<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 2, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LONE STAR INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
3241
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
13-0982660
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
300 FIRST STAMFORD PLACE
P.O. BOX 120014
STAMFORD, CT 06912-0014
(203) 969-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN S. JOHNSON
LONE STAR INDUSTRIES, INC.
300 FIRST STAMFORD PLACE
P.O. BOX 120014
STAMFORD, CT 06912-0014
(203) 969-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
ALAN B. HYMAN, ESQ.
PROSKAUER ROSE GOETZ & MENDELSOHN
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 969-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: From time to time after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH AMOUNT MAXIMUM AGGREGATE
CLASS OF SECURITIES TO BE OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
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Common Stock, par value $1.00 per
share.................................. 3,826,548 $16.875 $64,572,998 $22,266.71
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Common Stock Purchase Warrants........... 891,609 $7.00 $6,241,263 $2,152.17
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Common Stock, par value $1.00 per share,
issuable upon exercise of the
Warrants............................... 891,609 $18.75 $16,717,669 $5,764.75
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10% Senior Notes due 2003................ $21,140,000 98% $20,717,200 $7,143.91
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Total.................................... $37,327.54
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</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
registration fee.
Also registered hereunder pursuant to Rule 416 are an indeterminate number
of shares of Common Stock that may become issuable pursuant to antidilution
adjustments arising under the Warrants.
------------------------
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
LONE STAR INDUSTRIES, INC.
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM AND HEADING LOCATION IN PROSPECTUS
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<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Summary Financial
Information; Risk Factors; and Selected
Historical Financial Data
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Not Applicable
6. Dilution................................... Not Applicable
7. Selling Security Holders................... Selling Securityholders
8. Plan of Distribution....................... Outside Front Cover Page of Prospectus;
Plan of Distribution
9. Description of Securities to be
Registered................................. Prospectus Summary; Description of
Securities
10. Interests of Named Experts and Counsel..... Not Applicable
11. Information with Respect to the Company.... Inside Front Cover Page of Prospectus;
Prospectus Summary; The Company; Risk
Factors; Price Range of Common Stock and
Warrants; Dividend Policy; Capitalization;
Selected Historical Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Principal
Stockholders; Certain Relationships and
Related Transactions; Description of
Securities; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
</TABLE>
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED SEPTEMBER 2, 1994
PROSPECTUS
LONE STAR INDUSTRIES, INC.
4,718,157 SHARES OF COMMON STOCK
891,609 COMMON STOCK PURCHASE WARRANTS
$21,140,000 PRINCIPAL AMOUNT OF 10% SENIOR NOTES DUE 2003
------------------------
This Prospectus relates to the offering by the selling securityholders
named herein (the "Selling Securityholders") of up to (i) 3,826,548 shares of
Common Stock, par value $1.00 per share (the "Common Stock"), of Lone Star
Industries, Inc., a Delaware corporation (the "Company"), (ii) 891,609 Common
Stock Purchase Warrants, each Warrant entitling the holder thereof to purchase
one share of Common Stock at an exercise price of $18.75 until December 31, 2000
(the "Warrants"), (iii) 891,609 shares of Common Stock issuable upon exercise of
the Warrants offered hereby and (iv) $21,140,000 aggregate principal amount of
10% Senior Notes due 2003 of the Company (the "Senior Notes"). (The Common
Stock, Warrants and Senior Notes shall be referred to herein collectively as the
"Securities.") The Securities initially were issued to creditors and equity
securityholders of the Company in accordance with the plan of reorganization
under which the Company and certain of its subsidiaries emerged from a Chapter
11 bankruptcy proceeding (the "Plan of Reorganization"). See
"Business -- Bankruptcy Reorganization Proceedings." The Company will not
receive any of the proceeds from the sale of the Securities offered hereby,
except for the exercise price of the Warrants when and if they are exercised.
The Securities are listed for trading on the New York Stock Exchange, Inc.
(the "NYSE"). The closing sales price of the Securities on August 30, 1994 as
reported on the NYSE was $17 per share of Common Stock, $7 per Warrant and 98%
of the principal amount of the Senior Notes.
The Senior Notes bear interest at a rate of 10% per annum, payable
semi-annually on each of January 31 and July 31. The Senior Notes are general
unsecured obligations of the Company. Subject to the certain covenants in the
Company's financing agreement, the Senior Notes are redeemable, in whole or in
part, at any time at the Company's option at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest thereon.
In the event of a Change in Control (as defined), the Company is obligated
to make an offer to purchase all outstanding Senior Notes at a redemption price
of 100% of the principal amount thereof plus accrued and unpaid interest
thereon. In addition, the Company is obligated in certain instances to make
offers to purchase Senior Notes at a redemption price of 100% of the principal
amount thereof plus accrued and unpaid interest thereon with the Excess Net
Proceeds (as defined) of certain sales or dispositions of assets. Sinking fund
payments in the amount of $10,000,000 each are required to be made in each of
years 2000, 2001 and 2002.
The Selling Securityholders directly through agents designated from time to
time, or through dealers or underwriters to be designated, may sell the
Securities offered hereby from time to time on terms to be determined at the
time of sale. To the extent required, the specific amount of Securities to be
sold, the respective purchase price and public offering price, the names of any
such agent, dealer or underwriter, and any applicable commission or discount
with respect to a particular offer will be set forth in a Prospectus Supplement.
The Company has agreed to bear all expenses of registration of the
Securities offered hereby under federal and state securities laws and to
indemnify the Selling Securityholders against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities Act").
See "Plan of Distribution."
The Selling Securityholders and any broker-dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Securities registered hereunder may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions received by them and any
profit on the resale of such Securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
------------------------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD
BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES OFFERED HEREBY.
------------------------
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.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1994.
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the Securities being offered by this Prospectus. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto, certain portions of which have been omitted
as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Securities, reference is made to
the Registration Statement, including the exhibits and schedules thereto, which
may be inspected without charge at the Commission's principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of the Registration Statement
may be obtained from the Commission at its principal office upon payment of
prescribed fees. Statements contained in this Prospectus as to the contents of
any contract or other document are not necessarily complete, and in each
instance where such contract or other document is an exhibit to the Registration
Statement, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each statement being
qualified in all respects by such reference.
The Company also is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files periodic reports, proxy statements, and other
information with the Commission. Such Registration Statement, reports, proxy
statements, and other information can be inspected, without charge, and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its
regional offices located at 7 World Trade Center, 13th Floor, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60061. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. The Securities are listed on the NYSE.
Reports and other information concerning the Company are available for
inspection and copying at the offices of the NYSE at 20 Broad Street, New York,
New York 10005.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, all
information in this Prospectus assumes that no outstanding stock options or
warrants are exercised. Unless the context otherwise requires, as used herein
the "Company" shall mean Lone Star Industries, Inc. together with its
subsidiaries and affiliates, including Rosebud Holdings, Inc. and its
subsidiaries, and "Lone Star" shall mean the Company excluding Rosebud Holdings,
Inc. and its subsidiaries.
THE COMPANY
Lone Star is a cement, construction aggregates and ready-mixed concrete
company, with operations in the United States (principally in the midwest and
southwest and on the east coast) and Canada. Lone Star's cement operations
consist of five cement plants in the midwestern and southwestern regions of the
United States and a 25% interest in Kosmos Cement Company, a partnership which
operates one cement plant in each of Kentucky and Pennsylvania. These five
wholly-owned cement plants produced 3.6 million tons of cement in 1993 and are
expected to produce 3.7 million tons in 1994, which approximates the rated
capacity of such plants. Lone Star also is engaged in construction aggregate
operations including the mining, processing and distribution of sand, gravel and
crushed stone and provides a source of ready-mixed concrete and other
construction materials. Lone Star's aggregate operations serve the construction
market in the New York metropolitan area, the east coast and gulf coast of the
United States, the Caribbean and the Nova Scotia and Prince Edward Island areas
of Canada. The ready-mixed concrete business operates in central Illinois and
the Memphis, Tennessee area. On a pro forma basis after giving effect to the
plan of reorganization described below and the adoption of fresh-start reporting
in connection therewith, the Company had approximately $270 million in revenues
in 1993, with cement, construction aggregates and ready-mixed operations
representing approximately 70%, 17% and 13%, respectively, of such revenues.
Bankruptcy Reorganization Proceedings
In December 1990, Lone Star Industries, Inc. and certain of its
subsidiaries commenced proceedings under Chapter 11 of the Federal Bankruptcy
Code (the "Chapter 11 Cases"). The Chapter 11 Cases were precipitated by a
variety of factors including generally depressed economic and business
conditions, increasingly restricted sources of financing, potential defaults
under long-term debt agreements, potential litigation exposure relating to
concrete railroad crossties, and uncertainty and potential liabilities with
respect to environmental, retiree benefit and pension related obligations. The
Chapter 11 Cases were filed in order to preserve the Company's assets and enable
it to seek a long-term solution to its financial, litigation and business
problems.
Prior to and during the course of the Chapter 11 Cases, the Company
implemented a comprehensive organizational and financial restructuring. As part
of this process, the Company closed various offices and facilities, centralized
and reduced its corporate management structure, sold or otherwise disposed of
non-core or unprofitable assets and operations (including substantially all
partnership, joint venture and foreign interests), rejected, modified and
assumed contracts and leases, and implemented many programs designed to improve
the operating procedures, controls, efficiency and profitability of its ongoing
operations.
On April 14, 1994 (the "Plan Effective Date"), the Company emerged from
bankruptcy pursuant to a plan of reorganization (the "Plan of Reorganization").
The predecessor to the Company is referred to herein as the "Predecessor
Company." Unless the context otherwise requires, as used herein the term
"Company" or "Lone Star" means the Company or Lone Star following the Plan
Effective Date, and references to the Company prior to the Plan Effective Date
mean the Predecessor Company. Upon emergence from bankruptcy (the
"Reorganization"), the Company was reorganized around its core domestic
operations, while remaining non-core assets and operations (the "Rosebud
Assets") were transferred to Rosebud Holdings, Inc. and its subsidiaries
(collectively, "Rosebud"), a wholly-owned liquidating subsidiary formed pursuant
to the Plan of Reorganization. Also transferred to Rosebud was the Company's
right to recover under certain litigations. See "Business -- Liquidating
Subsidiary." Pursuant to the Plan of Reorganization, pre-petition equity
interests
3
<PAGE> 6
were cancelled and holders thereof were issued a percentage of new equity
interests, certain pre-petition indebtedness was discharged, certain
pre-petition indebtedness was reinstated or restructured and assumed, certain
litigations were settled, certain pre-petition creditors received cash, new
indebtedness and a percentage of new equity interests in satisfaction of their
claims, and a restructured Board of Directors was designated. The Plan of
Reorganization also implemented settlements related to certain retiree health
and life insurance benefits, pension and financing obligations.
THE OFFERING
<TABLE>
<S> <C>
SECURITIES OFFERED HEREBY
Common Stock................ Up to 4,718,157 shares, including 891,609 shares of Common
Stock issuable upon exercise of the Warrants
Warrants.................... Up to 891,609 Common Stock Purchase Warrants, each Warrant
entitling the holder thereof to purchase one share of Common
Stock at an exercise price of $18.75 until December 31, 2000.
The Warrants are not redeemable by the Company.
Senior Notes................ Up to $21,140,000 aggregate principal amount of 10% Senior
Notes due 2003
SECURITIES OUTSTANDING AS OF
THE DATE HEREOF
Common Stock................ 12,000,000 shares(1)
Warrants.................... 4,003,333 Common Stock Purchase Warrants(2)
Senior Notes................ $78 million principal amount of 10% Senior Notes due 2003
DESCRIPTION OF SENIOR NOTES
OFFERED HEREBY
Interest Rate............... 10%
Interest Payment Dates...... January 31 and July 31
Maturity Date............... July 31, 2003
Optional Redemption......... Subject to certain covenants in the Company's financing
agreement, the Senior Notes are redeemable, in whole or in
part, at any time at the Company's option at a redemption
price of 100% of the principal amount thereof, plus accrued
and unpaid interest thereon.
Mandatory Redemption........ The Company is obligated in certain instances to make offers
to purchase Senior Notes at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest
thereon with the Excess Net Proceeds (as defined) of certain
sales or dispositions of assets.
Change in Control........... In the event of a Change in Control (as defined), the Company
is obligated to make an offer to purchase all outstanding
Senior Notes at a redemption price of 100% of the principal
amount thereof plus accrued and unpaid interest thereon.
Ranking..................... The Senior Notes are general unsecured obligations of the
Company.
Sinking Fund................ Sinking fund payments in the amount of $10,000,000 each are
required to be made in each of years 2000, 2001 and 2002;
provided, however, that such payments will be reduced by the
principal amount of any Senior Notes that the Company has
optionally redeemed or purchased and delivered to the trustee
for cancellation.
Guarantees.................. The Senior Notes may be guaranteed in the future by certain
Restricted Subsidiaries (as defined). As of the date hereof,
there are no guarantees.
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C>
Certain Covenants........... The Senior Note Indenture contains certain covenants relating
to, among other things, (i) limitations on distributions;
(ii) limitations on additional indebtedness; (iii)
limitations on the consolidation or merger of the Company
with or into another person or the conveyance, transfer or
lease of substantially all the property of the Company to
another person; (iv) limitations on transactions with
affiliates; and (v) limitations on liens.
Rating...................... None
USE OF PROCEEDS............... None of the proceeds of this Offering will be received by the
Company, except for the exercise price of the Warrants when
and if they are exercised, which amount, if any, will be used
for working capital and general corporate purposes. See "Use
of Proceeds."
NYSE SYMBOLS
Common Stock................ LCE
Warrants.................... LCE WS
Senior Notes................ LCE 04
RISK FACTORS.................. Prospective purchasers should consider carefully the factors
specified under "Risk Factors."
</TABLE>
- ---------------
(1) Includes 578,524 shares of Common Stock which pursuant to the Plan of
Reorganization will be distributed to pre-petition unsecured creditors and
holders of pre-petition equity interests, but which had not been issued as
of August 16, 1994. Does not include (i) 4,003,333 shares of Common Stock
reserved for issuance upon exercise of the Warrants and (ii) 750,000 shares
of Common Stock reserved for issuance upon exercise of options granted and
to be granted under the Company's stock option plans.
(2) Includes 213,962 Common Stock Purchase Warrants which pursuant to the Plan
of Reorganization will be distributed to holders of pre-petition equity
interests, but which had not been issued as of August 16, 1994.
5
<PAGE> 8
SUMMARY FINANCIAL INFORMATION
Following the Reorganization, in accordance with AICPA Statement of
Position No. 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," the Company adopted "fresh-start" reporting ("Fresh-Start
Reporting") which assumes that a new reporting entity has been formed as of the
effective date of a plan of reorganization, which in the case of the Company was
deemed to be March 31, 1994 for accounting purposes. As a result of Fresh-Start
Reporting, the Company's consolidated financial statements for periods prior to
March 31, 1994 are not comparable to consolidated financial statements presented
on or subsequent to March 31, 1994. The following summary financial data of the
Predecessor Company as of and for the fiscal years ended December 31, 1993, 1992
and 1991, as of and for the six-month period ended June 30, 1993 and as of and
for the three-month period ended March 31, 1994, and the following summary
financial data of the Company as of and for the three-month period ended June
30, 1994 and the following summary pro forma financial data of the Company for
the six-month period ended June 30, 1994 are qualified in their entirety by
reference to the financial statements of the Predecessor Company and the
Company, respectively, and the related notes thereto and should be read in
conjunction with such financial statements and related notes and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
-------------------- ------------------------------------------------------
PRO FORMA
FOR THE FOR THE FOR THE FOR THE
THREE SIX THREE SIX
MONTHS MONTHS MONTHS MONTHS FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED DECEMBER 31,
JUNE 30, JUNE 30, MARCH 31, JUNE 30, -------------------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1994 1994(1) 1994 1993 1993 1992 1991
- --------------------------------------------- -------- --------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................................... $ 86,995 $132,258 $ 33,709 $103,057 $240,071 $ 230,098 $238,692
Joint venture income......................... $ 1,269 $ 1,344 $ 381 $ 12,610 $ 20,440 $ 37,831 $ 24,435
Income (loss) before reorganization items,
income taxes, and cumulative effect of
changes in accounting principles........... $ 11,999 $ (5,428) $ (3,170) $ 1,063 $ 6,196 $ (42,429) $ 2,948
Income (loss) before cumulative effect of
changes in accounting principles........... $ 7,914 $ (3,800) $(150,483) $(41,862) $(35,258) $ (45,428) $ (5,547)
Net income (loss)............................ $ 7,914 $ (3,800) $ (23,118) $(42,644) $(36,040) $(164,342) $ (5,547)
Net income (loss) applicable to common
stock(2)................................... $ 7,914 $ (3,800) $ (24,396) $(45,200) $(41,152) $(169,455) $(10,661)
-------- --------- --------- -------- -------- --------- --------
Primary Earnings Per Common Share:
Income (loss) before cumulative effect of
changes in accounting principles........... $ 0.62 $ (0.32) (3) $ (2.67) $ (2.42) $ (3.03) $ (0.64)
Net income (loss) per share................ $ 0.62 $ (0.32) (3) $ (2.72) $ (2.47) $ (10.18) $ (0.64)
-------- --------- --------- -------- -------- --------- --------
Weighted average common shares outstanding... 12,000 12,000 n/a 16,644 16,644 16,641 16,582
Cash dividends per common share.............. -- -- -- -- -- -- --
-------- --------- --------- -------- -------- --------- --------
Ratio of earnings to fixed charges(4)........ 4.95x (4) (4) (4) 2.80x (4) 1.12x
-------- --------- --------- -------- -------- --------- --------
</TABLE>
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
----------------- ------------------------------------------
DECEMBER 31,
JUNE 30, MARCH 31, JUNE 30, ------------------------------
1994 1994 1993 1993 1992 1991
-------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Financial Position at End of Period:
Total assets................................ $574,415 $579,411 $897,116 $924,885 $952,649 $914,437
Long-term debt(5):
Senior notes.............................. $ 78,000 $ 78,000 -- -- -- --
Asset proceeds notes...................... $116,000 $112,000 -- -- -- --
Production payment.......................... $ 20,963 $ 20,963 $ 4,000 $ 2,000 $ 4,000 $ 4,000
Liabilities subject to Chapter 11
proceedings............................... -- -- $607,306 $627,938 $611,129 $555,331
Redeemable preferred stock.................. -- -- $ 37,500 $ 37,500 $ 37,500 $ 37,500
Common shareholders' equity................. $101,190 $ 93,313 $ 17,486 $ 12,348 $ 59,698 $226,162
</TABLE>
(footnotes on next page)
6
<PAGE> 9
- ---------------
(1) The pro forma consolidated financial data reflects the effect of
implementation of the Plan of Reorganization, including changes in the
operating units of the successor company, reductions in postretirement
benefit expenses resulting from settlements reached during the Chapter 11
Cases, increased interest expense related to the issuance of the Senior
Notes and the adoption of Fresh-Start Reporting, as if the Company had
emerged from bankruptcy and adopted Fresh-Start Reporting as of January 1,
1994. The successor company's results include results of operations
previously classified as assets held for sale and exclude the results of
operations which have been transferred to Rosebud. See "Pro Forma
Consolidated Statement of Operations (Unaudited)" included in Note 4 of
Notes to Interim Consolidated Financial Statements and Pro Forma Financial
Data included elsewhere herein.
(2) In 1992, the Company adopted Statements of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions" ("SFAS 106"), and No. 109, "Accounting for Income Taxes" ("SFAS
109"). The cumulative effect of the change in accounting principles was an
after-tax charge of $130,510,000 related to the adoption of SFAS 106 and an
increase in earnings of $11,596,000 related to the adoption of SFAS 109. In
addition, in 1992 the Company also recorded a pre-tax provision of
$66,584,000 in connection with the settlement of the Company's concrete
railroad crosstie litigation. See Notes 30, 31 and 33 of Notes to
Consolidated Financial Statements included elsewhere herein.
The three-month period ended March 31, 1994 included an extraordinary gain
of $127,520,000 resulting from the discharge of pre-petition liabilities as
a result of the Company's emergence from bankruptcy; a pre-tax loss of
$133,917,000 to adjust the Company's assets and liabilities to fair value in
accordance with Fresh-Start Reporting; and a $6,500,000 pre-tax insurance
recovery related to the crosstie litigation settlement recorded in 1992.
(3) On the Plan Effective Date, the Company issued shares of the new Common
Stock, the Warrants, the Senior Notes, and the Asset Proceeds Notes (as
hereinafter defined), transferred certain assets to Rosebud and adopted
Fresh-Start Reporting effective as of March 31, 1994 for accounting
purposes. As a result, earnings per share for the three-month period ended
March 31, 1994 has not been presented because it is not meaningful.
(4) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income (loss) before reorganization items, income taxes and
cumulative effect of changes in accounting principles plus fixed charges.
"Fixed charges" consist of interest expense, capitalized interest and
one-third of rental expense, which is deemed to be representative of the
interest factor thereon. Earnings were insufficient to cover fixed charges
by $3,283,000 for the three months ended March 31, 1994, and by $42,919,000
for the year ended December 31, 1992. The ratio of earnings to fixed charges
is not included for the pro forma periods or the six-month period ended June
30, 1993.
(5) Pursuant to the Plan of Reorganization, the Company issued the Senior Notes,
which bear interest at a rate of 10% per annum, payable semi-annually.
Pursuant to the Plan of Reorganization, Rosebud, a wholly-owned subsidiary
of the Company, issued 10% Asset Proceeds Notes due 1997 in the aggregate
principal amount of $138,118,000 (the "Asset Proceeds Notes"). Interest on
the Asset Proceeds Notes is payable semi-annually in cash and/or additional
Asset Proceeds Notes (at the option of Rosebud) on each of January 31 and
July 31. A portion of Rosebud's obligations under the Asset Proceeds Notes
is guaranteed by the Company (the "Company Guarantee"). If, at the maturity
date of the Asset Proceeds Notes, the aggregate amount of all cash payments
of principal and interest on such notes is less than $88,118,000, the
Company Guarantee is payable either in cash, five-year notes or a
combination thereof to cover the shortfall between the actual payments and
$88,118,000, plus interest; provided, however, that the total amount paid
pursuant to the Company Guarantee cannot exceed $28,000,000. The Asset
Proceeds Notes are included in the successor company's consolidated balance
sheet at an amount equal to the estimated fair value of the Company's
investment in Rosebud.
7
<PAGE> 10
THE COMPANY
The Company was incorporated in Maine in 1919 as International Cement
Corporation and in 1936 changed its name to Lone Star Cement Corporation. In
1969, its state of incorporation was changed to Delaware and in 1971 its name
was changed to Lone Star Industries, Inc. The Company's executive offices are
located at 300 First Stamford Place, P.O. Box 120014, Stamford, Connecticut
06912-0014 and its telephone number is (203) 969-8600.
In December 1990, Lone Star Industries, Inc. and certain of its
subsidiaries commenced the Chapter 11 Cases. The Chapter 11 Cases were
precipitated by a variety of factors including generally depressed economic and
business conditions, increasingly restricted sources of financing, potential
defaults under long-term debt agreements, potential litigation exposure relating
to concrete railroad crossties, and uncertainty and potential liabilities with
respect to environmental, retiree benefit and pension related obligations. The
Chapter 11 Cases were filed in order to preserve the Company's assets and enable
it to seek a long-term solution to its financial, litigation and business
problems.
Prior to and during the course of the Chapter 11 Cases, the Company
implemented a comprehensive organizational and financial restructuring. As part
of this process, the Company closed various offices and facilities, centralized
and reduced its corporate management structure, sold or otherwise disposed of
noncore or unprofitable assets and operations (including partnership, joint
venture and foreign interests), rejected, modified and assumed contracts and
leases, settled litigations and implemented many programs designed to improve
the operating procedures, controls, efficiency and profitability of its ongoing
operations.
On the Plan Effective Date, the Company effected the Reorganization
pursuant to the Plan of Reorganization. Upon emergence from bankruptcy, the
Company was reorganized around its core domestic operations, while remaining
non-core assets and operations were transferred to Rosebud, a wholly-owned
liquidating subsidiary formed pursuant to the Plan of Reorganization. Also
transferred to Rosebud was the Company's right to recover under certain
litigations. See "Business -- Liquidating Subsidiary." In accordance with the
Plan of Reorganization, pre-petition equity interests were cancelled and holders
thereof were issued a percentage of new equity interests, certain pre-petition
indebtedness was discharged, certain pre-petition indebtedness was reinstated or
restructured and assumed, certain litigations were settled, certain pre-petition
creditors received cash, new indebtedness and a percentage of new equity
interests in satisfaction of their claims, and a restructured Board of Directors
was designated. The Plan of Reorganization also implemented settlements related
to certain retiree health and life insurance benefits, pension and financing
obligations.
Pursuant to the Plan of Reorganization, Rosebud issued the Asset Proceeds
Notes to pre-petition unsecured creditors of the Company. Interest on the Asset
Proceeds Notes is payable semi-annually in cash and/or additional Asset Proceeds
Notes (at the option of Rosebud) on each of January 31 and July 31. Rosebud paid
the first such semi-annual interest payment on July 31, 1994 in cash and intends
to make future interest payments in cash, to the extent Rosebud has cash
available. The indenture governing the Asset Proceeds Notes (the "Rosebud
Indenture") provides that interest and principal on the Asset Proceeds Notes
shall be paid from the proceeds of Rosebud Asset dispositions and proceeds, if
any, received by Rosebud in connection with certain litigations transferred to
it. A portion of Rosebud's obligations under the Asset Proceeds Notes is
guaranteed by the Company Guarantee. If, at the maturity date of the Asset
Proceeds Notes, the aggregate amount of all cash payments of principal and
interest on such notes is less than $88,118,000, the Company Guarantee is
payable either in cash, five-year notes or a combination thereof to cover the
shortfall between the actual payments and $88,118,000, plus interest; provided,
however, that the total amount paid pursuant to the Company Guarantee cannot
exceed $28,000,000. The Company Guarantee is secured by a pledge of the
Company's right, title and interest in and to all of the issued and outstanding
common stock of Rosebud. As of August 29, 1994, Rosebud had made cash payments
of principal and interest on the Asset Proceeds Notes of approximately
$37,600,000. In connection with the Plan of Reorganization, Lone Star entered
into a Management Services and Asset Disposition Agreement (the "Management
Services Agreement") with Rosebud pursuant to which, among other things, Lone
Star makes management personnel available to manage, market and dispose of the
Rosebud Assets in exchange for a fee payable to Lone Star. See
"Business -- Liquidating Subsidiary."
8
<PAGE> 11
RISK FACTORS
An investment in the Securities offered hereby involves a high degree of
risk. Prospective purchasers of the Securities should consider carefully the
following matters, as well as the other information in this Prospectus, in
evaluating an investment in such Securities.
LACK OF COMPARABLE OPERATING HISTORY
As part of the pre-petition restructuring which commenced in 1989 and while
the Chapter 11 Cases were pending, the Company disposed of a significant amount
of assets (including substantially all partnership, joint venture and foreign
interests). In connection with the Reorganization, the Company was reorganized
around its core domestic operations, while non-core assets and operations were
transferred to Rosebud. Certain assets that had been held for sale under the
1989 restructuring program were included as part of the reorganized entity and
other assets that were identified to be sold during the Chapter 11 proceedings
as being for sale but had not been sold prior to the conclusion of the
Reorganization were transferred to Rosebud for ultimate disposition. In
addition, the Company adopted Fresh-Start Reporting, which assumes that a new
reporting entity has been formed as of the Plan Effective Date, which was deemed
to be March 31, 1994 for accounting purposes, and requires assets and
liabilities be adjusted to their fair values as of the effective date.
Accordingly, there is no comparable historical financial information available
for the assets and businesses that constitute the reorganized Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition."
CONSTRUCTION INDUSTRY CONDITIONS
Cyclical, Seasonal and Regional Industry. Construction spending and cement
consumption historically have fluctuated widely. Demand for cement is correlated
to cyclical construction activity, which, in turn, is influenced largely by
economic conditions, including (particularly in the case of residential
construction) prevailing interest rates and availability of public funds for
infrastructure construction projects. The demand for cement also is seasonal,
particularly in the northern markets where colder weather affects construction
activity.
Cement manufacturing is largely a regional business due to the low
value-to-weight ratio of cement. As such, cement prices differ geographically,
depending on plant efficiency, domestic and foreign competition within each
market, energy costs, proximity and costs of materials and regional demand. The
demand for cement is subject to regional economic fluctuations which may be
greater or less than the fluctuations in the economy of the United States as a
whole. As a result, the Company's operating results are subject to significant
fluctuation. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business -- Industry Overview."
Commodity Product. The markets for the Company's products are highly
competitive. Due to the lack of product differentiation, competition in the
cement industry is based largely on price. Accordingly, the Company's
profitability is dependent on levels of cement demand and on the Company's
ability to manage operating costs, and is very sensitive to small shifts in the
balance between supply and demand. These factors can significantly impact
selling prices and the Company's profitability. Although the Company was able to
implement price increases in most of its markets in 1993 and 1994, the
maintenance of current price levels cannot be guaranteed and any price
deterioration will reduce the Company's level of profitability. See
"Business -- Competitive Conditions."
Imports. During the 1980's, cement imports rose to record levels, reaching
19% of total domestic consumption in 1987, according to statistics prepared by
the Portland Cement Association and the United States Bureau of Mines. This high
level of imports was a contributing factor in the decline in selling price of
cement in many regional markets during this period. As a result of anti-dumping
petitions filed by a group of domestic cement producers beginning in 1990,
substantial import duties were levied on cement imported from Mexico and Japan.
The duties are subject to annual reviews and revision by the United States
Department of Commerce. Although existing anti-dumping orders and the ability to
bring anti-dumping actions against importers remain in effect under the North
American Free Trade Agreement ("NAFTA"), the anti-dumping
9
<PAGE> 12
provisions would be substantially altered under the recently-concluded Uruguay
round of world trade negotiations under the General Agreement on Tariffs and
Trade ("GATT"). If enacted, GATT could make anti-dumping orders more difficult
to obtain and "sunset" reviews of anti-dumping orders would be required to
determine if the orders should remain in effect or be eliminated. The level of
cement imports is also affected by other factors, including world economic
conditions influencing levels of construction activity, and shipping costs.
Governmental Regulation. The Company's operations, like others in the
cement industry, are subject to extensive, stringent and complex federal, state
and local laws and regulations pertaining to the protection of the environment
and human health and safety, which require the Company to devote substantial
time and resources to ensure continued compliance with these statutory and
regulatory requirements. It is not possible to predict with accuracy the
environmental requirements that may be imposed on the Company's operations in
the future or the range of future costs for compliance by the Company with
current or future environmental laws and regulations. There can be no assurances
that changes in or additions to the environmental and health and safety laws and
regulations or judicial or administrative interpretations thereof will not
adversely affect the Company's ability to continue its operations. Moreover,
there can be no assurances that the capital, operating and other costs of
maintaining compliance with applicable environmental requirements, which could
be substantial, will not adversely affect the Company's financial condition or
that judicial or administrative proceedings, seeking penalties or injunctive
relief, will not be brought against the Company for alleged non-compliance with
applicable environmental laws and regulations. See "Business -- Environmental
Regulation."
FINANCIAL RESTRICTIONS
The indenture governing the Senior Notes (the "Senior Note Indenture") and
the Financing Agreement, dated April 13, 1994 (the "Credit Agreement"), and
other agreements entered into in connection with the Reorganization, impose
certain operating and financial restrictions on the Company. Such restrictions
affect, and in some respects significantly limit or prohibit, among other
things, the ability of the Company to incur additional indebtedness, repay
certain indebtedness prior to its stated maturity, create liens, apply proceeds
from asset sales, engage in mergers or acquisitions, make certain capital
expenditures, redeem the Senior Notes on an optional basis or pay dividends. In
addition, pursuant to the Credit Agreement, and other agreements entered into in
connection with the Reorganization, certain of the Company's assets are subject
to liens or negative pledges, including those issued to the Pension Benefit
Guaranty Corporation ("PBGC") to secure future pension obligations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition."
These restrictions may pose substantial risks to holders of the Securities,
and could have material adverse effects on the marketability, price and future
value of such Securities. Among other consequences, the restrictions may result
in the impairment of the Company's ability to obtain additional financing in the
future, to make acquisitions and to take advantage of significant business
opportunities that may arise, and will also increase the vulnerability of the
Company to adverse general economic and industry conditions.
The Company's ability to meet its debt service and other obligations or to
refinance the unpaid balance of its indebtedness at maturity, if appropriate,
depends on its future performance, which, in turn, depends on general economic
conditions and on financial business, weather, competition (including level of
imports) and other factors beyond the Company's control. There can be no
assurance that the Company's cash flow will be sufficient to satisfy its debt
service and other obligations or that any refinancing of indebtedness, if
appropriate, will be obtained or be sufficient to pay such obligations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition."
ENVIRONMENTAL MATTERS
Liability to federal or state governmental authorities or third parties may
be imposed jointly or severally upon the Company for the investigation and
remediation of facilities or sites at which contamination is present or
hazardous substances have been or may be released into the environment under
certain federal and state
10
<PAGE> 13
laws, including the federal Comprehensive Environmental Response, Compensation
and Liability Act ("Superfund") and the Resource Conservation and Recovery Act
or comparable state laws. Such liability has arisen or may arise in the future
because many of the raw materials, by-products and wastes produced, used or
disposed of by the Company or its predecessors contain chemical elements or
compounds which have been designated as hazardous substances or which otherwise
may cause environmental contamination. The Company has been named as a party
potentially responsible and liable for certain specific Superfund or other
contaminated sites. There can be no assurances that in the future the Company
will not be named as a potentially responsible party at other sites and be held
liable for the costs of the investigation and remediation of such sites, which
costs could be substantial. Although the Company may be able to avoid the
imposition of such liability predicated upon releases or threatened releases of
hazardous substances that occurred prior to the commencement of the Chapter 11
Cases or the Reorganization, there can be no assurances that the Company's
defenses will prevail in any litigation respecting the foregoing or that the
Company's financial condition will not be adversely affected by the imposition
of liability for Superfund or contaminated sites for which the Company has been,
or may in the future be, identified as a potentially responsible party. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Environmental Regulation" and "Business -- Legal
Proceedings."
NO PROCEEDS TO THE COMPANY
The Company will not receive any proceeds or additional capital from the
sale of the Securities being offered hereby by the Selling Securityholders. The
Company will, however, receive proceeds from any exercises of the Warrants
included in such Securities. The Company could receive up to approximately $16.7
million in gross proceeds if such currently exercisable Warrants are exercised;
however, there can be no assurance that the Warrants will be exercised or, if
exercised, when prior to their expiration on December 31, 2000 they will be
exercised. See "Use of Proceeds" and "Description of Securities -- Warrants."
PUBLIC MARKET FOR THE SECURITIES; LIMITED LIQUIDITY
The Securities trade on the NYSE. As of August 1, 1994, approximately 37%
of the outstanding Common Stock, 22% of the outstanding Warrants and 27% of the
outstanding Senior Notes were beneficially owned by the Selling Securityholders.
Therefore, the amount of the Securities which is available for trading by
securityholders other than the Selling Securityholders is relatively low.
Accordingly, there can be no assurance as to the market for, trading in or
liquidity of the Securities. See "Price Range of Common Stock and Warrants" and
"Principal Stockholders."
No prediction can be made as to the effect, if any, that future sales of
the Securities or the availability of the Securities for future sales, will have
on the market price of the Securities prevailing from time to time. Sales of
substantial amounts of the Securities, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Securities. The
Securities being registered hereunder (or exempt from registration under Section
1145 of the Bankruptcy Code) may be sold in the public market from time to time
by their beneficial owners. The sale by any such beneficial owner of a
significant amount of such Securities could adversely affect prevailing market
prices for the Securities. See "Plan of Distribution."
RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Senior Note Indenture and the Credit Agreement restrict or prohibit the
payment of dividends. The Company does not currently anticipate paying cash
dividends on the Common Stock at any time in the foreseeable future. See
"Dividend Policy."
11
<PAGE> 14
USE OF PROCEEDS
The Securities offered hereby will be sold by the Selling Securityholders,
which will receive the proceeds therefrom. The Company will not receive any of
the proceeds from the sale of such Securities, but will receive the exercise
price of the Warrants when and if they are exercised. Any proceeds received from
the exercise of the Warrants will be used by the Company for working capital and
general corporate purposes.
PRICE RANGE OF COMMON STOCK AND WARRANTS
The Common Stock, Warrants and Senior Notes are listed on the NYSE under
the symbols "LCE," "LCE WS" and "LCE 04," respectively. The Securities began
trading on May 3, 1994. The following table sets forth for each period indicated
the high and low sales prices for the Common Stock and Warrants in composite
transactions as reported on the NYSE.
<TABLE>
<CAPTION>
COMMON
STOCK(1) WARRANTS
-------------- ------------
HIGH LOW HIGH LOW
---- ----- ---- ---
<S> <C> <C> <C> <C>
1994
Second Quarter (commencing May 3, 1994).................... $16 $14 1/2 $7 5/8 $6
Third Quarter (through August 30, 1994).................... 17 1/4 14 7/8 7 5/8 6 1/8
</TABLE>
- ---------------
(1) Prior to April 15, 1994, the Company's old common stock was traded on the
NYSE. Pursuant to the Plan of Reorganization, this common stock was
cancelled. From April 15, 1994 through May 2, 1994, the Common Stock and
Warrants traded on the NYSE on a "when issued" basis.
On August 30, 1994, the last reported sale price of the Common Stock and
Warrants was $17 per share and $7 per Warrant, respectively. As of August 29,
1994, the Company had approximately 2,618 holders of record of Common Stock,
2,558 holders of record of the Warrants, and 244 holders of record of the Senior
Notes.
DIVIDEND POLICY
The holders of Common Stock are entitled to dividends as declared from time
to time by the Board of Directors of the Company from funds legally available
therefor. However, pursuant to the Senior Note Indenture, dividends on the
Common Stock can be paid only in certain circumstances and up to a maximum
amount. See "Description of Securities -- Senior Notes -- Restricted Investments
and Restricted Stock Payments." Additionally, the Credit Agreement prohibits the
payment of dividends by the Company. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Financial Condition." The
Company does not anticipate paying dividends at any time in the foreseeable
future.
12
<PAGE> 15
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents
and capitalization (including current maturities) of the Company as of June 30,
1994. None of the proceeds of this Offering will be received by the Company,
except for the exercise price of the Warrants when and if they are exercised.
This table should be read in conjunction with the Company's Interim Consolidated
Financial Statements including the related notes thereto, included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AT
JUNE 30,
1994
--------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents (including cash equivalents of $26,843).............. $ 28,795
========
Current maturities:
Current portion of production payment........................................ $ 2,500
Long-term debt:
Senior Notes................................................................. 78,000
Asset Proceeds Notes(1)...................................................... 116,000
--------
Total long-term debt...................................................... 194,000
--------
Production payment (excluding current maturities).............................. 18,463
Shareholders' Equity:
Common Stock, $1 par value (authorized -- 25,000,000 shares; issued and
outstanding -- 12,000,000 shares(2))...................................... 12,000
Warrants to purchase Common Stock(3)......................................... 15,613
Additional paid-in-capital................................................... 65,700
Retained earnings............................................................ 7,914
Cumulative translation adjustment............................................ (37)
--------
Total shareholders' equity................................................ 101,190
--------
Total capitalization (including current maturities)............................ $316,153
========
</TABLE>
- ---------------
(1) Pursuant to the Plan of Reorganization, Rosebud, a wholly-owned subsidiary
of the Company, issued the Asset Proceeds Notes. Interest on the Asset
Proceeds Notes is payable semi-annually in cash and/or additional Asset
Proceeds Notes (at the option of Rosebud) on each of January 31 and July
31. A portion of Rosebud's obligations under the Asset Proceeds Notes is
guaranteed by the Company Guarantee. If, at the maturity date of the Asset
Proceeds Notes, the aggregate amount of all cash payments of principal and
interest on such notes is less than $88,118,000, the Company Guarantee is
payable either in cash, five-year notes or a combination thereof to cover
the shortfall between the actual payments and $88,118,000, plus interest;
provided, however, that the total amount paid pursuant to the Company
Guarantee cannot exceed $28,000,000. The Asset Proceeds Notes are included
in the Company's consolidated balance sheet at an amount equal to the
estimated fair value of its investment in Rosebud.
(2) Includes 578,524 shares of Common Stock which pursuant to the Plan of
Reorganization will be distributed to pre-petition unsecured creditors and
holders of pre-petition equity interests, but which had not been issued as
of August 16, 1994. Does not include (i) 4,003,333 shares of Common Stock
reserved for issuance upon exercise of the Warrants and (ii) 750,000 shares
of Common Stock reserved for issuance upon exercise of options granted and
to be granted under the Company's stock option plans.
(3) Includes 213,962 Common Stock Purchase Warrants which pursuant to the Plan
of Reorganization will be distributed to holders of pre-petition equity
interests, but which had not been issued as of August 16, 1994.
13
<PAGE> 16
SELECTED HISTORICAL FINANCIAL DATA
Following the Reorganization, in accordance with AICPA Statement of
Position No. 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," the Company adopted "Fresh-Start Reporting." As a result of
Fresh-Start Reporting, the Company's consolidated financial statements for
periods prior to March 31, 1994 are not comparable to consolidated financial
statements presented on or subsequent to March 31, 1994. The following selected
financial data of the Predecessor Company as of and for the fiscal years ended
December 31, 1993, 1992, 1991, 1990 and 1989, as of and for the six-month period
ended June 30, 1993 and as of and for the three-month period ended March 31,
1994, and the following selected financial data of the Company as of and for the
three-month period ended June 30, 1994 and the following selected pro forma
financial data of the Company for the six-month period ended June 30, 1994 are
qualified in their entirety by reference to the financial statements of the
Predecessor Company and the Company, respectively, and the related notes thereto
and should be read in conjunction with such financial statements and related
notes and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
------------------------- ---------------------------------------------------------------------------------
PRO FORMA
FOR THE FOR THE FOR THE FOR THE
THREE MONTHS SIX MONTHS THREE MONTHS SIX MONTHS
(IN THOUSANDS ENDED ENDED ENDED ENDED FOR THE YEAR ENDED DECEMBER 31,
EXCEPT PER SHARE JUNE 30, JUNE 30, MARCH 31, JUNE 30, -------------------------------------------------------
AMOUNTS) 1994 1994(1) 1994 1993 1993 1992 1991 1990 1989
- ------------------- ------------ ----------- ------------ ---------- -------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......... $ 86,995 $ 132,258 $ 33,709 $103,057 $240,071 $ 230,098 $238,692 $253,850 $ 337,547
Joint venture
income........... $ 1,269 $ 1,344 $ 381 $ 12,610 $ 20,440 $ 37,831 $ 24,435 $ 32,846 $ 33,877
Income (loss)
before
reorganization
items, income
taxes, and
cumulative effect
of changes in
accounting
principles....... $ 11,999 $ (5,428) $ (3,170) $ 1,063 $ 6,196 $ (42,429) $ 2,948 $(85,774) $(342,899)
Income (loss)
before cumulative
effect of changes
in accounting
principles....... $ 7,914 $ (3,800) $ (150,638) $(41,862) $(35,258) $ (45,428) $ (5,547) $(66,739) $(273,882)
Net income
(loss)........... $ 7,914 $ (3,800) $ (23,118) $(42,644) $(36,040) $(164,342) $ (5,547) $(66,739) $(273,882)
Net income (loss)
applicable to
common
stock(2)......... $ 7,914 $ (3,800) $ (24,396) $(45,200) $(41,152) $(169,455) $(10,661) $(71,858) $(279,004)
-------- --------- ---------- -------- -------- --------- -------- -------- ---------
Primary Earnings
Per Common Share:
Income (loss)
before cumulative
effect of changes
in accounting
principles....... $ 0.62 $ (0.32) (3) $ (2.67) $ (2.42) $ (3.03) $ (0.64) $ (4.34) $ (16.88)
Net income (loss)
per share...... $ 0.62 $ (0.32) (3) $ (2.72) $ (2.47) $ (10.18) $ (0.64) $ (4.34) $ (16.88)
-------- --------- ---------- -------- -------- --------- -------- -------- ---------
Weighted average
common shares
outstanding...... 12,000 12,000 n/a 16,644 16,644 16,641 16,582 16,559 16,532
Cash dividends per
common share..... -- -- -- -- -- -- -- -- $ 1.90
-------- --------- ---------- -------- -------- --------- -------- -------- ---------
Ratio of earnings
to fixed
charges(4)....... 4.95x (4) (4) (4) 2.80x (4) 1.12x (4) (4)
-------- --------- ---------- -------- -------- --------- -------- -------- ---------
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
SUCCESSOR COMPANY ---------------------------------------------------------------------
------------------------- DECEMBER 31,
JUNE 30, MARCH 31, JUNE 30, -------------------------------------------------------
1994 1994 1993 1993 1992 1991 1990 1989
------------ ----------- ------------ ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Position
at End of Period:
Total assets...... $574,415 $ 579,411 $897,116 $924,885 $952,649 $914,437 $909,888 $1,113,615
Long-term debt(5):
Senior notes.... $ 78,000 $ 78,000 -- -- -- -- -- --
Asset proceeds
notes......... $116,000 $ 112,000 -- -- -- -- -- --
Other........... -- -- -- -- -- -- $ 367 $ 392,399
Production
payment......... $ 20,963 $ 20,963 $ 4,000 $ 2,000 $ 4,000 $ 4,000 $ 4,000 $ 47,000
Liabilities
subject to
Chapter 11
proceedings..... -- -- $607,306 $627,938 $611,129 $555,331 $544,549 --
Redeemable
preferred
stock........... -- -- $ 37,500 $ 37,500 $ 37,500 $ 37,500 $ 37,500 $ 37,500
Common
shareholders'
equity.......... $101,190 $ 93,313 $ 17,486 $ 12,348 $ 59,698 $226,162 $239,039 $ 309,605
</TABLE>
(footnotes on next page)
14
<PAGE> 17
- ---------------
(1) The pro forma consolidated financial data reflect the effects of
implementation of the Plan of Reorganization, including changes in the
operating units of the successor company, reductions in postretirement
benefit expenses resulting from settlements reached during the Chapter 11
Cases, increased interest expense related to the issuance of the Senior
Notes and the adoption of Fresh-Start Reporting, as if the Company had
emerged from bankruptcy and adopted Fresh-Start Reporting as of January 1,
1994. The successor company's results include results of operations
previously classified as assets held for sale and exclude the results of
operations which have been transferred to Rosebud. See "Pro Forma
Consolidated Statement of Operations (Unaudited)" included in Note 4 of
Notes to Interim Consolidated Financial Statements and Pro Forma Financial
Data included elsewhere herein.
(2) In 1992, the Company adopted SFAS 106 and SFAS 109. The cumulative effect of
the change in accounting principles was an after-tax charge of $130,510,000
related to the adoption of SFAS 106 and an increase in earnings of
$11,596,000 related to the adoption of SFAS 109. In addition, in 1992 the
Company also recorded a pre-tax provision of $66,584,000 in connection with
the settlement of the Company's concrete railroad crosstie litigation. See
Notes 30, 31 and 33 of Notes to Consolidated Financial Statements included
elsewhere herein.
The three-month period ended March 31, 1994 included an extraordinary gain
of $127,520,000 resulting from the discharge of pre-petition liabilities as
a result of the Company's emergence from bankruptcy; a pre-tax loss of
$133,917,000 to adjust the Company's assets and liabilities to fair value in
accordance with Fresh-Start Reporting; and a $6,500,000 pre-tax insurance
recovery related to the crosstie litigation settlement recorded in 1992.
(3) On the Plan Effective Date, the Company issued shares of the new Common
Stock, the Warrants, the Senior Notes, and the Asset Proceeds Notes,
transferred certain assets to Rosebud and adopted Fresh-Start Reporting
effective as of March 31, 1994 for accounting purposes. As a result,
earnings per share for the three-month period ended March 31, 1994 has not
been presented because it is not meaningful.
(4) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income (loss) before reorganization items, income taxes and
cumulative effect of changes in accounting principles plus fixed charges.
"Fixed charges" consist of interest expense, capitalized interest and
one-third of rental expense, which is deemed to be representative of the
interest factor thereon. Earnings were insufficient to cover fixed charges
by $3,283,000 for the three months ended March 31, 1994 and by $42,919,000,
$87,808,000 and $346,454,000 for the year ended December 31, 1992, 1990 and
1989, respectively. The ratio of earnings to fixed charges is not included
for the pro forma periods or the six-month period ended June 30, 1993.
(5) Pursuant to the Plan of Reorganization, the Company issued the Senior Notes,
which bear interest at a rate of 10% per annum, payable semi-annually.
Pursuant to the Plan of Reorganization, Rosebud, a wholly-owned subsidiary
of the Company, issued the Asset Proceeds Notes. Interest on the Asset
Proceeds Notes is payable semi-annually in cash and/or additional Asset
Proceeds Notes (at the option of Rosebud) on each of January 31 and July 31.
A portion of Rosebud's obligations under the Asset Proceeds Notes is
guaranteed by the Company Guarantee. If, at the maturity date of the Asset
Proceeds Notes, the aggregate amount of all cash payments of principal and
interest on such notes is less than $88,118,000, the Company Guarantee is
payable either in cash, five-year notes or a combination thereof to cover
the shortfall between the actual payments and $88,118,000, plus interest;
provided, however, that the total amount paid pursuant to the Company
Guarantee cannot exceed $28,000,000. The Asset Proceeds Notes are included
in the successor company's consolidated balance sheets at an amount equal to
the estimated fair value of the Company's investment in Rosebud.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company adopted Fresh-Start Reporting as of March 31, 1994, including
adjustments for bankruptcy-related cash transactions through the effective date
to properly reflect the Reorganization. Through the adoption of Fresh-Start
Reporting, the Company has recorded its assets and liabilities at fair value as
of March 31, 1994 and as such, balance sheet comparisons to prior periods are
not meaningful. A black line has been used to separate the December 31, 1993 and
the March 31, 1994 balance sheets to emphasize the fact that the March 31, 1994
balance sheet relates to the reorganized Company, a new reporting entity.
Activities in Connection with the Plan of Reorganization
In accordance with the Plan of Reorganization which became effective on
April 14, 1994, the Company disbursed $200.5 million in cash and pre-petition
creditors and equity holders became entitled to receive the Senior Notes in the
aggregate principal amount of $78.0 million, the Asset Proceeds Notes in the
aggregate principal amount of $138.1 million and 12 million shares of Common
Stock (85% of which was distributed to the pre-petition creditors).
Holders of the old preferred stock became entitled to receive their pro
rata share of 10.5% of the new Common Stock and 1,250,000 Warrants to purchase
Common Stock. The holders of the Company's old common stock became entitled to
receive the balance of the new Common Stock and 2,753,333 Warrants to purchase
Common Stock. Both preferred stock issues and the old common stock were
cancelled on the Plan Effective Date.
The Senior Notes bear interest at a rate of 10% per annum, payable
semi-annually, and mature on July 31, 2003. Pursuant to the Senior Note
Indenture, the Senior Notes are subject to mandatory redemption by the Company
in the event of a Change in Control or with the Excess Net Proceeds (as defined)
of certain sales or dispositions of assets. The Senior Note Indenture also
provides for optional redemption of the Senior Notes by the Company; however,
the Credit Agreement prohibits such optional redemptions except in accordance
with the terms thereof. See "Description of Securities -- Senior Notes" for a
description of the terms of the Senior Notes. The Asset Proceeds Notes bear
interest at a rate of 10% per annum payable in cash and/or in additional Asset
Proceeds Notes in semi-annual installments. The Asset Proceeds Notes are to be
repaid as the Rosebud Assets are disposed of and proceeds, if any, are received
in connection with the litigations transferred to Rosebud. All cash proceeds
less a $5.0 million cash reserve are to be deposited in a cash collateral
account for distribution to the noteholders. The Asset Proceeds Notes mature on
July 31, 1997. These notes are guaranteed, in part, by the Company pursuant to
the Company Guarantee. If, at the maturity date, the aggregate amounts of all
cash payments of principal and interest on the Asset Proceeds Notes is less than
$88.1 million, the Company Guarantee is payable either in cash, five-year notes
or a combination thereof (at the option of the Company) to cover the shortfall
between the actual payments and $88.1 million, plus interest; provided, however,
that the total amount paid pursuant to the Company Guarantee cannot exceed $28.0
million. The Asset Proceeds Notes are recorded on the Company's balance sheet at
June 30, 1994 at an amount equal to the estimated fair value of its investment
in Rosebud of $116.0 million. To the extent that amounts received upon
disposition of the Rosebud Assets and the Company Guarantee are not sufficient
to pay the principal and interest of the Asset Proceeds Notes, such notes will
not be paid. Other than an initial $5.0 million cash contribution by the Company
for working capital purposes, the Company is not obligated to fund additional
Rosebud working capital requirements.
In connection with the Plan of Reorganization, the terms of the Company's
production payment agreement were revised as of April 14, 1994. In connection
therewith, a new note was issued, with an outstanding principal balance of $21.0
million as of that date, and which bears interest at a rate, at the Company's
option, of either prime or LIBOR plus 1.75% through December 31, 1995 and either
prime plus .25% or LIBOR plus 2.5% beginning on January 1, 1996. The principal
balance is payable semi-annually
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through July 31, 1998 in increasing installments. Lone Star is required to make
payments in advance for minerals used at the two plants subject to the
production payment agreement and to take or pay for minerals in amounts
sufficient to permit the purchaser to service the note associated with the
production payment facility.
Following the Reorganization, the Company entered into a three-year $35.0
million revolving credit agreement which is collateralized by inventory,
receivables, collection proceeds and certain intangible assets. The Company's
borrowings under the Credit Agreement are limited to 55% of eligible inventory
plus 85% of eligible receivables. Advances under the Credit Agreement bear
interest at a rate, at the Company's option, of either prime plus 1.25% or LIBOR
plus 3%. A fee of .50% per annum is charged on the unused portion of the credit
line. Although the Company from time to time has used the letter of credit
facility pioneered by the Credit Agreement, it has not drawn any funds under the
Credit Agreement for working capital purposes. Accordingly, there was no
outstanding balance at August 31, 1994.
The Company's financing agreements contain restrictive covenants which,
among other things, restrict the payment of cash dividends. See "Dividend
Policy."
In accordance with the Plan of Reorganization, as part of the agreement
with the PBGC, the Company has granted the PBGC a mortgage on its Oglesby cement
plant, and a security interest in the Company's interest in the Kosmos Cement
Company partnership, to secure future pension obligations.
Analysis of Cash Flows and Working Capital
The Company operated under the protection of the bankruptcy court for the
period from December 10, 1990 to April 14, 1994. During such time, the companies
which filed Chapter 11 petitions were prohibited from paying claims which arose
prior to the filing date outside of a plan of reorganization or without specific
bankruptcy court authorization. In addition, during the Chapter 11 Cases, the
Company discontinued accruing interest on unsecured pre-petition debt
obligations. Also, the Company received interest income on its cash balances
during this period. However, as a result of the Chapter 11 Cases, the Company
incurred substantial professional fees and administrative expenses which
partially offset the above financial benefits.
Cash flows from operating activities of $0.8 million in the second quarter
of 1994 primarily reflect $6.0 million generated by the cement and ready-mixed
concrete operations resulting from increased average selling prices and
shipments partly offset by payments of professional fees and administrative
expenses of $5.2 million related to the Reorganization.
During the second quarter of 1994, the Company received $15.9 million from
investing activities, primarily representing proceeds from the sale of the
Pennsuco cement plant in Florida, partly offset by capital expenditures.
Working capital on June 30, 1994 was $42.8 million, compared to $14.1
million at March 31, 1994. Current assets increased $13.5 million principally
due to increased amounts of marketable securities, resulting from the sale of a
cement plant in Florida and higher accounts receivable due to seasonal
increases, partly offset by decreased inventories and other current assets.
Current liabilities decreased $15.1 million primarily due to the payment of
Chapter 11 professional fees which were held in escrow pending final approval of
the bankruptcy court.
At June 30, 1994, the carrying value on the Company's books of net assets
of Rosebud increased $4.0 million primarily due to the accretion of assets
reflecting the shorter time period used in determining the present value. Notes
receivable increased $1.0 million due to the receipt of a new trade note partly
offset by collections. Investments in joint ventures increased $1.3 million due
to results from the Kosmos Cement Company partnership. Net property, plant and
equipment decreased $20.9 million reflecting the sale of the Pennsuco cement
plant in Florida and depreciation, partly offset by capital expenditures. The
reorganization value in excess of amounts allocable to identifiable assets has
been reduced by the current period's deferred taxes of $4.1 million. The
liability for the Asset Proceeds Notes increased $4.0 million due to the
increase in the present value of the assets held by Rosebud. Other liabilities
decreased $1.7 million due to the reclassification of certain accruals to
current liabilities.
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Other Information
Following the Chapter 11 Cases, the Board of Directors of the Company
adopted the Lone Star Industries, Inc. Management Stock Option Plan (the
"Management Plan") and the Lone Star Industries, Inc. Directors' Stock Option
Plan (the "Directors Plan"). These plans were ratified by the Company's
shareholders at its 1994 Annual Meeting. Pursuant to the Management and
Directors Plans, the number of shares of Common Stock which may be issued
pursuant to options is 700,000 and 50,000 shares, respectively. In June 1994,
options to purchase 700,000 and 6,000 shares of Common Stock were granted under
the Management and Directors Plans, respectively. See "Management -- Employment
Agreements and Plans -- Directors' Compensation" and "Management -- Stock
Options."
In June 1994, Rosebud sold all of its interest in a cement plant located in
Santa Cruz, California for $33.0 million. The net proceeds from the sale, after
making provisions for an environmental reserve for landfill and other costs
related to the transaction, were used to redeem a portion of the outstanding
Asset Proceeds Notes on a pro rata basis. The Company transferred an aggregate
of $31.8 million to the collateral agent which redeemed such notes (including
the payment of accrued and unpaid interest thereon) on August 19, 1994.
In July 1994, Rosebud reached final agreements with most of its insurance
carriers involved in litigation related to the Company's claims for indemnity in
the crosstie litigation and for the reimbursement of related defense costs.
Rosebud will receive $5.3 million from the insurance carriers involved in the
settlements which amount is expected to be used by Rosebud for working capital
purposes pursuant to the Rosebud Indenture.
The Company is subject to federal, state and local laws, regulations and
ordinances pertaining to the quality and protection of the environment. Such
environmental regulations not only affect the Company's operating facilities but
also apply to closed facilities and sold properties. While it is not possible at
this time to assess accurately their expected impact on the Company, the
capital, operating and other costs of compliance with applicable environmental
requirements (currently in effect or likely to be in effect in the future) could
be substantial.
In early March 1994, the Company, along with other cement companies,
received a civil investigative demand from the Atlanta, Georgia Regional Office
of the U.S. Department of Justice Antitrust Division. The investigation concerns
possible violations of Section 1 of the Sherman Antitrust Act (price fixing and
market allocation) by cement sellers on a nationwide basis and seeks Company
records relating to its cement business. The Company has a long-standing policy
of complying with the letter and spirit of the antitrust laws and has fully
cooperated with the investigation.
