category of persons whose consent is required under Section 7 of the Act and the rules and regulations thereunder. I also consent to your filing copies of this opinion as an exhibit to the Registration Statement. Very truly yours, TEXAS INDUSTRIES, INC. By: /s/ Robert C. Moore --------------------------------------- Robert C. Moore Vice President - General Counsel EXHIBIT A
INCORPORATED OR ORGANIZED IN: ----------------------------- TEXAS INDUSTRIES, INC. Delaware Athens Brick Company Delaware Brookhollow Corporation Delaware Brook Hollow Properties, Inc. Texas Brookhollow of Alexandria, Inc. Louisiana Brookhollow of Virginia, Inc. Virginia Southwestern Financial Corporation Texas Chaparral Steel Company Delaware Chaparral Steel Holdings, Inc. Delaware Chaparral Steel Trust Delaware Chaparral Steel Texas, Inc. Delaware Chaparral Steel Midlothian, LP Delaware Chaparral (Virginia) Inc. Delaware Creole Corporation Delaware Pacific Custom Materials, Inc. California Riverside Cement Company California Partin Limestone Products, Inc. California Riverside Cement Holdings Company Delaware Texas Industries Holdings, Inc. Delaware Texas Industries Trust Delaware TXI Aviation, Inc. Texas TXI California Inc. Delaware TXI Cement Company Delaware TXI Corp. Delaware TXI Operating Trust Delaware TXI Operations, LP Delaware TXI Power Company Texas TXI Riverside Inc. Delaware TXI Star Recycling LP Delaware TXI Transportation Company Texas
EX-10.2 8 d06928exv10w2.txt EX-10.2 CREDIT AGREEMENT Exhibit 10.2 CREDIT AGREEMENT Dated as of June 6, 2003 among THE FINANCIAL INSTITUTIONS NAMED HEREIN, as the Lenders, BANK OF AMERICA, N. A., as the Administrative Agent, TEXAS INDUSTRIES, INC., as an Obligated Party, and TXI OPERATIONS, LP, RIVERSIDE CEMENT COMPANY, CHAPARRAL STEEL MIDLOTHIAN, LP, and CHAPARRAL (VIRGINIA) INC., as the Borrowers BANC OF AMERICA SECURITIES LLC Sole Lead Arranger and Book Manager TABLE OF CONTENTS ARTICLE 1 - LOANS AND LETTERS OF CREDIT................................................................................... 1 Section 1.1 Total Facility........................................................................ 1 Section 1.2 Revolving Loans....................................................................... 1 Section 1.3 Letters of Credit..................................................................... 5 Section 1.4 Bank Products......................................................................... 10 ARTICLE 2 - INTEREST AND FEES............................................................................................. 10 Section 2.1 Interest.............................................................................. 10 Section 2.2 Continuation and Conversion Elections................................................. 11 Section 2.3 Maximum Interest Rate................................................................. 13 Section 2.4 Unused Line Fee....................................................................... 14 Section 2.5 Letter of Credit Fee.................................................................. 14 Section 2.6 Other Fees............................................................................ 14 ARTICLE 3 - PAYMENTS AND PREPAYMENTS...................................................................................... 15 Section 3.1 Revolving Loans....................................................................... 15 Section 3.2 Termination of Total Facility......................................................... 15 Section 3.3 Prepayment of the Revolving Loans..................................................... 16 Section 3.4 LIBOR Rate Revolving Loan Prepayments................................................. 16 Section 3.5 Payments by the Borrowers............................................................. 16 Section 3.6 Payments as Revolving Loans........................................................... 17 Section 3.7 Apportionment, Application, and Reversal of Payments.................................. 17 Section 3.8 Indemnity for Returned Payments....................................................... 18 Section 3.9 The Administrative Agent's and the Lenders' Books and Records; Monthly Statements.................................................................... 18 ARTICLE 4 - TAXES, YIELD PROTECTION, AND ILLEGALITY....................................................................... 19 Section 4.1 Taxes................................................................................. 19 Section 4.2 Illegality............................................................................ 20 Section 4.3 Increased Costs and Reduction of Return............................................... 20 Section 4.4 Funding Losses........................................................................ 21 Section 4.5 Inability to Determine Rates.......................................................... 21 Section 4.6 Certificates of the Administrative Agent.............................................. 22 Section 4.7 Survival.............................................................................. 22 Section 4.8 Replacement of Affected Lender........................................................ 22 ARTICLE 5 - BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES............................................................. 23 Section 5.1 Books and Records..................................................................... 23 Section 5.2 Financial Information................................................................. 23 Section 5.3 Notices to the Lender................................................................. 27 ARTICLE 6 - GENERAL WARRANTIES AND REPRESENTATIONS........................................................................ 30 Section 6.1 Authorization, Validity, and Enforceability of this Agreement and the other Loan Documents; No Conflicts.................................................... 30 Section 6.2 Validity and Priority of Security Interest............................................ 30

TABLE OF CONTENTS i Section 6.3 Corporate Name; Prior Transactions.................................................... 31 Section 6.4 Capitalization and Subsidiaries....................................................... 31 Section 6.5 Financial Statements and Projections.................................................. 31 Section 6.6 Solvency.............................................................................. 32 Section 6.7 Debt.................................................................................. 32 Section 6.8 Distributions......................................................................... 32 Section 6.9 Real Estate; Leases................................................................... 32 Section 6.10 Proprietary Rights.................................................................... 32 Section 6.11 Trade Names........................................................................... 33 Section 6.12 Litigation............................................................................ 33 Section 6.13 Labor Matters......................................................................... 33 Section 6.14 Environmental Laws.................................................................... 33 Section 6.15 No Violation of Law................................................................... 34 Section 6.16 No Default............................................................................ 34 Section 6.17 ERISA Compliance...................................................................... 35 Section 6.18 Taxes................................................................................. 35 Section 6.19 Regulated Entities.................................................................... 35 Section 6.20 Use of Proceeds; Margin Regulations................................................... 36 Section 6.21 No Material Adverse Change............................................................ 36 Section 6.22 Full Disclosure....................................................................... 36 Section 6.23 Material Agreements................................................................... 36 Section 6.24 Bank Accounts......................................................................... 36 Section 6.25 Governmental Authorization............................................................ 36 Section 6.26 Reserved.............................................................................. 36 Section 6.27 Common Enterprise..................................................................... 36 Section 6.28 Tax Shelter Regulations............................................................... 37 ARTICLE 7 - AFFIRMATIVE AND NEGATIVE COVENANTS............................................................................ 37 Section 7.1 Taxes and Other Obligations........................................................... 37 Section 7.2 Legal Existence and Good Standing..................................................... 37 Section 7.3 Compliance with Law and Agreements; Maintenance of Licenses........................... 38 Section 7.4 Maintenance of Property; Inspection of Property....................................... 38 Section 7.5 Insurance............................................................................. 38 Section 7.6 Insurance and Condemnation Proceeds................................................... 39 Section 7.7 Environmental Laws.................................................................... 39 Section 7.8 Compliance with ERISA................................................................. 40 Section 7.9 Mergers, Consolidations, or Sales..................................................... 40 Section 7.10 Distributions; Capital Change; Restricted Investments................................. 42 Section 7.11 Transactions Resulting in a Material Adverse Effect................................... 42 Section 7.12 Guaranties............................................................................ 42 Section 7.13 Debt.................................................................................. 43 Section 7.14 Prepayment............................................................................ 43 Section 7.15 Transactions with Affiliates.......................................................... 43 Section 7.16 Investment Banking and Finder's Fees.................................................. 44 Section 7.17 Business Conducted.................................................................... 44 Section 7.18 Liens................................................................................. 44 Section 7.19 Reserved.............................................................................. 44

TABLE OF CONTENTS ii Section 7.20 New Subsidiaries; Addition of Subsidiaries as Borrowers............................... 44 Section 7.21 Fiscal Year........................................................................... 44 Section 7.22 Fixed Charge Coverage Ratio........................................................... 44 Section 7.23 Tangible Net Worth.................................................................... 45 Section 7.24 Use of Proceeds....................................................................... 45 Section 7.25 Lenders as Depository................................................................. 45 Section 7.26 Landlord and Bailee Agreements........................................................ 46 Section 7.27 Guaranties of the Obligations......................................................... 46 Section 7.28 Additional Collateral; Further Assurances............................................. 46 ARTICLE 8 - CONDITIONS OF LENDING......................................................................................... 47 Section 8.1 Conditions Precedent to Making of Revolving Loans on the Closing Date................. 47 Section 8.2 Conditions Precedent to Each Loan..................................................... 51 ARTICLE 9 - DEFAULT; REMEDIES............................................................................................. 52 Section 9.1 Events of Default..................................................................... 52 Section 9.2 Remedies.............................................................................. 55 ARTICLE 10 - TERM AND TERMINATION......................................................................................... 57 Section 10.1 Term and Termination.................................................................. 57 ARTICLE 11 - AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS................................................. 57 Section 11.1 Amendments and Waivers................................................................ 57 Section 11.2 Assignments; Participations........................................................... 59 ARTICLE 12 - THE ADMINISTRATIVE AGENT..................................................................................... 62 Section 12.1 Appointment and Authorization......................................................... 62 Section 12.2 Delegation of Duties.................................................................. 62 Section 12.3 Liability of the Administrative Agent................................................. 62 Section 12.4 Reliance by the Administrative Agent.................................................. 63 Section 12.5 Notice of Default..................................................................... 63 Section 12.6 Credit Decision....................................................................... 63 Section 12.7 Indemnification....................................................................... 64 Section 12.8 The Administrative Agent in Individual Capacity....................................... 64 Section 12.9 Successor Administrative Agent........................................................ 65 Section 12.10 Withholding Tax....................................................................... 65 Section 12.11 Collateral Matters.................................................................... 67 Section 12.12 Restrictions on Actions by the Lenders; Sharing of Payments........................... 68 Section 12.13 Agency for Perfection................................................................. 68 Section 12.14 Payments by the Administrative Agent to the Lenders................................... 69 Section 12.15 Settlement............................................................................ 69 Section 12.16 Letters of Credit; Intra-Lender Issues................................................ 73 Section 12.17 Concerning the Collateral and the Related Loan Documents.............................. 75 Section 12.18 Field Audit and Examination Reports; Disclaimer by the Lenders........................ 75 Section 12.19 Relation Among the Lenders............................................................ 76

TABLE OF CONTENTS iii ARTICLE 13 - MISCELLANEOUS................................................................................................ 76 Section 13.1 No Waivers; Cumulative Remedies....................................................... 76 Section 13.2 Severability.......................................................................... 76 Section 13.3 Governing Law; Choice of Forum; Service of Process.................................... 77 Section 13.4 Waiver of Jury Trial.................................................................. 78 Section 13.5 Survival of Representations and Warranties............................................ 78 Section 13.6 Other Security and Guaranties......................................................... 78 Section 13.7 Fees and Expenses..................................................................... 78 Section 13.8 Notices............................................................................... 79 Section 13.9 Waiver of Notices..................................................................... 80 Section 13.10 Binding Effect........................................................................ 80 Section 13.11 Indemnity of the Administrative Agent and the Lenders by the Borrower................. 80 Section 13.12 Limitation of Liability............................................................... 81 Section 13.13 Final Agreement....................................................................... 82 Section 13.14 Counterparts.......................................................................... 82 Section 13.15 Captions.............................................................................. 82 Section 13.16 Right of Setoff....................................................................... 82 Section 13.17 Confidentiality....................................................................... 83 Section 13.18 Conflicts with other Loan Documents................................................... 84 Section 13.19 Joint and Several Liability........................................................... 84 Section 13.20 Contribution and Indemnification among the Borrowers.................................. 85 Section 13.21 Agency of the Parent for each Obligated Party......................................... 85 Section 13.22 Additional Borrowers and Guarantors................................................... 86 Section 13.23 Express Waivers By the Obligated Parties In Respect of Cross Guaranties and Cross Collateralization................................................ 86

TABLE OF CONTENTS iv EXHIBITS: Exhibit A - Form of Revolving Loan Note Exhibit B - Form of Borrowing Base Certificate Exhibit C - Form of Compliance Certificate Exhibit D - Form of Notice of Borrowing Exhibit E - Form of Notice of Continuation/Conversion Exhibit F - Form of Assignment and Acceptance SCHEDULES: Schedule 6.3 - Prior Names Schedule 6.4 - Capitalization; Subsidiaries Schedule 6.7 - Debt Schedule 6.9 - Real Estate; Leases Schedule 6.10 - Material Proprietary Rights Schedule 6.11 - Trade Names Schedule 6.12 - Litigation Schedule 6.13 - Labor Matters Schedule 6.14 - Environmental Matters Schedule 6.17 - ERISA Schedule 6.23 - Material Agreements Schedule 6.24 - Bank Accounts Schedule A-1 - Commitments Schedule A-2 - Permitted Liens Schedule A-3 - Investments Schedule A-4 - Existing Letters of Credit TABLE OF CONTENTS v CREDIT AGREEMENT This Credit Agreement, dated as of June 6, 2003, ("Agreement") among the financial institutions from time to time parties hereto (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), Bank of America, N.A., with an office at 55 South Lake Avenue, Suite 900, Pasadena, California 91101, as administrative agent for the Lenders (in its capacity as administrative agent, the "Administrative Agent"), TXI Operations, LP, Riverside Cement Company, Chaparral Steel Midlothian, LP, and Chaparral (Virginia) Inc. (each individually a "Borrower" and collectively, the "Borrowers"), and Texas Industries, Inc. (the "Parent" and, collectively with the Borrowers, the "Obligated Parties"). RECITALS: A. Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed thereto in Annex A which is attached hereto and incorporated herein. The rules of construction contained in Annex A shall govern the interp retation of this Agreement, and all Annexes, Exhibits, and Schedules attached hereto are incorporated herein by reference. B. The Obligated Parties have requested the Lenders to make available to the Borrowers a revolving credit facility for loans and letters of credit in the aggregate principal amount of $200,000,000, which extensions of credit the Borrowers will use for the purposes permitted by Section 7.24. C. The Lenders have agreed to make available to the Borrowers a revolving credit facility upon the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the Lenders, the Agent, and the Obligated Parties hereby agree as follows. ARTICLE 1 LOANS AND LETTERS OF CREDIT Section 1.1 Total Facility. Subject to the terms and conditions of this Agreement, the Lenders agree to make available a total credit facility of up to $200,000,000 (the "Total Facility") for use by any one or more of the Borrowers from time to time during the term of this Agreement. The Total Facility shall be composed of a revolving line of credit consisting of Revolving Loans and Letters of Credit as described in Section 1.2 and Section 1.3. Section 1.2 Revolving Loans. (a) Amounts. Subject to the satisfaction of the conditions precedent set forth in Article 8, each Lender severally, but not jointly, agrees, upon a Borrower's request from time to time on any Business Day during the period from the Closing Date to the Termination Date, to make revolving loans (the "Revolving Loans") to the Borrowers in CREDIT AGREEMENT - Page 1 amounts not to exceed such Lender's Pro Rata Share of the Availability, except for Non-Ratable Loans and Agent Advances. The Lenders, however, in their unanimous discretion, may elect to make Revolving Loans or issue or arrange to have issued Letters of Credit in excess of the Availability or the Borrowing Base on one or more occasions, but if they do so, neither the Agent nor the Lenders shall be deemed thereby to have changed the limits of the Availability or the Borrowing Base or to be obligated to exceed such limits on any other occasion. If (i) any requested Borrowing would exceed Availability or (ii) after giving effect to any requested Borrowing the Aggregate Revolver Outstandings would exceed the amount of the Borrowing Base, then the Lenders may refuse to make or may otherwise restrict the making of Revolving Loans and the issuance of Letters of Credit as the Lenders determine until such excess has been eliminated, subject to the Administrative Agent's authority, in its sole discretion, to make Agent Advances pursuant to the terms of Section 1.2(j). (b) Revolving Loan Notes. The Borrowers shall execute and deliver to each Lender a promissory note to evidence the Revolving Loans of that Lender (each a "Revolving Loan Note" and, collectively, the "Revolving Loan Notes"). Each Revolving Loan Note shall be in the principal amount of the applicable Lender's Pro Rata Share of the Commitments, dated as of the Closing Date or the date of any assignment of a portion of any Lender's Revolving Loans, and substantially in the form of Exhibit A. Each Revolving Loan Note shall represent the obligation of the Borrowers to pay the amount of the applicable Lender's Pro Rata Share of the Commitments, or, if less, such Lender's Pro Rata Share of the aggregate unpaid principal amount of all Revolving Loans to the Borrowers together with interest thereon as prescribed in this Agreement. The entire unpaid balance of the Revolving Loans and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Termination Date. (c) Procedure for Borrowing. (i) Each Borrowing of Revolving Loans shall be made upon a Borrower's irrevocable written notice delivered to the Administrative Agent in the form of a notice of borrowing in the form attached hereto as Exhibit D (a "Notice of Borrowing"), which must be received by the Administrative Agent prior to 11:00 a.m. (Dallas, Texas time) (y) three Business Days prior to the requested Funding Date, in the case of LIBOR Rate Revolving Loans and (z) on the requested Funding Date, in the case of Base Rate Revolving Loans, specifying: (A) the amount of the Borrowing, which in the case of LIBOR Rate Revolving Loans shall be in an amount that is not less than $1,000,000 or an integral multiple of $100,000 in excess thereof or in the case of Base Rate Revolving Loans shall be in an amount that is not less than $500,000 or an integral multiple of $50,000 in excess thereof; (B) the requested Funding Date, which shall be a Business Day; CREDIT AGREEMENT - Page 2 (C) whether the Revolving Loans requested are to be Base Rate Revolving Loans or LIBOR Rate Revolving Loans; provided that if such Borrower fails to specify whether any Revolving Loans are to be Base Rate Revolving Loans or LIBOR Rate Revolving Loans, such request shall be deemed a request for Base Rate Revolving Loans; (D) the duration of the Interest Period if the requested Revolving Loans are to be LIBOR Rate Revolving Loans; provided that if such Borrower fails to select the duration of the Interest Period with respect to any requested LIBOR Rate Revolving Loans, such Borrower shall be deemed to have requested such Revolving Loans be made as LIBOR Rate Revolving Loans with an Interest Period of one month in duration; and (E) whether the proceeds of such Borrowing are to be deposited to the Designated Account or sent by wire transfer to a third party, in which case such Borrower shall provide the Administrative Agent with written wire transfer instructions satisfactory to the Administrative Agent; provided, however, that with respect to the Borrowing to be made on the Closing Date, such Borrowing will consist of Base Rate Revolving Loans only. (ii) With respect to any request for Base Rate Revolving Loans, in lieu of delivering a Notice of Borrowing, a Borrower may give the Administrative Agent telephonic notice of such request for advances to the Designated Account not later than the required time specified in clause (i) preceding. The Administrative Agent at all times shall be entitled to rely on such telephonic notice in making any such Revolving Loans, regardless of whether any written confirmation is received by the Administrative Agent. (iii) The Borrowers shall have no right to request a LIBOR Rate Revolving Loan while a Default or an Event of Default exists. (d) Disbursement. The Borrowers shall deliver to the Administrative Agent, prior to the Closing Date, a notice setting forth the deposit account (the "Designated Account") to which the Administrative Agent is authorized by the Borrowers to transfer the proceeds of the Revolving Loans requested hereunder. Each of the Borrowers agrees that the Designated Account may be established in the name of any other Borrower, and hereby agrees that the Designated Account has been established for the benefit of all of the Borrowers for receipt of the proceeds of Revolving Loans hereunder. Each Borrower hereby appoints each other Borrower as its agent with respect to receipt of the proceeds of Revolving Loans in the Designated Account as contemplated herein. The Borrowers may designate a replacement Designated Account from time to time by written notice to the Administrative Agent. Any designation by the Borrowers of the Designated Account must be reasonably acceptable to the Administrative Agent. CREDIT AGREEMENT - Page 3 (e) Reliance Upon Authority; No Liability. The Administrative Agent is entitled to rely conclusively on any individual's request for Revolving Loans on behalf of a Borrower, so long as the proceeds thereof are to be transferred to the Designated Account or according to such other instructions as may be provided to the Administrative Agent pursuant to Section 1.2(c)(i)(E). The Administrative Agent shall have no duty to verify the identity of any individual representing himself or herself as a person authorized by any Borrower to make such requests on its behalf. The Administrative Agent shall not incur any liability to the Borrowers as a result of acting upon any notice referred to in Section 1.2(c) and Section 1.2(d), which the Administrative Agent reasonably believes to have been given by an officer or other person duly authorized by a Borrower to request Revolving Loans on its behalf or for otherwise acting under this Section 1.2. The crediting of Revolving Loans to the Designated Account, or wire transfer to such Person as a Borrower shall direct, shall conclusively establish the obligation of the Borrowers to repay such Revolving Loans as provided herein. (f) Notice Irrevocable. Any Notice of Borrowing (or telephonic notice in lieu thereof) made pursuant to Section 1.2(c) shall be irrevocable and such Borrowers shall be bound to borrow the funds requested therein in accordance therewith. (g) The Administrative Agent's Election. Promptly after receipt of a Notice of Borrowing (or telephonic notice in lieu thereof) of LIBOR Rate Revolving Loans, the Administrative Agent shall elect in its discretion to have the terms of Section 1.2(h), Section 1.2(i), or the terms of Section 1.2(j) apply to such requested Borrowing. If the Bank declines in its sole discretion to make a Non-Ratable Loan pursuant to Section 1.2(i) or an Agent Advance pursuant to Section 1.2(j), the terms of Section 1.2(h) shall apply to the requested Borrowing. (h) Making of Revolving Loans. If the Administrative Agent elects to have the terms of this Section 1.2(h) apply to a requested Borrowing, then promptly after receipt of a Notice of Borrowing or telephonic notice in lieu thereof, the Administrative Agent shall notify the Lenders by telecopy, telephone, or e-mail of the requested Borrowing. Each Lender shall transfer its Pro Rata Share of the requested Borrowing to the Administrative Agent in immediately available funds, to the account from time to time designated by the Administrative Agent, not later than 1:00 p.m. (Dallas, Texas time) on the applicable Funding Date. After the Administrative Agent's receipt of all proceeds of such requested Borrowing, the Administrative Agent shall make the proceeds of such requested Borrowing available to the applicable Borrower on the applicable Funding Date by transferring same day funds to the Designated Account; provided, however, that the amount of Revolving Loans so made on any date shall not exceed the Availability on such date prior to giving effect to such requested Borrowing. (i) Making of Non-Ratable Loans. If the Administrative Agent elects, with the consent of the Bank, to have the terms of this Section 1.2(i) apply to a requested Borrowing, the Bank shall make a Revolving Loan in the amount of such requested Borrowing available to the Borrowers on the applicable Funding Date by transferring same day funds to the Designated Account. Each Revolving Loan made solely by the Bank pursuant to this Section 1.2(i) is referred to hereinafter as a "Non-Ratable Loan," CREDIT AGREEMENT - Page 4 and such Revolving Loans are collectively referred to as the "Non-Ratable Loans." Each Non-Ratable Loan shall be subject to all the terms and conditions applicable to other Revolving Loans except that all payments thereon shall be payable to the Bank solely for its own account. The aggregate amount of Non-Ratable Loans outstanding at any time shall not exceed $20,000,000. The Administrative Agent shall not request the Bank to make any Non-Ratable Loan if (A) the Administrative Agent has received written notice from any Lender that one or more of the applicable conditions precedent set forth in Article 8 will not be satisfied on the requested Funding Date for the applicable Borrowing, or (B) the requested Borrowing exceeds the Availability on the applicable Funding Date prior to giving effect to such requested Borrowing. The Non-Ratable Loans shall be secured by the Administrative Agent's Liens in and to the Collateral and shall constitute Base Rate Revolving Loans and Obligations hereunder. (j) Agent Advances. Subject to the limitations set forth below, the Administrative Agent is authorized by the Borrowers and the Lenders, from time to time in the Administrative Agent's sole discretion, (i) after the occurrence of a Default or an Event of Default, or (ii) at any time that any of the other conditions precedent set forth in Article 8 have not been satisfied, to make Base Rate Revolving Loans to the Borrowers or any Borrower on behalf of the Lenders in an aggregate amount outstanding at any time not to exceed $10,000,000 which the Administrative Agent, in its reasonable business judgment, deems necessary or desirable (A) to preserve or protect the Collateral, or any portion thereof, (B) to enhance the likelihood of, or maximize the amount of, repayment of the Revolving Loans and other Obligations, or (C) to pay any other amount chargeable to the Borrowers pursuant to the terms of this Agreement, including costs, fees, and expenses as described in Section 13.7 (any of such advances are herein referred to as "Agent Advances"); provided that the Required Lenders may at any time revoke the Administrative Agent's authorization to make Agent Advances; provided, further, that after giving effect to the making of any Agent Advance, the Aggregate Revolver Outstandings shall not exceed the Maximum Revolver Amount. Any such revocation must be in writing and shall become effective prospectively upon the Administrative Agent's receipt thereof. Absent such revocation, the Administrative Agent's determination that the making of an Agent Advance is required for any such purposes shall be conclusive. The Agent Advances shall be secured by the Agent's Liens in and to the Collateral and shall constitute Base Rate Revolving Loans and Obligations hereunder. Section 1.3 Letters of Credit. (a) Agreement to Issue or Cause to Issue. Subject to the terms and conditions of this Agreement, the Administrative Agent agrees to cause the Letter of Credit Issuer to issue for the account of any of the Borrowers (whether one or more) one or more commercial/documentary and standby letters of credit (each a "Letter of Credit" and collectively, the "Letters of Credit") from time to time during the term of this Agreement. Notwithstanding any other provision of this Agreement, the Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof. CREDIT AGREEMENT - Page 5 (b) Amounts; Outside Expiration Date. The Administrative Agent shall not have any obligation to issue or cause to be issued any Letter of Credit at any time if: (i) the maximum face amount of the requested Letter of Credit is greater than the Unused Letter of Credit Subfacility at such time; (ii) the maximum undrawn amount of the requested Letter of Credit and all commissions, fees, and charges due from such Borrower in connection with the opening thereof would exceed the Availability at such time; (iii) such Letter of Credit has an expiration date later than 30 days prior to the Stated Termination Date; or (iv) such Letter of Credit has an expiration date later than twelve calendar months from the date of issuance for standby letters of credit and six calendar months from the date of issuance for commercial/documentary letters of credit, provided that any Letter of Credit issued hereunder may include an "evergreen" or automatic renewal provision of the type referenced in Section 1.3(d)(iii) without contravening the requirement contained in this Section 1.3(b)(iv). (c) Other Conditions. In addition to being subject to the satisfaction of the applicable conditions precedent contained in Article 8, the obligation of the Administrative Agent to cause to be issued any Letter of Credit is subject to the following conditions precedent having been satisfied in a manner reasonably satisfactory to the Administrative Agent: (i) the Borrowers shall have delivered to the Letter of Credit Issuer, at such times and in such manner as the Letter of Credit Issuer may prescribe, an application in form and substance satisfactory to the Letter of Credit Issuer and reasonably satisfactory to the Administrative Agent for the issuance of the Letter of Credit and such other documents as may be required pursuant to the terms thereof, and the form, terms, and purpose of the proposed Letter of Credit shall be satisfactory to the Administrative Agent and the Letter of Credit Issuer (provided that in the event any term of such application or any other document is inconsistent with the terms of this Agreement and the Letter of Credit Issuer is either the same Person as the Administrative Agent or any Lender, then the terms of this Agreement shall be controlling); and (ii) as of the date of issuance, no order of any court, arbitrator, or Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit, and no law, rule, or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that the proposed Letter of Credit Issuer refrain from, the issuance of letters of credit generally or the issuance of such proposed Letters of Credit. (d) Issuance of Letters of Credit. (i) Request for Issuance. Any Borrower that wishes to cause the issuance of a Letter of Credit must notify the Administrative Agent of such request for issuance at least three Business Days prior to the proposed issuance CREDIT AGREEMENT - Page 6 date. Such notice shall be irrevocable and must specify the original face amount of the Letter of Credit requested, the Business Day of issuance of such requested Letter of Credit, whether such Letter of Credit may be drawn in a single or in partial draws, the Business Day on which the requested Letter of Credit is to expire, the purpose for which such Letter of Credit is to be issued, and the beneficiary of the requested Letter of Credit. The applicable Borrower shall attach to such notice the proposed form of the Letter of Credit. (ii) Responsibilities of the Administrative Agent; Issuance. The Administrative Agent shall determine, as of the Business Day immediately preceding the requested issuance date of the Letter of Credit set forth in the notice from a Borrower pursuant to Section 1.3(d)(i), (A) the amount of the Unused Letter of Credit Subfacility and (B) the Availability as of such date. If the face amount of the requested Letter of Credit is not greater than the Unused Letter of Credit Subfacility and the amount of such requested Letter of Credit and all commissions, fees, and charges due from the Borrower in connection with the opening thereof does not exceed the Availability, the Administrative Agent shall cause the Letter of Credit Issuer to issue the requested Letter of Credit on the requested issuance date so long as the other conditions hereof are met. (iii) Extensions and Amendments. The Administrative Agent shall not be obligated to cause the Letter of Credit Issuer to extend or amend any Letter of Credit issued pursuant hereto unless the requirements of this Section 1.3 are met as though a new Letter of Credit were being requested and issued. Each of the Existing Letters of Credit shall be terminated upon the expiration date set forth therein. With respect to any Letter of Credit which contains any "evergreen" or automatic renewal provision, each Lender shall be deemed to have consented to any such extension or renewal unless such Lender shall have provided to the Administrative Agent, written notice that it declines to consent to any such extension or renewal at least 30 days prior to the date on which the Letter of Credit Issuer is entitled to decline to extend or renew the Letter of Credit; provided that, notwithstanding the foregoing, if all of the requirements of this Section 1.3 are met and no Default or Event of Default has occurred and is continuing, no Lender may decline to consent to any such extension or renewal. (e) Payments Pursuant to Letters of Credit. The Borrowers agree to reimburse the Letter of Credit Issuer immediately for any draw under any Letter of Credit and to pay the Letter of Credit Issuer the amount of all other charges and fees payable to the Letter of Credit Issuer under or in connection with any Letter of Credit immediately when due, irrespective of any claim, setoff, defense, or other right which any Borrower may have at any time against the Letter of Credit Issuer or any other Person. Each drawing under any Letter of Credit shall constitute a request by the Borrower for whose account such Letter of Credit was issued for a Borrowing of a Base Rate Revolving Loan in the amount of such drawing. The Funding Date with respect to such Borrowing shall be the date of such drawing. (f) Indemnification; Exoneration; Power of Attorney. CREDIT AGREEMENT - Page 7 (i) Indemnification. In addition to amounts payable as elsewhere provided in this Section 1.3, each Borrower agrees to protect, indemnify, pay, and save the Lenders, the Administrative Agent, and, subject to Section 1.3(f)(iv), the Letter of Credit Issuer harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges, and expenses (including attorneys' fees) which any Lender, the Administrative Agent, or the Letter of Credit Issuer may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit. The Borrowers' obligations under this Section 1.3(f) shall survive payment of all other Obligations. (ii) Assumption of Risk by the Borrowers. As among the Borrowers, the Lenders, the Administrative Agent, and, subject to the provisions of Section 1.3(f)(iv), the Letter of Credit Issuer, the Borrowers assume all risks of the acts and omissions of, or misuse of any of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Lenders, the Administrative Agent, and, subject to Section 1.3(f)(iv), the Letter of Credit Issuer shall not be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness, or legal effect of any document submitted by any Person in connection with the application for and issuance of and presentation of drafts with respect to any of the Letters of Credit, even if it should prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent, or forged; (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (C) the failure of the beneficiary of any Letter of Credit to comply duly with conditions required in order to draw upon such Letter of Credit; (D) errors, omissions, interruptions, or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, or otherwise, whether or not they be in cipher; (E) errors in interpretation of technical terms; (F) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (G) the misapplication by the beneficiary of any Letter of Credit of the proceeds of any drawing under such Letter of Credit; (H) any consequences arising from causes beyond the control of the Lenders or the Administrative Agent, including any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority; or (I) the Letter of Credit Issuer's honor of a draw for which the draw or any certificate fails to comply in any respect with the terms of the Letter of Credit. None of the foregoing shall affect, impair, or prevent the vesting of any rights or powers of the Administrative Agent, any Lender, or, subject to Section 1.3(f)(iv), the Letter of Credit Issuer under this Section 1.3(f). (iii) Exoneration. Without limiting the foregoing, no action or omission whatsoever by the Administrative Agent or any Lender (excluding the Bank in its capacity as the Letter of Credit Issuer) under or in connection with any of the Letters of Credit or any related matters shall result in any liability of the CREDIT AGREEMENT - Page 8 Administrative Agent or any Lender to any Borrower, or relieve such Borrower of any of its obligations hereunder to any such Person. (iv) Rights Against Letter of Credit Issuer. Nothing contained in this Agreement is intended to limit any Borrower's rights, if any, with respect to the Letter of Credit Issuer which arise as a result of the letter of credit application and related documents executed by and between such Borrower and the Letter of Credit Issuer. (v) Account Party. Each Borrower hereby authorizes and directs the Letter of Credit Issuer to name any Borrower as the "Account Party" in any Letter of Credit and to deliver to the Administrative Agent all instruments, documents, and other writings and property received by the Letter of Credit Issuer pursuant to each such Letter of Credit, and to accept and rely upon the Administrative Agent's instructions and agreements with respect to all matters arising in connection with each such Letter of Credit or the application therefor. (vi) Power of Attorney. In connection with all Inventory financed by any Letter of Credit, each Borrower hereby appoints the Administrative Agent, or the Administrative Agent's designee, as its attorney-in-fact, with full power and authority: (A) to sign and/or endorse such Borrower's name upon any warehouse or other receipts; (B) to sign such Borrower's name on bills of lading and other negotiable and non-negotiable documents; (C) to clear Inventory through customs in the Administrative Agent's or such Borrower's name, and to sign and deliver to customs officials powers of attorney in such Borrower's name for such purpose; (D) during the existence of an Event of Default, to complete in such Borrower's or the Administrative Agent's name, any order, sale, or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof; and (E) to do such other acts and things as are necessary in order to enable the Administrative Agent to obtain possession or control of such Inventory and to obtain payment of the Obligations. Neither the Administrative Agent nor its designee, as such Borrower's attorney-in-fact, will be liable for any acts or omissions, nor for any error of judgment or mistakes of fact or law other than for gross negligence or willful misconduct. The Administrative Agent will give notice to the Borrowers when it acts pursuant to the foregoing power of attorney; provided that any failure to provide such notice shall not constitute a default by, or result in any liability of, the Administrative Agent under the terms of this Agreement. This power of attorney, being coupled with an interest, is irrevocable until all Obligations have been paid and satisfied. (vii) Control of Inventory. In connection with all Inventory financed by Letters of Credit, the Borrowers will, at the Administrative Agent's request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses, or others receiving or holding cash, checks, Inventory, documents, or instruments in which the Administrative Agent holds a security interest to deliver them to the Administrative Agent and/or subject to the Administrative Agent's order, and if they shall come into any Borrower's possession, to deliver them, upon request, to CREDIT AGREEMENT - Page 9 the Administrative Agent in their original form. The Borrowers shall also, at the Administrative Agent's request, designate the Administrative Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents. (g) Supporting Letter of Credit; Cash Collateral. If, notwithstanding the provisions of Section 1.3(b) and Section 10.1, any Letter of Credit is outstanding upon the termination of this Agreement, then upon such termination the Borrowers shall deposit with the Administrative Agent with respect to each such Letter of Credit then outstanding, either (i) a standby letter of credit (a "Supporting Letter of Credit") in form and substance satisfactory to the Administrative Agent, issued by an issuer satisfactory to the Administrative Agent in an amount equal to 105% of the undrawn face amount of such Letter of Credit, plus any fees and expenses associated with such Letter of Credit, under which Supporting Letter of Credit the Administrative Agent is entitled to draw amounts necessary to reimburse the Administrative Agent and the Lenders for payments to be made by the Administrative Agent and the Lenders under such Letter of Credit and any fees and expenses associated with such Letter of Credit or (ii) cash (a "Supporting Cash Deposit") in an amount equal to 105% of the undrawn face amount of such Letter of Credit, plus any fees and expenses associated with such Letter of Credit. Such Supporting Letter of Credit or Supporting Cash Deposit shall be held by the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, as security for, and to provide for the payment of, the aggregate undrawn amount of such Letters of Credit remaining outstanding. Section 1.4 Bank Products. Any Obligated Party may request, and the Administrative Agent may in its sole and absolute discretion, arrange for any Obligated Party to obtain Bank Products from any Lender or any Lender's Affiliates although no Obligated Party is required to do so. To the extent Bank Products are provided by an Affiliate of any Lender, the Obligated Parties agree to indemnify and hold the Administrative Agent and the Lenders harmless from any and all costs and obligations now or hereafter incurred by the Administrative Agent or any of the Lenders which arise from any indemnity given by a Lender to its Affiliates related to such Bank Products; provided, however, nothing contained herein is intended to limit any Obligated Party's rights, with respect to such Lender or its Affiliates, if any, which arise as a result of the execution of documents by and between such Obligated Party and a Lender or its Affiliates which relate to Bank Products. The agreement contained in this Section shall survive termination of this Agreement. Each Obligated Party acknowledges and agrees that the obtaining of Bank Products from a Lender or its Affiliates (a) is in the sole and absolute discretion of such Lender or its Affiliates, and (b) is subject to all rules and regulations of such Lender or its Affiliates. ARTICLE 2 INTEREST AND FEES Section 2.1 Interest. (a) Interest Rates. Subject to Section 2.3, all outstanding Obligations shall bear interest on the unpaid principal amount thereof (including, to the extent permitted by CREDIT AGREEMENT - Page 10 law, on accrued interest thereon not paid when due) from the date made or incurred until paid in full in cash at a rate determined by reference to the Base Rate or the LIBOR Rate, as applicable, plus the Applicable Margin as set forth below, but not to exceed the Maximum Rate. If at any time Revolving Loans are outstanding with respect to which a Borrower has not delivered to the Administrative Agent a notice specifying the basis for determining the interest rate applicable thereto in accordance herewith, such Revolving Loans shall be Base Rate Revolving Loans and bear interest at a rate determined by reference to the Base Rate until notice to the contrary has been given to the Administrative Agent in accordance with this Agreement and such notice has become effective. Except as otherwise provided herein, the outstanding Obligations shall bear interest as follows: (i) For all Base Rate Revolving Loans and other Obligations (other than LIBOR Rate Revolving Loans) at a fluctuating per annum rate equal to the lesser of (A) the Base Rate, plus the Applicable Margin or (B) the Maximum Rate; and (ii) For all LIBOR Rate Revolving Loans at a per annum rate equal to the lesser of (A) the LIBOR Rate, plus the Applicable Margin or (B) the Maximum Rate. Each change in the Base Rate shall be reflected in the interest rate described in clause (i) preceding as of the effective date of such change. Subject to Section 2.3, all interest charges on the Obligations shall be computed on the basis of a year of 360 days and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365 day year). (b) Default Rate. During the existence of any Default or Event of Default if the Administrative Agent or the Majority Lenders in their discretion so elect, then, while any such Default or Event of Default exists, the Obligations shall bear interest at a rate per annum equal to the lesser of (i) the Default Rate applicable thereto or (ii) the Maximum Rate. (c) Interest Periods. After giving effect to any Borrowing, conversion, or continuation of any LIBOR Rate Revolving Loan, there may not be more than ten different Interest Periods in effect hereunder. Section 2.2 Continuation and Conversion Elections. (a) A Borrower may upon irrevocable written notice to the Administrative Agent in accordance with Section 2.2(b): (i) elect, as of any Business Day, in the case of Base Rate Revolving Loans to convert any such Base Rate Revolving Loans (or any part thereof in an amount not less than $1,000,000, or that is in an integral multiple of $100,000 in excess thereof) into LIBOR Rate Revolving Loans; CREDIT AGREEMENT - Page 11 (ii) elect, as of any Business Day subject to Section 4.4, in the case of LIBOR Rate Revolving Loans to convert any such LIBOR Rate Revolving Loans (or any part thereof not being continued pursuant to clause (iii) next following) into Base Rate Revolving Loans; or (iii) elect, as of the last day of the applicable Interest Period, to continue any LIBOR Rate Revolving Loans having Interest Periods expiring on such day (or any part thereof in an amount not less than $1,000,000, or that is in an integral multiple of $100,000 in excess thereof as LIBOR Rate Revolving Loans); provided, that if at any time the aggregate amount of LIBOR Rate Revolving Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than $1,000,000, such LIBOR Rate Revolving Loans shall automatically convert into Base Rate Revolving Loans; provided, further, that if the notice shall fail to specify the duration of the Interest Period of any LIBOR Rate Revolving Loan to result from any such continuation or conversion, such Interest Period shall be one month in duration. (b) The Borrowers shall deliver a notice of continuation/conversion in the form of Exhibit E (a "Notice of Continuation/Conversion") to the Administrative Agent not later than 1:00 p.m. (Dallas, Texas time) at least three Business Days in advance of the Continuation/Conversion Date, if the Revolving Loans are to be continued as or converted into LIBOR Rate Revolving Loans and specifying: (i) the proposed Continuation/Conversion Date; (ii) the specific Revolving Loans (or portions thereof) and the aggregate amount of such Revolving Loans to be converted or continued; (iii) the type of Revolving Loans resulting from the proposed conversion or continuation; and (iv) the duration of the requested Interest Period, provided, however, the Borrowers may not select an Interest Period that ends after the Stated Termination Date. (c) If upon the expiration of any Interest Period applicable to LIBOR Rate Revolving Loans, the Borrowers have failed to timely select a new Interest Period to be applicable to such LIBOR Rate Revolving Loans or if any Default or Event of Default then exists, the Borrowers shall be deemed to have elected to convert such LIBOR Rate Revolving Loans into Base Rate Revolving Loans effective as of the expiration date of such Interest Period. (d) The Administrative Agent will promptly notify each Lender of its receipt of a Notice of Continuation/Conversion. All continuations and conversions shall be made ratably according to the respective outstanding principal amounts of the Revolving Loans with respect to which such notice was given held by each Lender. CREDIT AGREEMENT - Page 12 Section 2.3 Maximum Interest Rate. In no event shall any Interest Rate provided for in this Agreement exceed the Maximum Rate. If any Interest Rate, absent the limitation set forth in this Section 2.3, would otherwise exceed the Maximum Rate, then such Interest Rate shall be the Maximum Rate, and, if in the future, such Interest Rate would otherwise be less than the Maximum Rate, then such Interest Rate shall remain at the Maximum Rate until such time as the amount of interest paid hereunder equals the amount of interest which would have been paid if the same had not been limited by the Maximum Rate. In the event that, upon payment in full of the Obligations, the total amount of interest paid or accrued under the terms of this Agreement is less than the total amount of interest which would, but for this Section 2.3, have been paid or accrued if the Interest Rate otherwise set forth in this Agreement had at all times been in effect, then the Borrowers shall, to the extent permitted by Requirements of Law, pay the Administrative Agent, for the account of the Lenders, an amount equal to the excess of (a) the lesser of (i) the amount of interest which would have been paid or accrued if the Maximum Rate had, at all times, been in effect or (ii) the amount of interest which would have been paid or accrued had the Interest Rate otherwise set forth in this Agreement, at all times, been in effect over (b) the amount of interest actually paid or accrued under this Agreement. Each of the Administrative Agent, each Lender, and each Borrower acknowledges, agrees, and declares that it is its intention to expressly comply with all Requirements of Law in respect of limitations on the amount or rate of interest that can legally be contracted for, charged, or received under or in connection with the Loan Documents. Notwithstanding anything to the contrary contained in any Loan Document (even if any such provision expressly declares that it controls all other provisions of the Loan Documents), in no contingency or event whatsoever shall the amount of interest (including the aggregate of all charges, fees, benefits, or other compensation which constitutes interest under any Requirement of Law) under the Loan Documents paid by the Borrower, received by the Administrative Agent, the Letter of Credit Issuer, or any Lender, agreed to be paid by any Borrower, or requested or demanded to be paid by the Administrative Agent, the Letter of Credit Issuer, or any Lender, exceed the Maximum Rate, and all provisions of the Loan Documents in respect of the contracting for, charging, or receiving compensation for the use, forbearance, or detention of money shall be limited as provided by this Section 2.3. In the event any such interest is paid to the Administrative Agent, the Letter of Credit Issuer, or any Lender by any Borrower in an amount or at a rate which would exceed the Maximum Rate, the Administrative Agent, the Letter of Credit Issuer, or such Lender, as the case may be, shall automatically apply such excess to any unpaid amount of the Obligations other than interest, in the inverse order of maturity, or if the amount of such excess exceeds said unpaid amount, such excess shall be paid to the applicable Borrower. All interest paid, or agreed to be paid, by the Borrowers, or taken, reserved, or received by the Administrative Agent, the Letter of Credit Issuer, or any Lender, shall be amortized, prorated, spread, and allocated in respect of the Obligations throughout the full term of this Agreement. Notwithstanding any provision contained in any of the Loan Documents, or in any other related documents executed pursuant hereto, neither the Administrative Agent, the Letter of Credit Issuer, nor any Lender shall ever be entitled to charge, receive, take, reserve, collect, or apply as interest any amount which, together with all other interest under the Loan Documents would result in a rate of interest under the Loan Documents in excess of the Maximum Rate and, in the event the Administrative Agent, the Letter of Credit Issuer, or any Lender ever charges, receives, takes, reserves, collects, or applies any amount in respect of any Borrower that otherwise would, together with all other interest under the Loan Documents, be in excess of the Maximum Rate, such amount shall automatically CREDIT AGREEMENT - Page 13 be deemed to be applied in reduction of the unpaid principal balance of the Obligations and, if such principal balance is paid in full, any remaining excess shall forthwith be paid to the applicable Borrower. The Borrowers, the Administrative Agent, the Letter of Credit Issuer, and the Lenders shall, to the maximum extent permitted under any Requirement of Law, (A) characterize any non-principal payment as a standby fee, commitment fee, prepayment charge, delinquency charge, expense, or reimbursement for a third-party expense rather than as interest and (B) exclude prepayments, acceleration, and the effects thereof. Nothing in any Loan Document shall be construed or so operate as to require or obligate the Borrowers to pay any interest, fees, costs, or charges greater than is permitted by any Requirement of Law. Section 2.4 Unused Line Fee. Subject to Section 2.3, until the Revolving Loans have been paid in full and this Agreement terminated, the Borrowers agree to pay to the Administrative Agent, for the account of the Lenders, in accordance with their respective Pro Rata Shares, on the first day of each calendar month and on the Termination Date, an unused line fee (the "Unused Line Fee") equal to 0.375% per annum, multiplied by the amount by which the Maximum Revolver Amount exceeded the sum of the average daily outstanding amount of the Revolving Loans and the average daily undrawn face amount of all outstanding Letters of Credit during the immediately preceding month or shorter period if calculated for the first month after the Closing Date or on the Termination Date. Subject to Section 2.3, the Unused Line Fee shall be computed on the basis of a 360 day year for the actual number of days elapsed. For purposes of calculating the Unused Line Fee pursuant to this Section 2.4, any payment received by the Administrative Agent (if received prior to 1:00 p.m. (Dallas, Texas time)) shall be deemed to be credited to the Borrowers' Loan Account on the Business Day following the date such payment is received by the Administrative Agent. Section 2.5 Letter of Credit Fee. Subject to Section 2.3, the Borrowers agree to pay to the Administrative Agent, for the account of the Lenders, in accordance with their respective Pro Rata Shares, for each Letter of Credit, a fee (the "Letter of Credit Fee") equal to the Letter of Credit Fee Percentage, or during the existence of any Default or Event of Default the Default Rate with respect to Letters of Credit, multiplied by the undrawn face amount of each Letter of Credit, plus all out-of-pocket costs, fees, and expenses incurred by the Letter of Credit Issuer in connection with the application for, processing of, issuance of, or amendment to any Letter of Credit, which costs, fees, and expenses shall include a "fronting fee" in an amount equal to 0.125% of the face amount of such Letter of Credit, payable to the Letter of Credit Issuer on the date of issuance of each Letter of Credit. The Letter of Credit Fee shall be payable monthly in arrears on the first day of each month following any month in which a Letter of Credit was issued and/or in which a Letter of Credit remained outstanding and on the Termination Date. Subject to Section 2.3, the Letter of Credit Fee shall be computed on the basis of a 360 day year for the actual number of days elapsed. Section 2.6 Other Fees. Subject to Section 2.3, the Borrowers agree to pay the Administrative Agent all other fees and expenses as set forth in the Agent's Letter. CREDIT AGREEMENT - Page 14 ARTICLE 3 PAYMENTS AND PREPAYMENTS Section 3.1 Revolving Loans. The Borrowers shall repay the outstanding principal balance of the Revolving Loans, together with all other Obligations, including all accrued and unpaid interest thereon, on the Termination Date (or with respect to any Bank Products, any applicable earlier date). The Borrowers may prepay the Revolving Loans at any time and reborrow subject to the terms of this Agreement; provided that with respect to any LIBOR Rate Revolving Loans prepaid prior to the expiration date of the Interest Period applicable thereto, the Borrowers shall pay to the Administrative Agent, for the account of the Lenders, the amounts described in Section 4.4. In addition, and without limiting the generality of the foregoing, upon demand the Borrowers shall pay to the Administrative Agent, for the account of the Lenders, the amount, if any and without duplication, by which the Aggregate Revolver Outstandings exceeds the lesser of the Borrowing Base or the Maximum Revolver Amount. Accrued interest on the Revolving Loans shall be due and payable in arrears (a) in the case of Base Rate Revolving Loans, on the first day of each calendar month and on the Termination Date and (b) in the case of LIBOR Rate Revolving Loans and with respect to each such Revolving Loan (i) on the last day of the Interest Period with respect thereto, and (ii) on the Termination Date. Section 3.2 Termination of Total Facility. The Borrowers may terminate this Agreement upon at least 60 days prior written notice thereof to the Administrative Agent and the Lenders, upon (a) the payment in full of all outstanding Revolving Loans, together with accrued and unpaid interest thereon, and the cancellation and return of all outstanding Letters of Credit (or alternatively, subject to Section 10.1, with respect to each such Letter of Credit, the furnishing to the Administrative Agent of either a Supporting Cash Deposit or a Supporting Letter of Credit as required by Section 1.3(g)), (b) the payment in full of the early termination fee set forth in the following sentence, (c) the payment in full of all reimbursable expenses and other Obligations together with accrued and unpaid interest thereon, and (d) the payment in full of any amount due under Section 3.4. Subject to Section 2.3, if this Agreement is terminated at any time prior to the second Anniversary Date, whether pursuant to this Section or pursuant to Section 9.2, the Borrowers shall pay to the Administrative Agent, for the account of the Lenders, an early termination fee determined in accordance with the following table: Period during which early termination occurs Early Termination Fee - ----------------------------------------------------------------------------- Prior to the first Anniversary Date 1.00% of the Maximum Revolver Amount - ----------------------------------------------------------------------------- On or after the first Anniversary Date 0.50% of the Maximum Revolver Amount but prior to the second Anniversary Date
Notwithstanding the foregoing, no such early termination fee shall be payable in the event this Agreement is terminated in connection with refinancing of the Obligations in a transaction in which the Bank or any of its Affiliates arranges replacement financing. The Maximum Revolver CREDIT AGREEMENT - Page 15 Amount shall not be reduced except in connection with termination of the Total Facility and payment in full as provided by this Section 3.2. Section 3.3 Prepayment of the Revolving Loans. (a) The Borrowers may prepay the principal of the Revolving Loans, in whole or in part, at any time and from time to time. (b) After the occurrence of a Dominion Event, until completion of a Dominion Termination Period, all proceeds of any Collateral shall be applied to repayment of the Obligations as provided by the Security Agreements and in accordance with Section 3.7. (c) After the occurrence of a Dominion Event, until completion of a Dominion Termination Period, all cash payments or other cash proceeds (as defined in the UCC) received by any Obligated Party constituting proceeds of a Distribution, loan, or other advance (other than a Distribution, loan or advance by an Obligated Party to an Obligated Party) to such Obligated Party, other than proceeds of Revolving Loans, such proceeds which are proceeds of a loan or advance from one Borrower to another Obligated Party, and other than such proceeds which are proceeds of a loan or advance permitted under clause (c) through clause (h) of Section 7.13, shall be paid to the Administrative Agent, promptly upon such receipt, for application to the Revolving Loans. (d) All cash proceeds resulting from any sale or other Disposition permitted pursuant to clause (D) or clause (F) of Section 7.9 shall be applied to repayment of the Obligations in accordance with Section 3.7. (e) No provision contained in this Section 3.3 shall constitute a consent to any disposition of Collateral that is otherwise not permitted by the terms of this Agreement. (f) After the occurrence of a Dominion Event, until completion of a Dominion Termination Period, all cash proceeds arising from the sale of Inventory or collection of Accounts in the ordinary course of business of any Obligated Party shall be applied to repayment of the Obligations as provided by the Security Agreements and in accordance with Section 3.7. Section 3.4 LIBOR Rate Revolving Loan Prepayments. In connection with any prepayment, if any LIBOR Rate Revolving Loans are prepaid prior to the expiration date of the Interest Period applicable thereto, the Borrowers shall pay to the Administrative Agent, for the benefit of the Lenders, the amounts described in Section 4.4. Section 3.5 Payments by the Borrowers. (a) All payments to be made by the Borrowers shall be made without setoff, recoupment, or counterclaim. Without in any way limiting Section 2.10 of the Security Agreements, except as otherwise expressly provided herein, all payments by the Borrowers shall be made to the Administrative Agent, for the account of the Lenders, to CREDIT AGREEMENT - Page 16 the account designated by the Administrative Agent and shall be made in Dollars and in immediately available funds, no later than 1:00 p.m. (Dallas, Texas time) on the date specified herein. Any payment received by the Administrative Agent after such time shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. (b) Subject to the provisions set forth in the definition of Interest Period, whenever any payment is due on a day other than a Business Day, such payment shall be due on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. Section 3.6 Payments as Revolving Loans. At the election of the Administrative Agent, all payments of principal, interest, reimbursement obligations in connection with Letters of Credit, fees, premiums, reimbursable expenses (including, without limitation, all reimbursement for expenses pursuant to Section 13.7), and other sums payable under the Loan Documents, may be paid with the proceeds of Revolving Loans made hereunder whether made following a request for such purpose by the Borrowers pursuant to Section 1.2 or pursuant to a deemed request as provided in this Section 3.6. The Borrowers hereby irrevocably authorize the Administrative Agent to charge the Loan Account for the purpose of paying all amounts from time to time due under the Loan Documents and agree that all such amounts charged shall constitute Revolving Loans (including Non-Ratable Loans and Agent Advances) and that all such Revolving Loans shall be deemed to have been requested pursuant to Section 1.2. Section 3.7 Apportionment, Application, and Reversal of Payments. Principal and interest payments shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Revolving Loans to which such payments relate held by each Lender) and payments of the fees shall, as applicable, be apportioned ratably among the Lenders, except for fees payable solely to the Administrative Agent and the Letter of Credit Issuer and except as provided in Section 11.1(e). All payments shall be remitted to the Administrative Agent and all such payments not relating to principal or interest of specific Revolving Loans, or not constituting payment of specific fees, and all proceeds of any Obligated Party's Accounts or any other Collateral received by the Administrative Agent, shall be applied, ratably, subject to the other provisions of this Agreement, first, to pay any fees, indemnities, or expense reimbursements, then due to the Administrative Agent from the Borrowers, second, to pay any fees or expense reimbursements then due to any of the Lenders from the Borrowers, third, to pay interest due in respect of the Revolving Loans, including Non-Ratable Loans and Agent Advances, fourth, to pay or prepay principal of the Non-Ratable Loans and the Agent Advances, fifth, to pay or prepay principal of the Revolving Loans (other than the Non-Ratable Loans and the Agent Advances) and unpaid reimbursement obligations in respect of Letters of Credit, sixth, during the existence of a Default or an Event of Default, to pay an amount to the Administrative Agent equal to 100% of the aggregate undrawn face amount of all outstanding Letters of Credit and the aggregate amount of any unpaid reimbursement obligations in respect of Letters of Credit, to be held as cash collateral for such Obligations, and seventh, to the payment of any other Obligation including any amounts relating to Bank Products due to the Administrative Agent or any Lender by the Borrowers. Notwithstanding anything to the contrary contained in this Agreement, unless so directed by a Borrower, or unless an Event of Default is in existence, neither the Administrative Agent nor any Lender shall apply any payment which it receives to CREDIT AGREEMENT - Page 17 any LIBOR Rate Revolving Loan, except (a) on the expiration date of the Interest Period applicable to any such LIBOR Rate Revolving Loan, or (b) in the event, and only to the extent, that there are no outstanding Base Rate Revolving Loans and, in any event, the Borrowers shall pay the LIBOR breakage losses in accordance with Section 4.4. Subject to items "first" through "seventh" preceding, the Administrative Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Obligations. Section 3.8 Indemnity for Returned Payments. If after receipt of any payment which is applied to the payment of all or any part of the Obligations, the Administrative Agent, any Lender, the Bank, or any Affiliate of the Bank is for any reason compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason, then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Administrative Agent or such Lender and the Borrowers shall be liable to pay to the Administrative Agent and the Lenders, and each Borrower hereby indemnifies the Administrative Agent and the Lenders and holds the Administrative Agent and the Lenders harmless for the amount of such payment or proceeds surrendered. The provisions of this Section 3.8 shall be and remain effective notwithstanding any contrary action which may have been taken by the Administrative Agent or any Lender in reliance upon such payment or application of proceeds, and any such contrary action so taken shall be without prejudice to the Administrative Agent's and the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment or application of proceeds having become final and irrevocable. The provisions of this Section 3.8 shall survive the termination of this Agreement. Section 3.9 The Administrative Agent's and the Lenders' Books and Records; Monthly Statements. The Administrative Agent shall record the principal amount of the Revolving Loans owing to each Lender, the undrawn face amount of all outstanding Letters of Credit and the aggregate amount of unpaid reimbursement obligations outstanding with respect to the Letters of Credit from time to time on its books. In addition, each Lender may note the date and amount of each payment or prepayment of principal of such Lender's Revolving Loans in its books and records. Failure by the Administrative Agent or any Lender to make any such notation shall not affect the obligations of the Borrowers with respect to the Revolving Loans or the Letters of Credit. The Borrowers agree that the Administrative Agent's books and records showing the Obligations and the transactions pursuant to this Agreement and the other Loan Documents shall be admissible in any action or proceeding arising therefrom, and shall constitute presumptive proof thereof, irrespective of whether any Obligation is also evidenced by a promissory note or other instrument. The Administrative Agent will provide to the Borrowers a monthly statement of Revolving Loans, payments, and other transactions pursuant to this Agreement. Such statement shall be deemed correct, accurate, and binding on the Borrowers and an account stated (except for reversals and reapplications of payments made as provided in Section 3.7 and corrections of errors discovered by the Administrative Agent), unless a Borrower notifies the Administrative Agent in writing to the contrary within 30 days after such statement is rendered. In the event a timely written notice of objections is given by a Borrower, only the items to which exception is expressly made will be considered to be disputed by the Borrowers. CREDIT AGREEMENT - Page 18 ARTICLE 4 TAXES, YIELD PROTECTION, AND ILLEGALITY Section 4.1 Taxes. (a) Any and all payments by the Borrowers, or any of them, to the Administrative Agent or any Lender under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes. In addition, subject to Section 12.10(c), the Borrowers shall pay all Other Taxes. (b) The Borrowers agree to indemnify and hold harmless the Administrative Agent and each Lender for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 4.1) paid by the Administrative Agent or any Lender and any liability (including penalties, interest, additions to tax, and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the Administrative Agent or any Lender makes written demand therefor. (c) If the Borrowers shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to the Administrative Agent or any Lender, then: (i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including, without limitation, deductions and withholdings applicable to additional sums payable under this Section 4.1) the Administrative Agent or such Lender, 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 Borrowers shall make such deductions and withholdings; (iii) the Borrowers shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with any applicable Requirement of Law; and (iv) the Borrowers shall also pay to the Administrative Agent, for the account of each Lender, or each Lender at the time interest is paid, all additional amounts which the respective Lender specifies as necessary to preserve the after-tax yield such Lender would have received if such Taxes or Other Taxes had not been imposed. (d) Within 30 days after the date of any payment by the Borrowers of Taxes or Other Taxes, the Borrowers shall furnish the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Administrative Agent. CREDIT AGREEMENT - Page 19 (e) If the Borrowers are required to pay additional amounts to the Administrative Agent or any Lender pursuant to Section 4.1(c), then the applicable Lender shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its lending office so as to eliminate any such additional payment by the Borrowers which may thereafter accrue, if such change in the judgment of such Lender is not otherwise disadvantageous to such Lender. (f) Notwithstanding anything in this Section 4.1 to the contrary, the demand by the Administrative Agent or any Lender for the payment of Taxes or Other Taxes under this Section 4.1 shall not include any Taxes or Other Taxes which the Administrative Agent or such Lender had knowledge of more than 180 days prior to the date of such demand. Section 4.2 Illegality. (a) If any Lender determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for such Lender or its applicable lending office to make LIBOR Rate Revolving Loans, then, on notice thereof by such Lender to the Borrowers through the Administrative Agent, any obligation of such Lender to make LIBOR Rate Revolving Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrowers that the circumstances giving rise to such determination no longer exist. If a Lender determines that it is unlawful to maintain any LIBOR Rate Revolving Loan, the Borrowers shall, upon receipt of notice of such fact and demand from such Lender (with a copy to the Administrative Agent), prepay in full such LIBOR Rate Revolving Loans of such Lender then outstanding, together with accrued and unpaid interest thereon and amounts required under Section 4.4, either on the last day of the Interest Period thereof, if such Lender may lawfully continue to maintain such LIBOR Rate Revolving Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBOR Rate Revolving Loans. If the Borrowers are required to so prepay any LIBOR Rate Revolving Loans, then concurrently with such prepayment, the Borrowers shall borrow from the affected Lender, in the amount of such repayment, a Base Rate Revolving Loan. Each Lender agrees to designate a different lending office if such designation will avoid the need for such notice and will not, in the reasonable judgment of such Lender, otherwise be materially disadvantageous to such Lender. Section 4.3 Increased Costs and Reduction of Return. (a) If any Lender determines that due to either (i) the introduction of or any change in the interpretation of any law or regulation or (ii) the compliance by such Lender with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding, or maintaining any LIBOR Rate Revolving Loans, then the Borrowers shall be liable for, and shall from time to time, within three Business Days of demand by such Lender (with a copy of such demand to be CREDIT AGREEMENT - Page 20 sent to the Administrative Agent), pay to the Administrative Agent for the account of such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs. (b) If any Lender shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by such Lender or any corporation or other entity controlling such Lender with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation or other entity controlling such Lender and (taking into consideration such Lender's or such corporation's or other entity's policies with respect to capital adequacy and such Lender's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, loans, credits, or obligations under this Agreement, then, within three Business Days of demand by such Lender to the Borrowers through the Administrative Agent, the Borrowers shall pay to such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender for such increase. Section 4.4 Funding Losses. The Borrowers shall reimburse each Lender and hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of: (a) the failure of the Borrowers to make on a timely basis any payment of principal of any LIBOR Rate Revolving Loan; (b) the failure of the Borrowers to (i) borrow any requested LIBOR Rate Revolving Loan, (ii) continue any LIBOR Rate Revolving Loan, or (iii) convert a Base Rate Revolving Loan to a LIBOR Rate Revolving Loan after any Borrower has given (or is deemed to have given) a Notice of Borrowing or a Notice of Continuation/Conversion with respect thereto (except as permitted by Section 4.5); or (c) the prepayment or other payment (including after acceleration thereof) of any LIBOR Rate Revolving Loans on a day that is not the last day of the relevant Interest Period; including any such loss of anticipated profit and any loss or expense arising from the liquidation or reemployment of funds obtained by such Lender to maintain its LIBOR Rate Revolving Loans or from fees payable to terminate the deposits from which such funds were obtained. The Borrowers shall also pay any customary administrative fees charged by any Lender in connection with the foregoing. Section 4.5 Inability to Determine Rates. If the Administrative Agent determines that for any reason adequate and reasonable means do not exist for determining the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Rate Revolving Loan, or that the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Rate Revolving CREDIT AGREEMENT - Page 21 Loan does not adequately and fairly reflect the cost to the Lenders of funding such Revolving Loan, the Administrative Agent will promptly so notify the Borrowers and each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate Revolving Loans hereunder shall be suspended until the Administrative Agent revokes such notice in writing. Upon receipt of a notice pursuant to the first sentence of this Section, the Borrowers may revoke any Notice of Borrowing or Notice of Continuation/Conversion then submitted by any of them. If the Borrowers do not revoke any such Notice of Borrowing or Notice of Continuation/Conversion, the Lenders shall make, convert, or continue the Revolving Loans, as proposed by the Borrowers, in the amount specified in the applicable notice submitted by a Borrower, but such Revolving Loans shall be made, converted, or continued as Base Rate Revolving Loans instead of LIBOR Rate Revolving Loans. Section 4.6 Certificates of the Administrative Agent. If any Lender claims reimbursement or compensation under this Article 4, the Administrative Agent shall determine the amount thereof and shall deliver to the Borrowers (with a copy to the affected Lender) a certificate setting forth in reasonable detail the amount payable to the affected Lender, and such certificate shall be conclusive and binding on the Borrowers in the absence of manifest error. Section 4.7 Survival. The agreements and obligations of the Borrowers in this Article 4 shall survive the payment of all other Obligations. Section 4.8 Replacement of Affected Lender. Within 30 days after receipt by the Borrowers of written notice and demand from any Lender for any payment under the terms of Section 4.1 or Section 4.3 then, subject to this Section 4.8, the Borrowers may, at their option, notify the Administrative Agent and such Lender (the "Affected Lender") of their intention to obtain, at the Borrowers' sole expense, a replacement Lender ("Replacement Lender") to purchase the Affected Lender's Revolving Loans and its obligations under the Loan Documents. Subject to this Section 4.8, the Borrowers shall, within 30 days following the delivery of such notice from the Borrowers, cause the Replacement Lender to purchase (and the Affected Lender hereby agrees to sell and convey to such Replacement Lender) the Revolving Loans and other obligations of the Affected Lender and assume the Affected Lender's Commitment and obligations hereunder in accordance with the terms of an Assignment and Acceptance for cash in an aggregate amount equal to the aggregate unpaid principal of the Revolving Loans and other Obligations held by such Affected Lender, all unpaid interest and fees accrued thereon or with respect thereto, and all other Obligations owed to such Affected Lender, including amounts owed under Section 4.1 or Section 4.3 (but excluding any amount pursuant to Section 3.2). Notwithstanding the foregoing, (a) the Borrowers shall continue to be obligated to pay to the Affected Lender in full all amounts then demanded and due under Section 4.1 or Section 4.3 in accordance with the terms of this Agreement, (b) neither the Administrative Agent nor any Lender shall have any obligation to find a Replacement Lender, (c) the Replacement Lender must be acceptable to the Administrative Agent in its reasonable discretion, and (d) the Bank may not be replaced under this Section 4.8 without its consent. If the Borrowers elect to replace any Affected Lender, the Borrowers must replace all Affected Lenders as set forth in this Section, each such replacement to occur within a reasonable period of time not to exceed 60 days from the date the first such Affected Lender requested any payment under Section 4.1 or Section 4.3. CREDIT AGREEMENT - Page 22 ARTICLE 5 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES Section 5.1 Books and Records. The Obligated Parties shall, and shall cause each of their Subsidiaries to, maintain, at all times, proper books of record and account in which full, true, correct, and timely entries are made in conformity with GAAP consistently applied. The Obligated Parties shall, and shall cause each of their Subsidiaries to, by means of appropriate entries, reflect in such accounts and in all Financial Statements proper liabilities and reserves for all taxes and proper provision for depreciation and amortization of property and bad debts, all in conformity with GAAP. The Obligated Parties shall maintain at all times books and records pertaining to the Collateral in such detail, form, and scope as the Administrative Agent or any Lender shall reasonably require, including, but not limited to, timely records of (a) all payments received and all credits and extensions granted with respect to the Accounts, (b) the return, rejection, repossession, stoppage in transit, loss, damage, or destruction of any Inventory, and (c) all other dealings affecting the Collateral. Section 5.2 Financial Information. The Obligated Parties shall promptly furnish to the Administrative Agent, all such information regarding the Obligated Parties' and each of their Subsidiaries' financial and business affairs as the Administrative Agent or any Lender (through the Administrative Agent) may reasonably request. Without limiting the foregoing, the Obligated Parties will furnish, or cause to be furnished, to the Administrative Agent the following, in sufficient copies for distribution by the Administrative Agent to each Lender, in such detail as the Administrative Agent or the Lenders (through the Administrative Agent) shall request: (a) The Obligated Parties will furnish, or cause to be furnished, as soon as available, but in any event not later than 90 days after the close of each Fiscal Year of the Parent, consolidated audited balance sheets and statements of income, cash flow, and stockholders' equity for the Parent and its Subsidiaries for such Fiscal Year, and the accompanying notes thereto, setting forth in each case in comparative form figures for the previous Fiscal Year, all in reasonable detail, fairly presenting the financial position and the results of operations of the Parent and its Subsidiaries on a consolidated basis as at the date thereof and for the Fiscal Year then ended, and prepared in conformity with GAAP. Such Financial Statements shall be examined in accordance with generally accepted auditing standards by, accompanied by a report thereon unqualified in any respect of, independent certified public accountants of national standing selected by the Parent. Each Obligated Party hereby authorizes the Administrative Agent to communicate directly with the Obligated Parties' certified public accountants and, by