In 1989 Lone Star and its subsidiary filed a plenary action in the Maryland
Federal District Court, and third party complaints in other actions, against
Northeast Cement Co. and its affiliates, Lafarge Corporation and Lafarge Canada,
Inc., alleging breach of warranties in connection with the purchase from
Northeast Cement Company by Lone Star's subsidiary of the cement used to
manufacture substantially all of the crossties involved in the railroad crosstie
litigation proceedings and claiming a fraudulent sale of defective cement. On
April 7, 1994 the Fourth Circuit Court of Appeals vacated the judgment of the
District Court and remanded the case for a new trial on all issues relating to
both liability and damages. See Note 19 of the Notes to the Interim Consolidated
Financial Statements included elsewhere herein. The rights to any recovery of
damages in this action have been assigned to Rosebud pursuant to the Plan of
Reorganization.
RESULTS OF OPERATIONS
On April 14, 1994 the Plan of Reorganization became effective. Upon the
Plan of Reorganization becoming effective, the Company issued new Common Stock,
the Warrants, the Senior Notes and Asset Proceeds Notes, transferred certain
assets to Rosebud and for accounting purposes adopted Fresh-Start Reporting as
of March 31, 1994. As a result, the Company's financial statements for the
period ended June 30, 1994 are not comparable to statements for prior periods.
Accordingly, the Company has not presented historical information for the six
months ended June 30, 1994, since such information requires consolidating
statements of the Predecessor and successor entities. Also affecting
comparability are differences in the operating units of the successor company
and the Predecessor Company. The successor company's operations
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<PAGE> 21
include the Pryor, Oklahoma and Maryneal, Texas cement plants which were
previously classified as assets held for sale and were excluded from the
Predecessor Company's results. The successor company's operations exclude the
Nazareth, Pennsylvania and Santa Cruz, California cement plants and the Hawaiian
Cement and RMC LONESTAR partnerships. These operations, along with certain other
assets, have been transferred to Rosebud. The Predecessor Company's operations
also included a Brazilian joint venture which was sold in September 1993.
Three Months Ended June 30, 1994
Net sales for the three months ended June 30, 1994 were $87.0 million,
which is $7.0 million greater than sales from comparable operations for the same
period of 1993. The favorable sales reflect increased cement and ready-mixed
shipments and higher average ready-mixed concrete and cement selling prices.
Increased shipments of construction aggregates in the New York metropolitan area
were offset by decreased shipments from Lone Star's Canadian operations.
Net income for the three months ended June 30, 1994 of $7.9 million, or
$0.62 per share, reflects the higher cement and ready-mixed concrete shipments
and selling prices combined with reduced selling general and administrative
expenses reflecting savings achieved during and after the Company's bankruptcy
proceeding. Selling, general and administrative expenses for the current quarter
include $1.8 million of costs related to other post-retirement benefit expenses.
Net income for the current quarter also reflects joint venture income of $1.3
million which represents the Company's share of earnings from Kosmos Cement
Company, a partnership in which the Company has a 25% interest. Joint venture
income for the prior year period included the Company's share of earnings from
the RMC LONESTAR and Hawaiian Cement partnerships, which were transferred to
Rosebud, and the Company's share of earnings from a Brazilian joint venture
which was sold in September 1993. The positive net income for the current period
was partly offset by higher interest expense primarily due to interest on the
Senior Notes.
The Company's operations are seasonal and, consequently, the interim
results are not necessarily indicative of the results to be expected for a full
year.
In future years, first quarter results are expected to reflect losses
(which may be significant), due to the impact of the winter months on
construction activity, particularly at the Company's northern operations,
production curtailments at plants to perform annual maintenance, and higher
costs associated with the annual maintenance. Historically, for accounting
purposes planned capacity variances during a fiscal year were deferred in the
first quarter and recognized during the last nine months. These deferred costs
in 1994 totaling $8.4 million were written off as part of the revaluation of
assets in accordance with Fresh-Start Reporting. Beginning in 1995, due to a
change in the Company's accounting policies, these costs will be expensed as
incurred and will primarily impact first quarter results of the year in which
they occur. See Note 15 of the Notes to Interim Consolidated Financial
Statements included elsewhere herein.
Comparison of Fiscal Year 1993 with Fiscal Year 1992
Net Sales. Consolidated net sales of $240.1 million were $10.0 million
higher in 1993 than 1992. Cement sales of $158.7 million were $11.6 million
greater in 1993 than 1992 reflecting increased domestic cement shipments
particularly from the Cape Girardeau, Missouri cement plant due to stronger
demand and higher average net realized cement selling prices at all locations.
The favorable sales volume was partly offset by lower cement sales from the
Greencastle, Indiana cement plant as shipments were adversely effected by
production interruptions. Excluding the operations classified as assets held for
sale, domestic cement shipments increased in 1993 as compared to 1992 by 2% and
average unit net realized cement selling prices increased by 7%.
Sales of construction aggregates of $48.2 million in 1993 approximated that
of the prior year. In March 1993, the Company sold a small construction
aggregates operation in Mississippi. Excluding shipments from the Mississippi
operation sold in 1993, construction aggregates shipments increased 3% over
1992. Higher shipments of lower-priced products into the New York Metropolitan
area were offset by the effects of a teamsters strike in New York City and an
operating engineers strike on Long Island, New York during
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<PAGE> 22
summer 1993 which resulted in the reduction of orders from customers in the
ready-mixed concrete and asphalt businesses. In 1993, shipments from operations
in Illinois also were below the prior year due to delays in obtaining operating
permits and production start-up problems encountered when the plant was moved to
a new quarry.
Ready-mixed concrete and concrete products sales were $29.5 million in
1993, which were $1.3 million below 1992 reflecting lower shipments of
ready-mixed concrete and concrete block from the Illinois operations due to
heavy rains during the summer months and strikes affecting two major customers
in the Decatur, Illinois area. The decrease in sales at the Illinois operations
was partly offset by increased sales from the Tennessee operations reflecting
higher shipments of ready-mixed concrete and higher average selling prices due
to increased residential construction activity. In 1993, ready-mixed concrete
shipments decreased 4% and average selling prices increased approximately 1%
over 1992.
Sales from other operations, primarily building materials, were $3.6
million in 1993, which were $0.4 million below 1992 primarily due to slow
construction activity in Illinois as a result of poor weather and strikes
affecting certain customers.
Gross Profits. Cement gross profits increased by $6.1 million to $26.8
million in 1993 on higher shipments and higher average net realized cement
selling prices. Also contributing to the favorable cement gross profits were
reduced per ton production costs at the Cape Girardeau, Missouri cement plant as
a result of extensive maintenance and repairs performed in 1992, increased
revenues from burning waste fuels and lower coal costs. The positive results
were partly offset by higher production costs and lower production volume at
other locations primarily due to increased kiln down-time for repairs and higher
repair and maintenance expenses in 1993. In addition, gross profits were
negatively affected by a lower rate of production at the Greencastle, Indiana
cement plant due to start up problems associated with the installation of a new
clinker cooler in April 1993, and the temporary suspension of the use of waste
fuels in late September 1993 pending analysis of an administrative enforcement
action commenced by the EPA. See "Business -- Legal Proceedings -- Environmental
Matters" and Note 32 of the Notes to Consolidated Financial Statements included
elsewhere herein. The suspension of the use of waste fuel resulted in decreased
revenues and higher coal costs which unfavorably affected gross profits at the
Greencastle plant. Lone Star resumed burning waste fuel, on a limited basis, in
January 1994. Lone Star anticipates that its hazardous waste fuel operations at
the Greencastle Plant will continue and be fully operational by the end of 1994,
unless it is unable to demonstrate compliance with a stringent EPA air emissions
standard as a consequence of a recent Court of Appeals decision. See
"Business -- Environmental Regulation."
Lone Star expects to continue to operate its waste fuel program which is
subject to strict federal, state and local rules and regulations. Changes to
such rules and regulations, or their interpretations by the relevant agencies,
could prohibit the use of such fuels or make their use cost prohibitive, thus
depriving Lone Star of the favorable impact on production costs presently being
experienced. See "Business -- Environmental Regulation" and Note 32 of the Notes
to Consolidated Financial Statements included elsewhere herein.
Construction aggregates gross profits decreased $0.9 million to a loss of
$2.2 million in 1993 reflecting the continued severe effects of depressed
construction activity in the Northeast. Lower results from the New York
operations reflected higher costs resulting from changes in New York State
Department of Transportation specifications for stone used in state road-paving
projects. To comply with the needs of its customers to meet the new
specifications, the Company blended stone from its Canadian operation with the
stone of one of its New York operations. Also contributing to the decrease in
the gross profits were lower results from the Canadian operation reflecting
increased shipments of low margin products and lower results from the Illinois
operation due to lower sales and production volumes, and higher costs as a
result of delays in obtaining operating permits after moving the plant to a new
quarry location.
Gross profits from ready-mixed concrete and concrete products decreased
$0.7 million to $2.9 million in 1993 reflecting the lower sales of ready-mixed
concrete and concrete block in Illinois resulting primarily from the heavy
summer rains and strikes affecting two major customers, partly offset by
favorable gross profits from the Tennessee operations on higher shipments and
increased gross margins resulting from favorable selling prices.
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Other operations gross profits, primarily from building materials, of $0.4
million decreased $0.3 million in 1993 primarily due to lower sales resulting
from poor weather and strikes affecting customers in Decatur, Illinois.
Joint Ventures. Pre-tax income from joint ventures of $20.4 million in
1993 decreased $17.4 million from 1992 principally due to the sale of the
Company's Argentine investment in August 1992 and its Brazilian investment in
September 1993. The decrease in pre-tax joint venture income also reflects
reduced earnings at Hawaiian Cement, a partnership the Company's interest in
which has been transferred to Rosebud, attributable to lower shipments of
cement, construction aggregates and ready-mixed concrete, partly offset by
higher average net realized selling prices for cement and ready-mixed concrete.
The decrease in pre-tax earnings from joint ventures was partly offset by higher
income from RMC LONESTAR, a partnership, the Company's interest in which has
been transferred to Rosebud, and Kosmos Cement Company.
Other Income. Other income decreased $2.6 million to $11.2 million in 1993
primarily due to interest earned on a prior year income tax refund which was
received in 1992 and lower foreign exchange gains, partly offset by increased
interest income on notes receivable.
Litigation Settlement. In February 1994, the Company settled the remaining
aspects of shareholder litigation which had been pending in the Federal courts
by allowing claims in the Chapter 11 Cases in the amount of $2.5 million. The
litigation settlement expense of $66.6 million in 1992 represents the Company's
settlement of the crosstie litigation. See Note 33 of the Notes to Consolidated
Financial Statements included elsewhere herein.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $41.3 were $0.5 million higher in 1993 than the prior
year due primarily to increased post-retirement benefits expenses.
Interest Expense. Interest expense of $1.6 million in 1993 decreased $0.6
million from 1992. Capitalized interest was $0.2 million in 1993 and 1992. Total
interest incurred, most of which was not paid, was $1.8 million. The Company
stopped accruing interest on all unsecured pre-petition debt obligations as of
December 10, 1990, due to the filing for reorganization under Chapter 11.
Interest on certain obligations, primarily the production payment, continued to
accrue, but remained unpaid pending the Plan of Reorganization becoming
effective or upon specific order of the bankruptcy court. Total contractual
interest for 1993 would have been $31.2 million. Contractual interest included
interest accrued for the period, plus the contractual interest on other
outstanding secured debt and on letters of credit which specifically provide for
interest.
Reorganization Items. Reorganization items, related to the Chapter 11
Cases, include a pre-tax loss of $37.3 million in 1993 related to the sale of
the Company's Brazilian investment in 1993 and a pre-tax gain of $15.5 million
in 1992 which resulted from the sale of the Company's Argentine subsidiary.
Other reorganization items, related to the Chapter 11 Cases, of $10.5 million of
expense in 1993 were $6.4 million higher than in 1992 due to increased
professional fees and administrative expenses in 1993, partly offset by higher
interest income earned on higher investment balances.
Income Taxes. The income tax benefit of $6.4 million in 1993 was $20.8
million favorable as compared to the income tax expense of $14.5 million in
1992. The improvement was due to lower local taxes related to the Brazilian and
Argentine operations and the tax benefit related to the loss on the sale of the
Brazilian operation in 1993.
The 1992 income tax expense primarily reflected local and state taxes
related to the Company's foreign joint ventures. The Company had deferred tax
assets in excess of deferred tax liabilities. Under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), a
valuation reserve is required for these net tax assets and, as a result, tax
benefit could not be recognized for the current domestic losses.
Cumulative Effect of Changes in Accounting Principles. In 1993, the Kosmos
Cement Company partnership adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for
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Postretirement Benefits Other than Pensions" ("SFAS No. 106"). As a result, the
Company recognized a charge of $0.8 million representing its share of the
cumulative effect of the joint venture's change in accounting principle. The
Company's share of the cumulative effect was included in the results for 1993.
In 1992, the Company adopted SFAS No. 106 and, as a result, the Company
recognized a pre-tax charge from the cumulative effect of a change in accounting
principle of $144.7 million and also recognized $14.2 million of tax benefits
for a net after-tax charge of $130.5 million. The charge resulting from the
adoption of SFAS No. 106 did not reflect the results of any negotiations with
representatives of the retired salaried and hourly employees in connection with
proposed modifications of their benefits. See Note 30 of the Notes to
Consolidated Financial Statements included elsewhere herein. The prior year's
quarterly results were restated to reflect the adoption of SFAS No. 106
effective January 1, 1992.
Also in 1992, the Company and its Brazilian joint venture adopted SFAS No.
109. As a result the Company recognized income of $11.6 million due to the
cumulative effect of the change in accounting principle. See Notes 10 and 31 of
the Notes to Consolidated Financial Statements included elsewhere herein.
The loss per share from the cumulative effect of changes in accounting
principles was $0.05 in 1993 and $7.15 in 1992.
Net Loss. The net loss of $36.0 million in 1993 was $128.3 million lower
than 1992. Included in the net losses for 1993 and 1992 were net charges of $0.8
million and $118.9 million, respectively, related to the cumulative effect of
changes in accounting principles. The 1993 pre-tax loss of $41.6 million was
$10.7 million greater than 1992 reflecting the net effect of the loss on the
sale of the Company's Brazilian investment in 1993, higher other reorganization
expenses in 1993 and the gain on the sale of the Company's Argentine subsidiary
in 1992. Also contributing to the higher pre-tax loss in 1993 was decreased
joint venture income partly offset by the provision for settlement of crosstie
litigation recorded in 1992 and increased results from domestic operations in
1993. The improved results from domestic operations were primarily due to higher
cement results reflecting increased shipments and higher average net realized
cement selling prices partly offset by lower results from the construction
aggregates and ready-mixed concrete operations. The lower construction
aggregates results were attributable to the continued depressed level of
construction activity in the Northeast, and the lower results from ready-mixed
concrete operations reflect lower shipments and margins at the Illinois
operations.
The tax benefit in 1993 reflected the benefit realized on the loss of the
sale of the Brazilian investment in 1993 partly offset by foreign local taxes
related to the Brazilian investment.
The net loss per common share was $2.47 per share in 1993 as compared to
$10.18 per share in 1992. The net loss per share included a $0.05 loss per share
in 1993 and a $7.15 loss per share in 1992 related to the cumulative effect of
changes in accounting principles.
The net loss per common share is based on the net loss after deducting
provisions for preferred dividends of $5.1 million in both 1993 and 1992. Due to
the filing for reorganization under Chapter 11, the Company stopped accruing
preferred dividends as of the last payment date, September 15, 1990. Although
preferred dividends in 1993 and 1992 were not paid, both classes of the
Company's preferred stock, which were cancelled in connection with the
Reorganization, were cumulative and the full year's dividend amount was used in
computing net income per common share. The total of dividends in arrears on both
preferred issues was $16.8 million at December 31, 1993.
Weighted average common shares outstanding was 16.6 million in both 1993
and 1992.
Capital Expenditures. Capital expenditures of $19.0 million in 1993 and
$22.1 million in 1992 were primarily for major repairs, replacements and
upgrading of existing facilities including a new facility in 1992 used to
process alternative fuels.
Comparison of Fiscal Year 1992 to Fiscal Year 1991
Net Sales. Consolidated net sales of $230.1 million in 1992 were $8.6
million below 1991. Cement sales of $147.2 million were $2.1 million higher in
1992 than 1991 reflecting increased domestic cement shipments
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from all plant locations partly offset by the sale of the Company's cement
operation in Uruguay in December 1991. The improved domestic cement sales were
partly offset by lower average net realized selling prices in a number of
domestic markets, particularly in the northeast market which is supplied by the
Nazareth, Pennsylvania plant (which has been transferred to Rosebud), the
Indianapolis market which is supplied by the Greencastle, Indiana plant and the
markets which are supplied by the Cape Girardeau, Missouri plant. Excluding the
operations classified as assets held for sale, domestic cement shipments
increased by 14% in 1992 compared to 1991 and average cement net realized
selling prices decreased by 4%.
Sales of construction aggregates of $48.1 million in 1992 were $15.0
million below 1991 reflecting lower shipments and lower average net realized
selling prices, particularly in the Northeast, caused by the severe effects of
depressed business conditions there. Sales were also unfavorably affected by the
Company's decision to stop shipping to certain customers for credit reasons. In
1992, construction aggregates shipments decreased by 17% and average net
realized selling prices decreased by 9%.
Ready-mixed concrete and concrete products sales were $30.8 million in
1992, which were $4.5 million above 1991 reflecting increased shipments of
ready-mixed concrete in substantially all of the Company's markets and increased
shipments of concrete block in Illinois. The increase in ready-mixed concrete
shipments reflected the increase in residential construction in Illinois and
Tennessee.
Sales from other operations, primarily building materials, were $4.0
million in 1992, which were $0.2 million below 1991 due to increased competition
from other building materials suppliers in the Midwest.
Gross Profits. Cement gross profits increased by $7.7 million to $20.7
million in 1992 as higher shipments and production volumes at all plants more
than offset lower average net realized selling prices and the effect of the sale
of the Uruguayan operation in December 1991. The increase in production volume
combined with lower repair and maintenance expenses and a full year's benefit
from the new raw mill at the Oglesby plant, which was installed in 1991,
resulted in favorable unit production costs at all plants. Production costs were
also favorably impacted by lower fuel costs as two plants, operating under
specific permits, burned waste fuels.
Gross profits from construction aggregates decreased $5.7 million to a loss
of $1.3 million in 1992, reflecting the continued severe effects of depressed
business conditions, particularly in the Northeast. The decline in construction
activity resulted in significantly lower shipments and lower average net
realized prices at the New York operations. Construction aggregates gross
profits were also adversely affected by lower production volume which resulted
in higher unit production costs.
Gross profits from ready-mixed concrete and concrete products increased
$1.6 million to $3.6 million in 1992 reflecting higher shipments of ready-mixed
concrete due to increased residential construction in the Memphis, Tennessee
area and several Illinois markets.
Other operations gross profits, primarily from building materials, of $0.6
million in 1992 approximated those of 1991.
Joint Ventures. Pre-tax income from joint ventures of $37.8 million in
1992 increased $13.4 million from 1991 principally due to increased earnings
from the Brazilian operation. The increase in earnings was attributable to a
considerably higher U.S. dollar average selling price for cement resulting from
significant price increases since governmental price controls were removed
during the third quarter of 1991. During the first seven months of 1991
governmental price control and monitoring programs caused artificially low
average cement selling prices. The improvement in pre-tax income also reflected
increased earnings at Hawaiian Cement joint venture attributable to higher
shipments of cement and ready-mixed concrete and higher average net realized
selling prices for construction aggregates and ready-mixed concrete.
Partially offsetting the improvements were lower shipments of construction
aggregates and lower average cement net realized selling prices caused by the
continued slowdown in the construction industry in northern California which
adversely affected the RMC LONESTAR partnership, and lower results due to the
sale of the Argentine operation in August 1992.
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<PAGE> 26
Other Income. Other income decreased $0.9 million to $13.8 million in 1992
as lower interest income earned on marketable securities combined with the sale
of a note receivable during the fourth quarter of 1991 were partly offset by
interest earned on a prior year income tax refund which was received in 1992.
The lower interest on marketable securities reflected the classification of a
greater percentage of interest income as a reorganization item in 1992.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $40.8 million in 1992 were $1.3 million lower than
1991. The improvement reflected the sale of the cement operation in Uruguay,
lower expenses associated with certain of the Company's cement operations
combined with the effect of other Company-wide cost reduction programs. The
reduction was almost completely offset by $3.2 million of increased expense
related to the current year accrual for post-retirement benefits resulting from
the adoption of SFAS No. 106 in 1992. See Note 30 to the Notes to Consolidated
Financial Statements included elsewhere herein.
Interest Expense. Interest expense of $2.2 million in 1992 decreased $1.1
million from 1991. Capitalized interest was $0.2 million in 1992 and $1.3
million in 1991. Total interest incurred, most of which was not paid, was $2.4
million. The Company stopped accruing interest on all unsecured pre-petition
debt obligations as of December 10, 1990, due to the filing for reorganization
under Chapter 11. Total contractual interest for 1992 would have been $31.9
million. Contractual interest included interest accrued for the period, plus the
contractual interest on other outstanding secured debt and on letters of credit
which specifically provide for interest.
Reorganization Items. Reorganization items, related to the Chapter 11
Cases, include a pre-tax gain of $15.5 million in 1992 which resulted from the
sale of the Company's Argentine subsidiary for $38.0 million. Other
reorganization items, related to the Chapter 11 Cases, of $4.0 million of
expense in 1992 were $3.3 million lower than in 1991 due to the inclusion of
$5.8 million of costs related to rejected executory contracts in 1991 and higher
interest income in 1992 partly offset by increased professional fee expenses in
1992.
Income Taxes. Income tax expense of $14.5 million in 1992 increased by
$13.0 million from 1991. The increase was due to higher local taxes on foreign
earnings and the lack of domestic tax benefits available in 1992. All previously
provided deferred taxes at January 1, 1992 were utilized upon adoption of SFAS
No. 106. The 1992 income tax expense primarily reflected local and state taxes
related to the Company's foreign joint ventures. The Company had deferred tax
assets in excess of deferred tax liabilities. Under SFAS No. 109, a valuation
reserve is required for these net tax assets and, as a result, tax benefit could
not be recognized for the current domestic losses.
Cumulative Effect of Changes in Accounting Principles. In 1992 the Company
and its Brazilian joint venture adopted SFAS No. 109. As a result, the Company
recognized income of $11.6 million due to the cumulative effect of the change in
accounting principle. See Notes 10 and 31 of the Notes to Consolidated Financial
Statements included elsewhere herein.
Also in 1992 the Company adopted SFAS No. 106. As a result, the Company
recognized a pre-tax charge from the cumulative effect of a change in accounting
principle of $144.7 million and also recognized $14.2 million of tax benefits
for a net after-tax charge of $130.5 million. The charge resulting from the
adoption of SFAS No. 106 did not reflect the results of any negotiations with
representatives of the salaried and hourly employees in connection with proposed
modifications of retiree benefits. See Note 30 of the Notes to Consolidated
Financial Statements included elsewhere herein.
The loss per share from the cumulative effect of changes in accounting
principles was $7.15 in 1992.
Net Loss. The net loss of $164.3 million in 1992 was $158.8 million
greater than 1991. Included in the net loss for 1992 is a net charge of $118.9
million related to the cumulative effect of changes in accounting principles.
Excluding the cumulative effect of changes in accounting principles, the 1992
pre-tax loss of $31.0 million was $26.9 million greater than 1991 reflecting a
$66.6 million pre-tax provision for the settlement of crosstie litigation partly
offset by increased joint venture income, increased results from domestic
operations and the positive effect of reorganization items including the gain on
the sale of the Company's
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<PAGE> 27
Argentine subsidiary. The improved results from domestic operations were
primarily due to higher cement results reflecting increased shipments at all
plants combined with higher results from the ready-mixed concrete operations
partly offset by lower shipments of construction aggregates and lower average
net realized cement and aggregates selling prices.
The increased tax expense in 1992 reflected the increase in taxes primarily
related to higher foreign income and the inability to benefit domestic operating
losses in 1992.
The net loss per common share was $10.18 per share in 1992 as compared to
$0.64 in 1991. The net loss per share in 1992 included a $7.15 loss per share
related to the cumulative effect of changes in accounting principles.
The net loss per common share was based on the net loss after deducting
provisions for preferred dividends of $5.1 million in both 1992 and 1991. Due to
the filing for reorganization under Chapter 11, the Company stopped accruing
preferred dividends as of the last payment date, September 15, 1990. Although
preferred dividends in 1992 and 1991 were not paid, both preferred issues are
cumulative and the full year's dividend amount was used in computing net income
per common share. The total of dividends in arrears on both preferred issues was
$11.7 million at December 31, 1992.
Weighted average common shares outstanding was 16.6 million in both 1992
and 1991.
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<PAGE> 28
BUSINESS
GENERAL
Lone Star is a cement, construction aggregates and ready-mixed concrete
company, with operations in the United States (principally in the midwest and
southwest and on the east coast) and Canada. Lone Star's cement operations
consist of five cement plants in the midwestern and southwestern regions of the
United States and a 25% interest in Kosmos Cement Company, a partnership which
operates one cement plant in each of Kentucky and Pennsylvania. These five
wholly-owned cement plants produced 3.6 million tons of cement in 1993 and are
expected to produce 3.7 million tons in 1994, which approximates the rated
capacity of such plants. Lone Star also is engaged in construction aggregate
operations including the mining, processing and distribution of sand, gravel and
crushed stone and provides a source of ready-mixed concrete and other
construction materials. Lone Star's aggregate operations serve the construction
market in the New York metropolitan area, the east coast and gulf coast of the
United States, the Caribbean and the Nova Scotia and Prince Edward Island areas
of Canada. The ready-mixed concrete business operates in central Illinois and
the Memphis, Tennessee area. On a pro forma basis after giving effect to the
Plan of Reorganization and the adoption of Fresh-Start Reporting in connection
therewith, the Company had approximately $270 million in revenues in 1993, with
cement, construction aggregates and ready-mixed operations representing
approximately 70%, 17% and 13%, respectively, of such revenues.
BANKRUPTCY REORGANIZATION PROCEEDINGS
In December 1990, Lone Star Industries, Inc. and certain of its
subsidiaries commenced the Chapter 11 Cases. The Chapter 11 Cases were
precipitated by a variety of factors including generally depressed economic and
business conditions, increasingly restricted sources of financing, potential
defaults under long-term debt agreements, potential litigation exposure relating
to concrete railroad crossties, and uncertainty and potential liabilities with
respect to environmental, retiree benefit and pension related obligations. The
Chapter 11 Cases were filed in order to preserve the Company's assets and enable
it to seek a long-term solution to its financial, litigation and business
problems.
Prior to and during the course of the Chapter 11 Cases, the Company
implemented a comprehensive organizational and financial restructuring. As part
of this process, the Company closed various offices and facilities, centralized
and reduced its corporate management structure, sold or otherwise disposed of
noncore or unprofitable assets and operations (including partnership, joint
venture and foreign interests), rejected, modified and assumed contracts and
leases, and implemented many programs designed to improve the operating
procedures, controls, efficiency and profitability of its ongoing operations.
On the Plan Effective Date, the Company effected the Reorganization
pursuant to the Plan of Reorganization. Upon emergence from bankruptcy, the
Company was reorganized around its core domestic operations, while remaining
non-core assets and operations were transferred to Rosebud. Also transferred to
Rosebud was the Company's right to recover under certain litigations. In
accordance with the Plan of Reorganization, pre-petition equity interests were
cancelled and the holders thereof were issued a percentage of new equity
interests, certain pre-petition indebtedness was discharged, certain
pre-petition indebtedness was reinstated, or restructured and assumed, certain
pre-petition creditors received cash, new indebtedness and a percentage of new
equity interests in satisfaction of their claims, litigations were settled, and
a restructured Board of Directors was designated. The Plan of Reorganization
also implemented, among other things, settlements relating to (i) a production
payment financing transaction, (ii) post-retirement health and welfare benefits
for union and non-union retirees of the Company and (iii) pension benefit
obligations of the Company. These settlements all provide for certain ongoing
obligations of the Company.
Pursuant to the Plan of Reorganization, Rosebud issued the Asset Proceeds
Notes to pre-petition unsecured creditors of the Company. Interest on the Asset
Proceeds Notes is payable semi-annually in cash and/or additional Asset Proceeds
Notes (at the option of Rosebud) on each of January 31 and July 31. Rosebud paid
the first such semi-annual interest payment on July 31, 1994 in cash and intends
to make future interest payments in cash, to the extent Rosebud has cash
available. The Rosebud Indenture provides that
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<PAGE> 29
interest and principal on the Asset Proceeds Notes shall be paid from the
proceeds of Rosebud Asset dispositions and proceeds, if any, received by Rosebud
in connection with certain litigations transferred to it. A portion of Rosebud's
obligations under the Asset Proceeds Notes is guaranteed by the Company
Guarantee. If, at the maturity date of the Asset Proceeds Notes, the aggregate
amount of all cash payments of principal and interest on such notes is less than
$88,118,000, the Company Guarantee is payable either in cash, five-year notes or
a combination thereof to cover the shortfall between the actual payments and
$88,118,000, plus interest; provided, however, that the total amount paid
pursuant to the Company Guarantee cannot exceed $28,000,000. The Company
Guarantee is secured by a pledge of the Company's right, title and interest in
and to all of the issued and outstanding common stock of Rosebud. As of August
29, 1994, Rosebud had made cash payments of principal and interest on the Asset
Proceeds Notes of approximately $37,600,000. In connection with the Plan of
Reorganization, Lone Star entered into the Management Services Agreement with
Rosebud pursuant to which, among other things, Lone Star makes management
personnel available to manage, market and dispose of the Rosebud Assets in
exchange for a fee payable to Lone Star. See "Liquidating Subsidiary" below in
this section.
INDUSTRY OVERVIEW
Cement is the primary binding material used in the production of
ready-mixed concrete. The principal raw materials used in the manufacture of
cement are limestone or other calcareous materials, shale or clay, and sand.
These raw materials are crushed, ground, mixed together and then introduced into
a rotary kiln where they are heated to approximately 2700 degrees Fahrenheit.
The resultant marble-sized intermediate material produced by this process is
known as clinker. Clinker is then cooled, blended with a small amount of gypsum,
and ground to the consistency of face powder to produce cement.
Clinker can be produced under two basic methods, a "wet" and a "dry"
process. In the "wet" process, the raw materials are mixed with water to form a
slurry prior to introduction into the rotary kiln. The "dry" process excludes
the addition of water and the dry raw materials are introduced directly into the
kiln. The "wet" process has the advantage of more ease in the handling and
mixing of the raw materials. The disadvantage in this process is that additional
heat (fuel) is required to evaporate the moisture in the raw material slurry
before the materials can react to form the clinker. In the "dry" process, newer
technologies involve the recycling of the hot air from the rotary kiln to
pre-heat the raw materials prior to their introduction into the kiln or the
addition of separate burners to accomplish a significant portion of the chemical
reaction prior to the introduction of the raw materials into the rotary kiln.
These new technologies enhance the fuel efficiency inherent in the "dry" process
versus the "wet."
The manufacture of cement (whether "wet" or "dry") is energy intensive with
energy accounting for approximately one-third of the total manufacturing costs.
The cost for power and fuel, principally coal, varies on a regional basis and
with respect to coal is dependent on the transportation costs of the coal. The
Company has utilized waste materials as fuel at certain of its plants and is
actively exploring such usage at other plants. In this connection, see "Cement
Operations," "Environmental Regulation" and "Legal Proceedings -- Environmental
Matters" below in this section.
The demand for cement is derived primarily from residential construction,
commercial and industrial construction and public (infrastructure) construction,
with these three activities representing approximately 25%, 23% and 47%,
respectively, of cement consumption in 1992. The demand for cement is correlated
to construction activity, which in turn, is influenced largely by economic
conditions, including (particularly in the case of residential construction)
prevailing interest rates and the availability of public funds for
infrastructure projects. In addition, the demand for cement is subject to
regional economic fluctuations which may be greater or less than the
fluctuations in the economy of the United States as a whole.
The United States cement industry is comprised of approximately 50
companies with an annual cement production capacity in the 85 to 87.5 million
ton range. The 10 largest companies account for approximately 60% of the total
productive capacity. According to statistics compiled by the Portland Cement
Association ("PCA") and the United States Bureau of Mines, the demand for cement
in 1993 totaled 87.7 million tons with imported cement accounting for 7.9
million tons or 9% of the total demand. The demand for cement
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<PAGE> 30
appears to have reached its cyclical low point in 1991 with demand falling to 79
million tons and through 1993 had risen 11% from that point. Projections
prepared by the PCA show continued increases in the demand for cement, as well
as increases in the level of imports, through 1996 reaching the 97 million ton
level. While modest increases in the production capacity of the industry can be
accomplished through modifications to existing facilities, new productive
capacity is not expected due to the high cost of a new plant and the lengthy
regulatory permitting process that would be necessary. Imported cement will be
required to fill the gap between the demand for cement and the domestic
productive capacity. See "Risk Factors -- Construction Industry
Conditions -- Imports."
Due to the lack of product differentiation, competition in the cement
industry is based largely on price. To a lesser extent, service and location of
plants and distribution terminals also play a role in determining a company's
competitive position. Based on statistics compiled by the Bureau of Mines, the
price for cement remained in a narrow range throughout the 1980's. Improvement
in the performance of the economy coupled with lower imports and declining
domestic production capacity have led to a more favorable supply/demand ratio
for cement suppliers, which has enabled Lone Star to implement price increases
in both 1993 and 1994.
CEMENT OPERATIONS
Lone Star produces principally portland cement, the basic binding agent in
ready-mixed concrete, and also produces specialty cements such as masonry and
oil well and sells slag cement. The major portion of the domestic cement shipped
by Lone Star is to unrelated ready-mixed concrete suppliers. Lone Star also
supplies its own ready-mixed concrete operations. All of Lone Star's plants are
fully integrated from limestone mining through cement production and Lone Star
estimates that limestone reserves are sufficient to permit operation of its
plants at current levels of production for 30 to 100 years. Adequate supplies of
shale, clay and sand are owned, leased or available for purchase by Lone Star.
Gypsum generally is purchased under short-term contracts and is readily
available in all areas of operation.
Lone Star has a certain production payment agreement relating to limestone
reserves located adjacent to two of the cement plants described below. Pursuant
to such agreement, Lone Star transferred such reserves in consideration of its
right and obligation to extract and process these reserves into cement. Pursuant
to the agreement, Lone Star is required to make payments in advance for minerals
used at the two plants and to take or pay for minerals in amounts sufficient to
permit the purchaser to service the note associated with the production payment
facility. For additional information concerning the production payment
agreement, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition."
Lone Star's cement operations consist of five wholly-owned cement plants
and a 25% interest in Kosmos Cement Company, a partnership which operates one
cement plant in each of Kentucky and Pennsylvania.
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<PAGE> 31
Lone Star also operates a total of 14 cement distribution terminals. The
following table sets forth certain information regarding such plants:
<TABLE>
<CAPTION>
TONS OF
RATED ANNUAL
CEMENT CAPACITY
PLANT LOCATION (IN THOUSANDS) PROCESS FUEL PRINCIPAL MARKET AREA
- ---------------------------- ---------------- ---------------- ------------------------ ----------------------------
<S> <C> <C> <C> <C>
Cape Girardeau, Missouri.... 1,200 Dry/Precalciner Coal-Waste-Tires E. Missouri; Central and
N.E. Arkansas; Mississippi;
S. Louisiana; N. Alabama;
Tennessee; N.W. Kentucky;
S.W. Illinois
Greencastle, Indiana........ 750 Wet Coal-Waste Indiana; S.E. Illinois; N.
Central Kentucky
Pryor, Oklahoma............. 725 Dry Coal-Coke-Natural Gas Oklahoma; Dallas, Texas;
Kansas; W. Missouri
Oglesby, Illinois........... 600 Dry Coal-Coke-Tires Central and N. Illinois; S.
Wisconsin
Maryneal, Texas............. 520 Dry/Preheater Coal-Coke-Natural Gas W. Texas; E. New Mexico
Kosmos Cement Company
Kosmosdale, Kentucky...... 700 Dry/Preheater Coal-Oil Kentucky; S. Indiana; S.
Ohio; W. Virginia
Pittsburgh, 360 Wet Coal W. Pennsylvania; W.
Pennsylvania............ Virginia; E. Ohio
</TABLE>
Cape Girardeau Complex. Lone Star's cement complex in Cape Girardeau,
Missouri (the "Cape Complex") consists of a cement plant which uses a modern
dry/precalciner kiln; a raw materials quarry; and several key distribution
terminals. The Cape Complex is located on the Mississippi River and
approximately 80% of such plant's cement production is shipped from the Cape
Complex by 14 barges owned by Lone Star. Distribution by water is the least
expensive method of transporting cement and enables the Cape Complex to serve a
wider market than a non-water-based cement plant. Distribution by barge,
however, is also subject to interruption from time to time due to changing river
conditions brought about by either flood or drought. The Cape Complex also
supplies cement to Lone Star's ready-mixed operation that is located in Memphis,
Tennessee. Hazardous waste fuels provide up to 30% of the annual energy needs at
such plant, contributing further to a reduction of production costs. See
"Environmental Regulation" and "Legal Proceedings -- Environmental Matters"
below in this section regarding issues affecting, and the potential curtailment
of the use of, waste fuels. The distribution terminals which serve the Cape
Complex are located in St. Louis, Missouri; Brandon, Mississippi; Paducah,
Kentucky; Nashville and Memphis, Tennessee; and New Orleans, Louisiana.
Greencastle Complex. Lone Star's Greencastle cement plant is located
approximately 40 miles west of Indianapolis, Indiana and is the closest cement
plant to this market. The close proximity to Indianapolis provides a freight
cost advantage to Lone Star. The Greencastle plant produces a high quality Type
III portland cement, which is a high early strength cement required in certain
applications and sells for a premium relative to other types of portland cement.
Although this plant utilizes the "wet" process of clinker production, the
Company offsets such disadvantage through lower power and coal costs, higher
labor productivity and the use of waste fuels. Hazardous waste fuels provide up
to 40% of the annual energy needs at the plant. See "Environmental Regulations"
and "Legal Proceedings -- Environmental Matters" below in this section for
information regarding issues affecting, and the potential curtailment of, the
use of waste fuels. In early 1994, an upgraded precipitator was installed to
facilitate the Greencastle Complex's ability to meet anticipated clean air
standards that are expected to be promulgated and effective in the next several
years. The limestone used in the production of clinker at this plant is subject
to the production payment agreement described above. The Greencastle Complex is
served by distribution terminals located in Fort Wayne and Elkhart, Indiana and
has a warehousing and distribution arrangement in Itasca, Illinois.
Pryor Complex. The Pryor plant provides cement to the Kansas, Oklahoma and
Dallas, Texas areas and is located approximately 50 miles northeast of Tulsa,
Oklahoma. This plant produces a cement used in oil wells, in addition to cement
used in construction activity. Management believes that this plant has a
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<PAGE> 32
competitive advantage due to its relatively low power costs. The limestone used
in the production of clinker at this plant is subject to the production payment
agreement described above. The Pryor Complex has distribution terminals located
in Kechi (Wichita) and Bonner Springs (Kansas City), Kansas, Oklahoma City,
Oklahoma and Dallas, Texas.
Oglesby Complex. The Oglesby plant provides cement to the Chicago,
Illinois area construction market by truck as well as serving Central and
Northern Illinois. This plant also supplies cement to Lone Star's concrete
operations in Peoria, Illinois. This plant has improved its operating efficiency
over the last several years due to significant capital improvements. A roller
mill was installed to improve the consistency of the ground raw materials being
fed into the kiln and a high-efficiency separator was installed that has enabled
the production of a Type III portland cement. An upgraded precipitator was
installed in the spring of 1994 to facilitate the plant's ability to meet
anticipated clean air standards that are expected to be promulgated and
effective in the next several years. Pursuant to the Plan of Reorganization,
Lone Star has granted a security interest in this plant to the PBGC to secure
potential claims arising from future pension obligations of the Company. This
plant's distribution terminal is located in Milwaukee, Wisconsin.
Maryneal Complex. The Maryneal plant produces cement used in oil well and
construction activity and serves the Western Texas and Eastern New Mexico areas.
The Company is exploring the option of burning tires as an alternative to coal
at this plant in an effort to reduce its energy costs. Distribution of this
plant's production takes place through a terminal located in Amarillo, Texas or
through Lone Star's terminal located in Dallas, Texas whereby Lone Star can
supplement or replace cement sourced from the Pryor plant.
Kosmos Cement Company. Kosmos Cement Company ("Kosmos") is a partnership
in which Lone Star has a 25% interest. Southdown, Inc., a publicly-traded cement
company, holds the remaining 75% interest. Kosmos operates a cement plant in
each of Kosmosdale, Kentucky and Pittsburgh, Pennsylvania. Southdown, Inc. is
responsible for managing the day-to-day operations of Kosmos; however, all major
decisions require unanimous approval from the management committee of which a
Lone Star representative is a member. Pursuant to the Plan of Reorganization,
Lone Star has pledged its interest in this partnership to the PBGC to secure
potential claims arising from future pension obligations of the Company.
New Orleans Facility. The New Orleans facility is the site of a former
cement plant that has been converted to a distribution terminal which the
Company has been using for importing cement during 1994. This facility is
located off of the Gulf Intercoastal Waterway, which can accommodate
oceangoing-sized vessels. Lone Star has decided to utilize certain pieces of
equipment from the former cement plant for use in the production of slag cement.
Production of slag cement involves the grinding of granulated slag, a by-product
of steel mill blast furnaces to a fineness that is 20% finer than regular
portland cement. This ground product can be substituted for portland cement in
the production of ready-mixed concrete. Slag cement production is scheduled to
begin in early 1995.
CONSTRUCTION AGGREGATE OPERATIONS
Lone Star, through two wholly-owned subsidiaries New York Trap Rock
Corporation ("New York Trap Rock") and Construction Aggregates Limited
("Construction Aggregates"), produces construction aggregates including sand,
crushed stone and other stone products. Lone Star's total annual production
capacity is approximately 8.5 million tons and total reserves are in excess of
1.5 billion tons. Sales volume in 1993 approximated 5.8 million tons. The market
for construction aggregates is more highly regionalized than cement operations,
with most aggregates sold within a 50-mile radius of a quarry. Two of Lone
Star's quarries,
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<PAGE> 33
however, are located on water, which greatly increases the area in which the
product can be distributed. The following table sets forth certain information
regarding Lone Star's aggregate operations:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL ESTIMATED
PRODUCTION CAPACITY TYPE OF MINIMUM
PLANT LOCATION (IN THOUSAND TONS) AGGREGATE RESERVES (YEARS)
-------------- ------------------- --------- ----------------
<S> <C> <C> <C>
New York Trap Rock
Clinton Point......... 4,500 Wappingers Dolomite 60
West Nyack............ 1,100 Diabase Trap Rock 80
Construction
Aggregates............ 2,500 Devonian Granite 280
</TABLE>
New York Trap Rock
Clinton Point Plant. The Clinton Point quarry is located on the Hudson
River approximately 50 miles from the New York City area, which is its primary
market. Lone Star owns one barge and leases a fleet of 116 barges used to
transport product down the Hudson River to customers located throughout New York
City and Long Island. Approximately 80% of Clinton Point's sales are delivered
by barge, with the balance delivered by truck to the local market surrounding
the plant. The access to water distribution enables this plant to distribute its
product to a wider area than truck-based distribution systems. Lone Star's
primary customers are ready-mixed concrete producers and asphalt producers,
which account for 80% of this plant's sales, with the remainder of the aggregate
sold for roadway projects and specialty use such as rip rap for the construction
of jetties.
West Nyack Plant. The West Nyack quarry is located in Rockland County,
northwest of New York City, and ships all of its product by truck. The market
served by this plant is primarily the counties surrounding the quarry location.
The West Nyack Plant currently is not cost competitive and the Company is
reviewing all of its options regarding New York Trap Rock, including the
construction of a modern low-cost plant at West Nyack, at an expected cost of
$20 million, or the sale of New York Trap Rock.
Construction Aggregates
The Construction Aggregates quarry is located in Nova Scotia, Canada and is
located on the Strait of Canso, an all-weather deep water harbor, which permits
Lone Star to load vessels of up to 65,000 tons. This size vessel enables the
plant to deliver a cost-competitive product to the east coast and gulf coast of
the United States and the Caribbean markets. The plant also services Nova Scotia
and Prince Edward Island in Canada. This plant is a low-cost facility but the
lack of available ships to transport product has been a recent deterrent to
supplying the United States coastal markets. The granite that is located in the
quarry is ideal for use in asphalt and road construction operations where skid
resistance is required. Construction Aggregates supplies granite to the Clinton
Point quarry where it is blended with dolomite from such quarry to meet certain
skid resistance specifications.
READY-MIXED CONCRETE OPERATIONS
Lone Star's ready-mixed concrete operations in the vicinity of its Cape
Girardeau, Greencastle and Oglesby cement complexes have been vertically
integrated, enabling it to be a major supplier of ready-mixed concrete and other
concrete products in Central Illinois and the Memphis, Tennessee area. Lone
Star's ready-mixed concrete operations purchase cement from Lone Star's cement
plant in their vicinity and from outside suppliers. Ready-mixed concrete is sold
to a variety of end users, but is used primarily in residential construction and
infrastructure projects. The Company's sales of ready-mixed concrete was
approximately 590,000 cubic yards in 1993. Associated with one of Lone Star's
ready-mixed operations in Central Illinois is a small sand and gravel operation
that primarily provides these raw materials to Lone Star's ready-mixed concrete
operation in that vicinity.
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<PAGE> 34
CUSTOMERS AND MARKETING
Each plant has a broad customer base that encompasses, among others,
ready-mixed concrete producers, prestressed concrete producers, other concrete
product producers and highway construction firms. Taken as a whole, no single
customer of Lone Star accounted for more than 10% of total sales in 1993 and
during the six months ended June 30, 1994. Since cement, construction aggregates
and ready-mixed concrete operations are very regional in nature, the marketing
effort for such operations is handled by a local sales force for each plant.
Most purchases of Lone Star's products are done on a spot basis. Accordingly,
order backlogs are not significant.
SEASONALITY
As is true in the construction industry in general, Lone Star's operations
are materially affected by seasonal changes, particularly in the northern
operations where construction activity declines during colder weather. Inclement
weather also is a factor that affects Lone Star's operations. See "Risk
Factors -- Construction Industry Conditions -- Cyclical, Seasonal and Regional
Industry."
COMPETITIVE CONDITIONS
Generally, conditions in the cement, construction aggregate and ready-mixed
concrete industry are cyclical and highly competitive. These products are
marketed as commodities, with price the principal method of competition. To a
lesser extent, other factors such as service, delivery time and proximity to the
customer are important considerations. Accordingly, Lone Star's profitability is
dependent on levels of cement demand and on Lone Star's ability to manage
operating costs, and is very sensitive to small shifts in the balance between
supply and demand. Because Lone Star sells in many areas of the country, the
number of competitors differs from area to area. Competitors include domestic
and foreign producers and importers. See "Risk Factors -- Construction Industry
Conditions -- Imports."
Lone Star's operations are subject to fluctuations in governmental spending
for highway construction, housing and other projects as well as fluctuations
arising from general business conditions, increases or decreases in private
housing construction, the tightening or easing of credit and other factors,
including, in particular, the level of interest rates. While sales by Lone Star
directly to federal, state and local government agencies are not significant,
customers of Lone Star are engaged in government contract construction to an
extent which cannot be determined by Lone Star but which is believed to be
substantial.
LIQUIDATING SUBSIDIARY
Rosebud was established pursuant to the Plan of Reorganization for the
purpose of disposing of the Rosebud Assets for the benefit of holders of the
Asset Proceeds Notes and operating such assets pending their ultimate
disposition. Rosebud currently is engaged in the process of selling the Rosebud
Assets and concluding the litigations transferred to it; however, it is
difficult to estimate the time required to complete this process. Moreover,
Rosebud's ability to sell the Rosebud Assets may be affected by events and
results of operations at the various operating entities transferred to Rosebud
and its ability to conclude the litigations may be affected by events outside of
its control.
The assets and associated liabilities transferred to Rosebud were (a) (i)
Lone Star's 50% partnership interest in RMC LONESTAR (a vertically-integrated
cement, aggregate and concrete producer in California), (ii) a Lease and
Sublease dated December 31, 1987 between RMC LONESTAR and Lone Star relating to
Lone Star's interest in the Santa Cruz, California cement plant (which leases
were recently assigned in connection with the sale of the Santa Cruz plant) and
(iii) Promissory Notes in the principal amount of $16,833,329 executed by RMC
LONESTAR in favor of Lone Star California, Inc. (which company was transferred
to Rosebud); (b) Lone Star's 50% partnership interest in Lone Star-Falcon (owner
of cement terminals in Texas); (c) Lone Star's 50% partnership interest in
Hawaiian Cement (a vertically-integrated supplier of cement, aggregates and
ready-mixed concrete in Hawaii); (d) cement plants located in Nazareth,
Pennsylvania and Santa Cruz, California (which Santa Cruz plant was sold in June
1994); (e) the right to receive any recovery in certain litigations, the most
important of which are (i) Lafarge Corp. et al. v.
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<PAGE> 35
Lone Star Industries, Inc., et al. (a suit involving allegations of breach of
warranties in connection with Lone Star's purchase of cement used to manufacture
substantially all of the crossties involved in the railroad crosstie litigation
and an alleged fraudulent sale of defective cement and a claim of violations of
the Massachusetts Deceptive Practices Act, which is scheduled for retrial
commencing on October 24, 1994); (ii) Lone Star Industries, Inc. v. Liberty
Mutual Insurance Company et al. (a suit related to the Company's claim for
indemnity in the crosstie litigation and for the reimbursement of related
defense costs in connection with the crosstie litigation, which suit was
partially settled in July 1994 by most of the remaining defendants by payment to
Rosebud of $5.3 million, which amount is expected to be used by Rosebud for
working capital purposes pursuant to the Rosebud Indenture); and (iii) Lone Star
Industries, Inc. v. Compania Naviera Perez Companc, S.A.C.F.I.M.F.A. et al. (a
suit which alleges collusion, fraud and tortious interference by several
defendant companies in connection with the auction sale by Lone Star of its
Argentinian subsidiary; the dismissal of such suit is now on appeal by Lone Star
to the United States Court of Appeals for the Second Circuit after adverse
judgments at the Bankruptcy and District Court levels); (f) a secured Promissory
Note in the unpaid principal amount of $6,210,162 executed by Arthur A. Riedel
in favor of Lone Star plus unpaid interest since 1991 and related agreements (a
judgment for the unpaid principal amount plus interest and costs was awarded and
Rosebud currently is in the process of collecting on the judgment); and (g)
certain surplus property.
Lone Star provides management and various other services (including
personnel for the Nazareth cement plant operations) to Rosebud pursuant to the
Management Services Agreement. Rosebud pays to Lone Star quarterly a fee of .25%
of the value of its unsold assets (1.25% in the case of the Nazareth cement
plant) and reimburses Lone Star for all of Lone Star's payments to third parties
on behalf of Rosebud. For the various litigations, Rosebud pays Lone Star a
quarterly fee of $10,000. For the quarter ended June 30, 1994, Rosebud paid Lone
Star a fee of $500,000 for services rendered during such quarter. No fees or
other payments will be made to any officer or employee of Lone Star for services
to Rosebud except as may be made pursuant to the Lone Star Industries, Inc.
Rosebud Incentive Plan (the "Rosebud Incentive Plan") which was established in
connection with the Reorganization to ensure that the values obtained for the
Rosebud Assets are maximized. The Rosebud Incentive Plan provides that after
payment of the Asset Proceeds Notes in full, a pool of 20% of the net proceeds
from Rosebud Asset dispositions, up to a maximum of $5,000,000, will be
available for distribution among key employees of the Company to be selected by
the Compensation and Stock Option Committee of the Company's Board of Directors.
That committee also will determine the amounts of the incentive awards, except
that no individual may receive more than 15% of the aggregate funds awarded nor
is an individual eligible to receive an incentive payment unless he or she is
employed by the Company on the date(s) such payments are to be distributed. Mr.
David W. Wallace, the Company's Chairman of the Board and Chief Executive
Officer, is not eligible to receive incentive payments.
The Asset Proceeds Notes bear interest at a rate of 10% per annum, payable
in cash and/or additional Asset Proceeds Notes (at the option of Rosebud), in
semi-annual installments on each of January 31 and July 31, and have a maturity
date of July 31, 1997. Rosebud paid the first such semi-annual interest payment
on July 31, 1994 in cash, and intends to make future interest payments in cash,
to the extent Rosebud has cash available. The Rosebud Indenture provides that
interest and principal on the Asset Proceeds Notes shall be paid from proceeds
of Rosebud Asset dispositions and proceeds, if any, received by Rosebud in
connection with certain litigations transferred to it. The Asset Proceeds Notes
are secured by liens and security interests, as the case may be, on all of the
Rosebud Assets pursuant to a Security, Pledge and Collateral Agency Agreement
between Rosebud and Chemical Bank, as collateral agent. A portion of Rosebud's
obligations under the Asset Proceeds Notes is guaranteed by the Company
Guarantee. If, at the maturity date of the Asset Proceeds Notes, the aggregate
amounts of all cash payments of principal and interest on such notes is less
than $88,118,000, the Company Guarantee is payable in either cash, five-year
notes or a combination thereof (at the option of Lone Star) to cover the
shortfall between the actual payments and $88,118,000, plus interest; provided,
however, that the total amount paid pursuant to the Company Guarantee cannot
exceed $28,000,000. The Company Guarantee is secured by a pledge of the
Company's right, title and interest in and to all of the issued and outstanding
common stock of Rosebud. As of August 29, 1994, Rosebud had made cash payments
of principal and interest on the Asset Proceeds Notes of approximately
$37,600,000 (primarily from the sale of the Santa Cruz, California cement
plant). To the extent that amounts received upon
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<PAGE> 36
disposition of the Rosebud Assets and the Company Guarantee are not sufficient
to pay the principal and interest of the Asset Proceeds Notes, such notes will
not be paid. Other than an initial $5,000,000 cash contribution by Lone Star for
working capital purposes, Lone Star is not obligated to fund additional Rosebud
working capital requirements.
In connection with the sale of the Santa Cruz cement plant, Rosebud has
committed, on behalf of Lone Star, to complete, and is presently undertaking,
the closure of a former waste landfill area on a portion of a site that was the
subject of now-resolved investigation by Santa Cruz County authorities at an
anticipated cost of approximately $1.2 million, which funds were set aside from
the proceeds of the sale of such plant. Rosebud has committed to perform other
environmental remediation activities on behalf of Lone Star. See "Legal
Proceedings -- Environmental Matters" below in this section.
ENVIRONMENTAL REGULATION
The Company, like others in the construction materials and cement
manufacturing industry, is subject to federal, state and local laws and
regulations pertaining to the protection of the environment and human health and
safety. Many of these laws and regulations apply to the Company's current
operations, as well as to past activities and closed or formerly owned or
operated properties or facilities. These laws and regulations are extensive and
technically complex and require the Company to devote time and resources to
ensure continued compliance with applicable requirements. While it is not
possible to predict with accuracy the range of future costs for the Company's
program of compliance with current or future environmental laws and regulations,
the capital, operating and other costs of the program could be substantial. In
certain instances, future changes in regulatory requirements may require the
Company to undertake capital improvement projects or to cease or curtail certain
current operations. For information concerning certain environmental proceedings
involving the Company, see "Legal Proceedings -- Environmental Matters" below in
this section.
The Company's operations are required to comply with laws and regulations
governing water discharges, air emissions and the handling, use and disposal of
hazardous and non-hazardous waste materials, and those designed to protect
worker health and safety. In addition, if releases of hazardous substances are
discovered to have occurred at facilities currently or previously owned or
operated by the Company, or at facilities to which the Company has sent waste
materials, the Company may be subject to liability for the investigation and
remediation of such sites.
The federal Water Pollution Control Act, commonly known as the Clean Water
Act, provides a comprehensive federal regulatory scheme governing the discharge
of pollutants to waters of the United States. This regulatory scheme requires
that permits be secured for discharges of wastewater, including stormwater
runoff associated with industrial activity, to waters of the United States. The
Company has secured or has applied for all required permits in connection with
its wastewater and stormwater discharges.
The Clean Air Act provides a comprehensive federal regulatory scheme
governing the emission of air pollutants. In addition, the states in which the
Company operates have enacted laws and regulations governing the emission of air
pollutants and requiring permits for sources of air pollutants. In 1990,
Congress enacted amendments to the Clean Air Act to provide for a uniform
federal regulatory scheme governing control of air pollutant emissions and
permit requirements. As a result of the Clean Air Act Amendments of 1990, by
1995 the Company will be required to apply for federal operating permits for
each of its cement manufacturing facilities. As part of the permitting process,
the Company may be required to install equipment to monitor emissions of air
pollutants from its facilities. In addition, the Clean Air Act Amendments
require the United States Environmental Protection Agency ("EPA") to develop
regulations directed at reducing emissions of toxic air pollutants from a
variety of industrial sources, including the portland cement manufacturing
industry. As part of this process, EPA will identify maximum available control
technology ("MACT") for the reduction of emissions of air toxics from cement
manufacturing facilities. Following EPA's promulgations of MACT for the cement
industry, the Company, like others in the industry, may be required to install
additional control technology at its cement manufacturing facilities and meet
more stringent air emissions standards. It is possible that EPA will promulgate
separately MACT standards for those cement manufacturing facilities (like Lone
Star's Greencastle and Cape Girardeau plants) which burn hazardous waste fuels
("HWF") which
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standards may be even more stringent than those which apply to cement
manufacturing facilities not utilizing hazardous wastes as a fuel source.
The federal Resource Conservation and Recovery Act ("RCRA") establishes a
cradle to grave regulatory scheme governing the generation, treatment, storage,
handling, transportation and disposal of solid wastes. Solid wastes which are
classified as hazardous wastes pursuant to RCRA, as well as facilities which
treat, store or dispose of such hazardous wastes, are subject to stringent
regulatory requirements. Generally, wastes produced by the Company's operations
are not classified as hazardous wastes and are subject to less stringent federal
and state regulatory requirements. In particular, cement kiln dust ("CKD"), a
by-product of cement manufacturing, is currently exempted from regulation as a
hazardous waste pursuant to the Bevill Amendment to RCRA. The EPA has recently
completed the Congressionally-mandated study of the potential hazards posed by
CKD, and is expected to issue a regulatory determination regarding the need for
regulatory controls on the management, handling and disposal of CKD by January
1995. It is not possible to predict at this time what EPA's regulatory
determination regarding the need for additional regulatory controls on the
management, handling and disposal of CKD will be, and what, if any, increased
costs will be incurred by the Company to comply with any such new regulatory
requirements.