this provision, authorizes those accountants to disclose to the Administrative Agent any and all financial statements and other supporting financial documents and schedules relating to the Obligated Parties and to discuss directly with the Administrative Agent the finances and affairs of the Obligated Parties, provided that the Administrative Agent shall provide the Obligated Parties the opportunity to attend and participate in such discussions. Any information obtained by the Administrative Agent (or any of its representatives or independent contractors) in any such discussions shall be subject to the confidentiality provisions of Section 13.17. CREDIT AGREEMENT - Page 23 (b) The Obligated Parties will furnish or cause to be furnished, (i) as soon as available, but in any event not later than 30 days after the end of each calendar month, internally prepared financial statements of the Parent and its Subsidiaries prepared on a consolidating basis which at a minimum include both a statement of operations and a trial balance of general ledger accounts and (ii) as soon as available, but in any event not later than 45 days after the end of each of the first three Fiscal Quarters of the Parent, consolidated unaudited balance sheets of the Parent and its Subsidiaries as at the end of such Fiscal Quarter, and consolidated unaudited statements of income and cash flow for the Parent and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail, fairly presenting the financial position and results of operations of the Parent and its Subsidiaries, as at the date thereof and for such periods, and, in each case, in comparable form, figures for the corresponding period in the prior Fiscal Year, and prepared in conformity with GAAP (other than for presentation of footnotes and subject to normal year-end audit adjustments) applied consistently with the audited Financial Statements required to be delivered pursuant to Section 5.2(a). The Parent shall certify by a certificate signed by its chief financial officer or chief accounting officer that all such Financial Statements have been prepared in conformity with GAAP (other than for presentation of footnotes and subject to normal year-end audit adjustments) and present fairly, subject to normal year-end adjustments, the financial position of the Parent and its Subsidiaries as at the dates thereof and their results of operations for the periods then ended. (c) The Obligated Parties will cause to be furnished, with each of the audited Financial Statements delivered pursuant to Section 5.2(a), a certificate of the independent certified public accountants that audited such Financial Statements to the effect that such accountants have reviewed and are familiar with this Agreement and that, in auditing such Financial Statements, they did not become aware of any fact or condition which then constituted a Default or Event of Default with respect to a financial covenant set forth in Section 7.22 and Section 7.23, except for those, if any, described in reasonable detail in such certificate. (d) The Obligated Parties will furnish or cause to be furnished, with each of the annual audited Financial Statements delivered pursuant to Section 5.2(a), and with each of the unaudited Financial Statements delivered pursuant to Section 5.2(b)(ii), a certificate of the chief financial officer or chief accounting officer of the Parent in the form of Exhibit C (a "Compliance Certificate") (i) setting forth in reasonable detail the calculations set forth in Section 7.22 and Section 7.23 (whether or not such covenants are being tested as of such date) during the period covered by such Financial Statements and as at the end thereof and (ii) except as explained in reasonable detail in such certificate, (A) stating that all of the representations and warranties of the Obligated Parties contained in this Agreement and the other Loan Documents are correct and complete in all material respects as at the date of such certificate as if made at such time, except for those that speak as of a particular date, (B) stating that the Obligated Parties are, at the date of such certificate, in compliance in all material respects with all of their respective covenants and agreements in this Agreement and the other Loan Documents, (C) stating that no Default or Event of Default then exists or existed during the period covered by CREDIT AGREEMENT - Page 24 such Financial Statements, and (D) certifying, to the Obligated Parties' knowledge, that the amount of the Availability during the period covered by such certificate did not fall to an amount which resulted in testing of the covenants set forth in Section 7.22 and Section 7.23 and did not result in a Dominion Event, or if Availability fell to any such amount, the first date on which such event occurred. If such certificate discloses that a representation or warranty is not correct or complete, or that a covenant has not been complied with, or that a Default or Event of Default existed or exists, such certificate shall set forth what action the Obligated Parties have taken or propose to take with respect thereto. (e) The Obligated Parties will furnish, or cause to be furnished as soon as available, before the beginning of each Fiscal Year of the Parent but not more than 60 days prior to the beginning of such Fiscal Year, annual forecasts prepared by the Parent (to include forecasted consolidated balance sheets and statements of income and cash flow) for the Parent and its Subsidiaries as at the end of and for each Fiscal Quarter of such Fiscal Year, in each case in form consistent with the forecast delivered to the Agent prior to the Closing Date and past practices of the Obligated Parties. (f) The Obligated Parties will furnish, or cause to be furnished, promptly after filing with the PBGC and the IRS or any other Governmental Authority, a copy of each annual report or other filing filed with respect to each Plan of any Obligated Party. (g) The Obligated Parties will furnish, or cause to be furnished, promptly upon the filing thereof, copies of all reports, if any, or other documents filed by the Parent or any of its Subsidiaries with the Securities and Exchange Commission under the Exchange Act or any other similar Governmental Authority pursuant to any Requirement of Law, and all reports, notices, or statements sent or received by the Parent or any of its Subsidiaries to or from the holders of any equity interests of the Parent or any of its Subsidiaries (other than routine non-material correspondence sent by shareholders of the Parent or any of its Subsidiaries to the Parent or such Subsidiary) or of any Debt of the Parent or any of its Subsidiaries registered under the Securities Act of 1933 or to or from the trustee under any indenture under which the same is issued. (h) The Obligated Parties will furnish, or cause to be furnished, as soon as available, but in any event not later than fifteen days after the Parent's or any of its Subsidiaries' receipt thereof, a copy of all management reports and management letters prepared by any independent certified public accountants of the Parent or any other Obligated Party and submitted by such independent certified public accountants to the board of directors (or the audit committee of the board of directors) of the Parent or such other Obligated Party. (i) The Obligated Parties will furnish, or cause to be furnished, promptly after their preparation, copies of any and all proxy statements, financial statements, and reports which any Obligated Party makes available to its shareholders or which are made available to any holder of any Debt of any Obligated Party. CREDIT AGREEMENT - Page 25 (j) If requested by the Administrative Agent, the Obligated Parties will furnish, or cause to be furnished, promptly after filing with the IRS or any other Governmental Authority, a copy of each tax return filed by the Parent or any of its Subsidiaries. (k) The Obligated Parties will furnish, or cause to be furnished, as soon as available, but in any event on the third Business Day of each calendar week for the last Business Day of the preceding calendar week and at such other times, from time to time, as may be reasonably requested by the Administrative Agent, a Borrowing Base Certificate and supporting information in connection therewith including (i) a schedule of each Borrower's Accounts created, credits given, cash collected, and other adjustments made to such Borrower's Accounts since the date of the last such schedule and Borrowing Base Certificate and (ii) a summary schedule of Inventory of each Borrower by location. (l) The Obligated Parties shall provide for each Borrower, or cause to be provided, to the Administrative Agent the following documents, in form reasonably satisfactory to the Administrative Agent within ten days of the end of each calendar month, or more frequently if reasonably requested by the Administrative Agent, (i) each of the items required pursuant to clause (k) preceding as of the end of such calendar month, (ii) an aging of Accounts as of the last day of such calendar month then ended, together with a reconciliation to the corresponding general ledger of such Borrower and the Borrowing Base Certificate as of such calendar month end, (iii) an aging of accounts payable as of the last day of such calendar month then ended, together with a reconciliation to the corresponding general ledger of such Borrower, (iv) a perpetual Inventory report by location as of the last day of such calendar month then ended which itemizes and describes the kind, type, quantity, per unit cost, and extended cost of all Inventory, together with a reconciliation to the corresponding general ledger of such Borrower and the Borrowing Base Certificate as of such calendar month end, (v) a schedule identifying each location, if any, where any Collateral is located with a sales representative, agent, contractor, or other Person under any bailee, consignee, or warehouse arrangement, in each case setting forth, as of the last day of the immediately preceding month, (A) the name and address of each such sales representative, agent, contractor, or other Person and a description of the nature of any such arrangement and (B) the cost of such Inventory at each such location, and including a representation that all actions have been taken to comply with Section 2.11(a) of the Security Agreements with respect to such Collateral; (vi) upon the Administrative Agent's request, copies of invoices in connection with each Borrower's Accounts, customer statements, credit memos, remittance advices and reports, deposit slips, and shipping and delivery documents in connection with each Borrower's Accounts; (vii) upon the Administrative Agent's request, a statement of the balance of each of the Intercompany Accounts; (viii) such other reports as to the Collateral as the Administrative Agent may reasonably request from time to time; and (ix) with the delivery of each of the foregoing, a certificate of the Obligated Parties executed by a Responsible Officer of the Parent on behalf of all of the Obligated Parties certifying as to the accuracy and completeness of the foregoing. If any of the Obligated Parties' records or reports of the Collateral are prepared by an accounting service or other agent, each Obligated Party hereby authorizes, and shall CREDIT AGREEMENT - Page 26 cause each other Obligated Party to authorize, such service or agent to deliver such records, reports, and related documents to the Administrative Agent, for distribution to the Lenders. (m) The Obligated Parties will furnish, or cause to be furnished, such additional information as the Administrative Agent and/or any Lender may from time to time reasonably request regarding the financial and business affairs of the Parent or any Subsidiary of the Parent. (n) The Obligated Parties will provide the Administrative Agent and the Lenders the information required by Section 7.7(b). (o) Within 30 days following the date franchise taxes are due, the Obligated Parties will, unless the Administrative Agent shall otherwise consent, provide to the Administrative Agent a certificate of the applicable Governmental Authority evidencing each Obligated Party's good standing in its jurisdiction of incorporation or organization, as applicable. Section 5.3 Notices to the Lender. The Obligated Parties shall notify the Administrative Agent and the Lenders in writing of the following matters at the following times: (a) promptly after a Responsible Officer's becoming aware of (i) any Event of Default or (ii) any other Default that is not cured within 10 days of its occurrence; (b) promptly after a Responsible Officer's becoming aware of the assertion by the holder of any Capital Stock of the Parent or any Subsidiary of the Parent or the holder of any Debt of the Parent or any Subsidiary of the Parent in excess of $3,000,000 asserting that a default exists with respect thereto or that any such Person is not in compliance with the terms thereof, or the written threat or commencement by such holder of any enforcement action because of such asserted default or non-compliance; (c) promptly after a Responsible Officer's becoming aware of any event or circumstance which could reasonably be expected to have, or has resulted in, a Material Adverse Effect; (d) promptly after a Responsible Officer's becoming aware of any pending or threatened (in writing) action, suit, proceeding, or counterclaim by any Person, or any pending or threatened (in writing) investigation by a Governmental Authority, which could reasonably be expected to result in, or has resulted in, liability in excess of $3,000,000 or otherwise could reasonably be expected to result in, or has resulted in, a Material Adverse Effect; (e) promptly after a Responsible Officer's becoming aware of any (i) pending or threatened (in writing) strike or material work stoppage affecting any Obligated Party or (ii) unfair labor practice claim or other similar labor dispute affecting any Obligated Party which could reasonably be expected to result in, or has resulted in, liability in CREDIT AGREEMENT - Page 27 excess of $3,000,000 or otherwise could reasonably be expected to result in, or has resulted in, a Material Adverse Effect; (f) promptly after a Responsible Officer's becoming aware of any violation of any law, statute, regulation, or ordinance of a Governmental Authority affecting any Obligated Party which reasonably could be expected to result in, or has resulted in, liability in excess of $3,000,000 or otherwise could reasonably be expected to result in, or has resulted in, a Material Adverse Effect; (g) immediately after a Responsible Officer's receipt of any written notice or otherwise obtaining knowledge that any Governmental Authority has asserted in writing that any Obligated Party is not in compliance with any Environmental Law or is investigating any Obligated Party's compliance therewith, which in any event could reasonably be expected to result in, or has resulted in, liability in excess of $3,000,000 or otherwise could reasonably be expected to result in, or has resulted in, a Material Adverse Effect; (h) immediately after a Responsible Officer's receipt of any written notice from any Governmental Authority or other Person or otherwise obtaining knowledge that any Obligated Party is or may be liable to any Person as a result of the Release or threatened Release of any Contaminant or that any Obligated Party is subject to investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to the Release or threatened Release of any Contaminant which, in either case, is reasonably likely to give rise to liability in excess of $3,000,000 or otherwise could reasonably be expected to have, or has resulted in, a Material Adverse Effect; (i) promptly after receipt of any written notice of the imposition of any Environmental Lien against any property of any Obligated Party; (j) any change in any Obligated Party's name as it appears in the jurisdiction of its organization, type of entity, organizational identification number, locations of Collateral, or trade names under which such Obligated Party will sell Inventory or create Accounts, or to which instruments in payment of Accounts may be made payable, in each case at least 30 days prior thereto; (k) within three Business Days after any Responsible Officer knows or has reason to know, that an ERISA Event or a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has occurred, and, when known, any action taken or threatened by the IRS, the DOL, or the PBGC with respect thereto; (l) upon request, or, in the event that such filing reflects a significant change with respect to the matters covered thereby, within three Business Days after the filing thereof with the PBGC, the DOL, or the IRS, as applicable, copies of the following: (i) each annual report (form 5500 series), including Schedule B thereto, filed with the PBGC, the DOL, or the IRS with respect to each Plan, (ii) a copy of each funding waiver request filed with the PBGC, the DOL, or the IRS with respect to any Plan and all CREDIT AGREEMENT - Page 28 communications received by any Obligated Party or any ERISA Affiliate from the PBGC, the DOL, or the IRS with respect to such request, and (iii) a copy of each other filing or notice filed with the PBGC, the DOL, or the IRS, with respect to each Plan by any Obligated Party or any ERISA Affiliate; (m) upon request from the Administrative Agent, copies of each actuarial report for any Plan or Multi-employer Plan and annual report for any Multi-employer Plan, and promptly after receipt thereof by any Obligated Party or any ERISA Affiliate, copies of the following: (i) any notices of the PBGC's intention to terminate a Plan or to have a trustee appointed to administer such Plan; (ii) any favorable or unfavorable determination letter from the IRS regarding the qualification of a Plan under Section 401(a) of the Code; or (iii) any notice from a Multi-employer Plan regarding the imposition of withdrawal liability; (n) within three Business Days after the occurrence thereof: (i) any changes in the benefits of any existing Plan which increase any Obligated Party's annual costs with respect thereto by an amount in excess of $3,000,000, or the establishment of any new Plan or the commencement of contributions to any Plan to which any Obligated Party or any ERISA Affiliate was not previously contributing; or (ii) any failure by any Obligated Party or any ERISA Affiliate to make a required installment or any other required payment to any Plan in excess of $3,000,000 under Section 412 of the Code on or before the due date for such installment or payment; (o) promptly after any Obligated Party or any ERISA Affiliate knows or has reason to know that any of the following events has occurred or will occur: (i) a Multi-employer Plan has been or will be terminated; (ii) the administrator or plan sponsor of a Multi-employer Plan intends to terminate a Multi-employer Plan; or (iii) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multi-employer Plan; (p) promptly upon commencement of any proceedings contesting any tax, fee, assessment, or other governmental charge in excess of $3,000,000; (q) promptly after a Responsible Officer's becoming aware that any material assumption on which the Obligated Parties prepared and presented the Latest Projections is no longer valid; (r) promptly after any Borrower has notified the Administrative Agent of any intention by the such Borrower to treat the Loans and/or Letters of Credit and related transactions as being a "reportable transaction" (within the meaning of Treasury Regulation Section 1.6011-4), a duly completed copy of IRS Form 8886 or any successor form; (s) with each of the financial statements required to be delivered pursuant to Section 5.2, a listing of each Deposit Account opened by any Obligated Party in the preceding calendar month; and CREDIT AGREEMENT - Page 29 (t) promptly after a Responsible Officer's becoming aware of any Lien (other than Permitted Liens) or any other claim in excess of $500,000 made or asserted in writing against any of the Collateral. Each notice given under this Section shall describe the subject matter thereof in reasonable detail, and shall set forth the action that any Obligated Party or any ERISA Affiliate, as applicable, has taken or proposes to take with respect thereto. ARTICLE 6 GENERAL WARRANTIES AND REPRESENTATIONS Each Obligated Party warrants and represents to the Administrative Agent and the Lenders as follows: Section 6.1 Authorization, Validity, and Enforceability of this Agreement and the other Loan Documents; No Conflicts. Each Obligated Party has the power and authority to execute, deliver, and perform this Agreement and the other Loan Documents to which it is a party, to incur the indebtedness, liabilities, and obligations it has agreed to undertake hereunder and under the other Loan Documents, and to grant to the Agent Liens upon the Collateral owned by such Obligated Party. Each Obligated Party has taken all necessary action (including obtaining approval of its stockholders, partners, general partner(s), members, or other applicable equity owners, if necessary) to authorize its execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party. This Agreement and the other Loan Documents to which each Obligated Party is a party have been duly executed and delivered by such Obligated Party, and constitute the legal, valid, and binding obligations of such Obligated Party, enforceable against it in accordance with their respective terms without defense, setoff, or counterclaim except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights of creditors generally and to the effect of general principles of equity whether applied by a court of law or equity. Each Obligated Party's execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party do not and will not conflict with, or constitute a violation or breach of, or constitute a default under, or result in or require the creation or imposition of any Lien upon the property of any Obligated Party by reason of the terms of (a) any contract, mortgage, Lien, lease, agreement, indenture, document, or instrument to which such Obligated Party is a party or which is binding upon it, (b) any Requirement of Law applicable to such Obligated Party, or (c) the certificate or articles of incorporation, bylaws, limited liability company or partnership agreement, or other organizational or constituent documents, as the case may be, of such Obligated Party. Section 6.2 Validity and Priority of Security Interest. The provisions of this Agreement and the other Loan Documents create legal and valid Liens on all the Collateral in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, and such Liens constitute perfected and continuing Liens on the Collateral, securing the Obligations, enforceable against the applicable Obligated Party and all third parties, and having priority over all other Liens on the Collateral except in the case of Liens described in clause (e) and clause (h) of the definition of Permitted Liens to the extent any such Liens would have CREDIT AGREEMENT - Page 30 priority over the Agent's Liens pursuant to any Requirement of Law and Liens perfected only by possession to the extent the Administrative Agent has not obtained or does not maintain possession of such Collateral. Section 6.3 Corporate Name; Prior Transactions. Except as set forth on Schedule 6.3, the Obligated Parties have not, during the past five years, been known by or used any other corporate or fictitious name, or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property outside of the ordinary course of business. Section 6.4 Capitalization and Subsidiaries. Schedule 6.4 sets forth (a) a correct and complete list of the name and relationship to the Parent of each and all of the Parent's Subsidiaries, (b) the location of the chief executive office of the Parent and each of its Subsidiaries, (c) a true and complete listing of each class of each of the Parent's Subsidiaries' authorized Capital Stock, of which all of such issued shares are validly issued, outstanding, fully paid and non-assessable, and owned beneficially and of record by the Persons identified on Schedule 6.4, and (d) the type of entity of the Parent and each of its Subsidiaries. With respect to each Obligated Party, Schedule 6.4 sets forth the employer or taxpayer identification number of each Obligated Party and the organizational identification number issued by each Obligated Party's jurisdiction of organization or a statement that no such number has been issued. Each Obligated Party is (x) duly incorporated, formed, or organized and validly existing in good standing under the laws of its jurisdiction of incorporation, formation, or organization set forth on Schedule 6.4, (y) qualified to do business and in good standing (as applicable) in each jurisdiction in which the failure to so qualify or be in good standing could reasonably be expected to have a Material Adverse Effect, and (z) has all requisite power and authority to conduct its business and own its property. Section 6.5 Financial Statements and Projections. (a) The Borrowers have delivered to the Administrative Agent and the Lenders the audited balance sheet and related statements of income, retained earnings, cash flow, and changes in stockholders' equity for the Parent and its Subsidiaries on a consolidated basis as of May 31, 2002, and for the Fiscal Year then ended, accompanied by the report thereon of the Parent's independent certified public accountants, Ernst & Young LLP. The Borrowers have also delivered to the Administrative Agent and the Lenders the unaudited balance sheet and related statements of income and cash flow for the Parent and its Subsidiaries on a consolidated basis as of February 28, 2003. All such financial statements have been prepared in conformity with GAAP and fairly present the financial position of the Parent and its Subsidiaries as at the dates thereof and their results of operations for the periods then ended (except with respect to the financial statements dated February 28, 2003, for the absence of applicable footnotes and subject to normal year-end adjustments). (b) The Latest Projections when submitted to the Administrative Agent and the Lenders as required herein represent the Borrowers' good faith estimate of the future financial performance of the Borrowers for the periods set forth therein. The Latest Projections have been prepared on the basis of the assumptions set forth therein, which CREDIT AGREEMENT - Page 31 the Borrowers believe are fair and reasonable in light of current and reasonably foreseeable business conditions at the time submitted to the Administrative Agent and the Lenders. Section 6.6 Solvency. The Parent and its Subsidiaries, on a consolidated basis, are Solvent prior to and after giving effect to the Borrowings to be made on the Closing Date and the issuance of the Letters of Credit and Credit Support to be issued on the Closing Date (if any). Section 6.7 Debt. After giving effect to the making of the Revolving Loans to be made on the Closing Date and the issuance of the Letters of Credit to be issued on the Closing Date (if any), the Obligated Parties have no Debt, except (a) the Obligations, (b) Debt described on Schedule 6.7, and (c) other Debt entered into after the Closing Date as permitted by Section 7.13, which Debt will be reflected in the Financial Statements next delivered after its incurrence pursuant to Section 5.2. Section 6.8 Distributions. Except for the regular quarterly dividends paid by the Parent on its Capital Stock on May 30, 2003 and the regular quarterly payment of interest by the Parent on the Convertible Subordinated Debentures on March 31, 2003, for the purpose of funding the dividend paid by TXI Capital Trust I on the Convertible Trust Preferred Securities on March 31, 2003, as of the Closing Date, since February 28, 2003, no Distribution has been declared, paid, or made upon or in respect of any Capital Stock or any other security of the Parent. Section 6.9 Real Estate; Leases. As of the Closing Date, Schedule 6.9 sets forth a correct and complete list of all Real Estate owned by each Obligated Party, all leases and subleases of real or personal property by each Obligated Party as lessee or sublessee (other than leases of personal property as to which such Obligated Party is lessee or sublessee for which the value of such personal property under any such lease in the aggregate is less than $5,000,000), and all leases and subleases of real or personal property by each Obligated Party as lessor, or sublessor. Each of such leases and subleases is valid and enforceable in accordance with its terms and is in full force and effect, and no default by any party to any such lease or sublease exists. Each Obligated Party has good and indefeasible title in fee simple to the Real Estate identified on Schedule 6.9 as owned by such Obligated Party, or valid leasehold interests in all Real Estate designated on Schedule 6.9 as "leased" by such Obligated Party, and each Obligated Party has good, indefeasible, and merchantable title to all of its other property reflected on the February 28, 2003 Financial Statements of the Parent and its Subsidiaries delivered to the Administrative Agent and the Lenders, except as disposed of in the ordinary course of business since the date thereof, free of all Liens except Permitted Liens. Section 6.10 Proprietary Rights. As of the Closing Date, Schedule 6.10 sets forth a correct and complete list of all of each Obligated Party's material registered patents, trademarks, copyrights, and other Proprietary Rights. None of the Proprietary Rights listed in Schedule 6.10 is subject to any licensing agreement or similar arrangement except as set forth on Schedule 6.10. The Proprietary Rights described on Schedule 6.10 constitute all of the property of such type necessary to the current and anticipated future conduct of the Obligated Parties' business. To the best of each Obligated Party's knowledge, no slogan or other advertising device, product, process, method, substance, part, or other material now employed, or now CREDIT AGREEMENT - Page 32 contemplated to be employed, by any Obligated Party infringes upon any rights held by any other Person which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No claim or litigation regarding any of the foregoing is pending or, to the knowledge of any Obligated Party, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Section 6.11 Trade Names. All trade names or styles under which any Obligated Party will sell Inventory or create Accounts, or to which instruments in payment of Accounts may be made payable, are listed on Schedule 6.11. Section 6.12 Litigation. Except as specified on Schedule 6.12, as of the Closing Date, there is no pending, or to the best of any Obligated Party's knowledge threatened, action, suit, proceeding, or counterclaim by any Person, or investigation by any Governmental Authority, or any basis for any of the foregoing, which could reasonably be expected to have a Material Adverse Effect. Section 6.13 Labor Matters. Except as specified in Schedule 6.13, as of the Closing Date, (a) there is no collective bargaining agreement or other labor contract covering employees of any Obligated Party, (b) no such collective bargaining agreement or other labor contract is scheduled to expire during the term of this Agreement, (c) no union or other labor organization is seeking to organize, or to be recognized as, a collective bargaining unit of employees of any Obligated Party or for any similar purpose, (d) there is no pending or (to the best of any Obligated Party's knowledge) threatened, strike or material work stoppage against or affecting any Obligated Party or its employees, and (e) there is no pending (or to the best of any Obligated Party's knowledge) threatened, unfair labor practice claim or other similar labor dispute against or affecting any Obligated Party or its employees which could reasonably be expected to result in, or has resulted in, liability in excess of $3,000,000 or which could reasonably be expected to result in, or has resulted in, a Material Adverse Effect. Section 6.14 Environmental Laws. Except as otherwise set forth on Schedule 6.14: (a) Each Obligated Party is in compliance in all material respects with all applicable Environmental Laws, and neither any Obligated Party nor any of their respective presently or previously owned Real Estate or presently conducted or prior operations, is subject to any enforcement order from or liability agreement with any Governmental Authority or private Person respecting (i) compliance with any Environmental Law or (ii) any potential liabilities and costs or remedial action arising from the Release or threatened Release of a Contaminant. (b) Each Obligated Party has obtained all permits necessary for its current operations under applicable Environmental Laws, and all such permits are in good standing, and each Obligated Party is in material compliance with all terms and conditions of such permits. (c) No Obligated Party is in violation of any Environmental Law by storing, treating, or disposing of any hazardous waste (as defined pursuant to 40 CFR Part 261 or any equivalent Environmental Law). CREDIT AGREEMENT - Page 33 (d) No Obligated Party has received any summons, complaint, order, or similar written notice indicating that it is not currently in compliance with, or that any Governmental Authority is currently investigating its compliance with, any Environmental Laws or that it is or may be liable to any other Person as a result of a Release or threatened Release of a Contaminant, which noncompliance or liability could reasonably be expected to result in, or has resulted in, liability in excess of $3,000,000 or otherwise could reasonably be expected to result in, or has resulted in, a Material Adverse Effect. (e) No Obligated Party has received any summons, complaint, order, or similar written notice from any Governmental Authority indicating that any of the present or past operations of any Obligated Party is the subject of any current investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to a Release or threatened Release of a Contaminant. (f) To the best of any Responsible Officer's knowledge, there is not now on or in the Real Estate of any Obligated Party in violation of Environmental Laws: (i) any underground storage tanks or surface impoundments, (ii) any asbestos-containing material, or (iii) any polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical transformers, or other equipment. (g) No Obligated Party has entered into any negotiations or settlement agreements with any Person (including the prior owner of its property) imposing material obligations or liabilities on any Obligated Party with respect to any remedial action in response to the Release of a Contaminant or environmentally related claim. (h) None of the products currently manufactured, distributed, or sold by any Obligated Party or any Subsidiary of any Obligated Party contains asbestos containing material. (i) No presently effective Environmental Lien has attached to the Real Estate of any Obligated Party or any Subsidiary of any Obligated Party. Section 6.15 No Violation of Law. No Obligated Party or any Subsidiary of any Obligated Party is in violation of any law, statute, regulation, ordinance, judgment, order, or decree applicable to it which violation could reasonably be expected to have a Material Adverse Effect. Section 6.16 No Default. No Obligated Party or any Subsidiary of any Obligated Party is in default with respect to any note, indenture, loan agreement, mortgage, lease, deed, or other agreement to which such Obligated Party or Subsidiary of an Obligated Party is a party or by which it is bound, which default could reasonably be expected to have a Material Adverse Effect. CREDIT AGREEMENT - Page 34 Section 6.17 ERISA Compliance. Except as set forth on Schedule 6.17: (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code, and other federal or state law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS and to the best knowledge of each Obligated Party, nothing has occurred which would cause the loss of such qualification. Each Obligated Party and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the best knowledge of any Obligated Party, threatened claims, actions, or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. (c) Except where the occurrence or existence could not, individually or in the aggregate, result in liability in excess of $1,000,000 or otherwise be reasonably expected to have a Material Adverse Effect, (i) no ERISA Event has occurred or is reasonably expected to occur, (ii) no Pension Plan has any Unfunded Pension Liability, (iii) no Obligated Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA), (iv) no Obligated Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multi-employer Plan, and (v) no Obligated Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. Section 6.18 Taxes. Each Obligated Party has filed all federal, state, and other tax returns and reports required to be filed (or appropriate extensions have been timely filed), and has paid all federal, state, and other taxes, assessments, fees, and other governmental charges levied or imposed upon it or its properties, income, or assets otherwise due and payable unless such unpaid taxes and assessments would constitute a Permitted Lien. Section 6.19 Regulated Entities. No Obligated Party nor any Person controlling any Obligated Party is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940. No Obligated Party is a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, or a regulated entity under the Federal Power Act, the Interstate Commerce Act, any state public utilities code or law, or any other federal or state statute or regulation limiting its ability to incur indebtedness. CREDIT AGREEMENT - Page 35 Section 6.20 Use of Proceeds; Margin Regulations. The proceeds of the Revolving Loans are to be used solely for the purposes specified in Section 7.24. No Obligated Party is engaged in the business of buying or selling Margin Stock or extending credit for the purpose of buying or carrying Margin Stock. Section 6.21 No Material Adverse Change. No Material Adverse Effect has occurred since the latest date of the Financial Statements delivered to the Lenders referenced in Section 6.5. Section 6.22 Full Disclosure. None of the representations or warranties made by any Obligated Party in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement, or certificate furnished by or on behalf of any Obligated Party in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of any Obligated Party to the Lenders prior to the Closing Date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered. Section 6.23 Material Agreements. As of the Closing Date, Schedule 6.23 sets forth all material agreements and contracts (other than the Loan Documents) of the Obligated Parties which are required to be publicly disclosed pursuant to any Requirement of Law since the date of the Parent's quarterly report for the Fiscal Quarter ended February 28, 2003. Section 6.24 Bank Accounts. As of the Closing Date, Schedule 6.24 contains a complete and accurate list of all bank accounts maintained by each Obligated Party with any bank or other financial institution. Section 6.25 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or other Person is necessary or required in connection with the execution, delivery, or performance by, or enforcement against, any Obligated Party of this Agreement or any other Loan Document except for those which have been duly obtained by the Obligated Parties, copies of which have been provided to the Administrative Agent, and for filing of financing statements and mortgages (if any). Section 6.26 Reserved. Section 6.27 Common Enterprise. The successful operation and condition of each of the Obligated Parties is dependent on the continued successful performance of the functions of the group of the Obligated Parties as a whole and the successful operation of each of the Obligated Parties is dependent on the successful performance and operation of each other Obligated Party. Each Obligated Party expects to derive benefit (and its board of directors or other governing body has determined that it may reasonably be expected to derive benefit), directly and indirectly, from successful operations of each of the other Obligated Parties. Each Obligated Party expects to derive benefit (and the boards of directors or other governing body of each Obligated Party has determined that it may reasonably be expected to derive benefit), CREDIT AGREEMENT - Page 36 directly and indirectly, from the credit extended by the Lenders to the Borrowers hereunder, both in their separate capacities and as members of the group of companies. Each Obligated Party has determined that execution, delivery, and performance of this Agreement and any other Loan Documents to be executed by such Obligated Party is within its purpose, will be of direct and indirect benefit to such Obligated Party, and is in its best interest. Section 6.28 Tax Shelter Regulations. The Borrowers do not intend to treat the Revolving Loans and/or Letters of Credit as being a "reportable transaction" (within the meaning of Treasury Regulation Section 1.6011-4). In the event any Borrower determines to take any action inconsistent with such intention, it will promptly notify the Administrative Agent thereof. If any Borrower so notifies the Administrative Agent, the Borrowers acknowledge that one or more of the Lenders may treat the Revolving Loans and/or the Borrowers' interest in Non-Ratable Loans and/or Agent Advances and/or Letters of Credit as part of a transaction that is subject to Treasury Regulation Section 301.6112-1, and such Lender or Lenders, as applicable, will maintain the lists and other records required by such Treasury Regulation. ARTICLE 7 AFFIRMATIVE AND NEGATIVE COVENANTS Each Obligated Party covenants to the Administrative Agent and each Lender that so long as any of the Obligations remain outstanding or this Agreement is in effect each Obligated Party will keep and perform each of the following covenants: Section 7.1 Taxes and Other Obligations. Except as otherwise permitted by the terms of this Agreement, each Obligated Party shall (a) file when due (after giving effect to all timely filed appropriate extensions) all tax returns and other reports which it is required to file, (b) pay, or provide for the payment, when due, of all taxes, fees, assessments, and other governmental charges against it or upon its property, income, and franchises, make all required withholding and other tax deposits, and establish adequate reserves for the payment of all such items in conformity with GAAP, and provide to the Administrative Agent and the Lenders, upon request, satisfactory evidence of its timely compliance with the foregoing, and (c) pay when due all Debt owed by it and all claims of materialmen, mechanics, carriers, warehousemen, landlords, processors, and other like Persons, and all other indebtedness owed by it and perform and discharge in a timely manner all other obligations undertaken by it; provided, however, such Obligated Party need not pay any of the foregoing (w) which it is contesting in good faith by appropriate proceedings diligently pursued, (x) for which it has established proper reserves as required under GAAP, (y) for which no Lien (other than a Permitted Lien) results from such non-payment, and (z) with respect to which any such tax, fee, assessment, or governmental charge in excess of $3,000,000, such Obligated Party has notified the Administrative Agent in writing of any contest described in clause (w) preceding. Section 7.2 Legal Existence and Good Standing. Except as allowed by Section 7.9, each Obligated Party shall maintain its legal existence and its qualification and good standing in all jurisdictions in which the failure to maintain such existence and qualification or good standing could reasonably be expected to have a Material Adverse Effect. CREDIT AGREEMENT - Page 37 Section 7.3 Compliance with Law and Agreements; Maintenance of Licenses. Each Obligated Party shall comply, and shall cause each of its Subsidiaries to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act and all Environmental Laws) except in such instances which (a) individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect or (b) such Requirement of Law is being contested in good faith by appropriate proceedings diligently conducted and if such proceedings are determined adversely to such Obligated Party or its Subsidiary, the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Each Obligated Party shall obtain and maintain, and shall cause each of its Subsidiaries to obtain and maintain, all licenses, permits, franchises, and governmental authorizations necessary to own its property and to conduct its business as conducted on the Closing Date or as permitted by Section 7.17. No Obligated Party shall modify, amend, or alter its certificate or articles of incorporation, bylaws, limited liability company operating agreement, limited partnership agreement, or other similar constituent documents other than in a manner which does not adversely affect the rights of the Lenders or the Administrative Agent under this Agreement or any of the other Loan Documents. Section 7.4 Maintenance of Property; Inspection of Property. (a) Each Obligated Party shall (i) subject to clause (ii) following, maintain all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear and damage by casualty excepted, (ii) make all necessary repairs thereto and renewals and replacements thereof, and (iii) use the standard of care typical in the industry in the operation and maintenance of its equipment and facilities. (b) Each Obligated Party shall permit representatives and independent contractors of the Administrative Agent (accompanied by any Lender which so elects with the consent of the Administrative Agent) to visit and inspect any of its properties, to examine its corporate, financial, and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances, and accounts with its officers and independent public accountants (provided that the Administrative Agent shall provide the Obligated Parties the opportunity to attend and participate in such discussions with such public accountants and any information obtained by the Administrative Agent (or any of its representatives or independent contractors) in any such discussions shall be subject to the confidentiality provisions of Section 13.17). Prior to the existence and continuance of an Event of Default, all such visits and inspections shall be conducted at such reasonable times during normal business hours and as soon as may be reasonably desired, upon reasonable advance notice to such Obligated Party. During the existence of an Event of Default, the Administrative Agent or any Lender may do any of the foregoing at any time without advance notice. Section 7.5 Insurance. (a) Each Obligated Party shall maintain with financially sound and reputable insurers having a rating of at least A+ or better by Best Rating Guide (or self-insure with CREDIT AGREEMENT - Page 38 respect to workers compensation, health, and other insurance (excluding insurance of the Collateral), including deductible and loss retention provisions, compatible with the standards set forth in this Section 7.5(a), insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business and of such types and in such amounts as are customarily carried under similar circumstances by such other Persons, including, without limitation, business interruption insurance. Each Obligated Party shall also maintain flood insurance for its Eligible Inventory which is, at any time, located in a SFHA. (b) For each of the insurance policies issued as required by this Section 7.5, that insures Collateral against loss or damage, each Obligated Party shall cause the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, to be named as secured party and loss payee with respect to proceeds payable by reason of loss or damage to Collateral, in a manner acceptable to the Administrative Agent. Each policy of insurance shall contain a clause or endorsement requiring the insurer to give not less than 10 days prior written notice to the Administrative Agent in the event of cancellation of such policy for non-payment of premium and not less than 30 days prior written notice to the Administrative Agent in the event of cancellation of such policy for any other reason whatsoever and a clause or endorsement stating that the interest of the Administrative Agent shall not be impaired or invalidated by any act or neglect of the insured Person or the owner of any premises for purposes more hazardous than are permitted by such policy. All premiums for insurance required to be maintained by this Section 7.5 shall be paid by the Obligated Parties when due, and certificates of insurance and, if requested by the Administrative Agent or any Lender, photocopies of the policies shall be delivered to the Administrative Agent, in each case, in sufficient quantity for distribution by the Administrative Agent to each of the Lenders. If any Obligated Party fails to procure (or cause to be procured) such insurance or to pay the premiums therefor when due, the Administrative Agent may, and at the direction of the Majority Lenders shall, do so from the proceeds of Revolving Loans. Section 7.6 Insurance and Condemnation Proceeds. Each Obligated Party shall promptly notify the Administrative Agent and the Lenders of any loss, damage, or destruction to Collateral having a value in excess of $1,000,000, whether or not covered by insurance. If the Obligated Parties fail to promptly do so, or at any time during the continuance of an Event of Default, the Administrative Agent is hereby authorized to directly collect all insurance and condemnation proceeds in respect of any loss, damage, or destruction of Collateral and to apply such proceeds to the reduction of the Obligations, after deducting from such proceeds the reasonable expenses, if any, incurred by the Administrative Agent in the collection or handling thereof, the Administrative Agent shall apply such proceeds to the reduction of the Obligations in the manner provided for in Section 3.7. Section 7.7 Environmental Laws. (a) Each Obligated Party shall conduct, and shall cause each of its Subsidiaries to conduct, its business in compliance with all Environmental Laws applicable to it, including those relating to the generation, handling, use, storage, and CREDIT AGREEMENT - Page 39 disposal of any Contaminant. Each Obligated Party shall take, and shall cause each of its Subsidiaries to take, prompt and appropriate action to respond to any non-compliance with Environmental Laws. Each Obligated Party shall regularly report to the Administrative Agent on any such response with respect to any circumstance which could reasonably be expected to result in, or has resulted in, liability in excess of $3,000,000 or otherwise could reasonably be expected to result in, or has resulted in, a Material Adverse Effect. (b) Without limiting the generality of the foregoing, the Obligated Parties shall submit to the Administrative Agent and the Lenders annually, or more frequently if requested by the Administrative Agent, commencing on the first Anniversary Date, and on each Anniversary Date thereafter, an update of the status of each environmental compliance or liability issue concerning any Obligated Party or any Subsidiary of an Obligated Party or any of their respective properties or operations (whether past or present), if any, which could reasonably be expected to result in, or has resulted in, liability in excess of $3,000,000 or otherwise could reasonably be expected to result in, or has resulted in, a Material Adverse Effect. The Administrative Agent or any Lender may request, in which case the Borrowers will promptly furnish or cause to be promptly furnished to the Administrative Agent, copies of technical reports prepared by any Obligated Party or any Subsidiary of an Obligated Party and its communications with any Governmental Authority to determine whether such Obligated Party or Subsidiary of an Obligated Party is proceeding reasonably to correct, cure, or contest in good faith any alleged non-compliance or environmental liability. Each Obligated Party shall, at the Administrative Agent's or the Majority Lenders' request and at such Obligated Party's expense, (i) retain an independent environmental engineer acceptable to the Administrative Agent to evaluate any site, including tests if appropriate, where the non-compliance or alleged non-compliance with Environmental Laws has occurred and prepare and deliver to the Administrative Agent, in sufficient quantity for distribution by the Administrative Agent to the Lenders, a report setting forth the results of such evaluation, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to the Administrative Agent, in sufficient quantity for distribution by the Administrative Agent to the Lenders, a supplemental report of such engineer whenever the scope of the environmental problems (if any), or the response thereto or the estimated costs thereof, shall increase in any material respect. Section 7.8 Compliance with ERISA. Each Obligated Party shall, and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code, and other federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) make all required contributions to any Plan subject to Section 412 of the Code; (d) not engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan; and (e) not engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. Section 7.9 Mergers, Consolidations, or Sales. No Obligated Party shall enter into any transaction of merger, reorganization, or consolidation, or transfer, sell, assign, lease, or otherwise Dispose of all or any part of its property, or wind up, liquidate or dissolve, or agree to CREDIT AGREEMENT - Page 40 do any of the foregoing, except for (A) sales and other Dispositions of Inventory in the ordinary course of its business, (B) sales or Dispositions of Equipment that is (1) damaged, worn out, unserviceable, or obsolete, (2) no longer necessary for the proper conduct of business, or (3) contemporaneously replaced with Equipment of comparable utility, in each case in the ordinary course of business and operations of the Obligated Parties and on a basis consistent with past practices, (C) the sale or other Disposition of any assets of any Subsidiary of an Obligated Party to an Obligated Party, (D) the sale or other Disposition of all or substantially all of the assets of a Subsidiary (other than an Obligated Party) to a Person other than an Obligated Party, (E) the sale or other Disposition of any equity interests in any Subsidiary of an Obligated Party (other than a Borrower) to an Obligated Party, (F) the sale or other Disposition of all or substantially all of the equity interests in any Subsidiary which is not an Obligated Party to a Person other than an Obligated Party, (G) payments of cash in the ordinary course of business and as otherwise permitted by this Agreement, (H) sale or other Dispositions of Real Estate consistent with past practices, and (I) subject to Section 7.10, other transactions between or among the Obligated Parties and their Subsidiaries in the ordinary course of each Obligated Party's business consistent with past practices; provided that, notwithstanding the foregoing or any other provision of this Agreement, as long as no Default or Event of Default exists or would result therefrom and provided the Parent gives the Administrative Agent and the Lenders prior written notice: (a) a Borrower may wind-up, dissolve, or liquidate if (i) its property is transferred to another Borrower and (ii) the Person acquiring such property complies with its obligations under Section 7.28 hereof and Section 2.3 of the applicable Security Agreement simultaneously with such acquisition; (b) an Obligated Party (other than the Parent) which is not a Borrower may wind-up, dissolve, or liquidate if (i) its property is transferred to another Obligated Party and (ii) the Person acquiring such property complies with its obligations under Section 7.28 hereof and Section 2.3 of the applicable Security Agreement simultaneously with such acquisition; (c) a Borrower may merge or consolidate with another Borrower; (d) an Obligated Party may transfer assets in connection with, and as necessary to effect, an Investment otherwise permitted under this Agreement; (e) an Obligated Party which is not a Borrower may merge or consolidate with another Obligated Party, and a Subsidiary of an Obligated Party (which is not a Borrower) may merge or consolidate with another Obligated Party; provided that the Obligated Party is the survivor of any such merger or consolidation; and (f) an Obligated Party may enter into sales or other Dispositions of its property and assets (excluding Collateral) not otherwise permitted under this Section 7.9 in an arm's length transaction with a Person who is not an Affiliate if (A) the book value of the property and assets sold or Disposed of pursuant to this Section 7.9(f) does not exceed $25,000,000 in the aggregate (net of the related sales costs, if any, of such sales and other Dispositions) during the term of this Agreement for all of the Obligated Parties, CREDIT AGREEMENT - Page 41 collectively, (B) the book value of the property and assets sold or Disposed of pursuant to this Section 7.9(f) does not exceed $10,000,000 in the aggregate (net of the related sales costs, if any, of such sales and other Dispositions) for all of the Obligated Parties, collectively, during any period of four consecutive Fiscal Quarters of the Parent, and (C) the Administrative Agent shall have received written notice of any such sale or other Disposition involving property and assets with a book value in excess of $10,000,000. The inclusion of proceeds in the definition of Collateral shall not be deemed to constitute the Administrative Agent's or any Lender's consent to any sale or other disposition of the Collateral except as expressly permitted herein. Section 7.10 Distributions; Capital Change; Restricted Investments. The Parent will not, nor will it permit any of its Subsidiaries to, (a) directly or indirectly declare or pay any dividends or make any distributions on its Capital Stock, the Convertible Trust Preferred Securities, or the Convertible Preferred Debentures (other than dividends and distributions payable in its own Capital Stock) or redeem, repurchase, or otherwise acquire or retire any of its Capital Stock at any time outstanding or the Convertible Preferred Debentures (each of such dividends, distributions, or other transactions with respect to such Person's Capital Stock, the Convertible Trust Preferred Securities, or the Convertible Preferred Debentures being referred to in this Section as a "restricted payment"), except that (i) any Subsidiary of the Parent may declare and pay dividends or make distributions to the Parent or to a Wholly-Owned Subsidiary of the Parent which is an Obligated Party, (ii) the Parent may make the minimum cash distributions required according to the terms of the Convertible Preferred Debentures, (iii) TXI Capital Trust I may make the minimum cash restricted payments required according to the terms of the Convertible Trust Preferred Securities, (iv) the Parent may accept shares of its Capital Stock in connection with the purchase of shares of its Capital Stock issued pursuant to and in accordance with the Parent's 1993 Stock Option Plan, and (v) the Parent may make restricted payments with respect to its Capital Stock in an aggregate amount not to exceed $7,000,000 in any Fiscal Year so long as no Default or Event of Default exists or would result therefrom and Availability shall at all times during the last Fiscal Quarter ended prior to the date of declaration of such restricted payment after the Closing Date have not been less than $30,000,000, (b) make any change in its capital structure which could have an adverse effect on the ability of the Obligated Parties to perform any of their respective duties and obligations under any Loan Document or pay the Obligations when due, or (c) make any Restricted Investment. Section 7.11 Transactions Resulting in a Material Adverse Effect. No Obligated Party shall enter into any transaction which could be reasonably expected to result in a Material Adverse Effect. Section 7.12 Guaranties. No Obligated Party shall, make, issue, or become liable on any Guaranty, except (a) Guaranties of the Debt allowed under Section 7.13, (b) Guaranties by the Obligated Parties of Debt and other liabilities and obligations of the other Obligated Parties, provided that the underlying Debt or other liabilities and obligations are permitted pursuant to this Agreement, (c) endorsement in the ordinary course of business of negotiable instruments for deposit or collection, and (d) Guaranties in respect of operating leases and other contracts (excluding any contracts in respect of any Debt) of Subsidiaries which are not Obligated Parties incurred in the ordinary course of business, provided that any payment by any Obligated Party CREDIT AGREEMENT - Page 42 under any such Guaranty shall be included as an Investment pursuant to clause (h) of the definition of Restricted Investments. Section 7.13 Debt. No Obligated Party shall incur or maintain any Debt, other than: (a) the Obligations (including Debt attributable to Bank Products); (b) the Debt described on Schedule 6.7; (c) Capital Leases of Equipment and purchase money secured Debt incurred to purchase Equipment; provided that (i) the Liens securing such Capital Leases and purchase money secured Debt shall attach only to the Equipment acquired by the incurrence of such Capital Leases and purchase money secured Debt and (ii) the aggregate amount of such Debt (including all Capital Leases at any time outstanding) outstanding does not exceed $25,000,000 at any time; (d) Debt evidencing a refunding, renewal, or extension of the Debt described in clause (b) and clause (c) preceding; provided that (i) the principal amount thereof is not increased at the time of such renewal, refinancing, refunding, or extension thereof except by an amount equal to any existing commitments utilized thereunder and (ii) the Liens, if any, securing such refunded, renewed, or extended Debt do not attach to any assets in addition to those assets, if any, securing the Debt to be refunded, renewed, or extended, (e) Debt owing by an Obligated Party to another Obligated Party for intercompany loans and advances made for working capital in the ordinary course of business, (f) Guaranties of Debt which are permitted under Section 7.12, (g) Debt incurred in connection with the financing of premiums payable with respect to insurance policies required to be maintained by the Obligated Parties pursuant to this Agreement, (h) Debt assumed by an Obligated Party in connection with a Permitted Acquisition, provided that the aggregate amount of such Debt under this clause (h) does not exceed $15,000,000 at anytime outstanding, (i) unsecured Debt if, at the time the applicable Obligated Party enters into or issues such Debt, the Pro Forma Fixed Charge Coverage Ratio of the Parent and its Subsidiaries for the four preceding Fiscal Quarters of the Parent is greater than or equal to 1.00 to 1.00, and (j) other unsecured Debt in an aggregate amount at any time outstanding not in excess of $2,000,000. Section 7.14 Prepayment. No Obligated Party shall, voluntarily prepay or redeem any Debt, including the Convertible Subordinated Debentures unless the Convertible Subordinated Debentures are redeemed with Capital Stock of the Parent, except (a) the Obligations, (b) the IRB Debt, and (c) other Debt, provided that (i) the aggregate principal amount of other Debt prepaid under this Section 7.14(c) in any Fiscal Year of the Parent does not exceed $10,000,000, (ii) no Default or Event of Default exists after giving effect to such payment, and (iii) the Availability is equal to or greater than $40,000,000 after giving effect to such payment. Section 7.15 Transactions with Affiliates. Except as otherwise provided in Section 7.10, Section 7.12, Section 7.13, and this Section 7.15, no Obligated Party shall, sell, transfer, distribute, or pay any money or property, including, but not limited to, any fees or expenses of any nature (including, but not limited to, any fees or expenses for management services), to any Affiliate that is not an Obligated Party, or lend or advance money or property to any Affiliate that is not an Obligated Party, or invest in (by capital contribution or otherwise) or purchase or repurchase any Capital Stock or indebtedness, or any property, of any Affiliate that is not an Obligated Party, or become liable on any Guaranty of the indebtedness, dividends, or other obligations of any Affiliate that is not a Borrower. Notwithstanding the foregoing, if no Default or Event of Default is in existence or would result therefrom, (a) an Obligated Party may engage in transactions with an Affiliate in the ordinary course of such Obligated Party's business CREDIT AGREEMENT - Page 43 consistent with past practices and upon terms no less favorable to such Obligated Party than would be obtained in a comparable arm's-length transaction with a third party who is not an Affiliate and (b) an Obligated Party other than the Parent may make transfers, distributions, and payments to the owners of its Capital Stock if such transfer, distribution, or payment is also made by any such recipient which is not an Obligated Party to another Person which is an Obligated Party within one Business Day of its receipt of such transfer, distribution, or payment. Section 7.16 Investment Banking and Finder's Fees. No Obligated Party shall pay or agree to pay, or reimburse any other party with respect to, any investment banking or similar or related fee, underwriter's fee, finder's fee, or broker's fee to any Person in connection with this Agreement other than pursuant to the Agent's Letter. The Obligated Parties shall defend and indemnify the Administrative Agent and the Lenders against and hold them harmless from (a) all claims of any Person that any Obligated Party is obligated to pay any such fees and (b) all costs and expenses (including attorneys' fees) incurred by the Administrative Agent and/or any Lender in connection therewith. Section 7.17 Business Conducted. The Obligated Parties shall not engage, directly or indirectly, in any line of business other than the lines of businesses in which the Obligated Parties are engaged on the Closing Date and those reasonably similar, related, or incidental thereto. Section 7.18 Liens. No Obligated Party shall create, incur, assume, or permit to exist any Lien on any property now owned or hereafter acquired by it, except Permitted Liens. Other than as set forth in this Agreement, in the Senior Notes Indenture, in connection with the creation or incurrence of any Debt under Section 7.13(c), or in connection with creation of any Permitted Lien permitted under clause (i) of the definition of Permitted Liens, no Obligated Party will enter into or become subject to any Negative Pledge; provided that any Negative Pledge entered into or existing in connection with the creation of Debt under Section 7.13(c) or creation of any Permitted Lien permitted under clause (i) of the definition of Permitted Liens shall be limited to the purchase money Lien securing such Debt, and any Negative Pledge entered into in connection with the Senior Notes Indenture will not apply to the Agent's Liens on the Collateral. Section 7.19 Reserved. Section 7.20 New Subsidiaries; Addition of Subsidiaries as Borrowers. No Obligated Party shall, directly or indirectly, organize, create, acquire, or permit to exist any Subsidiary other than (a) those listed on Schedule 6.4 and (b) subject to Section 7.28 and Section 13.22, other Subsidiaries created or acquired after the Closing Date, provided that such creation or acquisition does not result in the occurrence of a Default or Event of Default hereunder. Section 7.21 Fiscal Year. No Obligated Party shall change the last day of its Fiscal Year. Section 7.22 Fixed Charge Coverage Ratio. In the event Availability, as of any day, is less than $30,000,000, the Obligated Parties shall not permit the Fixed Charge Coverage Ratio of the Parent and its Subsidiaries to be less than the ratio specified corresponding to the applicable Fiscal Quarter end in the table below, respectively, (a) for the immediately preceding period of CREDIT AGREEMENT - Page 44 four Fiscal Quarters of the Parent ending prior to such date and for which the financial statements required to be delivered pursuant to Section 5.2(b)(ii) have been delivered and (b) for each period of four Fiscal Quarters of the Parent ending thereafter until Availability equals or exceeds $30,000,000 for each day during a full Fiscal Quarter of the Parent, provided that the provisions of this Section 7.22 shall again become applicable if Availability, as of any subsequent day, is less than $30,000,000, as follows:
Fiscal Quarter End Fixed Charge Coverage Ratio =============================================================================================== May 31, 2003 0.85 to 1.00 - ----------------------------------------------------------------------------------------------- August 31, 2003 0.75 to 1.00 - ----------------------------------------------------------------------------------------------- November 30, 2003 0.80 to 1.00 - ----------------------------------------------------------------------------------------------- February 29, 2004 0.85 to 1.00 - ----------------------------------------------------------------------------------------------- May 31, 2004 and each Fiscal Quarter ending thereafter 1.00 to 1.00 ===============================================================================================
Section 7.23 Tangible Net Worth. In the event Availability, as of any day, is less than $30,000,000, the Obligated Parties shall not permit the Tangible Net Worth of the Parent to be less than the Tangible Net Worth Requirement specified for the applicable period (a) as of the last day of the Fiscal Quarter of the Parent ending prior to such date and for which the financial statements required to be delivered pursuant to Section 5.2(b)(ii) have been delivered and (b) as of the last day of each Fiscal Quarter of the Parent ending thereafter until Availability equals or exceeds $30,000,000 for each day during a full Fiscal Quarter of the Parent, provided that the provisions of this Section 7.22 shall again become applicable if Availability, as of any subsequent day, is less than $30,000,000. Section 7.24 Use of Proceeds. The Borrowers shall use the proceeds of the Revolving Loans (a) to repurchase Accounts of the Borrowers previously sold in connection with the asset securitization transaction described in Section 8.1(a)(xx), (b) to pay costs and expenses incurred in connection with the closing of this Agreement and the transactions contemplated hereby and the closing of the Senior Notes Indenture and the transactions contemplated thereby, (c) to pay interest, costs, and expenses incurred in connection with this Agreement, (d) to issue Letters of Credit and to repay reimbursement obligations related thereto, and (e) to finance ongoing general working capital needs and Capital Expenditures (in each case, not otherwise prohibited by this Agreement) of the Obligated Parties in the ordinary course of business, and shall not use any portion of the Revolving Loan proceeds, directly or indirectly, (w) to buy or carry any Margin Stock, (x) to repay or otherwise refinance indebtedness of the Borrowers or others incurred to buy or carry any Margin Stock, (y) to extend credit for the purpose of buying or carrying any Margin Stock, or (z) to acquire any security in any transaction that is subject to Sections 13 or 14 of the Exchange Act. Section 7.25 Lenders as Depository. Each Obligated Party shall maintain one or more of the Lenders as its principal depository bank(s), including for the maintenance of operating, administrative, cash management, collection activity, and other deposit accounts for the conduct of its business. CREDIT AGREEMENT - Page 45 Section 7.26 Landlord and Bailee Agreements. The Obligated Parties will use reasonable efforts in good faith to provide to the Administrative Agent upon the Administrative Agent's request, (a) a landlord's waiver and consent agreement or subordination and consent agreement, in form and substance reasonably acceptable to the Administrative Agent, from each landlord of leased Real Estate on which any Collateral is located and (b) a waiver and consent agreement (a "bailee agreement"), in form and substance reasonably acceptable to the Administrative Agent, from each Person which is not an Obligated Party and is in possession of any Collateral. In the event that any landlord waiver and consent agreement or subordination and consent agreement or any bailee agreement requested by the Administrative Agent pursuant to this Section is not provided, in lieu of such delivery, the Administrative Agent may, in its discretion, establish a Reserve with respect to any Collateral located on any leased Real Estate or in the possession of any third party which is not an Obligated Party for which the Administrative Agent has not received such acceptable waiver and consent agreement or subordination and consent agreement, and/or exclude such Collateral from the determination of the Borrowing Base. Section 7.27 Guaranties of the Obligations. Each Obligated Party, including any Person which becomes a Borrower or a Guarantor after the Closing Date pursuant to the terms of this Agreement, shall guarantee payment and performance of the Obligations pursuant to a Guaranty Agreement in form and substance satisfactory to the Administrative Agent, duly executed by each such Obligated Party. Each Borrower acknowledges and expressly agrees with the Administrative Agent and each Lender that the Guaranty by such Borrower is required solely as a condition to, and is given solely as inducement for and in consideration of, credit or accommodations extended or to be extended under the Loan Documents to any or all of the other Borrowers and is not required or given as a condition of extensions of credit to such Borrower. Section 7.28 Additional Collateral; Further Assurances. (a) In the event that the Subsidiaries of the Parent which are not Obligated Parties hereunder (collectively referred to in this Section as the "excluded Subsidiaries") own assets, excluding intercompany notes and accounts, with an aggregate book value or fair market value in excess of 5.0% of all assets, excluding intercompany notes and accounts, of the Parent and its Subsidiaries or have revenue in any Fiscal Year in excess of 5.0% of the revenue of the Parent and its Subsidiaries, the Obligated Parties shall notify the Administrative Agent in writing thereof and with the Administrative Agent's and the Majority Lenders' consent pursuant to Section 13.22 cause one or more of the excluded Subsidiaries to become, either a Borrower and a Guarantor or a Guarantor (but not a Borrower) subject to the terms of this Agreement to the extent required to cause the aggregate book value or fair market value of all assets, excluding intercompany notes and accounts, owned by the excluded Subsidiaries to be equal to or less than 5.0% of the assets, excluding intercompany notes and accounts, of the Parent and its Subsidiaries and to cause the revenue of the excluded Subsidiaries, collectively, to be equal to or less than 5.0% of the revenue of the Parent and its Subsidiaries. In the event that an insufficient number of the Parent's Subsidiaries are acceptable to the Administrative Agent and the Majority Lenders for joinder hereto as Obligated Parties (as applicable) as may be required pursuant to this Section, no Event of Default shall result from such occurrence CREDIT AGREEMENT - Page 46 and each reference to "5.0%" in this Section 7.28(a) shall instead be a reference to 10.0%. (b) Upon the request of the Administrative Agent, each Obligated Party shall (x) grant Liens on the Collateral to the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, pursuant to such documents as the Administrative Agent may reasonably deem necessary and deliver such property, documents, and instruments as the Administrative Agent may request to perfect the Agent's Liens in any property of such Obligated Party which constitutes Collateral, (y) execute a Guaranty Agreement as required by Section 7.27, and (z) in connection with the foregoing requirements, or either of them, deliver to the Administrative Agent (in its discretion) all items of the type required by Section 8.1 (as applicable). Upon execution and delivery of such Loan Documents and other agreements, certificates, documents, and instruments, each such Person shall automatically become a Borrower and a Guarantor, or a Guarantor (but not a Borrower), as applicable, hereunder and thereupon shall have all of the rights, benefits, duties, and obligations in such capacity under the Loan Documents. (c) Without limiting the foregoing, each Obligated Party shall, and shall cause each of the Parent's Subsidiaries which is required to become an Obligated Party pursuant to the terms of this Agreement to, execute and deliver, or cause to be executed and delivered, to the Administrative Agent such documents and agreements, and shall take or cause to be taken such actions as the Administrative Agent may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents. ARTICLE 8 CONDITIONS OF LENDING Section 8.1 Conditions Precedent to Making of Revolving Loans on the Closing Date. The obligation of the Lenders to make the initial Revolving Loans on the Closing Date, and the obligation of the Administrative Agent to cause the Letter of Credit Issuer to issue any Letter of Credit on the Closing Date, are subject to the following conditions precedent having been satisfied in a manner satisfactory to the Administrative Agent and each Lender: (a) The Administrative Agent shall have received each of the following documents, all of which shall be satisfactory in form and substance to the Administrative Agent and the Lenders: (i) certified copies of the certificate of incorporation, certificate of limited partnership, or comparable organizational document of each Obligated Party, with all amendments, if any, certified by the appropriate Governmental Authority of the jurisdiction of each Obligated Party's organization or formation, and the bylaws, regulations, operating agreement, limited partnership agreement, or similar governing agreement or document of each Obligated Party, in each case certified by the corporate secretary, general partner, or comparable authorized CREDIT AGREEMENT - Page 47 representative of such Obligated Party, as applicable as being true and correct and in effect on the Closing Date; (ii) certificates of incumbency and specimen signatures with respect to each individual authorized to execute and deliver this Agreement and the other Loan Documents on behalf of each Obligated Party, and any other individual executing any document, certificate, or instrument to be delivered in connection with this Agreement and the other Loan Documents and, in the case of each Borrower, to request Borrowings and the issuance of Letters of Credit; (iii) a certificate evidencing the existence of each Obligated Party, and certificates evidencing the good standing and tax status of each Obligated Party in the jurisdiction of its organization and in each other jurisdiction in which it is required to be qualified as a foreign business entity to transact its business as presently conducted; (iv) certified copies of all action taken by each Obligated Party and each other Person executing any document, certificate, or instrument to be delivered in connection with this Agreement and the other Loan Documents to authorize the execution, delivery, and performance of this Agreement, the other Loan Documents, and, with respect to the Borrowers, the Borrowings and the issuance of Letters of Credit; (v) a certificate of the Obligated Parties signed by a Responsible Officer (A) stating that all of the representations and warranties made or deemed to be made under this Agreement are true and correct as of the Closing Date, after giving effect to the Revolving Loans to be made at such time and the application of the proceeds thereof and the issuance of any Letter(s) of Credit at such time, (B) stating that no Default or Event of Default exists, (C) specifying the account of the Borrowers which is the Designated Account, and (D) certifying as to such other factual matters as may be reasonably requested by the Administrative Agent; (vi) with respect to any Letter of Credit to be issued, and with respect to each Existing Letter of Credit, all documentation required by Section 1.3, duly executed; (vii) a Revolving Loan Note, payable to the order of each Lender in the amount of its Commitment with respect thereto, duly executed and delivered by each Borrower, complying with the requirements of Section 1.2(b); CREDIT AGREEMENT - Page 48 (viii) UCC financing statements with respect to the Collateral as may be requested by the Administrative Agent, duly authorized by the respective Obligated Parties, in all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect the Agent's Liens therein and acknowledgment copies of proper financing statements, duly filed on or before the Closing Date under the UCC in each jurisdiction the Administrative Agent deems necessary or desirable in order to perfect the Agent's Liens; (ix) duly executed UCC termination statements or assignments and such other instruments, in form and substance satisfactory to the Administrative Agent, as shall be necessary to terminate and satisfy all Liens on the property of the Obligated Parties except Permitted Liens; (x) a Guaranty Agreement, duly executed and delivered by each Obligated Party as required pursuant to Section 7.27; (xi) a Borrowing Base Certificate effective as of the Business Day preceding the day such initial Revolving Loans are to be funded or any such Letter of Credit is to be issued; (xii) [Reserved]; (xiii) each Blocked Account Agreement duly executed as requested by the Administrative Agent; (xiv) signed opinions of counsel for the Obligated Parties, opining as to such matters in connection with the transactions contemplated by this Agreement as the Administrative Agent may reasonably request, each such opinion to be in a form, scope, and substance satisfactory to the Administrative Agent, the Lenders, and their respective counsel; (xv) evidence, in form, scope, and substance, reasonably satisfactory to the Administrative Agent, of all insurance coverage as required by this Agreement together with a copy of each such policy covering Collateral, with loss payable endorsements thereto in form acceptable to the Administrative Agent; (xvi) satisfactory evidence that all filings, consents, or approvals with or of the owners of any Capital Stock of any Obligated Party, any Governmental Authority, or any other third party have been made or obtained, as applicable; (xvii) the absence, as determined by each of the Administrative Agent and the Arranger, respectively, in its sole and absolute discretion, of any material disruption of or material adverse change in conditions in the financial, banking, or capital markets that the Administrative Agent and the Arranger, in their discretion, deem material in connection with the syndication of the credit facility as set forth in this Agreement; CREDIT AGREEMENT - Page 49 (xviii) satisfactory evidence that the Parent has received gross proceeds of not less than $525,000,000 from issuance of the Senior Notes the proceeds of which shall have been used in part to repay all outstanding indebtedness, liabilities, and obligations under (A) the Third Amended and Restated Credit Agreement, dated as of March 10, 1999, among the Parent and the lending institutions party thereto, (B) the senior notes issued pursuant to the Parent's Note Agreement, dated as of December 18, 1997, (C) the senior notes issued pursuant to the Parent's Amendment, Restatement and Assumption of Note Agreement, dated as of December 31, 1997, and (D) the senior notes issued pursuant to the Parent's Note Agreement, dated as of April 9, 1996; (xix) satisfactory evidence that the Parent has provided Bank of America, N.A. cash collateral deposits in an amount sufficient to fully repay the IRB Debt, including all reimbursement obligations with respect to the letters of credit issued in connection therewith; (xx) satisfactory evidence that upon the repurchase by the Borrowers of their respective Accounts remaining uncollected, the indebtedness, liabilities, and obligations of the Parent and certain of its subsidiaries owing in connection with the asset securitization transaction governed by (A) the TXI Receivables Purchase Agreement, (B) the Receivables Sale Agreement, and (C) the Receivables Purchase Agreement, each of which is dated as of March 11, 1999, and is executed by the Parent as a party thereto have been terminated and all outstanding Accounts sold by the Parent pursuant to such agreements shall have been re-conveyed to the Parent or to the Borrower originating such Accounts; and (xxi) such other documents and instruments as the Administrative Agent or any Lender may reasonably request. (b) On the Closing Date, after giving effect to the making of all Revolving Loans (including any Revolving Loans made to finance the fees and expenses set forth in the Agent's Letter or otherwise as reimbursement for fees, costs, and expenses then payable under this Agreement) and issuance of all Letters of Credit and with all of the Borrowers' obligations current, Availability shall not be less than $50,000,000. (c) All representations and warranties made hereunder and in the other Loan Documents shall be true and correct. (d) No Default or Event of Default shall exist or would exist after giving effect to the Revolving Loans to be made and the Letters of Credit to be issued. (e) The Borrowers shall have paid all fees and expenses of the Administrative Agent and the Attorney Costs incurred in connection with any of the Loan Documents and the transactions contemplated thereby to the extent invoiced (or shall have made provision for the direct payment thereof out of the proceeds of any Borrowing to be funded on the Closing Date). CREDIT AGREEMENT - Page 50 (f) The Administrative Agent and the Lenders shall have had an opportunity to examine the books of account and other records and files of the Obligated Parties and to make copies thereof, and to conduct a pre-closing audit which shall include, without limitation, verification of Inventory, Accounts, and the Borrowing Base, and the results of such examination and audit shall have been satisfactory to the Administrative Agent and the Lenders in all respects. (g) All proceedings taken by the Obligated Parties in connection with the execution of this Agreement, the other Loan Documents, and all documents and papers relating thereto shall be satisfactory in form, scope, and substance to the Administrative Agent and the Lenders. (h) Without in any way limiting Section 2.3 of the Security Agreements, the Administrative Agent shall have received any warehouse receipts, consent and control agreements, subordination agreements, or other documentation the Administrative Agent determines in its sole discretion are necessary to perfect the Agent's Liens in any Inventory or other Collateral in the possession of any warehouseman. (i) Without limiting the generality of the items described above, each of the Obligated Parties and each other Person guaranteeing payment of the Obligations shall have delivered or caused to be delivered to the Administrative Agent (in form and substance reasonably satisfactory to the Administrative Agent), the financial statements, instruments, resolutions, documents, agreements, certificates, opinions, and other items required by the Administrative Agent and the Lenders. The acceptance by the Borrowers of any Revolving Loans made or Letters of Credit issued on the Closing Date shall be deemed to be a representation and warranty made by the Obligated Parties to the effect that all of the conditions precedent to the making of such Loans or issuance of such Letters of Credit have been satisfied, with the same effect as delivery to the Administrative Agent and the Lenders of a certificate signed by a Responsible Officer of the Obligated Parties, dated the Closing Date, to such effect. Execution and delivery to the Administrative Agent by a Lender of a counterpart of this Agreement shall be deemed confirmation by such Lender that (1) all conditions precedent in this Section 8.1 have been fulfilled to the satisfaction of such Lender, (2) the decision of such Lender to execute and deliver to the Administrative Agent an executed counterpart of this Agreement was made by such Lender independently and without reliance on the Administrative Agent or any other Lender as to the satisfaction of any condition precedent set forth in this Section 8.1, and (3) all documents sent to such Lender for approval, consent, or satisfaction were acceptable to such Lender. Section 8.2 Conditions Precedent to Each Loan. The obligation of the Lenders to make each Revolving Loan, including the initial Revolving Loans on the Closing Date, and the obligation of the Administrative Agent to cause the Letter of Credit Issuer to issue any Letter of Credit shall be subject to the further conditions precedent that on and as of the date of any such extension of credit the following statements shall be true, and the acceptance by the Borrowers of any extension of credit shall be deemed to be a statement by each of the Obligated Parties to the effect set forth in clause (a), clause (b), and clause (c) following with the same effect as the CREDIT AGREEMENT - Page 51 delivery to the Administrative Agent and the Lenders of a certificate signed by a Responsible Officer of each of the Obligated Parties, dated the date of such extension of credit, stating that: (a) the representations and warranties contained in this Agreement and the other Loan Documents are correct in all material respects on and as of the date of such extension of credit as though made on and as of such date, other than any such representation or warranty which relates to a specified prior date and except to the extent the Administrative Agent and the Lenders have been notified in writing by the Obligated Parties that any representation or warranty is not correct and the Majority Lenders have explicitly waived in writing compliance with such representation or warranty; (b) no event has occurred and is continuing, or would result from such extension of credit, which constitutes a Default or an Event of Default; (c) no event has occurred and is continuing, or would result from such extension of credit, which has had or would reasonably be expected to have a Material Adverse Effect; and (d) The Administrative Agent shall have received satisfactory evidence that, except for Permitted Liens, the Administrative Agent has a valid, exclusive, and perfected first priority security interest, lien, collateral assignment, and pledge as of such date in all Collateral as security for the Obligations, to the extent any such Liens may be perfected under the UCC (but excluding any Liens perfected solely by possession, but only to the extent the Administrative Agent has not requested possession of such Collateral), in each case in form and substance satisfactory to the Administrative Agent; provided that upon the Administrative Agent's request, the Obligated Parties shall provide any additional agreement, document, instrument, certificate, or other item relating to any other Collateral as may be required for perfection under any Requirement of Law. Except as provided by Section 11.1(d), no Borrowing (other than Agent Advances) or issuance of any Letter of Credit shall exceed the Availability, provided, however, that the foregoing conditions precedent are not conditions to the requirement for each Lender participating in or reimbursing the Bank or the Administrative Agent for such Lenders' Pro Rata Share of any Non-Ratable Loan or Agent Advance made in accordance with the provisions of Section 1.2(i) or Section 1.2(j). ARTICLE 9 DEFAULT; REMEDIES Section 9.1 Events of Default. It shall constitute an event of default ("Event of Default") if any one or more of the following shall occur for any reason: (a) any failure by the Borrowers to pay the principal of or interest or premium on any of the Obligations or any fee or other amount owing hereunder when due, whether upon demand or otherwise; provided that, with respect to (i) any demand pursuant to Section 3.1 resulting from the Aggregate Revolver Outstandings exceeding the lesser of CREDIT AGREEMENT - Page 52 the Borrowing Base or the Maximum Revolver Amount as a result of imposition of any Reserve and (ii) any demand of amounts not constituting principal or interest hereunder, any such demand made shall constitute a requirement for payment of such amount then due on the Business Day following such demand, if such amount is not otherwise timely paid; (b) any representation or warranty made or deemed made by any Obligated Party in this Agreement or in any other Loan Document, any Financial Statement, or any certificate furnished by any Obligated Party at any time to the Administrative Agent or any Lender shall prove to be untrue in any material respect as of the date on which made, deemed made, or furnished; (c) any default shall occur in the (i) observance or performance of any of the covenants and agreements contained in clauses (a), (b), (d), (e), (h), (k), and (l) of Section 5.2, Section 7.2 (insofar as it requires the preservation of the existence of the Obligated Parties), or Section 7.9 through Section 7.28, or Section 2.3 and Section 2.9 through Section 2.11 of the Security Agreements, (ii) observance or performance of any of the covenants and agreements contained in clauses (c), (f), (g), (i), (j), and (m) of Section 5.2 or Section 5.3 and such default shall continue for three Business Days or more, or (iii) observance or performance of any of the other covenants or agreements contained in this Agreement other than as referenced in Section 9.1(a), Section 9.1(b), and clause (i) and clause (ii) preceding, any other Loan Document, or any other agreement entered into at any time to which any Obligated Party and the Administrative Agent or any Lender are party (including in respect of any Bank Products) and such default shall continue for more than ten Business Days after the earlier of (A) the date upon which a Responsible Officer knew or should have known of such failure or (B) the date upon which written notice thereof is given to the Borrower by the Administrative Agent or any Lender, or if any such agreement or document shall terminate (other than in accordance with its terms or the terms hereof or with the written consent of the Administrative Agent and the Majority Lenders) or become void or unenforceable without the written consent of the Administrative Agent and the Majority Lenders; (d) any default shall occur with respect to any Debt (other than the Obligations) of any Obligated Party in an outstanding principal amount which exceeds $3,000,000, or under any agreement or instrument under or pursuant to which any such Debt may have been issued, created, assumed, or guaranteed by any Obligated Party, and such default shall continue for more than the period of grace, if any, therein specified, if the effect thereof (with or without the giving of notice or further lapse of time or both) is to accelerate or to permit the holders of any such Debt to accelerate, the maturity of any such Debt, or any such Debt shall be declared due and payable or be required to be prepaid prior to the stated maturity thereof; (e) any Obligated Party shall (i) file a voluntary petition in bankruptcy or file a voluntary petition or an answer or otherwise commence any action or proceeding seeking reorganization, arrangement, or readjustment of its debts or for any other relief under the Bankruptcy Code or under any other bankruptcy or insolvency act or law, state or federal, now or hereafter existing, or consent to, approve of, or acquiesce in, any such CREDIT AGREEMENT - Page 53 petition, action, or proceeding, (ii) apply for or acquiesce in the appointment of a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee, or similar officer for it or for all or any part of its property, (iii) make an assignment for the benefit of its creditors, or (iv) be unable generally to pay its debts as they become due; (f) an involuntary petition or proposal shall be filed or an action or proceeding otherwise commenced seeking reorganization, arrangement, consolidation, or readjustment of the debts of any Obligated Party or for any other relief under the Bankruptcy Code or under any other bankruptcy or insolvency act or law, state or federal, now or hereafter existing and such petition or proceeding shall not be dismissed within 30 days after the filing or commencement thereof or an order of relief (or comparable order under any other Requirement of Law) against any Obligated Party shall be entered with respect thereto; (g) a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee, or similar officer for any Obligated Party or for all or any material part of its property shall be appointed or a warrant of attachment, execution, or similar process shall be issued against any part of the property of any Obligated Party; (h) any Obligated Party shall file a certificate of dissolution under any Requirement of Law or shall be liquidated, dissolved, or wound-up (except in a transaction allowed under Section 7.9) or shall commence or have commenced against it any action or proceeding for dissolution, winding-up, or liquidation, or shall take any corporate action in furtherance thereof (except in connection with a transaction allowed under Section 7.9); (i) all or any material part of the property of any Obligated Party shall be nationalized, expropriated, condemned, seized, or otherwise appropriated, or custody or control of such property or of any Obligated Party shall be assumed by any Governmental Authority or any court of competent jurisdiction at the instance of any Governmental Authority, except where contested in good faith by proper proceedings diligently pursued where a stay of enforcement is in effect; (j) any Loan Document, including any Guaranty Agreement, shall be terminated, revoked, or declared void or invalid or unenforceable or challenged by any Obligated Party or any other party thereto (other than in accordance with its terms or the terms hereof or with the written consent of the Administrative Agent and the Majority Lenders); (k) one or more judgments, orders, decrees, or arbitration awards is entered against any Obligated Party involving liability in the aggregate for any or all of the Obligated Parties (to the extent not covered by independent third-party insurance or surety bond as to which the insurer or surety does not dispute coverage) as to any single or related or unrelated series of transactions, incidents, or conditions, of $1,000,000 or more, and the same shall remain unsatisfied, unvacated, and unstayed pending appeal for a period of 30 days after the entry thereof; CREDIT AGREEMENT - Page 54 (l) any loss, theft, damage, or destruction of any item or items of Collateral or other property of any Obligated Party occurs which is not adequately covered by insurance and could reasonably be expected to cause a Material Adverse Effect; (m) there is filed against any Obligated Party any action, suit, or proceeding under any federal or state racketeering statute (including the Racketeer Influenced and Corrupt Organization Act of 1970), which action, suit, or proceeding (i) is not dismissed within 120 days and (ii) could reasonably be expected to result in the confiscation or forfeiture of any material portion of the Collateral; (n) for any reason other than the failure of the Administrative Agent to take any action available to it to maintain perfection of the Agent's Liens pursuant to the Loan Documents, any Loan Document ceases to be in full force and effect (other than in accordance with its terms or the terms hereof or with the written consent of the Administrative Agent and the Majority Lenders) or any Lien with respect to any material portion of the Collateral intended to be secured thereby ceases to be, or is not, valid, perfected, and prior to all other Liens (other than Permitted Liens which are expressly permitted to have priority over the Agent's Liens) or is terminated, revoked, or declared void (other than in accordance with its terms or the terms hereof or with the written consent of the Administrative Agent and the Majority Lenders); (o) (i) an ERISA Event shall occur with respect to a Pension Plan or Multi-employer Plan which has resulted in, or could reasonably be expected to result in, liability of any Obligated Party under Title IV of ERISA to the Pension Plan, Multi-employer Plan, or the PBGC in an aggregate amount in excess of $1,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans at any time exceeds $1,000,000; or (iii) any Obligated Party or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multi-employer Plan in an aggregate amount in excess of $1,000,000; (p) there occurs a Change of Control; or (q) there occurs an event having a Material Adverse Effect. Section 9.2 Remedies. (a) If a Default or an Event of Default exists, the Administrative Agent may, in its discretion, and shall, at the direction of the Majority Lenders, do one or more of the following at any time or times and in any order, without notice to or demand on any Obligated Party: (i) reduce the Maximum Revolver Amount, or the advance rates against Eligible Accounts and/or Eligible Inventory used in computing the Borrowing Base, or reduce or increase one or more of the other elements used in computing the Borrowing Base; (ii) restrict the amount of or refuse to make Revolving Loans; and (iii) restrict or refuse to provide Letters of Credit. If an Event of Default exists, the Administrative Agent shall, at the direction of the Majority Lenders, do one or more of the following, in addition to the actions described in the preceding sentence, at any time or times and in CREDIT AGREEMENT - Page 55 any order, without notice to or demand on any Obligated Party: (A) terminate the Commitments and the obligation of the Lenders to make Revolving Loans under this Agreement; (B) declare any or all of the Obligations to be immediately due and payable; provided, however, that upon the occurrence of any Event of Default described in Section 9.1(e), Section 9.1(f), Section 9.1(g), or Section 9.1(h), the Commitments shall automatically and immediately expire and all Obligations shall automatically become immediately due and payable without notice or demand of any kind; (C) require the Obligated Parties to cash collateralize all Obligations outstanding with respect to Letters of Credit; and (D) pursue its other rights and remedies under the Loan Documents and applicable law. (b) If an Event of Default has occurred and is continuing: (i) the Administrative Agent shall have, for the benefit of the Administrative Agent and the Lenders, in addition to all other rights of the Administrative Agent and the Lenders, the rights and remedies of a secured party under the Loan Documents and the UCC; (ii) the Administrative Agent may, at any time, take possession of the Collateral and keep it on any Obligated Party's premises, at no cost to the Administrative Agent or any Lender, or remove any part of the Collateral to such other place or places as the Administrative Agent may desire, or any Obligated Party shall, upon the Administrative Agent's demand, at such Obligated Party's cost, assemble the Collateral and make it available to the Administrative Agent at a place reasonably convenient to the Administrative Agent; and (iii) the Administrative Agent may sell and deliver any Collateral at public or private sales, for cash, upon credit, or otherwise, at such prices and upon such terms as the Administrative Agent deems advisable, in its sole discretion, and may, if the Administrative Agent deems it reasonable, postpone or adjourn any sale of the Collateral by an announcement at the time and place of sale or of such postponed or adjourned sale without giving a new notice of sale. Without in any way requiring notice to be given in the following manner, each Obligated Party agrees that any notice by the Administrative Agent of sale, disposition, or other intended action hereunder or in connection herewith, whether required by the UCC or otherwise, shall constitute reasonable notice to the Obligated Parties if such notice is mailed by registered or certified mail, return receipt requested, postage prepaid, or is delivered personally against receipt, at least ten days prior to such action to the Obligated Parties' address specified in or pursuant to Section 13.8. If any Collateral is sold on terms other than payment in full at the time of sale, no credit shall be given against the Obligations until the Administrative Agent or the Lenders receive payment, and if the buyer defaults in payment, the Administrative Agent may resell the Collateral without further notice to any Obligated Party. In the event the Administrative Agent seeks to take possession of all or any portion of the Collateral by judicial process, each Obligated Party irrevocably waives: (A) the posting of any bond, surety, or security with respect thereto which might otherwise be required; (B) any demand for possession prior to the commencement of any suit or action to recover the Collateral; and (C) any requirement that the Administrative Agent retain possession and not dispose of any Collateral until after trial or final judgment. Each Obligated Party agrees that the Administrative Agent has no obligation to preserve rights to the Collateral or marshal any Collateral for the benefit of any Person. The Administrative Agent is hereby granted a license or other right to use, without charge, each Obligated Party's labels, patents, copyrights, name, trade secrets, trade names, trademarks, and advertising CREDIT AGREEMENT - Page 56 matter, or any similar property, in completing production of, advertising, or selling any Collateral, and each Obligated Party's rights under all licenses and all franchise agreements shall inure to the Administrative Agent's benefit for such purpose. The proceeds of sale shall be applied first to all expenses of sale, including Attorney Costs, and then to the Obligations. The Administrative Agent will return any excess to the Obligated Parties and the Obligated Parties shall remain liable for any deficiency. (c) If an Event of Default occurs and is continuing, each Obligated Party hereby waives all rights to notice and hearing prior to the exercise by the Administrative Agent of the Administrative Agent's rights to repossess the Collateral without judicial process or to replevy, attach, or levy upon the Collateral without notice or hearing. ARTICLE 10 TERM AND TERMINATION Section 10.1 Term and Termination. The term of this Agreement shall end on the Stated Termination Date unless sooner terminated in accordance with the terms hereof. The Administrative Agent upon direction from the Majority Lenders may terminate this Agreement, without notice to the Obligated Parties, during the existence of an Event of Default. Upon the effective date of termination of this Agreement for any reason whatsoever, all Obligations (including all unpaid principal, accrued and unpaid interest, and any early termination or prepayment fees or penalties but excluding indemnification obligations to the extent no claim with respect thereto has been asserted and remains unsatisfied) shall become immediately due and payable and the Borrowers shall immediately arrange for the cancellation and return of all Letters of Credit then outstanding or presentation to the Administrative Agent of a Supporting Cash Deposit or, if permitted by the Administrative Agent in its discretion, a Supporting Letter of Credit, each as specified in Section 1.3(g). Notwithstanding the termination of this Agreement, until all Obligations are indefeasibly paid and performed in full, the Obligated Parties shall remain bound by the terms of this Agreement and the other Loan Documents and shall not be relieved of any of their Obligations hereunder or under any other Loan Document, and the Administrative Agent and the Lenders shall retain all their rights and remedies hereunder and under the other Loan Documents (including, without limitation, the Agent's Liens in and all rights and remedies with respect to all then existing and after-arising Collateral). ARTICLE 11 AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS Section 11.1 Amendments and Waivers. (a) No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by any Obligated Party therefrom, shall be effective unless the same shall be in writing and signed by the Majority Lenders (or by the Administrative Agent at the written request of the Majority Lenders) and the Obligated Parties and acknowledged by the Administrative Agent, and CREDIT AGREEMENT - Page 57 then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) No waiver, amendment, or consent shall, unless in writing and signed by all of the Lenders and the Obligated Parties and acknowledged by the Administrative Agent, do any of the following: (i) increase (other than pursuant to an assignment under Section 11.2) or extend the Commitment of any Lender or amend the second sentence of Section 1.2(a); (ii) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees (other than fees payable to the Administrative Agent solely for the Administrative Agent's benefit), or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document; (iii) reduce the principal of, or the rate of interest specified herein on any Loan, or any fees or other amounts payable hereunder or under any other Loan Document; (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Revolving Loans which is required for the Lenders or any of them to take any action hereunder; (v) increase any of the percentages set forth in the definition of the Borrowing Base; (vi) amend this Section 11.1 or any provision of this Agreement providing for consent or other action by all of the Lenders; (vii) release Collateral other than as permitted by Section 12.11; (viii) change the definition of Eligible Accounts, Eligible Inventory, Majority Lenders, or Required Lenders; (ix) increase the advance rates specified in the definition of Borrowing Base or the Maximum Inventory Loan Amount; or (x) increase the Maximum Revolver Amount or the Letter of Credit Subfacility. (c) No waiver, amendment, or consent shall, unless in writing and signed by the Required Lenders and the Obligated Parties and acknowledged by the Administrative Agent, amend any provision of Section 1.2(j), other than an amendment to the percentage of Lenders required to revoke the Administrative Agent's authorization to make Agent Advances which revocation shall not require the signature of any of the Obligated Parties. CREDIT AGREEMENT - Page 58 (d) Notwithstanding the foregoing, (i) the Administrative Agent may, in its sole discretion and notwithstanding the limitations contained in Section 11.1(b)(v) and Section 11.1(b)(ix) and any other terms of this Agreement, make Non-Ratable Loans in accordance with Section 1.2(i) and make Agent Advances in accordance with Section 1.2(j), and no amendment, waiver, or consent shall, unless in writing and signed by the Administrative Agent, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document and (ii) Schedule A-1 may be amended from time to time by the Administrative Agent alone to reflect assignments of Commitments in accordance herewith. (e) If any fees are paid to the Lenders as consideration for amendments, waivers, or consents with respect to this Agreement, at the Administrative Agent's election, such fees may be paid only to those Lenders that agree to such amendments, waivers, or consents within the time specified for submission thereof. (f) If, in connection with any proposed amendment, waiver, or consent (a "Proposed Change"): (i) requiring the consent of all of the Lenders, the consent of the Required Lenders is obtained but the consent of the other Lenders is not obtained (any such Lender whose consent is not obtained as described in this clause (i) being referred to as a "Non-Consenting Lender"), or (ii) requiring the consent of the Required Lenders, the consent of the Majority Lenders is obtained but the consent of the other Lenders is not obtained, then, so long as the Administrative Agent is not a Non-Consenting Lender, at the Obligated Parties' request the Administrative Agent (in its individual capacity as a Lender) or an Eligible Assignee (with the Administrative Agent's approval) shall have the right (but not the obligation) to purchase from each Non-Consenting Lender, and each Non-Consenting Lender agrees that it shall sell, such Non-Consenting Lender's Commitments for an amount equal to the principal balances thereof and all accrued interest and fees with respect thereto through the date of sale pursuant to an Assignment and Acceptance, without premium or discount. Section 11.2 Assignments; Participations. (a) Any Lender may, with the written consent of the Administrative Agent (which consent shall not be unreasonably withheld) and if no Default or Event of Default exists with the written consent of the Borrowers (which consent shall not be unreasonably withheld), assign and delegate to one or more Eligible Assignees (provided that no consent of the Administrative Agent or the Borrowers shall be required in connection with any assignment and delegation by a Lender to an Affiliate of such Lender or to another Lender) (each an "Assignee") all, or any ratable part of all, of the Revolving Loans, the Commitments, and the other rights and obligations of such Lender hereunder, in a minimum amount of $10,000,000 and integral amounts of $5,000,000 in excess thereof or all of such assigning Lender's Revolving Loans and Commitment (provided CREDIT AGREEMENT - Page 59 that, unless an assignor Lender has assigned and delegated all of its Revolving Loans and Commitment, no such assignment and/or delegation shall be permitted unless, after giving effect thereto, such assignor Lender retains a Commitment in a minimum amount of $10,000,000); provided, however, that the Obligated Parties and the Administrative Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses, and related information with respect to the Assignee, shall have been given to the Obligated Parties and the Administrative Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered to the Obligated Parties and the Administrative Agent an Assignment and Acceptance substantially in the form of Exhibit F (an "Assignment and Acceptance") together with any Revolving Loan Note subject to such assignment, and (iii) the assignor Lender or Assignee has paid to the Administrative Agent a processing fee in the amount of $5,000 (provided that the Administrative Agent may, in its discretion, waive such fee in connection with the initial syndication of the Commitments). The Borrowers agree to promptly execute and deliver new or replacement Revolving Loan Notes in exchange for existing Revolving Loan Notes as reasonably requested by the Administrative Agent to evidence assignments of the Revolving Loans and Commitments in accordance herewith. (b) From and after the date that the Administrative Agent notifies the assignor Lender that it has received an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations, including, but not limited to, the obligation to participate in Letters of Credit have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents 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 rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties, or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency, or value of this Agreement or any other Loan Document furnished pursuant hereto or the attachment, perfection, or priority of any Lien granted by the Obligated Parties to the Administrative Agent or any Lender in the Collateral; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Obligated Parties or the performance or observance by the Obligated Parties of any of their respective obligations under this Agreement or any other Loan Document furnished pursuant hereto; (iii) such Assignee confirms that it has received a copy of this Agreement, together with such other documents and information as it has deemed appropriate to make its own credit analysis CREDIT AGREEMENT - Page 60 and decision to enter into such Assignment and Acceptance; (iv) such Assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender, or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such Assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers, including the discretionary rights and incidental power, as are reasonably incidental thereto; and (vi) 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. (d) Immediately upon satisfaction of the requirements of Section 11.2(a), this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto. (e) Any Lender may at any time sell to one or more Participants participating interests in any Revolving Loans, the Commitment of that Lender, and the other interests of that Lender (the "Originating Lender") hereunder and under the other Loan Documents; provided, however, that (i) the Originating Lender's obligations under this Agreement shall remain unchanged, (ii) the Originating Lender shall remain solely responsible for the performance of such obligations, (iii) the Obligated Parties and the Administrative Agent shall continue to deal solely and directly with the Originating Lender in connection with the Originating Lender's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document except the matters set forth in Section 11.1(b)(i), Section 11.1(b)(ii), and Section 11.1(b)(iii), and (v) all amounts payable by the Borrowers hereunder shall be determined as if such Lender had not sold such participation, except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent and subject to the same limitation as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. (f) Notwithstanding any other provision in this Agreement, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Board or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. CREDIT AGREEMENT - Page 61 ARTICLE 12 THE ADMINISTRATIVE AGENT Section 12.1 Appointment and Authorization. Each Lender hereby designates and appoints the Bank (acting in its capacity as the Administrative Agent) as its agent under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. The Administrative Agent agrees to act as such on the express conditions contained in this Article 12. The provisions of this Article 12 are solely for the benefit of the Administrative Agent and the Lenders, and the Obligated Parties shall have no rights of a third party beneficiary of any of the provisions contained herein. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations, or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Except as expressly otherwise provided in this Agreement, the Administrative Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions which the Administrative Agent is expressly entitled to take or assert under this Agreement and the other Loan Documents, including (a) the determination of the applicability of ineligibility criteria with respect to the calculation of the Borrowing Base, (b) the making of Agent Advances pursuant to Section 1.2(j), and (c) the exercise of remedies pursuant to Section 9.2, and any action so taken or not taken shall be deemed consented to by the Lenders. Section 12.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees, or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects as long as such selection was made without gross negligence or willful misconduct. Section 12.3 Liability of the Administrative Agent. None of the Agent-Related Persons shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Lenders for any recital, statement, representation, or warranty made by any Obligated Party or Affiliate of any Obligated Party, or any officer thereof, contained in this CREDIT AGREEMENT - Page 62 Agreement or in any other Loan Document, or in any certificate, report, statement, or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability, or sufficiency of this Agreement or any other Loan Document, or for any failure of any Obligated Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books, or records of any Obligated Party or any Obligated Party's Affiliates. Section 12.4 Reliance by the Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex, or telephone message, statement, or other document or conversation believed by the Administrative Agent to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements of legal counsel (including, without limitation, counsel to any Obligated Party), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Lenders (or such other percentage of Lenders if so required by Section 11.1) and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. Section 12.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, unless the Administrative Agent shall have received written notice from an Obligated Party referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority Lenders in accordance with Article 9; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable. Section 12.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Obligated Parties and their Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition, and CREDIT AGREEMENT - Page 63 creditworthiness of the Obligated Parties and their Affiliates, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrowers. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals, and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition, and creditworthiness of the Obligated Parties. Except for notices, reports, and other documents expressly herein required to be furnished to the Lenders by the Administrative Agent, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition, or creditworthiness of any Obligated Party which may come into the possession of any of the Agent-Related Persons. Section 12.7 Indemnification. WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED, THE LENDERS SHALL UPON DEMAND INDEMNIFY THE AGENT-RELATED PERSONS (TO THE EXTENT NOT REIMBURSED BY OR ON BEHALF OF THE OBLIGATED PARTIES AND WITHOUT LIMITING THE OBLIGATION OF THE OBLIGATED PARTIES TO DO SO), IN ACCORDANCE WITH THEIR PRO RATA SHARES, FROM AND AGAINST ANY AND ALL INDEMNIFIED LIABILITIES; PROVIDED, HOWEVER, THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT TO THE AGENT-RELATED PERSONS OF ANY PORTION OF SUCH INDEMNIFIED LIABILITIES (AS DEFINED HEREIN) TO THE EXTENT IT ARISES FROM SUCH PERSON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its Pro Rata Share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment, or enforcement (whether through negotiations, legal proceedings, or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrowers. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Administrative Agent. Section 12.8 The Administrative Agent in Individual Capacity. The Bank and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in, and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with any Obligated Party and its Affiliates as though the Bank were not the Administrative Agent hereunder and without notice to or consent of the Lenders. The Bank or its Affiliates may receive information regarding any Obligated Party or its Affiliates and Account Debtors (including information that may be subject to confidentiality obligations in favor of any such Obligated Party or Affiliate), and the Lenders acknowledge that the Administrative Agent and the Bank shall be under no obligation to provide such information to the Lenders. With respect to its Revolving Loans, the Bank as a Lender shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as CREDIT AGREEMENT - Page 64 though it were not the Administrative Agent, and the terms "Lender" and "Lenders" include the Bank in its individual capacity. Section 12.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon at least 30 days prior notice to the Lenders and the Obligated Parties, such resignation to be effective upon the acceptance of a successor agent to its appointment as the Administrative Agent. In the event the Bank sells all of its Commitments and Revolving Loans as part of a sale, transfer, or other disposition by the Bank of substantially all of its loan portfolio, the Bank shall resign as the Administrative Agent and such purchaser or transferee shall become the successor Administrative Agent hereunder. Subject to the foregoing, if the Administrative Agent resigns (the "resigning Administrative Agent") under this Agreement, the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders (the "successor Administrative Agent"). If no successor Administrative Agent is appointed prior to the effective date of the resignation of the resigning Administrative Agent, the resigning Administrative Agent may appoint, after consulting with the Lenders and the Obligated Parties, a successor Administrative Agent from among the Lenders. Upon the acceptance of its appointment as the successor Administrative Agent, the successor Administrative Agent shall succeed to all the rights, powers, and duties of the resigning Administrative Agent and the term "Administrative Agent" shall mean the successor Administrative Agent and the resigning Administrative Agent's appointment, powers, and duties as the Administrative Agent shall be terminated. After any resigning Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of this Article 12 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement. Section 12.10 Withholding Tax. (a) If any Lender is a "foreign corporation, partnership, or trust" within the meaning of the Code and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such Lender agrees with and in favor of the Administrative Agent, to deliver to the Administrative Agent and the Parent: (i) if such Lender claims an exemption from, or a reduction of, withholding tax under a U.S. tax treaty, two properly completed and executed IRS Forms W-8BEN and W-8ECI before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement; (ii) if such Lender claims that interest paid under this Agreement is exempt from U.S. withholding tax because it is effectively connected with a U.S. trade or business of such Lender, two properly completed and executed copies of IRS Form W-8ECI before the payment of any interest is due in the first taxable year of such Lender and in each succeeding taxable year of such Lender during which interest may be paid under this Agreement, and IRS Form W-9; and CREDIT AGREEMENT - Page 65 (iii) such other form or forms as may be required under the Code or other laws of the U.S. as a condition to exemption from, or reduction of, U.S. withholding tax. Such Lender agrees to promptly notify the Administrative Agent and the Parent of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Lender claims exemption from, or reduction of, withholding tax under a U.S. tax treaty by providing IRS Form W-8BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations owing to such Lender, such Lender agrees to notify the Administrative Agent and the Parent of the percentage amount in which it is no longer the beneficial owner of Obligations owing to such Lender. To the extent of such percentage amount, the Administrative Agent and the Parent will treat such Lender's IRS Form W-8BEN as no longer valid. (c) If any Lender claiming exemption from U.S. withholding tax by filing IRS Form W-8ECI with the Administrative Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations owing to such Lender, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. (d) If any Lender is entitled to a reduction in the applicable withholding tax, the Administrative Agent or any Borrower may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by clause (a) preceding are not delivered to the Administrative Agent and the Parent, then the Administrative Agent or any Borrower may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax. (e) If the IRS or any other Governmental Authority of the U.S. or other jurisdiction asserts a claim that the Administrative Agent or any Borrower did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent or any Borrower of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify each of the Administrative Agent and any Borrower fully for all amounts paid, directly or indirectly, by either of them as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to either the Administrative Agent or the Borrowers under this Section 12.10, together with all costs and expenses (including Attorney Costs). The obligation of the Lenders under this clause (e) shall survive the payment of all Obligations and the resignation or replacement of the Administrative Agent. CREDIT AGREEMENT - Page 66 Section 12.11 Collateral Matters. (a) The Lenders hereby irrevocably authorize the Administrative Agent to release any Guarantor as provided in Section 7.9(f), and to release any Agent's Liens upon any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full of all Revolving Loans and reimbursement obligations in respect of Letters of Credit, and the termination or collateralization as provided in Section 1.3(g) of all outstanding Letters of Credit (whether or not any of such obligations are due) and all other Obligations, (ii) constituting property being sold or disposed of if the Obligated Party disposing of such property certifies to the Administrative Agent that the sale or disposition is made in compliance with Section 7.9 (and the Administrative Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property in which no Obligated Party owned any interest at the time the Lien was granted or at any time thereafter, or (iv) constituting property leased to an Obligated Party under a lease which has expired or been terminated in a transaction permitted under this Agreement. Except as provided above, the Administrative Agent will not release any Guarantor or any of the Agent's Liens without the prior written authorization of the Lenders; provided that the Administrative Agent may, in its discretion, release the Agent's Liens on Collateral valued in the aggregate not in excess of $2,000,000 during each Fiscal Year without the prior written authorization of the Lenders and the Administrative Agent may release the Agent's Liens on Collateral valued in the aggregate not in excess of $5,000,000 during each Fiscal Year with the prior written authorization of the Majority Lenders. Upon request by the Administrative Agent or the Obligated Parties at any time, the Lenders will confirm in writing the Administrative Agent's authority to release any Guarantor and any of the Agent's Liens upon particular types or items of Collateral pursuant to this Section 12.11. (b) Upon receipt by the Administrative Agent of any authorization required pursuant to Section 12.11(a) from the Lenders or the Majority Lenders, as applicable, of the Administrative Agent's authority to release any Agent's Liens upon particular types or items of Collateral, and upon at least five Business Days prior written request by the Obligated Parties, the Administrative Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Agent's Liens upon such Collateral; provided, however, that (i) the Administrative Agent shall not be required to execute any such document on terms which, in the Administrative Agent's opinion, would expose the Administrative Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of the Obligated Parties in respect of) all interests retained by the Obligated Parties, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral. (c) The Administrative Agent shall have no obligation whatsoever to any of the Lenders to assure that the Collateral exists or is owned by the Obligated Parties or is cared for, protected, or insured or has been encumbered, or that the Agent's Liens have been properly or sufficiently or lawfully created, perfected, protected, or enforced or are CREDIT AGREEMENT - Page 67 entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure, or fidelity, or to continue exercising, any of the rights, authorities, and powers granted or available to the Administrative Agent pursuant to any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, the Administrative Agent may act in any manner it may deem appropriate, in its sole discretion given the Administrative Agent's own interest in the Collateral in its capacity as one of the Lenders and that the Administrative Agent shall have no other duty or liability whatsoever to any Lender as to any of the foregoing. Section 12.12 Restrictions on Actions by the Lenders; Sharing of Payments. (a) Each of the Lenders agrees that it shall not, without the express consent of the Required Lenders, and that it shall, to the extent it is lawfully entitled to do so, upon the request of the Required Lenders, setoff against the Obligations, any amounts owing by such Lender to any Obligated Party or any accounts of any Obligated Party now or hereafter maintained with such Lender. Each of the Lenders further agrees that it shall not, unless specifically requested to do so by the Administrative Agent, take or cause to be taken any action to enforce its rights under this Agreement or any other Loan Document or against any Obligated Party, including the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral. (b) If at any time or times any Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments with respect to the Obligations owing to such Lender arising under, or relating to, this Agreement or the other Loan Documents, except for any such proceeds or payments received by such Lender from the Administrative Agent pursuant to the terms of this Agreement, or (ii) payments from the Administrative Agent in excess of such Lender's ratable portion of all such distributions by the Administrative Agent, such Lender shall promptly (1) turn the same over to the Administrative Agent, in kind, and with such endorsements as may be required to negotiate the same to the Administrative Agent, or in same day funds, as applicable, for the account of all of the Lenders and for application to the Obligations in accordance with the applicable provisions of this Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, however, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be ------- rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment. Section 12.13 Agency for Perfection. Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Liens, for the benefit of the Administrative Agent and the Lenders, in assets which, in accordance with Article 9 of the UCC or any other Requirement of Law can be perfected only by possession. Should any Lender (other than the Administrative CREDIT AGREEMENT - Page 68 Agent) obtain possession of any such Collateral, such Lender shall notify the Administrative Agent thereof, and, promptly upon the Administrative Agent's request therefor shall deliver such Collateral to the Administrative Agent or otherwise deal with such Collateral in accordance with the Administrative Agent's instructions. Section 12.14 Payments by the Administrative Agent to the Lenders. All payments to be made by the Administrative Agent to the Lenders shall be made by bank wire transfer or internal transfer of immediately available funds to each Lender pursuant to transfer instructions delivered in writing to the Administrative Agent on or prior to the Closing Date (or if such Lender is an Assignee, delivered with or in the applicable Assignment and Acceptance), or pursuant to such other transfer instructions as each party may designate for itself by written notice to the Administrative Agent. Concurrently with each such payment, the Administrative Agent shall identify whether such payment (or any portion thereof) represents principal, premium, or interest on the Revolving Loans or otherwise. Unless the Administrative Agent receives notice from the Borrowers prior to the date on which any payment is due to the Lenders that the Borrowers will not make such payment in full as and when required, the Administrative Agent may assume that the Borrowers have made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrowers have not made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid. Section 12.15 Settlement. (a) Each Lender's funded portion of the Revolving Loans is intended by the Lenders to be equal at all times to such Lender's Pro Rata Share of the outstanding Revolving Loans. Notwithstanding such agreement, the Administrative Agent, the Bank, and the Lenders agree (which agreement shall not be for the benefit of or enforceable by the Obligated Parties) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among them as to the Revolving Loans, including the Non-Ratable Loans and the Agent Advances shall take place on a periodic basis in accordance with the following provisions: (i) The Administrative Agent shall request settlement (a "Settlement") with the Lenders on at least a weekly basis, or on a more frequent basis at the Administrative Agent's election, (A) on behalf of the Bank, with respect to each outstanding Non-Ratable Loan, (B) for itself, with respect to each Agent Advance, and (C) with respect to collections received, in each case, by notifying the Lenders of such requested Settlement by telecopy, telephone, e-mail, or other similar form of transmission, of such requested Settlement, no later than 10:00 a.m. (Pasadena, California time) on the date of such requested Settlement (the "Settlement Date"). Each Lender (other than the Bank, in the case of the Non-Ratable Loans, and the Administrative Agent in the case of the Agent Advances) shall transfer the amount of such Lender's Pro Rata Share of the outstanding CREDIT AGREEMENT - Page 69 principal amount of the Non-Ratable Loans and Agent Advances with respect to which Settlement is requested to the Administrative Agent, to such account of the Administrative Agent as the Administrative Agent may designate, not later than 11:00 a.m. (Pasadena, California time), on the Settlement Date applicable thereto. Settlements may occur during the continuation of a Default or an Event of Default and whether or not the applicable conditions precedent set forth in Article 8 have then been satisfied. Such amounts transferred to the Administrative Agent shall be applied against the amounts of the applicable Non-Ratable Loan or Agent Advance and, together with the portion of such Non-Ratable Loan or Agent Advance representing the Bank's Pro Rata Share thereof, shall constitute Revolving Loans of such Lenders, respectively. If any such amount is not transferred to the Administrative Agent by any Lender on the Settlement Date applicable thereto, the Administrative Agent shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Federal Funds Rate for the first three days from and after the Settlement Date and thereafter at the Interest Rate then applicable to the Base Rate Revolving Loans (Y) on behalf of the Bank, with respect to each outstanding Non-Ratable Loan and (Z) for itself, with respect to each Agent Advance. (ii) Notwithstanding the foregoing, not more than one Business Day after demand is made by the Administrative Agent (whether before or after the occurrence of a Default or an Event of Default and regardless of whether the Administrative Agent has requested a Settlement with respect to a Non-Ratable Loan or Agent Advance), each other Lender (A) shall irrevocably and unconditionally purchase and receive from the Bank or the Administrative Agent, as applicable, without recourse or warranty, an undivided interest and participation in such Non-Ratable Loan or Agent Advance equal to such Lender's Pro Rata Share of such Non-Ratable Loan or Agent Advance, and (B) if Settlement has not previously occurred with respect to such Non-Ratable Loans or Agent Advances, upon demand by the Bank or the Administrative Agent, as applicable, shall pay to the Bank or the Administrative Agent, as applicable, as the purchase price of such participation an amount equal to 100% of such Lender's Pro Rata Share of such Non-Ratable Loans or Agent Advances. If such amount is not in fact transferred to the Administrative Agent by any Lender, the Administrative Agent shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Federal Funds Rate for the first three days from and after such demand and thereafter at the Interest Rate then applicable to Base Rate Revolving Loans. (iii) From and after the date, if any, on which any Lender purchases an undivided interest and participation in any Non-Ratable Loan or Agent Advance pursuant to clause (ii) preceding, the Administrative Agent shall promptly distribute to such Lender, such Lender's Pro Rata Share of all payments of principal and interest and all proceeds of Collateral received by the Administrative Agent in respect of such Non-Ratable Loan or Agent Advance. CREDIT AGREEMENT - Page 70 (iv) Between Settlement Dates, to the extent no Agent Advances are outstanding, the Administrative Agent may pay over to the Bank any payments received by the Administrative Agent, which in accordance with the terms of this Agreement would be applied to the reduction of the Revolving Loans, for application to the Bank's Revolving Loans including Non-Ratable Loans. If, as of any Settlement Date, collections received since the then immediately preceding Settlement Date have been applied to the Bank's Revolving Loans (other than to Non-Ratable Loans or Agent Advances in which a Lender has not yet funded its purchase of a participation pursuant to clause (ii) preceding), as provided for in the previous sentence, the Bank shall pay to the Administrative Agent for the accounts of the Lenders, to be applied to the outstanding Revolving Loans of such Lenders, an amount such that each Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Revolving Loans. During the period between Settlement Dates, the Bank with respect to Non-Ratable Loans, the Administrative Agent with respect to Agent Advances, and each Lender with respect to the Revolving Loans other than Non-Ratable Loans and Agent Advances, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the actual average daily amount of funds employed by the Bank, the Administrative Agent, and the other Lenders. (v) Unless the Administrative Agent has received written notice from a Lender to the contrary, the Administrative Agent may assume that the applicable conditions precedent set forth in Article 8 have been satisfied and the requested Borrowing will not exceed the Availability on any Funding Date for a Revolving Loan or Non-Ratable Loan. (b) The Lenders' Failure to Perform. All Revolving Loans (other than Non-Ratable Loans and Agent Advances) shall be made by the Lenders simultaneously and in accordance with their Pro Rata Shares. It is understood that (i) no Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Revolving Loans hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any failure by any other Lender to perform its obligation to make any Revolving Loans hereunder, (ii) no failure by any Lender to perform its obligation to make any Revolving Loans hereunder shall excuse any other Lender from its obligation to make any Revolving Loans hereunder, and (iii) the obligations of each Lender hereunder shall be several, not joint and several. (c) Defaulting Lenders. Unless the Administrative Agent receives notice from a Lender on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least one Business Day prior to the date of such Borrowing, that such Lender will not make available as and when required hereunder to the Administrative Agent such Lender's Pro Rata Share of such Borrowing, the Administrative Agent may assume that each Lender has made such amount available to the Administrative Agent in immediately available funds on the Funding Date. Furthermore, the Administrative Agent may, in reliance upon such assumption, make available to the Borrowers on such date a corresponding amount. If any Lender has not transferred its full Pro Rata Share to the Administrative Agent in immediately available funds and if the Administrative Agent CREDIT AGREEMENT - Page 71 has transferred a corresponding amount to the Borrowers on the Business Day following such Funding Date the applicable Lender shall make such amount available to the Administrative Agent, together with interest at the Federal Funds Rate for that day. A notice by the Administrative Agent submitted to any Lender with respect to amounts owing shall be conclusive, absent manifest error. If each Lender's full Pro Rata Share is transferred to the Administrative Agent as required, the amount transferred to the Administrative Agent shall constitute such Lender's Revolving Loan for all purposes of this Agreement. If any such amount is not transferred to the Administrative Agent on the Business Day following the Funding Date, the Administrative Agent will notify the Borrowers of such failure to fund and, upon demand by the Administrative Agent, the Borrowers shall pay such amount to the Administrative Agent for the Administrative Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the Interest Rate applicable at the time to the Revolving Loans comprising that particular Borrowing. The failure of any Lender to make any Revolving Loan on any Funding Date (any such Lender, prior to the cure of such failure, being hereinafter referred to as a "Defaulting Lender") shall not relieve any other Lender of its obligation hereunder to make a Revolving Loan on such Funding Date. No Lender shall be responsible for any other Lender's failure to advance such other Lenders' Pro Rata Share of any Borrowing. (d) Retention of Defaulting Lender's Payments. The Administrative Agent shall not be obligated to transfer to a Defaulting Lender any payments made by any Borrower to the Administrative Agent for the Defaulting Lender's benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder. Amounts payable to a Defaulting Lender shall instead be paid to or retained by the Administrative Agent. In its discretion, the Administrative Agent may loan the Borrowers the amount of all such payments received or retained by it for the account of such Defaulting Lender. Any amounts so loaned to the Borrowers shall bear interest at the rate applicable to Base Rate Revolving Loans and for all other purposes of this Agreement shall be treated as if they were Revolving Loans, provided, however, that for purposes of voting or consenting to matters with respect to the Loan Documents and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender." Until a Defaulting Lender cures its failure to fund its Pro Rata Share of any Borrowing (i) such Defaulting Lender shall not be entitled to any portion of the Unused Line Fee and (ii) the Unused Line Fee shall accrue in favor of the Lenders which have funded their respective Pro Rata Shares of such requested Borrowing and shall be allocated among such performing Lenders ratably based upon their relative Commitments. This Section shall remain effective with respect to such Lender until such time as the Defaulting Lender shall no longer be in default of any of its obligations under this Agreement. The terms of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by any Borrower of its duties and obligations hereunder. (e) Removal of Defaulting Lender. At the Borrowers' request, the Administrative Agent or an Eligible Assignee reasonably acceptable to the Administrative Agent and the Borrowers shall have the right (but not the obligation) to purchase from any Defaulting Lender, and each Defaulting Lender shall, upon such request, sell and assign to the Administrative Agent or such Eligible Assignee, all of the CREDIT AGREEMENT - Page 72 Defaulting Lender's outstanding Commitments hereunder. Such sale shall be consummated promptly after the Administrative Agent has arranged for a purchase by the Administrative Agent or an Eligible Assignee pursuant to an Assignment and Acceptance, and at a price equal to the outstanding principal balance of the Defaulting Lender's Revolving Loans, plus accrued interest and fees, without premium or discount. Section 12.16 Letters of Credit; Intra-Lender Issues. (a) Notice of Letter of Credit Balance. On each Settlement Date, the Administrative Agent shall notify each Lender of the issuance of all Letters of Credit since the prior Settlement Date. (b) Participations in Letters of Credit. (i) Purchase of Participations. Immediately upon issuance of any Letter of Credit in accordance with Section 1.3(d), each Lender shall be deemed to have irrevocably and unconditionally purchased and received without recourse or warranty, an undivided interest and participation equal to such Lender's Pro Rata Share of the face amount of such Letter of Credit in connection with the issuance of such Letter of Credit (including all obligations of the Borrower for whose account such Letter of Credit was issued, and any security therefor or guaranty pertaining thereto). (ii) Sharing of Reimbursement Obligation Payments. Whenever the Administrative Agent receives a payment from a Borrower on account of reimbursement obligations in respect of a Letter of Credit as to which the Administrative Agent has previously received for the account of the Administrative Agent or the Letter of Credit Issuer payment from a Lender, the Administrative Agent shall promptly pay to such Lender such Lender's Pro Rata Share of such payment from such Borrower. Each such payment shall be made by the Administrative Agent on the next Settlement Date. (iii) Documentation. Upon the request of any Lender, the Administrative Agent shall furnish to such Lender copies of any Letter of Credit, reimbursement agreements executed in connection therewith, applications for any Letter of Credit, and such other documentation as may reasonably be requested by such Lender. (iv) Obligations Irrevocable. The obligation of each Lender to make payments to the Administrative Agent with respect to any Letter of Credit or with respect to their participation therein or with respect to the Revolving Loans made as a result of a drawing under a Letter of Credit and the obligation of the Borrowers to make payments to the Administrative Agent, for the account of the Lenders, with respect to any Letter of Credit shall be irrevocable and shall not be subject to any qualification or exception whatsoever, including any of the following circumstances: CREDIT AGREEMENT - Page 73 (A) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (B) the existence of any claim, setoff, defense, or other right which any Borrower may have at any time against a beneficiary named in a Letter of Credit or any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), any Lender, the Administrative Agent, the Letter of Credit Issuer, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transactions between such Borrower or any other Person and the beneficiary named in any Letter of Credit); (C) any draft, certificate, or any other document presented under any 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; (D) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; (E) the occurrence of any Default or Event of Default; or (F) the failure of the Borrowers to satisfy the applicable conditions precedent set forth in Article 8. (c) Recovery or Avoidance of Payments; Refund of Payments in Error. In the event any payment by or on behalf of any Borrower received by the Administrative Agent with respect to any Letter of Credit and distributed by the Administrative Agent to the Lenders on account of their respective participations therein is thereafter set aside, avoided, or recovered from the Administrative Agent in connection with any receivership, liquidation, or bankruptcy proceeding, the Lenders shall, upon demand by the Administrative Agent, pay to the Administrative Agent their respective Pro Rata Shares of such amount set aside, avoided, or recovered, together with interest at the rate required to be paid by the Administrative Agent upon the amount required to be repaid by it. Unless the Administrative Agent receives notice from the Borrowers prior to the date on which any payment is due to the Lenders that the Borrowers will not make such payment in full as and when required, the Administrative Agent may assume that the Borrowers have made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrowers have not made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid. CREDIT AGREEMENT - Page 74 (d) Indemnification by the Lenders. To the extent not reimbursed by the Borrowers and without limiting the obligations of the Borrowers hereunder, the Lenders agree to indemnify the Letter of Credit Issuer ratably in accordance with their respective Pro Rata Shares, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees) or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Letter of Credit Issuer in any way relating to or arising out of any Letter of Credit or the transactions contemplated thereby or any action taken or omitted by the Letter of Credit Issuer under any Letter of Credit or any Loan Document in connection therewith; provided that no Lender shall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Letter of Credit Issuer promptly upon demand for its Pro Rata Share of any costs or expenses payable by any Borrower to the Letter of Credit Issuer, to the extent that the Letter of Credit Issuer is not promptly reimbursed for such costs and expenses by a Borrower. The agreement contained in this Section shall survive payment in full of all other Obligations. Section 12.17 Concerning the Collateral and the Related Loan Documents. Each Lender authorizes and directs the Administrative Agent to enter into the other Loan Documents, for the ratable benefit and obligation of the Administrative Agent and the Lenders. Each Lender agrees that any action taken by the Administrative Agent or the Majority Lenders in accordance with the terms of this Agreement or the other Loan Documents, and the exercise by the Administrative Agent or the Majority Lenders of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders. The Lenders acknowledge that the Revolving Loans (including the Agent Advances and the Non-Ratable Loans), Bank Products (including Hedge Agreements), and all interest, fees, and expenses hereunder constitute one Debt, secured pari passu by all of the Collateral. Section 12.18 Field Audit and Examination Reports; Disclaimer by the Lenders. By signing this Agreement, each Lender: (a) is deemed to have requested that the Administrative Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report (each a "Report" and collectively, the "Reports") prepared by or on behalf of the Administrative Agent; (b) expressly agrees and acknowledges that neither the Bank nor the Administrative Agent (i) makes any representation or warranty as to the accuracy of any Report or (ii) shall be liable for any information contained in any Report; (c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Administrative Agent, the Bank, or any other party performing any audit or examination will inspect only specific information regarding the Obligated Parties and will rely significantly upon the Obligated Parties' books and records, as well as on representations of the Obligated Parties' personnel; CREDIT AGREEMENT - Page 75 (d) agrees to keep all Reports confidential and strictly for its internal use, and not to distribute except to its Participants, or use any Report in any other manner; and (e) without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold the Administrative Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to the Obligated Parties, or the indemnifying Lender's participation in, or the indemnifying Lender's purchase of, a loan or loans of the Obligated Parties; and (ii) to pay and protect, and indemnify, defend, and hold the Administrative Agent and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including Attorney Costs) incurred by the Administrative Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender. Section 12.19 Relation Among the Lenders. The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Administrative Agent) authorized to act for, any other Lender. ARTICLE 13 MISCELLANEOUS Section 13.1 No Waivers; Cumulative Remedies. No failure by the Administrative Agent or any Lender to exercise any right, remedy, or option under this Agreement or any present or future supplement hereto, or in any other agreement between or among any Borrower and the Administrative Agent and/or any Lender, or delay by the Administrative Agent or any Lender in exercising the same, will operate as a waiver thereof. Subject to Section 11.1, no waiver by the Administrative Agent or any Lender will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by the Administrative Agent or the Lenders on any occasion shall affect or diminish the Administrative Agent's and each Lender's rights thereafter to require strict performance by the Obligated Parties of any provision of this Agreement. The Administrative Agent and the Lenders may proceed directly to collect the Obligations without any prior recourse to the Collateral. The Administrative Agent's and each Lender's rights under this Agreement will be cumulative and not exclusive of any other right or remedy which the Administrative Agent or any Lender may have. Section 13.2 Severability. The illegality or unenforceability of any provision of this Agreement, any other Loan Document, or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement, any other Loan Document, or any instrument or agreement required hereunder. CREDIT AGREEMENT - Page 76 Section 13.3 Governing Law; Choice of Forum; Service of Process. (a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS, PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF CALIFORNIA; PROVIDED THAT THE PARTIES HERETO SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE U.S. LOCATED IN LOS ANGELES COUNTY, CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE OBLIGATED PARTIES, THE ADMINISTRATIVE AGENT, AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE OBLIGATED PARTIES, THE ADMINISTRATIVE AGENT, AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY OTHER AGREEMENT, DOCUMENT, OR INSTRUMENT RELATED HERETO OR THERETO. NOTWITHSTANDING THE FOREGOING (i) THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OBLIGATED PARTY OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE ADMINISTRATIVE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (ii) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS. (c) EACH OBLIGATED PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH OBLIGATED PARTY AT ITS ADDRESS SET FORTH IN SECTION 13.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW. CREDIT AGREEMENT - Page 77 Section 13.4 Waiver of Jury Trial. EACH OF THE OBLIGATED PARTIES, THE LENDERS, AND THE ADMINISTRATIVE AGENT IRREVOCABLY WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING, OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT, OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE OBLIGATED PARTIES, THE LENDERS, AND THE ADMINISTRATIVE AGENT AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION 13.4 AS TO ANY ACTION, COUNTERCLAIM, OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. Section 13.5 Survival of Representations and Warranties. All representations and warranties of the Obligated Parties contained in this Agreement shall survive the execution, delivery, and acceptance thereof by the parties, notwithstanding any investigation by the Administrative Agent or the Lenders or their respective agents. Section 13.6 Other Security and Guaranties. The Administrative Agent may, without notice or demand and without affecting the Obligated Parties' obligations hereunder, from time to time: (a) take from any Person and hold collateral (other than the Collateral) for the payment of all or any part of the Obligations and exchange, enforce, or release such collateral or any part thereof and (b) accept and hold any endorsement or guaranty of payment of all or any part of the Obligations and release or substitute any such endorser or guarantor, or any Person who has given any Lien in any other collateral as security for the payment of all or any part of the Obligations, or any other Person in any way obligated to pay all or any part of the Obligations. Section 13.7 Fees and Expenses. Each Borrower agrees to pay to the Administrative Agent, for its benefit, on demand (except as provided otherwise in clause (a) following), all costs and expenses that the Administrative Agent pays or incurs in connection with the negotiation, preparation, syndication, consummation, administration, enforcement, and termination of this Agreement or any of the other Loan Documents, including: (a) Attorney Costs; provided that the Borrowers shall be provided seven days to review any invoice for such Attorney Costs prior to the due date therefor; (b) costs and expenses (including Attorney Costs; provided that the Borrowers shall be provided seven days to review any invoice for such Attorney Costs prior to the due date therefor) for any amendment, supplement, waiver, consent, or subsequent closing in connection with the Loan Documents and the transactions contemplated thereby; (c) reasonable costs and expenses of lien and title searches, and environmental audits; (d) taxes, fees, and other charges for filing financing statements and continuations, and other actions to perfect, protect, CREDIT AGREEMENT - Page 78 and continue the Agent's Liens (including costs and expenses paid or incurred by the Administrative Agent in connection with the consummation of this Agreement); (e) sums paid or incurred to pay any amount or take any action required of any Obligated Party under the Loan Documents that such Obligated Party fails to pay or take; (f) costs of appraisals, inspections, and verifications of the Collateral, including travel, lodging, and meals for field examinations and inspections of the Collateral and the Obligated Parties' operations by the Administrative Agent, plus the Administrative Agent's then customary charge for field examinations and audits and the preparation of reports thereof (such charge is currently $850 per day (or portion thereof) for each Person retained or employed by the Administrative Agent with respect to each field examination or audit); and (g) costs and expenses of forwarding loan proceeds, collecting checks and other items of payment, and establishing and maintaining Payment Accounts and lockboxes, and costs and expenses of preserving and protecting the Collateral. In addition, the Borrowers agree to pay costs and expenses incurred by the Administrative Agent (including Attorney Costs) to the Administrative Agent, for its benefit, on demand, and to the other Lenders for their benefit, on demand, and all reasonable fees, expenses, and disbursements incurred by such other Lenders for one law firm retained by such other Lenders, in each case, paid or incurred to obtain payment of the Obligations, enforce the Agent's Liens, sell or otherwise realize upon the Collateral, and otherwise enforce the provisions of the Loan Documents, or to defend any claims made or threatened against the Administrative Agent or any Lender arising out of the transactions contemplated hereby (including preparations for and consultations concerning any such matters). The foregoing shall not be construed to limit any other provisions of the Loan Documents regarding costs and expenses to be paid by the Borrowers. All of the foregoing costs and expenses shall be charged to the Loan Account as Revolving Loans as described in Section 3.6. Section 13.8 Notices. Except as otherwise provided herein, all notices, demands, and requests that any party is required or elects to give to any other party shall be in writing, or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, but not limited to, delivery by overnight mail or courier service, (b) four days after it shall have been mailed by U.S. mail, first class, certified or registered, with postage prepaid, or (c) in the case of notice by such a telecommunications device, when properly transmitted, in each case addressed to the party to be notified as follows: If to the Administrative Agent or to the Bank: Bank of America, N.A. 55 South Lake Avenue, Suite 900 Pasadena, California 91101 Attention: Business Credit: URGENT Telecopy No.: (626) 397-1273 CREDIT AGREEMENT - Page 79 If to any Obligated Party: c/o Texas Industries, Inc. 1341 West Mockingbird Lane, Suite 700W Dallas, Texas 75247 Attention: Treasurer Telecopy No.: (972) 647-3964 or to such other address as each party may designate for itself by like notice. For purposes of providing any notice to a Lender, such notice shall be delivered to such Lender at the address for notice of such Lender set forth on the signature pages of this Agreement or on the most recent Assignment and Acceptance to which such Lender is a party. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration, or other communication to the persons designated above to receive copies shall not adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, or other communication. Section 13.9 Waiver of Notices. Unless otherwise expressly provided herein, each Obligated Party waives presentment, notice of demand or dishonor, protest as to any instrument, notice of intent to accelerate the Obligations, and notice of acceleration of the Obligations, as well as any and all other notices to which it might otherwise be entitled. No notice to or demand on any Obligated Party which the Administrative Agent or any Lender may elect to give shall entitle any Obligated Party to any or further notice or demand in the same, similar, or other circumstances. Section 13.10 Binding Effect. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective representatives, successors, and assigns of the parties hereto; provided, however, that no interest herein may be assigned by any Obligated Party without the prior written consent of the Administrative Agent and each Lender. The rights and benefits of the Administrative Agent and the Lenders hereunder shall, if such Persons so agree, inure to any party acquiring any interest in the Obligations or any part thereof. Section 13.11 Indemnity of the Administrative Agent and the Lenders by the Borrower. (a) EACH OBLIGATED PARTY AGREES TO DEFEND, INDEMNIFY, AND HOLD THE AGENT-RELATED PERSONS, AND EACH LENDER AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS, AND ATTORNEYS-IN-FACT (EACH, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, CHARGES, EXPENSES, AND DISBURSEMENTS (INCLUDING ATTORNEY FEES AND EXPENSES) OF ANY KIND OR NATURE WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING AT ANY TIME FOLLOWING REPAYMENT OF THE REVOLVING LOANS AND THE TERMINATION, RESIGNATION, OR REPLACEMENT OF THE ADMINISTRATIVE AGENT OR REPLACEMENT OF ANY LENDER) BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST ANY SUCH PERSON IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, ANY OTHER CREDIT AGREEMENT - Page 80 LOAN DOCUMENT, OR ANY OTHER AGREEMENT, DOCUMENT, OR ANY OTHER AGREEMENT, DOCUMENT, OR INSTRUMENT CONTEMPLATED BY OR REFERRED TO HEREIN OR THEREIN, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR ANY ACTION TAKEN OR OMITTED BY ANY SUCH PERSON UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING WITH RESPECT TO ANY INVESTIGATION, LITIGATION, OR PROCEEDING (INCLUDING ANY INSOLVENCY PROCEEDING OR APPELLATE PROCEEDING) RELATED TO OR ARISING OUT OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR THE REVOLVING LOANS OR THE USE OF THE PROCEEDS THEREOF, WHETHER OR NOT ANY INDEMNIFIED PERSON IS A PARTY THERETO (ALL THE FOREGOING, COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"); PROVIDED THAT THE OBLIGATED PARTIES SHALL HAVE NO OBLIGATION HEREUNDER TO ANY INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON. THE AGREEMENTS IN THIS SECTION 13.11 SHALL SURVIVE PAYMENT OF ALL OTHER OBLIGATIONS. (b) EACH OBLIGATED PARTY AGREES TO INDEMNIFY, DEFEND, AND HOLD HARMLESS THE ADMINISTRATIVE AGENT AND THE LENDERS FROM ANY LOSS OR LIABILITY DIRECTLY OR INDIRECTLY ARISING OUT OF THE USE, GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE OF A HAZARDOUS SUBSTANCE RELATING TO ANY OBLIGATED PARTY'S OPERATIONS, BUSINESS, OR PROPERTY. THIS INDEMNITY WILL APPLY WHETHER THE HAZARDOUS SUBSTANCE IS ON, UNDER, OR ABOUT ANY OBLIGATED PARTY'S PROPERTY OR OPERATIONS OR PROPERTY LEASED TO ANY OBLIGATED PARTY. THE INDEMNITY INCLUDES BUT IS NOT LIMITED TO ATTORNEY FEES AND EXPENSES. THE INDEMNITY EXTENDS TO THE ADMINISTRATIVE AGENT AND THE LENDERS, THEIR AFFILIATES, SUBSIDIARIES, AND ALL OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS, ATTORNEYS, AND ASSIGNS. AS USED IN THIS CLAUSE (b), "HAZARDOUS SUBSTANCES" MEANS ANY SUBSTANCE, MATERIAL, OR WASTE THAT IS OR BECOMES DESIGNATED OR REGULATED AS "TOXIC," "HAZARDOUS," "POLLUTANT," OR "CONTAMINANT" OR A SIMILAR DESIGNATION OR REGULATION UNDER ANY FEDERAL, STATE, OR LOCAL LAW (WHETHER UNDER COMMON LAW, STATUTE, REGULATION, OR OTHERWISE) OR JUDICIAL OR ADMINISTRATIVE INTERPRETATION OF SUCH, INCLUDING PETROLEUM OR NATURAL GAS. THIS INDEMNITY WILL SURVIVE REPAYMENT OF ALL OTHER OBLIGATIONS. Section 13.12 Limitation of Liability. NO CLAIM MAY BE MADE BY ANY OBLIGATED PARTY, THE ADMINISTRATIVE AGENT, ANY LENDER, OR OTHER PERSON AGAINST ANY OBLIGATED PARTY, THE ADMINISTRATIVE AGENT, ANY LENDER, OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS, OR ATTORNEYS-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES IN RESPECT CREDIT AGREEMENT - Page 81 OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH OBLIGATED PARTY, THE ADMINISTRATIVE AGENT, AND EACH LENDER HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. Section 13.13 Final Agreement. This Agreement and the other Loan Documents are intended by the Obligated Parties, the Administrative Agent, and the Lenders to be the final, complete, and exclusive expression of the agreement between them. This Agreement and the other Loan Documents supersede any and all prior oral or written agreements relating to the subject matter hereof and thereof. No modification, rescission, waiver, release, or amendment of any provision of this Agreement or any other Loan Document shall be made, except by a written agreement signed by the Obligated Parties and a duly authorized officer of each of the Administrative Agent and the Majority Lenders, the Required Lenders, or all of the Lenders, as applicable. Section 13.14 Counterparts. This Agreement and the other Loan Documents may be executed in any number of counterparts, and by the Administrative Agent, each Lender, and the Obligated Parties in separate counterparts, each of which shall be an original, but all of which shall together constitute one and the same agreement. Signature pages to this Agreement and the other Loan Documents may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document and a telecopy of any such executed signature page shall be valid as an original. Section 13.15 Captions. The captions contained in this Agreement and the other Loan Documents are for convenience of reference only, are without substantive meaning and should not be construed to modify, enlarge, or restrict any provision. Section 13.16 Right of Setoff. In addition to any rights and remedies of the Lenders provided by law, if an Event of Default exists or the Revolving Loans have been accelerated, each Lender is authorized at any time and from time to time, without prior notice to the Obligated Parties, any such notice being waived by the Obligated Parties to the fullest extent permitted by law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender or any Affiliate of such Lender to or for the credit or the account of the Obligated Parties against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Obligated Parties and the Administrative Agent after any such setoff and application made by such Lender; provided, however, the failure to give such notice shall not affect the validity of such setoff and application. NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE ANY RIGHT OF SETOFF, BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT ACCOUNT OR CREDIT AGREEMENT - Page 82 PROPERTY OF ANY OBLIGATED PARTY HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE PRIOR WRITTEN CONSENT OF THE REQUIRED LENDERS. Section 13.17 Confidentiality. (a) Each Obligated Party hereby consents that the Administrative Agent and each Lender may issue and disseminate to the public general information describing the credit accommodation entered into pursuant to this Agreement, including the name and address of the Obligated Parties and a general description of the Obligated Parties' business and may use each Obligated Party's name in advertising and other promotional material. (b) Each Lender severally agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by any Obligated Party and provided to the Administrative Agent or such Lender by or on behalf of any Obligated Party, under this Agreement or any other Loan Document, except to the extent that such information (i) was or becomes generally available to the public other than as a result of disclosure by the Administrative Agent or such Lender, or (ii) was or becomes available on a nonconfidential basis from a source other than an Obligated Party, provided that such source is not bound by a confidentiality agreement with an Obligated Party known to the Administrative Agent or such Lender; provided, however, that the Administrative Agent and any Lender may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which the Administrative Agent or such Lender is subject or in connection with an examination of the Administrative Agent or such Lender by any such Governmental Authority, (B) pursuant to subpoena or other court process, (C) when required to do so in accordance with the provisions of any applicable Requirement of Law, (D) to the extent reasonably required in connection with any litigation or proceeding (including, but not limited to, any bankruptcy proceeding) to which the Administrative Agent, any Lender or their respective Affiliates may be party, (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document, (F) to the Administrative Agent's or such Lender's independent auditors, accountants, attorneys, and other professional advisors, (G) to any prospective Participant or Assignee, actual or potential, provided that such prospective Participant or Assignee agrees to keep such information confidential to the same extent required of the Administrative Agent and the Lenders hereunder, (H) as expressly permitted under the terms of any other document or agreement regarding confidentiality to which any Obligated Party is party or is deemed party with the Administrative Agent or such Lender, and (I) to its Affiliates. Notwithstanding anything herein to the contrary, the information subject to this Section 13.17(b) shall not include, and the Administrative Agent and each Lender may disclose without limitation of any kind, any information with respect to the "tax treatment" and "tax structure" (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Administrative Agent or such Lender relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transactions as well as CREDIT AGREEMENT - Page 83 other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the Revolving Loans, Letters of Credit and transactions contemplated hereby. Section 13.18 Conflicts with other Loan Documents. Unless otherwise expressly provided in this Agreement (or in another Loan Document by specific reference to the applicable provision contained in this Agreement), if any provision contained in this Agreement conflicts with any provision of any other Loan Document, the provision contained in this Agreement shall govern and control. Section 13.19 Joint and Several Liability. All Revolving Loans, upon funding, shall be deemed to be jointly funded to and received by the Borrowers. Each Borrower jointly and severally agrees to pay, and shall be jointly and severally liable under this Agreement for, all Obligations, regardless of the manner or amount in which proceeds of Revolving Loans are used, allocated, shared, or disbursed by or among the Borrowers themselves, or the manner in which the Administrative Agent and/or any Lender accounts for such Revolving Loans or other extensions of credit on its books and records. Each Borrower shall be liable for all amounts due to the Administrative Agent and/or any Lender under this Agreement, regardless of which Borrower actually receives Revolving Loans or other extensions of credit hereunder or the amount of such Revolving Loans and extensions of credit received or the manner in which the Administrative Agent and/or such Lender accounts for such Revolving Loans or other extensions of credit on its books and records. Each Borrower's Obligations with respect to Revolving Loans and other extensions of credit made to it, and such Borrower's Obligations arising as a result of the joint and several liability of such Borrower hereunder, with respect to Revolving Loans made to the other Borrowers hereunder, shall be separate and distinct obligations, but all such Obligations shall be primary obligations of such Borrower. The Borrowers acknowledge and expressly agree with the Administrative Agent and each Lender that the joint and several liability of each Borrower is required solely as a condition to, and is given solely as inducement for and in consideration of, credit or accommodations extended or to be extended under the Loan Documents to any or all of the other Borrowers and is not required or given as a condition of extensions of credit to such Borrower. Each Borrower's obligations under this Agreement and as an obligor under a Guaranty Agreement shall be separate and distinct obligations. Each Borrower's obligations under this Agreement shall, to the fullest extent permitted by law, be unconditional irrespective of (i) the validity or enforceability, avoidance, or subordination of the Obligations of any other Borrower or of any promissory note or other document evidencing all or any part of the Obligations of any other Borrower, (ii) the absence of any attempt to collect the Obligations from any other Borrower, any Guarantor, or any other security therefor, or the absence of any other action to enforce the same, (iii) the waiver, consent, extension, forbearance, or granting of any indulgence by the Administrative Agent and/or any Lender with respect to any provision of any instrument evidencing the Obligations of any other Borrower or Guarantor, or any part thereof, or any other agreement now or hereafter executed by any other Borrower or Guarantor and delivered to the Administrative Agent and/or any Lender, (iv) the failure by the Administrative Agent and/or any Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for the Obligations of any other Borrower or Guarantor, (v) the Administrative Agent's and/or any Lender's election, in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security interest by any other Borrower, as CREDIT AGREEMENT - Page 84 debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the disallowance of all or any portion of the Administrative Agent's and/or any Lender's claim(s) for the repayment of the Obligations of any other Borrower under Section 502 of the Bankruptcy Code, or (viii) any other circumstances which might constitute a legal or equitable discharge or defense of a guarantor or of any other Borrower. With respect to any Borrower's Obligations arising as a result of the joint and several liability of the Borrowers hereunder with respect to Revolving Loans or other extensions of credit made to any of the other Borrowers hereunder, such Borrower waives, until the Obligations shall have been paid in full and this Agreement shall have been terminated, any right to enforce any right of subrogation or any remedy which the Administrative Agent and/or any Lender now has or may hereafter have against any other Borrower, any endorser or any Guarantor of all or any part of the Obligations, and any benefit of, and any right to participate in, any security or collateral given to the Administrative Agent and/or any Lender to secure payment of the Obligations or any other liability of any Borrower to the Administrative Agent and/or any Lender. Upon any Event of Default, the Administrative Agent may proceed directly and at once, without notice, against any Borrower to collect and recover the full amount, or any portion of the Obligations, without first proceeding against any other Borrower or any other Person, or against any security or collateral for the Obligations. Each Borrower consents and agrees that the Administrative Agent shall be under no obligation to marshal any assets in favor of any Borrower or against or in payment of any or all of the Obligations. Section 13.20 Contribution and Indemnification among the Borrowers. Each Borrower is obligated to repay the Obligations as joint and several obligors under this Agreement. To the extent that any Borrower shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Revolving Loans made to another Borrower hereunder or other Obligations incurred directly and primarily by any other Borrower (an "Accommodation Payment"), then the Borrower making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Borrowers in an amount, for each of such other Borrowers, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Borrower's Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Borrowers. As of any date of determination, the "Allocable Amount" of each Borrower shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Borrower hereunder without (a) rendering such Borrower "insolvent" within the meaning of Section 101 (32) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act ("UFTA") or Section 2 of the Uniform Fraudulent Conveyance Act ("UFCA"), (b) leaving such Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Borrower unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA. All rights and claims of contribution, indemnification, and reimbursement under this Section shall be subordinate in right of payment to the prior payment in full of the Obligations. The provisions of this Section shall, to the extent expressly inconsistent with any provision in any Loan Document, supersede such inconsistent provision. Section 13.21 Agency of the Parent for each Obligated Party. Each of the Obligated Parties irrevocably appoints the Parent as its agent for all purposes relevant to this Agreement, including the giving and receipt of notices and execution and delivery of all documents, CREDIT AGREEMENT - Page 85 instruments, and certificates contemplated herein (including, without limitation, execution and delivery to the Administrative Agent of Borrowing Base Certificates) and all modifications hereto. Any acknowledgment, consent, direction, certification, or other action which might otherwise be valid or effective only if given or taken by all or any of the Obligated Parties or acting singly, shall be valid and effective if given or taken only by the Parent, whether or not any of the other Obligated Parties joins therein, and the Administrative Agent and the Lenders shall have no duty or obligation to make further inquiry with respect to the authority of the Parent under this Section 13.21, provided that nothing in this Section 13.21 shall limit the effectiveness of, or the right of the Administrative Agent and the Lenders to rely upon, any notice, document, instrument, certificate, acknowledgment, consent, direction, certification, or other action delivered by any Obligated Party pursuant to this Agreement. Section 13.22 Additional Borrowers and Guarantors. Addition of any Person as a Borrower or a Guarantor to this Agreement is subject to approval of the Administrative Agent and the Majority Lenders, and may be conditioned upon such requirements as they may determine in their discretion, including, without limitation, (a) the furnishing of such financial and other information as the Administrative Agent or any such Lender may request, (b) approval by all appropriate approval authorities of the Administrative Agent and each such Lender, and (c) execution and delivery by the Obligated Parties, such Person, the Administrative Agent, and the Majority Lenders of such agreements and other documentation (including, without limitation, an amendment to this Agreement or any other Loan Document), and the furnishing by such Person or any of the Obligated Parties of such certificates, opinions, and other documentation, as the Administrative Agent and any such Lender may request. Neither the Administrative Agent nor any Lender shall have any obligation to approve any such Person for addition as a party to this Agreement. Section 13.23 Express Waivers By the Obligated Parties In Respect of Cross Guaranties and Cross Collateralization. Each Obligated Party agrees as follows: (a) Each Obligated Party hereby waives: (i) notice of acceptance of this Agreement; (ii) notice of the making of any Revolving Loans, the issuance of any Letter of Credit, or any other financial accommodations made or extended under the Loan Documents or the creation or existence of any Obligations; (iii) notice of the amount of the Obligations, subject, however, to such Obligated Party's right to make inquiry of the Administrative Agent to ascertain the amount of the Obligations at any reasonable time; (iv) notice of any adverse change in the financial condition of any other Obligated Party or of any other fact that might increase such Obligated Party's risk with respect to such other Obligated Party under the Loan Documents; (v) notice of presentment for payment, demand, protest, and notice thereof as to any promissory notes or other instruments among the Loan Documents; and (vii) all other notices (except if such notice is specifically required to be given to such Obligated Party hereunder or under any of the other Loan Documents to which such Obligated Party is a party) and demands to which such Obligated Party might otherwise be entitled; (b) Each Obligated Party hereby waives the right by statute or otherwise to require the Administrative Agent or any Lender to institute suit against any other Obligated Party or to exhaust any rights and remedies which the Administrative Agent or CREDIT AGREEMENT - Page 86 any Lender has or may have against any other Obligated Party. Each Obligated Party further waives any defense arising by reason of any disability or other defense of any other Obligated Party (other than the defense that the Obligations shall have been fully and finally performed and indefeasibly paid) or by reason of the cessation from any cause whatsoever of the liability of any such Obligated Party in respect thereof. (c) Each Obligated Party hereby waives and agrees not to assert against the Administrative Agent, any Lender, or the Letter of Credit Issuer: (i) any defense (legal or equitable), setoff, counterclaim, or claim which such Obligated Party may now or at any time hereafter have against any other Obligated Party or any other party liable under the Loan Documents; (ii) any defense, setoff, counterclaim, or claim of any kind or nature available to any other Obligated Party against the Administrative Agent, any Lender, the Bank, or the Letter of Credit Issuer, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Obligations or any security therefor; (iii) any right or defense arising by reason of any claim or defense based upon an election of remedies by the Administrative Agent, any Lender, the Bank, or the Letter of Credit Issuer under any applicable law; (iv) the benefit of any statute of limitations affecting any other Obligated Party's liability hereunder; (d) Each Obligated Party consents and agrees that, without notice to or by such Obligated Party and without affecting or impairing the obligations of such Obligated Party hereunder, the Administrative Agent may (subject to any requirement for consent of any of the Lenders to the extent required by this Agreement), by action or inaction: (i) compromise, settle, extend the duration or the time for the payment of, or discharge the performance of, or may refuse to or otherwise not enforce the Loan Documents; (ii) release all or any one or more parties to any one or more of the Loan Documents or grant other indulgences to any other Obligated Party in respect thereof; (iii) amend or modify in any manner and at any time (or from time to time) any of the Loan Documents; or (iv) release or substitute any Person liable for payment of the Obligations, or enforce, exchange, release, or waive any security for the Obligations or any Guaranty of the Obligations; Each Obligated Party represents and warrants to the Administrative Agent and the Lenders that such Obligated Party is currently informed of the financial condition of all other Obligated Parties and all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. Each Obligated Party further represents and warrants that such Obligated Party has read and understands the terms and conditions of the Loan Documents. Each Obligated Party agrees that neither the Administrative Agent, any Lender, the Bank, nor the Letter of Credit Issuer has any responsibility to inform any Obligated Party of the financial condition of any other Obligated Party or of any other circumstances which bear upon the risk of nonpayment or nonperformance of the Obligations. [Remainder of page intentionally left blank] CREDIT AGREEMENT - Page 87 IN WITNESS WHEREOF, the parties have entered into this Agreement on the date first above written. OBLIGATED PARTIES: TEXAS INDUSTRIES, INC. By: /s/ KENNETH R. ALLEN ------------------------------------ Name: Kenneth R. Allen Title: Vice President and Treasurer TXI OPERATIONS, LP By: TXI OPERATING TRUST, general partner By: /s/ KENNETH R. ALLEN -------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer RIVERSIDE CEMENT COMPANY By: /s/ KENNETH R. ALLEN -------------------------- Name: Kenneth R. Allen Title: Assistant General Manager- Treasurer CHAPARRAL STEEL MIDLOTHIAN, LP By: CHAPARRAL STEEL TEXAS, INC., general partner By: /s/ KENNETH R. ALLEN -------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer CREDIT AGREEMENT - Page 88 CHAPARRAL (VIRGINIA) INC. By: /s/ KENNETH R. ALLEN ------------------------------- Name: Kenneth R. Allen Title: Vice President and Treasurer CREDIT AGREEMENT - Page 89 ADMINISTRATIVE AGENT: BANK OF AMERICA, N. A. By: /s/ KEVIN R. KELLY ------------------------ Name: Kevin R. Kelly Title: Senior Vice President CREDIT AGREEMENT - Page 90 LENDERS: BANK OF AMERICA, N.A. By: /s/ KEVIN R. KELLY --------------------------- Name: Kevin R. Kelly Title: Senior Vice President Address for Notices: Bank of America, N.A. 55 South Lake Avenue, Suite 900 Pasadena, California 91101 Attn: Business Credit: URGENT Telecopy: (626) 397-1273 CREDIT AGREEMENT - Page 91 ANNEX A to Credit Agreement Definitions, Accounting Terms, and Interpretive Provisions DEFINITIONS: Capitalized terms wherever used in the Loan Documents shall have the following respective meanings (unless otherwise defined therein): "Account" and "Accounts" have the meaning specified in the Security Agreements. "Accommodation Payment" has the meaning specified in Section 13.20. "Account Debtor" means each Person obligated in any way on or in connection with an Account, Chattel Paper, or General Intangibles (including a payment intangible). "ACH Transactions" means any cash management or related services including, without limitation, the automated clearinghouse transfer of funds by a Lender for the account of any Obligated Party pursuant to agreement or overdrafts. "Adjusted Net Earnings from Operations" means, with respect to any fiscal period of any Person (the "subject Person"), net income of the subject Person on a consolidated basis after provision for income taxes for such fiscal period, as determined in conformity with GAAP and reported on the financial statements for such fiscal period, excluding any and all of the following included in such net income: (a) gain, to the extent in excess of $5,000,000, or loss arising from the sale of any capital assets (including sales of surplus operating assets and real estate); (b) gain arising from any write-up in the book value of any asset; (c) earnings of any other Person, substantially all the assets of which have been acquired by the subject Person in any manner, to the extent realized by such other Person prior to the date of acquisition; (d) earnings of any other Person (excluding Wholly-Owned Subsidiaries) in which the subject Person has an ownership interest unless (and only to the extent) such earnings shall actually have been received by the subject Person in the form of cash distributions; (e) earnings of any Person to which assets of the subject Person shall have been sold, transferred, or disposed of, or into which subject Person shall have been merged, or which has been a party with the subject Person to any consolidation or other form of reorganization, prior to the date of such transaction; (f) gain arising from the acquisition of debt or equity securities of the subject Person or from cancellation or forgiveness of Debt; and (g) gain or loss arising from extraordinary items, as determined in conformity with GAAP, or from any other non-recurring transaction. "Administrative Agent" means the Bank, solely in its capacity as administrative agent for the Lenders, and any successor administrative agent. "Affiliate" means, as to any Person (the "subject Person"), any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, the subject Person or which owns, directly or indirectly, 5.0% or more of the outstanding Capital ANNEX A TO CREDIT AGREEMENT - Page 1 Stock of the subject Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise. "Agent Advances" has the meaning specified in Section 1.2(j). "Agent-Related Persons" means the Administrative Agent, together with its Affiliates, and the officers, directors, employees, counsel, representatives, agents, and attorneys-in-fact of the Administrative Agent and its Affiliates. "Agent's Letter" means that certain letter agreement, dated as of the Closing Date, among the Parent, the Borrowers, and the Administrative Agent as such letter agreement may be amended, restated, or otherwise modified from time to time. "Agent's Liens" means the Liens in the Collateral granted to the Administrative Agent, for the benefit of the Lenders, the Bank, and the Administrative Agent pursuant to this Agreement and the other Loan Documents. "Aggregate Revolver Outstandings" means, at any time, the sum of (a) the unpaid balance of the Revolving Loans, (b) the aggregate undrawn face amount of all outstanding Letters of Credit, and (c) the aggregate amount of any unpaid reimbursement obligations in respect of Letters of Credit. "Agreement" means the Credit Agreement to which this Annex A is attached, as amended, restated, or otherwise modified from time to time. "Allocable Amount" has the meaning specified in Section 13.20. "Anniversary Date" means an anniversary of the Closing Date. "Applicable Margin" means, as of the Closing Date, (a) with respect to Base Rate Revolving Loans and all other Obligations (other than LIBOR Rate Revolving Loans), 0.50% per annum; and (b) with respect to LIBOR Rate Revolving Loans, 2.50% per annum; in each case subject to adjustment from time to time thereafter to the applicable percentage specified corresponding to the Fixed Charge Coverage Ratio, as set forth below, respectively: ANNEX A TO CREDIT AGREEMENT - Page 2
============================================================================================================== LIBOR Rate Base Rate Revolving Fixed Charge Coverage Ratio Revolving Loans Loans ============================================================================================================== Greater than 1.25 to 1.00 0.00% 2.00% - -------------------------------------------------------------------------------------------------------------- Greater than 1.00 to 1.00 but less than or equal to 1.25 to 1.00 0.25% 2.25% - -------------------------------------------------------------------------------------------------------------- Greater than 0.90 to 1.00 but less than or equal to 1.00 to 1.00 0.50% 2.50% - -------------------------------------------------------------------------------------------------------------- Greater than 0.80 to 1.00 but less than or equal to 0.90 to 1.00 0.75% 2.75% - -------------------------------------------------------------------------------------------------------------- Less than or equal to 0.80 to 1.00 1.00% 3.00% ==============================================================================================================
For the purpose of determining any such adjustments to the Applicable Margin, the Fixed Charge Coverage Ratio shall be determined, beginning with the Fiscal Quarter ending November 30, 2003, based upon the Financial Statements of the Parent and its Subsidiaries for the immediately preceding four Fiscal Quarters of the Parent, and for each Fiscal Quarter of the Parent ending thereafter, delivered to the Administrative Agent and the Lenders as required by Section 5.2(a) (with respect to the Financial Statements for the last Fiscal Quarter of each Fiscal Year) or Section 5.2(b)(ii) (with respect to the Financial Statements for each of the other Fiscal Quarters of each Fiscal Year), and any such adjustment, if any, shall become effective prospectively on and after the first day of the calendar month after the date of delivery of such Financial Statements to the Administrative Agent and the Lenders. Concurrently with the delivery of such Financial Statements, the Parent shall deliver to the Administrative Agent and the Lenders a certificate, signed by its chief financial officer or chief accounting officer, setting forth in reasonable detail the basis for the continuance of, or any change in, the Applicable Margin. In the event the Obligated Parties fail to timely deliver any such Financial Statements, in addition to any other remedy provided for in this Agreement, the Applicable Margin shall be deemed to be equal to the highest level set forth in the preceding table, until the first day of the first calendar month following the delivery of such Financial Statements at which time the Applicable Margin shall be determined, prospectively, in accordance with the terms hereof. If a Default or Event of Default exists at the time any reduction in the Applicable Margin is to be implemented, such reduction shall not occur until the first day of the first calendar month following the date on which such Default or Event of Default is waived or cured. "Arranger" shall mean Banc of America Securities LLC. "Assignee" has the meaning specified in Section 11.2(a). "Assignment and Acceptance" has the meaning specified in Section 11.2(a). "Attorney Costs" means and includes all reasonable fees, expenses, and disbursements of any law firm or other counsel engaged by the Administrative Agent and the reasonably allocated costs and expenses of internal legal services of the Administrative Agent. ANNEX A TO CREDIT AGREEMENT - Page 3 "Availability" means, at any time (a) the lesser of (i) the Maximum Revolver Amount or (ii) the Borrowing Base, minus (b) the Aggregate Revolver Outstandings. "Bank" means Bank of America, N.A., a national banking association, or any successor entity thereto. "Bank Products" means any one or more of the following types of services or facilities extended to any Obligated Party by any Lender or any Affiliate of any Lender in reliance on such Lender's agreement to indemnify such Affiliate: (a) credit cards; (b) ACH Transactions; (c) cash management, including, without limitation, controlled disbursement services; and (d) Hedge Agreements. "Bank Product Reserves" means all reserves which the Administrative Agent from time to time establishes in its reasonable credit judgment for the Bank Products then provided or outstanding. "Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. Section 101 et seq.). "Base Rate" means, for any day, the rate of interest in effect for such day as publicly announced from time to time by the Bank in Charlotte, North Carolina as its "prime rate" (the "prime rate" being a rate set by the Bank based upon various factors including the Bank's costs and desired return, general economic conditions, and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate). Any change in the prime rate announced by the Bank shall take effect at the opening of business on the day specified in the public announcement of such change. Each Interest Rate based upon the Base Rate shall be adjusted simultaneously with any change in the Base Rate. "Base Rate Revolving Loan" means a Revolving Loan during any period in which it bears interest based on the Base Rate. "Blocked Account Agreement" means an agreement among one or more of the Obligated Parties, the Administrative Agent, and a Clearing Bank, in form and substance reasonably satisfactory to the Administrative Agent, concerning the collection of payments which represent the proceeds of Accounts or of any other Collateral. "Borrower" means, separately and individually, any of TXI Operations, LP, Riverside Cement Company, Chaparral Steel Midlothian, LP, Chaparral (Virginia) Inc., and any other Person who becomes a party to this Agreement as a "Borrower" pursuant to the terms hereof, jointly, severally, and collectively, and "Borrowers" means more than one or all of the foregoing Persons, jointly, severally, and collectively, as the context requires. "Borrowing" means a borrowing hereunder consisting of Revolving Loans made on the same day by the Lenders to the Borrowers, or any of them, or by the Bank (in the case of a Borrowing funded by Non-Ratable Loans) or by the Administrative Agent (in the case of a Borrowing consisting of an Agent Advance), or the issuance of a Letter of Credit hereunder. "Borrowing Base" means, at any time, an amount equal to the lesser of (a) the Maximum Revolver Amount, (b) the sum of, without duplication, (i) 85.0% of the Net Amount of Eligible ANNEX A TO CREDIT AGREEMENT - Page 4 Accounts, plus (ii) the lesser of (A) 60.0% of Eligible Inventory, (B) 80.0% of the Orderly Liquidation Value of appraised Inventory of the Borrowers, or (C) the Maximum Inventory Loan Amount, minus (iii) Reserves, or (c) the maximum amount of "Indebtedness" (as defined in the Senior Notes Indenture) permitted under Section 4.09(b)(i) of the Senior Notes Indenture, less any "Indebtedness" (as defined in the Senior Notes Indenture) which is not part of the Obligations hereunder and is outstanding under Section 4.09(b)(i) of the Senior Notes Indenture. "Borrowing Base Certificate" means a certificate by a Responsible Officer of the Borrowers, or the Parent on behalf of the Borrowers, substantially in the form of Exhibit B (or another form acceptable to the Administrative Agent) setting forth the calculation of the Borrowing Base, including a calculation of each component thereof (including to the extent a Borrower has received notice of any Reserve from the Administrative Agent, any of the Reserves included in such calculation pursuant to clause (b) of the definition of Borrowing Base), all in such detail as shall be reasonably satisfactory to the Administrative Agent. All calculations of the Borrowing Base in connection with the preparation of any Borrowing Base Certificate shall originally be made by the Borrowers, or the Parent on behalf of the Borrowers, and certified to the Administrative Agent; provided that the Administrative Agent shall have the right to review and adjust, in the exercise of its reasonable credit judgment, any such calculation (a) to reflect its reasonable estimate of declines in value of any of the Collateral described therein and (b) to the extent that such calculation is not in accordance with this Agreement. "Business Day" means (a) any day that is not a Saturday, Sunday, or a day on which national banks in Pasadena, California, or Charlotte, North Carolina are required or permitted to be closed, and (b) with respect to all notices, determinations, fundings, and payments in connection with the LIBOR Rate or LIBOR Rate Revolving Loans, any day that is a Business Day pursuant to clause (a) preceding and that is also a day on which trading in Dollars is carried on by and between banks in the London interbank market. "CAC Segment Receivable" means any account owing to either (a) TXI Operations, LP, or (b) Riverside Cement Company. "Capital Adequacy Regulation" means any guideline, request, or directive of any central bank or other Governmental Authority, or any other law, rule, or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Capital Expenditures" means all payments made with respect to the cost of any fixed asset or improvement, or replacement, substitution, or addition thereto, which has a useful life of more than one year, including, without limitation, those costs arising in connection with the direct or indirect acquisition of such asset by way of increased product or service charges or in connection with a Capital Lease, but excluding any such payments that are treated as expense items in conformity with GAAP. "Capital Lease" means any lease of property by an Obligated Party which, in conformity with GAAP, should be reflected as a capital lease on the balance sheet of such Obligated Party. ANNEX A TO CREDIT AGREEMENT - Page 5 "Capital Stock" means any and all corporate stock, units, shares, partnership interests, membership interests, equity interests, rights, securities, or other equivalent evidences of ownership (howsoever designated) issued by any Person. "Change of Control" means the occurrence of any of the following: (a) except as allowed by Section 7.9, the adoption of a plan relating to the liquidation or dissolution of any Obligated Party; (b) the acquisition by any "person" or "group" (as each such term is used in Section 13(d)(3) and Section 14(d)(2) of the Securities Exchange Act of 1934, as amended) of a direct or indirect interest of more than 35.0% of the voting power of the voting stock of the Parent by way of merger or consolidation or otherwise; (c) during any period of twelve consecutive calendar months, individuals (i) who were members of the Management Group of the Parent on the first day of such period, or (ii) whose election or nomination for election to the Management Group of the Parent was recommended or approved by at least a majority of the Management Group then still in office who were members of the Management Group of the Parent on the first day of such period, or whose election or nomination for election was so approved, shall cease to constitute a majority of the Management Group of the Parent; or (d) except as allowed by Section 7.9, any Borrower (other than the Parent) shall cease to be a Wholly-Owned Subsidiary of the Parent. "Chattel Paper" has the meaning specified in the UCC and includes, without limitation, electronic chattel paper. "Clearing Bank" means the Bank or any other banking institution with whom a Payment Account has been established pursuant to a Blocked Account Agreement. "Closing Date" means the date of this Agreement as specified in the introductory paragraph. "Code" means the Internal Revenue Code of 1986, as amended from time to time and any successor statute and the regulations promulgated thereunder. "Collateral" means (a) all of the "Collateral", as such term is defined in the Security Agreements, (b) all other personal property at any time subject to the Agent's Liens, and (c) all accessions to, substitutions for and replacements, products and proceeds of any of the foregoing, including, but not limited to, proceeds of any insurance policies, claims against third parties, and condemnation or requisition payments with respect to all or any of the foregoing. "Commitment" means, at any time with respect to a Lender, the principal amount set forth beside such Lender's name under the heading "Commitment" on Schedule A-1 or in the most recent Assignment and Acceptance to which such Lender is a party, as such Commitment may be adjusted from time to time in accordance with the provisions of Section 11.1 and Section 11.2, and "Commitments" means, collectively, the aggregate amount of the Commitments of all of the Lenders. "Compliance Certificate" has the meaning specified in Section 5.2(d). "Contaminant" means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, petroleum or petroleum-derived substance or waste, asbestos in ANNEX A TO CREDIT AGREEMENT - Page 6 any form or condition, polychlorinated biphenyls ("PCBs"), or any constituent of any such substance or waste. "Continuation/Conversion Date" means the effective date of (a) any conversion of LIBOR Rate Revolving Loans to Base Rate Revolving Loans or of Base Rate Revolving Loans to LIBOR Rate Revolving Loans or (b) any continuation of LIBOR Rate Revolving Loans as LIBOR Rate Revolving Loans. "Convertible Subordinated Debentures" means the 5.5% convertible subordinated debentures due June 30, 2028 issued by the Parent to TXI Capital Trust I. "Convertible Trust Preferred Securities" means the 5.5% Convertible Trust Preferred Securities, in an aggregate amount of $200,000,000 evidencing preferred undivided beneficial interests in the assets of TXI Capital Trust I. "Debt" means, without duplication, with respect to any Person (the "subject Person") all liabilities, obligations, and indebtedness of the subject Person to any other Person, of any kind or nature, now or hereafter owing, arising, due, or payable, howsoever evidenced, created, incurred, acquired, or owing, whether primary, secondary, direct, contingent, fixed, or otherwise, consisting of indebtedness for borrowed money or the deferred purchase price of property, excluding trade payables, but including, without in any way limiting the generality of the foregoing: (a) in the case of the Obligated Parties, the Obligations; (b) all such indebtedness, liabilities, and obligations of any Person secured by any Lien on the subject Person's property, even if the subject Person shall not have assumed or become liable for the payment thereof; provided, however, that all such indebtedness, liabilities, and obligations which are limited in recourse to such property shall be included in Debt only to the extent of the book value of such property as would be shown on a balance sheet of the subject Person prepared in conformity with GAAP; (c) all such indebtedness, liabilities, and obligations created or arising under any Capital Lease or conditional sale or other title retention agreement with respect to property used or acquired by the subject Person, even if the rights and remedies of the lessor, seller, or lender thereunder are limited to repossession of such property; provided, however, that all such indebtedness, liabilities, and obligations which are limited in recourse to such property shall be included in Debt only to the extent of the book value of such property as would be shown on a balance sheet of the subject Person prepared in conformity with GAAP; (d) all indebtedness, liabilities, and obligations under Guaranties of Debt; (e) the present value (discounted at the Base Rate) of lease payments due under synthetic leases; and (f) net obligations in respect of Hedge Agreements. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured, waived, or otherwise remedied during such time) constitute an Event of Default. "Default Rate" means a fluctuating per annum interest rate at all times equal to the sum of (a) the otherwise applicable Interest Rate, plus (b) 2.00% per annum. Each Default Rate shall be adjusted simultaneously with any change in the applicable Interest Rate. In addition, with respect to Letters of Credit, the Default Rate shall mean the Letter of Credit Fee Percentage, plus 2.00% per annum. ANNEX A TO CREDIT AGREEMENT - Page 7 "Defaulting Lender" has the meaning specified in Section 12.15(c). "Deposit Accounts" has the meaning specified in the Security Agreements. "Designated Account" has the meaning specified in Section 1.2(d). "Disposition" or "Dispose" means the sale, transfer, license, lease, or other disposition (including any sale and leaseback transaction) of any property by any Person. "Distribution" means, with respect to any Person (other than a natural person): (a) the payment or making of any dividend or other distribution of property in respect of such Person's Capital Stock (or any options or warrants for, or other rights with respect to, such Capital Stock, including with respect to the Parent the Convertible Subordinated Debentures and with respect to TXI Capital Trust I the Convertible Trust Preferred Securities) of such Person, other than distributions solely in such Person's Capital Stock (or any options or warrants for, or other rights with respect to, such Capital Stock, including with respect to the Parent the Convertible Subordinated Debentures and with respect to TXI Capital Trust I the Convertible Trust Preferred Securities) of the same class; or (b) the redemption or other acquisition by such Person of any Capital Stock (or any options or warrants for, or other rights with respect to, such Capital Stock, including with respect to the Parent the Convertible Subordinated Debentures and with respect to TXI Capital Trust I the Convertible Trust Preferred Securities) of such Person. "DOL" means the United States Department of Labor or any successor department or agency. "Dollar" and "$" means dollars in the lawful currency of the U.S. Unless otherwise specified, all payments under this Agreement shall be made in Dollars. "Dominion Event" means (a) the occurrence of an Event of Default or (b) the Availability at any time is less than $40,000,000. "Dominion Termination Period" means, any Fiscal Quarter of the Parent occurring after a Dominion Event during which Availability equals or exceeds $60,000,000 for each day in such Fiscal Quarter and no Event of Default has occurred or existed. "EBITDA" means, with respect to any fiscal period of any Person (the "subject Person"), Adjusted Net Earnings from Operations, plus, to the extent deducted in the determination of Adjusted Net Earnings from Operations for such fiscal period, Interest Expense, plus Federal, state, local, and foreign income taxes, plus depreciation and amortization, in each case for the subject Person on a consolidated basis. "Eligible Accounts" means the Accounts of a Borrower which the Administrative Agent in the exercise of its reasonable credit judgment determines to be Eligible Accounts. Without limiting the discretion of the Administrative Agent to establish other criteria of ineligibility, Eligible Accounts shall not include any Account: ANNEX A TO CREDIT AGREEMENT - Page 8 (a) which is a Steel Segment Receivable, if more than 60 days have elapsed since the original due date therefor or more than 90 days have elapsed from the original invoice date therefor; (b) which is a CAC Segment Receivable, if more than 90 days have elapsed since the original due date therefor or more than 150 days have elapsed from the original invoice date therefor; (c) Eligible Accounts which are CAC Segment Receivables that (i) are 61 to 90 days from the original due date, and (ii) constitute more than 5.0% of all CAC Segment Receivables; (d) with respect to which any of the representations, warranties, covenants, and agreements contained in the Security Agreements are incorrect or have been breached; (e) with respect to which Account (or any other Account due from the applicable Account Debtor), in whole or in part, a check, promissory note, draft, trade acceptance, or other instrument for the payment of money has been received, presented for payment, and returned uncollected for any reason or which is the subject of any debit memo or charge-back, but only to the extent of such debit memo or charge-back; (f) which represents a progress billing (as hereinafter defined) or as to which the applicable Borrower has extended the time for payment without the consent of the Administrative Agent (for the purposes hereof, "progress billing" means any invoice for goods sold or leased or services rendered under a contract or agreement pursuant to which the Account Debtor's obligation to pay such invoice is conditioned upon such Borrower's completion of any further performance under such contract or agreement); (g) with respect to which any one or more of the following events has occurred to the Account Debtor on such Account: (i) death or judicial declaration of incompetency of such Account Debtor who is a natural person; (ii) the filing by or against such Account Debtor of a request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or other relief under the Bankruptcy Code or any other bankruptcy, insolvency, or similar laws of the U.S., any state or territory thereof, or any foreign jurisdiction, now or hereafter in effect; (iii) the making of any general assignment by such Account Debtor for the benefit of creditors; (iv) the appointment of a receiver or trustee for such Account Debtor or for any of the assets of the Account Debtor, including, without limitation, the appointment of or taking possession by a "custodian," as defined in the Bankruptcy Code; (v) the institution by or against such Account Debtor of any other type of insolvency proceeding (under the Bankruptcy Code or otherwise) or of any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against, or winding up of affairs of, such Account Debtor; (vi) the sale, assignment, or transfer of all or any material part of the assets of such Account Debtor; (vii) the nonpayment generally by such Account Debtor of its debts as they become due; or (viii) the cessation of the business of such Account Debtor as a going concern; ANNEX A TO CREDIT AGREEMENT - Page 9 (h) 50.0% or more of the aggregate Dollar amount of outstanding Accounts owed at such time by the Account Debtor thereon is classified as ineligible pursuant to the other provisions of this definition; (i) owed by an Account Debtor which (i) does not maintain its chief executive office in the U.S. or Canada (excluding the province of Newfoundland), (ii) is not organized under the laws of the U.S. or Canada (excluding the province of Newfoundland) or any political subdivision, state, province, or territory thereof, or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, except to the extent that such Account is secured or payable by a letter of credit the terms of which are satisfactory to the Administrative Agent in its discretion and which is in the possession of the Administrative Agent, and which, together with all related letter-of-credit rights (as defined in the UCC), is subject to a first priority Lien in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Lenders; (j) owed by an Account Debtor which is an Affiliate or employee of such Borrower; (k) except as provided in clause (m) following, with respect to which either the perfection, enforceability, or validity of the Agent's Liens in such Account, or the Administrative Agent's right or ability to obtain direct payment to the Administrative Agent of the proceeds of such Account, is governed by any federal, state, or local statutory requirements other than those of the UCC; (l) owed by an Account Debtor to which an Obligated Party or any of its Affiliates, is indebted in any way (including accrued liabilities), or which is subject to any right of setoff or recoupment by the Account Debtor, unless the Account Debtor has entered into an agreement acceptable to the Administrative Agent to waive setoff rights, or if the Account Debtor thereon has disputed liability or made any claim with respect to any other Account due from such Account Debtor, but in each such case only to the extent of such indebtedness, setoff, recoupment, dispute, or claim; (m) owed by the government of the U.S., or any department, agency, public corporation, or other instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727 et seq.), and any other steps necessary to perfect the Agent's Liens therein, have been complied with to the Administrative Agent's satisfaction with respect to such Account; (n) owed by any state, municipality, or other political subdivision of the U.S., or any department, agency, public corporation, or other instrumentality thereof and as to which the Administrative Agent determines that its Lien therein is not or cannot be perfected; (o) which represents a sale on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or other repurchase or return basis; ANNEX A TO CREDIT AGREEMENT - Page 10 (p) which is evidenced by a promissory note or other Instrument or by Chattel Paper; (q) with respect to which the Administrative Agent believes, in the exercise of its reasonable credit judgment, that the prospect of collection of such Account is impaired or that such Account may not be paid by reason of the Account Debtor's financial inability to pay; (r) with respect to which the Account Debtor is located in any state requiring the filing of a Notice of Business Activities Report or similar report in order to permit such Borrower to seek judicial enforcement in such state of payment of such Account, unless such Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year; (s) which arises out of a sale not made in the ordinary course of such Borrower's business or which represents a sale on a cash or "COD" basis; (t) with respect to which the goods giving rise to such Account have not been shipped and delivered to and accepted by, or have been rejected or objected to by, the Account Debtor or the services giving rise to such Account have not been performed by such Borrower, and, if applicable, accepted by the Account Debtor, or the Account Debtor revokes its acceptance of such goods or services; (u) owed by an Account Debtor, or group of affiliated Account Debtors, which is obligated to the Obligated Parties respecting Accounts the aggregate unpaid balance of which exceeds 10.0% of the aggregate unpaid balance of all Eligible Accounts owed to the Borrowers at such time by all of the Borrowers' Account Debtors, but only to the extent of such excess; (v) which is not subject to a first priority and perfected security interest in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Lenders; (w) with respect to which such Borrower or the Administrative Agent, in the exercise of its reasonable credit judgment, has deemed such Account as uncollectible or has any reason to believe that such Account is uncollectible; (x) which is the subject of any unreconciled variance between the aging of Accounts delivered to the Agent, the general ledger, and the applicable Borrowing Base Certificate; and (y) which the Administrative Agent determines in its reasonable credit judgment is ineligible for any other reason. If any Account (or portion thereof) at any time ceases to be an Eligible Account, then such Account (or the applicable portion thereof) shall promptly be excluded from the calculation of the Borrowing Base. ANNEX A TO CREDIT AGREEMENT - Page 11 "Eligible Assignee" means (a) a commercial bank, commercial finance company, or other asset based lender having total assets in excess of $1,000,000,000, (b) any Lender listed on the signature pages of this Agreement, (c) any Affiliate of any Lender, and (d) if an Event of Default has occurred and is continuing, any Person reasonably acceptable to the Administrative Agent. "Eligible Inventory" means Inventory, valued at the lower of cost or market value, which the Administrative Agent, in its reasonable credit judgment, determines to be Eligible Inventory. Without limiting the discretion of the Administrative Agent to establish other criteria of ineligibility, Eligible Inventory shall not include any Inventory: (a) that is not owned by a Borrower, including goods held by a Borrower on consignment; (b) that is not subject to the Agent's Liens, which are perfected as to such Inventory, or that is subject to any other Lien whatsoever (other than the Liens described in clause (e) of the definition of Permitted Liens; provided that such Permitted Liens (i) are junior in priority to the Agent's Liens or subject to Reserves and (ii) do not impair directly or indirectly the ability of the Administrative Agent to realize on or obtain the full benefit of the Collateral); (c) that is work-in-progress and raw materials, other than clinker, ferrous scrap, and billets; (d) that is not finished goods, other than clinker, ferrous scrap, and billets; (e) cement that is manufactured for specific end-users; (f) that is chemicals, samples, prototypes, supplies, or packing and shipping materials; (g) that is not in good condition, is unmerchantable, or does not meet all standards imposed by any Governmental Authority having regulatory authority over such goods or their use or sale; (h) that is obsolete, defective, or not currently salable, at prices approximating at least cost, in the normal course of such Borrower's business, or that is slow moving or stale; (i) that is returned, repossessed, or used goods taken in trade; (j) that is located outside the U.S. or that is in transit from vendors or suppliers; provided that the Administrative Agent may in its discretion include as Eligible Inventory any Inventory which is in transit and establish a Reserve with respect to costs and expenses owing for shipping and storage of such Inventory; (k) that is consigned to third parties or located in a public warehouse or in possession of a bailee or in a facility leased by such Borrower, if the applicable warehouseman, bailee, or lessor has not delivered to the Administrative Agent, if ANNEX A TO CREDIT AGREEMENT - Page 12 requested by the Administrative Agent, a subordination agreement in form and substance satisfactory to the Administrative Agent or if a Reserve for rents or storage charges has not been established for Inventory at that location; (l) that contains or bears any Proprietary Rights licensed to a Borrower by any Person, if the Administrative Agent is not satisfied that it may sell or otherwise dispose of such Inventory in accordance with the terms of the Security Agreements and Section 9.2 without infringing the rights of the licensor of such Proprietary Rights or violating any contract with such licensor (and without payment of any royalties other than any royalties due with respect to the sale or disposition of such Inventory pursuant to the existing license agreement), and, if the Administrative Agent deems it necessary, as to which such Borrower has not delivered to the Administrative Agent a consent or sublicense agreement from such licensor in form and substance acceptable to the Administrative Agent; or (m) that is not reflected in the details of a current perpetual inventory report. If any Inventory at any time ceases to be Eligible Inventory, such Inventory shall promptly be excluded from the calculation of the Borrowing Base. "Environmental Compliance Reserve" means any reserve which the Administrative Agent establishes from time to time in its reasonable credit judgment after prior written notice to the Borrowers for amounts that are reasonably likely to be expended by an Obligated Party in order for such Obligated Party and its operations and property (a) to comply with any notice from a Governmental Authority asserting non-compliance with Environmental Laws which could reasonably be expected to result in, or has resulted in, liability in excess of $3,000,000 or otherwise could reasonably be expected to result in, or has resulted in, a Material Adverse Effect or (b) to correct any such material non-compliance identified in a report delivered to the Administrative Agent and the Lenders pursuant to Section 7.7. "Environmental Laws" means all applicable federal, state, or local laws, statutes, common law duties, rules, regulations, ordinances, and codes, together with all administrative orders, directed duties, licenses, authorizations, and permits of, and agreements with, any Governmental Authority, in each case relating to environmental, health, safety, and land use matters. "Environmental Lien" means a Lien in favor of any Governmental Authority or any other Person for (a) any liability under Environmental Laws or (b) damages arising from, or costs incurred by such Governmental Authority in response to, a Release or threatened Release of a Contaminant into the environment. "Equipment" has the meaning specified in the UCC. "ERISA" means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder, as amended from time to time, and any successor statute. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with an Obligated Party within the meaning of Section 414(b) or (c) of the Code ANNEX A TO CREDIT AGREEMENT - Page 13 (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan, (b) a withdrawal by an Obligated Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA, (c) a complete or partial withdrawal by an Obligated Party or any ERISA Affiliate from a Multi-employer Plan or notification that a Multi-employer Plan is in reorganization or insolvent, (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or the termination, insolvency, or reorganization of a Multi-employer Plan, (e) the occurrence of an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multi-employer Plan, or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon an Obligated Party or any ERISA Affiliate. "Event of Default" has the meaning specified in Section 9.1. "Exchange Act" means the Securities Exchange Act of 1934, and the regulations promulgated thereunder. "Existing Letters of Credit" means each of the letters of credit listed on Schedule A-4, issued under the certain Third Amended and Restated Credit Agreement, dated March 10, 1999, among the Parent, the lenders party thereto, and Bank of America, N.A. (successor in interest to NationsBank, N.A.), as amended. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1.00%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Bank on such day on such transactions as determined by the Administrative Agent. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "Financial Statements" means, according to the context in which used, the financial statements referred to in Section 5.2 and Section 6.5 or any other financial statements required to be given to the Administrative Agent or the Lenders pursuant to this Agreement. ANNEX A TO CREDIT AGREEMENT - Page 14 "Fiscal Quarter" means one of the four, three calendar month measurement periods in a Fiscal Year. "Fiscal Year" means, with respect to any Obligated Party, such Obligated Party's fiscal year for financial accounting purposes. The current Fiscal Year of the Parent will end on May 31, 2004. "Fixed Charge Coverage Ratio" means, as of the end of any Fiscal Quarter of the Parent, determined for the Parent and its Subsidiaries on a consolidated basis for the preceding four Fiscal Quarters, the ratio of EBITDA to Fixed Charges. "Fixed Charges" means, with respect to any fiscal period, determined for any Person (the "subject Person"), without duplication, the sum of Interest Expense, Capital Expenditures (excluding in the case of the Obligated Parties Capital Expenditures funded with Debt other than Revolving Loans, but including, without duplication, principal payments with respect to any such Debt), Distributions in respect of any Capital Stock, scheduled principal payments of Debt, and Federal, state, local, and foreign income taxes (not less than zero), excluding deferred taxes; provided that with respect to the Obligated Parties payments made with respect to amounts owing under the Convertible Subordinated Debentures and the Convertible Trust Preferred Securities shall constitute a single payment equal to the largest of such payments made for the purpose of calculating Fixed Charges. "Funding Date" means the date on which a Borrowing occurs. "GAAP" means generally accepted accounting principles and practices set forth from time to time in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the Closing Date. "General Intangibles" has the meaning specified in the Security Agreements. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing, and any department, agency, board, commission, tribunal, committee, or instrumentality of any of the foregoing. "Guarantor" means each of (a) the Borrowers, (b) the Parent, and (c) each other Person who becomes a party to any Guaranty Agreement pursuant to the terms of this Agreement, and "Guarantors" means two or more of the foregoing Persons, collectively. "Guaranty" means, with respect to any Person, all obligations of such Person which in any manner directly or indirectly guarantee or assure, or in effect guarantee or assure, the payment or performance of any indebtedness, dividend, or other obligations of any other Person (the "guaranteed obligations"), or assure or in effect assure the holder of the guaranteed ANNEX A TO CREDIT AGREEMENT - Page 15 obligations against loss in respect thereof, including any such obligations incurred through an agreement, contingent or otherwise: (a) to purchase the guaranteed obligations or any property constituting security therefor; (b) to advance or supply funds for the purchase or payment of the guaranteed obligations or to maintain a working capital or other balance sheet condition; or (c) to lease property or to purchase any debt or equity securities or other property or services. "Guaranty Agreement" means, each of the Parent Guaranty Agreement and the Subsidiary Guaranty Agreement, and "Guaranty Agreements" means all of such agreements, collectively. "Hedge Agreement" means any and all transactions, agreements, or documents now existing or hereafter entered into, which provide for an interest rate, credit, commodity, or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging a Person's exposure to fluctuations in interest or exchange rates, loan, credit exchange, security, or currency valuations, or commodity prices. "IRB Debt" means all indebtedness, liabilities, and obligations of the Parent or any of its Subsidiaries pursuant to (a) the certain Loan Agreement, dated as of May 1, 1999, between the Parent and the City of Midlothian Industrial Development Authority, (b) the certain Loan Agreement, dated as of September 1, 1998, between the Parent and the Industrial Development Authority of Dinwiddie County, Virginia, (c) the certain Loan Agreement, dated as of August 1, 1999, between the Parent and the Industrial Development Authority of Dinwiddie County, Virginia, and (d) all other agreements, certificates, and instruments executed or delivered in connection with any of the agreements described in clause (a), clause (b), and clause (c) preceding, including, without limitation, each of the letters of credit issued by Bank of America, N.A. (or its predecessor in interest) in connection therewith. "Indemnified Liabilities" has the meaning specified in Section 13.11(a). "Indemnified Person" has the meaning specified in Section 13.11(a). "Instruments" has the meaning specified in the UCC. "Intercompany Accounts" means all assets and liabilities, however arising, which are due to the Parent or a Subsidiary of the Parent from, which are due from the Parent or a Subsidiary of the Parent to, or which otherwise arise from any transaction by the Parent or a Subsidiary of the Parent with, any Affiliate of the Parent or a Subsidiary of the Parent. "Interest Expense" means, with respect to any Person for any period, the interest expense of such Person for such period, determined in conformity with GAAP. "Interest Period" means, with respect to any LIBOR Rate Revolving Loan, the period commencing on the Funding Date of such Revolving Loan or on the Continuation/Conversion Date on which such Revolving Loan is continued as or converted into a LIBOR Rate Revolving Loan, and ending on the date one, two, or three months thereafter as selected by a Borrower in its Notice of Borrowing or Notice of Continuation/Conversion, provided that: ANNEX A TO CREDIT AGREEMENT - Page 16 (a) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the following Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (b) any Interest Period pertaining to a LIBOR Rate Revolving Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (c) no Interest Period shall extend beyond the Stated Termination Date. "Interest Rate" means each or any of the interest rates, including the Default Rate, set forth in Section 2.1. "Inventory" has the meaning specified in the Security Agreements. "IRS" means the Internal Revenue Service and any Governmental Authority succeeding to any of its principal functions under the Code. "Latest Projections" means: (a) on the Closing Date and thereafter until the Administrative Agent receives new projections pursuant to Section 5.2(e), the projections of the Obligated Parties' financial condition, results of operations, and cash flows, in each case for the period commencing on March 1, 2003 and ending on May 31, 2004 and delivered to the Administrative Agent prior to the Closing Date; and (b) thereafter, the projections most recently received by the Administrative Agent pursuant to Section 5.2(e). "Lender" and "Lenders" have the meanings specified in the introductory paragraph hereof and shall include the Administrative Agent to the extent of any Agent Advance outstanding and the Bank to the extent of any Non-Ratable Loan outstanding; provided that no such Agent Advance or Non-Ratable Loan shall be taken into account in determining any Lender's Pro Rata Share. "Letter of Credit" has the meaning specified in Section 1.3(a) and includes each Existing Letter of Credit. "Letter of Credit Fee" has the meaning specified in Section 2.5. "Letter of Credit Fee Percentage" means with respect to any Letter of Credit, on any date of determination, a per annum percentage equal to the Applicable Margin for LIBOR Rate Revolving Loans as of such date of determination. "Letter of Credit Issuer" means the Bank or any Affiliate of the Bank that issues any Letter of Credit pursuant to this Agreement. "Letter of Credit Subfacility" means $40,000,000. ANNEX A TO CREDIT AGREEMENT - Page 17 "LIBOR Rate" means, for any Interest Period, with respect to LIBOR Rate Revolving Loans, the rate of interest per annum determined pursuant to the following formula: Offshore Base Rate LIBOR Rate = ---------------------------------------- 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Reserve Percentage" means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1.00%) in effect on such day applicable to member banks under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental, or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The LIBOR Rate for each outstanding LIBOR Rate Revolving Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. "Offshore Base Rate" means the rate per annum appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the Offshore Base Rate shall be, for any Interest Period, the rate per annum appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. If for any reason none of the foregoing rates is available, the Offshore Base Rate shall be, for any Interest Period, the rate per annum determined by the Administrative Agent as the rate of interest at which Dollar deposits in the approximate amount of the LIBOR Rate Revolving Loan comprising part of such Borrowing would be offered by the Bank's London Branch to major banks in the offshore Dollar market at their request at or about 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. "LIBOR Rate Revolving Loan" means a Revolving Loan during any period in which it bears interest based on the LIBOR Rate. "Lien" means (a) any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute, or contract, and including a security interest, charge, claim, or lien arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, agreement, security agreement, conditional sale or trust receipt or a lease, consignment, or bailment for security purposes, (b) to the extent not included under clause (a) preceding, any reservation, exception, encroachment, easement, right-of-way, covenant, condition, restriction, ANNEX A TO CREDIT AGREEMENT - Page 18 lease, or other title exception or encumbrance affecting property, and (c) any contingent or other agreement to provide any of the foregoing. "Loan Account" means the loan account of the Borrowers, which account shall be maintained by the Administrative Agent. "Loan Documents" means, collectively, this Agreement, the Revolving Loan Notes, the Security Agreements, the Guaranty Agreements, agreements providing for Bank Products (if any), and any other agreements, instruments, and documents heretofore, now or hereafter evidencing, securing, guaranteeing, or otherwise relating to the Obligations, the Collateral, or any other aspect of the transactions contemplated by this Agreement. "Majority Lenders" means, at any time, Lenders whose Pro Rata Shares aggregate more than 50.0% of the Commitments. "Management Group" means, as of any date of determination, the board of directors, board of managers, or similar constituency having management authority in respect of an entity under any Requirement of Law. "Margin Stock" means "margin stock" as such term is defined in Regulation T, U, or X of the Federal Reserve Board. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon the value, condition, use, or availability of the Collateral or upon the operations, business, properties, or condition (financial or otherwise) of the Obligated Parties, taken as a whole, or the Collateral, (b) a material impairment of the ability of the Obligated Parties, taken as a whole, to perform their Obligations under the Loan Documents, or (c) a material adverse effect upon the legality, validity, binding effect, or enforceability against the Obligated Parties, taken as a whole, of any Loan Document. "Maximum Inventory Loan Amount" means (a) during the period from April 1 of each calendar year through and including November 30 of such calendar year, $75,000,000 and (b) during the period from December 1 of each calendar year through and including March 31 of the following calendar year, $90,000,000. "Maximum Rate" means, at any time, the maximum rate of interest the Lenders may lawfully contract for, charge, or receive in respect of the Obligations as allowed by any Requirement of Law. "Maximum Revolver Amount" means $200,000,000. "Multi-employer Plan" means a "multi-employer plan" as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current calendar year or the immediately preceding six calendar years contributed to by an Obligated Party or any ERISA Affiliate. "Negative Pledge" means any agreement, contract, or other arrangement whereby any Obligated Party is prohibited from, or would otherwise be in default as a result of, creating, ANNEX A TO CREDIT AGREEMENT - Page 19 assuming, incurring, or suffering to exist, directly or indirectly, any Lien on any of its assets in favor of the Administrative Agent under the Loan Documents. "Net Amount of Eligible Accounts" means, at any time, the gross amount of Eligible Accounts, less sales, excise, or similar taxes, and less returns, discounts, claims, credits, allowances, accrued rebates, offsets, deductions, counterclaims, disputes, and other defenses of any nature at any time issued, owing, granted, outstanding, available, or claimed. "Non-Ratable Loan" and "Non-Ratable Loans" have the respective meanings specified in Section 1.2(i). "Notice of Borrowing" has the meaning specified in Section 1.2(c). "Notice of Continuation/Conversion" has the meaning specified in Section 2.2(b). "Obligated Party" means each of the Guarantors and the Borrowers, individually, and "Obligated Parties" means two or more of such Persons, collectively. "Obligations" means all present and future loans, advances, liabilities, obligations, covenants, duties, and debts owing by the Obligated Parties, or any of them, to the Administrative Agent and/or any Lender, arising under or pursuant to this Agreement or any of the other Loan Documents, whether or not evidenced by any note, or other similar instrument or document, whether arising from an extension of credit, opening of a letter of credit, loan, guaranty, indemnification, or otherwise, whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, as principal or guarantor, and including all principal, interest, charges, expenses, fees, attorneys' fees, filing fees, and any other sums chargeable to any Obligated Party hereunder or under any of the other Loan Documents. "Obligations" includes, without limitation, (a) all debts, liabilities, and obligations now or hereafter arising from or in connection with the Letters of Credit and (b) all debts, liabilities, and obligations now or hereafter arising from or in connection with Bank Products. "Orderly Liquidation Value" means, with respect to Inventory of any Person, the orderly liquidation value thereof as determined in a manner acceptable to the Administrative Agent by an experienced and reputable independent appraiser acceptable to the Administrative Agent, net of all costs of liquidation thereof. "Other Taxes" means any present or future stamp or documentary taxes or any other excise or property taxes, charges, or similar levies (excluding, in the case of each Lender and the Administrative Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Lender's or the Administrative Agent's gross or net income) which arise from any payment made hereunder or from the execution, delivery, or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. "Parent" means Texas Industries, Inc., a Delaware corporation. "Parent Guaranty Agreement" means that certain Guaranty Agreement (in form and substance satisfactory to the Administrative Agent), dated concurrently herewith, duly executed by the Parent in favor of the Administrative Agent, for the benefit of the Administrative Agent ANNEX A TO CREDIT AGREEMENT - Page 20 and the Lenders, as such agreement may be amended, restated, or otherwise modified and in effect from time to time. "Parent Security Agreement" means that certain Security Agreement (in form and substance satisfactory to the Administrative Agent), dated concurrently herewith, duly executed by the Parent in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, as such agreement may be amended, restated, or otherwise modified from time to time. "Participant" means any commercial bank, financial institution, or other Person not an Affiliate of the Obligated Parties who shall have been granted the right by any Lender to participate in the financing provided by such Lender under this Agreement, and who shall have entered into a participation agreement in form and substance satisfactory to such Lender. "Payment Account" means each bank account established pursuant to a Security Agreement, to which the funds of an Obligated Party, as applicable, (including proceeds of Accounts and other Collateral) are deposited or credited, and which is maintained in the name of the Administrative Agent, an Obligated Party, or any of them, as the Administrative Agent may determine, on terms acceptable to the Administrative Agent. "PBGC" means the Pension Benefit Guaranty Corporation or any Governmental Authority succeeding to the functions thereof. "Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which any Obligated Party or any ERISA Affiliate sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multi-employer Plan has made contributions at any time during the immediately preceding five plan years. "Permitted Acquisition" means (y) an acquisition of Capital Stock or assets permitted under the provisions of Section 7.9 and (z) an acquisition of the Capital Stock of a Person which constitutes all or substantially all of the issued and outstanding Capital Stock of such Person or any acquisition of property which constitutes a significant or material portion of an existing business of a Person by any Obligated Party, in each case under this clause (z), in a transaction that satisfies each of the following requirements: (a) such acquisition is not a hostile or contested acquisition; (b) the business acquired in connection with such acquisition is (i) located in the U.S., (ii) organized under Requirements of Law of the U.S., and (iii) not engaged, directly or indirectly, in any line of business other than the businesses permitted pursuant to Section 7.17; (c) both before and after giving effect to such acquisition and the Revolving Loans (if any) requested to be made in connection therewith, each of the representations and warranties in the Loan Documents is true and correct (except (i) any such representation or warranty which relates to a specified prior date, and (ii) to the extent the Administrative Agent and the Lenders have been notified in writing by the Obligated ANNEX A TO CREDIT AGREEMENT - Page 21 Parties that any representation or warranty is not correct and the Majority Lenders have explicitly waived in writing compliance with such representation or warranty) and no Default or Event of Default exists or will exist or would result therefrom; (d) (i) as soon as available, but not less than 30 days prior to such acquisition, the Borrowers have given the Administrative Agent (A) notice of such acquisition (B) a copy of all business and financial information reasonably requested by the Administrative Agent including pro forma financial statements, statements of cash flow, and projections of Availability and, if the Accounts and Inventory acquired in connection with such acquisition are proposed to be included in the determination of the Borrowing Base, such financial information is reasonably satisfactory to the Administrative Agent, and (C) a certificate of the Parent's chief financial officer certifying (and showing the calculations therefor in reasonable detail) that the Obligated Parties would be in compliance with the covenants set forth in Section 7.22 and Section 7.23 on a pro forma basis before and after giving effect to such acquisition (whether or not such covenants are being tested at such time pursuant to the provisions of Section 7.22 and Section 7.23) and (ii) as soon as available, the information provided to the board of directors of the Parent with respect to such acquisition; (e) the aggregate cash consideration paid in connection with any such acquisition does not exceed $10,000,000 and the aggregate cash consideration paid in connection with all such acquisitions during the term of this Agreement does not exceed $25,000,000; (f) if such acquisition is an acquisition of the Capital Stock of a Person, the acquisition is structured so that the acquired Person shall become a wholly-owned Subsidiary of a Borrower and, (if applicable) subject to Section 13.22, an Obligated Party pursuant to the terms of this Agreement; (g) no Obligated Party shall, as a result of or in connection with any such acquisition, assume or incur any direct or contingent liabilities (whether relating to environmental, tax, litigation, or other matters) that could reasonably be expected, as of the date of such acquisition, to result in the existence or occurrence of a Material Adverse Effect; (h) in connection with an acquisition of the Capital Stock of any Person, all Liens on the Accounts, Inventory, Deposit Accounts, and General Intangibles of such Person shall be terminated unless the Majority Lenders in their sole discretion consent otherwise, and in connection with an acquisition of the assets of any Person, all Liens on such assets which consist of Accounts, Inventory, Deposit Accounts, and General Intangibles shall be terminated; (i) the Parent shall certify (and provide the Administrative Agent and the Lenders with a pro forma calculation in form and substance reasonably satisfactory to the Administrative Agent) to the Administrative Agent and the Lenders that, before and after giving effect to completion of such acquisition, the Availability is not less than $50,000,000; and ANNEX A TO CREDIT AGREEMENT - Page 22 (j) no Default or Event of Default exists or would result therefrom. "Permitted Liens" means: (a) the Agent's Liens; (b) Liens, if any, which are described on Schedule A-2 on the Closing Date and Liens resulting from the refinancing of the related Debt, provided that the Debt secured thereby shall not be increased and the Liens shall not cover any additional property; (c) Liens for (i) taxes, fees, assessments, or other charges of a Governmental Authority which are not delinquent and (ii) taxes, fees, assessments, or other charges of a Governmental Authority in an amount not to exceed $3,000,000, provided that the payment of such taxes, fees, assessments, or other charges of a Governmental Authority referenced in this clause (ii) which are due and payable is being contested in good faith and by appropriate proceedings diligently pursued and as to which adequate financial reserves have been established in conformity with GAAP on the applicable Obligated Party's books and records and a stay of enforcement of any such Lien is in effect; (d) Liens consisting of deposits made in the ordinary course of business in connection with, or to secure payment of, obligations under worker's compensation, unemployment insurance, social security, and other similar laws, or to secure the performance of bids, tenders, or contracts (other than for the repayment of Debt) or to secure indemnity, performance, or other similar bonds for the performance of bids, tenders, or contracts (other than for the repayment of Debt) or to secure statutory obligations (other than Liens arising under ERISA or Environmental Liens) or surety or appeal bonds, or to secure indemnity, performance, or other similar bonds; (e) Liens securing the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords, and other similar Persons, provided that if any such Lien arises from the nonpayment of such claims or demands when due, such claims or demands do not exceed $3,000,000 in the aggregate; (f) Outstanding mineral estates and mineral reservations and Liens constituting encumbrances in the nature of reservations, exceptions, encroachments, easements, rights of way, covenants running with the land, and other similar title exceptions or encumbrances affecting any Real Estate, provided that any such outstanding mineral estates, mineral reservations and Liens do not in the aggregate materially interfere with the use of such Real Estate in the ordinary conduct of an Obligated Party's business; (g) Liens which constitute purchase money Liens and secure Debt permitted under clause (c) of Section 7.13 including the lessors' interests under Capital Leases permitted under clause (c) of Section 7.13; (h) Liens arising from judgments and attachments in connection with court proceedings, provided that the attachment or enforcement of such Liens would not result ANNEX A TO CREDIT AGREEMENT - Page 23 in an Event of Default hereunder and such Liens are being contested in good faith by appropriate proceedings, adequate financial reserves have been established on the applicable Obligated Party's books and records in conformity with GAAP, no material property is subject to a material risk of loss or forfeiture, the claims in respect of such Liens are fully covered by insurance (subject to ordinary and customary deductibles), and a stay of execution pending appeal or proceeding for review is in effect; (i) Liens on the assets (and proceeds thereof and accessions thereto, but excluding Accounts, Inventory, Deposit Accounts, and General Intangibles), of any Person not a Subsidiary that are existing at the time such assets are acquired by an Obligated Party, whether by merger, consolidation, purchase of assets, or otherwise, so long as (i) such Liens (A) are not created, incurred, or assumed in contemplation of such assets being acquired by such Obligated Party and (B) do not extend to any other assets of such Obligated Party or any other Obligated Party and (ii) if such assets are acquired as part of an acquisition of all or substantially all of the Capital Stock of a Person or an acquisition that constitutes a significant or material portion of an existing business of a Person, such acquisition is a Permitted Acquisition, and refinancings of such Liens, and the Debt secured thereby, so long as any such Lien remains solely on the asset or assets acquired (and proceeds thereof and accessions thereto, but excluding Accounts, Inventory, Deposit Accounts, and General Intangibles) and the amount of Debt related thereto is not increased; provided that in no event shall the aggregate unpaid principal amount of Debt secured by Liens permitted pursuant to clause (i) and clause (ii) preceding exceed $15,000,000 at any time outstanding; and (j) Liens (i) arising from rights of setoff, but excluding any requirement for provision of cash collateral, in favor of a Lender arising from any agreement entered into in connection with any Obligated Party obtaining Bank Products from such Lender and (ii) arising in favor of the Letter of Credit Issuer under the applicable application and reimbursement agreement delivered to the Letter of Credit Issuer in connection with each Letter of Credit. provided that (i) none of such Liens listed in clause (b) through clause (g) preceding may attach to any Accounts, (ii) none of such Liens listed in clause (b) through clause (g) preceding, other than such Liens of a type and to the extent provided by clause (e) preceding, may attach to any Inventory owned by a Borrower, and (iii) none of such Liens listed in clause (e) preceding shall be a "Permitted Lien" to the extent that any such Lien attaches to any Inventory owned by an Obligated Party and the aggregate amount of claims or demands under clause (e) against all Obligated Parties exceeds $3,000,000. "Person" means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, Governmental Authority, or any other entity. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which any Obligated Party sponsors or maintains or to which any Obligated Party makes, is making, or is obligated to make contributions and includes any Pension Plan. ANNEX A TO CREDIT AGREEMENT - Page 24 "Proprietary Rights" has the meaning specified in the Security Agreements. "Pro Forma Fixed Charge Coverage Ratio" means, at any time, determined as of the end of any Fiscal Quarter of the Parent for the Parent and its Subsidiaries on a consolidated basis for the immediately preceding four Fiscal Quarters, the ratio of (a) EBITDA to (b) Fixed Charges, plus the projected amount of interest expense to be incurred by an Obligated Party in connection with any Debt issued pursuant to Section 7.13(h). "Pro Rata Share" means, with respect to a Lender, a fraction (expressed as a percentage), the numerator of which is the amount of such Lender's Commitment and the denominator of which is the sum of the amounts of all of the Lenders' Commitments, or if no Commitments are outstanding, a fraction (expressed as a percentage), the numerator of which is the amount of Obligations owed to such Lender and the denominator of which is the aggregate amount of the Obligations owed to the Lenders, in each case giving effect to a Lender's participation in Non-Ratable Loans and Agent Advances. "Real Estate" means, with respect to any Person, all of such Person's now or hereafter owned or leased estates in real property, including, without limitation, all fees, leaseholds, and future interests, together with all of such Person's now or hereafter owned or leased interests in the improvements thereon, the fixtures attached thereto, and the easements appurtenant thereto. "Release" means a release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration of a Contaminant into the indoor or outdoor environment or into or out of any Real Estate or other property, including the movement of Contaminants through or in the air, soil, surface water, groundwater, or Real Estate or other property. "Report" has the meaning specified in Section 12.18(a). "Reportable Event" means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. "Required Lenders" means at any time Lenders whose Pro Rata Shares aggregate more than 66-2/3% of the Commitments. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule, or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Reserves" means reserves that limit the availability of credit hereunder, consisting of reserves against Availability, Eligible Accounts, or Eligible Inventory, established by the Administrative Agent from time to time in the Administrative Agent's reasonable credit judgment. Without limiting the generality of the foregoing, the following reserves shall be deemed to be a reasonable exercise of the Administrative Agent's credit judgment: (a) Bank Product Reserves; (b) reserves for accrued, unpaid interest on the Obligations; (c) reserves for rent at each leased location where Eligible Inventory or the books and records of an Obligated ANNEX A TO CREDIT AGREEMENT - Page 25 Party are maintained or kept; (d) reserves for Inventory shrinkage; (e) Environmental Compliance Reserves; (f) reserves for customs charges; (g) reserves for dilution of Accounts equal to 2.0% of Eligible Accounts for every 1.0% of average dilution in excess of 7.5% during the preceding three calendar months; (h) reserves for warehousemen's or bailees' charges; and (i) reserves for taxes, fees, assessments, and other governmental charges which are due and unpaid. "Responsible Officer" means, with respect to any Obligated Party, the chief executive officer, the president, the chief financial officer, the treasurer, the director of corporate finance, any vice president, or any other officer having substantially the same authority and responsibility as any of the foregoing. "Restricted Investment" means, with respect to any Obligated Party, any acquisition of property by such Obligated Party in exchange for cash or other property, whether in the form of an acquisition of Capital Stock, debt, or other indebtedness or obligation, or the purchase or acquisition of any other assets or property, or a loan, advance, capital contribution, or subscription (each of the foregoing an "Investment"), except acquisitions of Inventory in the ordinary course of business and each of the following if made at a time when no Default or Event of Default exists or would result therefrom: (a) acquisitions of real and personal property in the ordinary course of business of such Obligated Party and consistent with such Obligated Party's past practices; (b) acquisitions of other current assets acquired in the ordinary course of business of such Obligated Party; (c) Investments in direct obligations of the U.S., or any agency thereof, or obligations guaranteed by the U.S., provided that such obligations mature within one year from the date of acquisition thereof; (d) Investments in certificates of deposit maturing within one year from the date of investment, bankers' acceptances, Eurodollar bank deposits, or overnight bank deposits, in each case issued by, created by, or with a bank or trust company organized under the laws of the U.S. or any state thereof having capital and surplus aggregating at least $100,000,000; (e) Investments in commercial paper given a rating of "A2" or better by Standard & Poor's Corporation or "P2" or better by Moody's Investors Service, Inc. and maturing not more than 90 days from the date of creation thereof; (f) Investments in Hedge Agreements entered into for the purpose of (i) limiting the amount of interest payable under this Agreement or the Senior Notes and (ii) eliminating pricing risk with respect to the cost of coal, natural gas, and electricity used in the Obligated Parties' business; (g) Investments in mutual funds substantially all of the assets of which are comprised of securities of the types described in clauses (c), (d), and (e) preceding; (h) the net amount of Investments after the Closing Date consisting of intercompany loans and advances between any Obligated Party and any of its Subsidiaries which is not an Obligated Party, the aggregate net amount of such Investments not to exceed $10,000,000 at any time outstanding; (i) Investments existing on the Closing Date by any Obligated Party in its Subsidiaries; (j) Investments by any Obligated Party in another Obligated Party; (k) loans to executive officers and non-employee directors, and employees of the Obligated Parties; provided that (i) at the time of such loan no Default or Event of Default shall exist or result therefrom and (ii) the aggregate amount of such loans made by the Obligated Parties and outstanding at any one time shall not exceed $1,000,000, calculated net of any bad debt reserves; (l) existing Investments listed on Schedule A-3); (m) Investments which are Permitted Acquisitions; and (n) other Investments not included in clauses (a) through (m) preceding in an aggregate amount at any time not exceeding $1,000,000. ANNEX A TO CREDIT AGREEMENT - Page 26 "Revolving Loan Note" and "Revolving Loan Notes" have the meanings specified in Section 1.2(b). "Revolving Loans" has the meaning specified in Section 1.2 and includes each Agent Advance and Non-Ratable Loan. "Security Agreements" means the Parent Security Agreement and the Subsidiary Security Agreement. "Senior Notes" means each of the "Notes" as defined in and issued under the Senior Notes Indenture. "Senior Notes Indenture" means that certain Indenture, dated as of June 6, 2003, between the Parent and Wells Fargo Bank, National Association entered into in connection with issuance of the Parent's 10 1/4% senior notes due 2011. "Settlement" and "Settlement Date" have the meanings specified in Section 12.15(a)(i). "Solvent" means, when used with respect to any Person, that at the time of determination: (a) the assets of such Person, at a fair valuation, are in excess of the total amount of its debts (including contingent liabilities); (b) the present fair saleable value of its assets is greater than its probable liability on its existing debts as such debts become absolute and matured; (c) it is then able and expects to be able to pay its debts (including contingent debts and other commitments) as they mature; and (d) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. For purposes of determining whether a Person is Solvent, the amount of any contingent liability shall be computed as the amount that, in 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. "Stated Termination Date" means June 6, 2007. "Steel Segment Receivable" means any account owing to either (a) Chaparral (Virginia), Inc. or (b) Chaparral Steel Midlothian, LP. "Subsidiary" means, with respect to any Person (the "subject Person"), any corporation, association, partnership, limited liability company, joint venture, or other business entity of which more than 50.0% of the voting Capital Stock or other Capital Stock, is owned or controlled directly or indirectly by the subject Person, or one or more of the Subsidiaries of the subject Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of an Obligated Party. ANNEX A TO CREDIT AGREEMENT - Page 27 "Subsidiary Guaranty Agreement" means that certain Guaranty Agreement (in form and substance satisfactory to the Administrative Agent), dated concurrently herewith, duly executed by each Obligated Party other than the Parent in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, as such agreement may be amended, restated, or otherwise modified from time to time. "Subsidiary Security Agreement" means that certain Security Agreement (in form and substance satisfactory to the Administrative Agent), dated concurrently herewith, duly executed by each Obligated Party other than the Parent in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, as such agreement may be amended, restated, or otherwise modified from time to time. "Supporting Cash Deposit" has the meaning specified in Section 1.3(g). "Supporting Letter of Credit" has the meaning specified in Section 1.3(g). "Tangible Net Worth" means, as applied to any Person, at any date and determined in conformity with GAAP, (a) total assets, minus (b) total liabilities, excluding the outstanding amount of the Convertible Trust Preferred Securities, minus (c) intangible assets, but excluding from the calculation of Tangible Net Worth, the effect of any non-cash impairment charges to fixed assets and goodwill incurred during the term of this Agreement in conformity with GAAP. "Tangible Net Worth Requirement" means, as of the end of each Fiscal Quarter of the Parent ending after the Closing Date, an amount equal to the amount specified corresponding to the applicable Fiscal Quarter end in the table below, respectively:
================================================================================================================== Adjusted Tangible Net Worth Fiscal Quarter End Requirement ================================================================================================================== May 31, 2003 $760,000,000 - ------------------------------------------------------------------------------------------------------------------ August 31, 2003 $750,000,000, plus the cumulative amount of all Tangible Net Worth Requirement Increases - ------------------------------------------------------------------------------------------------------------------ November 30, 2003 $740,000,000, plus the cumulative amount of all Tangible Net Worth Requirement Increases - ------------------------------------------------------------------------------------------------------------------ February 29, 2004 $725,000,000, plus the cumulative amount of all Tangible Net Worth Requirement Increases - ------------------------------------------------------------------------------------------------------------------ May 31, 2004 and each Fiscal Quarter ending thereafter $725,000,000, plus the cumulative amount of all Tangible Net Worth Requirement Increases ==================================================================================================================
ANNEX A TO CREDIT AGREEMENT - Page 28 "Tangible Net Worth Requirement Increase" means an amount, determined for the Parent and its Subsidiaries on a consolidated basis as of the end of any Fiscal Quarter of the Parent, commencing with the Fiscal Quarter ending August 31, 2003, equal to the sum of (a) 50.0% of the amount (not less than zero) of Net Income for each Fiscal Quarter of the Parent ending after May 31, 2004, excluding the effect of (i) any non-recurring non-cash loss attributable to the sale of assets outside the ordinary course of business, including any sale of an operating division or a Subsidiary and (ii) any other non-recurring, non-cash loss, including any loss attributable to the write-down of long-lived assets or the impairment of intangible assets (excluding any write-down of Inventory), stock based compensation, and amortization of financing costs, plus (b) 100% of the net amount of all equity proceeds received by the Parent after the Closing Date. As used in this definition, a "non-cash loss" is a loss which involves no cash expenditure by the subject Person in the current Fiscal Year, and a "non-cash gain" is any gain which involves no cash receipt by the subject Person in the current Fiscal Year. "Taxes" means any and all present or future taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, excluding, in the case of the Administrative Agent and each Lender, such taxes (including income taxes or franchise taxes) as are imposed on or measured by the Administrative Agent's or such Lender's gross or net income in the jurisdiction (whether federal, state, or local and including any political subdivision thereof) under the laws of which the Administrative Agent or such Lender, as the case may be, is organized or maintains a lending office. "Termination Date" means the earliest to occur of (a) the Stated Termination Date, (b) the date the Total Facility is terminated (i) by the Borrowers pursuant to Section 3.2 or (ii) pursuant to Section 9.2, and (c) the date this Agreement is otherwise terminated for any reason whatsoever pursuant to the terms of this Agreement. "Total Facility" has the meaning specified in Section 1.1. "UCC" means the Uniform Commercial Code (or any successor statute), as in effect from time to time, of the State of California or of any other state the laws of which are required as a result thereof to be applied in connection with the issue of perfection of security interests; provided that to the extent that the UCC is used to define any term herein or in any other documents and such term is defined differently in different Articles or Divisions of the UCC, the definition of such term as contained in Article or Division 9 shall govern. "Unfunded Pension Liability" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "Unused Letter of Credit Subfacility" means an amount equal to the Letter of Credit Subfacility, minus the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit, plus, without duplication, (b) the aggregate unpaid reimbursement obligations with respect to all Letters of Credit. "Unused Line Fee" has the meaning specified in Section 2.4. ANNEX A TO CREDIT AGREEMENT - Page 29 "U.S." means the United States of America. "Wholly-Owned Subsidiary" when used to determine the relationship of a Subsidiary to a Person, means a Subsidiary all of the issued and outstanding Capital Stock (other than directors' qualifying shares) of which shall at the time be owned by such Person or one or more of such Person's Wholly-Owned Subsidiaries or by such Person and one or more of such Person's Wholly-Owned Subsidiaries. ACCOUNTING TERMS: Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given to such term in conformity with GAAP, and all financial computations in this Agreement shall be computed, unless otherwise specifically provided herein, in conformity with GAAP as consistently applied and using the same method for inventory valuation as used in the preparation of the Financial Statements. INTERPRETIVE PROVISIONS: Wherever used in this Agreement, (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. Terms used herein that are defined in the UCC and are not otherwise defined herein shall have the meanings specified therefor in the UCC. (b) The words "hereof," "herein," "hereunder," and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement. Section, Schedule, and Exhibit references are to this Agreement unless otherwise specified. The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices, and other writings, however evidenced. The term "including" is not limiting and means "including, without limitation." In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including," the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including." The word "or" is not exclusive. The words "hereof," "herein," "hereunder" and similar words refer to the Agreement as a whole and not to any particular provision of the Agreement, and Subsection, Section, Schedule, and Exhibit references are to this Agreement unless otherwise specified. (c) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, and other modifications thereto, but only to the extent such amendments, restatements, and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting the statute or regulation. ANNEX A TO CREDIT AGREEMENT - Page 30 (d) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (e) This Agreement and the other Loan Documents may use several different limitations, tests, or measurements to regulate the same or similar matters. All such limitations, tests, and measurements are cumulative and shall each be performed in accordance with their terms. (f) For purposes of Section 9.1, a breach of a financial covenant contained in Section 7.22 and Section 7.23 shall be deemed to have occurred as of any date of determination thereof by the Administrative Agent or as of the last day of any specified measuring period, regardless of when the Financial Statements reflecting such breach are delivered to the Administrative Agent and the Lenders. (g) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Administrative Agent, each Lender, and the Obligated Parties and are the products of all parties. Accordingly, this Agreement and the other Loan Documents shall not be construed against the Administrative Agent, the Lender, or the Obligated Parties merely because of their respective involvement in their preparation. ANNEX A TO CREDIT AGREEMENT - Page 31 EX-12.1 9 d06928exv12w1.txt EX-12.1 STATEMENT REGARDING COMPUTATION OF RATIOS . . . EXHIBIT 12.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLAR AMOUNTS IN THOUSANDS)
Fiscal Years Ended May 31, -------------------------------------------------------------------------- 2002 1998 1999 2000 2001 2002 Pro Forma ---------- ---------- ---------- ---------- ---------- ---------- Income before income taxes per income statement ...................... $ 159,590 $ 144,097 $ 114,974 $ 48,571 $ 83,550 $ 83,550 Add: Portion of rents representative of the interest factor ................ 6,650 6,200 7,279 9,585 8,687 8,687 Interest on Indebtedness .............. 20,088 10,216 30,220 34,376 38,334 56,610 Amortization of debt issue costs ...... 372 1,094 2,523 2,685 4,346 2,188 Amortization of capitalized interest .. -- -- 1,424 1,708 2,808 2,808 ---------- ---------- ---------- ---------- ---------- ---------- Income as adjusted ...................... $ 186,700 $ 161,607 $ 156,419 $ 96,926 $ 137,725 $ 153,843 ========== ========== ========== ========== ========== ========== Fixed charges Interest on indebtedness (A) ......... $ 20,088 $ 10,216 $ 30,220 $ 34,376 $ 38,334 $ 56,610 Amortization of debt issue costs (B) .. 372 1,094 2,523 2,685 4,346 2,188 Capitalized interest (C) .............. 4,626 23,230 12,705 15,601 -- -- Rents: Total for Company ..................... 22,200 20,700 24,300 32,000 29,000 29,000 Portion of rents representative of the interest factor (D) ........... 6,650 6,200 7,279 9,585 8,687 8,687 Preferred stock dividends (E) ......... -- 10,878 11,000 11,000 11,000 11,000 ---------- ---------- ---------- ---------- ---------- ---------- Fixed charges (A) + (B) + (C) + (D) + (E) ........... $ 31,736 $ 51,619 $ 63,727 $ 73,247 $ 62,367 $ 78,485 ========== ========== ========== ========== ========== ========== Ratio of earnings to fixed charges ...... 5.9 3.1 2.5 1.3 2.2 2.0 ========== ========== ========== ========== ========== ========== Deficiency of earnings to cover fixed charges ......................... Nine Months Ended Twelve Months Ended February 28, February 28, ------------------------------------- ----------------------- 2003 2003 2002 2003 Pro Forma 2003 Pro Forma ---------- ---------- ---------- ---------- ---------- Income before income taxes per income statement ...................... $ 48,658 $ (21,408) $ (21,408) $ 13,574 $ 13,574 Add: Portion of rents representative of the interest factor ................ 6,558 6,248 6,248 8,193 8,193 Interest on Indebtedness .............. 29,860 23,082 37,774 31,556 50,938 Amortization of debt issue costs ...... 3,339 2,791 1,641 3,798 2,188 Amortization of capitalized interest .. 2,106 2,106 2,106 2,808 2,808 ---------- ---------- ---------- ---------- ---------- Income as adjusted ...................... $ 90,521 $ 12,819 $ 26,360 $ 59,929 $ 77,700 ========== ========== ========== ========== ========== Fixed charges Interest on indebtedness (A) ......... $ 29,860 $ 23,082 $ 37,774 $ 31,556 $ 50,938 Amortization of debt issue costs (B) .. 3,339 2,791 1,641 3,798 2,188 Capitalized interest (C) .............. -- -- -- -- Rents: Total for Company ..................... 21,894 20,857 20,857 27,351 27,351 Portion of rents representative of the interest factor (D) ........... 6,558 6,248 6,248 8,193 8,193 Preferred stock dividends (E) ......... 8,250 8,248 8,248 10,998 10,998 ---------- ---------- ---------- ---------- ---------- Fixed charges (A) + (B) + (C) + (D) + (E) ........... $ 48,007 $ 40,369 $ 53,910 $ 54,545 $ 72,316 ========== ========== ========== ========== ========== Ratio of earnings to fixed charges ...... 1.9 0.3 0.5 1.1 1.1 ========== ========== ========== ========== ========== Deficiency of earnings to cover fixed charges ......................... $ 27,550 $ 27,550 ========== ==========
EX-23.1 10 d06928exv23w1.txt EX-23.1 CONSENT OF ERNST & YOUNG LLP Exhibit 23.1 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" and to the use of our report dated July 9, 2002 in the Registration Statement on Form S-4 and related prospectus of Texas Industries, Inc. for the registration of $600,000,000 10 1/4% Senior Notes due 2011. /s/ ERNST & YOUNG LLP Ernst & Young LLP Dallas, Texas June 25, 2003 EX-25.1 11 d06928exv25w1.txt EX-25.1 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) [ ] --------- WELLS FARGO BANK, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) Not Applicable 94-1347393 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 505 Main Street, Suite 301 76102 Fort Worth, Texas (Zip code) (Address of principal executive offices) Wells Fargo & Company Law Department, Trust Section MAC N9305-172 Sixth and Marquette, 17th Floor Minneapolis, MN 55479 (agent for services) --------- Texas Industries, Inc. (Exact name of obligor as specified in its charter) Delaware 75-0832210 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) --------- 10.25% Senior Notes due 2011 (Title of the indenture securities) ========================================================================== Item 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. Comptroller of the Currency, Treasury Department Washington, D.C. 20230 Federal Deposit Insurance Corporation Washington, D.C. 20429 Federal Reserve Bank of San Francisco San Francisco, CA 94120 (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None with respect to the trustee. No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13. Item 15. Foreign Trustee. Not applicable. Item 16. List of Exhibits. Wells Fargo Bank incorporates by reference into this Form T-1 exhibits attached hereto. Exhibit 1. A copy of the Articles of Association of the trustee now in effect.* Exhibit 2. A copy of the Comptroller of the Currency Certificate of Corporate Existence for Wells Fargo Bank, National Association, dated November 28, 2001.* Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust powers. A copy of the Comptroller of the Currency Certificate of Corporate Existence (with Fiduciary Powers) for Wells Fargo Bank, National Association, dated November 28, 2001.* Exhibit 4. Copy of By-laws of the trustee as now in effect.* Exhibit 5. Not applicable. Exhibit 6. The consents of United States institutional trustees required by Section 321(b) of the Act. Exhibit 7. Attached is a copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. Exhibit 8. Not applicable. Exhibit 9. Not applicable. * Incorporated by reference to exhibit number 25 filed with registration statement number 333-87398. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wells Fargo Bank, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Fort Worth and State of Texas on the day of 25thth of June, 2003. WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ Melissa Scott ---------------------------------- Melissa Scott, Corporate Trust Officer Exhibit 6 June 25, 2003 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request thereof. Very truly yours, WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ Melissa Scott ---------------------------------------- Melissa Scott, Corporate Trust Officer Exhibit 7 Consolidated Report of Condition of Wells Fargo Bank National Association of 420 Montgomery Street, San Francisco, CA 94163 And Foreign and Domestic Subsidiaries, at the close of business March 31, 2003, filed in accordance with 12 U.S.C.ss.161 for National Banks.
Dollar Amounts In Millions -------------- ASSETS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin $ 8,008 Interest-bearing balances 1,370 Securities: Held-to-maturity securities 0 Available-for-sale securities 5,189 Federal funds sold and securities purchased under agreements to resell: Federal funds sold in domestic offices 78 Securities purchased under agreements to resell 56 Loans and lease financing receivables: Loans and leases held for sale 41,208 Loans and leases, net of unearned income 113,872 LESS: Allowance for loan and lease losses 1,334 Loans and leases, net of unearned income and allowance 112,538 Trading Assets 6,069 Premises and fixed assets (including capitalized leases) 1,594 Other real estate owned 69 Investments in unconsolidated subsidiaries and associated companies 255 Customers' liability to this bank on acceptances outstanding 29 Intangible assets Goodwill 5,379 Other intangible assets 4,694 Other assets 10,219 --------- Total assets $ 196,755 ========= LIABILITIES Deposits: In domestic offices $ 105,713 Noninterest-bearing 29,176 Interest-bearing 76,537 In foreign offices, Edge and Agreement subsidiaries, and IBFs 17,156 Noninterest-bearing 3 Interest-bearing 17,153 Federal funds purchased and securities sold under agreements to repurchase: Federal funds purchased in domestic offices 25,772 Securities sold under agreements to repurchase 385