Lone Star's cement manufacturing facilities which use hazardous waste fuels
as an energy source are subject to strict RCRA, state and local requirements
governing hazardous waste treatment, storage and disposal facilities, including
those contained in the federal Boiler and Industrial Furnace regulations (the
"BIF Rules"). Lone Star's two cement manufacturing facilities which burn HWF
(Cape Girardeau and Greencastle plants) qualified for and are currently
operating under interim status pursuant to RCRA and the BIF Rules. While Lone
Star believes that it is currently in compliance with the extensive and complex
technical requirements of the BIF Rules, there can be no assurances that Lone
Star will be able to maintain compliance with the BIF Rules or that changes to
such rules or their interpretation by the relevant agencies or courts might not
make it more difficult or cost prohibitive to maintain compliance or continue to
burn HWF. In February 1994, a decision was issued by the United States Court of
Appeals for the District of Columbia Circuit in a lawsuit challenging certain
aspects of the BIF Rules. Among other things, that court's decision vacated and
remanded to EPA a challenged BIF Rules air emissions standard applicable to wet
process cement kilns with which Lone Star's Greencastle cement plant had been
complying, but upheld two related standards. Lone Star has, together with other
cement manufacturers adversely affected by the Court's decision, filed a
petition for certiorari to the United States Supreme Court for review of the
D.C. Circuit's ruling and is working with EPA to adopt an interim replacement
standard. Lone Star also is seeking to demonstrate that the Greencastle plant
can comply with one of the remaining standards. Nevertheless, there can be no
assurances that any of these efforts will be successful. Unless the court's
decision is reversed, an appropriate modification of the remanded standard is
adopted by EPA with which Lone Star can comply or Lone Star can successfully
demonstrate compliance with one of the remaining standards, Lone Star's
Greencastle cement plant may have to cease or curtail its use of hazardous waste
fuels.
In addition, Lone Star is currently engaged in the process of securing the
permit required under RCRA and the BIF Rules for each of the Cape Girardeau and
Greencastle cement plants to enable it to continue the use of HWF at those
facilities. The permitting process is lengthy and complex, involving the
submission of extensive technical data. There can be no assurances that Lone
Star will be successful in securing a final RCRA permit for either or both of
its HWF facilities, or, if able to secure such permits, that the permits will
contain terms and conditions with which Lone Star will be able to comply or
which will not require costly upgrades to the facilities to enable Lone Star to
achieve such compliance.
The Company's operations are also subject to federal and state laws and
regulations designed to protect worker health and safety. Worker protection at
the Company's cement manufacturing and aggregate facilities are governed by the
federal Mine Safety and Health Act ("MSHA"). Worker protection at the Company's
other operations are governed by the federal Occupational Safety and Health Act
("OSHA"). Safety and health standards designed for worker protection have been
promulgated under both MSHA and OSHA which apply to the Company's operations.
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The federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA" or "Superfund"), as well as many comparable state
statutes, creates a joint and several liability scheme for the investigation and
remediation of facilities where releases of hazardous substances are found to
have occurred. Liability may be imposed upon current owners and operators of the
facility, upon owners and operators of the facility at the time of the release
and upon generators and transporters of hazardous substances released at the
facility. Many of the raw materials, by-products and wastes used or produced by
industrial facilities, including cement manufacturing facilities, may contain
chemical elements or compounds which have been designated as hazardous
substances. In addition, other past and present operations of the Company may
have used or disposed of materials containing hazardous substances in the course
of their operations. As a consequence, federal or state governmental authorities
or third parties may seek to recover the costs of investigation and remediation
or to require the Company to investigate and remediate facilities where
hazardous substances have been released which are presently or were previously
owned or operated by the Company or which are locations where hazardous
substances generated by the Company have been disposed. The Company has been
named by the EPA as a potentially responsible party for the investigation and
remediation of several Superfund sites and is currently undertaking
investigation and remediation activities at several facilities presently or
formerly owned or operated by the Company under similar state environmental
requirements. See "Legal Proceedings -- Environmental Matters" below in this
section. There can be no assurances that the Company will not be named as a
potentially responsible party at additional Superfund Sites, or that additional
releases of hazardous substances will not be found to have occurred at
facilities presently or formerly owned or operated by the Company.
EMPLOYEES
As of August 29, 1994, the Company had approximately 1,535 employees, of
whom approximately 1,035 were members of various labor unions. Except for
employees at certain cement distribution terminals, all of the Company's hourly
employees in its cement, construction aggregates and ready-mixed concrete
operations are represented by labor unions. Although the Company transferred
certain of its cement plant operations to Rosebud in connection with the
Reorganization, the Company remains obligated under the collective bargaining
agreements covering its hourly employees engaged in operations transferred to
Rosebud.
A number of collective bargaining agreements covering the Company's hourly
employees are scheduled to expire during 1995 and 1996. Significant agreements
that expire in early 1995 are those with the International Brotherhood of
Teamsters who represent the truck drivers employed by Lone Star's ready-mixed
concrete operations in Memphis, Tennessee and Peoria, Illinois. The Company does
not anticipate any unusual circumstances or difficulties in obtaining
replacement agreements.
In 1994, there have been no labor disruptions at any of the Company's
facilities. The Company believes that relations with its employees are good.
PROPERTIES
Lone Star's main operations are conducted at its plants and distribution
terminals described above. Lone Star owns all of the cement plants and a
majority of the distribution terminals used in its cement operations. With
respect to those distribution terminals not owned, Lone Star holds a landlease
for the underlying real property and owns the facilities located on such
property. There are two additional distribution terminals that are leased to
third parties and a former quarry site that is jointly owned is also leased to a
third party. Lone Star has sold certain limestone reserves adjacent to two of
its cement plants, pursuant to the production payment agreement. See "Cement
Operations" above in this section. Lone Star owns or leases its aggregate plant
sites or has purchased the aggregate minerals in place. In each case, subject to
lease termination dates, it has the right to continue mining operations until
the deposit is no longer suitable for commercial exploitation. The ready-mixed
concrete plants are located on owned land or sites held under leases for varying
terms. No difficulty is anticipated in renewing leases as they expire or finding
satisfactory alternative plant sites. The Company leases executive offices in
Stamford, Connecticut and owns or leases offices in Indianapolis, Indiana and
West Nyack, New York. The Company also owns or leases other offices in the
United States.
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LEGAL PROCEEDINGS
The Company is involved in a number of pending legal proceedings, the more
significant of which are discussed in this section. See also "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition," "Certain Relationships and Related
Transactions" and Notes to the Company's financial statements included elsewhere
herein.
Environmental Matters
While the Company generally has been able to maintain its operations in
compliance with the requirements of environmental laws and regulations, it has
been, or is presently, involved in certain environmental enforcement matters.
For example, in September 1992, as part of an EPA enforcement initiative
targeting facilities burning hazardous waste fuels, a complaint was issued by
EPA against the Company's Greencastle cement facility alleging violations of the
BIF Rules and seeking a civil penalty in excess of $3.8 million. The Company was
able to resolve with EPA all the matters alleged in the complaint and paid a
penalty of $315,000. The Company was also able to resolve certain violations
alleged by the State of Indiana in connection with the Greencastle cement
plant's hazardous waste fuel burning operations and paid a penalty of $87,250.
In March 1994, the EPA commenced an administrative proceeding against Lone Star
in connection with alleged violations of regulations governing the handling and
burning of hazardous waste fuels at the Company's Cape Girardeau cement
facility. In this proceeding, EPA is seeking in excess of $500,000 in civil
penalties. The Company is currently engaged in negotiations with EPA and expects
to be able to satisfactorily resolve this proceeding, which settlement may also
include the payment of a penalty.
Past operations of the Company or its predecessors have resulted in
releases of hazardous substances at sites currently or formerly owned by the
Company or where waste materials generated by the Company have been disposed.
The Company has been identified as one of the parties that may be held
responsible by federal or state governmental authorities pursuant to CERCLA or
similar state laws for the costs of investigation and remediation of
contamination at sites where waste materials generated by the Company were
deposited. For twelve such sites which are on the National Priority List of
sites requiring investigation and remediation pursuant to CERCLA, the Company is
one of numerous potentially responsible parties and available factual
information indicates that the Company's contributions of waste to the site was
small and the Company may have certain defenses arising out of the
Reorganization. For one of those sites the Company was recently notified by EPA
that it is eligible to participate in a de minimis settlement to resolve its
liability for that site for a cost of approximately $14,000, subject to certain
limitations and the potential for a reopener if the total clean-up exceeds a
certain sum; the Company intends to avail itself of this settlement opportunity.
With respect to sites located in the vicinity of Salt Lake City, Utah,
where waste materials, including CKD, generated by the Company and its
predecessors were deposited as fill, the Company has reached a settlement
agreement with federal, state and local governmental authorities to resolve the
Company's liability for those sites, including natural resource damages, in
exchange for a general unsecured claim of $18.5 million in the bankruptcy
proceedings. This settlement agreement is currently undergoing the public review
mandated by CERCLA and, following the conclusion of that process, bankruptcy
court approval of the settlement agreement will be sought at a hearing currently
scheduled for September 22, 1994. One local governmental authority, which filed
a claim in the bankruptcy proceedings, determined not to participate in the
settlement agreement. The Company expects such claim to be resolved by the
bankruptcy court in connection with approval of the settlement agreement. If in
the future the local governmental authority seeks to impose liability upon the
Company with respect to these sites, the Company will have various defenses
available to it; provided, however, there can be no assurance that the Company's
defenses will prevail. In addition, in connection with the Company's bankruptcy
proceedings, settlement agreements were entered into between the Company and the
other individuals and entities identified by EPA as potentially responsible
parties as well as other property owners generally resolving the Company's
liability to those individuals and entities. With respect to certain of those
individuals and entities, the settlement agreements which also resolve a related
cost-recovery and property damage action pending in federal district court in
Utah, are subject to those individuals and entities reaching settlements with
EPA, the negotiation of which is continuing.
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In connection with the Company's prior lumber yard operations, the Company
has been involved in the investigation and clean up of certain sites
contaminated by wood treating chemicals. With respect to one former wood
treating site previously leased by the Company, in connection with the Chapter
11 Cases the Company resolved its liability to State and local governmental
entities by agreeing to conduct additional investigation and, if necessary,
remediation up to a total cost of $2 million. The Company sued two of its
insurance carriers for its defense costs and indemnification in such dispute.
The Company was awarded a judgment on the defense cost claim, which is currently
on appeal. The Company's claim with respect to indemnification is pending.
Additional investigation and remedial activities are also required at a
former wood treating facility located on land which was transferred to Rosebud
pursuant to the Plan of Reorganization. The Company is currently negotiating a
consent order with state governmental authorities regarding additional
investigative and clean up efforts required at the site, including ground water
monitoring and possible remediation, which activities are anticipated to be
undertaken by Rosebud and funded through a sale of the property. There can be no
assurances, however, that such funds will be available or that governmental
authorities will not seek to recover costs of investigation or remediation from
the Company, which remains liable therefor pursuant to an agreement approved by
the bankruptcy court.
Other Legal Proceedings
Reorganization Proceedings. These proceedings in the United States
Bankruptcy Court for the Southern District of New York are entitled "In re: New
York Trap Rock Corporation, Lone Star Industries, Inc. et al., Debtors" Chapter
11 Case Nos. 90B21276-21286, 21334 and 21335. See "Bankruptcy Reorganization
Proceedings" earlier in this section.
Cement Industry Antitrust Investigation. In early March 1994, the Company,
along with other cement companies, received a civil investigative demand from
the Atlanta, Georgia Regional Office of the U.S. Department of Justice Antitrust
Division. The investigation concerns possible violations of Section 1 of the
Sherman Antitrust Act (price fixing and market allocation) by cement sellers on
a nationwide basis and seeks Company records relating to its cement business.
The Company has a long-standing policy of complying with the letter and spirit
of the antitrust laws and has fully cooperated with the investigation.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
OFFICE AND DATE FROM WHICH INDIVIDUAL FIRST
NAME AGE BECAME AN EXECUTIVE OFFICER OR DIRECTOR
---- --- -------------------------------------------
<S> <C> <C>
David W. Wallace 70 Chairman of the Board and Chief Executive Officer (Class I
Director; 1970)
William M. Troutman 53 President and Chief Operating Officer (1986); Director (Class
II Director; 1992)
James E. Bacon 63 Director (Class II Director; 1992)
Theodore F. Brophy 71 Director (Class III Director; 1992)
Arthur B. Newman 50 Director (Class I Director; 1994)
Allen E. Puckett 75 Director (Class I Director; 1974)
Robert G. Schwartz 66 Director (Class III Director; 1994)
Jack R. Wentworth 66 Director (Class III Director; 1992)
John J. Martin 63 Senior Vice President of the Company (1979) and President of
Rosebud (1994)
Roger J. Campbell 58 Vice President -- Cement Operations (1986)
William J. Caso 50 Vice President -- Taxes and Insurance (1994)
Pasquale P. Diccianni 52 Vice President -- Cement Sales and Aggregate Operations
(1988)
Thomas S. Hoelle 42 Vice President -- Planning (1994)
Gerald F. Hyde, Jr. 51 Vice President -- Personnel and Labor Relations (1983)
John S. Johnson 63 Vice President, General Counsel, and Secretary (1994)
Harry M. Philip 45 Vice President -- Cement Manufacturing (1994)
Michael W. Puckett 49 Vice President -- Cement Sales and Concrete Operations (1985)
William E. Roberts 54 Vice President, Chief Financial Officer, Controller and
Treasurer (1988)
</TABLE>
DIRECTORS
David W. Wallace has served as Chairman of the Board and Chief Executive
Officer of Lone Star since January 1991. He is also Chairman of the Executive
Committee of the Board. Mr. Wallace was Chairman of the Board and Chief
Executive Officer of Todd Shipyards Corporation during the pendency of its
Chapter 11 bankruptcy case which began in 1987 and ended with approval of a Plan
of Reorganization in late 1990. Prior to July 1984, he was Chairman of the Board
and President, Bangor Punta Corporation, a diversified company whose operations
included general aviation aircraft and law enforcement equipment. Since 1985,
Mr. Wallace has been Chairman of the Board of FECO Engineered Systems, Inc., a
manufacturer and engineer of high technology industrial ovens. Mr. Wallace was
also Chairman of the Board of National Securities & Research Corporation, an
advisor to a family of eleven mutual funds, from 1988 to 1993. He is Chairman of
the Board of The Putnam Trust Company, and a director of Zurn Industries, Inc.
and Holmes Protective Company.
William M. Troutman is a member of the Executive Committee of the Board.
Since 1986, he has been President and Chief Operating Officer of Lone Star.
James E. Bacon is a member of the Executive, Audit and Compensation and
Stock Option Committees of the Board. He is a private investor and consultant.
From 1986 to 1990, he was Executive Vice President and a Director of United
States Trust Company, a bank holding company, and a Trustee of United States
Trust
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Company of New York. Mr. Bacon is a director of Accuhealth, Inc. Mr. Bacon was
also a director of Todd Shipyards Corporation from September 1991 to June 1992
and a director of Prime Hospitality Corp. from July 1992 to January 1994. He is
a trustee of Nuveen Select Tax-Free Income Portfolio and a trustee of the
Federation of Protestant Welfare Agencies (N.Y.).
Theodore F. Brophy is a member of the Executive and Audit Committees of the
Board. Until May 1988, Mr. Brophy was Chairman and Chief Executive Officer of
GTE Corporation, a telecommunications company. In 1988, he was Chairman, United
States Delegation to the World Administrative Conference on Space
Communications. Mr. Brophy is also a director of Transcell Technologies Inc.
Arthur B. Newman has been a General Partner in The Blackstone Group, a
private investment banking firm, since May, 1991. Previously, Mr. Newman was a
Managing Director and head of the Restructuring and Reorganization Group of
Chemical Bank from August 1989 and prior thereto was a Senior Partner at Ernst &
Young.
Allen E. Puckett is Chairman of the Audit Committee of the Board. Since
April 1987 he has been Chairman Emeritus of Hughes Aircraft Company, a
manufacturer of aerospace and missile systems, data processing systems and
industrial electronics equipment. From 1978 to 1987 he was Chairman of the Board
and Chief Executive Officer of Hughes Aircraft Company. Dr. Puckett is also a
director of General Dynamics Corporation and Logicon, Inc.
Robert G. Schwartz is a member of the Executive and Compensation and Stock
Option Committees of the Board. Mr. Schwartz retired as Chairman of the Board of
Directors, President and Chief Executive Officer of the Metropolitan Life
Insurance Company in 1993, having held these positions since 1989. He has
continued as a director of the Metropolitan Life Insurance Company, and is also
a director of CS First Boston, Inc., COMSAT Corporation, Lowe's Companies, Inc.,
Mobil Corporation, Potlatch Corporation and The Reader's Digest Association,
Inc., and a member of the Board of Trustees of the Consolidated Edison Company
of New York. Mr. Schwartz is a member of the Business Council and a Trustee of
the Committee for Economic Development.
Jack R. Wentworth is Chairman of the Compensation and Stock Option
Committee of the Board. From 1984 to 1993 he was Dean of the Graduate School of
Business at Indiana University and is now Arthur M. Weimer Professor of Business
Administration. Professor Wentworth is also a director of Kimball International,
Inc., Market Facts, Inc., Bank One Bloomington NA. and KPT Inc.
The Company's Restated Certificate of Incorporation provides that the Board
of Directors shall be divided into three classes of directors, each class to be
as nearly equal in number of directors as possible. The initial term of office
of each director in the first class will expire at the annual meeting of
stockholders in 1997; the initial term of office of each director in the second
class will expire at the annual meeting of stockholders in 1995; and the initial
term of office of each director in the third class shall expire at the annual
meeting of stockholders in 1996. At each annual election, the successors to the
class of directors whose term expires at that time shall be elected to hold
office for a term of three years, and until their respective successors shall be
elected and qualified, to succeed those directors whose term expires, so that
the term of one class of directors will expire each year. Under the Delaware
General Corporation Law, in the case of a corporation having a classified board,
stockholders may remove a director only for cause. The classification of the
Board of Directors of the Company makes it more difficult to replace the Board
of Directors as well as for another party to obtain control of the Company by
replacing the Board of Directors. Since the Board of Directors has the power to
retain and discharge officers of the Company, these provisions could also make
it more difficult for existing stockholders or another party to effect a change
in management.
The Company has standing Audit, Compensation and Stock Option and Executive
Committees of the Board. The functions of the Audit Committee are to recommend
the principal auditors of Lone Star, to consult with the principal auditors with
regard to the plan of audit, to review the report of audit and the accompanying
management letter, to consult with the principal auditors with regard to the
adequacy of internal controls, and to consult with Lone Star's internal auditors
on the above matters.
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<PAGE> 43
The functions of the Compensation and Stock Option Committee are to approve
compensation arrangements for senior management and to approve and recommend to
the Board of Directors the adoption of any compensation plans in which officers
and directors are eligible to participate, and to grant stock options or other
benefits under any such plans.
The Executive Committee is empowered to exercise all of the authority of
the Board of Directors, except that it does not have the power to rescind any
action previously taken by the board of directors or to take certain actions
enumerated in the Company's By-Laws (such as amend the Restated Certificate of
Incorporation, change the Company's dividend policy or adopt an agreement of
merger or consolidation).
The Company has no nominating committee of the Board of Directors or
committee of the Board performing a similar function.
EXECUTIVE OFFICERS
All of the executive officers of the Company were elected at a meeting of
the Board of Directors on August 24, 1994. Their terms of office continue until
the next annual meeting of the Board of Directors and until their successors
shall have been elected and qualified. All of the executive officers have been
employed by the Company as an officer or in an executive capacity for more than
five years.
EXECUTIVE COMPENSATION
The following table shows compensation received by the Company's Chief
Executive Officer and the four other most highly paid executive officers for the
three fiscal years ending December 31, 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- ----------------------- ----------------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) SARS(#) ($) ($)(2)
--------------------------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David W. Wallace............. 1993 $250,000 -- -- -- -- -- 2,249
Chairman of the 1992 250,000 -- -- -- -- -- 2,189
Board of Directors 1991 250,000 -- * -- 100,000(3) -- *
and Chief Executive Officer
William M. Troutman.......... 1993 325,000 -- -- -- -- -- 2,249
President and Chief 1992 325,000 -- -- -- -- -- 2,189
Operating Officer 1991 325,000 -- * -- -- -- *
John J. Martin............... 1993 250,000 -- -- -- -- -- 2,249
Senior Vice President 1992 250,000 -- -- -- -- -- 2,189
General Counsel and 1991 250,000 -- * -- -- -- *
Secretary(4)
Roger J. Campbell............ 1993 170,000 -- -- -- -- -- 2,249
Vice President -- 1992 170,000 -- -- -- -- -- 2,189
Cement Operations 1991 170,000 -- * -- -- -- *
Pasquale P. Diccianni........ 1993 165,000 -- -- -- -- -- 2,249
Vice President -- 1992 165,000 -- 32,573 -- -- -- 2,189
Cement Sales and 1991 165,000 -- * -- -- -- *
Aggregates
</TABLE>
- ---------------
(1) Perquisites and other personal benefits were less than 10% of the total
annual salary and bonus for 1992 and 1993 for each of the named executive
officers except for Mr. Diccianni in whose case $18,782 was paid under an
executive medical plan in 1992.
(2) Contributions by the Company on behalf of the named executive officers under
the Savings Plan for Salaried Employees.
(3) Cancelled pursuant to the Plan of Reorganization.
(4) Mr. Martin's position with the Company changed to that of President of
Rosebud as of July 1, 1994.
* Under the transition rules of the Commission, no disclosure is required.
41
<PAGE> 44
EMPLOYMENT AGREEMENTS AND PLANS
Employment Agreements and Change in Control and Severance Arrangements
Effective July 1, 1994, the Company entered into two-year employment
agreements (the "Employment Agreements") with David W. Wallace, William M.
Troutman and John J. Martin. Pursuant to such agreements, Mr. Wallace agreed to
be employed as Chairman and Chief Executive Officer of the Company at an annual
salary of $150,000; Mr. Troutman agreed to be employed as President and Chief
Operating Officer of the Company at an annual salary of $275,000; and Mr. Martin
agreed to be employed as Senior Vice President of the Company and President of
Rosebud at an annual salary of $200,000. Messrs. Wallace and Troutman's
employment agreements are renewable for successive two-year terms.
The Employment Agreements respecting Messrs. Wallace and Troutman may be
terminated (i) by either party upon written notice at least six months prior to
the expiration of the current term, (ii) by the Company for any reason other
than "cause" (as defined in the Employment Agreements) by written notice setting
forth the effective date of termination (which shall be at least six months
after such notice), (iii) by Mr. Wallace or Mr. Troutman if terminated for "good
reason" (as defined in the Employment Agreements), (iv) in the case of Mr.
Wallace, by him as a result of any "incapacity" (as defined in his Employment
Agreement), and (v) by the Company for "cause" (as defined in the Employment
Agreements). In the event the Company terminates an Employment Agreement other
than for cause, or if Messrs. Wallace and Troutman terminate their respective
Employment Agreements for "good reason," the Company is required to make a
severance payment in an amount equal to the employee's salary for the period
from the effective date of termination through the latter of (i) the initial
term, or (ii) one year (or 18 months if terminated for "good reason") after the
effective date of termination, whichever is greater. Upon a "change in control"
(as defined in the Employment Agreement) of the Company, Mr. Wallace and Mr.
Troutman may terminate their employment with the Company and receive severance
pay equal to two years' salary.
Mr. Martin's Employment Agreement may be terminated (i) by the Company for
any reason other than "cause" or "unsatisfactory performance" (both as defined
in the Employment Agreement) by written notice setting forth the effective date
of the termination (which shall be at least seven days after receipt of such
notice), (ii) by the Company for cause or unsatisfactory performance, and (iii)
by Mr. Martin for "good reason" (as defined in the Employment Agreement). If the
Company terminates Mr. Martin's Employment Agreement other than for cause, or
Mr. Martin terminates the Employment Agreement for good reason, he is entitled
to receive a severance payment equal to his salary for the remainder of the term
of his agreement. In the event the Company terminates Mr. Martin's Employment
Agreement for unsatisfactory performance, the Company is required to make a
severance payment (a) of $250,000 if such termination is prior to July 1, 1995,
and (b) of an amount equal to the lesser of (i) $200,000, or (ii) Mr. Martin's
salary through the expiration of the term of his Employment Agreement, if such
termination occurs on or after July 1, 1995. Upon a "change of control" (as
defined in the Employment Agreement) of the Company, Mr. Martin may terminate
his employment with the Company and receive severance pay equal to the full
amount of unpaid compensation through the remaining term of his Employment
Agreement.
Effective July 1, 1994, the Company entered into change of control
agreements (the "Change of Control Agreements") with nine of its executive
officers, including Roger J. Campbell and Pasquale P. Diccianni, other than
Messrs. Wallace, Troutman and Martin. Pursuant to such agreements, each officer
other than Mr. Diccianni, during the five-year period commencing on July 1,
1994, will be entitled to receive a lump-sum cash payment equal to two years of
his base salary in the event of termination of such officer's employment as a
result of the occurrence of certain events subsequent to a change in control of
the Company (as defined in such agreements). Pursuant to Mr. Diccianni's
agreement, during a two-year period commencing on July 1, 1994, he will be
entitled to a lump-sum cash payment equal to one year's base salary (subject to
reduction) in the event of termination of his employment as a result of the
occurrence of certain events following a sale (as defined in the agreement) of
New York Trap Rock. Pursuant to the Employment and Change in Control Agreements,
if such officers receive severance payments they also will be entitled to
medical and other insurance benefits for a specified period of time following
termination of employment.
42
<PAGE> 45
Mr. Troutman is entitled to receive annual retirement benefits at age 65 of
$225,000, including the benefits payable to him pursuant to the Salaried
Employees Pension Plan and an annuity purchased by Lone Star for Mr. Troutman in
1989. If Mr. Troutman ceases full-time employment with the Company between ages
55 and 62, he may elect to receive his retirement benefits reduced by 5% for
each year before age 62. Thereafter there will be no reduction. If Mr. Troutman
is disabled at any time, the retirement benefits shall commence immediately.
Upon his death the retirement benefits will be paid to his spouse until her
death.
Upon retirement, Messrs. Wallace, Troutman and Martin, and their respective
spouses, will be entitled to full payment for certain medical services and
expenses pursuant to agreement between each of them and the Company. These
medical benefit payments are to be reduced by an annual deductible of $1,000
prior to age 65 and $750 thereafter, with a lifetime benefit limit for each
person of $1,000,000. Upon retirement, Lone Star will also provide Messrs.
Wallace, Troutman and Martin retiree life insurance on the same basis as that
presently in effect for Lone Star's salaried retirees. Mr. Martin will also be
provided retirement benefits pursuant to an annuity purchased for him in 1989.
In recognition of their significant contributions to the Reorganization,
the Company, with the approval of the Board of Directors and the Bankruptcy
Court, paid confirmation bonuses of $600,000 to Mr. Wallace; $360,000 to Mr.
Troutman; $200,000 to Mr. Martin; $100,000 to Mr. Campbell; and an aggregate of
$300,000 to other officers and employees.
Separation and Retention Plan
Because of the rejection and/or termination of employment agreements with
officers during 1991 and to enable the Company to retain and, if necessary, to
attract key personnel, the Bankruptcy Court entered an Order approving a
separation pay and retention award plan (the "Separation and Retention Plan")
pursuant to which the Compensation and Stock Option Committee could designate
certain key executive personnel for separation pay and retention payment awards.
Seventeen current employees of the Company, including Messrs. Campbell and
Diccianni and certain other executive officers but not including Messrs.
Wallace, Troutman and Martin, were designated as such key employees (the "Key
Employees").
The Separation and Retention Plan is comprised of two components. The first
component provides the Key Employees with a supplement to Lone Star's Standard
Severance Pay Program (described below) in the event of involuntary termination
of their employment (the "Separation Payments"). The second component provided
for payments to Key Employees which were designed to encourage such employees to
remain with Lone Star throughout the Reorganization Proceedings (the "Retention
Award") and in view of the effectiveness of the Plan of Reorganization such
payments totaling $1,139,598.60 have been made to Key Employees, including
$85,000 for Mr. Campbell and $82,500 for Mr. Diccianni, less applicable
withholding.
The Separation Payments are equal to three months base salary and would be
provided to the Key Employees upon the occurrence of either of the following
events which may occur on or after the effective date of the Plan of
Reorganization and prior to February 17, 1995, the first anniversary of the
confirmation of the Plan of Reorganization (i) discharge from employment for
reasons other than Cause (as defined in the Separation and Retention Plan); or
(ii) termination of employment for Good Reason (as defined in the Separation and
Retention Plan). A Separation Payment has been made by the Company to three Key
Employees.
The Separation Payments would be in addition to those provided under Lone
Star's Standard Severance Payment Plan in the event of involuntary termination
of salaried employees. Under the Standard Severance Payment Plan, those
employees with less than five years service would receive a payment equal to
four weeks salary. Those employees working for five years or more are entitled
to severance payments equal to one week's salary for each year of service, up to
a maximum of fifty-two weeks.
Rosebud Incentive Plan
The Rosebud Incentive Plan provides that after payment of the Asset
Proceeds Notes in full, a pool of 20% of the net proceeds from remaining Rosebud
Asset dispositions, up to a maximum of $5,000,000, will be
43
<PAGE> 46
available for distribution to key employees of the Company to be selected by the
Compensation and Stock Option Committee of the Company's Board of Directors.
That Committee will also determine the amounts of the incentive awards. No
individual may receive more than 15% of the aggregate funds awarded nor is an
individual eligible to receive an incentive payment unless he or she is employed
by the Company on the date(s) such payments are to be distributed. Mr. David W.
Wallace, Chairman of the Board of the Company, is not eligible to receive
incentive payments. As yet, no individuals have been designated by the
Compensation and Stock Option Committee to participate in the Rosebud Incentive
Plan.
Directors' Compensation
Directors who are not Lone Star employees ("Non-Employee Directors") are
compensated for their services at an annual rate of $20,000 plus $1,000 for each
board and board committee meeting attended, have rights pursuant to certain
indemnification agreements, and are provided with $100,000 of life insurance.
Such insurance continues for directors who leave the board of directors after
five or more years of service as a director. In addition, Non-Employee Directors
who have five or more years of service as a director are entitled to receive
annual payments of $15,000 for ten years, commencing on the earlier of the
director's death (in which case payments are to be made to his beneficiary) or
his leaving the board of directors. All of the directors are Non-Employee
Directors except for Messrs. Troutman and Wallace. Mr. Wallace, having served
more than five years as a Non-Employee Director, is entitled to receive $15,000
for 10 years upon his retirement from the board. In 1988, Lone Star deposited
$1,500,000 into a bank trust fund to provide for payment of these annual
payments and claims under the directors' indemnification agreements; however,
the rights of directors to such payments are not limited by the amount of money
in this fund. At June 30, 1994 the balance in this fund was $1,324,147 and eight
persons were receiving payments under the directors retirement program.
Effective as of April 14, 1994, the Company established the Directors Plan
in which Non-Employee Directors are eligible to participate. The Directors Plan
provides for the issuance of options to purchase up to 50,000 shares of Common
Stock, subject to adjustment under certain circumstances.
Each year during the term of the Directors Plan, each eligible Non-Employee
Director will automatically be granted an option to purchase 1,000 shares of
Common Stock. Pursuant to the Directors Plan, the per share exercise price of an
option will be the fair market value of a share of Common Stock on the date of
grant. All of such options vest six months and expire 10 years after the date of
grant. The Directors Plan is administered by the Board of Directors and expires
on March 10, 2004. Pursuant to the Directors Plan, on June 10, 1994 each
Non-Employee Director was granted a 10-year option to purchase 1,000 shares of
Common Stock, which option vests in full six months from the date of grant.
STOCK OPTIONS
Effective as of April 14, 1994, the Company established the Management Plan
in which officers and other key management employees are eligible to
participate. The Management Plan provides for the issuance of incentive and
non-qualified stock options to purchase up to 700,000 shares of Common Stock,
subject to adjustment under certain circumstances. The Compensation and Stock
Option Committee of the Board of Directors has the exclusive authority to
determine the persons eligible to participate and to determine the amount and
the terms and conditions of the awards made to each participant, within the
parameters of the Management Plan. Pursuant to the Management Plan, the per
share exercise price of an option will not be less than the fair market value of
a share of Common Stock on the date of grant. All of such options will expire 10
years from the date of grant. The Management Plan terminates on March 10, 2004.
In June 1994, incentive and non-qualified options to purchase an aggregate
of 700,000 shares of Common Stock were granted pursuant to the Management Plan,
which options were granted at the fair market value of the Common Stock on the
date of grant and expire 10 years from such date. Options were granted to
officers and other key management employees, including Messrs. Wallace,
Troutman, Martin, Campbell and Diccianni, who received options to purchase
125,000, 125,000, 25,000, 75,000, and 25,000 shares, respectively. All of such
options vest in four equal installments, with the first 25% vesting on July 1,
1994 and the balance
44
<PAGE> 47
on January 1, 1995, 1996 and 1997, except for options granted to (i) Messrs.
Wallace and Troutman which vested in full on the date of grant and (ii) Mr.
Martin which vest in the following three installments: 6,504 on each of July 1,
1994 and January 1, 1995 and the balance on January 1, 1996.
Information concerning Stock Option Plans of the Company in effect on
December 31, 1993 is not provided because such plans were terminated and all
options outstanding thereunder were cancelled pursuant to the Plan of
Reorganization, without any such options being exercised.
EMPLOYEE STOCK PURCHASE PLAN
Effective as of June 9, 1994, the Company established the Lone Star
Industries, Inc. Employees Stock Purchase Plan (the "Employee Plan"), in which
all eligible employees, including officers, may elect to purchase shares of
Common Stock by means of a monthly payroll deduction of not less than 2% nor
more than 6% of base pay. The Company contributes 25% of such deduction, plus
all brokerage commissions payable for the purchase transactions. The number of
shares of Common Stock purchased for the employee in each purchase transaction
depends upon the market price of the Common Stock at the time such purchases are
made. The employee acquires immediate and full ownership of all shares and
fractional interests in shares purchased for such employee's account at the time
of such purchase.
SALARIED EMPLOYEES PENSION PLAN
In 1984, Lone Star terminated its Retirement Plan for Salaried Employees
and established the Lone Star Industries, Inc. Salaried Employees Pension Plan
with the same type of benefits as the terminated plan. All benefits earned under
the provisions of the terminated plan became fully vested and guaranteed annuity
contracts were purchased to cover such benefits.
The following table shows the estimated annual benefits payable upon
retirement to persons in specified compensation and years of credited service
classifications under the Salaried Employees Pension Plan:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION BENEFIT PAYABLE AT NORMAL RETIREMENT
ASSUMING THE FOLLOWING YEARS OF CREDITED SERVICE
ASSUMED AVERAGE ------------------------------------------------------------------
ANNUAL COMPENSATION 10 15 20 25 30 35
------------------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$125,000................... $18,900 $27,800 $ 36,800 $ 45,800 $ 54,800 $ 63,700
150,000................... 23,000 33,900 44,900 55,900 66,800 77,800
175,000................... 27,100 40,000 53,000 65,900 78,900 91,800
200,000................... 31,200 46,100 61,100 76,000 90,900 105,800
250,000................... 39,400 58,300 77,200 96,100 115,000 133,900
300,000................... 47,700 70,500 93,400 116,300 139,100 162,000
350,000................... 55,900 82,700 109,600 136,400 163,200 190,100
400,000................... 64,100 94,900 125,700 156,500 187,300 218,100
</TABLE>
The compensation covered by the Plan includes base pay, subject to ERISA
limitations of $228,860 for 1992, $235,840 for 1993 and $150,000 for 1994. Base
pay is shown in the second column of the Summary Compensation Table.
The years of Credited Service for Roger J. Campbell, Pasquale D. Diccianni,
John J. Martin, William M. Troutman and David W. Wallace are 8, 29, 14, 11 and
3, respectively.
The benefits shown in this table are payable for the lifetime of the
individuals. The benefits shown are payable without reduction at age 62 or
later, and are not subject to any deductions or offsets. However, ERISA
currently limits benefits payable at age 65 to $115,641 for 1993 and $118,800
for 1994.
45
<PAGE> 48
PRINCIPAL STOCKHOLDERS
The following table presents certain information regarding the beneficial
ownership of Common Stock at August 1, 1994 by (a) each stockholder known by the
Company to be the beneficial owner of more than five percent of the outstanding
shares of Common Stock, (b) each director, (c) each executive officer named in
the Summary Compensation Table, and (d) all directors and current executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OUTSTANDING SHARES
BENEFICIAL OWNERS OF COMMON STOCK OF COMMON STOCK(1)
------------------- -------------------- ------------------
<S> <C> <C>
Metropolitan Life Insurance Company and Metropolitan
Insurance and Annuity Company........................ 2,714,958(2) 21.1%
One Madison Avenue
New York, NY 10010
The TCW Group, Inc. and Affiliates(3).................. 2,003,199 16.7%
18th Floor
865 South Figueroa St.
Los Angeles, CA 90071
James E. Bacon......................................... 99(4) (5)
Theodore F. Brophy..................................... --(4) (5)
Arthur B. Newman....................................... --(4) (5)
Allen E. Puckett....................................... 598(4) (5)
Robert G. Schwartz..................................... 5,000(4) (5)
William M. Troutman.................................... 125,643(4)(6) 1.0%
David W. Wallace....................................... 125,929(4)(7) 1.0%
Jack R. Wentworth...................................... 39(4) (5)
Roger J. Campbell...................................... 18,917(4) (5)
Pasquale P. Diccianni.................................. 6,753(4)(8) (5)
John J. Martin......................................... 7,414(4) (5)
All directors and executive officers as a group (18
persons)............................................. 368,506(9) 3.0%
</TABLE>
- ---------------
(1) The percentage of outstanding shares of Common Stock calculation assumes for
each beneficial owner that all of the currently exercisable options and
warrants beneficially owned by such person or entity are exercised in full
by such beneficial owner and that no other options or warrants are deemed to
be exercised by any other stockholders.
(2) Includes 891,609 shares of Common Stock issuable upon exercise of Warrants
held by such principal stockholder.
(3) TCW Special Credits, an affiliate of The TCW Group, Inc. serves as general
partner of various limited partnerships and investment advisor of various
funds and third party accounts with power to vote and direct the disposition
of shares of Common Stock owned by such limited partnerships, funds and
third party accounts. TCW Asset Management Company, a subsidiary of The TCW
Group, Inc., is the managing general partner of TCW Special Credits. The TCW
Group, Inc. may be deemed to be a beneficial owner of such shares for
purposes of the reporting requirement of the Exchange Act; however, The TCW
Group, Inc. and its affiliates expressly disclaim beneficial ownership of
these shares.
(4) Includes shares of Common Stock which the directors and executive officers
had the right to acquire through the exercise of Warrants held by them as
follows: James E. Bacon -- 83 shares; Allen E. Puckett -- 413 shares;
William M. Troutman -- 538 shares; David W. Wallace -- 777 shares; Jack R.
Wentworth -- 33 shares; and John J. Martin -- 418 shares. Also includes
shares of Common Stock which the executive officers had the right to acquire
through the exercise of options within 60 days of August 1, 1994, as
follows: William M. Troutman -- 125,000 shares; David W. Wallace -- 125,000
shares; Roger J. Campbell -- 18,750 shares; Pasquale P. Diccianni -- 6,250
shares; and John J. Martin -- 6,504 shares. Does not include shares of
Common Stock which the directors and executive officers had the right to
acquire through the exercise of options not exercisable within 60 days of
46
<PAGE> 49
August 1, 1994, as follows: James E. Bacon -- 1,000 shares; Theodore F.
Brophy -- 1,000 shares; Arthur B. Newman -- 1,000 shares; Allen E.
Puckett -- 1,000 shares; Robert G. Schwartz -- 1,000 shares; Jack R.
Wentworth -- 1,000 shares; Roger J. Campbell -- 56,250 shares; Pasquale P.
Diccianni -- 18,750 shares; and John J. Martin -- 18,496 shares.
(5) Represents less than 1% of the outstanding shares of Common Stock.
(6) Does not include 80 shares of Common Stock jointly held by Mr. Troutman's
father and son, as to which shares he disclaims beneficial ownership.
(7) Does not include 99 shares of Common Stock (including 83 shares of Common
Stock issuable upon exercise of Warrants) held by Mr. Wallace's wife, as to
which shares he disclaims beneficial ownership.
(8) Does not include 793 shares of Common Stock (including 663 shares of Common
Stock issuable upon exercise of Warrants) owned by Mr. Diccianni's wife, as
to which shares he disclaims beneficial ownership.
(9) Includes or excludes, as the case may be, shares of Common Stock as
indicated in the preceding footnotes. With respect to the executive officers
not named above, (i) includes 21 shares of Common Stock issuable upon
exercise of Warrants and 81,250 shares of Common Stock issuable upon
exercise of options exercisable within 60 days of August 1, 1994 and (ii)
excludes 243,750 shares of Common Stock issuable upon exercise of options
not exercisable within such time period and an aggregate of 1,001 shares of
Common Stock held by the wives of two such officers, as to which shares
beneficial ownership is disclaimed by such officers.
------------------------
Except as noted in the footnotes above (i) none of such shares is known by
the Company to be shares with respect to which such beneficial owner has the
right to acquire beneficial ownership and (ii) the Company believes the
beneficial holders listed above have sole voting and investment power regarding
the shares shown as being beneficially owned by them.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As authorized by the stockholders at the 1988 Annual Meeting, the Company
has entered into indemnification agreements with Mr. John J. Martin, an
executive officer, and each of the directors named in this Prospectus.
The provisions of each indemnification agreement provide for
indemnification to the fullest extent permitted by law. They cover all amounts
paid in connection with any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether civil, criminal,
administrative or otherwise (a "proceeding"), related to the fact that such
director or officer is or was a director, officer, employee, agent or fiduciary
of the Company or is or was serving at the request of the Company in any
capacity with another entity, or by reason of anything done or not done by such
director or officer in any such capacity.
Indemnification would not, however, be available if a person or body
appointed by the Company's Board of Directors who is not a party to the
proceeding for which indemnification is sought and who may be or consist of one
or more members of the Board (or, under certain circumstances discussed below,
independent legal counsel) determines that such indemnification is not permitted
under applicable law and such determination is not successfully challenged
before a court. A director's or officer's rights under the indemnification
agreement are not exclusive of any other indemnity rights; however, the
agreements prevent double payment.
The indemnification agreements provide for the prompt advancement of
expenses incurred in connection with any proceeding and obligate the director or
officer to reimburse the Company for amounts so advanced if it is subsequently
determined that the director or officer is not entitled to indemnification. The
indemnification agreements further provide that the director or officer is
entitled to indemnification for, and advancement of, expenses incurred in any
proceeding seeking to collect from the Company an indemnity claim or advancement
47
<PAGE> 50
of expenses under the indemnification agreements, the Company's By-Laws or
otherwise, or in seeking to recover under a directors' and officers' liability
insurance policy, whether or not the director or officer is successful. Pursuant
to the indemnification agreements all legal actions brought against the director
or officer by or in the right of the Company must be brought within a period of
two years from the date of the accrual of such actions (or any shorter period
that would otherwise be applicable), after which period any such cause of action
will be extinguished.
After a change in control (as defined) of the Company not approved by the
Company's board of directors, all determinations to be made by or on behalf of
the Company regarding a director's or officer's right to indemnification and to
the advancement of expenses are required to be made by independent legal counsel
to be selected by the director or officer and approved by the board. In the
event of a potential change in control (as defined) of the Company, the director
or officer may require the Company to establish a trust for such director's or
officer's benefit and to fund such trust in an amount sufficient to cover
reasonably anticipated costs in connection with any claims.
Pursuant to the Plan of Reorganization, the Company assumed, to the extent
such obligations have not been rejected prior to Confirmation, all obligations
relating to indemnification and exculpation of the Company, and its subsidiaries
and affiliates, respective present or former directors, officers, employees,
fiduciaries, agents or controlling persons as arise under applicable laws or as
provided in any of (i) the Company's Amended and Restated Certificate of
Incorporation, (ii) the Company's by-laws, (iii) any agreement with the Company
or (iv) the certificate of incorporation, by-laws or similar documents or
agreements of any of the Company's subsidiaries, all as in effect prior to or as
of the Plan Effective Date, and in each case with respect to matters occurring
on or prior to the Plan Effective Date. In addition, the Company provides
directors and officers liability insurance.
Also pursuant to the Plan of Reorganization, all of the Company's present
and former officers and directors, agents, employees, professionals and counsel
(collectively, the "Released Parties") were discharged and released from any and
all claims asserted or assertable by any person arising in any way out of such
person's relationship with or work performed for the Company on or prior to the
Plan Effective Date; except, however, that (i) the foregoing discharge and
release only applies to those claims for which the Released Parties are entitled
to indemnification by the Company pursuant to applicable laws or as provided in
any of (a) the Company's Amended and Restated Certificate of Incorporation, (b)
the Company's by-laws, (c) any agreement with the Company, or (d) the
certificates of incorporation, by-laws or similar documents or agreements of any
of the Company's subsidiaries, all as in effect prior to or as of the Plan
Effective Date, and in each case with respect to matters occurring on or prior
to the Plan Effective Date, and (ii) the discharge and release does not apply to
(a) any of the Company's present officers or directors who were released prior
to the Plan Effective Date by order of the bankruptcy court and as to such
individuals, the terms of their respective releases shall govern, (b) any of the
Company's present officers or directors who are the subject of a proceeding to
recover property or money commenced by the Company prior to the Plan Effective
Date, or (c) any claims asserted or assertable by or against any of the
Company's present or former officers or directors in the following litigations
settled in the United States District Court for the District of Connecticut: (1)
Cohn v. Lone Star Industries, Inc., et al., Civ. No. B-89-617 (JAC), and (2)
Garbarino, et ano. v. Stewart, et al., Civ. No. B-90-631 (JAC).
Mr. Arthur B. Newman, a director of the Company, is a General Partner in
The Blackstone Group. Pursuant to an Order of the bankruptcy court, the Company
employed The Blackstone Group as its financial advisor during the
Reorganization. Fees paid to The Blackstone Group for services rendered in
connection with the Reorganization prior to the confirmation of the Plan of
Reorganization were approved by the bankruptcy court and fees paid for services
rendered thereafter were not subject to bankruptcy court approval.
Mr. Robert G. Schwartz, a director of the Company, was formerly Chairman of
the Board of Directors, President and Chief Executive Officer of Metropolitan
Life Insurance Company ("MetLife") and continues to serve as a director of
MetLife, a principal stockholder of the Company and one of the Selling
Securityholders. In connection with the Reorganization, Metropolitan Insurance
and Annuity Company ("MIAC") and its parent, MetLife, filed claims against the
Company with respect to their aggregate holdings
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of $50 million outstanding principal amount of the Company's defaulted 9.5%
Promissory Notes due 1991 and with respect to the Company's rejection of a lease
for office space at One Commerce Green located in Houston, Texas. These claims
have been allowed and paid in accordance with the terms of the Plan of
Reorganization. MetLife was also the holder of 275,000 shares of the Company's
$13.50 Cumulative Convertible Preferred Stock which was cancelled as of the Plan
Effective Date and for which shares of Common Stock and Warrants have been
issued to MetLife. The shares of Common Stock, Warrants and Senior Notes which
MetLife and MIAC received pursuant to the Plan of Reorganization are being
registered hereunder. In addition, effective July 1993, MetLife, through various
subsidiaries, has been a manager of accounts established under group annuity
contracts for the Lone Star Industries, Inc. Savings Plan for Salaried
Employees, for which services MetLife is paid a fee based on a percentage of
funds under management, together with reimbursement for certain direct costs
incurred by MetLife. For the year ended December 31, 1993, MetLife received
$11,175 for services rendered. This management arrangement may be terminated by
the Company at any time. Assets held under management by MetLife were
approximately $7,500,000 at July 31, 1994.
MetLife is currently a defendant in several cases in which the Company is
also a defendant. In certain of these cases, MetLife may have cross claims
against the Company. If MetLife brings a cross claim action against the Company,
the Company believes that it will have valid defenses available to it; provided,
however, there can be no assurance that the Company's defenses will prevail.
As of July 18, 1994, the Company, MetLife, MIAC and TCW Special Credits, as
agent and nominee for the entities listed on Schedule I thereto (a principal
stockholder of the Company and one of the Selling Securityholders) entered into
a registration rights agreement (the "Registration Rights Agreement") pursuant
to which the Company agreed to register the Securities held by such entities and
maintain an effective registration statement until such time as in the opinion
of counsel a prospectus is not required to be delivered in connection with the
sale of the registered securities. The securities registered hereunder are being
registered pursuant to the Registration Rights Agreement. The Selling
Securityholders also were granted "piggyback" registration rights. Pursuant to
the Registration Rights Agreement, the Company agreed to pay all of the expenses
incident to the registration, offering and sale of the Securities offered hereby
to the public other than commissions, fees and discounts of the underwriters,
dealers or agents. Under the Registration Rights Agreement, the Company agreed
to indemnify the Selling Securityholders against certain civil liabilities,
including liabilities under the Securities Act.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 25,000,000 shares of Common Stock. As of
August 16, 1994, 12,000,000 shares of Common Stock were outstanding, which
includes 578,524 shares which pursuant to the Plan of Reorganization will be
distributed to pre-petition unsecured creditors and holders of pre-petition
equity interests but which had not been issued as of such date. In addition,
4,709,333 shares of Common Stock were reserved for issuance upon exercise of
outstanding warrants and options.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of the stockholders, including the election of directors.
The Company's Amended and Restated Certificate of Incorporation does not provide
for cumulative voting for the election of directors. The holders of Common Stock
are entitled to dividends as declared from time to time by the Board of
Directors from funds legally available therefor and such holders will be
entitled to receive pro rata all assets of the Company available for
distribution to such holders upon liquidation. No shares of Common Stock have
any preemptive rights to subscribe for additional shares of capital stock.
Under the Senior Note Indenture, dividends on the Common Stock can be paid
only in certain circumstances and up to a maximum amount. See "Senior
Notes -- Restricted Investments and Restricted
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Stock Payments" below. In addition, the Credit Agreement prohibits the payment
of dividends by the Company.
The Company's Restated Certificate of Incorporation provides that the Board
of Directors shall be divided into three classes of directors, each class to be
as nearly equal in number of directors as possible. The initial term of office
of each director in the first class will expire at the annual meeting of
stockholders in 1997; the initial term of office of each director in the second
class will expire at the annual meeting of stockholders in 1995; and the initial
term of office of each director in the third class shall expire at the annual
meeting of stockholders in 1996. At each annual election, the successors to the
class of directors whose term expires at that time shall be elected to hold
office for a term of three years, and until their respective successors shall be
elected and qualified, to succeed those directors whose term expires, so that
the term of one class of directors will expire each year. Under the Delaware
General Corporation Law, in the case of a corporation having a classified board,
stockholders may remove a director only for cause. The classification of the
Board of Directors of the Company makes it more difficult to replace the Board
of Directors as well as for another party to obtain control of the Company by
replacing the Board of Directors. Since the Board of Directors has the power to
retain and discharge officers of the Company, these provisions could also make
it more difficult for existing stockholders or another party to effect a change
in management.
WARRANTS
As of August 16, 1994, there were 4,003,333 Warrants outstanding, including
213,962 Warrants which pursuant to the Plan of Reorganization will be
distributed to holders of pre-petition equity interests but which had not been
issued as of such date. Each Warrant entitles the holder thereof to purchase one
share of Common Stock. The Warrants are non-callable, non-redeemable and
exercisable until December 31, 2000 at a price of $18.75 per share.
The number of shares of Common Stock purchasable upon the exercise of each
Warrant and the exercise price of the Warrant are subject to adjustment if the
Company (i) pays a dividend in shares of Common Stock, (ii) subdivides its
outstanding shares of Common Stock, (iii) combines its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or issues by
reclassification or recapitalization of its shares of Common Stock, other
securities of the Company or (iv) issues certain stock rights convertible into,
or exchangeable for, Common Stock. An adjustment will not result from the
Company's sale of Common Stock on the open market or the declaration of regular
cash dividends.
SENIOR NOTES
The Senior Notes were issued under an indenture dated as of March 29, 1994
(the "Senior Note Indenture") between the Company and Chemical Bank, as trustee
(the "Trustee"). The terms of the Senior Notes include those stated in the
Senior Note Indenture and those made part of the Senior Note Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act") as in
effect on the date of the Senior Note Indenture. The Senior Notes are subject to
all such terms, and reference is made to the Senior Note Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Senior Note Indenture does not purport to be complete and is
qualified in its entirety by reference to the Senior Note Indenture, including
the definitions therein. Capitalized terms used herein and not otherwise defined
herein shall have the meanings as defined in the Senior Note Indenture.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Senior Note Indenture. Reference is made to the Senior Note Indenture for the
full definition of all such terms as well as any other capitalized terms used
herein for which no definition is provided.
"Adjusted Consolidated Net Income" means, with respect to the period
commencing on the Effective Date and continuing through the last day of the
fiscal quarter of the Company immediately preceding the date of determination
(i) the sum of fifty percent of the Consolidated Net Income for each fiscal year
or partial
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fiscal year in such period minus (ii) the sum of one hundred percent of the
Consolidated Net Losses for each fiscal year or partial fiscal year in such
period.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under common control with the Company or any Guarantor, as the
case may be; provided, however, that the term Affiliate, with respect to the
Company, will not include any wholly-owned Restricted Subsidiary of the Company.
For this purpose, "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
at any date of determination, the quotient obtained by dividing (a) the sum of
the products of (i) the number of years from such date to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
"Board of Directors" means the Board of Directors of any Person or any
committee of the Board authorized to act for it hereunder.
"Capital Stock" means any shares, interests, participations, rights in or
other equivalents (however designated) of such Person's capital stock, and any
rights (other than debt securities convertible into capital stock), warrants or
options exchangeable for or convertible into such capital stock.
"Capitalized Lease" means, at the time any determination thereof is to be
made, any lease of property, real or personal, in respect of which the present
value of the minimum rental commitment would be capitalized on a balance sheet
of the lessee in accordance with GAAP.
"Capitalized Rent" under any Capitalized Lease will mean, at any time as of
which the amount thereof is to be determined, the lesser of (i) 10 times the
amount of the maximum net rent payable under such lease during any period of 12
consecutive months subsequent to the date as of which the rental obligation is
to be determined and (ii) the lesser of (x) the aggregate amount of net rent
payable under such lease until the expiration thereof in accordance with its
terms and (y) the aggregate amount of net rent payable thereunder until the
first date as of which the lessee will have the right to terminate such lease,
together with any other payments required on the part of the lessee to effect
such termination. The net rent payable under any lease for any period will be
the total amount of the rent payable by the lessee with respect to such period
but will not include amounts required to be paid on account of maintenance and
repairs, insurance, taxes, assessments, water rates and similar charges. The
amount to be included in net rent for any given period with respect to any
portion thereof which may be a variable will be such amount as the Company will
in good faith determine is reasonably to be expected to be due as a result of
such variable.
"Cash Equivalents" means, at any time: (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; (iii) commercial paper with a maturity of
180 days or less issued by a corporation that is not an Affiliate of the Company
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by S&P or at least P-1 by Moody's or at least an
equivalent rating category of another nationally recognized securities rating
agency; (iv) repurchase agreements and reverse repurchase agreements, in each
case maturing within 180 days from the date of acquisition, collateralized by
marketable direct obligations issued or unconditionally guaranteed by the
government of the United States of America or issued by any agency thereof and
backed by the full faith and credit of the United States of America; provided
that the terms of such agreements comply with the guidelines set forth in the
Federal Financial Agreements of Depository Institutions With Securities Dealers
and Others, as adopted by the Comptroller of the Currency on October 31, 1985;
and (v) money market funds described in clause (v) of the definition of
Permitted Investments.
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"Change of Control" means (a) a sale of all or substantially all of the
assets of the Company as an entirety to any person (within the meaning of Rule
13d-3 under the Exchange Act and Sections 13(d) and 14(d) of the Exchange Act),
(b) the approval by the stockholders of the Company of a plan of liquidation or
dissolution, or (c) any person or group (within the meaning of Rule 13d-5 under
the Exchange Act and Section 13(d) and 14(d) of the Exchange Act) becoming,
directly or indirectly, the "beneficial owner," as defined in Rule 13d-3 under
the Exchange Act (in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business combination or
otherwise), of greater than 50% of the total voting power entitled to vote in
the election of directors, managers or trustees of the Company or such other
person surviving the transaction.
"Consolidated Net Income (Loss)", with respect to any period subsequent to
the Effective Date, means net income (or loss) of the Company and its
Subsidiaries, other than Rosebud, Construction Aggregates and any Subsidiary
referred to in clause (A)(i) of the definition of Restricted Subsidiary (as set
forth below), all as consolidated (except as expressly provided herein) and
determined in accordance with GAAP but excluding, without duplication, (i) all
extraordinary gains or losses (net of fees and expenses relating to the
transaction giving rise thereto); (ii) net income (or loss) of any Person
combined with such Person or one of its Subsidiaries on a "pooling of interests"
basis attributable to any period prior to the date of combination; (iii) gains
or losses in respect of Sales of Assets (net of fees and expenses relating to
the transaction giving rise thereto and on an after-tax basis); (iv) the net
income of any Subsidiary to the extent that the declaration of dividends or
similar distributions by that Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulations applicable to that Subsidiary or its stockholders; and
(v) any net income of any Person who is not a wholly-owned Subsidiary (except to
the extent of the amount of dividends or distributions actually paid in cash to
the Company or a wholly-owned Subsidiary of the Company during such period, but
not in excess of the Company's pro rata share of such Person's net income).
"Consolidated Net Worth" means the total assets of a Person and its
Restricted Subsidiaries minus the total liabilities of a Person and its
Restricted Subsidiaries, as consolidated (except for the exclusion of
Subsidiaries which are not Restricted Subsidiaries) and determined in accordance
with GAAP; provided, however, when determining the Consolidated Net Worth of a
Person and its Restricted Subsidiaries for purposes of Section 5.01(iv) of the
Senior Note Indenture, New York Trap Rock and NYTR Transportation will be
excluded.
"Construction Aggregates" means Construction Aggregates Limited, a
corporation organized under the laws of Nova Scotia.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Dividends" means any dividends declared by a Person on its Capital Stock
(other than (i) dividends payable to the Company or dividends payable by
Subsidiaries of a Restricted Subsidiary to such Restricted Subsidiary, (ii)
dividends payable solely in Capital Stock of the Company and (iii) dividends
required under the terms of Preferred Stock of a Restricted Subsidiary permitted
under Section 4.10 of the Senior Note Indenture).
"EBITDA" means, in respect of any period subsequent to the Effective Date,
the Consolidated Net Income (or Consolidated Net Loss), plus (i) any amounts
that were deducted from revenues in determining such Consolidated Net Income (or
Consolidated Net Loss) in respect of depreciation, amortization and Interest
Expense, (ii) the aggregate amount of any provisions (or minus any credits) for
federal, state, and local franchise, income and similar taxes (including taxes
based on capital), and (iii) without duplication, the aggregate amount of all
non-cash charges to Consolidated Net Income (or Consolidated Net Loss); minus
(a) non-cash items increasing Consolidated Net Income and (b) interest income.
"Employee Settlement Agreements" means settlement agreements in effect on
the Effective Date with (i) the PBGC, (ii) the Official Committee of Retired
Employees of the Company and its Subsidiaries and
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(iii) the Unions, and all related agreements, documents and instruments, as
amended, modified and supplemented from time to time to the extent permitted
under Section 4.16(d) of the Senior Note Indenture.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Controlled Group" means a group which includes the Company and which
is treated as a single employer under Section 414(b) or (c) of the Internal
Revenue Code of 1986, as amended.
"Event of Default" has the meaning assigned to such term in Section 6.01 of
the Senior Note Indenture.
"Excepted Lease" means (i) any lease existing on the Effective Date and
renewals or extensions thereof and (ii) any lease between the Company or any
Restricted Subsidiary (other than New York Trap Rock and NYTR Transportation)
and the Company or any wholly-owned Restricted Subsidiary (other than New York
Trap Rock and NYTR Transportation) and (iii) any lease which is a Trap Rock
Permitted Transaction.
"Excess Net Proceeds" means at any date of determination, the excess of (i)
all Net Proceeds received from time to time subsequent to the Effective Date
during the Company's fiscal year (or portion thereof) in which such date occurs
by the Company or any Restricted Subsidiary over (ii) $2 million.
"Fair Value" means fair market value as determined in good faith by the
Board of Directors of the Company.
"First Fiscal Year" means the first four complete fiscal quarters following
the Effective Date.
"GAAP" means generally accepted accounting principles in effect from time
to time.
"Guarantee" means the Guarantee set forth in Article 10 of the Senior Note
Indenture to be made for the benefit of the holders of Senior Notes from time to
time by the Guarantors.
"Guarantee Agreement" means the Guarantee Agreement, dated of even date
with the Senior Note Indenture, between the Company and Chemical Bank, as
Trustee, pursuant to which the Company has guaranteed the payment of a portion
of the Asset Proceeds Notes issued pursuant to the Rosebud Indenture.
"Guarantor" means each Restricted Subsidiary in existence from time to time
other than New York Trap Rock and NYTR Transportation.
"Incentive Compensation Plan" means the incentive compensation plan for
certain employees of the Company with respect to the sale of assets of Rosebud
as in effect on the Effective Date and any replacement or modification thereto
so long as such replacement or modification is not materially disadvantageous to
the Holders or the Company.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for money borrowed, created, incurred or assumed by such Person or
guaranteed by such Person or for which it is otherwise liable or responsible
(such as by agreement to purchase indebtedness of others), (b) all amounts owing
by such Person under Purchase Money Indebtedness or other purchase money liens
or conditional sales or other title retention agreements, (c) all indebtedness
secured by any mortgage, pledge or other lien or encumbrance upon property owned
by such Person, even though such Person has not assumed or become liable for the
payment of such indebtedness, (d) all Capitalized Rent under any Capitalized
Lease (other than Excepted Leases), (e) the lowest mandatory or optional
redemption price or liquidation value of outstanding Preferred Stock issued by
such Person, if a Restricted Subsidiary, and owned by any Person other than the
Company or another Restricted Subsidiary, (f) all obligations under any
agreement relating to the fixing of interest rates on any Indebtedness, such as
an interest rate swap, cap or collar agreement if and to the extent the same
would constitute a liability on the balance sheet of such Person prepared in
accordance with GAAP and (g) all obligations in respect of standby letters of
credit issued at the request of such Person; provided, however, that the term
Indebtedness excludes (i) trade payables and other accrued current liabilities
incurred in the ordinary course of business; (ii) any obligations to the Company
or any Restricted Subsidiary; (iii) any obligations arising from the Production
Payment Transaction, (iv) in the case of the Company, any obligations arising
under the Guarantee Agreement and (without limitation) any obligations on any
Payment Notes hereafter issued thereunder and (v) any particular indebtedness
if, upon or prior to the maturity
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thereof, there shall have been deposited with the proper depository in trust
money (or evidences of such indebtedness if permitted by the instrument creating
such indebtedness) in the necessary amount to pay, redeem or satisfy such
indebtedness as and when due, and thereafter such money and evidences of
indebtedness so deposited shall not be included in any computation of the assets
of such Person. In determining the Indebtedness of the Company and its
Restricted Subsidiaries, any Indebtedness for which the Company and one or more
Restricted Subsidiaries or for which two or more Restricted Subsidiaries are
obligated shall be deemed to be Indebtedness of only one such Person.
"Interest Expense" means, in respect of any period subsequent to the
Effective Date, (i) all interest charges on Indebtedness of the Company and its
Restricted Subsidiaries (and, in the case of Preferred Stock included in the
definition of Indebtedness, mandatory dividends thereon when payable, regardless
of when declared, other than liquidating and similar dividends) paid or payable
(or, with respect to any original issue discount, accrued) in respect of such
period, including without limitation all late charges, funding cost adjustments,
prepayment and yield protection fees paid or payable in respect of Indebtedness,
and interest payable on obligations arising under the Production Payment
Transaction, during such period and (ii) 4% of the amount of all lease payments
(other than lease payments under Capitalized Leases) during such period in
connection with any sale-leaseback transaction entered into after the date
hereof.
"Interest Expense Ratio" means the ratio of (i) the aggregate EBITDA for
the four complete fiscal quarters (or such smaller number of fiscal quarters as
have elapsed since the Effective Date) immediately preceding the date of
calculation to (ii) the aggregate Interest Expense for such four immediately
preceding fiscal quarters (or shorter period, as the case may be); provided,
however, that in calculating the Interest Expense Ratio for purposes of
determining whether proposed Indebtedness may be incurred or a sale-leaseback
transaction may be entered into (A) Interest Expense will be calculated on a pro
forma basis giving effect to the incurrence of such proposed Indebtedness or
sale-leaseback transaction as if it were incurred on the first day of such four
fiscal quarter period and (B) if the incurrence of such Indebtedness or the
entering into of any sale-leaseback transaction relates to any transaction
proposed by the Company (and otherwise permitted hereunder), any EBITDA,
determined on a pro forma basis, which the Company or its Subsidiaries would
have received had such transaction been consummated immediately prior to such
four fiscal quarter period (calculating, in the event of an acquisition, such
EBITDA, to the extent practicable, from actual financial results for the
appropriate period) will be included within the aggregate EBITDA referenced in
clause (i) above for purposes of such calculation.
"Inventory" means finished goods, work in process, repair parts and
supplies, fuels and packages, raw materials and goods in transit.
"Investment" means, other than in the ordinary course of business,
providing any cash or assets to, or extending credit to, or becoming liable in
respect of, or otherwise providing for, payment of any Indebtedness of, any
Person, whether or not in exchange for securities of any Person or other
consideration.
"Kosmos" means Kosmos Cement Company, a Kentucky partnership.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or similar encumbrance 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
Capitalized Lease in the nature thereof, and any filing of or agreement to give
any financing statement under the Uniform Commercial Code or equivalent statutes
of any jurisdiction other than an information filing), but does not include, in
the case of the Company and its Restricted Subsidiaries, the lien granted to the
Trustee under Section 7.07 of the Senior Note Indenture.
"Management Services Agreement" means the management services and asset
disposition agreement in effect on the Effective Date between the Company and
Rosebud and its Subsidiaries and any replacement or modification thereto so long
as such replacement or modification is not materially disadvantageous to the
Holders or the Company.
"Material Restricted Subsidiary" has the meaning assigned to such term in
Section 6.01 of the Senior Note Indenture.
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"Maturity Date" of the Senior Notes means July 31, 2003.
"Moody's" means Moody's Investors Services, Inc. and its successors.
"Multiemployer Plan" means a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Proceeds" with respect to any Sale of Assets, means the cash (in U.S.
dollars or currency freely convertible into U.S. dollars) received from such
Sale of Assets after (i) provision for all income or other taxes measured by or
resulting from such sale or other disposition or the transfer of the proceeds
thereof to the Company that are payable by the Company or any of its
Subsidiaries (as reasonably and in good faith estimated by the Chief Financial
Officer of the Company or such Subsidiary), (ii) payment of all brokerage
commissions, legal and accounting fees and expenses and other fees and expenses
related to such sale or other disposition, (iii) deduction of any amounts
required to be paid to the lender pursuant to any Permitted Working Capital
Loans or West Nyack Indebtedness upon such Sale of Assets to the extent actually
paid, (iv) deduction of amounts provided by the Company or its Subsidiaries as a
reserve on its regularly prepared balance sheets (or the notes thereto), in
accordance with GAAP consistently applied (including, without limitation,
subject to the next succeeding sentence, all amounts escrowed, pledged or
otherwise set aside to assume payment of such liabilities), against any
liabilities associated with the assets sold in such Sale of Assets and retained
by the Company or its Subsidiaries, including, without limitation, trade
payables, payroll and pension and other employment and postemployment benefit
liabilities and liabilities related to environmental matters, or against any
indemnification obligations associated with the sale or other disposition, (v)
deduction of amounts set aside in good faith for the construction, acquisition
or improvement of assets as contemplated by clause (D) of the proviso to the
definition of "Sale of Assets," and (vi) deduction of any amounts required to
discharge any Permitted Liens on the assets sold, leased, conveyed or otherwise
disposed of. Net Proceeds (i) will not include any proceeds from the transfer of
the Non-Core Assets pursuant to the Plan of Reorganization but (ii) will
include, when received in cash (x) any Net Proceeds from the sale or other
disposition of any non-cash proceeds received by the Company or any of its
Subsidiaries from a Sale of Assets and (y) any Net Proceeds released from
escrow, pledge or other set aside pursuant to the contract, settlement or other
instrument or document governing such aspect of the Sale of Assets and amounts
no longer reserved or set aside as described in clause (iv) or (v),
respectively, of the immediately preceding sentence.
"New York Trap Rock" means New York Trap Rock Corporation, a Delaware
corporation.
"NYTR Transportation" means NYTR Transportation Corp., a Delaware
corporation.
"Officer" means the Chairman of the Board, the President, any Senior
Vice-President, Executive Vice-President or any other Vice-President, the
Treasurer or the Secretary of the Company or a Guarantor, as the case may be.
"Officers' Certificate" means a certificate signed by any two Officers of
the Company or a Guarantor, as the case may be.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. Such counsel may be an employee of or
counsel for the Company, the Trustee or a Guarantor or other counsel.
"Payment Notes" has the meaning assigned to such term in the Guarantee
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Acquisitions" means (i) any acquisition of assets in the
ordinary course of business and (ii) if approved by the Board of Directors of
the Company, any acquisition out of the ordinary course of business (including
by way of merger or consolidation) of Capital Stock or other equity interests
(but not of less than 100% of such Capital Stock or other equity interests then
outstanding other than director's qualifying shares) or assets of, any Person
(provided such Capital Stock, equity interests or assets primarily relate to a
line of business in which the Company or a Subsidiary is operating immediately
prior to such acquisition); provided,
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in the case of either clause (i) or (ii), that neither the Company nor any
Restricted Subsidiary of the Company (other than the acquired Person and its
Subsidiaries) incurs any liability, contingent or otherwise, for the payment of
any deferred portion of the purchase price therefor, other than Purchase Money
Indebtedness, or for any Indebtedness, obligation or liability, contingent or
otherwise, other than any such liability, contingent or otherwise, which the
Company could incur without violation of the Senior Note Indenture, For purposes
of this definition, "ordinary course of business" shall exclude any acquisition
of all or substantially all of the Capital Stock or assets of a Person, a
division or line of business.
"Permitted Investment" means (i) any Investment in the Company or any
Restricted Subsidiary (whether or not such Person is a Restricted Subsidiary
before such Investment) other than New York Trap Rock and NYTR Transportation;
(ii) Investments in obligations of, or guaranteed by the United States
government or any agency or political subdivision thereof; (iii) Investments in
commercial paper issued by corporations maturing within 180 days from the date
of the original issue thereof, and rated "P-1" or better by Moody's or "A-1" or
better by S&P or an equivalent rating or better by any other nationally
recognized securities rating agency; (iv) Investments in certificates of deposit
issued or acceptances accepted by or guaranteed by any bank or trust company
organized under the laws of the United States of America or any state thereof or
the District of Columbia, in each case having combined capital, surplus and
undivided profits totalling more than $500,000,000 maturing within one year of
the date of purchase; (v) money market funds organized under the laws of the
United States of America or any state thereof that invest substantially all of
their assets in any of the types of Investments described in clause (ii), (iii)
or (iv) above or (xii) below including funds held by Chemical Bank (e.g. the
"Hanover Fund"); (vi) any additional Investments in, or purchases of additional
interests in, Kosmos; (vii) one or more capital contributions to Rosebud on or
before the Effective Date in a maximum aggregate amount of $5 million and any
advance to Rosebud or its Subsidiaries or Affiliates permitted under the
Management Services Agreement; (viii) any Investment in Construction Aggregates,
provided the aggregate amount of such Investments net of cash repayments during
the appropriate period, will not exceed $2 million in any successive 12-month
period and will not when aggregated with Investments described in clause (xiii)
below exceed $5 million in the First Fiscal Year; (ix) any Investments required
pursuant to any agreement existing on the date hereof; (x) Permitted
Acquisitions; (xi) non-cash consideration received in a Sale of Assets or series
of related Sales of Assets, to the extent permitted in Section 4.13 of the
Senior Note Indenture; (xii) Cash Equivalents; (xiii) Investments in any
Affiliates during the First Fiscal Year in the aggregate amount of not more than
$5 million; (xiv) other Investments expressly required by the Plan of
Reorganization; and (xv) Trap Rock Permitted Transactions.
"Permitted Liens" means (i) Liens which may be granted from time to time to
secure and/or maintain Permitted Working Capital Loans; (ii) Liens provided for
or expressly contemplated by the Plan of Reorganization or existing on the
Effective Date; (iii) Liens in favor of the Trustee on all property and funds
held or collected by the Trustee as security for the performance by the Company
of its obligations of payment to, and reimbursement and indemnification of, the
Trustee for its services under the Senior Note Indenture and any similar liens
in favor of the Trustee under any indenture under which the Payment Notes may be
issued; (iv) Liens for taxes or assessments and similar charges, or imposed in
connection with litigation or asserted claims, either not delinquent or
contested in good faith by appropriate proceedings and as to which the Company
or a Subsidiary shall have set aside on its books such reserves as it deems
adequate (provided such reserves will be in accordance with GAAP); (v) Liens
incurred, or pledges and deposits made, in connection with workers'
compensation, unemployment insurance and other social security benefits, or
securing the performance of leases, statutory obligations, progress payments,
surety and appeal bonds and other obligations of like nature, but only to the
extent any of the foregoing are incurred in good faith in the ordinary course of
business; (vi) Liens imposed by law, such as mechanics', carriers',
warehousemen's, materialmen's and vendors' Liens, incurred in good faith in the
ordinary course of business either in respect of amounts not delinquent or
contested in good faith by appropriate proceedings as to which the Company or a
Subsidiary will have set aside on its books such reserves as it deems adequate
(provided such reserves will be in accordance with GAAP); (vii) zoning
restrictions, easements, licenses, covenants, reservations, restrictions on the
use of real property or irregularities of title incident thereto that do not in
the aggregate materially detract from the value of the property or assets of the
Company or any of its Subsidiaries, as the case may be, or materially impair the
use of such property in the operation of the Company's or any Subsidiary's
business;
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(viii) Liens created by Restricted Subsidiaries of the Company to secure
Indebtedness of such Restricted Subsidiaries to the Company or to any
wholly-owned Restricted Subsidiaries (other than New York Trap Rock and NYTR
Transportation) thereof; (ix) any Lien on any asset acquired as a part of a
Permitted Acquisition; (x) Liens on the Capital Stock or other securities of any
Unrestricted Subsidiary or any asset (including the stock of any Subsidiary
thereof) of any Unrestricted Subsidiary to secure Indebtedness of such
Unrestricted Subsidiary; (xi) Liens on assets acquired in connection with the
incurrence of Purchase Money Indebtedness in accordance with the definition
thereof; (xii) Liens granted in connection with the incurrence of Refinancing
Indebtedness in accordance with the definition thereof; (xiii) Liens securing
Employee Settlement Agreements; (xiv) Liens required under the Production
Payment Transaction in accordance with the definition thereof; (xv) any Liens on
the West Nyack, New York, plant and related facilities of the Company and/or its
Restricted Subsidiaries incurred in connection with West Nyack Indebtedness;
(xvi) Liens under Capital Leases and sale and leaseback transactions, each to
the extent permitted under Section 4.10 of the Senior Note Indenture; (xvii)
Liens on the Capital Stock of Rosebud to secure the Company's obligations under
the Guarantee Agreement or any Payment Notes issued thereunder; (xviii) other
Liens expressly required to be granted under the Plan of Reorganization; (xix)
any other Liens existing from time to time securing obligations not exceeding,
in the aggregate, $1.5 million; and (xx) Liens hereafter created to replace
other Permitted Liens to the extent they secure the same obligations and are in
property having an aggregate value no greater than the property subject to the
replaced Lien.
"Permitted Working Capital Loans" means Indebtedness for money borrowed
under committed revolving credit or similar committed facilities for working
capital purposes, or the issuance of letters of credit pursuant to any such
facility, which facility may or may not be secured by a lien on assets customary
for working capital loans (which shall not include real property or tangible
assets (other than Inventory) relating to physical facilities) including,
without limitation, cash, Inventory, general intangibles, Receivables and/or the
Capital Stock of Construction Aggregates and Subsidiaries of the Company (other
than Rosebud and its Subsidiaries, New York Trap Rock and NYTR Transportation)
with total assets with a book value greater than or equal to $500,000, and
proceeds thereof, that the Company or any Restricted Subsidiary of the Company
may have from time to time, to the extent that the aggregate principal amount of
all such Indebtedness outstanding under all such facilities at any time does not
exceed the greater of (i) $35 million or (ii) the sum of 85% of the book value
of the Receivables of the Company and its Restricted Subsidiaries and 60% of the
book value of the Inventory of the Company and its Restricted Subsidiaries.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, or
government or any agency or political subdivision thereof.
"Plan" means any employee benefit plan covered by Title IV of ERISA, the
funding requirements of which:
(i) were the responsibility of the Company or a member of its ERISA
Controlled Group at any time within the five years immediately preceding
the date hereof for which the Company or a member of its ERISA Controlled
Group reasonably could expect to incur liability under Section 4069 or
4212(c) of ERISA,
(ii) are currently the responsibility of the Company or a member of
its ERISA Controlled Group, or
(iii) hereafter becomes the responsibility of the Company or a member
of its ERISA Controlled Group, including any such plans as may, within the
last five years prior to the Effective Date, have been, or may hereafter
be, terminated for whatever reason.
"Preferred Stock", as applied to the stock of any Person, means any class
of stock of such Person which has a preference in respect of dividends of such
Person or other distribution of assets, or in respect of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution and winding up of
such Person, over any other class of stock of such Person.
"Production Payment Transaction" means the Second Amended and Restated
Conveyance of Production Payments and the Second Amended and Restated Marketing
Agreement, each dated as of March 29, 1994,
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the Amended and Restated Option Agreement and the Amended and Restated Expense
and Interest Agreement, each dated as of September 1, 1988, all such documents
between the Company and John Fouhey, as Trustee for Selleck Hill Trust, and all
related documents and instruments, as each of the foregoing may have been
amended, amended and restated or supplemented on or prior to the Effective Date.
"Purchase Money Indebtedness" means any Indebtedness incurred by the
Company or any of its Restricted Subsidiaries in connection with the acquisition
or construction by the Company or such Restricted Subsidiary, after the
Effective Date, of equipment or other fixed assets, including Indebtedness
incurred to finance, refinance or refund the cost (including the cost of
construction) of such assets; provided that a) the principal amount of such
Indebtedness does not exceed 75% of the Fair Value of the assets being acquired
or the cost of construction paid by or charged to the Company or such Restricted
Subsidiary and b) such Indebtedness shall not be secured by any assets of the
Company or any Restricted Subsidiary other than the assets acquired or
constructed with the proceeds of such Indebtedness.
"Receivables" means all "accounts", all "chattel paper", all "documents",
all "instruments" evidencing "accounts" and all proceeds thereof, as each such
term is defined in the Uniform Commercial Code as in effect in the State of New
York on the Effective Date.
"Refinancing Indebtedness" means Indebtedness, the proceeds of which are
used to extend, renew, refinance or refund then outstanding Indebtedness of the
Company or its Restricted Subsidiaries permitted under the Senior Note
Indenture, if such refinancing or refunding Indebtedness (i) does not have a
principal amount in excess of the principal amount of the Indebtedness being so
refinanced or refunded, plus customary fees, expenses and costs related to the
incurrence of such Refinancing Indebtedness; (ii) gives its holders collateral
with no greater value (as determined by the Company's Board of Directors) and no
more guaranties from the Company and its Subsidiaries (other than Unrestricted
Subsidiaries) than the Indebtedness being refinanced; (iii) has an Average Life
to Stated Maturity no shorter than the Indebtedness being refinanced; and (iv)
is at least as junior or no more senior in right of payment to the Senior Notes,
as the case may be, as the Indebtedness being refinanced (it being understood
that the fact that such Indebtedness is secured by a Permitted Lien or
guaranteed by an Unrestricted Subsidiary will not cause the Indebtedness to be
excluded from the definition of Refinancing Indebtedness under this clause
(iv)).
"Reportable Event" shall have the meaning set forth in Section 4043(b) of
ERISA other than a Reportable Event as to which the provision of 30 days' notice
to the PBGC is waived under applicable regulations), or is the occurrence of the
events described in Section 4068(f) or 4063(a) of ERISA.
"Restricted Stock Payments" means any payment on account of the purchase,
redemption or other retirement of any shares of Capital Stock or any other
distribution in respect thereof (other than Dividends, payments to the Company
or by Subsidiaries of a Restricted Subsidiary to such Restricted Subsidiary,
dividends payable solely in Capital Stock of the Company and dividends required
under the terms of Preferred Stock of a Restricted Subsidiary permitted under
Section 4.10 of the Senior Note Indenture).
"Restricted Subsidiary" means, for any time of determination: (A) any
Subsidiary which has assets with a book value at such time in excess of
$1,000,000 (as reflected in the Company's most recent audited consolidated
financial statements) other than: (i) a Subsidiary substantially all of the
physical properties of which are located, and substantially all of the business
of which is carried on, outside the limits of the United States of America
(including Alaska and Hawaii) or which is organized under the laws of any
jurisdiction other than the United States of America, the District of Columbia,
the Commonwealth of Puerto Rico, or the States or the possessions of the United
States; (ii) a Subsidiary the primary business of which consists of purchasing
accounts receivable and/or making loans secured by accounts receivable or
providing services directly related thereto, or which is otherwise primarily
engaged in the finance business; (iii) Rosebud, its Subsidiaries and its and
their successors-in-interest; or (iv) Construction Aggregates; (B) any
Subsidiary specified in clause (i), (ii), or (iv) of clause (A) above which the
Company, by resolution of the Board of Directors, shall have designated as a
Restricted Subsidiary; and (C) New York Trap Rock and NYTR Transportation.
"Rosebud" means Rosebud Holdings, Inc., a Delaware corporation and a
Subsidiary of the Company.
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"S&P" means Standard & Poor's Corporation and its successors.
"Sale of Assets" means any sale, lease or other conveyance (including by
way of merger or consolidation) of assets (including the Capital Stock of any
Subsidiary of the Company but excluding the Capital Stock of the Company) of (i)
the Company or any Restricted Subsidiary or (ii) any Unrestricted Subsidiary to
the extent and solely to the extent that the Company or any Restricted
Subsidiary actually receives a distribution of some or all of the Net Proceeds
of such sale, lease or conveyance; provided, however, that the term "Sale of
Assets" does not include (A) any consolidation or merger involving the Company
or any Subsidiary for the purpose of reincorporating the Company or such
Subsidiary in another jurisdiction; (B) any sale, lease, conveyance or other
disposition of assets (including by way of merger or consolidation) (x) by the
Company to one or more of its wholly-owned Restricted Subsidiaries (other than
New York Trap Rock or NYTR Transportation) or (y) by a wholly-owned Restricted
Subsidiary (other than New York Trap Rock or NYTR Transportation) to the Company
or another wholly-owned Restricted Subsidiary (other than New York Trap Rock or
NYTR Transportation) or (z) between New York Trap Rock and NYTR Transportation;
(C) any sale, lease or conveyance required under the Production Payment
Transaction; (D) any sale, lease, conveyance or other disposition of assets of
the Company or any Subsidiary to the extent the proceeds thereof are reinvested
substantially contemporaneously with their receipt in the construction,
acquisition or improvement of assets by the Company and/or any Restricted
Subsidiary which the Board of Directors has in good faith determined will be
useful in the business to be conducted by the Company or such Restricted
Subsidiary; (E) any sale of Receivables provided such sale is without recourse
to the Company or its Restricted Subsidiaries or any sale of Receivables with
recourse to the Company or its Restricted Subsidiaries provided such sale is
Indebtedness permitted under the Senior Note Indenture; (F) any sale,
assignment, transfer, lease, conveyance or other disposition of assets that is
governed by and permitted under the provisions of Article 5 of the Senior Note
Indenture; (G) any sale, assignment, transfer, lease, conveyance or other
disposition of assets that is in the ordinary course of business (it being
agreed that, for purposes of this definition, "ordinary course of business"
shall not include any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets or Capital Stock of a
Subsidiary or all or substantially all of the assets of a division or line of
business) or (H) any sale, assignment, transfer, lease, conveyance or other
disposition of any property, right or interest of the Company or any Subsidiary
to Rosebud or any of its Subsidiaries or Affiliates as contemplated by the Plan
of Reorganization. For purposes of the Senior Notes Indenture, a reinvestment of
proceeds shall be considered substantially contemporaneous if (1) the Board of
Directors of the appropriate Person has approved the construction, acquisition
or improvement within 12 months before or 6 months after the consummation of the
sale, lease or other conveyance of assets and (2) such company shall have
entered into a definitive agreement for such construction, acquisition or
improvement or shall have commenced such construction, acquisition or
improvement within 12 months after such sale, assignment, transfer, lease,
conveyance or other disposition.
"Subsidiary" shall mean any Person more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries. For the purposes of this definition, "voting stock"
means stock or partnership interests or any other equity interest which
ordinarily has voting power for the election of directors or, if the Person is
not a corporation, voting power to direct the management of such Person, whether
at all times or only so long as no senior class of stock or equity has such
voting power by reason of any contingency.
"Termination Event" shall mean (i) a Reportable Event, or (ii) the
initiation of any action by the Company, any member of the Company's ERISA
Controlled Group or any ERISA Plan fiduciary to terminate an ERISA Plan or the
treatment of an amendment to an ERISA Plan as a termination under Section
4041(c) of ERISA, or (iii) the institution of proceedings by the PBGC under
Section 4042 of ERISA to terminate an ERISA Plan or to appoint a trustee to
administer any ERISA Plan.
"Trap Rock Permitted Transaction" means (i) any lease or purchase of assets
or services by or from the Company or any Restricted Subsidiary from or by New
York Trap Rock or NYTR Transportation on terms no less favorable to the Company
or such Restricted Subsidiary than would be obtained in an arms' length
transaction; (ii) any borrowings by New York Trap Rock or NYTR Transportation
directly or indirectly through the Company of the proceeds of Permitted Working
Capital Loans or West Nyack Indebtedness;
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(iii) any capital contributions, loans or Investments by the Company or any
Restricted Subsidiary to or in New York Trap Rock or NYTR Transportation for
purposes of repairing or replacing its assets or upgrading such assets for
environmental or safety purposes or providing for winter maintenance or
extending their useful life, provided that any such capital contribution, loan
or Investment in excess of $1 million shall be approved by the Company's Board
of Directors; and (iv) any transaction between New York Trap Rock and NYTR
Transportation.
"Unions" mean the International Brotherhood of Boilermakers, Iron Ship
Builders, Blacksmiths, Forgers and Helpers; the United Paperworkers
International Union; the United Steelworkers of America; the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers, Local 445; the
International Union of Operating Engineers; the International Association of
Machinists; and the Laborers International Union of North America, Local 60.
"Unrestricted Subsidiary" shall mean any Subsidiary which is not a
Restricted Subsidiary.
"U.S. Government Obligations" means direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
timely payment of which the full faith and credit of the United States of
America is pledged.
"West Nyack Indebtedness" means the first $25 million of principal amount
of Indebtedness from time to time outstanding (and accrued interest thereon),
including without limitation Capitalized Leases, sale-leaseback transactions or
any other kind of Indebtedness incurred in connection with the West Nyack
Modernization.
"West Nyack Modernization" means the proposed modernization of the West
Nyack, New York, plant and related facilities owned by the Company and/or its
Restricted Subsidiaries.
Paying Agent and Registrar
Principal of, and interest on the Senior Notes are payable, and the Senior
Notes may be presented for registration of transfer or exchange, at the offices
or agencies of the respective Paying Agents and Registrars in New York, New
York. Holders must surrender the Securities to a Paying Agent to collect
principal payments. The initial Paying Agent and Registrar is the Trustee. The
Company may pay principal and interest by check and may mail interest checks to
the registered holders of the Senior Notes. The Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection with certain transfers or exchanges. The Company or any of its
subsidiaries may act as Paying Agent or Registrar and the Company may change the
Paying Agent or Registrar without prior notice to holders of Notes. In addition,
if the Company fails to maintain a Registrar or Paying Agent, the Trustee may
act as such.
Maturity, Interest and Principal
The Senior Notes have a maturity date of July 31, 2003 and bear interest at
an annual rate of 10% with interest payable semiannually on January 31 and July
31 of each year. Interest is computed on the basis of a 360 day year of twelve
30-day months. The Senior Notes were issued in the original aggregate principal
amount of $78,000,000.
The Senior Notes are general unsecured obligations of the Company; however,
the Senior Notes may be entitled to the benefit of the Guarantee.
Denominations
Senior Notes will be issued in registered form without coupons only in
$1,000 denominations and in integral multiples of $1,000.
Optional Redemption; Open Market Purchases
Pursuant to the Senior Note Indenture, the Senior Notes are subject to
redemption (otherwise than through the mandatory redemption described below)
upon at least 30 days' written notice to the holders
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thereof, at any time in whole, or from time to time in part, at the election of
Company, at a redemption price equal to 100% of their principal amount, together
with accrued and unpaid interest, if any, to the date fixed for redemption in
such notice ("Redemption Price"). If less than all the Senior Notes are to be
redeemed, the Trustee will select the Senior Notes or portions thereof to be
redeemed pro rata, by lot or such other method as the Trustee considers fair and
equitable to the holders of the Senior Notes. The Senior Note Indenture also
provides that the Senior Notes may also be purchased by the Company on the open
market from time to time, without penalty or premium. However, the Credit
Agreement prohibits such optional redemptions except in accordance with the
terms thereof.
Mandatory Redemption
Upon a Sale of Assets, the Excess Net Proceeds derived therefrom are to be
deposited with the Trustee within 45 days after the end of each fiscal quarter
of the Company; provided, however, if the Company has determined in good faith
to reinvest substantially contemporaneously all or any portion of the Net
Proceeds derived from any such Sale of Assets in the construction, acquisition
or improvement of assets by the Company and/or any Restricted Subsidiary, then
those Net Proceeds will not be available for deposit with the Trustee. If at any
time there is at least $5,000,000 of Excess Net Proceeds on deposit with the
Trustee, all such monies will be used by the Trustee to redeem the Senior Notes
at the Redemption Price. The amount of any such deposited monies will be reduced
by the principal amount of any Senior Notes that the Company has (during a
period commencing with the public announcement that a Sale of Assets has
occurred in respect of which a deposit of Excess Net Proceeds is expected to be
made and ending on the earlier of (i) ninety days after the date of such
announcement or (ii) the date on which the deposit is required to be made in
accordance with the first sentence of this paragraph) optionally redeemed or
purchased and delivered to the Trustee for cancellation ("Redemption Credit
Securities").
Sinking Fund
Commencing in the year 2000, the Company is required to make three annual
payments of $10,000,000 each into a sinking fund account maintained with the
Trustee for redemption of the Senior Notes. The amount of any such required
sinking fund account will be reduced, without duplication, by the principal
amount of any Senior Notes that the Company has optionally redeemed or purchased
and delivered to the Trustee for cancellation; provided, however, that no such
reduction shall be made in respect of any Redemption Credit Securities.
Guarantee
The Company is obligated to cause each Guarantor to unconditionally
guarantee the due and punctual payment of the principal of, and interest on, the
Senior Notes.
Upon any Sale of Assets permitted by the terms of the Senior Note
Indenture, or any transaction which would be a Sale of Assets if not for the
provisions of clause (D) of the definition of Sale of Assets, which, in either
case, consists of all of the Capital Stock of a Guarantor or the sale of a
Guarantor by means of any merger or consolidation permitted under the Senior
Notes Indenture, such Guarantor's obligations in respect of the Guarantee will
be released.
In addition, if any Guarantor ceases to be a Restricted Subsidiary by
virtue of its having had total assets with a book value of less than $1,000,000
on the last day of each of any four consecutive fiscal quarters of the Company,
such Guarantor will be released from its obligation under the Guarantee.
As of the date hereof, there are no Guarantors of the Senior Notes.
Restricted Investments and Restricted Stock Payments
The Company will not itself, and will not permit any Restricted Subsidiary
to, declare any Dividends or make any Restricted Stock Payment or Investment
(other than Permitted Investments), unless, in the case of Dividends, such
Dividends are declared to be payable not more than 60 days after the date of
declaration and
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unless, in each case, after giving effect to the proposed Dividend, Restricted
Stock Payment or Investment and to any other Dividends declared but not yet
paid, at the date (hereinafter called the "Computation Date") of such
declaration (in case of a Dividend) or of such Restricted Stock Payment or
Investment (i) the Company could incur $1.00 of additional Indebtedness under
Section 4.10 of the Senior Note Indenture without taking into consideration the
proviso thereto, (ii) there is no outstanding Default or Event of Default and
(iii) the sum of:
(A) Adjusted Consolidated Net Income, plus:
(B) the aggregate amount of net cash proceeds to the Company from
sales subsequent to the Effective Date of shares of its Capital Stock
(other than Preferred Stock of a Restricted Subsidiary permitted under
Section 4.10 of the Senior Note Indenture and other than sales to a
Subsidiary of the Company), plus:
(C) in the case of the disposition or repayment of any Investment
(other than Permitted Investments), if such Investment was made by a
Restricted Subsidiary or the Company after the Effective Date in accordance
with Section 4.08 of the Senior Note Indenture, an amount equal to the
lesser of the return of capital to such Restricted Subsidiary or the
Company, as the case may be, with respect to such Investment and the cost
of such Investment, in either case, less the cost of the disposition of
such Investment;
shall be greater than the aggregate amount of all such Dividends declared and
Restricted Stock Payments and Investments (other than Permitted Investments)
made during the period commencing on the Effective Date and continuing to and
including the Computation Date; provided, however, that without regard to the
foregoing restrictions, (a) the Company may retire any shares of any class of
its Capital Stock by exchange for, or out of the proceeds of the substantially
concurrent sale of, other shares of its Capital Stock, and neither any such
retirement nor any such proceeds so used shall be included in any computation
provided for above and (b) any Restricted Subsidiary may make any required
payments (including without limitation, dividend, sinking fund, and mandatory
redemption payments) on or in respect of any Preferred Stock of such Restricted
Subsidiary permitted under Section 4.10 of the Senior Note Indenture. For
purposes of Section 4.08 of the Senior Note Indenture, the issuance of Capital
Stock upon the conversion of any Indebtedness of the Company will be deemed to
constitute a sale for cash of such Capital Stock and the net proceeds of such
sale will be deemed to be an amount equal to the principal amount of such
Indebtedness, less applicable expenses and cash payments for fractional shares.
For the purposes of any computation provided for above, the amount of any
Dividend declared or Restricted Stock Payment made in property other than cash,
and the amount of any Investment in a Person other than a Restricted Subsidiary
made through the transfer to it of any such property, will be deemed to be the
Fair Value of such property at the time of declaration (in the case of
Dividends) or at the time of payment or distribution or the making of such
Investment.
Certain Limitations on Indebtedness, etc.
The Company will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to create, incur or assume or guarantee or otherwise
become liable or responsible for, any Indebtedness, or enter into any
sale-leaseback transaction (other than an Excepted Lease) unless immediately
thereafter and after giving effect thereto, the Interest Expense Ratio shall be
at least equal to 2.0:1.0; provided, however, that nothing contained in the
foregoing will prevent the Company or any Restricted Subsidiary from creating,
incurring or assuming or guaranteeing or otherwise becoming liable or
responsible for (i) the Indebtedness evidenced by the Senior Notes and the
Senior Note Indenture; (ii) any Refinancing Indebtedness; (iii) any Permitted
Working Capital Loans; (iv) any West Nyack Indebtedness; and (v) other
Indebtedness having an aggregate outstanding principal amount of no more than
$1.5 million.
Furthermore, the Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien on
any asset owned by the Company or any of its Restricted Subsidiaries except
Permitted Liens.
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Sales of Assets
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate a Sale of Assets unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Sale of Assets at least equal to the Fair Value of the shares or assets
sold or otherwise disposed of and (ii) at least 80% of such consideration
(including consideration described in clause (D)) consists of (A) cash (which
will be deemed to include amounts subject to post-closing adjustments or
contingencies and held in escrow or payable pursuant to a promissory note
maturing within 60 days of consummation of such sale or disposition), (B) Cash
Equivalents, (C) readily marketable securities which the Company in good faith
expects to liquidate promptly following such Sale of Assets, (D) the assumption
of liabilities by the purchaser pursuant to such Sale of Assets (including, in
the case of the sale of the Capital Stock of a Restricted Subsidiary,
liabilities of such Restricted Subsidiary) or (E) assets which the Board of
Directors has in good faith determined to be a like kind swap or similar swap or
trade arrangement involving property intended to produce business and/or tax
benefits for the Company and its Restricted Subsidiaries and (iii) if such Sale
of Assets or series of related Sales of Assets involves aggregate payments or
value in excess of $5 million, it will be approved by a majority of the
directors of the Company who are not also employees of the Company.
Change of Control
Upon the occurrence of a Change of Control, the Company will be obligated
to make an offer to purchase (a "Change of Control Offer") and will, subject to
the provisions described below, purchase, on a Business Day (the "Change of
Control Purchase Date") not more than 90 nor less than 30 days following the
occurrence of the Change of Control, all of the then outstanding Senior Notes at
a purchase price (the "Change of Control Purchase Price") equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the Change
of Control Purchase Date. The Company will, subject to the provisions described
below, be required to purchase all Senior Notes properly tendered into the
Change of Control Offer and not withdrawn.
Notice of a Change of Control Offer will be mailed by the Company not later
than the 60th day after the Change of Control to the holders of Senior Notes at
their last registered addresses with a copy to each Guarantor, the Trustee and
the Paying Agent. The Change of Control Offer will remain open from the time of
mailing for at least 20 Business Days and until 5:00 p.m., New York City time,
on the Business Day preceding the Change of Control Purchase Date.
On the Change of Control Purchase Date, the Company will (i) accept for
payment Senior Notes or portions thereof (but only in principal amounts which
are integral multiples of $1,000) validly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the Change of Control Purchase Price of all
Senior Notes or portions thereof so tendered and accepted, and (iii) deliver to
the Trustee the Senior Notes so accepted together with an Officer's Certificate
setting forth the Senior Notes or portions thereof tendered to and accepted for
payment by the Company.
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
applicable to a Change of Control Offer made by the Company and purchases all
Senior Notes validly tendered and not withdrawn under such Change of Control
Offer.
Events of Default
An "Event of Default" is defined in the Senior Note Indenture to mean,
among other things, (i) failure by the Company or any Guarantor to pay interest
when the same becomes due and payable and continuance of such failure for 30
days after such date; (ii) failure by the Company or any Guarantor to pay
principal when and as the same will become due and payable, whether at maturity,
upon acceleration, in connection with any sinking fund payment obligation or
redemption or otherwise or default under any of the Company's purchase
obligations with respect to a Change of Control; (iii) default by the Company or
any of its Restricted
63
<PAGE> 66
Subsidiaries under any Indebtedness in excess of $1,000,000 or the Employee
Settlement Agreements, which default has resulted in an acceleration thereof;
(iv) one or more final judgments against the Company or any of its Restricted
Subsidiaries for payments of money which in the aggregate exceed $1,000,000,
occur and such judgments are not stayed or otherwise rescinded; (v) failure by
the Company or any of its Restricted Subsidiaries to perform certain covenants
in the Senior Note Indenture and continuance of such failure for 30 days after
written notice is given to the Company by the Trustee or to the Company and the
Trustee by the holders of 25% in principal amount of the Senior Notes; (vi)
certain events of bankruptcy, insolvency or reorganization of the Company or any
of its Material Restricted Subsidiaries; (vii) any Termination Event with
respect to a Plan shall occur which could reasonably be expected to result in
the imposition of a Lien on the assets of the Company or any Restricted
Subsidiary under Title IV of ERISA in excess of $1,000,000; (viii) a material
Lien, other than a Permitted Lien, is imposed on any assets of the Company or a
member of its ERISA Controlled Group in favor of the PBGC or a Plan; or (ix) the
Company or a member of its ERISA Controlled Group will partially or completely
withdraw from a Multiemployer Plan which withdrawal results in the imposition of
withdrawal liability in excess of $1,000,000 which remains unpaid or will be a
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
of more than $1,000,000 to a Multiemployer Plan resulting from the Company's or
a member of its ERISA Controlled Group's complete or partial withdrawal (as
described in Section 4203 or 4205 of ERISA). The Senior Note Indenture provides
that the Trustee must, within 90 days after the occurrence of a Default, give to
the holders of the Senior Notes notice of all uncured Defaults known to it,
provided that, except in the case of Default in payment on any Senior Notes, the
Trustee will be protected in withholding notice if the Trustee in good faith
determines that the withholding of such notice is in the interest of the holders
of Senior Notes.
The Company or any Guarantor will be required to furnish to the Trustee
within 120 days after the close of each fiscal year ending after the Effective
Date; and within 60 days after the end of each of the first three fiscal
quarters of the Company and such Guarantor, an Officers' Certificate stating
whether such officers know of any Default or Event of Default under the Senior
Note Indenture during such period, and the status of each such Default or Event
of Default.
The Trustee or the holders of not less than 25% in principal amount of the
Senior Notes will be authorized, upon the happening of any Event of Default
specified in the Senior Note Indenture, to declare all unpaid principal and
accrued interest on the Senior Notes to the date of acceleration, due and
payable.
The holders of 66 2/3% in principal amount of the Senior Notes are
authorized to waive any Default or Event of Default and rescind such declaration
if the Default or Event of Default, except a Default in the payment of principal
of or interest on any Senior Notes, or a Default with respect to a covenant or
provision which cannot be modified or amended without consent of the holder of
each outstanding Senior Note affected. Subject to all provisions of the Senior
Note Indenture and applicable law, the holders of a majority in principal amount
of the Senior Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee.
Amendment, Supplement and Waiver
Subject to certain exceptions, the Senior Note Indenture, the Guarantee or
the Senior Notes may be amended or supplemented with the consent of the holders
of at least 66 2/3 percent in principal amount of the respective issue of Senior
Notes then outstanding, and any existing Default or compliance with any
provision may be waived (other than a continuing Default or Event of Default in
the payment of principal or interest of any Senior Note) with the consent of the
holders of 66 2/3 percent in principal amount of Senior Notes then outstanding.
Without the consent of any holder of Senior Notes, the Company and the Trustee
may amend or supplement the Senior Note Indenture or the Senior Notes, among
other things, to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes, to provide for the assumption of the Company's obligations in the case of
a merger or acquisition, in order to effect the granting or release of the
Guarantee with respect to any Guarantor as permitted under the Senior Note
Indenture, or to make any change that does not adversely affect the rights of
any holder of the Senior Notes.
64
<PAGE> 67
Without the consent of each holder affected, the Company may not, among
other things, reduce the principal amount of Senior Notes whose holders are
necessary to consent to an amendment of the Senior Note Indenture; reduce the
rate or change the interest payment time of any Senior Note or alter the
redemption provisions with respect thereto; reduce the principal of or change
the fixed maturity of any Senior Note; make any change in the provisions
concerning waiver of Defaults or Events of Default by holders of the Senior
Notes or rights of holders to receive payment of principal or interest; waive a
Default in the payment of principal or interest on any Senior Note; or change
any of the provisions in the Senior Note Indenture relating to a Change of
Control.
SELLING SECURITYHOLDERS
The following table presents certain information regarding the Securities
held by the Selling Securityholders, which were issued to the Selling
Securityholders in connection with the Plan of Reorganization. This information
was furnished to the Company by the Selling Securityholders and has not been
verified. Because the Selling Securityholders may sell all or some part of the
Securities which they hold pursuant to this Prospectus and the fact that this
offering is not being underwritten on a firm commitment basis, no estimate can
be given as to the amount of Securities that will be held by the Selling
Securityholders upon termination of this offering. See "Plan of Distribution."
None of the Selling Securityholders has had, any position, office or other
material relationship during the past three years with the Company, other than
as the result of the ownership of the Securities of the Company or as set forth
elsewhere in this Prospectus. See "Principal Stockholders" and "Certain
Relationships and Related Transactions." The Securities offered by this
Prospectus may be offered from time to time in whole or in part by the persons
named below or by their transferee, as to whom applicable information will, to
the extent required, be set forth in a Prospectus Supplement.
COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF AMOUNT TO BE
SELLING SECURITYHOLDERS SHARES CLASS OFFERED
- ----------------------- --------- ---------- ------------
<S> <C> <C> <C>
Metropolitan Life Insurance Company.................... 2,351,426(1) 18.2% 2,351,426(1)
Metropolitan Insurance and Annuity Company............. 363,532 3.0% 363,532
--------- ---------
Total........................................ 2,714,958(2) 21.1% 2,714,958(2)
The TCW Group, Inc. and Affiliates, as general partner
or investment advisor for the following entities(3):
TCW Special Credits Fund IIIb........................ 14,078 (4) 14,078
Weyerhaeuser Company Master Retirement Trust......... 148,564 1.2% 148,564
TCW Special Credits Fund III......................... 542,743 4.5% 542,743
The Common Fund for Bond Investments................. 44,977 (4) 44,977
Inland Steel Industries Pension Trust................ 3,248 (4) 3,248
TCW Special Credits Trust............................ 194,230 1.6% 194,230
TCW Special Credits Fund IIIb........................ 348,944 2.9% 348,944
TCW Special Credits Trust IIIb....................... 249,899 2.1% 249,899
Delaware State Employees' Retirement Fund............ 24,197 (4) 24,197
TCW Special Credits Fund IV.......................... 135,317 1.1% 135,317
TCW Special Credits Plus Fund........................ 148,501 1.2% 148,501
TCW Special Credits Trust IV......................... 114,961 1.0% 114,961
TCW Special Credits Trust IV-A....................... 33,540 (4) 33,540
--------- ---------
Total........................................ 2,003,199 16.7% 2,003,199
</TABLE>
65
<PAGE> 68
WARRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF AMOUNT TO BE
SELLING SECURITYHOLDERS WARRANTS CLASS OFFERED
- ----------------------- --------- ---------- ------------
<S> <C> <C> <C>
Metropolitan Life Insurance Company.................... 891,609 22.2% 891,609
</TABLE>
10% SENIOR NOTES DUE 2003
<TABLE>
<CAPTION>
PRINCIPAL
PRINCIPAL PERCENT OF AMOUNT TO BE
SELLING SECURITYHOLDERS AMOUNT CLASS OFFERED
- ----------------------- --------- ---------- ------------
<S> <C> <C> <C>
Metropolitan Life Insurance Company.................... $ 4,056,000 5.2% $ 4,056,000
Metropolitan Insurance and Annuity Company............. 2,628,000 3.4% 2,628,000
----------- -----------
Total........................................ $ 6,684,000 8.6% $ 6,684,000
The TCW Group, Inc. and Affiliates, as general partner
or investment advisor for the following entities(3):
TCW Special Credits Fund IIIb........................ $ 101,000 (4) $ 101,000
Weyerhaeuser Company Master Retirement Trust......... 1,071,000 1.4% 1,071,000
TCW Special Credits Fund III......................... 3,918,000 5.0% 3,918,000
The Common Fund for Bond Investments................. 321,000 (4) 321,000
Inland Steel Industries Pension Trust................ 23,000 (4) 23,000
TCW Special Credits Trust............................ 1,402,000 1.8% 1,402,000
TCW Special Credits Fund IIIb........................ 2,521,000 3.2% 2,521,000
TCW Special Credits Trust IIIb....................... 1,806,000 2.3% 1,806,000
Delaware State Employees' Retirement Fund............ 174,000 (4) 174,000
TCW Special Credits Fund IV.......................... 978,000 1.3% 978,000
TCW Special Credits Plus Fund........................ 1,072,000 1.4% 1,072,000
TCW Special Credits Trust IV......................... 829,000 1.1% 829,000
TCW Special Credits Trust IV-A....................... 240,000 (4) 240,000
----------- -----------
Total........................................ $14,456,000 18.5% $14,456,000
</TABLE>
- ---------------
(1) Includes 891,609 shares of Common Stock issuable upon the exercise of
Warrants held by such Selling Securityholder. Does not include 363,532
shares held by MIAC, an indirect, wholly-owned subsidiary of MetLife, as to
which shares MetLife may be deemed the beneficial owner.
(2) Includes 891,609 shares of Common Stock issuable upon the exercise of
Warrants held by MetLife.
(3) TCW Special Credits, an affiliate of The TCW Group, Inc., serves as general
partner of the various limited partnerships and investment advisor of
various funds and third party accounts listed in the table with the power
to vote and direct the disposition of the Securities owned by such limited
partnerships, funds and third party accounts. TCW Asset Management Company,
a subsidiary of The TCW Group, Inc., is the managing general partner of TCW
Special Credits.
(4) Represents less than 1% of the applicable outstanding class of Securities.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of the Securities
offered hereby, except for the exercise price of the Warrants when and if they
are exercised. The Securities may be sold from time to time to purchasers
directly by the Selling Securityholders. Alternatively, the Selling
Securityholders may from time to time offer the Securities through underwriters,
dealers or agents who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Securityholders and/or
the purchasers of Securities for whom they may act as agent. The Selling
Securityholders and any such underwriters, dealers or agents who participate in
the distribution of the Securities may be deemed to be underwriters, and any
profits
66
<PAGE> 69
on the sale of the Securities by them and any discounts, commissions or
concessions received by any such underwriters, dealers or agents might be deemed
to be underwriting discounts and commissions under the Securities Act. To the
extent the Selling Securityholders may be deemed to be an underwriter, the
Selling Securityholders may be subject to certain statutory liabilities of the
Securities Act, including but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Exchange Act. At any time a particular
offer of the Securities is made, if required, a Prospectus Supplement will be
distributed that will set forth the aggregate amount of the Securities being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, any discounts, commissions and other items
constituting compensation from the Selling Securityholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers. Such
Prospectus Supplement and, if necessary, a post-effective amendment to the
Registration Statement of which this Prospectus is a part will be filed with the
Commission to reflect the disclosure of additional information with respect to
the distribution of the Securities.
The Securities may be sold from time to time in one or more transactions at
a fixed offering price, which may be changed, or at varying prices determined at
the time of sale or at negotiated prices. Such prices will be determined by the
Selling Securityholders or by agreement between the Selling Securityholders and
underwriters or dealers.
The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including without limitation Rules 10b-3,
10b-6 or 10b-7, which provisions may limit the timing or purchases and sales of
any of the Securities by the Selling Securityholders and any other such person.
Furthermore, under Rule 10b-6 under the Exchange Act, to the extent applicable,
any person engaged in a distribution of the Securities may not simultaneously
engage in market-making activities with respect to the particular Securities
being distributed for a period of nine business days prior to the commencement
of such distribution. All of the foregoing may affect the marketability of the
Securities and the ability of any person or entity to engage in market-making
activities with respect to the Securities.
Pursuant to the Registration Rights Agreement, the Company agreed to pay
all of the expenses incident to the registration, offering and sale of the
Securities to the public other than commissions, fees and discounts of
underwriters, dealers or agents. Under the Registration Rights Agreement, the
Selling Securityholders will be indemnified by the Company against certain civil
liabilities, including liabilities under the Securities Act. See "Certain
Relationships and Related Transactions."
LEGAL MATTERS
The legality of the securities offered hereby will be passed on for the
Company by John S. Johnson, General Counsel of the Company.
EXPERTS
The consolidated financial statements and schedules of the Company and its
subsidiaries at December 31, 1993 and 1992, and for each of the years in the
three-year period ended December 31, 1993, and the consolidated balance sheet of
the Company and its subsidiaries at March 31, 1994, included herein and
elsewhere in the Registration Statement, have been so included in reliance on
the reports of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing. Reference is made
to the report on the financial statements and schedules at December 31, 1993 and
1992 and for each of the three years ended December 31, 1993, which includes
explanatory paragraphs that describe certain uncertainties.
The combined financial statements and schedules of the International
Division of the Company as of December 31, 1992, and for each of the two years
in the period ended December 31, 1992, have been audited by Price Waterhouse
LLP, independent accountants, whose report thereon appears herein. Such report
has been given on the authority of said firm as experts in auditing and
accounting.
67
<PAGE> 70
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Interim Consolidated Financial Statements (unaudited):
Consolidated Statements of Operations for the Three Months Ended June 30, 1994 and
March 31, 1994 and the Three and Six Months Ended June 30, 1993.................. F-2
Consolidated Statements of Retained Earnings for the Three Months Ended June 30,
1994 and March 31, 1994 and the Three and Six Months Ended June 30, 1993......... F-3
Consolidated Balance Sheets -- June 30, 1994, March 31, 1994 and December 31,
1993............................................................................. F-4
Consolidated Statements of Cash Flows for the Three Months Ended June 30, 1994 and
March 31, 1994 and the Six Months Ended June 30, 1993............................ F-5
Notes to Interim Consolidated Financial Statements.................................. F-6
Report of Coopers & Lybrand L.L.P..................................................... F-23
Consolidated Balance Sheet -- March 31, 1994.......................................... F-24
Notes to Consolidated Balance Sheet................................................. F-25
Report of Coopers & Lybrand L.L.P..................................................... F-40
Report of Price Waterhouse LLP........................................................ F-41
Consolidated Financial Statements:
Consolidated Statements of Operations for the Years Ended December 31, 1993, 1992
and 1991......................................................................... F-42
Consolidated Balance Sheets -- December 31, 1993 and 1992........................... F-43
Consolidated Statements of Changes in Common Shareholders' Equity for the Years
Ended December 31, 1993, 1992 and 1991........................................... F-44
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1992
and 1991......................................................................... F-45
Notes to Consolidated Financial Statements.......................................... F-46
Pro Forma Financial Data (unaudited):
Pro Forma Financial Data............................................................ F-76
Pro Forma Consolidated Statements of Operations for the Three Months Ended March 31,
1994 and the Six Months Ended June 30, 1994...................................... F-77
Pro Forma Consolidated Statement of Operations for the Year Ended December 31,
1993............................................................................. F-78
Notes to Unaudited Pro Forma Consolidated Statements of Operations.................. F-79
</TABLE>
F-1
<PAGE> 71
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
----------------- ----------------------------------------------
FOR THE THREE FOR THE THREE FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, 1994 MARCH 31, 1994 JUNE 30, 1993 JUNE 30, 1993
----------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Consolidated Income
Revenues:
Net sales................................. $86,995 $ 33,709 $ 70,580 $ 103,057
Joint venture income...................... 1,269 381 10,981 12,610
Other income, net......................... 823 2,691 2,497 5,067
------- ---------- --------- ---------
89,087 36,781 84,058 120,734
------- ---------- --------- ---------
Deductions from revenues:
Cost of sales............................. 61,403 29,694 56,827 85,328
Selling, general and administrative
expenses................................ 7,487 9,836 10,074 20,280
Depreciation and depletion................ 5,979 6,688 6,577 13,161
Recovery of litigation settlement......... -- (6,500) -- --
Interest expense.......................... 2,219 233 428 902
------- ---------- --------- ---------
77,088 39,951 73,906 119,671
------- ---------- --------- ---------
Income (loss) before reorganization items
and income taxes.......................... 11,999 (3,170) 10,152 1,063
Reorganization items:
Adjustments to fair value................. -- (133,917) -- --
Loss on sale of assets.................... -- -- (44,889) (44,889)
Other items............................... -- (13,396) (2,589) (5,197)
------- ---------- --------- ---------
-- (147,313) (47,478) (50,086)
------- ---------- --------- ---------
Income (loss) before income taxes and
cumulative effect of change in accounting
principle................................. 11,999 (150,483) (37,326) (49,023)
(Provision) credit for income taxes....... (4,085) (155) 9,039 7,161
------- ---------- --------- ---------
Income (loss) before cumulative effect of
change in accounting principle and
extraordinary item........................ 7,914 (150,638) (28,287) (41,862)
Cumulative effect of change in accounting
principle:
Postretirement benefits other than
pensions................................ -- -- -- (782)
Extraordinary item: gain on discharge of
prepetition liabilities................... -- 127,520 -- --
------- ---------- --------- ---------
Income (loss) before preferred dividends.... 7,914 (23,118) (28,287) (42,644)
Provision for preferred dividends........... -- (1,278) (1,278) (2,556)
------- ---------- --------- ---------
Net income (loss) applicable to common
stock..................................... $ 7,914 $ (24,396) $ (29,565) $ (45,200)
======= ========== ========= =========
Weighted average common shares
outstanding............................... 12,000 (a) (a) (a)
======= ========== ========= =========
Primary and fully diluted income per common
share:
Income before cumulative effect of change in
accounting principle...................... $ 0.62 (a) (a) (a)
Cumulative effect of change in accounting
principle................................. -- (a) (a) (a)
Extraordinary gain on discharge of
prepetition liabilities................... -- (a) (a) (a)
------- ---------- --------- --------
Net income per common share................. $ 0.62 (a) (a) (a)
======= ========== ========= ========
</TABLE>
- ---------------
(a) Earnings per share are not meaningful due to reorganization and revaluation
entries and the issuance of 12 million shares of new common stock.
The accompanying Notes to Interim Consolidated Financial Statements
are an integral part of the Financial Statements.
F-2
<PAGE> 72
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR
COMPANY PREDECESSOR COMPANY
----------------- -------------------------------------------------
FOR THE THREE FOR THE THREE FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, 1994 MARCH 31, 1994 JUNE 30, 1993 JUNE 30, 1993
----------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulated deficit, beginning of
period........................... $-- $(187,896) $(166,356) $(151,856)
Net income (loss).................. 7,914 (23,118) (28,287) (42,787)
------- --------- --------- ---------
Retained earnings (accumulated
deficit)......................... 7,914 (211,014) (194,643) (194,643)
Elimination of accumulated
deficit.......................... -- 211,014 -- --
------- --------- --------- --------
Retained earnings (accumulated
deficit) end of period........... $ 7,914 $ -- $(194,643) $(194,643)
======= ========= ========= =========
</TABLE>
The accompanying Notes to Interim Consolidated Financial Statements
are an integral part of the Financial Statements.