Dollar Amounts In Millions -------------- Trading liabilities 5,473 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases) 10,268 Bank's liability on acceptances executed and outstanding 29 Subordinated notes and debentures 5,684 Other liabilities 7,658 --------- Total liabilities $ 178,138 Minority interest in consolidated subsidiaries 36 EQUITY CAPITAL Perpetual preferred stock and related surplus 0 Common stock 520 Surplus (exclude all surplus related to preferred stock) 13,285 Retained earnings 4,638 Accumulated other comprehensive income 138 Other equity capital components 0 --------- Total equity capital 18,581 --------- Total liabilities, minority interest, and equity capital $ 196,755 =========
I, James E. Hanson, Vice President of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. James E. Hanson Vice President We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. Carrie L. Tolstedt Howard Atkins Directors Clyde W. Ostler EX-99.1 12 d06928exv99w1.htm EX-99.1 FORM OF LETTER OF TRANSMITTAL exv99w1


Delaware	3312	75-0832210
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Number.)	(I.R.S. Employer Identification No.)


1341 West Mockingbird Lane Suite 700W Dallas, Texas 75247-6913 (972) 647-6700		Robert C. Moore Vice President — General Counsel Texas Industries, Inc. 1341 West Mockingbird Lane Suite 700W Dallas, Texas 75247-6913 (972) 647-6700
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)		(Name, address, including zip code, and telephone number, including area code, of agent for service)