F-3
<PAGE> 73
LONE STAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR COMPANY COMPANY
------------------------ ------------
JUNE 30, MARCH 31, DECEMBER 31,
1994 1994 1993
--------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Assets:
Current assets:
Cash including cash equivalents of $26,843, $3,498 and
$243,220..................................................... $ 28,795 $ 12,147 $ 244,397
Accounts and notes receivable, net............................. 42,374 29,711 49,022
Inventories:
Finished goods............................................... 18,844 23,743 20,277
Work in process and raw materials............................ 2,734 2,126 1,987
Supplies and fuel............................................ 18,229 18,925 16,162
--------- -------- ----------
39,807 44,794 38,426
Current assets of assets held for sale........................... -- -- 20,634
Other current assets............................................. 4,347 15,127 2,733
--------- -------- ----------
Total current assets...................................... 115,323 101,779 355,212
Net assets of liquidating subsidiary (See Note 5)................ 116,000 112,000 --
Assets held for sale............................................. -- -- 65,663
Notes receivable................................................. 1,096 105 5,058
Joint ventures................................................... 18,769 17,500 88,574
Property, plant and equipment.................................... 316,799 332,263 682,830
Less accumulated depreciation and depletion...................... 5,433 -- 284,745
--------- -------- ----------
311,366 332,263 398,085
Reorganization value in excess of amounts allocable to
identifiable assets............................................ 10,257 14,372 --
Cost in excess of net assets of businesses acquired, net......... -- -- 9,273
Other assets and deferred charges................................ 1,604 1,392 3,020
--------- -------- ----------
Total assets.............................................. $ 574,415 $579,411 $ 924,885
========= ======== ==========
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable............................................... $ 14,622 $ 15,927 $ 16,079
Accrued liabilities............................................ 54,841 68,718 60,353
Other current liabilities...................................... 3,064 2,994 3,227
--------- -------- ----------
Total current liabilities................................. 72,527 87,639 79,659
Asset proceeds notes of liquidating subsidiary (See Note 5)...... 116,000 112,000 --
Senior notes payable............................................. 78,000 78,000 --
Production payment............................................... 18,463 18,463 --
Deferred income taxes............................................ 5,000 5,000 3,356
Postretirement benefits other than pensions...................... 126,014 125,260 141,950
Pensions......................................................... 21,519 22,351
Other liabilities................................................ 35,702 37,385 21,886
Liabilities subject to Chapter 11 proceedings.................... -- -- 627,938
Contingencies (See Notes 18 and 19)
Shareholders' Equity:
Redeemable preferred stock....................................... -- -- 37,500
Non-redeemable preferred stock (involuntary liquidating value,
1993 - $1,102)................................................. -- -- 248
Common stock..................................................... 12,000 12,000 18,103
Warrants to purchase common stock................................ 15,613 15,613 --
Additional paid-in capital....................................... 65,700 65,700 239,870
Retained earnings (deficit)...................................... 7,914 -- (187,896)
Cumulative translation adjustment................................ (37) -- --
Pension liability adjustment..................................... -- -- (21,157)
Treasury stock, at cost.......................................... -- -- (36,572)
--------- -------- ----------
Total liabilities and shareholders' equity................ $ 574,415 $579,411 $ 924,885
========= ======== ==========
</TABLE>
The accompanying Notes to Interim Consolidated Financial Statements
are an integral part of the Financial Statements.
F-4
<PAGE> 74
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
------------------ ------------------------------
FOR THE THREE FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, 1994 MARCH 31, 1994 JUNE 30, 1993
------------------ -------------- -------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Income (loss) before cumulative effect of change
in accounting principle and extraordinary
item............................................ $ 7,914 $ (150,638) $ (41,862)
Adjustments to arrive at net cash provided (used)
by operating activities:
Depreciation and depletion...................... 5,979 6,688 13,161
Deferred income taxes........................... 4,080 155 1,133
Provision for crosstie litigation settlement.... -- (6,500) --
Loss on sale of joint venture interest.......... -- -- 32,389
Changes in operating assets and liabilities:
Accounts and notes receivable................ (14,997) 22,157 (12,552)
Inventories and other current assets......... 3,340 (17,189) (11,567)
Accounts payable and accrued liabilities..... 2,560 (1,808) (1,190)
Unremitted earnings of joint ventures........... (1,269) 619 (872)
Adjustments to fair value....................... -- 133,917 --
Other reorganization items...................... -- 13,396 5,197
Other, net...................................... (1,598) (5,866) 2,272
-------- ---------- ---------
Net cash provided (used) by operating activities
before reorganization items..................... 6,009 (5,069) (13,891)
Operating cash flows from reorganization items:
Interest received on cash accumulated because of
Chapter 11 proceedings....................... -- 1,998 2,132
Professional fees and administrative expenses... (5,247) (5,849) (6,235)
Professional fees escrow pursuant to the
reorganization plan.......................... -- (12,431) --
-------- ---------- ---------
Net cash used by reorganization items............. (5,247) (16,282) (4,103)
-------- ---------- ---------
Net cash provided (used) by operating
activities...................................... 762 (21,351) (17,994)
Cash Flows from Investing Activities:
Capital expenditures.............................. (5,984) (6,695) (8,968)
Proceeds from sales of assets..................... 21,829 -- --
Proceeds from sales of assets held for sale....... -- 2,457 6,758
Collection of notes receivable.................... -- 93 576
Advances to equity investees...................... -- -- (5,000)
Other, net........................................ 41 (293) (1,602)
Proceeds from sales of assets due to Chapter 11
proceedings..................................... -- -- 721
-------- ---------- ---------
Net cash provided (used) by investing
activities...................................... 15,886 (4,438) (7,515)
Cash Flows from Financing Activities:
Cash distribution pursuant to the reorganization
plan............................................ -- (200,451) --
Transfer to liquidating subsidiary................ -- (5,010) --
Reduction of production payment................... -- (1,000) (4,000)
-------- ---------- ---------
Net cash used by financing activities............. -- (206,461) (4,000)
-------- ---------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... 16,648 (232,250) (29,509)
Cash and cash equivalents, beginning of period.... 12,147 244,397 168,605
-------- ---------- ---------
Cash and cash equivalents, end of period.......... $ 28,795 $ 12,147 $ 139,096
======== ========== =========
</TABLE>
The accompanying Notes to Interim Consolidated Financial Statements
are an integral part of the Financial Statements.
F-5
<PAGE> 75
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the company as of June 30, 1994, and the results of
operations for the three months ended June 30, 1994, the three months ended
March 31, 1994 and the three and six months ended June 30, 1993 and the cash
flows for the three months ended June 30, 1994, the three months ended March 31,
1994 and the six months ended June 30, 1993. As discussed in Notes 2, 3, and 4,
the company emerged from its bankruptcy proceedings on April 14, 1994, with an
effective date for accounting purposes of March 31, 1994. Accordingly, the March
31, 1994 accompanying consolidated balance sheet presents the financial position
of the reorganized Lone Star as of the effective date. The financial statements
contained herein should be read in conjunction with the consolidated financial
statements and related notes for the year ended December 31, 1993, included
elsewhere herein. The company's operations are seasonal and, consequently,
interim results are not necessarily indicative of the results to be expected for
a full year. In addition, having operated for over three years in bankruptcy,
results of operations prior to emergence from bankruptcy are not indicative of
results of operations outside of Chapter 11 proceedings. Also affecting
comparability are differences in the operating units of the successor company
and the predecessor company.
NOTE 2 -- REORGANIZATION
In November 1989, in an effort to improve the company's operating results
and to generate cash to pay maturing debt obligations, the company implemented a
restructuring program involving the sale of certain marginal operations and
facilities. Although progress was made in implementing the restructuring
program, depressed economic conditions and the shortage of financing available
to potential buyers during 1990 impeded the company's ability to complete the
sale of all assets within the time frame and at the values estimated in 1989. In
addition, during the fourth quarter of 1990, the company was unable to secure
short-term borrowing arrangements, at acceptable terms and conditions, following
the termination of its revolving-credit agreement and its agreement with
financial institutions to sell trade receivables in November 1990. Without such
financing or other sources of cash, the company probably would have been in
default under its long-term debt agreements in the first quarter of 1991. The
company decided to seek reorganization under Chapter 11 of Title 11 of the
United States Code ("Chapter 11") to achieve a long-term solution to its
financial, litigation and business problems. On December 10, 1990 (the "petition
date"), Lone Star Industries, Inc. together with certain of its subsidiaries
(including two subsidiaries filing on December 21, 1990) ("filed companies"),
filed voluntary petitions for reorganization under Chapter 11 in the United
States Bankruptcy Court for the Southern District of New York ("Bankruptcy
Court"), and operated their respective businesses as debtors-in-possession
during the pendency of the bankruptcy proceedings.
On February 17, 1994, with the approval of all voting classes of creditors
and equity holders, the Bankruptcy Court confirmed the Debtors Modified Amended
Consolidated Plan of Reorganization dated November 4, 1993 (as further modified
on February 17, 1994) (the "plan"). On April 14, 1994, (the "effective date")
the plan became effective, and distributions to creditors and shareholders
commenced (as provided by the plan, a reserve for approximately $40,000,000 in
disputed unresolved claims has been established). In accordance with the plan,
certain core cement, ready-mixed concrete and construction aggregates operations
constitute the reorganized Lone Star. Other non-core assets and their associated
liabilities of the company including the Nazareth, Pennsylvania cement plant,
the Santa Cruz, California cement plant and the company's interests in the RMC
LONESTAR, Hawaiian Cement and Lone Star Falcon joint ventures, certain surplus
real estate and certain litigations have been transferred to Rosebud Holdings,
Inc., a wholly-owned liquidating subsidiary and its subsidiaries (collectively
"Rosebud") for disposition and distribution of the proceeds of such
dispositions, for the benefit of unsecured creditors (See Note 5).
The plan provides for distributions on the effective date to claims which
were allowed at that time, and for the establishment of a reserve for certain
disputed, contingent, and unliquidated claims. On the effective date,
F-6
<PAGE> 76
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the escrow agent administering the reserve received a distribution of cash and
securities attributable to the reserved claims. On the effective date, the total
amount of allowed and reserved claims was $590,944,000, which the company
expects to be reduced to approximately $584,016,000 when all claims are paid. On
the effective date the company estimated that when all claims were paid, allowed
and reserved secured claims would approximate $435,000, allowed and reserved
priority claims would approximate $5,676,000, and allowed and reserved
convenience claims (under $5,000) would approximate $2,152,000. The plan
provided that these claimants are to receive full payment in cash. In connection
with the plan, holders of allowed and reserved unsecured claims, which the
company estimated would be $575,753,000 when all claims are paid, were entitled
to receive their pro rata share of (i) $192,188,000 in cash, (ii) $78,000,000
ten year 10% senior unsecured notes of the reorganized company (the company's
March 31, 1994 balance sheet includes accrued interest of $1,300,000 for the
period from February 1, 1994 through March 31, 1994 per the terms of the senior
unsecured notes indenture), (iii) $138,118,000 secured asset proceeds notes of
Rosebud, to be paid out of the proceeds from the disposition of its assets (See
Note 5) and (iv) 85.0% of the common stock of reorganized Lone Star. The
aggregate recovery on unsecured claims will depend on the ultimate value of the
common stock, the senior unsecured notes, and the secured asset proceeds notes
(the value of the secured asset proceeds notes will reflect the sums realized
from the disposition of assets and litigation recoveries of Rosebud).
Holders of the company's cumulative convertible preferred stock became
entitled to receive a pro rata share of 10.5% of the common stock of reorganized
Lone Star and 1,250,000 warrants to purchase common stock of the reorganized
Lone Star. The holders of common stock of Lone Star became entitled to receive
the balance of reorganized Lone Star's common equity and 2,753,333 warrants to
purchase common stock in the reorganized Lone Star. The warrants are exercisable
through December 31, 2000, and each warrant provides for the purchase of one
share of the common stock of reorganized Lone Star at a price of $18.75 per
share.
In addition, in accordance with the plan, as part of the agreement with the
Pension Benefit Guaranty Corporation ("PBGC") the company granted the PBGC a
mortgage on the Oglesby, Illinois plant, and a security interest in the Kosmos
Cement Company partnership, to secure certain contingent future pension
obligations.
NOTE 3 -- BASIS OF PRESENTATION
As of the effective date of the plan, the sum of allowed claims plus
post-petition liabilities of the company exceeded the value of its
preconfirmation assets. In addition, the company experienced a change in control
as pre-reorganization equity holders received less than 50% of the reorganized
Lone Star common stock issued pursuant to the plan. Therefore, in accordance
with AICPA Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP No. 90-7"), the company has
adopted "fresh-start" reporting which assumes that a new reporting entity has
been created and requires assets and liabilities to be adjusted to their fair
values as of the effective date.
Although the plan became effective on April 14, 1994, for accounting
purposes the effective date of the plan is considered to be March 31, 1994, and
accordingly, the company has reflected fresh-start reporting in the March 31,
1994 balance sheet. Adjustments were recorded as of March 31, 1994 to reflect
the effects of the consummation of the plan and to reflect the implementation of
fresh-start reporting. The reorganization value of the company was determined
using several factors and by reliance on various valuation methods, including
discounted cash flows, price/earnings ratios and other applicable ratios.
Reorganization value generally approximates fair value of the entity before
considering liabilities and approximates the amount a buyer would pay for the
assets of the entity after the reorganization. Based on information from parties
in interest and from Lone Star's financial advisors, the total reorganization
value of the Company was $579,411,000. The reorganization value was then
allocated to the company's assets and liabilities in conformity
F-7
<PAGE> 77
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with the Accounting Principles Board Opinion No. 16, "Business Combinations"
("APB No. 16"), as specified by SOP No. 90-7. Income related to the settlement
of liabilities subject to the company's Chapter 11 proceedings is included in
the accompanying consolidated statement of operations as an extraordinary gain
on discharge of prepetition liabilities. The gains or losses related to the
adjustments of assets and liabilities to fair value are included in
reorganization items in the accompanying consolidated statement of operations
(See Note 10). The reorganization value in excess of amounts allocable to
identifiable assets is the portion of the reorganization value of the company
which was not attributed to specific tangible or identified intangible assets of
the company.
Total equity of reorganized Lone Star under fresh-start reporting at March
31, 1994 was less than total equity included in the plan. This is due to the
different discount rates used to value the company's liability for
postretirement benefits other than pensions, in the plan and under generally
accepted accounting principles.
NOTE 4 -- ADJUSTMENTS TO RECORD EFFECTS OF PLAN OF REORGANIZATION
The effect of the plan and the company's adoption of fresh-start reporting
on its March 31, 1994 balance sheet are as follows:
ADJUSTMENTS TO RECORD EFFECTIVENESS OF THE PLAN OF REORGANIZATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
EFFECTS OF
PREDECESSOR PLAN OF FRESH START SUCCESSOR
COMPANY REORGANIZATION REPORTING COMPANY
----------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash including cash equivalents............ $ 220,466 $ (208,319) $ -- $ 12,147
Accounts and notes receivable, net......... 42,758 (13,047) -- 29,711
Inventories................................ 50,135 5,248 (10,589) 44,794
Current assets of assets held for sale..... 22,991 (22,991) -- --
Other current assets....................... 5,856 12,391 (3,120) 15,127
----------- -------------- ----------- ---------
Total current assets............. 342,206 (226,718) (13,709) 101,779
Net assets of liquidating subsidiary (See
Note 5).................................. -- 208,668 (96,668) 112,000
Assets held for sale....................... 66,024 (66,024) -- --
Notes receivable........................... 4,965 (4,860) -- 105
Joint ventures............................. 89,405 (65,571) (6,334) 17,500
Property, plant and equipment.............. 397,638 (57,968) (7,407) 332,263
Reorganization value in excess of amounts
allocable to identifiable assets......... -- -- 14,372 14,372
Cost in excess of net assets and deferred
charges.................................. 9,132 -- (9,132) --
Other assets and deferred charges.......... 3,038 -- (1,646) 1,392
----------- -------------- ----------- ---------
Total assets..................... $ 912,408 $ (212,473) $ (120,524) $ 579,411
======== =========== ========= ========
</TABLE>
F-8
<PAGE> 78
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ADJUSTMENTS TO RECORD EFFECTIVENESS OF THE PLAN OF REORGANIZATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
EFFECTS FRESH
PREDECESSOR OF PLAN OF START SUCCESSOR
COMPANY REORGANIZATION REPORTING COMPANY
----------- -------------- --------- ---------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable........................... $ 16,055 $ (128) $ -- $ 15,927
Accrued liabilities........................ 61,489 6,034 1,195 68,718
Other current liabilities.................. 2,471 523 -- 2,994
---------- ---------- --------- ---------
Total current liabilities........ 80,015 6,429 1,195 87,639
Asset proceeds notes of liquidating
subsidiary (See Note 5).................. -- 112,000 -- 112,000
Senior notes payable....................... -- 78,000 -- 78,000
Production payment......................... -- 18,463 -- 18,463
Deferred income taxes...................... 3,506 -- 1,494 5,000
Postretirement benefits other than
pensions................................. 142,715 -- (17,455) 125,260
Other liabilities.......................... 31,565 12 5,808 37,385
Pensions................................... -- -- 22,351 22,351
Liabilities subject to Chapter 11
proceedings.............................. 620,942 (620,942) -- --
Equity:
Predecessor Company:
Redeemable preferred stock............... 37,500 (37,500) -- --
Non-redeemable preferred stock............. 244 (244) -- --
Common stock............................... 18,103 (18,103) -- --
Additional paid-in capital................. 239,874 291 (240,165) --
Retained earnings........................ (204,327) 127,229 77,098 --
Pension liability adjustment............. (21,157) -- 21,157 --
Treasury stock, at cost.................... (36,572) 36,572 -- --
Successor Company:
Common Stock............................. -- 12,000 -- 12,000
Warrants................................. -- 15,613 -- 15,613
Additional paid-in capital............... -- 57,707 7,993 65,700
---------- ---------- --------- ---------
Total liabilities and
shareholders' equity........... $ 912,408 $ (212,473) $(120,524) $ 579,411
========== ========== ========= =========
</TABLE>
F-9
<PAGE> 79
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following entries record the provisions of the plan and the adoption of
fresh-start reporting:
Entries to record debt discharge:
<TABLE>
<CAPTION>
DEBIT CREDIT
------------- -------------
<S> <C> <C>
Liabilities subject to Chapter 11 proceedings........... $584,016,000
Cash.................................................. $200,451,000
Asset proceeds notes of liquidating subsidiary
(See Note 5)....................................... 112,000,000
Senior debt........................................... 78,000,000
Common stock.......................................... 10,200,000
Additional paid-in capital............................ 55,845,000
Gain on discharge of prepetition liabilities.......... 127,520,000
------------ ------------
$584,016,000 $584,016,000
============ ============
Entries to record exchange of stock for stock:
Preferred stock......................................... $ 37,744,000
Common stock (old)...................................... 18,103,000
Treasury stock........................................ $ 36,572,000
Common stock (new).................................... 1,800,000
Warrants to purchase common stock..................... 15,613,000
Additional paid-in capital............................ 1,862,000
------------ ------------
$ 55,847,000 $ 55,847,000
============ ============
Entries to record other effects of the plan:
Inventories............................................. $ 5,248,000
Net assets of liquidating subsidiary.................... 208,668,000
Other current assets.................................... 12,391,000
Liabilities subject to Chapter 11 proceedings........... 36,926,000
Reorganization expenses................................. 291,000
Cash and marketable securities........................ $ 7,868,000
Accounts receivable................................... 13,047,000
Current assets of assets held for sale................ 22,991,000
Assets held for sale.................................. 66,024,000
Notes receivables..................................... 4,860,000
Joint ventures........................................ 65,571,000
Property, plant and equipment......................... 57,968,000
Accrued expenses and accounts payable................. 5,906,000
Other current liabilities............................... 523,000
Production payment.................................... 18,463,000
Other liabilities..................................... 12,000
Additional paid-in capital............................ 291,000
------------ ------------
$263,524,000 $263,524,000
============ ============
</TABLE>
F-10
<PAGE> 80
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Entries to record the adoption of fresh-start reporting and to eliminate
the deficit:
<TABLE>
<CAPTION>
DEBIT CREDIT
------------ ------------
<S> <C> <C>
Reorganization value in excess of amounts allocable to
identifiable assets................................... $ 14,372,000
Postretirement benefits other than pensions............. 17,455,000
Gain on discharge of prepetition liabilities............ 127,520,000
Additional paid-in capital.............................. 232,172,000
Inventories........................................... $ 10,589,000
Other current assets.................................. 3,120,000
Net assets of liquidating subsidiary.................. 96,668,000
Joint ventures........................................ 6,334,000
Property, plant and equipment......................... 7,407,000
Cost in excess of net assets and deferred charges..... 9,132,000
Other assets and deferred charges..................... 1,646,000
Accrued expenses and accounts payable................. 1,195,000
Pensions.............................................. 22,351,000
Other liabilities..................................... 5,808,000
Deferred income taxes................................. 1,494,000
Pension liability adjustment.......................... 21,157,000
Accumulated deficit................................... 204,618,000
------------ ------------
$391,519,000 $391,519,000
============ ============
</TABLE>
The company's emergence from its Chapter 11 proceedings resulted in a new
reporting entity with no retained earnings or accumulated deficit as of March
31, 1994. Accordingly, the company's consolidated financial statements for
periods prior to March 31, 1994 are not comparable to consolidated financial
statements presented on or subsequent to March 31, 1994. A black line has been
drawn on the accompanying consolidated financial statements to distinguish
between the pre-reorganization and post-reorganization company.
PRO FORMA INFORMATION
The following pro forma condensed financial information of the company and
its subsidiaries illustrates the estimated financial effects of the
implementation of the company's plan of reorganization (which resulted in the
end of the company's 1989 Restructuring Program) and its adoption of fresh-start
reporting. Pro forma statement of operations data for the three months ended
March 31, 1994 have been presented as if the company had emerged from Chapter 11
bankruptcy proceedings and adopted fresh-start reporting as of January 1, 1994.
The pro forma data is unaudited.
F-11
<PAGE> 81
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LONE STAR INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
EFFECT OF PLAN OF
REORGANIZATION
AND FRESH START PRO FORMA
HISTORICAL REPORTING RESULTS
---------- ----------------- ---------
<S> <C> <C> <C>
Revenues:
Net sales....................................... $ 33.7 $ 11.6 $ 45.3
Joint venture income............................ 0.4 (0.3) 0.1
Other income.................................... 2.7 (1.5) 1.2
-------- ------- -------
36.8 9.8 46.6
-------- ------- -------
Deductions from revenues:
Cost of sales................................... 29.7 17.7 47.4
Recovery of litigation settlement............... (6.5) 6.5 --
Selling, general and administrative............. 9.9 (1.6) 8.3
Depreciation and depletion...................... 6.7 (0.6) 6.1
Interest expense................................ 0.2 2.0 2.2
-------- ------- -------
40.0 24.0 64.0
-------- ------- -------
Loss before reorganization items................ (3.2) (14.2) (17.4)
Reorganization items:
Adjustments to fair value....................... (133.9) 133.9 --
Other........................................... (13.4) 13.4 --
-------- ------- -------
Total reorganization items...................... (147.3) 147.3 --
-------- ------- -------
Income (loss) before income taxes and
extraordinary item............................ (150.5) 133.1 (17.4)
Credit (provision) for income taxes............. (0.2) 5.4 5.2
-------- ------- -------
Loss before extraordinary item.................. (150.7) 138.5 (12.2)
Extraordinary item: gain on discharge of
prepetition liabilities....................... 127.5 (127.5) --
-------- ------- -------
Loss before provision for preferred dividends... $ (23.2) $ 11.0 $ (12.2)
======== ======= =======
</TABLE>
The above pro forma condensed financial information includes estimated
adjustments for the following items:
As a result of the implementation of the plan and adoption of fresh-start
reporting the company's 1989 restructuring program ended effective as of the
effective date of the plan. Operating results of the cement plants at Pryor,
Oklahoma and Maryneal, Texas, which were formerly included in assets held for
sale are included in the pro forma consolidated operating results for the three
months ended March 31, 1994 (See Note 11).
The operating results of the assets which were transferred to a liquidating
subsidiary for distribution for the benefit of unsecured creditors, have been
eliminated from the pro forma statement of operations for the three months ended
March 31, 1994.
F-12
<PAGE> 82
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the adjustment of the March 31, 1994 property, plant and
equipment balances to reflect the estimated values of the assets under
fresh-start reporting, the pro forma consolidated operating results for the
three months ended March 31, 1994 have been adjusted to include the estimated
change in depreciation expense related to the new values.
Interest expense related to long-term debt, including the senior unsecured
notes of the reorganized company has been included in the pro forma statement of
operations for the three months ended March 31, 1994.
The provision for preferred dividends for the three months ended March 31,
1994 has been eliminated from the statement of operations as common and
preferred shareholders' equity of the old company has been eliminated and
replaced with common equity of the new company as of March 31, 1994.
All Chapter 11 reorganization items included in the statement of operations
for the three months ended March 31, 1994 have been eliminated.
The extraordinary gain on discharge of prepetition liabilities has been
eliminated.
The pro forma statement of operations has been adjusted to reflect the
reduction in expenses resulting from settlements, including settlements reached
with the Pension Benefit Guaranty Corporation and retirees in accordance with
the requirements of fresh-start reporting.
Cost of sales has been adjusted to reflect the company's change in its
method of accounting for inventory for interim reporting purposes and the
expensing of $8.4 million of deferred costs in accordance with the adoption of
fresh-start reporting. (See Note 15). In addition, cost of sales has been
adjusted to reflect $1.5 million of costs related to its construction aggregates
barges which were deferred during the first quarter of 1994 and subsequently
written-off in accordance with fresh-start reporting. Similar costs will be
incurred and expensed in future years.
F-13
<PAGE> 83
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following pro forma condensed financial information for the six months
ended June 30, 1994 illustrates the estimated operating results as if the
company had emerged from its Chapter 11 proceedings and adopted a fresh-start
reporting as of January 1, 1994 by combining the pro forma results for the three
months ended March 31, 1994 and the actual results for the three months ended
June 30, 1994. Because of the seasonality of the company's business, interim
results are not necessarily indicative of full year results.
LONE STAR INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA RESULTS ACTUAL RESULTS RESULTS
FOR THE FOR THE FOR THE
THREE MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, 1994 JUNE 30, 1994 JUNE 30, 1994
------------------ ------------------ ----------------
<S> <C> <C> <C>
Revenues:
Net sales.............................. $ 45.3 $87.0 $132.3
Joint venture income................... 0.1 1.3 1.4
Other income........................... 1.2 0.8 2.0
------ ----- ------
46.6 89.1 135.7
------ ----- ------
Deductions from revenues:
Cost of sales.......................... 47.4 61.4 108.8
Selling, general and administrative.... 8.3 7.5 15.8
Depreciation and depletion............. 6.1 6.0 12.1
Interest expense....................... 2.2 2.2 4.4
------ ----- ------
64.0 77.1 141.1
Income (loss) before income taxes...... $(17.4) $12.0 (5.4)
====== ===== ======
Credit for income taxes*............... 1.6
------
Net (loss)............................. $ (3.8)
======
</TABLE>
- ---------------
* The credit for income taxes is based on a pro forma tax rate of 30% for the
year which includes the pro forma first quarter loss and the effect of
percentage depletion.
NOTE 5 -- ROSEBUD HOLDINGS, INC. LIQUIDATING SUBSIDIARY
As part of the plan, Lone Star transferred on April 14, 1994 certain
non-core assets and their related liabilities to Rosebud Holdings, Inc., a
wholly-owned liquidating subsidiary, and its subsidiaries (collectively
"Rosebud"). The assets transferred consist of the company's interests in the RMC
LONESTAR, Lone Star Falcon and Hawaiian Cement partnerships, cement plants
located in Santa Cruz, California, and Nazareth, Pennsylvania, certain
promissory notes executed by RMC LONESTAR, certain surplus real estate, the
company's interest in any recovery resulting from the litigation against
Northeast Cement Company and its affiliates, Lafarge Corporation, and Lafarge
Canada, Inc., certain other miscellaneous assets including a note receivable and
certain litigation and insurance claims, and a $5,000,000 cash investment by the
company to be used for working capital purposes. The company is under no
obligation to fund additional Rosebud working capital requirements.
It was estimated by the company in connection with the plan that
disposition of the non-core assets would generate, over time, gross proceeds of
approximately $113,000,000 to $170,000,000. Lone Star's investment in
F-14
<PAGE> 84
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rosebud is included in Lone Star's June 30, 1994 fresh-start balance sheet at
$116,000,000, which is the present value of estimated net proceeds generated by
the sale of assets and collection of insurance claims and cash generated from
operations, and was determined by using the middle of the range of the proceeds
contained in the plan, discounted at 14%, plus cash, marketable securities and
escrow deposits at June 30, 1994. The increase of $4.0 million from March 31,
1994 is primarily due to the accretion of assets reflecting the shorter time
period used in determining the present value. Other than litigation against
certain insurance companies, this amount does not include any amount for
potential recovery from any litigation including the Northeast Cement Company
litigation (See Note 19).
At the effective date of the plan, Rosebud issued asset proceeds notes in
the aggregate principal amount of $138,118,000. The asset proceeds notes bear
interest at a rate of 10% per annum payable in cash and/or in additional asset
proceeds notes, in semi-annual installments. The asset proceeds notes are to be
repaid as Rosebud's assets are disposed of and proceeds, if any, are received in
connection with the litigation transferred to Rosebud. All net cash proceeds
less a $5,000,000 cash reserve are to be deposited in a cash collateral account
for distribution to the noteholders. The asset proceeds notes mature on July 31,
1997. These notes are guaranteed, in part, by Lone Star. In the event that, at
the maturity date, the aggregate amounts of all cash payments of principal and
interest on the asset proceeds notes is less than $88,118,000, the guarantee is
payable in either cash, five-year notes or a combination thereof to cover the
shortfall between the actual payments and $88,118,000 dollar for dollar plus
interest provided however that the amount paid pursuant to the guarantee cannot
exceed $28,000,000. The asset proceeds notes are recorded on Lone Star's June
30, 1994 balance sheet at an amount equal to the estimated value of assets to be
utilized to liquidate these obligations.
In June 1994, a subsidiary of Rosebud sold all of its interest in a cement
plant located in Santa Cruz, California for $33,063,000. The net proceeds from
the sale, after making provisions for an environmental reserve for landfill and
other costs related to the transaction, were used to redeem a portion of the
outstanding asset proceeds notes on a pro rata basis and to pay interest on the
redeemed notes through the date of redemption. $31,719,000 has been transferred
to the collateral agent who made payments to note holders on August 19, 1994.
In addition, in July 1994, Rosebud reached final agreements with all but
one insurance carrier involved in litigation related to the reimbursement of
defense costs. Rosebud will receive $5,300,000 from the insurance carriers
involved in the settlements.
NOTE 6 -- PRODUCTION PAYMENT
As part of the plan, the company's production payment agreement terms were
revised as of April 14, 1994. In connection therewith, a new note was issued,
with an outstanding principal balance of $20,963,000 as of that date, and which
bears interest at the company's option at a rate of either prime or LIBOR plus
1.75% through December 31, 1995 and either prime plus .25% or LIBOR plus 2.5%
beginning on January 1, 1996. The principal balance is payable semi-annually
through July 31, 1998 in increasing installments.
NOTE 7 -- REVOLVING CREDIT LINE
Upon emergence from Chapter 11, the company entered into a three-year
$35,000,000 revolving credit agreement which is collateralized by inventory,
receivables, collection proceeds and certain intangible assets. The company's
borrowings under this agreement are limited to 55% of eligible inventory plus
85% of eligible receivables. Advances under the agreement bear interest at a
rate, at the Company's option, of either prime plus 1.25% or LIBOR plus 3%. A
fee of .50% per annum is charged on the unused portion of the credit line. There
was no outstanding balance at June 30, 1994.
The company's financing agreements contain restrictive covenants which,
among other things, restrict the payment of cash dividends.
F-15
<PAGE> 85
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- SENIOR UNSECURED NOTES
Upon emergence from its Chapter 11 proceedings, the company issued
$78,000,000 of ten year senior unsecured notes. The notes bear interest at a
rate of 10% per annum, payable semi-annually.
NOTE 9 -- STOCK OPTIONS
Upon emergence from Chapter 11 proceedings, the board of directors of the
company adopted the Lone Star Industries, Inc. Management Stock Option Plan
("Management Plan") and the Lone Star Industries, Inc. Directors Stock Option
Plan ("Directors Plan"). Both plans were ratified by the company's shareholders
at the 1994 Annual Meeting. Total options authorized for grant are 700,000 and
50,000 under the Management and the Directors Plans, respectively. In June 1994,
options to purchase common stock for 700,000 shares at an exercise price of
$15.375 and 6,000 shares at an exercise price of $15.6875 were granted under the
Management and Directors Plans, respectively.
NOTE 10 -- REORGANIZATION ITEMS
The effects of transactions occurring as a result of the Chapter 11 filings
have been segregated from ordinary operations in the accompanying consolidated
statements of operations. Such items for the three months ended March 31, 1994
and the three and six months ended June 30, 1993 include the following (in
thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
THREE MONTHS THREE MONTHS SIX MONTHS
ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30,
1994 1993 1993
------------ ------------ ----------
<S> <C> <C> <C>
Professional fees and administrative
expenses.................................... $ (15,431) $ (3,578) $ (7,329)
Interest income............................... 2,035 989 2,132
--------- -------- --------
(13,396) (2,589) (5,197)
Loss on sale of assets........................ -- (44,889) (44,889)
Adjustments to fair value..................... (133,917) -- --
--------- -------- --------
$(147,313) $(47,478) $(50,086)
========= ======== ========
</TABLE>
NOTE 11 -- RESTRUCTURING PROGRAM
In November 1989, the Lone Star Board of Directors approved a restructuring
program which included the proposed sale of certain facilities and marginal
businesses, interests in certain joint ventures, an investment in preferred
stock, surplus real estate, and certain other assets. The assets held for sale,
including related current and other assets, were classified as assets held for
sale in the accompanying consolidated December 31, 1993 balance sheet at their
estimated net realizable values. As a result of the effectiveness of the
company's plan of reorganization, certain assets included in the restructuring
program have been transferred to Rosebud to be sold with the proceeds to be used
to pay off the asset proceeds notes, and other assets are being retained by the
company.
In accordance with the plan, the company will retain the Pryor, Oklahoma
and Maryneal, Texas cement plants. The results from the operations which the
company is retaining, but which were previously classified as assets held for
sale, consist of net sales of $14,030,000, $16,831,000 and $28,060,000 for the
three months ended March 31, 1994 and the three and six months ended June 30,
1993, respectively, and pre-tax income of $1,278,000, $1,799,000 and $2,999,000
for the three months ended March 31, 1994 and the three and six months ended
June 30, 1993, respectively.
F-16
<PAGE> 86
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- KOSMOS CEMENT COMPANY
Summarized financial information of Kosmos Cement Company, a 25% owned
partnership which produces and sells cement in Kentucky and Pennsylvania, for
the three months ended June 30, 1994 and March 31, 1994 and the three and six
months ended June 30, 1993 is as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
THREE MONTHS THREE MONTHS THREE MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, MARCH 31, JUNE 30, JUNE 30,
1994 1994 1993 1993
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Net sales............................. $19,619 $ 6,825 $18,626 $26,077
Gross profit.......................... $ 3,956 $ 159 $ 3,319 $ 3,462
Income (loss) before cumulative effect
of change in accounting
principles.......................... $ 4,284 $ (59) $ 3,431 $ 3,514
Cumulative effect of change in
accounting principles............... $ -- $ -- $ -- $(3,126)
Net income (loss)..................... $ 4,284 $ (59) $ 3,431 $ 388
</TABLE>
In the first quarter of 1993, the Kosmos Cement Company partnership adopted
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." As a result, the company
recognized a charge of $782,000 representing its share of the partnership's
cumulative effect of the change in accounting principles.
NOTE 13 -- CASH AND CASH EQUIVALENTS
Cash equivalents include the company's marketable securities which are
comprised of short-term, highly liquid investments with original maturities of
three months or less. Interest paid during the three months ended June 30, 1994,
the three months ended March 31, 1994, and the three and six months ended June
30, 1993 was $57,000, $20,000, $31,000 and $63,000, respectively. Income taxes
paid during the three months ended June 30, 1994, the three months ended March
31, 1994 and the three and six months ended June 30, 1993 were $57,000,
$756,000, $51,000, and $77,000, respectively.
NOTE 14 -- INTEREST
Interest expense of $2,259,000, $271,000, $482,000, and $1,001,000 has been
accrued for the three months ended June 30, 1994, the three months ended March
31, 1994 and the three and six months ended June 30, 1993, respectively.
Interest capitalized during the three months ended June 30, 1994, the three
months ended March 31, 1994 and the three and six months ended June 30, 1993 was
$40,000, $38,000, $54,000 and $100,000, respectively.
The filed companies stopped accruing interest on all of their unsecured
debt as of the petition date. The amount not accrued for the three months ended
March 31, 1994 and the three and six months ended June 30, 1993 was $7,398,000,
$7,427,000 and $14,853,000, respectively.
NOTE 15 -- INVENTORIES
Effective April 1, 1994, the company adopted, on a prospective basis, a
change in the method of accounting for inventory for interim reporting purposes.
Under the previous method, planned capacity variances were deferred in periods
of low production and absorbed later in the year. Under the new method, the
expense resulting from capacity variances will be recognized as incurred.
Fresh-start adjustments recorded as of March 31, 1994 included the write-off of
$8,391,000 of deferred costs related to operations included in predecessor
company results.
F-17
<PAGE> 87
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16 -- EARNINGS PER SHARE
Due to the company having common stock equivalents in excess of 20% of the
number of shares of outstanding common stock, primary and fully diluted earnings
per share of the successor company are calculated using the modified treasury
stock method in accordance with Accounting Principles Board Opinion No. 15,
"Earnings per Share," and are based on adjusted weighted average shares
outstanding of 13,774,000 and adjusted net income of $8,585,000.
NOTE 17 -- SALE OF FLORIDA CEMENT PLANT
In June 1994, the company sold its interest in a cement plant located in
Florida for $21,750,000, which approximated book value.
NOTE 18 -- ENVIRONMENTAL MATTERS
The company is subject to federal, state and local laws, regulations and
ordinances pertaining to the quality and the protection of the environment. Such
environmental regulations not only affect the company's operating facilities but
also apply to closed facilities and previously owned and operated properties.
While it is not possible to predict with accuracy the range of future costs
for the company's program of compliance with current or future environmental
regulations or their expected impact on the company, the capital, operating and
other costs of the program could be substantial.
In order to save on fuel costs, the company is blending and burning
hazardous waste fuels at two of its cement manufacturing plants. This process
involves obtaining permits and complying with applicable state and federal
environmental regulations. While the company believes it is in substantial
compliance with such regulations, changes in them or in their interpretation by
the relevant agencies or courts could limit, effectively prohibit the use of, or
make prohibitive the cost of using, hazardous waste fuels, thus depriving the
company of the economic benefits of its waste fuel program. In February 1994,
the United States Court of Appeals for the District of Columbia Circuit (i)
vacated and remanded a facility-specific standard promulgated by the U.S.
Environmental Protection Agency ("U.S. EPA") for ascertaining the presence of
products of incomplete combustion designed for wet process cement kilns that
burn hazardous waste fuels, ruling that the standard had been promulgated
without sufficient notice, but (ii) upheld related standards applicable to the
industry. In April 1994, the Circuit Court denied plaintiffs' motion to
reconsider its decision. Unless the Circuit Court's decision (from which a
petition for certiorari to the U.S. Supreme Court has been filed) is reversed or
a modification of the remanded standard is adopted by U.S. EPA, or the company
can institute operational changes which will enable it to meet the industry
standards upheld by the Circuit Court, the company's Greencastle, Indiana cement
plant may have to cease or curtail its use of hazardous waste fuels. Meanwhile,
the Circuit Court's ruling is stayed pending the Supreme Court's decision on
plaintiffs' petition for certiorari, and the company is investigating
modifications to operations at this plant that would enable it to continue to
burn hazardous waste fuels under the surviving standards. The Circuit Court's
ruling has no impact upon the current use of hazardous waste fuels at the
company's Cape Girardeau, Missouri cement plant.
Since 1991, federal and state environmental agencies have conducted
inspections and instituted inquiries and administrative actions regarding waste
fuel operations at both of the company's waste fuel burning facilities. In the
first half of 1994 the company paid amounts totalling approximately $402,000
representing negotiated settlements with federal and state environmental
authorities of administrative actions that alleged violations of regulations
pertaining to the handling and burning of hazardous waste fuels at the
Greencastle plant. In March 1994, U.S. EPA, Region 7, instituted an
administrative proceeding regarding waste fuel operations at the company's Cape
Girardeau plant, seeking over $500,000 in civil penalties. The company is
holding settlement negotiations with officials of Region 7.
F-18
<PAGE> 88
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cement kiln dust, ("CKD") a by-product of cement manufacturing, is
currently exempted from environmental regulation by the Bevill Amendment to the
Federal Resource Conservation and Recovery Act pending the completion of a
Congressionally-mandated study and regulatory determination by U.S. EPA
regarding the need for regulatory controls on the management, handling and
disposal of cement kiln dust. The regulatory determination is scheduled to be
made in January 1995. It is impossible at this time to predict with accuracy
what increased costs (or range of costs), if any, changes in regulatory control
of CKD would impose on the company.
The company and certain of its subsidiaries have been identified as parties
that may be held responsible by various federal, state and local authorities
with respect to contamination at certain sites of former operations or sites
where waste materials from the company or its subsidiaries, such as equipment
containing polychlorinated biphenyls, were deposited, including sites placed on
the National Priority List ("NPL") pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"). These include sites
located: in Utah (seven sites, including three NPL sites discussed below);
Illinois (one NPL site); Texas (two sites, including one NPL site); Missouri
(one NPL site); Washington (two NPL sites); Minnesota (two NPL sites); Colorado
(one NPL site); Florida (four sites, including two related NPL sites and two
non-NPL sites described below); California (one non-NPL site described below);
Pennsylvania (one NPL site); and Louisiana (one NPL site).
Except for the Utah NPL sites described below, all of the NPL sites
referred to above involve numerous potentially responsible parties ("PRP's") and
factual investigation indicates that in each case the company's or subsidiary's
contributions of waste were small in comparison to those of other PRP's. Except
for the Utah sites, no timely proofs of claim were filed with the Bankruptcy
Court by the environmental regulatory agencies with respect to NPL sites, none
of which are currently owned or leased by the company or its subsidiaries.
However, a number of PRP's filed timely proofs of claim with the Bankruptcy
Court with respect to various NPL sites; these claims have either been (i)
allowed in full as de minimis, (ii) resolved through negotiation and allowed as
general unsecured claims, or (iii) objected to and disallowed in the company's
Chapter 11 proceedings.
Following are descriptions of proceedings involving certain NPL and non-NPL
sites mentioned above:
In July 1989, the company was advised by U.S. EPA, Region 8 that it was a
PRP under CERCLA with respect to three adjoining sites in Salt Lake City, Utah
on which CKD and small amounts of chrome-containing kiln brick from the
company's Utah cement plant had been deposited. In July 1990, the U.S. EPA and
the Utah Department of Health issued a record of decision selecting a remedial
action calling for removal of the CKD, over a period of time, to a location to
be selected in the Salt Lake City vicinity where an industrial type landfill
would be constructed. The company has reached an agreement with the U.S.
Department of Justice, U.S. EPA, the U.S. Department of the Interior, the Utah
Department of Environmental Quality and Davis County, Utah regarding a
settlement pursuant to which among other things, U.S. EPA will receive a general
unsecured claim in the company's bankruptcy proceedings in exchange for releases
from further liability for investigation and clean-up costs and natural resource
damage claims and protection against third-party claims for investigation and
clean-up costs. The agreement has been executed by the company and by the
respective governmental agencies and is subject to a CERCLA-mandated public
notice and comment period and approval by the company and the Bankruptcy Court.
In October 1989, the company commenced an action in United States District
Court in Utah seeking contribution from the two principal owners of these Utah
NPL sites, who had also been named PRP's, for their share of investigative
clean-up costs. Following pre-trial litigation, settlement agreements with the
landowners were negotiated and approved by the Bankruptcy Court, pursuant to
which the landowners receive general unsecured claims in the company's
bankruptcy proceedings and all their claims against the company were dismissed
with prejudice, subject to the landowners' reaching settlements with U.S. EPA,
the negotiation of which is continuing.
F-19
<PAGE> 89
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In a transaction in the early 1970's, the company acquired subsidiaries
that conducted woodtreating or wood-dipping operations at two sites in Florida.
Contamination from chemicals at these non-NPL sites has been the subject of
various proceedings by federal, state or local environmental authorities, as
well as lawsuits involving private parties.
In 1992, pursuant to an Administrative Order on Consent with U.S. EPA,
Region 4, entered into prior to the company's Chapter 11 filing, a clean up of
soils and water in excavated areas at the Dania, Florida site was completed by a
subsidiary of the company and approved by U.S. EPA in 1992. The subsidiary has
entered into a stipulation approved by the Bankruptcy Court, with the State of
Florida Department of Environmental Protection ("FDEP") (which filed a claim in
the company's bankruptcy proceedings) committing to undertake a groundwater
monitoring program and, if necessary, groundwater treatment in settlement of the
State's proof of claim it filed in the bankruptcy proceedings. The subsidiary is
currently negotiating a consent order with FDEP setting forth the monitoring and
possible remediation efforts in detail. This site has been transferred to
Rosebud pursuant to the plan.
In 1992, pursuant to a stipulation in Florida state court, executed prior
to its Chapter 11 filing, a subsidiary of the company completed the clean-up of
soils under Florida environmental regulations at a site in Dade County, Florida
which it had leased for woodtreating operations in the 1960's and 1970's. In
settlement of the proofs of claim filed in the company's bankruptcy proceedings,
the subsidiary has executed a stipulation with state and county environmental
authorities regarding entry into a consent order whereby the subsidiary has
committed to undertake further groundwater investigation of the site and, if
necessary, soil remediation, groundwater treatment and groundwater monitoring
programs all within a specified monetary cap.
Prior to its Chapter 11 filing, the subsidiary filed a lawsuit in federal
district court in Florida against other PRP's, including past and present owners
of the site, for cost recovery and contribution under CERCLA. Two of the PRP's
filed counterclaims and proofs of claim in the bankruptcy proceedings. The
subsidiary has entered into a settlement agreement, approved by the Bankruptcy
Court, with the PRP's pursuant to which they will reimburse the subsidiary for a
portion of its clean-up costs and dismiss their federal and state court and
claims filed in the bankruptcy proceedings, with prejudice and the subsidiary
will dismiss its court claims against them with prejudice, while committing to
undertake the further investigation and, if necessary, remedial work under the
Bankruptcy Court stipulation with state and county environmental authorities
described above.
In August 1992, Santa Cruz County, California authorities served the
company with written notice that it had commenced a criminal and civil
investigation of long-term waste disposal practices at a site formerly owned by
the company and now owned by a partnership in which a subsidiary of Rosebud
holds a partnership interest. The investigation and negotiations by the company
and others with interests in the site culminated in the resolution of the matter
by the concurrent filing of a complaint and stipulated final judgment. Pursuant
to the settlement, certain county and state authorities received an
administrative priority claim in the company's bankruptcy proceedings totaling
$150,000 and all claims raised in the complaint were released and dismissed.
Rosebud Holdings, Inc. has also committed to complete and is presently
undertaking the closure of a former waste landfill area on the investigated site
at an anticipated cost of approximately $1,200,000, which is for the account of
the Rosebud subsidiary. The closure work is not expected to commence until 1995.
The Company believes that it has adequately provided for estimated
remediation and other costs at these and other known sites.
NOTE 19 -- LITIGATION
Between 1983 and 1989 a Lone Star subsidiary (among those who filed Chapter
11 petitions) manufactured and sold approximately 500,000 concrete railroad
crossties to various railroads. In 1989 and early 1990 purchasers of most of the
crossties sued Lone Star and such subsidiary, alleging that the crossties were
defective because of cracking, and seeking substantial compensatory and punitive
damages. The suits by
F-20
<PAGE> 90
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
four purchasers, which sought damages of over $200,000,000 were consolidated for
pre-trial purposes in the U.S. District Court for the District of Maryland under
the Federal Courts Multi-District Rules. In addition, an administrative
proceeding was brought by the Baltimore Mass Transit Authority ("MTA"),
involving crossties sold to the MTA, and an MTA procurement officer found Lone
Star and its subsidiary liable to the MTA for damages in an amount of
approximately $10,000,000.
Lone Star determined that it would be in the best interest of the company
to settle the proceedings brought by the railroads, and in late 1992 Lone Star
entered into separate agreements with each of the four purchasers providing for
the release of their respective claims against the company and its subsidiaries
relating to the crossties, and for the railroads to receive in the aggregate
allowed liquidated unsecured claims in its bankruptcy proceedings of
$57,200,000, for one railroad to receive a cash payment of $5,000,000 and for
the payment of $4,384,000 to another railroad from an escrow fund established to
hold the proceeds from the sale of property by a Lone Star subsidiary on which
that railroad had obtained liens in the litigation. These agreements have been
approved by the Bankruptcy Court, and the $9,384,000 cash payments have been
made. The claims were treated in accordance with the provisions of the company's
plan.
In 1989 Lone Star and its subsidiary filed a plenary action in the Maryland
Federal District Court, and third party complaints in other actions, against
Northeast Cement Co. and its affiliates, Lafarge Corporation and Lafarge Canada,
Inc. ("Lafarge"), alleging breach of warranties in connection with the purchase
from Northeast Cement Co. by Lone Star's subsidiary of the cement used to
manufacture substantially all of the crossties involved in the above proceedings
and claiming a fraudulent sale of defective cement. The plenary action and the
third party complaints sought compensatory damages growing out of the various
crosstie actions, including the foregoing settlements and defense costs at
approximately $15,750,000. The plenary action brought against the cement
supplier was tried before a jury in the Maryland Federal District Court in late
1992. The jury found that Lone Star had proven its claims of fraud, breach of
certain warranties and negligence, but Lone Star's recovery was limited to
$1,213,000 for direct lost profits due to limitations on the awarding of damages
in the trial judge's instructions to the jury. Lone Star believed that these
instructions were in error and filed a motion for a new trial on damages based
on the judge's refusal to permit the jury to even consider certain damages.
Lafarge also moved for judgment as a matter of law and for a new trial.
Following a hearing on March 5, 1993 the judge denied these motions. Lone Star
consequently appealed to the Federal Circuit Court of Appeals for the Fourth
Circuit for a new trial on the issue of damages. Lafarge also filed an appeal.
On April 7, 1994 the Fourth Circuit Court of Appeals vacated the judgment of the
District Court and remanded the case for a new trial on all issues relating to
both liability and damages and permitted the company to amend its complaint to
add a claim of violation of a Massachusetts consumer protection law which allows
for attorney fees and doubling and trebling of damages. A request by Lafarge for
a rehearing of that decision by the Fourth Circuit Court of Appeals en banc was
denied and new trial is scheduled for October of this year. The rights to any
recovery of damages in this action have been assigned to Rosebud pursuant to the
plan.
The primary insurance carrier insuring the company has asserted that Lone
Star has only limited insurance coverage for the various crosstie claims and,
while agreeing that certain defense costs are covered by insurance, did not
agree to Lone Star's position as to the amount of defense costs covered.
Consequently, in 1989 Lone Star began an action in the Superior Court of the
State of Delaware against the insurance companies (both primary and excess
carriers) which insured it during the 1983 to 1989 period, seeking a declaratory
judgment as to their duty under the applicable policies to indemnify Lone Star
for all damages incurred by it in the various crosstie proceedings which
includes the settlements of $66,584,000 and as to the duty of the primary
insurance carrier to pay the costs of defending those proceedings. The Superior
Court made a preliminary ruling that the primary insurance carrier has a duty to
pay certain of the costs of the company's defense in the crosstie proceedings.
With the approval of the Bankruptcy Court, Lone Star settled its claims against
the primary insurance carrier for defense costs for payments to Lone Star of
$14,733,000 in cash; and setoffs to the carrier's claim in the bankruptcy of
approximately $4,778,000.
F-21
<PAGE> 91
LONE STAR INDUSTRIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Lone Star, with the approval of the Bankruptcy Court, settled its indemnity
action against the primary insurance carrier in March 1994 for $6,500,000 as a
set-off to a claim filed in the company's bankruptcy proceedings by that
carrier. The rights to any additional recoveries from insurance carriers has
been assigned to Rosebud pursuant to the plan. Rosebud and certain of the
remaining insurance carriers have negotiated a settlement of the indemnity
action which provides for payments to Rosebud of $5,300,000. Pre-trial
preparation in the action was stayed by agreement of the parties during these
negotiations. Rosebud is in the process of continuing the indemnity action
against any insurance carriers as to which no settlement has been reached and
will also seek to recover the costs of the Lafarge action.
In addition, a settlement with all parties has been reached in the
consolidated shareholders' class action lawsuits brought against the company and
certain of its past and present officers and directors. The settlement involves
the actions entitled Cohn v. Lone Star Industries, Inc., et al. filed in
November 1989 on behalf of persons who purchased Lone Star common stock between
February 8, 1988 and November 16, 1989 and the action entitled Garbarino, et
ano. v. Stewart, et al. filed in December 1990 on behalf of persons who
purchased Lone Star common stock between November 16, 1989 and December 9, 1990.
The settlements were adopted and approved by an order and final judgment of a
magistrate judge and the order and judgment was in turn approved and adopted by
an order of the U.S. District Court for the District of Connecticut on January
20, 1994.
The terms of the settlement agreement, which was entered into by Mr. James
E. Stewart, the former Chairman and Chief Executive Officer of Lone Star,
includes the dismissal of the claims against Mr. Stewart and the officers and
directors of Lone Star and the agreement of Lone Star's directors and officers
liability insurers to pay $40,000,000 to establish settlement funds on behalf of
the plaintiff classes. In order to participate in these settlement funds,
eligible plaintiffs were required to submit a proof of claim by July 29, 1994.
Distribution from these settlement funds is to take place on or about October
29, 1994. Lone Star was dismissed without prejudice from the Cohn action, the
only action in which it was named as a defendant by the plaintiffs. The
settlement does not constitute an admission by Lone Star, or any of its past and
present officers, directors and employees of any liability or wrongdoing on
their part. In connection with the company's bankruptcy proceedings, in order to
resolve the claims filed by both plaintiff classes without admitting any
liability, a claim in the aggregate of $2,500,000 was allowed to the plaintiff
classes by the company. The proceeds from the claim have been added to the
settlement funds for distribution in October 1994.
The company, along with numerous other parties, has been named a defendant
in a series of toxic tort lawsuits filed in a Texas state court commencing in
March, 1994 in which multiple plaintiffs claim to have suffered injury from the
proximity of deposits of toxic wastes or substances at a site located near
Galveston, Texas. The wastes or substances are alleged to have been deposited at
the site starting in the 1940's. The company has retained Texas counsel and has
filed, or is in the process of filing, answers denying the allegations of the
various complaints. The company intends to contest these lawsuits vigorously.
The company's insurance carriers have been notified of the claims but the extent
of the company's insurance coverage, if any, for these lawsuits has not yet been
determined.
F-22
<PAGE> 92
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders of
Lone Star Industries, Inc.:
We have audited the accompanying consolidated balance sheet of Lone Star
Industries, Inc. and Consolidated Subsidiaries as of March 31, 1994. This
balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on the balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of Lone
Star Industries, Inc. and Consolidated Subsidiaries as of March 31, 1994, in
conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
August 10, 1994
F-23
<PAGE> 93
LONE STAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
1994
---------
<S> <C>
Assets:
Current assets:
Cash including cash equivalents of $3,498.................................... $ 12,147
Accounts and notes receivable, net........................................... 29,711
Inventories:
Finished goods.......................................................... 23,743
Work in process and raw materials....................................... 2,126
Supplies and fuel....................................................... 18,925
--------
44,794
Other current assets............................................................ 15,127
--------
Total current assets.................................................... 101,779
Net assets of liquidating subsidiary (See Note 4)............................... 112,000
Notes receivable................................................................ 105
Joint ventures.................................................................. 17,500
Property, plant and equipment................................................... 332,263
Reorganization value in excess of amounts allocable to identifiable assets...... 14,372
Other assets.................................................................... 1,392
--------
Total assets............................................................ $579,411
========
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable............................................................. $ 15,927
Accrued liabilities.......................................................... 68,718
Other current liabilities.................................................... 2,994
--------
Total current liabilities............................................... 87,639
Asset proceeds notes of liquidating subsidiary (See Note 4)..................... 112,000
Senior notes payable............................................................ 78,000
Production payment.............................................................. 18,463
Deferred income taxes........................................................... 5,000
Postretirement benefits other than pensions..................................... 125,260
Pensions........................................................................ 22,351
Other liabilities............................................................... 37,385
Contingencies (See Notes 23 and 24)
Shareholders' Equity:
Common stock................................................................. 12,000
Warrants to purchase common stock............................................ 15,613
Additional paid-in capital................................................... 65,700
--------
Total shareholders' equity.............................................. 93,313
--------
Total liabilities and shareholders' equity.............................. $579,411
========
</TABLE>
The accompanying Notes to Consolidated Balance Sheet
are an integral part of the Financial Statements.
F-24
<PAGE> 94
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
NOTE 1 -- BASIS OF PRESENTATION
On February 17, 1994, with the approval of all classes of creditors and
equity holders, the Bankruptcy Court confirmed the Lone Star Plan of
Reorganization (the "plan"). On April 14, 1994, the plan became effective, and
distributions to creditors and shareholders commenced. Although the plan became
effective on April 14, 1994, for accounting purposes the effective date of the
plan is considered to be March 31, 1994, and accordingly, the company has
adopted fresh-start reporting as of March 31, 1994.
As of the effective date of the plan, the sum of allowed claims plus
post-petition liabilities of the company exceeded the value of its
preconfirmation assets. In addition, the company experienced a change in control
as pre-reorganization equity holders received less than 50% of the new Lone Star
common stock issued pursuant to the plan. Therefore, in accordance with AICPA
Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP No. 90-7"), the company has
adopted "fresh-start" reporting which assumes that a new reporting entity has
been created and assets and liabilities should be reported at their estimated
fair values as of the effective date.
Adjustments were recorded as of March 31, 1994 to reflect the effects of
the consummation of the plan of reorganization and to reflect the implementation
of fresh-start reporting. The reorganization value of the company was determined
using several factors and by reliance on various valuation methods, including
discounted cash flows, price/earnings ratios and other applicable ratios.
Reorganization value generally approximates fair value of the entity before
considering liabilities and approximates the amount a buyer would pay for the
assets of the entity after the restructuring. Based on information from parties
in interest and from Lone Star's financial advisors, the total reorganization
value of the Company is $579,411,000. The reorganization value was then
allocated to the company's assets and liabilities in conformity with the
Accounting Principles Board Opinion No. 16, "Business Combinations" ("APB No.
16"), as specified by SOP No. 90-7. The reorganization value in excess of
amounts allocable to identifiable assets is the portion of the reorganization
value of the company which was not attributed to specific tangible or identified
intangible assets of the company.
Total equity of new Lone Star under fresh-start reporting is less than
total equity included in the plan. This is due to the different discount rates
used to value the company's liability for postretirement benefits other than
pensions, in the plan and under generally accepted accounting principles.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION -- The consolidated financial statements include the accounts
of Lone Star Industries, Inc. and subsidiaries. All intercompany transactions
have been eliminated. Joint ventures are accounted for under the equity method.
CASH AND CASH EQUIVALENTS -- Cash equivalents include the company's
marketable securities which are comprised of short-term, highly liquid
investments with original maturities of three months or less. Marketable
securities are recorded at fair market value.
INVENTORIES -- Inventories are stated at fair market value.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated
at appraised value and depreciated over the estimated useful lives of the assets
using the straight-line method. Significant expenditures which extend the useful
lives of existing assets are capitalized. Maintenance and repair costs are
charged to current earnings. Cost depletion is calculated using the units of
production method. The cost of
F-25
<PAGE> 95
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
assets and related accumulated depreciation is removed from the accounts when
such assets are disposed of, and any related gains or losses are reflected in
current earnings.
INCOME TAXES -- In accordance with SFAS No. 109, deferred income taxes are
provided for the temporary differences between the financial reporting basis and
the tax basis of the company's assets and liabilities.
PENSION PLANS -- The company and certain of its consolidated subsidiaries
have a number of retirement plans which cover substantially all of its
employees. Defined benefit plans for salaried employees provide benefits based
on employees' years of service and average compensation for a specified period
of time. Defined benefit plans for hourly paid employees, including those
covered by multi-employer pension plans under collective bargaining agreements,
generally provide benefits of stated amounts for specified periods of service.
The company's policy is to fund amounts as are necessary on an actuarial basis
to provide assets sufficient to meet the benefits to be paid to plan members in
accordance with the requirements of the Employees Retirement Income Security Act
of 1974 ("ERISA"). Assets of the plans are administered by an independent
trustee and are invested principally in fixed income, equity securities and real
estate.
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS
- -- The portion of the company's reorganization value which was not attributed to
specific tangible or identified intangible assets of the company is amortized
using the straight-line method over a period not to exceed forty years.
NOTE 3 -- REORGANIZATION
On February 17, 1994, with the approval of all classes of creditors and
equity holders, the Bankruptcy Court confirmed the plan. On April 14, 1994, the
plan became effective, and distributions to creditors and shareholders commenced
(as provided by the plan, a reserve for approximately $40,000,000 in disputed
unresolved claims was established). In accordance with the confirmed plan,
certain core cement, ready-mixed concrete and construction aggregates operations
constitute the reorganized Lone Star. Other non-core assets of the company and
their associated liabilities including the Nazareth, Pennsylvania cement plant,
the Santa Cruz, California cement plant and the company's interest in the RMC
LONESTAR, Hawaiian Cement and Lone Star Falcon joint ventures and certain
surplus real estate have been transferred to Rosebud Holdings, Inc., a
liquidating subsidiary and its subsidiaries (collectively "Rosebud"), for sale
and the distribution of the proceeds of sale, and of certain litigation which
has also been transferred to Rosebud, for the benefit of creditors (See Note 4).
On the effective date, the total amount of allowed and reserved claims was
$590,944,000, which the company expects to be reduced to approximately
$584,016,000 when all claims are finalized. On the effective date the company
estimated that when all claims were paid, allowed and reserved secured claims
would approximate $435,000, allowed and reserved priority claims would
approximate $5,676,000, and allowed and reserved convenience claims (under
$5,000) would approximate $2,152,000. The plan provided that these claimants are
to receive full payment in cash. Also in connection with the plan, holders of
allowed and reserved unsecured claims,which the company estimated would be
$575,753,000 when all claims are paid, were entitled to receive their pro rata
share of (i) $192,188,000 in cash, (ii) $78,000,000 ten year 10% senior
unsecured notes of the reorganized company, (the company's March 31, 1994
balance sheet includes accrued interest of $1,300,000 for the period from
February 1, 1994 through March 31, 1994 per the terms of the senior unsecured
notes agreements) (iii) $138,118,000 secured asset proceeds notes of Rosebud, to
be paid out of the proceeds from the disposition of its assets (See Note 5) and
(iv) 85.0% of the common stock of reorganized Lone Star. The aggregate recovery
on unsecured claims will depend on the ultimate value of the common stock, the
senior notes, and the secured notes (the value of the secured notes will reflect
the sums realized from the disposition of assets of Rosebud).
F-26
<PAGE> 96
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
Holders of preferred stock became entitled to receive their pro rata share
of 10.5% of the common stock of reorganized Lone Star and 1,250,000 warrants to
purchase common stock of the reorganized Lone Star. The holders of common stock
of Lone Star became entitled to receive the balance of the reorganized company's
common equity and 2,753,333 warrants to purchase common stock in the reorganized
Lone Star. The warrants are exercisable through December 31, 2000, and provide
for the purchase of shares of the common stock of reorganized Lone Star at a
price of $18.75 per share.
In addition, in accordance with its plan of reorganization, as part of the
agreement with the Pension Benefit Guaranty Corporation ("PBGC") the company has
granted the PBGC a mortgage on the Oglesby, Illinois plant, and a security
interest in the Kosmos Cement Company partnership, to secure future pension
obligations.
NOTE 4 -- ROSEBUD HOLDINGS, INC. LIQUIDATING SUBSIDIARY
As part of its extinguishment of debt, Lone Star transferred on April 14,
1994 certain non-core assets and their associated liabilities to Rosebud. Those
assets transferred consist of the company's interest in the RMC LONESTAR, Lone
Star Falcon and Hawaiian Cement partnerships, cement plants in Santa Cruz,
California, and Nazareth, Pennsylvania, certain promissory notes executed by RMC
LONESTAR, certain surplus real estate, the company's interest in any recovery
resulting from the litigation against Northeast Cement Company and its
affiliates, Lafarge Corporation, and Lafarge Canada, Inc., certain other
miscellaneous litigation and insurance claims, and a $5,000,000 cash investment
by the company to be used for working capital purposes. The company is under no
obligation to fund additional Rosebud working capital requirements.
It was estimated in the company's plan that disposition of the non-core
assets would generate, over time, gross proceeds of approximately $113,000,000
to $170,000,000. Lone Star's investment in Rosebud is included in Lone Star's
March 31, 1994 fresh start balance sheet at $112,000,000, which is the present
value of estimated net proceeds generated by the sale of assets and collection
of insurance claims and cash generated from operations, and was determined by
using the middle of the range of the proceeds contained in the plan, discounted
at 14%. This amount does not include any amount for potential recovery from any
litigation including the Northeast Cement Company litigation (See Note 24).
At the effective date of the plan, Rosebud issued asset proceeds notes in
the aggregate principal amount of $138,118,000. The asset proceeds notes bear
interest at a rate of 10% per annum payable in cash and/or in additional asset
proceeds notes in semi-annual installments. The notes are to be repaid as
Rosebud's assets are sold and proceeds, if any, are received in connection with
the litigation transferred to Rosebud. All cash proceeds less a $5,000,000 cash
reserve are to be deposited in a cash collateral account for distribution to the
noteholders. The notes mature on July 31, 1997. These notes are guaranteed, in
part, by Lone Star. In the event that, at the maturity date, the aggregate
amounts of all cash payments of principal and interest on the notes is less than
$88,118,000, the guarantee is payable to cover the shortfall between the actual
payments and $88,118,000 dollar for dollar plus interest provided however that
the amount paid pursuant to the guarantee cannot exceed $28,000,000. The asset
proceeds notes are recorded on Lone Star's March 31, 1994 fresh-start balance
sheet at an amount equal to the investment in Rosebud of $112,000,000.
F-27
<PAGE> 97
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
NOTE 5 -- ACCOUNTS AND NOTES RECEIVABLE
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------
<S> <C>
Trade accounts and notes receivable............................................ $ 34,439
Other notes receivable......................................................... 52
Other receivables.............................................................. 4,063
--------
38,554
Less: Allowance for doubtful accounts.......................................... 8,843
--------
$ 29,711
========
</TABLE>
Due to the nature of the company's products, a majority of the company's
accounts receivable are from businesses in the construction industry. Although
the company's customer base is geographically diversified, collection of
receivables is partially dependent on the economics of the construction
industry.
NOTE 6 -- INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------
<S> <C>
Finished goods................................................................. $ 23,743
Work in process and raw materials.............................................. 2,126
Supplies and fuel.............................................................. 18,925
--------
$ 44,794
========
</TABLE>
NOTE 7 -- OTHER CURRENT ASSETS
Other current assets consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------
<S> <C>
Professional fees escrow....................................................... $ 12,432
Prepaid expenses............................................................... 2,695
--------
$ 15,127
========
</TABLE>
NOTE 8 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------
<S> <C>
Land........................................................................... $ 48,721
Buildings and equipment........................................................ 235,242
Construction in progress....................................................... 10,661
Automobiles and trucks......................................................... 37,639
--------
332,263
========
</TABLE>
F-28
<PAGE> 98
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
NOTE 9 -- JOINT VENTURES
The company's investment in and advances to joint ventures at March 31,
1994 represents its 25% interest in Kosmos Cement Company ("Kosmos"), a
partnership with cement plants in Kosmosdale, Kentucky and Pittsburgh,
Pennsylvania.
Summarized financial information of Kosmos as of March 31, 1994 is as
follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------
<S> <C>
Current assets................................................................. $ 24,060
Property, plant and equipment, net............................................. 75,065
Cost in excess of net assets of businesses acquired............................ 25,312
Other assets................................................................... 4
Current liabilities............................................................ (3,375)
Other liabilities.............................................................. (3,457)
--------
Net assets..................................................................... $117,609
========
</TABLE>
At March 31, 1994, the company's share of the underlying net assets of
Kosmos Cement Company exceeded its investment by $11,902,000 and is being
amortized over the estimated remaining life of the assets.
NOTE 10 -- ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------
<S> <C>
Professional fees.............................................................. $ 18,897
Postretirement benefits other than pensions.................................... 10,487
Pensions....................................................................... 6,913
Insurance...................................................................... 3,036
Payroll and vacation pay....................................................... 3,030
Taxes other than income taxes.................................................. 2,920
Other.......................................................................... 23,435
--------
$ 68,718
========
</TABLE>
NOTE 11 -- OTHER CURRENT LIABILITIES
Other current liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------
<S> <C>
Current portion of production payment and other................................ $ 2,523
Income taxes payable........................................................... 471
--------
$ 2,994
========
</TABLE>
NOTE 12 -- PRODUCTION PAYMENT
The company entered into a production payment arrangement concerning
specific limestone reserves located adjacent to two cement plants, and pursuant
to the terms of the document, is obligated to extract and process those reserves
into cement for the purchaser free and clear of all expenses. The proceeds have
been deferred and are being reflected in income, together with related costs and
expenses, as the limestone is processed into cement and the cement is sold.
F-29
<PAGE> 99
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
The company's production payment agreement terms were revised as of April
14, 1994. The company is now required to make such payments in advance for
minerals used at such two plants and to take or pay for minerals in amounts
sufficient to permit the purchaser to service its new note associated with the
production payment facility. The production payment, with an outstanding
principal balance of $20,963,000 as of April 14, 1994, bears interest at the
company's option at a rate of either prime or LIBOR plus 1.75% through December
31, 1995 and either prime plus .25% or LIBOR plus 2.5% beginning on January 1,
1996. The principal balance is payable semi-annually through July 31, 1998 in
increasing installments. As of March 31, 1994, the company expects to remit
payments as follows: 1994 -- $1,000,000, 1995 -- $3,000,000, 1996 -- $4,000,000,
1997 -- $5,000,000, 1998 -- $7,963,000.
NOTE 13 -- LONG-TERM DEBT
Upon emergence from its Chapter 11 proceedings, the company issued
$78,000,000 of ten year senior unsecured notes, which bear interest at a rate of
10% per annum. The indenture governing the senior notes and other agreements
entered into in connection with the reorganization, impose certain operating and
financial restrictions on the company. Such restrictions affect, and in some
respects significantly limit or prohibit, among other things, the ability of the
company to incur additional indebtedness, repay certain indebtedness prior to
its stated maturity, create liens, apply proceeds from asset sales, engage in
mergers and acquisitions, make certain capital expenditures or pay dividends.
Commencing in the year 2000, the company is required to make three annual
payments of $10,000,000 each into a sinking fund account for redemption of the
senior notes. The amount of any such required sinking fund account will be
reduced, without duplication, by the principal amount of any senior notes that
the company has optionally redeemed or purchased.
NOTE 14 -- REVOLVING CREDIT LINE
Upon emergence from Chapter 11, the company entered into a three year
$35,000,000 revolving credit agreement which is collateralized by inventory,
receivables, collection proceeds and certain intangible assets. The company's
borrowings under this agreement are limited to 55% of eligible inventory plus
85% of eligible receivables. The advances under the agreement bear interest at a
rate of either prime plus 1.25% or LIBOR plus 3%, at the company's option. A fee
of .50% per annum is charged on the unused portion of the line.
The indenture governing the revolving credit agreement and other agreements
entered into in connection with the reorganization, impose certain operating and
financial restrictions on the company. Such restrictions affect, and in some
respects significantly limit or prohibit, among other things, the ability of the
company to incur additional indebtedness, repay certain indebtedness prior to
its stated maturity, create liens, apply proceeds from asset sales, engage in
mergers and acquisitions, make certain capital expenditures or pay dividends. In
addition, pursuant to the credit agreement, and other agreements entered into in
connection with the reorganization, certain of the company's assets are subject
to liens or negative pledges.
NOTE 15 -- LEASES
Minimum rental commitments under all non-cancelable leases principally
pertaining to land, buildings and equipment are as follows: remaining nine
months of 1994 -- $4,622,000; 1995 -- $4,532,000; 1996 -- $515,000;
1997 -- $406,000; 1998 -- $389,000; after 1998 -- $287,000. Certain leases
include options for renewal or purchase of leased property.
A subsidiary of the company was leasing its Florida cement plant for
approximately twenty years at a current annual rental of $2,500,000. In June
1994, the company sold its interest in the cement plant located in Florida, for
$21,750,000, which approximated book value.
F-30
<PAGE> 100
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
NOTE 16 -- COMMON STOCK
The company has 25,000,000 of authorized shares of $1.00 par value common
stock. Upon emergence from its Chapter 11 proceedings, the company issued
12,000,000 shares of common stock (See Note 3). 750,000 shares of stock have
been reserved for issuance under the company's stock option plans (See Note 18).
NOTE 17 -- WARRANTS
As of March 31, 1994, the company had 4,003,333 outstanding warrants to
purchase common stock at an exercise price of $18.75 per share. The warrants
expire on December 31, 2000.
NOTE 18 -- STOCK OPTIONS
Upon emergence from its Chapter 11 proceedings, the board of directors of
the company adopted the Lone Star Industries, Inc. Management Stock Option Plan
("Management Plan") and the Lone Star Industries, Inc. Directors Stock Option
Plan ("Directors Plan"). As of March 31, 1994, no options were outstanding or
granted. Total options available for grant at March 31, 1994 were 700,000 and
50,000 under the Management and the Directors plans, respectively. In June 1994,
options to purchase 700,000 shares of common stock at an exercise price of
$15.375 per share and 6,000 shares of common stock at an exercise price of
$15.6875 per share were granted under the Management and Directors Plans,
respectively.
NOTE 19 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND SHORT-TERM INVESTMENTS -- the carrying amount approximates fair
value because of the short maturity of those instruments.
NOTE RECEIVABLE -- The fair values of notes receivable are estimated based
on discounted future cash flows. The carrying amount of notes receivables
approximates fair value.
LONG-TERM DEBT -- The fair value of long-term debt is based on rates
negotiated with the pre-petition creditors and approximates carrying value.
NOTE 20 -- PENSION PLANS
The company sponsors a number of defined benefit retirement plans which
cover substantially all employees. Defined benefit plans for salaried employees
provide benefits based on employees' years of service and average compensation.
Defined benefit plans for hourly paid employees generally provide benefits of
stated amounts for specified periods of service. The company's policy is to fund
at least the minimum amount required under ERISA in accordance with appropriate
actuarial assumptions.
F-31
<PAGE> 101
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
The following table presents the plans' funded status and amounts
recognized in the accompanying consolidated balance sheet at March 31, 1994 (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------------------
OVER-FUNDED UNDER-FUNDED
PLANS PLANS
----------- ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits..................................................... $4,387 $132,674
Non-vested benefits................................................. 181 5,610
------ --------
Accumulated benefit obligation...................................... 4,568 138,284
------ --------
Projected benefit obligation........................................ 4,568 141,334
Plan assets at fair value........................................... 4,624 112,013
------ --------
Projected benefit obligation (in excess of) or less than plan
assets........................................................... 56 (29,321)
------ --------
Pension asset/(liability)........................................... $ 56 $(29,321)
====== ========
</TABLE>
The weighted average discount rates of 7.0% in 1994, and the rate of annual
increase in future compensation levels of 5.5% in 1994 were used in determining
the actuarial present values of the projected benefit obligation. The expected
long-term rates of return on plan assets was 8.0% for 1994. Future obligations
are secured by the grant to the Pension Benefit Guaranty Corporation (PBGC) of a
mortgage on the Ogelsby, Illinois cement plant and a security interest in the
Kosmos Cement Company partnership.
NOTE 21 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company currently provides retiree life insurance and health plan
coverage to employees qualifying for early, normal or disability pension
benefits under the company's salaried employees pension plan and certain of the
pension plans providing for hourly-compensated employees. Life insurance
protection presently provided to retirees under the salaried employees pension
plan is one-half their active employment coverage (approximately two times
earnings) declining to 25% of their active employment coverage at age 70. The
coverage provided under hourly plans is fixed, as provided under the terms of
the plans. Health care coverage presently is extended to retirees and their
qualified dependents during the retirees' lifetime. The coverage provided
assumes participation by the retiree in the Medicare program and benefit
payments are integrated with Medicare benefit levels. Medicare Part B coverage
is provided for certain hourly employees. The company's postretirement benefit
plans other than pension plans are not funded. Claims are paid as incurred.
The actuarial and recorded liabilities for these postretirement benefits,
none of which have been funded, are as follows at March 31, 1994 (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------
<S> <C>
Accumulated postretirement benefit obligation:
Retirees..................................................................... $ 93,767
Fully eligible active plan participants...................................... 22,393
Other active plan participants............................................... 19,587
--------
Accrued postretirement benefit obligation...................................... 135,747
Less current portion........................................................... 10,487
--------
Long-term accrued post-retirement benefit cost................................. $125,260
========
</TABLE>
F-32
<PAGE> 102
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% as of the March 31, 1994.
Compensation levels are assumed to increase at a rate of 5.5% annually.
For measurement purposes, a 16% and 10 1/2% annual medical rate of increase
was assumed for 1994 for pre-medicare and post-medicare claims, respectively;
the rate was assumed to decrease 1% each year to 6% per year after 2004 for
pre-medicare claims, and decrease 1/2% per year to 6% after 2003 for
post-medicare claims. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by 1 percentage point in each year would
increase the accumulated postretirement benefit obligation as of March 31, 1994
by approximately $9,500,000.
As part of its emergence from Chapter 11 proceedings, the company reached
settlements with the salaried and union retirees with respect to reductions and
modifications of retiree medical and life insurance benefits. As part of the
settlement with salaried retirees, the company has established a Voluntary
Employees Beneficiary Association ("VEBA"), a tax-exempt trust, and has agreed
to make defined quarterly contributions to the trust. The Company has the option
to prepay all future quarterly contributions to the VEBA in a single cash amount
equal to 110% of the discounted present value (using an 8.5% discount factor) of
all future quarterly contributions.
NOTE 22 -- INCOME TAXES
As of December 31, 1993, the company had investment tax credit
carryforwards for federal income tax purposes of $15,610,000 which expire at
various dates through 2001. The company also has regular tax net operating loss
carryforwards of approximately $105,122,00 which expire at various dates through
2007 and an alternative minimum tax credit carryforward of $4,047,000. The
Internal Revenue Code of 1986, as amended (the "Code"), imposes limitations
under certain circumstances on the use of carryforwards upon the occurrence of
an "ownership change" (as defined in Section 382 of the Code). An "ownership
change" has resulted from the issuance of equity securities by the company as
part of its Plan of Reorganization (See Note 3). Such an "ownership change"
could limit the use or continued availability of the company's carryforwards.
F-33
<PAGE> 103
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
The components of net deferred tax assets (liabilities) as of March 31,
1994 are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------
<S> <C>
Current tax assets related to:
Reserves for retiree benefits................................................ $ 3,670
Reserves not yet deducted.................................................... 13,986
---------
17,656
Non-current tax assets related to:
Reserves not yet deducted.................................................... 15,019
Reserve for pension benefits................................................. 7,823
Reserve for retiree benefits................................................. 43,841
Loss carryforwards........................................................... 87,110
Investment credits........................................................... 14,418
Alternative minimum tax credits.............................................. 4,047
---------
172,258
Non-current tax liabilities related to:
Fixed assets................................................................. (58,495)
Domestic joint ventures...................................................... (8,697)
---------
(67,192)
---------
Gross federal tax asset........................................................ 122,722
Valuation allowance............................................................ (122,722)
Net federal tax asset.......................................................... --
State & other.................................................................. (5,000)
---------
Net deferred liability......................................................... $ (5,000)
=========
</TABLE>
NOTE 23 -- ENVIRONMENTAL MATTERS
The company is subject to federal, state and local laws, regulations and
ordinances pertaining to the quality and the protection of the environment. Such
environmental regulations not only affect the company's operating facilities but
also apply to closed facilities and previously owned and operated properties.
While it is not possible to predict with accuracy the range of future costs
for the company's program of compliance with current or future environmental
regulations or their expected impact on the company, the capital, operating and
other costs of the program could be substantial.
In order to save on fuel costs, the company is blending and burning
hazardous waste fuels at two of its cement manufacturing plants. This process
involves obtaining permits and complying with applicable state and federal
environmental regulations. While the company believes it is in substantial
compliance with such regulations, changes in them or in their interpretation by
the relevant agencies or courts could limit, effectively prohibit the use of, or
make prohibitive the cost of using, hazardous waste fuels, thus depriving the
company of the economic benefits of its waste fuel program. In February 1994,
the United States Court of Appeals for the District of Columbia Circuit (i)
vacated and remanded a facility-specific standard promulgated by the U.S.
Environmental Protection Agency ("U.S. EPA") for ascertaining the presence of
products of incomplete combustion designed for wet process cement kilns that
burn hazardous waste fuels, ruling that the standard had been promulgated
without sufficient notice, but (ii) upheld related standards applicable to the
industry. In April 1994, the Circuit Court denied plaintiffs' motion to
reconsider its decision. Unless the Circuit Court's
F-34
<PAGE> 104
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
decision (from which a petition for certiorari to the U.S. Supreme Court has
been filed) is reversed or a modification of the remanded standard is adopted by
U.S. EPA, or the company can institute operational changes which will enable it
to meet the industry standards upheld by the Circuit Court, the company's
Greencastle, Indiana cement plant may have to cease or curtail its use of
hazardous waste fuels. Meanwhile, the Circuit Court's ruling is stayed pending
the Supreme Court's decision on plaintiffs' petition for certiorari, and the
company is investigating modifications to operations at this plant that would
enable it to continue to burn hazardous waste fuels under the surviving
standards. The Circuit Court's ruling has no impact upon the current use of
hazardous waste fuels at the company's Cape Girardeau, Missouri cement plant.
Since 1991, federal and state environmental agencies have conducted
inspections and instituted inquiries and administrative actions regarding waste
fuel operations at both of the company's waste fuel burning facilities. In the
first half of 1994 the company paid amounts totalling approximately $402,000
representing negotiated settlements with federal and state environmental
authorities of administrative actions that alleged violations of regulations
pertaining to the handling and burning of hazardous waste fuels at the
Greencastle plant. In March 1994, U.S. EPA, Region 7, instituted an
administrative proceeding regarding waste fuel operations at the company's Cape
Girardeau plant, seeking over $500,000 in civil penalties. The company is
holding settlement negotiations with officials of Region 7.
Cement kiln dust, ("CKD") a by-product of cement manufacturing, is
currently exempted from environmental regulation by the Bevill Amendment to the
Federal Resource Conservation and Recovery Act pending the completion of a
Congressionally-mandated study and regulatory determination by U.S. EPA
regarding the need for regulatory controls on the management, handling and
disposal of cement kiln dust. The regulatory determination is scheduled to be
made in January 1995. It is impossible at this time to predict with accuracy
what increased costs (or range of costs), if any, changes in regulatory control
of CKD would impose on the company.
The company and certain of its subsidiaries have been identified as parties
that may be held responsible by various federal, state and local authorities
with respect to contamination at certain sites of former operations or sites
where waste materials from the company or its subsidiaries, such as equipment
containing polychlorinated biphenyls, were deposited, including sites placed on
the National Priority List ("NPL") pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"). These include sites
located: in Utah (seven sites, including three NPL sites discussed below);
Illinois (one NPL site); Texas (two sites, including one NPL site); Missouri
(one NPL site); Washington (two NPL sites); Minnesota (two NPL sites); Colorado
(one NPL site); Florida (four sites, including two related NPL sites and two
non-NPL sites described below); California (one non-NPL site described below);
Pennsylvania (one NPL site); and Louisiana (one NPL site).
Except for the Utah NPL sites described below, all of the NPL sites
referred to above involve numerous potentially responsible parties ("PRP's") and
factual investigation indicates that in each case the company's or subsidiary's
contributions of waste were small in comparison to those of other PRP's. Except
for the Utah sites, no timely proofs of claim were filed with the Bankruptcy
Court by the environmental regulatory agencies with respect to NPL sites, none
of which are currently owned or leased by the company or its subsidiaries.
However, a number of PRP's filed timely proofs of claim with the Bankruptcy
Court with respect to various NPL sites; these claims have either been (i)
allowed in full as de minimis, (ii) resolved through negotiation and allowed as
general unsecured claims, or (iii) objected to and disallowed in the company's
Chapter 11 proceedings.
Following are descriptions of proceedings involving certain NPL and non-NPL
sites mentioned above:
In July 1989, the company was advised by U.S. EPA, Region 8 that it was a
PRP under CERCLA with respect to three adjoining sites in Salt Lake City, Utah
on which CKD and small amounts of chrome-containing kiln brick from the
company's Utah cement plant had been deposited. In July 1990, the
F-35
<PAGE> 105
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
U.S. EPA and the Utah Department of Health issued a record of decision selecting
a remedial action calling for removal of the CKD, over a period of time, to a
location to be selected in the Salt Lake City vicinity where an industrial type
landfill would be constructed. The company has reached an agreement with the
U.S. Department of Justice, U.S. EPA, the U.S. Department of the Interior, the
Utah Department of Environmental Quality and Davis County, Utah regarding a
settlement pursuant to which among other things, U.S. EPA will receive a general
unsecured claim in the company's bankruptcy proceedings in exchange for releases
from further liability for investigation and clean-up costs and natural resource
damage claims and protection against third-party claims for investigation and
clean-up costs. The agreement has been executed by the company and by the
respective governmental agencies and is subject to a CERCLA-mandated public
notice and comment period and approval by the company and the Bankruptcy Court.
In October 1989, the company commenced an action in United States District
Court in Utah seeking contribution from the two principal owners of these Utah
NPL sites, who had also been named PRP's, for their share of investigative
clean-up costs. Following pre-trial litigation, settlement agreements with the
landowners were negotiated and approved by the Bankruptcy Court, pursuant to
which the landowners receive general unsecured claims in the company's
bankruptcy proceedings and all their claims against the company were dismissed
with prejudice, subject to the landowners' reaching settlements with U.S. EPA,
the negotiation of which is continuing.
In a transaction in the early 1970's, the company acquired subsidiaries
that conducted woodtreating or wood-dipping operations at two sites in Florida.
Contamination from chemicals at these non-NPL sites has been the subject of
various proceedings by federal, state or local environmental authorities, as
well as lawsuits involving private parties.
In 1992, pursuant to an Administrative Order on Consent with U.S. EPA,
Region 4, entered into prior to the company's Chapter 11 filing, a clean up of
soils and water in excavated areas at the Dania, Florida site was completed by a
subsidiary of the company and approved by U.S. EPA in 1992. The subsidiary has
entered into a stipulation approved by the Bankruptcy Court, with the State of
Florida Department of Environmental Protection ("FDEP") (which filed a claim in
the company's bankruptcy proceedings) committing to undertake a groundwater
monitoring program and, if necessary, groundwater treatment in settlement of the
State's proof of claim it filed in the bankruptcy proceedings. The subsidiary is
currently negotiating a consent order with FDEP setting forth the monitoring and
possible remediation efforts in detail. This site has been transferred to
Rosebud pursuant to the plan.
In 1992, pursuant to a stipulation in Florida state court, executed prior
to its Chapter 11 filing, a subsidiary of the company completed the clean-up of
soils under Florida environmental regulations at a site in Dade County, Florida
which it had leased for woodtreating operations in the 1960's and 1970's. In
settlement of the proofs of claim filed in the company's bankruptcy proceedings,
the subsidiary has executed a stipulation with state and county environmental
authorities regarding entry into a consent order whereby the subsidiary has
committed to undertake further groundwater investigation of the site and, if
necessary, soil remediation, groundwater treatment and groundwater monitoring
programs all within a specified monetary cap.
Prior to its Chapter 11 filing, the subsidiary filed a lawsuit in federal
district court in Florida against other PRP's, including past and present owners
of the site, for cost recovery and contribution under CERCLA. Two of the PRP's
filed counterclaims and proofs of claim in the bankruptcy proceedings. The
subsidiary has entered into a settlement agreement, approved by the Bankruptcy
Court, with the PRP's pursuant to which they will reimburse the subsidiary for a
portion of its clean-up costs and dismiss their federal and state court and
claims filed in the bankruptcy proceedings, with prejudice and the subsidiary
will dismiss its court claims against them with prejudice, while committing to
undertake the further investigation and, if necessary, remedial work under the
Bankruptcy Court stipulation with state and county environmental authorities
described above.
F-36
<PAGE> 106
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
In August 1992, Santa Cruz County, California authorities served the
company with written notice that it had commenced a criminal and civil
investigation of long-term waste disposal practices at a site formerly owned by
the company and now owned by a partnership in which a subsidiary of Rosebud
holds a partnership interest. The investigation and negotiations by the company
and others with interests in the site culminated in the resolution of the matter
by the concurrent filing of a complaint and stipulated final judgment. Pursuant
to the settlement, certain county and state authorities received an
administrative priority claim in the company's bankruptcy proceedings totaling
$150,000 and all claims raised in the complaint were released and dismissed.
Rosebud Holdings, Inc. has also committed to complete and is presently
undertaking the closure of a former waste landfill area on the investigated site
at an anticipated cost of approximately $1,200,000, which is for the account of
the Rosebud subsidiary. The closure work is not expected to commence until 1995.
The Company believes that it has adequately provided for estimated
remediation and other costs at these and other known sites.
NOTE 24 -- LITIGATION
Between 1983 and 1989 a Lone Star subsidiary (among those who filed Chapter
11 petitions) manufactured and sold approximately 500,000 concrete railroad
crossties to various railroads. In 1989 and early 1990 purchasers of most of the
crossties sued Lone Star and such subsidiary, alleging that the crossties were
defective because of cracking, and seeking substantial compensatory and punitive
damages. The suits by four purchasers, which sought damages of over $200,000,000
were consolidated for pre-trial purposes in the U.S. District Court for the
District of Maryland under the Federal Courts Multi-District Rules. In addition,
an administrative proceeding was brought by the Baltimore Mass Transit Authority
("MTA"), involving crossties sold to the MTA, and an MTA procurement officer
found Lone Star and its subsidiary liable to the MTA for damages in an amount of
approximately $10,000,000.
Lone Star determined that it would be in the best interest of the company
to settle the proceedings brought by the railroads, and in late 1992 Lone Star
entered into separate agreements with each of the four purchasers providing for
the release of their respective claims against the company and its subsidiaries
relating to the crossties, and for the railroads to receive in the aggregate
allowed liquidated unsecured claims in its bankruptcy proceedings of
$57,200,000, for one railroad to receive a cash payment of $5,000,000 and for
the payment of $4,384,000 to another railroad from an escrow fund established to
hold the proceeds from the sale of property by a Lone Star subsidiary on which
that railroad had obtained liens in the litigation. These agreements have been
approved by the Bankruptcy Court, and the $9,384,000 cash payments have been
made. The claims were treated in accordance with the provisions of the company's
plan.
In 1989 Lone Star and its subsidiary filed a plenary action in the Maryland
Federal District Court, and third party complaints in other actions, against
Northeast Cement Co. and its affiliates, Lafarge Corporation and Lafarge Canada,
Inc. ("Lafarge"), alleging breach of warranties in connection with the purchase
from Northeast Cement Co. by Lone Star's subsidiary of the cement used to
manufacture substantially all of the crossties involved in the above proceedings
and claiming a fraudulent sale of defective cement. The plenary action and the
third party complaints sought compensatory damages growing out of the various
crosstie actions, including the foregoing settlements and defense costs at
approximately $15,750,000. The plenary action brought against the cement
supplier was tried before a jury in the Maryland Federal District Court in late
1992. The jury found that Lone Star had proven its claims of fraud, breach of
certain warranties and negligence, but Lone Star's recovery was limited to
$1,213,000 for direct lost profits due to limitations on the awarding of damages
in the trial judge's instructions to the jury. Lone Star believed that these
instructions were in error and filed a motion for a new trial on damages based
on the judge's refusal to permit the jury to even consider certain damages.
Lafarge also moved for judgment as a matter of law and for a new trial.
Following a hearing on March 5, 1993 the judge denied these motions. Lone Star
consequently appealed to the Federal Circuit Court of Appeals for the Fourth
Circuit for a new trial on the issue of damages. Lafarge also filed an appeal.
On April 7, 1994 the Fourth Circuit Court of Appeals vacated the judgment of the
District
F-37
<PAGE> 107
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
Court and remanded the case for a new trial on all issues relating to both
liability and damages and permitted the company to amend its complaint to add a
claim of violation of a Massachusetts consumer protection law which allows for
attorney fees and doubling and trebling of damages. A request by Lafarge for a
rehearing of that decision by the Fourth Circuit Court of Appeals en banc was
denied and new trial is scheduled for October of this year. The rights to any
recovery of damages in this action have been assigned to Rosebud pursuant to the
plan.
The primary insurance carrier insuring the company has asserted that Lone
Star has only limited insurance coverage for the various crosstie claims and,
while agreeing that certain defense costs are covered by insurance, did not
agree to Lone Star's position as to the amount of defense costs covered.
Consequently, in 1989 Lone Star began an action in the Superior Court of the
State of Delaware against the insurance companies (both primary and excess
carriers) which insured it during the 1983 to 1989 period, seeking a declaratory
judgment as to their duty under the applicable policies to indemnify Lone Star
for all damages incurred by it in the various crosstie proceedings which
includes the settlements of $66,584,000 and as to the duty of the primary
insurance carrier to pay the costs of defending those proceedings. The Superior
Court made a preliminary ruling that the primary insurance carrier has a duty to
pay certain of the costs of the company's defense in the crosstie proceedings.
With the approval of the Bankruptcy Court, Lone Star settled its claims against
the primary insurance carrier for defense costs for payments to Lone Star of
$14,733,000 in cash; and setoffs to the carrier's claim in the bankruptcy of
approximately $4,778,000.
Lone Star, with the approval of the Bankruptcy Court, settled its indemnity
action against the primary insurance carrier in March 1994 for $6,500,000 as a
set-off to a claim filed in the company's bankruptcy proceedings by that
carrier. The rights to any additional recoveries from insurance carriers has
been assigned to Rosebud pursuant to the plan. Rosebud and certain of the
remaining insurance carriers have negotiated a settlement of the indemnity
action which provides for payments to Rosebud of $5,300,000. Pre-trial
preparation in the action was stayed by agreement of the parties during these
negotiations. Rosebud is in the process of continuing the indemnity action
against any insurance carriers as to which no settlement has been reached and
will also seek to recover the costs of the Lafarge action.
In addition, a settlement with all parties has been reached in the
consolidated shareholders' class action lawsuits brought against the company and
certain of its past and present officers and directors. The settlement involves
the actions entitled Cohn v. Lone Star Industries, Inc., et al. filed in
November 1989 on behalf of persons who purchased Lone Star common stock between
February 8, 1988 and November 16, 1989 and the action entitled Garbarino, et
ano. v. Stewart, et al. filed in December 1990 on behalf of persons who
purchased Lone Star common stock between November 16, 1989 and December 9, 1990.
The settlements were adopted and approved by an order and final judgment of a
magistrate judge and the order and judgment was in turn approved and adopted by
an order of the U.S. District Court for the District of Connecticut on
January 20, 1994.
The terms of the settlement agreement, which was entered into by Mr. James
E. Stewart, the former Chairman and Chief Executive Officer of Lone Star,
includes the dismissal of the claims against Mr. Stewart and the officers and
directors of Lone Star and the agreement of Lone Star's directors and officers
liability insurers to pay $40,000,000 to establish settlement funds on behalf of
the plaintiff classes. In order to participate in these settlement funds,
eligible plaintiffs were required to submit a proof of claim by July 29, 1994.
Distribution from these settlement funds is to take place on or about October
29, 1994. Lone Star was dismissed without prejudice from the Cohn action, the
only action in which it was named as a defendant by the plaintiffs. The
settlement does not constitute an admission by Lone Star, or any of its past and
present officers, directors and employees of any liability or wrongdoing on
their part. In connection with the company's bankruptcy proceedings, in order to
resolve the claims filed by both plaintiff classes without admitting any
liability, a claim in the aggregate of $2,500,000 was allowed to the plaintiff
classes by the company. The proceeds from the claim have been added to the
settlement funds for distribution in October 1994.
F-38
<PAGE> 108
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
The company, along with numerous other parties, has been named a defendant
in a series of toxic tort lawsuits filed in a Texas state court commencing in
March, 1994 in which multiple plaintiffs claim to have suffered injury from the
proximity of deposits of toxic wastes or substances at a site located near
Galveston, Texas. The wastes or substances are alleged to have been deposited at
the site starting in the 1940's. The company has retained Texas counsel and has
filed, or is in the process of filing, answers denying the allegations of the
various complaints. The company intends to contest these lawsuits vigorously.
The company's insurance carriers have been notified of the claims but the extent
of the company's insurance coverage, if any, for these lawsuits has not yet been
determined.
F-39
<PAGE> 109
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Lone Star Industries, Inc.:
We have audited the consolidated financial statements of Lone Star
Industries, Inc. and Consolidated Subsidiaries as of December 31, 1993 and 1992
and for each of the three years in the period ended December 31, 1993, as listed
on Page F-1 of this registration statement. We have also audited the financial
statement schedules as listed in item 16b in this registration statement. These
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We
did not audit the combined financial statements or the financial statement
schedule information of the foreign operations of the Company (which, as
discussed in Note 10, were substantially sold in 1993), which financial
statements represent total assets of 13% of the consolidated assets as of
December 31, 1992 and total revenues of 10% and 14% of the consolidated revenues
for 1992 and 1991, respectively. These statements were audited by other
auditors, whose report, which has been furnished to us, includes an explanatory
paragraph regarding the change, as discussed in Note 31 herein, in accounting
for income taxes by the Company's foreign operations, and our opinion, insofar
as it relates to the amounts included for the foreign operations, is based
solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. 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 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 and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Lone Star Industries, Inc. and
Consolidated Subsidiaries as of December 31, 1993 and 1992, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles. In addition, in our opinion, based upon our audits and the report of
other auditors, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
The accompanying consolidated financial statements and financial statement
schedules have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial statements, in
December 1990, Lone Star Industries, Inc. and certain of its subsidiaries filed
voluntary petitions for relief under Chapter 11 of the United States Bankruptcy
Code. These filings and related circumstances raise substantial doubt about
their ability to continue as going concerns. The continuation of their
businesses as going concerns is contingent upon, among other things, a plan of
reorganization becoming effective, future profitable operations, and the ability
to generate sufficient cash from operations, asset sales and financing sources
to meet obligations. The accompanying financial statements and financial
statement schedules do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or the amounts and
classification of liabilities that might be necessary as a consequence of these
uncertainties.
As discussed in Note 32, the accompanying consolidated financial statements
include accruals related to the remediation of certain environmental sites. The
Company's ultimate liability for remediation costs, at these and other sites, in
excess of amounts recorded in the accompanying financial statements, is not
presently determinable.
As discussed in Notes 30 and 31 to the consolidated financial statements,
the Company changed its method of accounting for other postretirement benefits
and income taxes in 1992.
/s/ COOPERS & LYBRAND
COOPERS & LYBRAND
Stamford, Connecticut
February 17, 1994
F-40
<PAGE> 110
REPORT OF OTHER INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Lone Star Industries, Inc.
In our opinion, the combined balance sheet and the related combined
statements of income and equity and of cash flows and supporting Schedules I, V,
VI, VIII and X to the Form 10-K (none of which are presented separately herein)
present fairly, in all material respects, the financial position of Lone Star
Industries, Inc. International Division at December 31, 1992 and the results of
its operations and its cash flows for each of the two years in the period ended
December 31, 1992, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the combined financial statements of Lone Star
Industries, Inc. International Division for any periods subsequent to December
31, 1992.
As discussed in Note 31 to the financial statements, the Company changed
its method of accounting for income taxes in 1992.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Stamford, Connecticut
February 4, 1993
F-41
<PAGE> 111
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1993 1992 1991
-------- --------- --------
<S> <C> <C> <C>
Revenues:
Net sales............................................... $240,071 $ 230,098 $238,692
Joint venture income.................................... 20,440 37,831 24,435
Other income, net....................................... 11,238 13,824 14,747
-------- --------- --------
271,749 281,753 277,874
-------- --------- --------
Deductions from revenues:
Cost of sales........................................... 193,884 188,440 203,742
Provision for litigation settlements.................... 2,500 66,584 --
Selling, general and administrative expenses............ 41,278 40,817 42,137
Depreciation and depletion.............................. 26,254 26,131 25,745
Interest expense (contractual interest of $31,227 in
1993, $31,914 in 1992 and $33,357 in 1991)........... 1,637 2,210 3,302
-------- --------- --------
265,553 324,182 274,926
-------- --------- --------
Income (loss) before reorganization items and income
taxes................................................... 6,196 (42,429) 2,948
Reorganization items:
(Loss) gain on sale of assets........................... (37,335) 15,525 391
Other................................................... (10,470) (4,046) (7,385)
-------- --------- --------
Total reorganization items................................ (47,805) 11,479 (6,994)
-------- --------- --------
Loss before income taxes and cumulative effect of changes
in accounting principles................................ (41,609) (30,950) (4,046)
Credit (provision) for income taxes..................... 6,351 (14,478) (1,501)
-------- --------- --------
Loss before cumulative effect of changes in accounting
principles.............................................. (35,258) (45,428) (5,547)
Cumulative effect of changes in accounting principles:
Postretirement benefits other than pensions............. (782) (130,510) --
Income taxes............................................ -- 11,596 --
-------- --------- --------
(782) (118,914) --
-------- --------- --------
Loss before preferred dividends........................... (36,040) (164,342) (5,547)
Provisions for preferred dividends...................... (5,112) (5,113) (5,114)
-------- --------- --------
Net loss applicable to common stock....................... $(41,152) $(169,455) $(10,661)
======== ========= ========
Weighted average common shares outstanding................ 16,644 16,641 16,582
======== ========= ========
Primary and fully diluted loss per common share:
Loss before cumulative effect of changes in accounting
principles........................................... $ (2.42) $ (3.03) $ (0.64)
Cumulative effect of changes in accounting principles... (0.05) (7.15) --
-------- --------- --------
Net loss................................................ $ (2.47) $ (10.18) $ (0.64)
======== ========= ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the Financial Statements.
F-42
<PAGE> 112
LONE STAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1993 1992
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash, including cash equivalents of $243,220 and $167,767............ $ 244,397 $ 168,605
Accounts and notes receivable, net................................... 49,022 34,137
Inventories.......................................................... 38,426 38,504
Current assets of assets held for sale............................... 20,634 20,151
Other current assets................................................. 2,733 2,806
--------- ---------
Total current assets....................................... 355,212 264,203
Assets held for sale................................................. 65,663 69,177
Notes receivable..................................................... 5,058 7,172
Joint ventures....................................................... 88,574 187,874
Property, plant and equipment, net................................... 398,085 408,271
Cost in excess of net assets of businesses acquired, net............. 9,273 9,659
Other assets and deferred charges.................................... 3,020 6,293
--------- ---------
Total assets............................................... $ 924,885 $ 952,649
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable..................................................... $ 16,079 $ 14,117
Accrued liabilities.................................................. 60,353 57,135
Other current liabilities............................................ 3,227 4,000
--------- ---------
Total current liabilities.................................. 79,659 75,252
Deferred income taxes................................................ 3,356 15,612
Postretirement benefits other than pensions.......................... 141,950 137,618
Other liabilities.................................................... 21,886 15,588
Liabilities subject to Chapter 11 proceedings........................ 627,938 611,129
Contingencies (Notes 1 and 32)
Redeemable preferred stock........................................... 37,500 37,500
Non-redeemable preferred stock (involuntary liquidating value,
1993 -- $1,102).................................................... 248 252
Common stock, $1 par value. Authorized: 25,000,000 shares.
Shares issued: 1993 -- 18,102,723; 1992 -- 18,102,007.............. 18,103 18,102
Additional paid-in capital........................................... 239,870 239,867
Accumulated deficit.................................................. (187,896) (151,856)
Pension liability adjustment......................................... (21,157) (9,843)
Treasury stock, at cost.............................................. (36,572) (36,572)
--------- ---------
Total liabilities and shareholders' equity................. $ 924,885 $ 952,649
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the Financial Statements.
F-43
<PAGE> 113
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
------------------------------------
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Common Stock
Balance at beginning of year............................. $ 18,102 $ 18,101 $ 18,099
Conversions of $4.50 non-redeemable preferred stock.... 1 1 2
--------- --------- --------
Balance at end of year................................... 18,103 18,102 18,101
--------- --------- --------
Additional Paid-In Capital
Balance at beginning of year............................. 239,867 240,329 241,502
Conversions of $4.50 non-redeemable preferred stock.... 3 3 13
Excess of cost over market value of treasury stock
issued to employee stock purchase plan.............. -- (465) (1,186)
--------- --------- --------
Balance at end of year................................... 239,870 239,867 240,329
--------- --------- --------
Accumulated Deficit
Balance at beginning of year as restated................. (151,856) 12,486 18,033
Net loss............................................... (36,040) (164,342) (5,547)
--------- --------- --------
Balance at end of year................................... (187,896) (151,856) 12,486
--------- --------- --------
Pension Liability Adjustment
Balance at beginning of year............................. (9,843) (7,625) --
Excess of additional pension liability over
unrecognized prior service cost..................... (11,314) (2,218) (7,625)
--------- --------- --------
Balance at end of year................................... (21,157) (9,843) (7,625)
--------- --------- --------
Treasury Stock
Balance at beginning of year............................. (36,572) (37,129) (38,595)
Shares issued to employee stock purchase plan.......... -- 557 1,466
--------- --------- --------
Balance at end of year................................... (36,572) (36,572) (37,129)
--------- --------- --------
Total common shareholders' equity, end of year........... $ 12,348 $ 59,698 $226,162
========= ========= ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the Financial Statements
F-44
<PAGE> 114
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Loss before cumulative effect of changes in accounting
principles............................................... $(35,258) $(45,428) $ (5,547)
Adjustments to arrive at net cash provided (used) by
operating activities:
Depreciation and depletion............................... 26,254 26,131 25,745
Provision for litigation settlements..................... 2,500 57,200 --
Deferred income taxes.................................... (10,546) 2,920 1,902
Provision for doubtful accounts.......................... 1,605 1,083 3,133
Changes in operating assets and liabilities:
Accounts and notes receivable......................... (2,895) 3,382 (218)
Inventories and other current assets.................. 846 6,063 8,253
Accounts payable and accrued expenses................. (2,198) (13,295) 701
Unremitted earnings of joint ventures.................... (951) (17,942) (10,182)
Loss (gain) on sale of joint venture interests........... 37,335 (15,525) (391)
Reorganization items..................................... 10,470 4,046 7,385
Other, net............................................... 9,793 8,655 2,522
-------- -------- --------
Net cash provided by operating activities before
reorganization items..................................... 36,955 17,290 33,303
Operating cash flows from reorganization items:
Interest received on cash accumulated because of
Chapter 11 proceedings................................ 5,102 4,500 4,219
Professional fees and administrative expenses............ (10,459) (5,910) (3,160)
-------- -------- --------
Net cash (used) provided by reorganization items........... (5,357) (1,410) 1,059
-------- -------- --------
Net cash provided by operating activities.................. 31,598 15,880 34,362
Cash Flows from Investing Activities:
Capital expenditures....................................... (18,999) (22,122) (17,612)
Proceeds from sales of assets held for sale................ 9,206 7,934 29,166
Proceeds from sales of assets due to Chapter 11
proceedings.............................................. 71,162 39,675 4,135
Sales of property, plant and equipment..................... 888 1,064 711
Collection of notes receivable............................. 908 4,418 4,104
Investment and advances to equity investees................ (5,000) (3,500) (3,585)
Other, net................................................. (5,971) (3,239) (1,796)
-------- -------- --------
Net cash provided by investing activities.................. 52,194 24,230 15,123
Cash Flows from Financing Activities:
Net reduction of short-term debt........................... -- -- (1,687)
Reduction of production payment............................ (8,000) (8,000) (8,000)
Proceeds from long-term debt............................... -- -- 174
-------- -------- --------
Net cash used by financing activities...................... (8,000) (8,000) (9,513)
-------- -------- --------
Net increase in cash and cash equivalents.................. 75,792 32,110 39,972
Cash and cash equivalents, beginning of period............. 168,605 136,495 96,523
-------- -------- --------
Cash and cash equivalents, end of period................... $244,397 $168,605 $136,495
======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the Financial Statements.
F-45
<PAGE> 115
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. CHAPTER 11 PROCEEDINGS AND BASIS OF FINANCIAL STATEMENT PRESENTATION
In November 1989, in an effort to improve the company's operating results
and generate cash to pay maturing debt obligations, the company implemented a
restructuring program involving the sale of certain marginal operations and
facilities. Although progress was made in implementing the restructuring
program, depressed economic conditions and the shortage of financing available
to potential buyers during 1990 impeded the company's ability to complete the
sale of all assets within the time frame and at the values estimated in 1989. In
addition, during the fourth quarter of 1990, the company was unable to secure
short-term borrowing arrangements, at acceptable terms and conditions, following
the November 1990 termination of its revolving-credit agreement and its
agreement with financial institutions to sell trade receivables. Without such
financing or other sources of cash, the company probably would have been in
default under its long-term debt agreements in the first quarter of 1991. The
company decided to seek reorganization under Chapter 11 of Title 11 of the
United States Code ("Chapter 11") to achieve a long-term solution to its
financial, litigation and business problems. On December 10, 1990 (the "petition
date"), Lone Star Industries, Inc. together with certain of its subsidiaries
(including two subsidiaries on December 21, 1990) ("filed companies"), filed
voluntary petitions for reorganization under Chapter 11 in the United States
Bankruptcy Court for the Southern District of New York ("Bankruptcy Court"), and
began operating their respective businesses as debtors-in-possession. On
February 17, 1994, the Bankruptcy Court confirmed the company's Plan of
Reorganization which had been sent along with a related Disclosure Statement, to
all creditors and security holders involved in the company's bankruptcy
proceedings, in late 1993 and which had been overwhelmingly approved by such
creditors and security holders (the "confirmed plan"). It is expected that the
confirmed plan will become effective by March 31, 1994 (See Note 3).
Under Chapter 11, the filed companies cannot pay claims which arose prior
to the filing of the petitions for relief under the federal bankruptcy laws
outside of the plan of reorganization or without specific Bankruptcy Court
authorization. These claims, which will be satisfied pursuant to the plan of
reorganization, are reflected in the December 31, 1993 and 1992 consolidated
balance sheets as liabilities subject to Chapter 11 proceedings. Additional
amounts for claims may arise from claims for contingencies and other disputed
amounts that are not included in the debtors' books and records as remaining
unresolved claims are liquidated (See Note 17).
The filed companies have received approval from the Bankruptcy Court to pay
certain of their prepetition obligations. Such obligations have been included in
the appropriate liability captions on the accompanying consolidated balance
sheets. Claims secured by the assets of the filed companies ("secured claims")
also may not be paid outside the plan of reorganization or without specific
Bankruptcy Court authorization, and actions to enforce the claims against the
filed companies' assets are stayed, although the holders of such claims have the
right to move the Bankruptcy Court for relief from the stay.
As a result of the Chapter 11 filings, events of default occurred with
respect to substantially all of the company's debt which was outstanding as of
the petition date. Default remedies since the petition date have been stayed. In
addition, the company has discontinued accruing interest on its unsecured
prepetition debt obligations.
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets and liquidation of liabilities and commitments in the normal course of
business. The appropriateness of using the going concern basis is dependent
upon, among other things, the company's future profitable operations, and the
ability to generate sufficient cash from operations, asset sales (See Note 4)
and financing sources to meet obligations. The accompanying consolidated
financial statements do not include any adjustments relating to the
recoverability of the carrying value of recorded asset amounts or the amounts
and classification of liabilities that might be necessary as a consequence of
the plan of reorganization becoming effective. The company expects to adopt
"fresh-start" reporting, in accordance with the Statement of Position No. 90-7,
"Financial Reporting by Entities in
F-46
<PAGE> 116
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reorganization Under the Bankruptcy Code", upon the effectiveness of its plan of
reorganization. See Note 3, "Plan of Reorganization", including pro forma
information for further discussion of estimated adjustments to the carrying
values of historical assets and liabilities that will be required in future
financial statements to reflect the plan of reorganization becoming effective.
The company is not actively marketing certain facilities which were
classified as assets held for sale in the 1989 restructuring program and, in
accordance with the confirmed plan of reorganization the company expects to
retain certain of these operating facilities.
Accordingly, prior to the plan of reorganization becoming effective these
operations continued to be classified as assets held for sale in the
accompanying consolidated financial statements. In accordance with its plan of
reorganization, the company expects to dispose of certain assets which were not
previously included in the company's restructuring program and are not currently
classified as assets held for sale (See Note 4).
The accompanying consolidated financial statements include results of both
filed and non-filed entities. The entities which had not filed for
reorganization under Chapter 11 primarily consist of the foreign operations, the
joint ventures and a subsidiary with net assets of $45,780,000, which mainly
consists of a cement plant in Florida leased to a third party (See Notes 10 and
11).
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION -- The consolidated financial statements include the accounts
of Lone Star Industries, Inc. and all domestic and foreign subsidiaries. All
intercompany transactions have been eliminated. Joint ventures are accounted for
under the equity method.
INVENTORIES -- Inventories are stated at the lower of cost or market. Cost
is determined principally by the average cost method.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated
at cost and depreciated over the estimated useful lives of the assets using the
straight-line method. Significant expenditures which extend the useful lives of
existing assets are capitalized. Maintenance and repair costs are charged to
current earnings. Cost depletion is calculated using the units of production
method. The cost of assets and related accumulated depreciation is removed from
the accounts when such assets are disposed of, and any related gains or losses
are reflected in current earnings.
INCOME TAXES -- Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
company's assets and liabilities. Provision is made for appropriate taxes on the
unremitted earnings of joint ventures and foreign subsidiaries which are not
considered to be permanently reinvested or restricted. The company's equity
income in corporate joint ventures is presented on a pre-tax basis. Joint
venture taxes are combined with the company's tax provision.
PENSION PLANS -- The company and certain of its consolidated subsidiaries
have a number of retirement plans which cover substantially all of its
employees. Defined benefit plans for salaried employees provide benefits based
on employees' years of service and average compensation for a specified period
of time. Defined benefit plans for hourly paid employees, including those
covered by multi-employer pension plans under collective bargaining agreements,
generally provide benefits of stated amounts for specified periods of service.
The company's policy is to fund amounts as are necessary on an actuarial basis
to provide assets sufficient to meet the benefits to be paid to plan members in
accordance with the requirements of the Employees Retirement Income Security Act
of 1974 ("ERISA"). Assets of the plans are administered by an independent
trustee and are invested principally in fixed income, equity securities and real
estate.
INCOME PER COMMON SHARE -- Primary income per common share is based on the
weighted average number of shares outstanding in each year after providing for
cumulative preferred dividends including amounts in arrears (See Notes 22 and
23). Fully diluted income per common share assumes that dilutive
F-47
<PAGE> 117
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
convertible preferred stock had been converted and dilutive stock options had
been exercised at the beginning of each year or on the date of issuance.
COST IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED -- The excess of the
cost of purchased businesses over the fair value of net assets at dates of
acquisition is amortized using the straight-line method over periods not to
exceed forty years.
CASH AND CASH EQUIVALENTS -- Cash equivalents include the company's
marketable securities which are comprised of short-term, highly liquid
investments with original maturities of three months or less. Marketable
securities are recorded at cost, which approximates market value.
NOTE 3. PLAN OF REORGANIZATION
On February 17, 1994 the Bankruptcy Court confirmed the Lone Star Plan of
Reorganization (the "confirmed plan"). At the hearing for the confirmation of
the plan, the Official Committee of Equity Holders and certain other parties
withdrew their objections to confirmation of the plan as a result of negotiated
settlements. The Alternative Plan which had been proposed by that committee was
rejected by the company's creditors and preferred shareholders and was
withdrawn. In accordance with the confirmed plan certain core cement,
ready-mixed concrete and construction aggregates operations will constitute the
reorganized Lone Star. Other non-core assets of the company including the
Nazareth, Pennsylvania cement plant, the Santa Cruz, California cement plant and
the company's interest in the RMC LONESTAR, Hawaiian Cement and Lone Star Falcon
joint ventures and certain surplus properties will be transferred to a
liquidating corporation for distribution for the benefit of creditors. The
confirmed plan is expected to become effective in late March 1994 and
distributions to the creditors and shareholders would begin immediately
thereafter.
The confirmed plan, provides that allowed unsecured claims (currently
estimated to amount to about $570,000,000) would receive their pro rata share of
(i) approximately $182,700,000 in cash expected to be available on the effective
date, (ii) $78,000,000 senior unsecured notes of the reorganized company, (iii)
$138,000,000 secured notes of the liquidating company, to be paid out of the
proceeds from the disposition of its assets (the notes and the indenture under
which they are to be issued provide for a guarantee by reorganized Lone Star and
in an amount not to exceed $20,000,000 plus interest to become payable should a
specified principal amount of such secured notes not be paid by 1997. The
principal amount of such secured notes is to be reduced by the proceeds, if any,
from certain asset dispositions and from certain other matters occurring prior
to the effective date of the plan of reorganization) and (iv) approximately
85.0% of the common equity of reorganized Lone Star.
Holders of preferred stock will receive their pro rata share of 10.5% of
the common equity of reorganized Lone Star and 1,250,000 warrants to purchase
common stock of the reorganized Lone Star. The holders of common stock of Lone
Star will receive the balance of the reorganized company's common equity and
2,753,333 warrants to purchase common stock in the reorganized Lone Star. The
warrants proposed to be issued to the preferred and common shareholders will be
exercisable through December 31, 2000 and will provide for the purchase of
shares of the common stock of reorganized Lone Star at a price of $18.75 a
share.
In connection with the confirmation of the company's plan, the Lone Star
Board of Directors has been reconstituted.
Pro Forma Information
The company will account for the plan of reorganization utilizing the fresh
start reporting principles as contained in the Statement of Position No. 90-7
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code".