		Proposed maximum	Proposed maximum
Title of each class of	Amount to be	offering price per	aggregate offering	Amount of
securities to be registered	registered	share	price(1)	registration fee


10 1/4% Senior Notes due 2011	$600,000,000	100%	$600,000,000	$48,540

Guarantees of 10 1/4% Senior Notes due 2011		N/A	N/A	(2)


Schedule A SUBSIDIARY GUARANTORS
TABLE OF CONTENTS
MARKET, RANKING AND OTHER DATA
FORWARD-LOOKING STATEMENTS
PROSPECTUS SUMMARY
The Exchange Offer
Summary Consolidated Financial and Other Data
RISK FACTORS
USE OF PROCEEDS
CAPITALIZATION
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INDUSTRY OVERVIEW
BUSINESS
MANAGEMENT
DESCRIPTION OF CERTAIN DEBT AND PREFERRED SECURITIES
THE EXCHANGE OFFER
DESCRIPTION OF EXCHANGE NOTES
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
PLAN OF DISTRIBUTION
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INCORPORATION OF DOCUMENTS BY REFERENCE
TEXAS INDUSTRIES, INC. REPORT OF INDEPENDENT AUDITORS
CONSOLIDATED BALANCE SHEETS TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
SIGNATURES
SIGNATURES
SIGNATURES
INDEX TO EXHIBITS
EX-4.5 Indenture, dated as of June 6, 2003
EX-4.6 Form of 10 1/4% Senior Exchange Note
EX-4.7 Registration Rights Agreement
EX-5.1 Opinion of Thompson & Knight LLP
EX-5.2 Opinion of Robert C. Moore
EX-10.2 Credit Agreement
EX-12.1 Statement Regarding Computation of Ratios
EX-23.1 Consent of Ernst & Young LLP
EX-25.1 Statement of Eligibility and Qualification
EX-99.1 Form of Letter of Transmittal
EX-99.2 Form of Notice of Guaranteed Delivery


The exchange offer		We are offering to exchange up to $600.0 million principal amount of the exchange notes for up to $600.0 million principal amount of the outstanding notes. Outstanding notes may only be exchanged in $1,000 increments.

		The terms of the exchange notes are identical in all material respects to those of the outstanding notes except the exchange notes will not be subject to transfer restrictions and holders of exchange notes, with limited exceptions, will have no registration rights. Also, the exchange notes will not contain provisions for an increase in their stated interest rate related to any registration or exchange delay.

		Outstanding notes that are not tendered for exchange will continue to be subject to transfer restrictions and, with limited exceptions, will not have registration rights. Therefore, the market for secondary resales of outstanding notes that are not tendered for exchange is likely to be minimal.

		We will issue registered exchange notes on or promptly after the expiration of the exchange offer.

Resale of the exchange notes		We believe that the exchange notes issued to you pursuant to the exchange offer may be offered for sale, resold and otherwise transferred by you, without compliance with the registration and prospectus delivery provisions of the Securities Act, if you:

		• are acquiring the exchange notes in the ordinary course of your business;

		• are not engaging, do not intend to engage and no arrangement or understanding with any person to participate in a distribution of the exchange notes; and

		• are not an “affiliate” of ours within the meaning of Rule 405 under the Securities Act.

		If any of these conditions is not satisfied and you transfer any exchange notes without delivering a proper prospectus or without qualifying for an exemption from registration, you may incur liability under the Securities Act. In addition, if you are a broker-dealer seeking to receive exchange notes for your own account in exchange for outstanding notes that you acquired as a result of market-making or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any offer to resell, or any resale or other transfer of the exchange notes that you receive in the exchange offer. See “Plan of Distribution.”

Expiration date		The exchange offer will expire at 5:00 p.m., New York City time, on , 2003, unless we extend the exchange offer.

Withdrawal rights		You may withdraw the tender of your outstanding notes at any time prior to the expiration of the exchange offer. We will return to you any of your outstanding notes that we do not accept for


	Page

Market, Ranking and Other Data		ii
Forward-Looking Statements		ii
Prospectus Summary		1
Risk Factors		14
Use of Proceeds		24
Capitalization		25
Selected Consolidated Financial and Other Data		26
Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Industry Overview		43
Business		46
Management		54
Description of Certain Debt and Preferred Securities		58
The Exchange Offer		60
Description of Exchange Notes		69
Certain United States Federal Income Tax Considerations		111
Plan of Distribution		116
Legal Matters		116
Experts		116
Where You Can Find More Information		117
Incorporation of Documents by Reference		117
Index to Consolidated Financial Statements		F-1


Issuer		Texas Industries, Inc.

Securities		$600.0 million in principal amount of 10 1/4% senior notes due 2011.

Maturity		June 15, 2011.

Interest		Annual rate: 10 1/4%.

		Payment frequency: every six months on June 15 and December 15.

		First payment: December 15, 2003.

Guarantees		The exchange notes will be unconditionally guaranteed by each of our existing and future domestic restricted subsidiaries, other than our accounts receivable facility subsidiary and our capital trust subsidiary.

Ranking		The exchange notes will be general unsecured senior obligations of Texas Industries, Inc. Accordingly, they will rank:

		• equally with all of its existing and future unsecured un-subordinated debt;

		• effectively behind all of its existing and future secured debt to the extent of the assets securing such debt, including the new senior secured credit facility;

		• ahead of any of its existing and future subordinated debt, including its 5.5% convertible subordinated debentures due 2028 that underlie its capital trust subsidiary’s company-obligated mandatorily redeemable preferred securities; and

		• structurally behind all of the existing and future liabilities of its subsidiaries that are not guarantors, including trade payables.

		The guarantees by our subsidiaries that guarantee the exchange notes will be general unsecured senior obligations of the guarantors and will rank equally with all unsecured unsubordinated debt of the guarantors, effectively behind all secured debt of the guarantors to the extent of the assets securing such debt and ahead of all future subordinated debt of the guarantors.

Optional Redemption		We may redeem the exchange notes, in whole or in part, on or after June 15, 2007, at the redemption prices described in this prospectus, plus accrued interest. At any time before June 15, 2007, we may redeem the exchange notes, in whole or in part, at a redemption price equal to 100% of their principal amount plus a make-whole premium, together with accrued interest to the redemption date.


		In addition, at any time prior to June 15, 2006, we may redeem up to 35% of the aggregate principal amount of the exchange notes at the redemption price described in this prospectus with the net cash proceeds from certain equity offerings. However, we may only make such redemptions if at least 65% of the aggregate principal amount of the exchange notes remains outstanding after each such redemption. See “Description of the Exchange Notes — Optional Redemption.”

Certain Covenants		While we do not meet the Suspension Condition, covenants contained in the indenture under which the exchange notes will be issued will, among other things, limit our ability and the ability of our restricted subsidiaries to do certain things. We will meet the Suspension Condition if the exchange notes are rated investment grade by both Moody’s Investors Service, Inc. and Standard & Poor’s Rating Services and if we are not in default under the indenture. We currently do not meet the Suspension Condition.

		While we do not meet the Suspension Condition, the covenants contained in our indenture will, among other things, limit our ability and the ability of our restricted subsidiaries to:

		• pay dividends on, or redeem or repurchase, our stock;

		• make certain investments;

		• incur additional debt or sell preferred stock;

		• create liens;

		• restrict dividend payments or other payments from subsidiaries to us;

		• engage in consolidations and mergers or sell or transfer assets;

		• engage in transactions with our affiliates; and

		• sell stock in our subsidiaries.

		If and while we meet the Suspension Condition, the covenants contained in the indenture will, among other things, limit our ability and the ability of our restricted subsidiaries to:

		• create liens;

		• restrict dividend payments or other payments from subsidiaries to us; and

		• engage in consolidations and mergers or sell or transfer assets.

		These covenants are subject to a number of important exceptions, limitations and qualifications that are described under “Description of Exchange Notes.”

Absence of a public market for the exchange notes on any securities exchange		We do not intend to list the exchange notes.



											Unaudited						Unaudited
											Nine Months Ended						Twelve Months
		Fiscal Year Ended May 31,									February 28,						Ended
																	February 28,
		2000			2001			2002			2002			2003			2003


		($ in thousands, except operating data)
Consolidated Statement of Operations Data:
Net sales		$	1,306,407		$	1,252,232		$	1,344,920		$	1,000,551		$	923,072		$	1,267,441
Costs and expenses (income)
	Cost of products sold		1,064,477			1,082,012			1,134,222			848,091			850,333			1,136,464
	Selling, general and administrative		113,713			110,956			109,151			86,643			71,227			93,735
	Interest(1)		32,743			37,061			42,680			33,199			25,873			35,354
	Other income		(19,500	)		(26,368	)		(24,683	)		(15,950	)		(2,953	)		(11,686	)

			1,191,433			1,203,661			1,261,370			951,983			944,480			1,253,867

Income (loss) before the following items			114,974			48,571			83,550			48,568			(21,408	)		13,574
Income taxes (benefit)			37,995			15,198			25,124			15,487			(10,126	)		(489	)

			76,979			33,373			58,426			33,081			(11,282	)		14,063
Dividends on preferred securities — net of tax			(7,150	)		(7,150	)		(7,150	)		(5,363	)		(5,361	)		(7,148	)

Net income (loss)		$	69,829		$	26,223		$	51,276		$	27,718		$	(16,643	)	$	6,915

Balance Sheet Data (at end of period):
Cash		$	6,988		$	8,734		$	7,430		$	9,073		$	5,494		$	5,494
Total assets			1,815,680			1,857,361			1,773,277			1,785,556			1,730,754			1,730,754
Total debt (including current portion)			632,657			623,487			484,191			535,556			467,722			467,722
Company-obligated mandatorily redeemable preferred securities of subsidiary holding solely company convertible debentures			200,000			200,000			200,000			200,000			199,937			199,937
Shareholders’ equity			698,026			712,245			762,410			737,892			741,319			741,319
Other Financial Data:
Net sales:
	CAC	$	679,767		$	678,001		$	708,605		$	526,711		$	482,222		$	664,116
	Steel		626,640			574,231			636,315			473,840			440,850			603,325
Operating profit (loss):
	CAC		169,717			134,745			119,234			89,568			56,764			86,430
	Steel		15,238			(22,526	)		31,381			15,574			(29,584	)		(13,777	)
Ratio of earnings to fixed charges(2)			2.5	x		1.3	x		2.2	x		1.9	x		0.3	x		1.1	x
Capital expenditures:
	Capital expenditures — expansion		266,346			48,261			—			—			—			—
	Capital expenditures — other		50,750			88,631			29,662			19,011			41,094			51,745

Total capital expenditures			317,096			136,892			29,662			19,011			41,094			51,745


	*If you do not properly tender your outstanding notes, your ability to transfer the outstanding notes will be adversely affected.*


	*Our substantial debt could adversely affect our cash flow and prevent us from fulfilling our obligations under the exchange notes.*


	Pro Forma as of
	February 28, 2003

	(Unaudited)
	($ in thousands)
Total debt (including current portion)	$	606,366
Company-obligated mandatorily redeemable preferred securities		199,937
Shareholders’ equity		734,032

Total capitalization	$	1,540,335


	*Although the exchange notes are referred to as “senior notes,” they will be effectively subordinated to our and the subsidiary guarantors’ secured indebtedness.*


	Not all our subsidiaries will guarantee our obligations under the exchange notes, and the assets of the non-guarantor subsidiaries may not be available to make payments on the exchange notes.


	*We will require a significant amount of cash to service our debt. Our ability to generate cash depends on many factors beyond our control.*


	The financing agreements governing our debt, including the exchange notes and our new senior secured credit facility, contain various covenants that restrict our ability to prepay or repurchase the exchange notes, otherwise limit our discretion in the operation of our business and could lead to acceleration of debt.


	*Federal and state statutes allow courts, under specific circumstances, to void guarantees and require exchange note holders to return payments received from guarantors.*


	We may be unable to make a change of control offer required by the indenture governing the exchange notes, which would cause defaults under the indenture governing the exchange notes, our new senior secured credit facility and our other financing arrangements.


	We could enter into various transactions, such as acquisitions, refinancings, recapitalizations or other highly leveraged transactions, which would not constitute a change of control, but which could nevertheless increase the amount of our outstanding debt at such time, or adversely affect our capital structure or credit ratings, or otherwise adversely affect holders of the exchange notes.


	*An active public market may not develop for the exchange notes, which may hinder your ability to liquidate your investment.*


	*Our business is sensitive to economic cycles, seasonality and weather.*


	*The availability and pricing of raw materials and energy could have an adverse impact on our results of operation and financial condition.*


	*Our business would suffer if antidumping duties on imports are reduced or eliminated or we face increased imports from foreign competitors not subject to such duties.*


	*We may incur substantial expenditures to comply with environmental laws which may adversely affect our results of operations and financial condition.*


	*Unexpected equipment failures may lead to production curtailments or shutdowns.*


	*Our California facilities may be damaged by an earthquake for which we have a limited amount of insurance.*



			February 28, 2003

			Actual		As Adjusted


			($ in thousands)
Total debt (including current portion):
	New senior secured credit facility(1)		$	—	$	1,644
	Revolving credit facility			76,500		—
	Senior notes offered hereby			—		600,000
	Senior notes:
		Notes due through 2017, interest rates average 7.28%		200,000		—
		Notes due through 2008, interest rates average 7.28%		75,000		—
		Notes due through 2004, interest rates average 10.20%		16,000		—
	Variable-rate industrial development revenue bonds:(2)
		Bonds maturing in 2028, interest rate approximately 2.50%		50,000		—
		Bonds maturing in 2029, interest rate approximately 2.50%		25,000		—
		Bonds maturing in 2029, interest rate approximately 2.50%		20,500		—
	Pollution control bonds, due through 2007, interest rate 3.19%
	(75% of prime)			4,195		4,195
	Other, maturing through 2009, interest rates from 7.50% to 10.00%			527		527

	Total debt			467,722		606,366
Company-obligated mandatorily redeemable preferred securities of subsidiary holding solely company convertible debentures				199,937		199,937
Shareholders’ equity(3)				741,319		734,032

Total capitalization			$	1,408,978	$	1,540,335

Accounts receivable facility usage(4)			$	110,928	$	—


																							(Unaudited)
																	(Unaudited)						Twelve
																	Nine Months Ended						Months
		Fiscal Year Ended May 31,															February 28,						Ended
																							February 28,
		1998			1999			2000			2001			2002			2002			2003			2003


		($ in thousands, except operating data)
Consolidated Statement of Operations Data:
Net sales		$	1,196,275		$	1,126,800		$	1,306,407		$	1,252,232		$	1,344,920		$	1,000,551		$	923,072		$	1,267,441
Costs and expenses (income)
	Cost of products sold		938,418			889,502			1,064,477			1,082,012			1,134,222			848,091			850,333			1,136,464
	Selling, general and administrative		95,088			104,604			113,713			110,956			109,151			86,643			71,227			93,735
	Interest(1)		20,460			11,310			32,743			37,061			42,680			33,199			25,873			35,354
	Other income		(17,281	)		(22,713	)		(19,500	)		(26,368	)		(24,683	)		(15,950	)		(2,953	)		(11,686	)

			1,036,685			982,703			1,191,433			1,203,661			1,261,370			951,983			944,480			1,253,867

Income (loss) before the following items			159,590			144,097			114,974			48,571			83,550			48,568			(21,408	)		13,574
Income taxes (benefit)			53,060			48,283			37,995			15,198			25,124			15,487			(10,126	)		(489	)

			106,530			95,814			76,979			33,373			58,426			33,081			(11,282	)		14,063
Dividends on preferred securities — net of tax			—			(7,071	)		(7,150	)		(7,150	)		(7,150	)		(5,363	)		(5,361	)		(7,148	)
Minority interest in Chaparral			(4,400	)		—			—			—			—			—			—			—

Net income (loss)		$	102,130		$	88,743		$	69,829		$	26,223		$	51,276		$	27,718		$	(16,643	)	$	6,915

Balance Sheet Data (at end of period):
Cash		$	16,718		$	17,652		$	6,988		$	8,734		$	7,430		$	9,073		$	5,494		$	5,494
Total assets			1,185,831			1,531,053			1,815,680			1,857,361			1,773,277			1,785,556			1,730,754			1,730,754
Total debt (including current portion)			419,131			465,533			632,657			623,487			484,191			535,556			467,722			467,722
Company-obligated mandatorily redeemable preferred securities of subsidiary holding solely company convertible debentures			—			200,000			200,000			200,000			200,000			200,000			199,937			199,937
Shareholders’ equity			553,326			632,550			698,026			712,245			762,410			737,892			741,319			741,319
Other Financial Data:
Net sales:
	CAC	$	490,586		$	644,357		$	679,767		$	678,001		$	708,605		$	526,711		$	482,222		$	664,116
	Steel		705,689			482,443			626,640			574,231			636,315			473,840			440,850			603,325
Operating profit (loss):
	CAC		107,726			165,310			169,717			134,745			119,234			89,568			56,764			86,430
	Steel		87,525			12,950			15,238			(22,526	)		31,381			15,574			(29,584	)		(13,777	)


		Low			High


		($ in millions)
Loss before the following items (income taxes and dividends on preferred securities — net of tax)		$	(37	)	$	(27	)
Plus:
	Interest expense		35			35
	Depreciation, depletion and amortization		97			97

EBITDA		$	95		$	105


Estimated costs associated with the accident and fire		$	7
Accounts receivable facility fees			3

	Total	$	10



								Nine Months Ended
		Year Ended May 31,						February 28,

		2000		2001		2002		2002		2003


		($ and units shipped in thousands)
TOTAL SALES (including intercompany sales)
	Cement	$	311,981	$	326,065	$	349,330	$	257,174	$	246,657
	Ready-mix		263,375		235,201		231,543		175,622		150,388
	Stone, sand & gravel		106,318		114,326		117,761		89,984		75,448
	Structural mills		499,967		451,895		501,158		374,338		343,452
	Bar mill		110,679		105,391		114,682		84,001		84,373
UNITS SHIPPED (including intercompany shipments)
	Cement (tons)		4,135		4,570		4,902		3,596		3,559
	Ready-mix (cubic yards)		4,197		3,949		3,921		2,962		2,596
	Stone, sand & gravel (tons)		19,653		20,834		21,152		16,004		13,503
	Structural mills (tons)		1,470		1,286		1,498		1,124		1,093
	Bar mill (tons)		331		324		383		281		264
NET SALES
	Cement	$	234,790	$	254,019	$	276,964	$	202,605	$	202,216
	Ready-mix		262,962		234,674		231,276		175,405		150,232
	Stone, sand & gravel		74,061		80,547		85,319		64,901		52,235
	Other products		107,954		108,761		115,046		83,800		77,539

TOTAL CAC		$	679,767	$	678,001	$	708,605	$	526,711	$	482,222
	Structural mills		499,967		451,895		501,158		374,338		343,452
	Bar mill		110,679		105,391		114,682		84,001		84,373
	Other		15,994		16,945		20,475		15,501		13,025

TOTAL STEEL		$	626,640	$	574,231	$	636,315	$	473,840	$	440,850

TOTAL NET SALES		$	1,306,407	$	1,252,232	$	1,344,920	$	1,000,551	$	923,072



	Future Payments by Period

	Total		2004		2005-2006		2007-2008		After 2008


	($ in thousands)
Total debt (including current portion)	$	467,722	$	85,232	$	94,390	$	87,158	$	200,942
Operating leases		69,381		21,654		19,033		9,727		18,967
Company-obligated mandatorily redeemable preferred securities		199,937		—		—		—		199,937

Total contractual obligations	$	737,040	$	106,886	$	113,423	$	96,885	$	419,846


					Internally Estimated
		Number		Rated Annual	Minimum Reserves —
Type of Facility and General Location		of Plants		Productive Capacity	Years

Crushed Limestone
	North Central & South Texas		2	8.1 million tons		25
	Oklahoma(1)		1	5.5 million tons		99
Sand & Gravel
	North Central Texas		4	3.3 million tons		24
	Central Texas		5	4.0 million tons		13
	Louisiana		10	5.4 million tons		33
	South Central Oklahoma		1	1.4 million tons		11
Expanded Shale & Clay(2)
	North Central & South Texas		2	1.2 million cu. yds		25
	California		2	.5 million cu. yds		25
	Colorado		1	.4 million cu. yds		25


	Number		Number
Location	of Plants		of Trucks

Texas		42		427
Louisiana		18		101
Arkansas		1		2


Products		Locations

Prepackaged concrete and related products		Dallas/ Fort Worth, Texas Austin, Texas Cresson, Texas Houston, Texas Bossier City, Louisiana
Concrete block		Alexandria, Louisiana Bossier City, Louisiana Monroe, Louisiana
Clay brick		Athens, Texas Mineral Wells, Texas Mooringsport, Louisiana