Upon adoption of fresh-start reporting, the value of the company as determined
in the confirmed plan of reorganization will be allocated to the company's net
assets in conformity with the procedures specified by Accounting Principles
Board Opinion No. 16, "Business Combinations."
F-48
<PAGE> 118
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following pro forma condensed financial information of the company and
its subsidiaries illustrates the presently estimated financial effects of the
implementation of the company's plan of reorganization (which will result in the
end of the company's 1989 Restructuring Program) and its adoption of fresh-start
reporting. Pro forma statement of operations data for the year ended December
31, 1993 have been presented as if the company had emerged from Chapter 11
bankruptcy proceedings and adopted fresh start reporting as of January 1, 1993.
The pro forma data is unaudited.
LONE STAR INDUSTRIES, INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1993
(IN MILLIONS)
<TABLE>
<CAPTION>
EFFECT OF
PLAN OF
REORGANIZATION
AND FRESH START PRO FORMA
HISTORICAL REPORTING RESULTS
---------- --------------- ---------
<S> <C> <C> <C>
Revenues:
Net sales................................................ $240.1 $ 30.4 $270.5
Joint venture income..................................... 20.4 (17.0) 3.4
Other income............................................. 11.2 (7.4) 3.8
------ ------ ------
271.7 6.0 277.7
------ ------ ------
Deductions from revenues:
Cost of sales............................................ 193.9 24.9 218.8
Provision for litigation settlements..................... 2.5 (2.5) --
Selling, general and administrative...................... 41.3 (3.2) 38.1
Depreciation and depletion............................... 26.3 (2.7) 23.6
Interest expense......................................... 1.6 7.8 9.4
------ ------ ------
265.6 24.3 289.9
------ ------ ------
Income (loss) before reorganization items................ 6.1 (18.3) (12.2)
Reorganization items:
Loss on sale of assets................................... (37.3) 37.3 --
Other.................................................... (10.5) 10.5 --
------ ------ ------
Total reorganization items............................... (47.8) 47.8 --
------ ------ ------
Loss before income taxes and cumulative effect of change
in accounting principles............................... (41.7) 29.5 (12.2)
Credit (provision) for income taxes...................... 6.4 (7.5) (1.1)
------ ------ ------
Loss before cumulative effect of changes in accounting
principles............................................. $(35.3) $ 22.0 $(13.3)
====== ====== ======
</TABLE>
F-49
<PAGE> 119
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The above pro forma condensed financial information includes adjustments
for the following items:
As a result of the implementation of the plan of reorganization and
adoption of fresh-start reporting the company's 1989 Restructuring Program will
end effective March 31, 1994. Operating results related to the cement plants at
Pryor, Oklahoma and Maryneal, Texas, which were formerly included in assets held
for sale are included in the pro forma consolidated operating results for the
year ended December 31, 1993.
Operating results for the operations which have been transferred to a
liquidating corporation have been eliminated from the pro forma statement of
operations for the year ended December 31, 1993.
Pro forma consolidated operating results for the year ended December 31,
1993 have been adjusted to include the change in depreciation expense related to
the values of property, plant and equipment under fresh-start reporting.
Interest expense related to the senior unsecured notes has been included in
the pro forma statement of operations for the year ended December 31, 1993.
The provision for preferred dividends for the year ended December 31, 1993
has been eliminated from the statement of operations.
The 1993 provision for litigation settlements has been eliminated.
All Chapter 11 reorganization items included in the pro forma statement of
operations for the year ended December 31, 1993 have been eliminated.
The pro forma statement of operations has been adjusted to reflect the
reduction in expenses resulting from settlements reached with the Pension
Benefit Guaranty Corporation and retirees in accordance with the requirements of
fresh-start reporting.
NOTE 4. RESTRUCTURING AND OTHER UNUSUAL CHARGES
In November 1989, the Board of Directors approved a restructuring program
which included the planned sale of certain facilities and marginal businesses,
interests in certain joint ventures, an investment in preferred stock, surplus
real estate, and certain other assets, and resulted in a pre-tax provision of
$311,500,000 in 1989. The assets to be sold, including related current and other
assets, have been classified as assets held for sale in the accompanying
consolidated balance sheets at their then estimated net realizable values (as
revised in 1990).
Although progress had been made in implementing the restructuring program,
depressed economic conditions and the shortage of financing available to
potential buyers during 1990 impeded the company's ability to complete the sale
of all assets within the time frame and at the values estimated in 1989. As a
result, the company recorded an additional restructuring charge of $63,400,000
which included $8,200,000 to adjust the carrying value of the remaining assets
held for sale to their then current estimated net realizable value, $14,400,000
for anticipated operating losses until disposition of the assets, $24,200,000
for the estimated additional costs of environmental cleanup actions and other
costs associated with operations to be disposed, and $16,600,000 for estimated
losses on other operations to be curtailed or disposed of and expenses
associated with company-wide cost reduction programs.
In 1991, the company received $29,166,000 in cash from the sale of the
following assets held for sale:
- The company's Polymer-GraniteTM operation in Canada.
- A note receivable related to the sale of the company's interest in
Pacific Coast Cement Corporation.
F-50
<PAGE> 120
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- The company's remaining one percent interest in the Mountain Cement
Company joint venture.
- A corporate airplane, barges and certain parcels of real estate.
In addition, the New Orleans cement plant lease was cancelled by the lessee
effective December 31, 1991. In January 1992, the company began using the New
Orleans silos and dock as a terminal for the Cape Girardeau, Missouri cement
plant. The terminal related asset balances have been reclassified from assets
held for sale to property, plant and equipment as of December 31, 1991 (See Note
21).
In 1992, the company received $7,934,000 in cash from the sale of the
following assets held for sale:
- A ready-mixed concrete and construction aggregates operation in
Massachusetts.
- A concrete block operation in Tennessee.
- Certain parcels of real estate.
In addition, the company reduced its prepetition debt and interest
obligation by $1,089,000 through the exchange of a parcel of land.
In 1993, the company received $9,206,000 in cash from the sale of the
following assets held for sale:
- A portion of a former plant site in Kansas.
- Certain parcels of real estate.
The assets carried on the company's books at December 31, 1993 as assets
held for sale include the cement plants at Pryor, Oklahoma; and Maryneal, Texas;
the company's interest in Lone Star Falcon, an owner of a leased cement terminal
in southern Texas; and various parcels of surplus property.
The company is not actively marketing certain of the facilities which were
identified for sale in the 1989 restructuring program and, in accordance with
the confirmed plan of reorganization, the company will retain certain of these
operating facilities. Due to the uncertainty at December 31, 1993 as to which of
these assets, if any, would ultimately be retained, these operations continued
to be classified as assets held for sale in the accompanying consolidated
financial statements. In accordance with its plan of reorganization, the company
intends to dispose of certain assets which were not previously included in the
company's restructuring program and are not currently classified as assets held
for sale in the accompanying consolidated balance sheets.
Operating results related to assets held for sale included income of
$8,100,000 and $3,100,000 in 1993 and 1992 and losses in 1991 of $1,800,000. The
results from the operations held for sale were offset by increases to
restructuring and other unusual charges primarily related to environmental
monitoring, clean-up and legal costs associated with the properties classified
as assets held for sale.
NOTE 5. ASSET DISPOSITIONS
In March 1993, the company sold substantially all of the equipment and
inventory of Southern Aggregates for $721,000.
In September 1993, the company sold its 49.6% interest in Companhia
Nacional de Cimento Portland, a Brazilian joint venture, for $69,629,000 in
cash. A pre-tax loss of $37,335,000, offset by a tax benefit of $12,500,000, was
recognized on the transaction and is included in reorganization items in the
accompanying consolidated statements of operations.
In September 1993, the company sold one of its cement terminals which had
been leased to a third party, for $812,000.
In August 1992, the company sold all the capital stock of Compania
Argentina de Cemento Portland, S.A. ("CACP") for $38,000,000 in cash. CACP held
a 50% interest in Cemento San Martin, S.A., a joint
F-51
<PAGE> 121
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
venture in Argentina, and substantially all of the capital stock of Canteras de
Riachuelo, S.A., a crushed stone operation in Uruguay. The transaction resulted
in a pre-tax gain of $15,525,000 which is included in reorganization items in
the accompanying consolidated statements of operations.
In December 1992, the company sold its 50% interest in LSM Concrete Tie
Company for $1,675,000.
In December 1991, the company sold all of the capital stock of Compania
Uruguaya de Cemento Portland, a producer of portland cement in Uruguay, for
$4,135,000. A pre-tax gain of $391,000 was recognized on the transaction and is
included in reorganization items in the accompanying consolidated statements of
operations.
The operations sold in 1993, 1992 and 1991 contributed the following
results for the years ended December 31, 1993, 1992 and 1991 through their
respective dates of disposition (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------- -------
<S> <C> <C> <C>
Net sales.............................................. $ 118 $ 1,339 $15,638
Joint venture income................................... $9,745 $28,056 $12,695
Net income............................................. $4,564 $13,727 $ 5,133
</TABLE>
NOTE 6. ACCOUNTS AND NOTES RECEIVABLE
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Trade accounts and notes receivable.............................. $37,185 $31,935
Other notes receivable........................................... 299 1,566
Other receivables................................................ 20,451 8,669
------- -------
57,935 42,170
Less: Allowance for doubtful accounts............................ 8,913 8,033
------- -------
$49,022 $34,137
======= =======
</TABLE>
Due to the nature of the company's products, a majority of the company's
accounts receivable are from businesses in the construction industry. Although
the company's customer base is geographically diversified, collection of
receivables is partially dependent on the economics of the construction
industry.
NOTE 7. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Finished goods................................................... $20,277 $22,996
Work in process and raw materials................................ 1,987 3,010
Supplies and fuel................................................ 16,162 12,498
------- -------
$38,426 $38,504
======= =======
</TABLE>
F-52
<PAGE> 122
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Land........................................................... $ 21,934 $ 21,243
Buildings and equipment........................................ 633,273 623,058
Construction in progress....................................... 4,116 6,737
Automobiles and trucks......................................... 21,184 17,610
Other.......................................................... 2,323 2,255
-------- --------
682,830 670,903
Less accumulated depreciation and depletion.................... 284,745 262,632
-------- --------
$398,085 $408,271
======== ========
</TABLE>
NOTE 9. INTEREST COSTS
Interest costs incurred during 1993, 1992 and 1991 were $1,832,000,
$2,406,000, and $4,612,000, respectively. Interest capitalized during 1993, 1992
and 1991 was $195,000, $196,000 and $1,310,000, respectively. Interest paid
during 1993, 1992 and 1991 was $123,000, $119,000 and $287,000, respectively.
Contractual interest for 1993, 1992 and 1991 was $31,227,000, $31,914,000 and
$33,357,000, respectively. As discussed in Note 1 the filed companies have
stopped accruing interest on their unsecured prepetition debt.
NOTE 10. FOREIGN OPERATIONS
The accompanying consolidated financial statements include the following
with respect to the company's operations in Argentina, Brazil, Uruguay and Nova
Scotia, Canada as of, and for the years ended, December 31, 1993, 1992 and 1991
(in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Current assets..................................... $ 8,515 $ 7,981 $ 8,149
Property, plant and equipment net.................. 7,897 9,015 10,860
Investment in joint ventures:
Companhia Nacional de Cimento Portland ("CNCP").. -- 105,702 69,554
Other joint ventures............................. -- -- 19,580
Other assets....................................... 2,292 1,773 1,825
Current liabilities................................ (1,592) (1,470) (1,078)
Net (payable) receivable from Lone Star
Industries....................................... (17,284) 22,375 (15,508)
Other liabilities.................................. -- -- (1,754)
-------- -------- --------
Net assets......................................... $ (172) $145 376 $ 91,628
-------- -------- --------
Net sales.......................................... $ 9,273 $ 9,799 $ 24,633
Joint venture income............................... $ 9,745 $ 27,989 $ 12,276
Income before income taxes and cumulative effect of
change in accounting principle................... $ 9,184 $ 43,599 $ 12,835
Income before cumulative effect of change in
accounting principle............................. $ 4,989 $ 32,019 $ 11,094
Cumulative effect of change in accounting
principle........................................ $ -- $ 23,788 $ --
Net income......................................... $ 4,989 $ 55,807 $ 11,094
</TABLE>
F-53
<PAGE> 123
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The company's 49.6% interest in Companhia Nacional de Cimento Portland,
("CNCP") a Brazilian joint venture was sold in September 1993 for $69,629,000
and an after-tax loss of $24,835,000 was recognized.
All of the capital stock of Compania Argentina de Cemento Portland, S.A.
("CACP") was sold in August 1992 for $38,000,000 and a gain of $15,525,000 was
recognized. CACP held the company's 50% interest in the Cemento San Martin, S.A.
joint venture and substantially all of the capital stock of Canteras de
Riachuelo, S.A. The proceeds of $38,000,000 is reflected in the above table in
1992 as a receivable from Lone Star Industries. The cement operation in Uruguay
was sold in December 1991 for $4,135,000 and a gain of $391,000 was recognized.
The pre-tax gains and losses on the above sales are included in reorganization
items on the accompanying consolidated statements of operations.
None of the company's foreign operations have filed for reorganization
under Chapter 11.
In 1992, the company and CNCP, its remaining international joint venture at
December 31, 1992, adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"). The effect of the adoption of
SFAS No. 109 on the financial results of foreign operations for the year ended
December 31, 1992 was to decrease earnings by approximately $2,660,000. The
cumulative effect of the change in accounting principle as of January 1, 1992
was an increase in earnings of $23,788,000.
The impact of the adoption of SFAS No. 109 on foreign operations, as
reflected in the above table, is limited to the effect on local income taxes.
For discussion of the effect of the adoption on consolidated taxes, see Note 31.
NOTE 11. JOINT VENTURES
The company's investment in and advances to joint ventures at December 31,
1993 and 1992 are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- --------
<S> <C> <C>
RMC LONESTAR.................................................... $32,543 $ 25,950
Hawaiian Cement................................................. 31,985 30,502
Kosmos Cement Company........................................... 24,149 25,774
CNCP............................................................ -- 105,702
Other joint ventures............................................ (103) (54)
------- --------
$88,574 $187,874
======= ========
</TABLE>
The amount of cumulative unremitted earnings of joint ventures included in
consolidated retained earnings at December 31, 1993, was $22,194,000.
During 1993, 1992 and 1991, respectively, $15,294,000, $8,331,000 and
$12,512,000 in distributions were received from joint ventures.
None of the company's joint ventures have filed for reorganization under
Chapter 11.
COMPANHIA NACIONAL DE CIMENTO PORTLAND ("CNCP")
CNCP was a joint venture formed in 1979 when the company and Lafarge
Coppee, S.A. combined substantially all of their Brazilian operations. The
company owned a 49.6% interest in the combined entity which operates four cement
plants and a grinding facility in Brazil.
F-54
<PAGE> 124
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized financial information based on the consolidated financial
statements of CNCP as of and for the years ended December 31, 1993, 1992 and
1991 is as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- -------- --------
<S> <C> <C> <C>
Current assets...................................... $ -- $101,220 $ 57,034
Property, plant and equipment net................... -- 149,989 150,340
Other assets........................................ -- 7,013 6,002
Current liabilities................................. -- (41,055) (21,631)
Other liabilities................................... -- (15,388) (64,203)
------- -------- --------
Net assets.......................................... $ -- $201,779 $127,542
------- -------- --------
Net sales........................................... $50,967 $125,647 $ 96,327
Gross profit........................................ $24,729 $ 61,017 $ 28,101
Income before income taxes and cumulative effect of
change in accounting principle.................... $20,190 $ 51,423 $ 16,276
Income before cumulative effect of change in
accounting principle.............................. $11,728 $ 29,765 $ 12,152
Cumulative effect of change in accounting
principle......................................... $ -- $ 47,980 $ --
Net income.......................................... $11,728 $ 77,745 $ 12,152
</TABLE>
In September 1993, the company completed the sale of its 49.6% interest in
CNCP for $69,629,000. The above table includes results for CNCP for the portion
of the year in which the company recorded its proportional share of income. The
transaction resulted in a pre-tax loss of $37,335,000 and a tax benefit of
$12,500,000 which are included in reorganization items and credit for income
taxes in the accompanying consolidated statements of operations.
At December 31, 1992 and 1991 the excess of the investment by the company
over its share of the underlying net tangible assets of CNCP was $7,159,000 and
$7,795,000, respectively, and was being amortized over twenty-five years.
The effect of the adoption of SFAS No. 109 by CNCP in 1992 for the year
ended December 31, 1992, was to decrease local earnings by approximately
$5,400,000.
RMC LONESTAR
RMC LONESTAR is a partnership formed in 1987 at the time of the sale of a
50% partnership interest in the company's ready-mixed concrete, aggregates,
cement terminals, building materials and trucking operations in northern
California. The partnership is leasing from the company its cement manufacturing
plant in Santa Cruz, California at an annual rental of $10,048,000 through 1997
and $8,548,000 from 1998 through 2007. The excess of the average rent over the
annual rent paid during the initial years of the lease is included in the
company's investment and advances to joint ventures. The lease contains a
purchase option at the end of years ten, eleven and twenty for the plant's then
fair market value but not less than the plant's then net book value. The
carrying value of the plant at December 31, 1993, net of accumulated
depreciation is $91,063,000.
F-55
<PAGE> 125
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized financial information of RMC LONESTAR as of and for the years
ended December 31, 1993, 1992 and 1991 is as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Current assets..................................... $ 47,108 $ 43,090 $ 45,134
Property, plant and equipment net.................. 162,134 172,771 183,345
Other assets....................................... 26,986 26,776 26,097
Payable to Lone Star Industries.................... (11,833) (3,500) --
Current liabilities................................ (45,638) (36,700) (32,932)
Long-term debt..................................... (62,000) (83,000) (91,700)
Other liabilities.................................. (24,384) (24,870) (25,885)
-------- -------- --------
Net assets......................................... $ 92,373 $ 94,567 $104,059
-------- -------- --------
Net sales.......................................... $164,756 $159,054 $173,010
Gross profit....................................... $ 18,916 $ 19,127 $ 26,735
Pre-tax loss....................................... $ (6,930) $ (9,117) $ (3,597)
</TABLE>
At December 31, 1993, 1992 and 1991, the company's share of the underlying
net assets of RMC LONESTAR exceeded its investment by $41,477,000, $44,834,000
and $48,246,000, respectively, and is being amortized over the estimated
remaining life of the assets.
During 1993, the company advanced to RMC LONESTAR, $5,000,000 in cash,
received a promissory note for $5,833,000 of deferred rent payments, and
capitalized $2,500,000 of notes receivable from RMC LONESTAR, resulting in a net
payable to the company of $11,833,000 at December 31, 1993. The company expects
to advance to RMC LONESTAR additional funds in 1994.
Hawaiian Cement
Hawaiian Cement is a manufacturer of cement, ready-mixed concrete and
construction aggregates in Hawaii. The company has a 50% interest in the entity.
Summarized financial information of Hawaiian Cement as of and for the years
ended December 31, 1993, 1992 and 1991 is as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Current assets..................................... $ 18,146 $ 22,964 $ 24,607
Property, plant and equipment, net................. 69,701 69,593 64,435
Other assets....................................... 2,492 1,897 1,705
Current liabilities................................ (7,471) (7,237) (6,328)
Long-term debt..................................... (14,500) (21,000) (24,000)
-------- -------- --------
Net assets......................................... $ 68,368 $ 66,217 $ 60,419
-------- -------- --------
Net sales.......................................... $ 96,562 $108,067 $107,220
Gross profit....................................... $ 21,380 $ 22,821 $ 19,567
Pre-tax income..................................... $ 14,338 $ 15,890 $ 15,651
</TABLE>
At December 31, 1993, 1992 and 1991, the company's share of the underlying
net assets of Hawaiian Cement exceeded its investment by $2,199,000, $2,607,000
and $3,523,000, respectively and is being amortized over the estimated remaining
life of the assets.
Lone Star's interest in Hawaiian Cement is owned by subsidiaries of Lone
Star that have not filed for bankruptcy.
F-56
<PAGE> 126
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cemento San Martin, S.A.("CSM")
CSM is a manufacturer of cement in Argentina. The company owned through
Compania Argentina de Cemento Portland ("CACP"), a wholly owned subsidiary of
the company, a 50% interest in CSM until August 1992.
Summarized financial information of CSM as of December 31, 1991 and for the
seven months ended July 31, 1992 and the year ended December 31, 1991 is as
follows (in thousands):
<TABLE>
<CAPTION>
1992 1991
------- -------
<S> <C> <C>
Current assets................................................... $ -- $15,788
Property, plant and equipment, net............................... -- 34,169
Other assets..................................................... -- 1,432
Current liabilities.............................................. -- (8,128)
Long-term debt................................................... -- (2,857)
------- -------
Net assets....................................................... $ -- $40,404
------- -------
Net sales........................................................ $31,111 $48,225
Gross profit..................................................... $10,262 $19,132
Income before income taxes....................................... $ 6,112 $ 9,665
Net income....................................................... $ 4,473 $10,266
</TABLE>
In August 1992, CACP was sold for $38,000,000. The transaction resulted in
a pre-tax gain of $15,525,000 which is included in reorganization items in the
accompanying consolidated statement of operations.
In November 1991, CACP purchased 50% of the preferred stock of CSM for
$3,760,000. This was recorded as an increase in the company's investment in
joint ventures on the accompanying consolidated balance sheet.
Kosmos Cement Company ("Kosmos")
Kosmos is a partnership with cement plants in Kosmosdale, Kentucky and
Pittsburgh, Pennsylvania, in which the company owns a 25% interest.
Summarized financial information of Kosmos as of and for the years ended
December 31, 1993, 1992 and 1991 is as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Current assets..................................... $ 24,236 $ 28,268 $ 22,485
Property, plant and equipment, net................. 74,713 75,327 79,718
Cost in excess of net assets of businesses
acquired......................................... 25,497 26,242 26,987
Current liabilities................................ (3,449) (4,165) (3,120)
Other liabilities.................................. (3,329) (96) (230)
-------- -------- --------
Net assets......................................... $117,668 $125,576 $125,840
-------- -------- --------
Net revenues....................................... $ 65,597 $ 62,769 $ 62,500
Gross profits...................................... $ 15,027 $ 13,545 $ 10,906
Income before cumulative effect of change in
accounting principle............................. $ 12,218 $ 7,736 $ 7,828
Cumulative effect of change in accounting
principle........................................ $ 3,126 $ -- $ --
Net income......................................... $ 9,092 $ 7,736 $ 7,828
</TABLE>
F-57
<PAGE> 127
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1993, 1992 and 1991, the company's share of the underlying
net assets of Kosmos Cement Company exceeded its investment by $5,260,000,
$5,619,000 and $6,049,000, respectively and is being amortized over the
estimated remaining life of the assets.
Other Joint Ventures
Other joint ventures at December 31, 1992 and 1991, includes the company's
50% interest in LSM Concrete Tie Company.
Summarized financial information of other joint ventures in which the
company participates, none of which is of significant size individually, as of
and for the years ended December 31, 1992 and 1991 is as follows (in thousands):
<TABLE>
<CAPTION>
1992 1991
---- ------
<S> <C> <C>
Current assets..................................................... $ -- $3,008
Property, plant and equipment, net................................. -- 1,772
Other assets....................................................... -- 20
Current liabilities................................................ -- (530)
---- ------
Net assets......................................................... $ -- $4,270
---- ------
Net revenues....................................................... $736 $9,768
Gross profits...................................................... $124 $1,335
Net income......................................................... $ 75 $ 833
</TABLE>
In December 1992, the company sold its interest in LSM Concrete Tie Company
for $1,675,000.
Investments in joint ventures included in the company's restructuring
program have been reclassified to assets held for sale and are excluded from the
above summarized financial information (See Note 4).
NOTE 12. COST IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED
Cost in excess of net assets of businesses acquired and accumulated
amortization are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Cost in excess of net assets of businesses acquired.............. $10,793 $10,859
Less accumulated amortization.................................... 1,520 1,200
------- -------
$ 9,273 $ 9,659
======= =======
</TABLE>
NOTE 13. ACCOUNTS PAYABLE
Accounts payable consist of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Trade............................................................ $11,327 $12,331
Other............................................................ 4,752 1,786
------- -------
$16,079 $14,117
======= =======
</TABLE>
Accounts payable balances as of the petition date have been classified as
liabilities subject to Chapter 11 proceedings on the accompanying consolidated
balance sheets (See Note 17).
F-58
<PAGE> 128
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Postretirement benefits other than pensions...................... $11,432 $10,955
Insurance........................................................ 7,463 9,279
Professional fees................................................ 8,352 7,389
Pensions......................................................... 6,684 6,687
Environmental matters............................................ 4,475 1,389
Taxes other than income taxes.................................... 3,309 4,158
Payroll and vacation pay......................................... 3,488 3,240
Other............................................................ 15,150 14,038
------- -------
$60,353 $57,135
======= =======
</TABLE>
Accrued liabilities as of the petition date, except for those approved for
payment or those which the company believes will be paid in the ordinary course
of business in the following year, have been classified as liabilities subject
to Chapter 11 proceedings in the accompanying consolidated balance sheets (See
Note 17).
NOTE 15. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Current portion of production payment............................ $ 2,000 $ 4,000
Income taxes payable............................................. 1,227 --
------- -------
$ 3,227 $ 4,000
======= =======
</TABLE>
Other current liabilities as of the petition date, except those approved
for payment or those which the company believes will be paid in the ordinary
course of business in the following year, have been classified as liabilities
subject to Chapter 11 proceedings in the accompanying consolidated balance
sheets (See Note 17).
NOTE 16. NOTES PAYABLE TO BANKS
There were no outstanding notes payable to banks during 1993 or at December
31, 1993 and 1992. The maximum aggregate notes payable to banks at any month end
was $1,894,000 during 1991; the average borrowings were $800,000 during 1991;
and the daily weighted average interest rate on aggregate borrowings was 22.0%
during 1991. The unusually high interest rate of 22.0% for 1991 reflects
interest expense charged on local short-term borrowings at the Uruguayan
operations.
F-59
<PAGE> 129
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. LIABILITIES SUBJECT TO CHAPTER 11 PROCEEDINGS
Liabilities subject to Chapter 11 proceedings at December 31, 1993 and 1992
consist of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Long-term debt................................................. $322,403 $323,526
Letters of credit.............................................. 66,678 66,982
Crosstie litigation settlement................................. 57,200 57,200
Other liabilities.............................................. 46,298 44,479
Accrued liabilities............................................ 40,493 28,625
Pensions....................................................... 37,269 28,106
Accounts payable............................................... 29,095 29,538
Accrued interest............................................... 15,502 13,673
Production payment (See Note 20)............................... 13,000 19,000
-------- --------
$627,938 $611,129
======== ========
</TABLE>
Long-term debt subject to compromise at December 31, 1993 and 1992 includes
the following (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
8 3/4% Notes due 1992.......................................... $150,000 $150,000
9 3/4% Promissory Notes due 1993 and 1994...................... 90,000 90,000
9 1/2% Note due 1991........................................... 50,000 50,000
9.9% Term-Loan due 1995........................................ 25,000 25,000
Pollution Control, Industrial Development and Industrial
Revenue Bonds due 1991-2008.................................. 6,365 7,465
Other notes and debentures..................................... 1,038 1,061
-------- --------
$322,403 $323,526
======== ========
</TABLE>
Letters of credit (used to insure payment of certain pollution control,
industrial development and industrial revenue bonds) have been drawn down by the
related debt holders. Liabilities for letters of credit which have been drawn
down are considered to be unsecured liabilities subject to compromise and, as
such, interest is no longer accrued. Letters of credit which support debt with
principal amounts totalling $64,278,000 at December 31, 1993 do not contain a
contractual provision for interest. No interest for these liabilities has been
included in the reported contractual interest expense for the years ended
December 31, 1993, 1992 and 1991.
The filed companies stopped accruing interest on all of their unsecured
debt as of the petition date. The amount of interest not accrued but considered
to be part of contractual interest for the years ended December 31, 1993, 1992
and 1991 was $29,592,000, $29,704,000 and $30,055,000, respectively.
At the petition date, all liabilities subject to Chapter 11 proceedings
were considered to be liabilities subject to compromise. The company has
determined that only a small portion of its prepetition obligations are, in
fact, fully secured. Consequently, all liabilities subject to Chapter 11
proceedings continue to be considered liabilities subject to compromise.
Interest expense, primarily related to the production payments, of
$1,832,000, $2,401,000 and $4,394,000 has been accrued for the years ended
December 31, 1993, 1992 and 1991, respectively.
F-60
<PAGE> 130
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The company reached an agreement, with Bankruptcy Court approval in April
1992, with two banks which jointly issued a significant portion of the letters
of credit whereby the banks agreed not to assert any claims for interest during
the post-petition period on $45,329,000 of prepetition debt obligations.
During 1991, the company continued the process of identifying all
prepetition claims. As a result, additional items were reclassified as
liabilities subject to Chapter 11 proceedings. In addition, the company recorded
accruals totalling $5,838,000 for the year ended December 31, 1991, for
estimated claims related to rejected executory contracts. The bar date for
filing claims in the company's bankruptcy was October 15, 1991. Claims filed by
creditors and scheduled by the filed companies, excluding intercompany claims of
$870,000,000 and claims for which amounts were not specified ("unliquidated
claims"), totalled $1,742,000,000. To date, claims for approximately
$1,110,000,000 have been objected to by the company and expunged by the
Bankruptcy Court. The remaining total resolved and unresolved claims amount to
approximately $570,000,000. Unresolved claims will be handled in accordance with
the plan of reorganization and Bankruptcy Court procedures. Estimation
proceedings, if necessary, will be completed prior to the plan becoming
effective and a portion of the distribution to creditors will be withheld
pending final resolution of these claims.
Certain pollution control and industrial development and industrial revenue
bonds are backed by letters of credit purchased by the company and which can be
drawn upon in the event the company fails to make payments due on the bonds. In
accordance with the underlying agreements, letters of credit totalling
$66,678,000 at December 31, 1993 are considered to have been drawn upon as of
that date. Once the letters of credit are drawn upon, the amounts drawn
constitute unsecured claims and interest is no longer being accrued.
NOTE 18. REORGANIZATION ITEMS
The effects of transactions occurring as a result of the Chapter 11 filings
have been segregated from ordinary operations in the accompanying consolidated
statements of operations. Such items for the years ended December 31, 1993, 1992
and 1991, include the following (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Professional fees and administrative expenses........ $(15,572) $(8,546) $(5,766)
Interest income...................................... 5,102 4,500 4,219
Rejected executory contracts......................... -- -- (5,838)
-------- ------- -------
(10,470) (4,046) (7,385)
Gain/(loss) on sale of assets........................ (37,335) 15,525 391
-------- ------- -------
$(47,805) $11,479 $(6,994)
======== ======= =======
</TABLE>
Professional fees and administrative expenses related to the filed
companies' Chapter 11 proceedings are expensed as incurred. Interest income
represents interest earned on cash accumulated as a result of the Chapter 11
proceedings. The loss on the sale of assets in 1993 represents the pre-tax loss
on the sale of the company's 49.6% interest in Companhia Nacional de Cimento
Portland. The gain on sale of assets in 1992 represents the pre-tax gain on the
sale of the capital stock of Compania Argentina de Cemento Portland, S.A. (See
Note 5).
NOTE 19. LONG-TERM DEBT
Due to the Chapter 11 proceedings, the filed companies are in default under
their financing agreements. Long-term debt subject to compromise has been
classified as liabilities subject to Chapter 11 proceedings in the accompanying
consolidated balance sheets (See Note 17).
F-61
<PAGE> 131
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. PRODUCTION PAYMENT
The company entered into a production payment arrangement concerning
specific limestone reserves located adjacent to two cement plants, and pursuant
to the terms of the document, is obligated to extract and process those reserves
into cement for the purchaser free and clear of all expenses. The purchaser is
also entitled to receive the income from mining, or specific fixed payments,
whichever is less. The proceeds have been deferred and are being reflected in
income, together with related costs and expenses, as the limestone is produced
into cement and the cement is sold. An amount equivalent to interest, which is
expensed currently, is payable by the company at a maximum rate of prime plus
1/4% through 1990 and prime plus 1/2% through maturity. The company is
presently accruing interest on the unpaid balance at the penalty rate of
three-month LIBOR plus 1 3/4%.
One of the cement plants involved in the processing of the reserves was
included in the company's restructuring program but which, in accordance with
the plan of reorganization, is expected to be retained by the company. The
December 31, 1993 production payment balance is $15,000,000. The non-current
principal amount of $13,000,000 and unpaid interest of $6,817,000 are included
in liabilities subject to Chapter 11 proceedings in the accompanying
consolidated balance sheets (See Notes 1 and 17). In accordance with the final
settlement with the production payment creditors, reorganized Lone Star will
assume this liability at the modified terms included in the settlement. The
company will make a payment of $2,000,000 in 1994. Accordingly, this amount is
included in other current liabilities in the accompanying consolidated balance
sheets.
NOTE 21. LEASES
Net rental expense in 1993, 1992 and 1991 was $5,888,000, $6,325,000 and
$6,653,000, respectively. Minimum rental commitments under all non-cancelable
leases principally pertaining to land, buildings and equipment are as follows:
1994 - $5,427,000; 1995 - $4,674,000; 1996 - $640,000; 1997 - $531,000; 1998 -
$522,000; after 1998 - $450,000. Certain leases include options for renewal or
purchase of leased property.
In accordance with the provisions of the Bankruptcy Code, the company
rejected certain executory contracts and leases in 1991 (See Note 17). A total
of $3,212,000 has been accrued related to rejected leases and is included in
prepetition liabilities in the accompanying consolidated balance sheets.
A subsidiary of the company is leasing its Florida cement plant for
approximately twenty years at a current annual rental of $2,500,000. The lease
can be cancelled at the end of 1999 upon written notice by the lessee. The lease
contains an option that allows the lessee to purchase the cement plant at the
end of the lease term at the assets' then fair market value. The carrying value
of the plant at December 31, 1993, net of accumulated depreciation was
$31,335,000.
NOTE 22. REDEEMABLE PREFERRED STOCK
At December 31, 1993, 1992 and 1991, the company had 375,000 shares
outstanding of its $13.50 cumulative convertible redeemable preferred stock
originally issued for $37,500,000.
In accordance with the provisions of the preferred stock issue, holders of
the stock are entitled to receive cumulative cash dividends of $13.50 per share
annually, payable quarterly. Under a mandatory sinking fund provision, the
company is required to redeem one-fifth of the shares annually, beginning in
September 1992 at $100 per share. Mandatory redemption can be satisfied with the
company's common stock, at its option. Each share of $13.50 preferred stock is
convertible into 2.546 shares of common stock, subject to adjustment in certain
events. As a result of the Chapter 11 filings, the company is unable to comply
with terms related to mandatory redemption of the preferred stock and the
payment of dividends. The company stopped accruing preferred dividends as of the
last payment date, September 15, 1990. The dividends are, however, used in
computing net loss per common share. The total of dividends in arrears on the
$13.50 preferred stock at
F-62
<PAGE> 132
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1993 was $16,671,000. The aggregate amount of such dividends must
be paid before any dividends are paid on the common stock. As of December 31,
1993, thirteen quarterly dividend payments have not been made.
The redeemable preferred stock will be cancelled upon the plan of
reorganization becoming effective.
NOTE 23. NON-REDEEMABLE PREFERRED STOCK
Authorized: 3,500,000 shares of $4.50 cumulative convertible preferred
stock, par value $1.00 per share. Transactions in non-redeemable preferred stock
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
$4.50
----------------
SHARES VALUE
------ -----
<S> <C> <C>
Balance December 31, 1990................................... 12,054 $ 271
Conversions of stock........................................ (679) (15)
------ -----
Balance December 31, 1991................................... 11,375 256
Conversions of stock........................................ (176) (4)
------ -----
Balance December 31, 1992................................... 11,199 252
Conversions of stock........................................ (179) (4)
------ -----
Balance December 31, 1993................................... 11,020 $ 248
====== ====
</TABLE>
Each share of $4.50 preferred stock (stated value $22.50 per share) is
convertible into four shares of common stock. Such stock is callable at the
option of the company. The $4.50 non-redeemable preferred stock is entitled,
upon involuntary liquidation, to $100 per share, or $1,102,000 which is $854,000
in excess of the carrying value.
In accordance with the provisions of the preferred stock issue, holders are
entitled to receive cumulative cash dividends of $4.50 per share annually,
payable quarterly. As a result of the Chapter 11 filings, the company is unable
to make any dividend payments. The company stopped accruing preferred dividends
as of the last payment date, September 15, 1990. The dividends are, however,
used in computing net loss per common share. The total of dividends in arrears
on the $4.50 preferred stock at December 31, 1993 was $167,000. The aggregate
amount of such dividends must be paid before any dividends are paid on the
common stock. As of December 31, 1993, thirteen quarterly dividend payments have
not been made.
The non-redeemable preferred stock will be cancelled upon the plan of
reorganization becoming effective.
F-63
<PAGE> 133
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 24. COMMON STOCK
Authorized: 25,000,000 shares of common stock, par value $1.00 per share.
Transactions in common stock are as follows:
<TABLE>
<CAPTION>
COMMON TREASURY
SHARES SHARES
---------- ---------
<S> <C> <C>
Balance December 31, 1990............................ 18,098,587 1,538,810
Conversions of preferred stock....................... 2,716 --
Issuance of treasury stock........................... -- (58,416)
---------- ---------
Balance December 31, 1991............................ 18,101,303 1,480,394
Conversions of preferred stock....................... 704 --
Issuance of treasury stock........................... -- (22,223)
---------- ---------
Balance December 31, 1992............................ 18,102,007 1,458,171
Conversions of preferred stock....................... 716 --
---------- ---------
Balance December 31, 1993............................ 18,102,723 1,458,171
========== =========
</TABLE>
At December 31, 1993, the company has reserved 4,572,484 shares of its
authorized but unissued common stock for possible future issuance in connection
with conversions of the $4.50 non-redeemable preferred stock (44,080 shares),
$13.50 redeemable preferred stock (954,750 shares), and the exercise of stock
options (3,572,938 shares). The payment of cash dividends on common stock is not
permitted as the company is in default under its financing agreements and as a
result of the Chapter 11 filings.
In May 1991, the company began using treasury shares for the purchase by
employees of Lone Star common stock under the Lone Star Employee Stock Purchase
Plan and to meet its related matching contributions. The plan was terminated as
of March 16, 1992.
The common stock will be cancelled upon the plan of reorganization becoming
effective.
NOTE 25. SHAREHOLDER RIGHTS PLAN
In June 1988, the company adopted a Shareholder Rights Plan in which
preferred stock purchase rights ("Rights") were distributed as a dividend to
common shareholders as of the close of business on June 22, 1988.
The Shareholder Rights Plan provides that under certain circumstances each
Right will entitle the holder to purchase one-hundredth of a share of Series A
Junior Participating Preferred Stock par value $1.00 per share at an exercise
price of $100 per Right. Upon exercise, each holder of a Right will also have
the right to receive common stock (or a package of other Lone Star securities
and/or cash) having a value equal to two times the exercise price of the Right.
Unless redeemed, the Rights become exercisable if a person or group acquires 20%
or more of the outstanding shares of common stock or commences a tender or
exchange offer which would result in the ownership of 20% or more of the
outstanding common stock. The Rights also become exercisable if a person or
group acquires 15% or more of the outstanding common shares and the non-officer
members of the Board of Directors determine that the owner of such shares is an
"adverse person" because such ownership is likely to have a material adverse
impact on the company, or that such ownership is intended to cause the company
to purchase those persons' common stock, or to enter into transactions intended
to provide short-term gain to such persons when the Board of Directors
determines the long-term interests of the company and its stockholders would not
be served by such transaction. The Rights Plan is designed to deter coercive or
unfair takeover tactics and to prevent an acquirer from gaining control of the
company without offering a fair price to all shareholders. The rights expire on
June 22, 1998 unless redeemed prior to that date. As of December 31, 1993, there
were 16,644,552 Rights outstanding. The Shareholder Rights Plan will be
cancelled upon to the plan of reorganization becoming effective.
F-64
<PAGE> 134
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 26. STOCK OPTIONS
Transactions in options outstanding and exercisable as of and for the years
ended December 31, 1993, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
OPTION
EXERCISE OPTIONS OPTIONS
PRICE OUTSTANDING EXERCISABLE
---------------- ---------- ----------
<S> <C> <C> <C>
Balance December 31, 1990................. $13.50 - $35.625 3,008,127 3,008,127
Options granted......................... 5.00 100,000 --
Options expired or cancelled............ 13.50 - 35.625 (2,328,921) (2,328,921)
---------- ----------
Balance December 31, 1991................. 5.00 - 35.625 779,206 679,206
Options which became exercisable........ 5.00 -- 100,000
Options expired or cancelled............ 13.50 - 35.625 (85,715) (85,715)
---------- ----------
Balance December 31, 1992................. 5.00 - 35.625 693,491 693,491
Options expired or cancelled............ 13.50 - 35.625 (22,750) (22,750)
---------- ----------
Balance December 31, 1993................. $ 5.00 - $35.625 670,741 670,741
========== ==========
</TABLE>
Options available for future grants were 2,902,197 at December 31, 1993 and
2,879,447 at December 31, 1992. All existing stock options have been cancelled
in accordance with the confirmed plan of reorganization.
NOTE 27. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and short-term investments -- the carrying amount approximates fair
value because of the short maturity of those instruments.
Note receivable -- a non-trade note receivable is carried at its expected
recoverability which is estimated by using the present value of future cash
flows discounted at a rate appropriate with the credit risk involved. It is not
practicable to estimate the fair value of this note.
Long-term debt -- the fair value of the company's long-term debt is not
presently determinable due to the company's Chapter 11 proceedings. The plan of
reorganization has been confirmed and the holders of long-term debt will receive
cash, senior unsecured notes, secured notes of the liquidating company and
common stock in reorganized Lone Star (See Note 3).
NOTE 28. OTHER INCOME, NET
Other income, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Rental income......................................... $ 8,817 $ 8,910 $ 9,793
Interest on income tax refund......................... -- 3,051 --
Other interest income................................. 1,080 942 3,201
Interest income on investments........................ 159 227 1,186
Other, net............................................ 1,182 694 567
------- ------- -------
$11,238 $13,824 $14,747
======= ======= =======
</TABLE>
F-65
<PAGE> 135
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 29. PENSION PLANS
The company sponsors a number of defined benefit retirement plans which
cover substantially all employees. Defined benefit plans for salaried employees
provide benefits based on employees' years of service and average compensation.
Defined benefit plans for hourly paid employees generally provide benefits of
stated amounts for specified periods of service. The company's policy is to fund
at least the minimum amount required under ERISA in accordance with appropriate
actuarial assumptions.
Net periodic pension cost of defined benefit plans for 1993, 1992 and 1991
included the following components (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Interest cost........................................ $ 10,236 $ 9,987 $10,048
Service cost -- benefits during the period........... 1,363 1,266 1,289
Actual return on plan assets......................... (11,913) (6,432) (5,360)
Net amortization and deferral........................ 3,404 (2,129) (3,974)
-------- ------- -------
Net pension cost..................................... $ 3,090 $ 2,692 $ 2,003
======== ======= =======
</TABLE>
During 1991, the company recognized pre-tax settlement and curtailment
gains of approximately $828,000. The gains primarily resulted from the transfer
to other pensions trusts of assets and liabilities of certain salaried and
hourly plans related to joint ventures.
The following table presents the plans' funded status and amounts
recognized in the accompanying consolidated balance sheets at December 31, 1993
and 1992 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
-------------------- --------------------
OVER- UNDER- OVER- UNDER-
FUNDED FUNDED FUNDED FUNDED
PLANS PLANS PLANS PLANS
------- -------- ------- --------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits.......................... $ 333 $142,642 $31,424 $ 89,206
Non-vested benefits...................... -- 3,205 833 317
----- -------- ------- --------
Accumulated benefit obligation............. $ 333 $145,847 $32,257 $ 89,523
----- -------- ------- --------
Projected benefit obligation............... $ 333 $148,729 $35,599 $ 89,523
Plan assets at fair value.................. 337 103,191 36,418 58,806
----- -------- ------- --------
Projected benefit obligation (in excess of)
or less than plan assets................. 4 (45,538) 819 (30,717)
Unamortized net asset at January 1, 1987... (64) (1,366) (74) (1,613)
Unamortized prior service cost............. -- (3,161) (5,195) 1,655
Adjustment required to recognize minimum
liability................................ -- (22,594) -- (11,440)
Unrecognized net loss (gain)............... 185 28,589 (266) 12,049
----- -------- ------- --------
Pension asset/(liability).................. $ 125 $(44,070) $(4,716) $(30,066)
===== ======== ======= ========
</TABLE>
The weighted average discount rates of 7.0% and 8.5% in 1993 and 1992,
respectively, and the rate of annual increase in future compensation levels of
5.5% in both 1993 and 1992, were used in determining the actuarial present
values of the projected benefit obligation. The expected long-term rates of
return on plan assets were 8.0% and 9.0% for 1993 and 1992, respectively.
F-66
<PAGE> 136
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain union employees are covered under multi-employer defined benefit
plans administered under collective bargaining agreements. Multi-employer
pension expenses and contributions to the plans in 1993, 1992 and 1991 were
approximately $300,000, $400,000 and $500,000, respectively.
The assets of certain of the company's various employee pension plan trust
funds are maintained for investment purposes in a master trust, held by The
Northern Trust Company. In 1983, the master trust purchased four operating
properties from the company for the benefit of participating pension plans, and
leased back partial use of the properties to the company. As a result of various
transactions, by 1987 only one property continued to be leased to a party in
interest with respect to the master trust under circumstances that may result in
a prohibited transaction under ERISA and the Internal Revenue Code (as no longer
meeting the "geographical diversity" test for "Qualified Employer Real Property"
governing transactions between a company and its pension plans). As a result, in
December 1988, the company filed a request with the Department of Labor for an
administrative exemption from the prohibited transaction restrictions of ERISA
and the Internal Revenue Code. In furtherance of its application for exemption
and as requested by the Department of Labor, the company appointed an
independent fiduciary for the property. The company's December 1990 bankruptcy
filing delayed the exemption request. The company has reached an agreement,
subject to Bankruptcy Court and Department of Labor approval, with the fiduciary
and the master trust whereby the company will contribute additional cash to the
pension plan. In addition, the company has reached an agreement with the Pension
Benefit Guaranty Corporation ("PBGC") whereby the company will settle the PBGC's
claim in its bankruptcy proceedings by contributing additional cash to the
pension plan and secure future obligations by granting to the PBGC a mortgage on
the Oglesby plant, and a security interest in the Kosmos Cement Company
partnership.
In 1993 and 1992, as required by Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions", the company recorded an
additional pension liability, totalling $22,594,000 and $11,440,000 at December
31, 1993 and 1992, respectively, to reflect the excess of accumulated benefits
over the fair value of pension plan assets. To the extent that these additional
liabilities exceeded related unrecognized prior service cost, the increase in
liabilities was charged directly to shareholders' equity.
NOTE 30. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company provides retiree life insurance and health plan coverage to
employees qualifying for early, normal or disability pension benefits under the
company's salaried employees pension plan and certain of the pension plans
providing for hourly-compensated employees. Life insurance protection presently
provided to retirees under the salaried employees pension plan is one-half their
active employment coverage declining to 25% of their active employment coverage
at age 70. The coverage provided under hourly plans is fixed, as provided under
the terms of the plans. Health care coverage presently is extended to retirees
and their qualified dependents during the retirees' lifetime. The coverage
provided assumes participation by the retiree in the Medicare program and
benefit payments are integrated with Medicare benefit levels. The company's
postretirement benefit plans other than pension plans are not funded. Claims are
paid as incurred.
Benefits paid were approximately $9,444,000, $9,600,000 and $10,400,000 for
the years ended December 31, 1993, 1992 and 1991. The cost of these benefits,
net of liabilities recorded related to acquisitions, was expensed as claims were
paid and approximated $8,900,000 for the year ended December 31, 1991.
As of January 1, 1992, the company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions" ("SFAS No. 106"). In accordance with the requirements of
the statement, the company has changed its accounting for postretirement
benefits from a cash basis to an accrual basis over an employee's period of
service, and has recognized the full liability as of the adoption date. The
cumulative effect of the change in accounting principle resulted in a pre-tax
charge of $144,654,000 offset by tax benefits of $14,144,000 for a net after-tax
charge of $130,510,000 or $7.84
F-67
<PAGE> 137
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
per share. The effect of adoption of SFAS No. 106 on 1992 operating results was
to decrease earnings by approximately $3,919,000 or $0.24 per share.
Net periodic postretirement benefit cost for 1993 and 1992 included the
following components (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Service cost -- benefits attributed to service during the
period......................................................... $ 1,912 $ 1,704
Interest cost on accumulated postretirement benefit obligation... 12,341 11,854
------- -------
Net periodic postretirement benefit cost......................... $14,253 $13,558
======= =======
</TABLE>
The actuarial and recorded liabilities for these postretirement benefits,
none of which have been funded, are as follows at December 31, 1993 and 1992 (in
thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees..................................................... $120,716 $109,306
Fully eligible active plan participants...................... 25,789 21,142
Other active plan participants............................... 24,777 18,125
-------- --------
Accumulated postretirement benefit obligation.................. 171,282 148,573
Unamortized prior service cost................................. 2,613 --
Unrecognized net loss.......................................... (20,513) --
-------- --------
Accrued postretirement benefit cost............................ 153,382 148,573
Less current portion........................................... 11,432 10,955
-------- --------
Long-term accrued post-retirement benefit cost................. $141,950 $137,618
======== ========
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% and 8.5% for 1993 and 1992,
respectively. Compensation levels are assumed to increase at a rate of 5.5%
annually.
For measurement purposes, a 17% and 11% annual medical rate of increase was
assumed for 1993 for pre-medicare and post-medicare claims, respectively; the
rate was assumed to decrease 1% each year to 6% per year after 2002 for
pre-medicare claims, and decrease 1/2% per year to 6% after 2000 for
post-medicare claims. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by 1 percentage point in each year would
increase the accumulated postretirement benefit obligation as of December 31,
1993 by approximately $13,200,000 and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for the year ended
December 31, 1993 by approximately $1,200,000.
In the first quarter of 1993, the Kosmos Cement Company partnership, in
which the company owns a 25% interest, adopted SFAS No. 106. As a result, the
company recognized a charge of $782,000 or $0.05 per share representing its
share of the partnership's cumulative effect of the change in accounting
principle.
Two other domestic joint ventures are not required to adopt SFAS No. 106
until 1995. The effect of adoption of SFAS No. 106 by each of the joint ventures
is not presently determinable.
The company has reached a settlement with the salaried retirees and an
agreement in principle with the union employees with respect to reductions and
modifications of existing retiree medical and life insurance benefits. The
company expects to finalize the agreement in principle prior to the plan of
reorganization becoming effective.
F-68
<PAGE> 138
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The liability related to postretirement benefits at December 31, 1993 does
not reflect the results of any of these agreements.
NOTE 31. INCOME TAXES
In 1992, the company and its Brazilian joint venture (CNCP -- See Note 10)
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS No. 109"), effective January 1, 1992. The cumulative effect
of the change in accounting principle as of January 1, 1992 was an increase in
earnings of $11,596,000. The effect of the adoption of SFAS No. 109 on financial
results for the year ended December 31, 1992 was to increase the company's share
of CNCP's income tax expense by approximately $2,660,000, and decrease domestic
income tax expense by approximately $399,000, resulting in a net decrease of
approximately $2,261,000 or $.14 per share.
In 1991, the company's international joint ventures had adopted Statement
of Financial Accounting Standards No. 96, "Accounting for Income Taxes" ("SFAS
No. 96") with retroactive application to all prior periods.
(Provision) credit for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
Federal:
Current........................................... $ (1,541) $ -- $ --
Deferred:
Difference between tax and book depreciation... (3,320) 1,700 2,244
Investment and other credits................... 635 -- --
Net operating loss carryforward................ (6,209) 3,217 6,779
Restructuring.................................. 3,132 7,820 (6,870)
Sale of international joint venture............ 26,093 6,014 --
Valuation allowance............................ (17,961) (15,422) --
Other, net..................................... (1,735) (3,329) 646
-------- -------- -------
Total deferred...................................... 635 -- 2,799
-------- -------- -------
Total federal....................................... (906) -- 2,799
-------- -------- -------
Foreign:
Current........................................... -- (374) (1,422)
Deferred tax on unremitted foreign earnings....... 12,132 (2,246) (979)
-------- -------- -------
Total foreign....................................... 12,132 (2,620) (2,401)
-------- -------- -------
State and local:
Current........................................... (621) (300) (240)
Deferred.......................................... (59) -- 82
-------- -------- -------
Total state and local............................... (680) (300) (158)
-------- -------- -------
Joint venture taxes................................. (4,195) (11,558) (1,741)
-------- -------- -------
$ 6,351 $(14,478) $(1,501)
======== ======== =======
</TABLE>
The company has investment tax credit carryforwards for federal income tax
purposes of $15,610,000 which expire at various dates through 2001. The company
also has regular tax net operating loss carryforwards of approximately
$105,122,000 which expire at various dates through 2007 and an alternative
minimum tax credit carryforward of $4,682,000. The Internal Revenue Code of
1986, as amended (the "Code"), imposes limitations under certain circumstances
on the use of carryforwards upon the occurrence of an "ownership change" (as
defined in Section 382 of the Code). An "ownership change" will result from the
issuance of equity securities by the company as part of its Plan of
Reorganization (See Note 3). Such an "ownership change" could limit the use or
continued availability of the company's carryforwards.
F-69
<PAGE> 139
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under SFAS No. 109, a portion of these carryforwards has been used for
financial purposes to offset the tax effect of temporary differences between
book carrying values and tax basis of certain assets which will reverse during
the carryforward period.
The following is a schedule of consolidated pre-tax loss and a
reconciliation of income taxes computed at the U.S. statutory rate to the
provision (credit) for income taxes (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
Loss before income taxes and cumulative effect
of changes in accounting principles................. $(41,609) $(30,950) $(4,046)
-------- -------- -------
Tax benefits computed at statutory rates.............. 14,563 10,523 1,376
(Decreases) increases resulting from:
Foreign subsidiaries, net........................... 397 79 15
Corporate joint ventures............................ 9,405 (9,358) (2,734)
Restructuring....................................... -- -- --
State tax, net...................................... (680) (300) (158)
Other............................................... 627 -- --
Valuation allowance................................. (17,961) (15,422) --
-------- -------- -------
$ 6,351 $(14,478) $(1,501)
======== ======== =======
</TABLE>
The components of net deferred tax assets (liabilities) as of December 31,
1993 and 1992 are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- ---------
<S> <C> <C>
Current tax assets related to:
Reserves.................................................... $ 3,083 $ 9,876
Miscellaneous............................................... 7,196 6,486
-------- ---------
10,279 16,362
Non-current tax assets related to:
Reserves not yet deducted................................... 47,777 37,283
Reserve for retiree benefits................................ 53,154 49,182
Loss carryforwards.......................................... 36,793 43,002
Investment credits.......................................... 15,610 15,610
Alternative minimum tax credits............................. 4,682 4,047
Miscellaneous............................................... 8,691 7,976
-------- ---------
166,707 157,100
Non-current tax liabilities related to:
Fixed assets................................................ (72,574) (69,254)
Domestic joint ventures..................................... (18,336) (10,636)
International joint ventures................................ -- (26,093)
-------- ---------
(90,910) (105,983)
Valuation allowance........................................... (85,441) (67,479)
-------- ---------
Net federal tax asset......................................... 635 --
Foreign taxes................................................. -- (12,132)
State and other............................................... (3,991) (3,480)
-------- ---------
Net deferred.................................................. $ (3,356) $ (15,612)
======== =========
</TABLE>
Income taxes paid during 1993, 1992 and 1991 were $1,038,000, $637,000 and
$2,571,000, respectively.
NOTE 32. ENVIRONMENTAL MATTERS
The company is subject to federal, state and local laws, regulations and
ordinances pertaining to the quality and the protection of the environment. Such
environmental regulations not only affect the company's operating facilities but
also apply to closed facilities and sold properties.
F-70
<PAGE> 140
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
While it is not possible to predict with accuracy the range of future costs
for the company's program of compliance with current or future environmental
regulations or their expected impact on the company, the capital, operating and
other costs of the program could be substantial.
In order to save on fuel costs, the company is blending and burning waste
fuels at two of its cement manufacturing plants and this process involves
permitting and compliance with applicable state and federal environmental
regulations. While the company believes it is in substantial compliance with
such regulations, changes in them or in their interpretation by the relevant
agencies could effectively prohibit the use of, or make prohibitive the cost of
using, waste fuels, thus depriving the company of the savings. On February 22,
1994, the United States Court of Appeals for the District of Columbia Circuit
(i) vacated and remanded a standard promulgated by the U.S. Environmental
Protection Agency ("U.S. EPA") for ascertaining the presence of products of
incomplete combustion, specifically in wet process cement kilns that burn
hazardous waste fuels, ruling that the standard had been promulgated without
sufficient notice, but (ii) upheld related non-specific standards as applicable
to wet kilns. Unless the Court's decision is reversed or a modification of the
remanded standard is adopted by U.S. EPA, the company's Greencastle, Indiana
cement plant may have to cease or curtail its use of hazardous waste fuels. The
company, with other cement producers, plans to file a motion for reconsideration
including a stay of the effect of the remand pending a final decision.
Meanwhile, the company is discussing with U.S. EPA modifications of the remanded
standard that would make it possible for plants like the Greencastle plant to
continue to burn hazardous waste fuels. The Court's ruling does not affect the
use of hazardous waste fuels at the company's Cape Girardeau, Missouri cement
plant.
Since 1991, federal and state environmental agencies have conducted
inspections and instituted inquiries and administrative actions regarding waste
fuel operations at both of the company's waste fuel burning facilities. In
September 1993, U.S. EPA, Region V, commenced an administrative enforcement
action alleging violations of certain requirements of RCRA, against the company
regarding the use of hazardous waste fuels at its Greencastle, Indiana cement
plant and seeking civil penalties totaling over $3,800,000 and certain
affirmative injunctive relief. The action against the company is one of thirty
such actions (against a number of entities) brought as part of an EPA
Headquarters Enforcement Initiative seeking aggregate fines in excess of
$19,800,000. The company has negotiated a Consent Agreement and Final Order with
the agency, subject to Bankruptcy Court approval, whereby it will pay a total of
$315,000 in civil penalties and will not be subject to specific injunctive
relief beyond complying with regulations. The company is also entering into a
consent order, subject to Bankruptcy Court approval, with state environmental
authorities relating to alleged violations of state regulations regarding the
handling of waste fuels at the Greencastle plant.
The Bevill Amendment to the federal Resource Conservation and Recovery Act,
as amended ("RCRA"), 42 U.S.C. Sec. 6901, et seq., which relates to
environmental management of cement kiln dust, a by-product of cement
manufacturing, is currently under review by the U.S. Environmental Protection
Agency ("U.S. EPA") and may be substantially altered. It is impossible at this
point to predict with accuracy what increased costs (or range of costs), if any,
changes in the regulation of CKD disposal would impose on the company.
The company and certain of its subsidiaries have been identified as parties
that may be held responsible by various federal, state and local authorities
with respect to contamination at certain sites of former operations or sites
where waste materials from the company or its subsidiaries, such as equipment
containing polychlorinated biphenyls, were deposited, including sites placed on
the National Priority List ("NPL") pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act (known as "CERCLA" or the "Superfund
Act"). These include sites located: in Utah (seven sites, including three NPL
sites discussed below); Indiana (one NPL site); Texas (three sites, including
one NPL site); Massachusetts (one non-NPL site); Missouri (one NPL site);
Washington (two NPL sites); Minnesota (two sites, including one NPL site and one
non-NPL site described below); Colorado (one NPL site); Florida (four sites,
F-71
<PAGE> 141
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
including two related NPL sites and two non-NPL sites described below);
California (one non-NPL site described below) and Mississippi (one non-NPL site
described below).
Except for the Utah NPL site described below, all of the NPL sites referred
to above involve numerous potentially responsible parties ("PRP's") and factual
investigation indicates that in each case the company's or subsidiary's
contributions of waste were small in comparison to those of other PRP's. In
addition, the company has notified relevant federal and state environmental
agencies of its Chapter 11 bankruptcy filing, providing them an opportunity to
file claims by the bar date of October 15, 1991. Except for the Utah sites, no
claims were filed by the agencies with respect to NPL sites, none of which are
owned or leased by the company or its subsidiaries. A number of PRP's also filed
bankruptcy claims with respect to various NPL sites; these claims have either
been (i) allowed in full as de minimis, (ii) resolved through negotiation and
allowed as general unsecured claims or (iii) objected to in the company's
Chapter 11 proceedings.
Following are descriptions of proceedings involving certain NPL and non-NPL
sites mentioned above:
In July 1989, the company was advised by U.S. EPA, Region VIII that it was
a PRP under CERCLA with respect to three adjoining sites in Salt Lake City, Utah
on which CKD from the company's Utah cement plant had been deposited and in July
1990, the EPA and the Utah Department of Health issued a record of decision
selecting a remedial action (Operable Unit One) calling for removal of the CKD,
over a period of time, to a location to be selected in the Salt Lake City
vicinity where an industrial type landfill would be constructed. The company has
reached agreement with the U.S. Department of Justice, the State of Utah and
certain county authorities regarding a settlement of outstanding claims relating
to CKD deposits at all Utah sites (including three non-NPL sites) pursuant to
which EPA will receive a general unsecured claim in the company's bankruptcy
proceedings in exchange for releases from further liability for investigation
and clean-up costs and natural resource damage claims and protection against
third-party claims for investigation and clean-up costs. The agreement is
subject to review by higher level authorities in the respective governmental
agencies and to approval by the Federal District Court in Utah and the
Bankruptcy Court.
In October 1989, the company commenced an action in United States District
Court in Utah seeking contribution from the two principal owners of these Utah
NPL sites, who had also been named PRP's, for their share of investigative
clean-up costs. Following pre-trial litigation, settlement agreements with the
landowners were negotiated and approved by the Bankruptcy Court, pursuant to
which the landowners will receive general unsecured claims in the company's
bankruptcy proceedings and all their claims against the company will be
dismissed with prejudice, subject to the landowners' reaching settlements with
EPA and the State, negotiation of which is in the final stages.
The total amount of general unsecured claims reserved for and attributable
to settlement and discharge in bankruptcy for these NPL sites, as well as
certain non-NPL sites in Utah where CKD was deposited, is not expected to exceed
$20,000,000.
In a transaction in the early 1970's, the company acquired subsidiaries
that conducted woodtreating or wood-dipping operations at two sites in Florida
and one site in Minnesota. Contamination from chemicals at these non-NPL sites
has been the subject of various proceedings by federal, state or local
environmental authorities, as well as lawsuits commenced by private parties.
In 1992, pursuant to an Administrative Order on Consent with U.S. EPA,
Region IV, entered into prior to its Chapter 11 filing, a clean up of soils and
water in excavated areas at the Dania, Florida site was completed by a
debtor-subsidiary of the company and approved by EPA in 1992. The subsidiary is
negotiating a stipulation with the State of Florida Department of Environmental
Protection (which filed a claim in the company's bankruptcy proceedings)
committing to undertake a groundwater monitoring program and, if necessary,
groundwater treatment in exchange for the State's withdrawing its bankruptcy
claim.
F-72
<PAGE> 142
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1992, pursuant to a stipulation in Florida state court, executed prior
to its Chapter 11 filing, a debtor-subsidiary of the company completed the
clean-up of soils under Florida environmental regulations at a site in Dade
County, Florida which it had leased for woodtreating operations in the 1960's
and 1970's. The subsidiary has been conducting negotiations with state and
county environmental authorities regarding entry into a consent decree whereby
the subsidiary would commit to undertake a groundwater monitoring program and,
if necessary, groundwater treatment, in return for withdrawal of bankruptcy
claims and a specified monetary cap on future clean-up liability.
Prior to its Chapter 11 filing, the subsidiary filed a lawsuit in federal
district court in Florida against other PRP's, including past and present owners
of the site, for cost recovery and contribution under CERCLA. Two of the PRP's
filed counterclaims and claims against the subsidiary, an intermediate
debtor-subsidiary and the company in the bankruptcy proceedings. The subsidiary
is conducting settlement negotiations with the PRP's pursuant to which they will
reimburse the subsidiary for a portion of its clean-up costs and dismiss their
federal court and bankruptcy claims with prejudice and the subsidiary will
dismiss its federal court claims against them with prejudice.
The purchaser of a former woodtreating site located in Minneapolis,
Minnesota, from a non-debtor subsidiary of the company has invoked an
indemnification given by the subsidiary and guaranteed by the company with
respect to third-party claims against the purchaser for alleged groundwater
contamination purportedly caused by woodtreating chemicals used by the
subsidiary. In late 1993, the parties entered into an agreement, approved by the
Bankruptcy Court, pursuant to which the purchaser will receive a general,
unsecured claim in the amount of $3,400,000 in the company's bankruptcy
proceedings in return for its agreement to use the proceeds of the claim to
clean up the contamination under a consent order it is to enter into with
Minnesota State environmental authorities. The parties have exchanged releases
of all claims arising out of this matter. The third party has received a cash
payment from the non-debtor subsidiary and its court claim has been dismissed
with prejudice.
In August 1992, Santa Cruz County, California environmental authorities
served written notice of a criminal and civil investigation of long-term waste
disposal practices at a site formerly owned by the company and now owned by a
partnership in which the company holds an interest. The company has entered into
a stipulation, approved by the Bankruptcy Court, whereby the environmental
authorities will receive an administrative claim in the company's bankruptcy
proceedings in exchange for release of the company from all criminal and civil
liabilities. Also, the company is committed to undertake closure of the
investigated area. The company expects the amount related to clean-up, certain
monitoring, consulting and legal expenses, and the claim allowed in its Chapter
11 proceedings related to the above sites in Florida, California and other
locations will not exceed $8,400,000.
The company's ultimate liability for remediation and other costs, at these
and other sites, in excess of amounts recorded in the accompanying consolidated
financial statements is not presently determinable.
NOTE 33. LITIGATION
As a result of the filing of Chapter 11 petitions by Lone Star and certain
of its subsidiaries, the prosecution of litigation against such entities
involving matters arising prior to the bankruptcy filing was stayed. Such stay
could be lifted by the Bankruptcy Court in appropriate circumstances.
Between 1983 and 1989 a Lone Star subsidiary (among those in bankruptcy)
manufactured and sold approximately 500,000 concrete railroad crossties to
various railroads. In 1989 and early 1990 purchasers of most of the crossties
sued Lone Star and such subsidiary, alleging that the crossties were defective
because of cracking, and seeking substantial compensatory and punitive damages.
The suits by four purchasers, which sought damages of over $200,000,000 were
consolidated for pre-trial purposes in the U.S. District Court for the District
of Maryland under the Federal Courts Multi-District Rules. In addition, an
administrative
F-73
<PAGE> 143
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
proceeding was brought by the Baltimore Mass Transit Authority ("MTA"),
involving crossties sold to the MTA, and an MTA procurement officer found Lone
Star and its subsidiary liable to the MTA for damages in an amount of
approximately $10,000,000.
Lone Star determined that it would be in the best interest of the company
to settle the proceedings brought by the railroads, and in late 1992 Lone Star
entered into separate agreements with each of them providing for the release of
their respective claims against the company and its subsidiaries relating to the
crossties, and for the railroads to receive in the aggregate allowed liquidated
unsecured claims in its bankruptcy proceedings of $57,200,000, for one railroad
to receive a cash payment of $5,000,000 and for the payment of $4,384,000 to
another railroad from an escrow fund established to hold the proceeds from the
sale of property by a Lone Star subsidiary on which that railroad had obtained
liens in the litigation. These agreements have been approved by the Bankruptcy
Court, and the $9,384,000 cash payments have been made. The claims are being
treated in accordance with the provisions of the company's plan of
reorganization for claims of this type.
In 1989 Lone Star and its subsidiary filed a plenary action in the Maryland
Federal District Court, and third party complaints in other actions, against
Northeast Cement Co. and its affiliates, Lafarge Corporation and Lafarge Canada,
Inc., alleging breach of warranties in connection with the purchase from
Northeast Cement Co. by Lone Star's subsidiary of the cement used to manufacture
substantially all of the crossties involved in the above proceedings and
claiming a fraudulent sale of defective cement. The plenary action and the third
party complaints sought compensatory damages growing out of the various crosstie
actions, including the foregoing settlements and defense costs at approximately
$15,750,000. The plenary action brought against the cement supplier was tried
before a jury in the Maryland Federal District Court in late 1992. The jury
found that Lone Star had proven its claims of fraud, breach of certain
warranties and negligence, but Lone Star's recovery was limited to $1,213,000
for direct lost profits due to limitations on the awarding of damages in the
trial judge's instructions to the jury. Lone Star believes that these
instructions were in error and filed a motion for a new trial on damages based
on the judge's refusal to permit the jury to even consider certain damages. The
cement supplier also moved for judgment as a matter of law and for a new trial.
Following a hearing on March 5, 1993 the judge denied these motions. Lone Star
consequently has appealed to the Federal Circuit Court of Appeals for the Fourth
Circuit for a new trial on the issue of damages. Lafarge has also filed an
appeal. Oral argument on the appeals was held on December 8, 1993 and a decision
by the Court of Appeals is expected in the near future.
The primary insurance carrier insuring the company has asserted that Lone
Star has only limited insurance coverage for the various crosstie claims and,
while agreeing that certain defense costs are covered by insurance, did not
agree to Lone Star's position as to the amount of defense costs covered.
Consequently, in 1989 Lone Star began an action in the Superior Court of the
State of Delaware against the insurance companies (both primary and excess
carriers) which insured it during the 1983 to 1989 period, seeking a declaratory
judgment as to their duty under the applicable policies to indemnify Lone Star
for all damages incurred by it in the various crosstie proceedings which
includes the settlements of $66,584,000 and as to the duty of the primary
insurance carrier to pay the costs of defending those proceedings. The Superior
Court has made a preliminary ruling that the primary insurance carrier has a
duty to pay certain of the costs of the company's defense in the crosstie
proceedings. Lone Star has received a portion of its defense costs from such
insurance carrier and has reached an agreement with this carrier, approved by
the Bankruptcy Court, as to additional payments. Negotiations are in progress
with the insurance carrier for further payments of defense costs and any
agreement reached must also be approved by the Bankruptcy Court. A portion of
defense costs due to Lone Star under the already approved agreement will be
offset against amounts claimed by the insurance carrier to be due it from Lone
Star but not paid because of the company's 1990 Chapter 11 filing.
Lone Star and certain of the insurance carriers have been negotiating a
settlement of the indemnity action (which would be subject to approval by the
Bankruptcy Court). Pre-trial preparation in the action has been
F-74
<PAGE> 144
LONE STAR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
stayed by agreement of the parties during these negotiations. Lone Star
anticipates continuing the indemnity action against any insurance carrier as to
which no settlement is reached.
A settlement has been reached in the consolidated shareholders' class
action lawsuits brought against the company and certain of its past and present
officers and directors. The settlement involves the actions entitled Cohn v.
Lone Star Industries, Inc., et al. filed in November 1989 on behalf of persons
who purchased Lone Star common stock between February 8, 1988 and November 16,
1989 and the action entitled Garbarino, et ano. v. Stewart, et al. filed in
December 1990 on behalf of persons who purchased Lone Star common stock between
November 16, 1989 and December 9, 1990. The settlements were adopted and
approved by an order and final judgment of a magistrate judge and the order and
judgment was in turn approved and adopted by an order of the U.S. District Court
for the District of Connecticut on January 20, 1994.
The terms of the settlement agreement, which was entered into by Mr. James
E. Stewart, the former Chairman and Chief Executive Officer of Lone Star,
includes the dismissal of the claims against Mr. Stewart and the officers and
directors of Lone Star and the agreement of Lone Star's directors and officers
liability insurers to pay $40,000,000 to establish settlement funds on behalf of
the plaintiff classes. Lone Star has been dismissed without prejudice from the
Cohn action, the only action in which it was named as a defendant by the
plaintiffs. The settlement does not constitute an admission by Lone Star, or any
of its past and present officers, directors and employees of any liability or
wrongdoing on their part. The company has agreed to, and the Bankruptcy Court
has approved, $2,500,000 of general unsecured claims in the aggregate for the
representatives of the plaintiffs in both the Cohn and Garbarino actions.
NOTE 34. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1993 and 1992 is as follows (in
thousands except per share data):
<TABLE>
<CAPTION>
QUARTER
------------------------------------------
1993 FIRST SECOND THIRD FOURTH
---- -------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net sales.................................... $ 32,477 $ 70,580 $ 72,778 $ 64,236
Gross profit (loss).......................... $ (638) $ 9,147 $ 10,994 $ 8,311
Net income (loss)............................ $(14,357) $(28,287) $ 11,480 $ (4,876)
-------- -------- -------- ---------
Net income (loss) per common share:
Primary and fully diluted.................... $ (0.94) $ (1.78) $ 0.61 $ (0.37)
-------- -------- -------- ---------
</TABLE>
<TABLE>
<CAPTION>
QUARTER
-------------------------------------------
1992 FIRST SECOND THIRD FOURTH
---- --------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net sales................................... $ 33,500 $ 64,685 $ 73,400 $ 58,513
Gross profit................................ $ (950) $ 7,534 $ 13,000 $ 3,945
Net income (loss)........................... $(129,559) $ 3,139 $(36,847) $ (1,075)
--------- -------- -------- ---------
Net income (loss) per common share:
Primary and fully diluted................... $ (7.87) $ .11 $ (2.29) $ (.14)
--------- -------- -------- ---------
</TABLE>
- ---------------
(1) Gross profit is net of depreciation expense relating to cost of sales of
$18,420,000 and $18,179,000 in 1993 and 1992, respectively.
(2) The effect of preferred stock on the fully diluted earnings per share
computation for the quarters of 1993 and 1992 was anti-dilutive and,
therefore, primary and fully diluted earnings per share are equivalent.
(3) Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share in 1993
and 1992 does not equal the total computed for the year due to stock
transactions which occurred during 1993 and 1992 (See Note 24).
(4) In the fourth quarter of 1992, the company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions", and Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" effective January 1, 1992.
The first three quarters of 1992 have been restated for the effect of
adopting both statements (See Notes 30 and 31).
F-75
<PAGE> 145
LONE STAR INDUSTRIES, INC.
PRO FORMA FINANCIAL DATA (UNAUDITED)
On April 14, 1994, the Plan of Reorganization became effective. The company
has accounted for its plan of reorganization utilizing the fresh-start reporting
principles as contained in the Statement of Position No. 90-7 "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" as of March
31, 1994. Upon adoption of fresh-start reporting, the value of the company as
determined in the confirmed plan of reorganization was allocated to the
company's net assets in conformity with the procedures specified by Accounting
Principles Board Opinion No. 16, "Business Combinations."
The following unaudited pro forma condensed financial information of the
company and its subsidiaries illustrates the estimated financial effects of the
implementation of the company's plan of reorganization (which resulted in the
end of the company's 1989 Restructuring Program) and its adoption of fresh-start
reporting. Pro forma statement of operations data for the three months ended
March 31, 1994, the six months ended June 30, 1994, and the year ended December
31, 1993 have been presented as if the company had emerged from its Chapter 11
bankruptcy proceedings and adopted fresh-start reporting as of January 1, 1994
and January 1, 1993, respectively.
F-76
<PAGE> 146
LONE STAR INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO PRO
ACTUAL FORMA FORMA
RESULTS RESULTS RESULTS
FOR THE EFFECT OF FOR THE FOR THE
THREE PLAN OF THREE SIX
MONTHS REORGANIZATION MONTHS MONTHS
ENDED AND ENDED ENDED
MARCH 31, FRESH-START MARCH 31, JUNE 30,
1994 REPORTING 1994 1994
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Net sales......................... $ 33.7 $ 11.6(a) $ 45.3 $ 132.3
Joint venture income.............. 0.4 (0.3)(a) 0.1 1.4
Other income...................... 2.7 (1.5)(a) 1.2 2.0
--------- ---------- -------- ---------
36.8 9.8 46.6 135.7
--------- ---------- -------- ---------
Deductions from revenues:
Cost of sales..................... 29.7 17.7(a)(i) 47.4 108.8
Recovery of litigation
settlement...................... (6.5) 6.5(e) -- --
Selling, general and
administrative.................. 9.9 (1.6)(a)(h) 8.3 15.8
Depreciation and depletion........ 6.7 (0.6)(a)(b) 6.1 12.1
Interest expense.................. 0.2 2.0(c) 2.2 4.4
--------- ---------- -------- ---------
40.0 24.0 64.0 141.1
--------- ---------- -------- ---------
Loss before reorganization items....... (3.2) (14.2) (17.4) (5.4)
Reorganization items:
Adjustments to fair value......... (133.9) 133.9(f) -- --
Other............................. (13.4) 13.4(f) -- --
--------- ---------- -------- ---------
Total reorganization items........ (147.3) 147.3 -- --
--------- ---------- -------- ---------
Income (loss) before income taxes and
extraordinary item................... (150.5) 133.1 (17.4) (5.4)
Credit (provision) for income taxes.... (0.2) 5.4 5.2 1.6
--------- ---------- -------- ---------
Loss before extraordinary item......... (150.7) 138.5 (12.2) (3.8)
Extraordinary item: gain on discharge
of prepetition liabilities........... 127.5 (127.5)(g) -- --
--------- ---------- -------- ---------
Loss before provision for preferred
dividends............................ $ (23.2) $ 11.0 $ (12.2) $ (3.8)
========= ========== ========= =========
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated
Statements of Operations.
F-77
<PAGE> 147
LONE STAR INDUSTRIES, INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO
ACTUAL FORMA
RESULTS RESULTS
FOR THE EFFECT OF FOR THE
YEAR PLAN OF YEAR
ENDED REORGANIZATION ENDED
DECEMBER AND DECEMBER
31, FRESH-START 31,
1993 REPORTING 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Net sales................................... $ 240.1 $ 30.4(a) $ 270.5
Joint venture income........................ 20.4 (17.0)(a) 3.4
Other income................................ 11.2 (7.4)(a) 3.8
--------- --------- ---------
271.7 6.0 277.7
--------- --------- ---------
Deductions from revenues:
Cost of sales............................... 193.9 24.9(a) 218.8
Provision for litigation settlements........ 2.5 (2.5)(e) --
Selling, general and administrative......... 41.3 (3.2)(a)(h) 38.1
Depreciation and depletion.................. 26.3 (2.7)(a)(b) 23.6
Interest expense............................ 1.6 7.8(c) 9.4
--------- --------- ---------
265.6 24.3 289.9
--------- --------- ---------
Income (loss) before reorganization items........ 6.1 (18.3) (12.2)
Reorganization items:
Loss on sale of assets...................... (37.3) 37.3(f) --
Other....................................... (10.5) 10.5(f) --
--------- --------- ---------
Total reorganization items.................. (47.8) 47.8 --
--------- --------- ---------
Loss before income taxes and cumulative effect of
change in accounting principles................ (41.7) 29.5 (12.2)
Credit (provision) for income taxes.............. 6.4 (7.5) (1.1)
--------- --------- ---------
Loss before cumulative effect of changes in
accounting principles.......................... $ (35.3) $ 22.0 $ (13.3)
========= ========= =========
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated
Statements of Operations.
F-78
<PAGE> 148
LONE STAR INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The pro forma condensed consolidated financial information includes
estimated adjustments for the following items:
(a) As a result of the implementation of the plan of reorganization and
adoption of fresh-start reporting, the company's 1989 Restructuring Program
ended effective March 31, 1994. Operating results of the cement plants at
Pryor, Oklahoma and Maryneal, Texas, which were formerly included in assets
held for sale are included in the pro froma consolidated operating results
for the three months ended March 31, 1994, the six months ended June 30,
1994 and the year ended December 31, 1993.
The operating results of the assets and liabilities which were transferred
to the liquidating corporation for distribution for the benefit of
creditors, have been eliminated from the pro forma statements of
operations.
Cost of sales has been adjusted to reflect the write-up of inventory in
accordance with fresh-start reporting.
(b) In connection with the adjustment of the property, plant and equipment
balances to reflect the values of the assets under fresh-start reporting,
the pro forma consolidated operating results have been adjusted to include
the change in depreciation expense related to the new values.
(c) Interest expense related to long-term debt, including the senior unsecured
notes of the reorganized company has been included in the pro forma
statements of operations.
(d) Due to the elimination of common and preferred shareholders' equity of the
predecessor company, and its replacement with common equity of the
successor company, the provision for preferred dividends has been
eliminated from the pro forma statements of operations.
(e) The 1993 provision for litigation settlements and 1994 recovery of
litigation settlement have been eliminated.
(f) All Chapter 11 reorganization items included in the historical statements
of operations have been eliminated from the pro forma statements.
(g) The extraordinary gain on discharge of pre-petition liabilities has been
eliminated.
(h) The pro forma statement of operations has been adjusted to reflect the
reduction in expenses resulting from settlements, including settlements
reached with the Pension Benefit Guaranty Corporation and retirees in
accordance with the requirements of fresh-start reporting.
(i) Cost of sales for the three months ended March 31, 1994 has been adjusted
to reflect the company's change in its method of accounting for inventory
for interim reporting purposes and the expensing of deferred costs in
accordance with the adoption of fresh-start reporting. In addition, cost of
sales has been adjusted to reflect costs related to its construction
aggregates barges which were deferred during the first quarter of 1994 and
subsequently written-off in accordance with fresh-start reporting. Similar
costs will be incurred and expensed in future years.
F-79
<PAGE> 149
================================================================================
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATES AS OF WHICH
SUCH INFORMATION IS GIVEN.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 8
Risk Factors.......................... 9
Use of Proceeds....................... 12
Price Range of Common Stock and
Warrants............................ 12
Dividend Policy....................... 12
Capitalization........................ 13
Selected Historical Financial Data.... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 26
Management............................ 39
Principal Stockholders................ 46
Certain Relationships and Related
Transactions........................ 47
Description of Securities............. 49
Selling Securityholders............... 65
Plan of Distribution.................. 66
Legal Matters......................... 67
Experts............................... 67
Index to Financial Statements......... F-1
</TABLE>
================================================================================
================================================================================
LONE STAR
INDUSTRIES, INC.
4,718,157 SHARES OF COMMON STOCK
891,609 COMMON STOCK PURCHASE WARRANTS
$21,140,000 PRINCIPAL AMOUNT OF
10% SENIOR NOTES DUE 2003
------------------------
PROSPECTUS
------------------------
, 1994
================================================================================
<PAGE> 150
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemized statement of all estimated
expenses in connection with the registration, offering and sale of the
Securities being registered hereby other than underwriting discounts and
commissions(1).
<TABLE>
<S> <C>
SEC registration fee............................................... $37,382
Accounting fees and expenses....................................... *
Legal fees and expenses............................................ *
Blue sky expenses and counsel fees................................. *
Cost of printing and engraving..................................... *
Transfer agent's fees.............................................. *
Miscellaneous...................................................... *
-------
Total......................................................... *
=======
</TABLE>
- ---------------
* To be completed by amendment.
(1) Pursuant to the Registration Rights Agreement, the Company will pay all of
the expenses incurred by the Selling Securityholders in connection with the
registration, offering and sale of the Securities registered hereby, other
than commission, fees and discounts paid to underwriters, agents or
dealers.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-laws and Article SEVENTH of the Company's Amended and
Restated Certificate of Incorporation provide that the Company shall, to the
fullest extent permitted by Section 145 of the General Corporation Law of the
State of Delaware, as amended from time to time, indemnify all persons whom it
may indemnify pursuant thereto. In addition, Article SIXTH of the Company's
Amended and Restated Certificate of Incorporation eliminates or limits personal
liability of its directors to the full extent permitted by Section 102(b)(7) of
the General Corporation Law of the State of Delaware, as amended from time to
time.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation to indemnify its directors and officers against expenses
(including attorney's fees), judgments, fines and amounts paid in settlements
actually and reasonably incurred by them in connection with any action, suit or
proceeding brought by third parties, if such directors or officers 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 reason to believe their conduct was unlawful. In a derivative
action, i.e., one by or in the right of the corporation, indemnification may be
made only for expenses actually and reasonably incurred by directors and
officers in connection with the defense or settlement of an action or suit, and
only with respect to a matter as to which they shall have acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interest of the corporation, except that no indemnification shall be made if
such person shall have been adjudged liable to the corporation, unless and only
to the extent that the court in which the action or suit was brought shall
determine upon application that the defendant officers or directors are
reasonably entitled to indemnity for such expenses despite such adjudication of
liability.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a corporation may eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. No such provision shall eliminate or
II-1
<PAGE> 151
limit the liability of a director for any act or omission occurring prior to the
date when such provision becomes effective.
In addition, the Company's directors and officers reimbursement and
liability insurance provides for indemnification of the directors and officers
of the Company against certain liabilities. By contracts, the Company has agreed
to indemnify directors and certain executive officers against certain
liabilities. A bank trust fund ($1,324,147 at June 30, 1994) established by the
Company in 1988 may be used to pay legal and other expenses of directors arising
out of their Company activities pursuant to claims by them under their
indemnification contracts with the Company. The rights of directors to receive
payments for indemnified claims are not limited by the amount of money in this
fund.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<S> <C>
2.1 Voluntary Petition for Relief under Chapter 11, Title 11 of the United States
Code dated December 10, 1990 (incorporated herein by reference to Exhibit 28A of
the Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1990).
2.2 Modified Amended Disclosure Statement Regarding Debtors' Modified Amended
Consolidated Plan of Reorganization and exhibits thereto (incorporated herein by
reference to the Registrant's Form T-3 filed January 14, 1994, File No.
1.022-22175; except for Exhibit J to said Modified Amendment Disclosure Statement
which is incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992, and Exhibit K to said Modified
Amended Disclosure Statement which is incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1993, filed August 12, 1993, File Number 1.001-06124).
2.3 Modification of Debtors' Plan of Reorganization (incorporated herein by reference
to Exhibit 2 of the Registrant's Current Report on Form 8-K dated March 1, 1994,
filed March 8, 1994, File Number 1.001-06124).
2.4 Order Confirming Debtors' Modified Amended and Consolidated Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code dated February 17, 1994
(incorporated herein by reference to Exhibit 28E of the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993).
3.1 Amended and Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 3(i)A of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
3.2 Certificate of Correction of Amended and Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3(i)B of the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1994).
3.3 Amended By-Laws (incorporated herein by reference to Exhibit 3(ii) of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
4.1 Indenture, dated as of March 29, 1994, between Lone Star Industries, Inc. and
Chemical Bank, as Trustee, relating to 10% Senior Notes Due 2003 of Lone Star
Industries, Inc. (incorporated herein by reference to Exhibit 4A of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
4.2 Warrant Agreement, dated April 13, 1994, between Lone Star Industries, Inc. and
Chemical Bank, as Warrant Agent (incorporated herein by reference to Exhibit 4B
of the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1994).
4.3 Financing Agreement, dated as of April 13, 1994, among Lone Star Industries,
Inc., its subsidiary, New York Trap Rock Corporation, and the CIT Group/Business
Credit, Inc. (incorporated herein by reference to Exhibit 4C of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1994).
</TABLE>
II-2
<PAGE> 152
<TABLE>
<S> <C>
5 Opinion of John S. Johnson (to be filed by amendment).
10.1 Order of the United States Bankruptcy Court for the Southern District of New
York, dated September 24, 1992, approving terms of a Separation Pay and Retention
Award Plan and authorizing payments thereunder and the Plan (incorporated herein
by reference to Exhibit 10E of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992).
10.2 Settlement Agreement and Order of the United States Bankruptcy Court for the
Southern District of New York, dated October 13, 1992 (incorporated herein by
reference to Exhibit 1 of the Registrant's Current Report on Form 8-K, dated
October 13, 1992).
10.3 Indenture, dated as of March 29, 1994, between Rosebud Holdings, Inc. and its
subsidiaries and Chemical Bank, as Trustee, relating to 10% Asset Proceeds Note
Due 1997 of Rosebud Holdings, Inc. (incorporated herein by reference to Exhibit
10A of the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1994).
10.4 Guarantee Agreement, dated as of March 29, 1994, by Lone Star Industries, Inc. in
favor of each and every holder of 10% Asset Proceeds Notes Due 1997 of Rosebud
Holdings, Inc. (incorporated herein by reference to Exhibit 10B of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
10.5 Management Services and Asset Disposition Agreement, dated as of April 13, 1994,
between Lone Star Industries, Inc. and Rosebud Holdings, Inc. and its
subsidiaries (incorporated herein by reference to Exhibit 10C of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1994).
10.6 Employment Agreement, dated July 1, 1994, between David W. Wallace and Lone Star
Industries, Inc. (incorporated herein by reference to Exhibit 10D(i) of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
10.7 Stock Option Agreement, dated as of June 8, 1994, between David W. Wallace and
Lone Star Industries, Inc. (incorporated herein by reference to Exhibit 10D(ii)
of the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1994).
10.8 Employment Agreement, dated July 1, 1994, between William M. Troutman and Lone
Star Industries, Inc. (incorporated herein by reference to Exhibit 10E(i) of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
10.9 Agreement, dated April 15, 1994, between William M. Troutman and Lone Star
Industries, Inc. (incorporated herein by reference to Exhibit 10E(ii) of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
10.10 Stock Option Agreement, dated as of June 8, 1994, between William M. Troutman and
Lone Star Industries, Inc. (incorporated herein by reference to Exhibit 10E(iii)
of the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1994).
10.11 Employment Agreement, dated July 1, 1994, between John J. Martin and Lone Star
Industries, Inc. (incorporated herein by reference to Exhibit 10F(i) of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
10.12 Stock Option Agreement, dated as of June 8, 1994, between John J. Martin and Lone
Star Industries, Inc. (incorporated herein by reference to Exhibit 10F(ii) of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
10.13 Form of Indemnification Agreement entered into between Lone Star Industries, Inc.
and directors and an executive officer (incorporated herein by reference to
Exhibit 10G of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1994).
10.14 Form of "Change of Control" agreement for executive officers of Lone Star
Industries, Inc. (incorporated herein by reference to Exhibit 10H of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
10.15 Change of Control Agreement, dated as of July 1, 1994, between Lone Star
Industries, Inc. and Pasquale P. Diccianni (filed herewith).
10.16 Form of 25,000 shares stock option agreement for executive officers of Lone Star
Industries, Inc. (incorporated herein by reference to Exhibit 10I of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
</TABLE>
II-3
<PAGE> 153
<TABLE>
<S> <C>
10.17 Form of 75,000 shares stock option agreement for executive officers of Lone Star
Industries, Inc. (incorporated herein by reference to Exhibit 10J of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1994).
10.18 Lone Star Industries, Inc. Rosebud Incentive Plan (incorporated herein by
reference to Exhibit 10K of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).
10.19 Lone Star Industries, Inc. Management Stock Option Plan (incorporated herein by
reference to Appendix A of the Registrant's Definitive Proxy Statement, dated May
11, 1994).
10.20 Lone Star Industries, Inc. Directors Stock Option Plan (incorporated herein by
reference to Appendix B of the Registrant's Definitive Proxy Statement, dated May
11, 1994).
10.21 Lone Star Industries, Inc. Employees Stock Purchase Plan (incorporated herein by
reference to Appendix C of the Registrant's Definitive Proxy Statement, dated May
11, 1994).
10.22 Registration Rights Agreement, dated as of July 18, 1994, among Lone Star
Industries, Inc., Metropolitan Life Insurance Company, Metropolitan Insurance and
Annuity Company and TCW Special Credits, as Agent and Nominee (filed herewith).
10.23 Settlement Agreement, dated as of February 4, 1994, between Lone Star Industries,
Inc., et al. and the Official Committee of Retired Employees of Lone Star
Industries, Inc., et al. (filed herewith).
10.24 Settlement Agreement, dated as of April 12, 1994, by and between Pension Benefit
Guaranty Corporation and the Lone Star Group (filed herewith).
10.25 Agreement, dated as of March 11, 1994, by and between the Debtors and the Unions
(filed herewith).
10.26 Second Amended and Restated Conveyance of Production Payment, dated as of March
29, 1994, Lone Star Industries, Inc. to John Fouhey, as Trustee for Selleck Hill
Trust (filed herewith).
10.27 Second Amended and Restated Term Loan Agreement, dated as of March 29, 1994,
among John Fouhey, as Trustee for Selleck Hill Trust, Morgan Guaranty Trust
Company of New York, TCW Special Credits, The Chase Manhattan Bank (N.A.), Wells
Fargo Bank, N.A. and Morgan Guaranty Trust Company of New York, as Agent (filed
herewith).
11 Statement re computation of per share earnings (filed herewith).
12 Statement re computation of ratio of earnings to fixed charges (filed herewith).
21 Subsidiaries of the Company (filed herewith).
23.1 Consent and Report of Price Waterhouse LLP (filed herewith).
23.2 Consent and Report of Coopers & Lybrand L.L.P. (filed herewith).
23.3 Consent of John S. Johnson (included in Exhibit 5).
24 Powers of Attorney (included on Page II-7).
27 Financial Data Schedules (filed herewith).
28 Separate Financial Statements for Kosmos Cement Company, a significant subsidiary
of Lone Star Industries, Inc., as at and for the year ended December 31, 1993
(incorporated herein by reference to Exhibit 28B of the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993).
</TABLE>
II-4
<PAGE> 154
(B) FINANCIAL STATEMENT SCHEDULES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992
AND 1991
<TABLE>
<S> <C>
I Marketable Securities
IV Indebtedness of and to Related Parties -- Not Current
V Property, Plant and Equipment
VI Accumulated Depreciation, Depletion and Amortization of Property, Plant and
Equipment
VIII Valuation and Qualifying Accounts
X Supplementary Income Statement Information
</TABLE>
The foregoing supporting schedules should be read in conjunction with the
consolidated financial statements and notes thereto included in the Prospectus.
The presentation of individual condensed financial information of the
registrant is omitted because the restricted net assets of the consolidated
subsidiaries do not exceed twenty-five percent of total consolidated net assets
at December 31, 1993.
Separate financial statements for Hawaiian Cement, a significant subsidiary
of the Company, as of and for the year ended June 30, 1994, will be filed as an
amendment to Lone Star's 1993 Form 10-K and this Form S-1 Registration Statement
when they become available.
Separate financial statements for Kosmos Cement Company, a significant
subsidiary of Lone Star as of and for the year ended December 31, 1993, have
been filed as Exhibit 28B to Lone Star's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 and are incorporated herein by reference.
Separate financial statements for the company's other fifty percent or less
owned companies or joint ventures are omitted because such subsidiaries
individually do not constitute a significant subsidiary at December 31, 1993.
Schedules other than those listed above are omitted because the information
required is not applicable or is included in the financial statements or notes
thereto. Columns omitted from schedules filed are omitted because the
information is not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Company hereby undertakes:
(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; 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:
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
II-5
<PAGE> 155
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has 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 registrant of expenses incurred
or paid by a director, officer or controlling person of the Company 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 registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
II-6
<PAGE> 156
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Stamford, and the State of Connecticut, on this 24th
day of August, 1994.
LONE STAR INDUSTRIES, INC.
By: /s/ David W. Wallace
---------------------------------
David W. Wallace
Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William E. Roberts and John S. Johnson, and each
of them, his attorney-in-fact, with full power of substitution, for him in all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact, or
either of them, or their substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
capacities on August 24, 1994.
<TABLE>
<C> <S>
/s/ David W. Wallace Chairman of the Board and Chief Executive
- ------------------------------------- Officer (Principal Executive Officer)
David W. Wallace
/s/ William M. Troutman President, Chief Operating Officer and
- ------------------------------------- Director
William M. Troutman
/s/ James E. Bacon Director
- -------------------------------------
James E. Bacon
/s/ Theodore F. Brophy Director
- -------------------------------------
Theodore F. Brophy
/s/ Arthur B. Newman Director
- -------------------------------------
Arthur B. Newman
/s/ Allen E. Puckett Director
- -------------------------------------
Allen E. Puckett
/s/ Robert G. Schwartz Director
- -------------------------------------
Robert G. Schwartz
/s/ Jack R. Wentworth Director
- -------------------------------------
Jack R. Wentworth
/s/ William E. Roberts Vice President, Chief Financial Officer,
- ------------------------------------- Controller and Treasurer (Principal
William E. Roberts Accounting and Financial Officer)
</TABLE>
II-7
<PAGE> 157
LONE STAR INDUSTRIES, INC.
SCHEDULE I -- MARKETABLE SECURITIES -- OTHER INVESTMENTS
DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARKET VALUE
OF EACH AMOUNTS
NAME OF ISSUER PRINCIPAL ISSUE AT CARRIED AT
AND TITLE OF AMOUNT OF COST OF BALANCE SHEET BALANCE SHEET
EACH ISSUE NOTES EACH ISSUE DATE DATE
-------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
MARKETABLE SECURITIES
Commercial paper........................... $224,428 $224,366 $224,366 $224,366
U.S. dollar time deposits.................. 18,854 18,854 18,854 18,854
-------- -------- -------- --------
$243,282 $243,220 $243,220 $243,220
======== ======== ======== ========
</TABLE>
S-1
<PAGE> 158
LONE STAR INDUSTRIES, INC.
SCHEDULE IV -- INDEBTEDNESS OF AND TO RELATED PARTIES -- NOT CURRENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
INDEBTEDNESS OF INDEBTEDNESS TO
------------------------------------------------ ------------------------------------------------
BALANCE AT BALANCE AT BALANCE AT BALANCE AT
BEGINNING END BEGINNING END
NAME OF ISSUER OF YEAR ADDITIONS DEDUCTIONS OF YEAR OF YEAR ADDITIONS DEDUCTIONS OF YEAR
-------------- ---------- --------- ---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993
Joint Ventures:
RMC LONESTAR(1)............ $23,500 $11,000 $ 6,667 $27,833 -- -- -- --
Other, net(2).............. 1,157 -- -- 1,157 $1,351 -- $1,351 --
------- ------- ------- ------- ------ ------ ------ ------
$24,657 $11,000 $ 6,667 $28,990 $1,351 -- $1,351 --
======= ======= ======= ======= ====== ====== ====== ======
1992
Joint Ventures:
RMC LONESTAR(1)............ $24,000 $ 9,500 $10,000 $23,500 -- -- -- --
Other, net(2).............. 2,102 168 1,113 1,157 -- $1,351 -- $1,351
------- ------- ------- ------- ------ ------ ------ ------
$26,102 $ 9,668 $11,113 $24,657 -- $1,351 -- $1,351
======= ======= ======= ======= ====== ====== ====== ======
1991
Joint Ventures:
RMC LONESTAR(1)............ $18,000 $ 6,000 -- $24,000 -- -- -- --
Other, net(2).............. 2,208 70 $ 176 2,102 -- -- -- --
------- ------- ------- ------- ------ ------ ------ ------
$20,208 $ 6,070 $ 176 $26,102 -- -- -- --
======= ======= ======= ======= ====== ====== ====== ======
</TABLE>
- ---------------
(1) The indebtedness of RMC LONESTAR represents primarily deferred rent on Santa
Cruz plant and notes payable to the company.
(2) The indebtedness of these joint ventures is primarily for working capital.
The changes from prior years' ending balances represent regular and
recurring transactions with related parties.
S-2
<PAGE> 159
LONE STAR INDUSTRIES, INC.
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE BALANCE
BEGINNING ADDITIONS OTHER(1) END OF
CLASSIFICATION OF YEAR AT COST RETIREMENTS CHANGES YEAR
-------------- --------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
1993
Land................................. $ 21,243 $ 169 -- $ 522 $ 21,934
Buildings and equipment.............. 623,058 17,015 2,148 (4,652) 633,273
Construction in progress............. 6,737 (2,624) -- 3 4,116
Automobiles and trucks............... 17,610 4,238 163 (501) 21,184
Other, principally property rights... 2,255 201 -- (133) 2,323
-------- ------- ------ ------- --------
$670,903 $18,999 $2,311 $(4,761) $682,830
======== ======= ====== ======= ========
1992
Land................................. $ 21,394 $ 211 $ 92 $ (270) $ 21,243
Buildings and equipment.............. 613,260 14,709 687 (4,224) 623,058
Construction in progress............. 4,168 2,593 -- (24) 6,737
Automobiles and trucks............... 13,443 4,609 490 48 17,610
Other, principally property rights... 1,953 -- -- 302 2,255
-------- ------- ------ ------- --------
$654,218 $22,122 $1,269 $(4,168) $670,903
======== ======= ====== ======= ========
1991
Land................................. $ 21,745 $ 10 $ 646 $ 285 $ 21,394
Buildings and equipment.............. 578,841 42,120 5,949 (1,752) 613,260
Construction in progress............. 32,517 (26,950) 269 (1,130) 4,168
Automobiles and trucks............... 10,851 2,376 975 1,191 13,443
Other, principally property rights... 2,197 56 -- (300) 1,953
-------- ------- ------ ------- --------
$646,151 $17,612 $7,839 $(1,706) $654,218
======== ======= ====== ======= ========
</TABLE>
- ---------------
(1) Other changes in 1993 consist primarily of the disposition of a small
construction aggregates operation and a cement terminal. Other changes in
1992 consist of the application of a reserve, for certain fixed assets which
are leased to a third party, to reduce their carrying value to the value of
the lease payments and a foreign exchange loss related to the translation of
the fixed asset balances of the company's Canadian subsidiary partly offset
by the reclassification of a cement terminal which was previously included
in the company's restructuring program and classified as assets held for
sale. Other changes in 1991 consisted primarily of the disposition of fixed
assets related to the sale of the capital stock of Compania Uruguaya de
Cemento Portland, partly offset by the reclassification of certain assets
from assets held for sale.
S-3
<PAGE> 160
LONE STAR INDUSTRIES, INC.
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
BEGINNING COSTS AND OTHER(1) END
CLASSIFICATION OF YEAR EXPENSES RETIREMENTS CHANGES OF YEAR
-------------- --------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
1993
Accumulated for:
Depreciation of buildings and
equipment......................... $249,847 $22,166 $1,417 $(2,277) $268,319
Depreciation of automobiles and
trucks............................ 8,209 3,864 120 (637) 11,316
-------- ------- ------ ------- --------
258,056 26,030 1,537 (2,914) 279,635
Depletion of mining properties....... 2,875 88 -- -- 2,963
Amortization of other, principally
property rights................... 1,701 136 -- 310 2,147
-------- ------- ------ ------- --------
$262,632 $26,254 $1,537 $(2,604) $284,745
======== ======= ====== ======= ========
1992
Accumulated for:
Depreciation of buildings and
equipment......................... $226,743 $24,302 $ 430 $ (768) $249,847
Depreciation of automobiles and
trucks............................ 6,968 1,610 406 37 8,209
-------- ------- ------ ------- --------
233,711 25,912 836 (731) 258,056
Depletion of mining properties....... 2,805 91 -- (21) 2,875
Amortization of other, principally
property rights................... 1,600 128 -- (27) 1,701
-------- ------- ------ ------- --------
$238,116 $26,131 $ 836 $ (779) $262,632
======== ======= ====== ======= ========
1991
Accumulated for:
Depreciation of buildings and
equipment......................... $212,982 $23,735 $3,850 $(6,124) $226,743
Depreciation of automobiles and
trucks............................ 6,327 1,793 785 (367) 6,968
-------- ------- ------ ------- --------
219,309 25,528 4,635 (6,491) 233,711
Depletion of mining properties....... 3,369 127 -- (691) 2,805
Amortization of other, principally
property rights................... 1,510 90 -- -- 1,600
-------- ------- ------ ------- --------
$224,188 $25,745 $4,635 $(7,182) $238,116
======== ======= ====== ======= ========
</TABLE>
- ---------------
(1) Other changes in 1993 consist primarily of the disposition of a small
construction aggregates operation and a cement terminal. Other changes in
1992 consist primarily of a foreign exchange loss related to the translation
of the accumulated depreciation balance for the company's Canadian
subsidiary. Other changes in 1991 consisted primarily of depreciation
related to the disposition of accumulated depreciation resulting from the
sale of the capital stock of Compania Uruguaya de Cemento Portland, partly
offset by the reclassification of accumulated depreciation related to assets
held for sale.
S-4
<PAGE> 161
LONE STAR INDUSTRIES, INC.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE ------------------------
AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS(2) DEDUCTIONS(1) OF YEAR
----------- --------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1993
Allowance for doubtful accounts
deducted from notes and
accounts receivable........... $8,033 1,605 63 788 $8,913
====== ===== === ===== ======
1992
Allowance for doubtful accounts
deducted from notes and
accounts receivable........... $7,397 1,084 397 845 $8,033
====== ===== === ===== ======
1991
Allowance for doubtful accounts
deducted from notes and
accounts receivable........... $8,720 2,719 20 4,062 $7,397
====== ===== === ===== ======
</TABLE>
- ---------------
(1) Deductions in 1993, 1992 and 1991 primarily represent uncollectable accounts
charged off.
(2) Represents reserves related to acquisitions and dispositions.
S-5
<PAGE> 162
LONE STAR INDUSTRIES, INC.
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
1. Maintenance and repairs.................................... $27,932 $28,263 $30,222
======= ======= =======
2. Taxes, other than payroll and income taxes:................
Social Security.......................................... $ 3,369 $ 3,102 $ 3,764
Other Taxes.............................................. 2,864 2,812 2,425
------- ------- -------
$ 6,233 $ 5,914 $ 6,189
======= ======= =======
</TABLE>
S-6
<PAGE> 163
INDEX TO EXHIBITS
<TABLE>
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2.1 Voluntary Petition for Relief under Chapter 11, Title 11 of the United
States Code dated December 10, 1990 (incorporated herein by reference to
Exhibit 28A of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990)....................................
2.2 Modified Amended Disclosure Statement Regarding Debtors' Modified
Amended Consolidated Plan of Reorganization and exhibits thereto
(incorporated herein by reference to the Registrant's Form T-3 filed
January 14, 1994, File No. 1.022-22175; except for Exhibit J to said
Modified Amendment Disclosure Statement which is incorporated by
reference to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, and Exhibit K to said Modified Amended
Disclosure Statement which is incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1993, filed August 12, 1993, File Number 1.001-06124)..........
2.3 Modification of Debtors' Plan of Reorganization (incorporated herein by
reference to Exhibit 2 of the Registrant's Current Report on Form 8-K
dated March 1, 1994, filed March 8, 1994, File Number 1.001-06124)......
2.4 Order Confirming Debtors' Modified Amended and Consolidated Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code dated February
17, 1994 (incorporated herein by reference to Exhibit 28E of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993)......................................................
3.1 Amended and Restated Certificate of Incorporation (incorporated herein
by reference to Exhibit 3(i)A of the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1994)...................
3.2 Certificate of Correction of Amended and Restated Certificate of
Incorporation (incorporated herein by reference to Exhibit 3(i)B of the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1994)..........................................................
3.3 Amended By-Laws (incorporated herein by reference to Exhibit 3(ii) of
the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1994)....................................................
4.1 Indenture, dated as of March 29, 1994, between Lone Star Industries,
Inc. and Chemical Bank, as Trustee, relating to 10% Senior Notes Due
2003 of Lone Star Industries, Inc. (incorporated herein by reference to
Exhibit 4A of the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1994).....................................
4.2 Warrant Agreement, dated April 13, 1994, between Lone Star Industries,
Inc. and Chemical Bank, as Warrant Agent (incorporated herein by
reference to Exhibit 4B of the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1994)........................
4.3 Financing Agreement, dated as of April 13, 1994, among Lone Star
Industries, Inc., its subsidiary, New York Trap Rock Corporation, and
the CIT Group/Business Credit, Inc. (incorporated herein by reference to
Exhibit 4C of the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1994).....................................
5 Opinion of John S. Johnson (to be filed by amendment)...................
10.1 Order of the United States Bankruptcy Court for the Southern District of
New York, dated September 24, 1992, approving terms of a Separation Pay
and Retention Award Plan and authorizing payments thereunder and the
Plan (incorporated herein by reference to Exhibit 10E of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992)......................................................
</TABLE>
<PAGE> 164
<TABLE>
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EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
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10.2 Settlement Agreement and Order of the United States Bankruptcy Court for
the Southern District of New York, dated October 13, 1992 (incorporated
herein by reference to Exhibit 1 of the Registrant's Current Report on
Form 8-K, dated October 13, 1992).......................................
10.3 Indenture, dated as of March 29, 1994, between Rosebud Holdings, Inc.
and its subsidiaries and Chemical Bank, as Trustee, relating to 10%
Asset Proceeds Note Due 1997 of Rosebud Holdings, Inc. (incorporated
herein by reference to Exhibit 10A of the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 1994)................
10.4 Guarantee Agreement, dated as of March 29, 1994, by Lone Star
Industries, Inc. in favor of each and every holder of 10% Asset Proceeds
Notes Due 1997 of Rosebud Holdings, Inc. (incorporated herein by
reference to Exhibit 10B of the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1994)........................
10.5 Management Services and Asset Disposition Agreement, dated as of April
13, 1994, between Lone Star Industries, Inc. and Rosebud Holdings, Inc.
and its subsidiaries (incorporated herein by reference to Exhibit 10C of
the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1994)....................................................
10.6 Employment Agreement, dated July 1, 1994, between David W. Wallace and
Lone Star Industries, Inc. (incorporated herein by reference to Exhibit
10D(i) of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1994)............................................
10.7 Stock Option Agreement, dated as of June 8, 1994, between David W.
Wallace and Lone Star Industries, Inc. (incorporated herein by reference
to Exhibit 10D(ii) of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).................................
10.8 Employment Agreement, dated July 1, 1994, between William M. Troutman
and Lone Star Industries, Inc. (incorporated herein by reference to
Exhibit 10E(i) of the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1994).....................................
10.9 Agreement, dated April 15, 1994, between William M. Troutman and Lone
Star Industries, Inc. (incorporated herein by reference to Exhibit
10E(ii) of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1994)............................................
10.10 Stock Option Agreement, dated as of June 8, 1994, between William M.
Troutman and Lone Star Industries, Inc. (incorporated herein by
reference to Exhibit 10E(iii) of the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1994)...................
10.11 Employment Agreement, dated July 1, 1994, between John J. Martin and
Lone Star Industries, Inc. (incorporated herein by reference to Exhibit
10F(i) of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1994)............................................
10.12 Stock Option Agreement, dated as of June 8, 1994, between John J. Martin
and Lone Star Industries, Inc. (incorporated herein by reference to
Exhibit 10F(ii) of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994).................................
10.13 Form of Indemnification Agreement entered into between Lone Star
Industries, Inc. and directors and an executive officer (incorporated
herein by reference to Exhibit 10G of the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 1994)................
</TABLE>
<PAGE> 165
<TABLE>
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NO. DESCRIPTION PAGES
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10.14 Form of "Change of Control" agreement for executive officers of Lone
Star Industries, Inc. (incorporated herein by reference to Exhibit 10H
of the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1994)....................................................
10.15 Change of Control Agreement, dated as of July 1, 1994, between Lone Star
Industries, Inc. and Pasquale P. Diccianni (filed herewith).............
10.16 Form of 25,000 shares stock option agreement for executive officers of
Lone Star Industries, Inc. (incorporated herein by reference to Exhibit
10I of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1994)............................................
10.17 Form of 75,000 shares stock option agreement for executive officers of
Lone Star Industries, Inc. (incorporated herein by reference to Exhibit
10J of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1994)............................................
10.18 Lone Star Industries, Inc. Rosebud Incentive Plan (incorporated herein
by reference to Exhibit 10K of the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1994)........................
10.19 Lone Star Industries, Inc. Management Stock Option Plan (incorporated
herein by reference to Appendix A of the Registrant's Definitive Proxy
Statement, dated May 11, 1994)..........................................
10.20 Lone Star Industries, Inc. Directors Stock Option Plan (incorporated
herein by reference to Appendix B of the Registrant's Definitive Proxy
Statement, dated May 11, 1994)..........................................
10.21 Lone Star Industries, Inc. Employees Stock Purchase Plan (incorporated
herein by reference to Appendix C of the Registrant's Definitive Proxy
Statement, dated May 11, 1994)..........................................
10.22 Registration Rights Agreement, dated as of July 18, 1994, among Lone
Star Industries, Inc., Metropolitan Life Insurance Company, Metropolitan
Insurance and Annuity Company and TCW Special Credits, as Agent and
Nominee (filed herewith)................................................
10.23 Settlement Agreement, dated as of February 4, 1994, between Lone Star
Industries, Inc., et al. and the Official Committee of Retired Employees
of Lone Star Industries, Inc., et al. (filed herewith)..................
10.24 Settlement Agreement, dated as of April 12, 1994, by and between Pension
Benefit Guaranty Corporation and the Lone Star Group (filed
herewith)...............................................................
10.25 Agreement, dated as of March 11, 1994, by and between the Debtors and
the Unions (filed herewith).............................................
10.26 Second Amended and Restated Conveyance of Production Payment, dated as
of March 29, 1994, Lone Star Industries, Inc. to John Fouhey, as Trustee
for Selleck Hill Trust (filed herewith).................................
10.27 Second Amended and Restated Term Loan Agreement, dated as of March 29,
1994, among John Fouhey, as Trustee for Selleck Hill Trust, Morgan
Guaranty Trust Company of New York, TCW Special Credits, The Chase
Manhattan Bank (N.A.), Wells Fargo Bank, N.A. and Morgan Guaranty Trust
Company of New York, as Agent (filed herewith)..........................
11 Statement re computation of per share earnings (filed herewith).........
12 Statement re computation of ratio of earnings to fixed charges (filed
herewith)...............................................................
21 Subsidiaries of the Company (filed herewith)............................
23.1 Consent and Report of Price Waterhouse LLP (filed herewith).............
23.2 Consent and Report of Coopers & Lybrand L.L.P. (filed herewith).........
23.3 Consent of John S. Johnson (included in Exhibit 5)......................
24 Powers of Attorney (included on Page II-7)..............................
</TABLE>
<PAGE> 166
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27 Financial Data Schedules (filed herewith)...............................
28 Separate Financial Statements for Kosmos Cement Company, a significant
subsidiary of Lone Star Industries, Inc., as at and for the year ended
December 31, 1993 (incorporated herein by reference to Exhibit 28B of
the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993)......................................................
</TABLE>
<PAGE> 1
EXHIBIT 10.15
-------------
Dated as of July 1, 1994
Pasquale P. Diccianni
24 Mohawk Road
Ramsey, NJ 07446
Dear Mr. Diccianni:
This letter will evidence the agreement of Lone Star Industries, Inc.
(the "Company") with you on the terms specified herein.
1. If, at any time prior to or at the consummation (during the
effectiveness of this Agreement) of a Sale of Trap Rock, as defined below, you
are not, upon your written request given at least 30 days prior to the
consummation of the Sale of Trap Rock, addressed to the Company and the company
(the "Surviving Entity") which thereafter owns the capital stock or assets of
New York Trap Rock Corporation, a Delaware corporation ("Trap Rock"), offered
employment in writing by the Surviving Entity which is Substantially
Comparable, as defined below, to your employment with the Company prior to such
Sale of Trap Rock, or if such Substantially Comparable employment does not
continue to be tendered to you by the Surviving Entity thereafter for a
<PAGE> 2
period of at least one year following the consummation of such Sale of Trap
Rock (whether because of a termination of your employment by the Surviving
Entity, for a cause or otherwise, or because of a change in the terms of such
employment so that it is no longer Substantially Comparable), then you may by
written notice to the Company (and to the Surviving Entity if such notice is
given following consummation of the Sale of Trap Rock) terminate your
employment with the Company and decline employment (or decline further
employment) with the Surviving Company and its affiliates and thereafter you
shall be entitled to severance from the Company in an amount equal to your base
salary immediately prior to the Sale of Trap Rock, for a period of one year
(reduced by any period of your continued employment by the Surviving Entity).
Such severance shall be paid in substantially equal installments on the
Company's regularly established pay periods during the one year period (or the
balance of such one year period following any continued employment by you by
the Surviving Entity) following consummation of the Sale of Trap Rock. In
addition, you shall continue to receive medical insurance and other benefits
from the Company during such period (the "Benefit Period") as you remain
unemployed, but in no event shall the Benefit Period be longer than the period
ending one year from the date of consummation of the Sale of Trap Rock.
Benefits pursuant to the immediately preceding sentence shall be substantially
comparable to those you received from the Company prior to the Sale of Trap
Rock. In furtherance and not in limitation of the second preceding sentence,
you shall be deemed
2
<PAGE> 3
to have continued your employment with the Company at your salary effective
prior to the Sale of Trap Rock during the Benefit Period for purposes of
vesting, eligibility and benefit accrual under any applicable employee benefit
plan. Severance pay pursuant to this Agreement shall be in lieu of severance
pay pursuant to any other Lone Star severance policy.
2. For purposes of this Agreement (i) a "Sale of Trap Rock" shall
be deemed to have occurred upon the sale of all or substantially all of the
capital stock or assets of Trap Rock (including any sale by way of merger or
consolidation), but excluding any sale to or merger or consolidation with a
wholly-owned subsidiary of the Company; and (ii) "Substantially Comparable"
employment shall mean employment which (a) has an annual salary equivalent or
superior to your annual salary in effect prior to the Sale of Trap Rock; and
(b) is at a location within the same State as your State of employment prior to
the Sale of Trap Rock and no more than 25 miles from your then current
employment location.
3. This Agreement shall not confer upon you any right to
continuance of employment with the Company or Trap Rock, or with any successor
thereof (including the Surviving Entity), or in any way interfere with the
right of the Company, Trap Rock or such successor to terminate such employment.
4. This Agreement constitutes the entire agreement between the
parties and may not be changed or modified except by
3
<PAGE> 4
an agreement in writing signed by you and the Company. The effectiveness of
this Agreement shall commence as of July 1, 1994 and shall terminate on July 1,
1996.
5. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
6. This Agreement shall inure to the benefit of, and be binding
upon, any successor in interest or assign of the Company. This Agreement may
not be assigned by you without the prior written consent of the Company.
7. a. Any dispute relating to this Agreement arising
between you and the Company (or any successor or assign) shall be settled by
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA"). The arbitration proceedings, including the
rendering of an award, shall take place in Stamford, Connecticut (or such other
location mutually agreed upon by the Company and you), and shall be
administered by the AAA.
b. The arbitral tribunal shall be appointed within 30
days of the notice of dispute, and shall consist of three arbitrators, one of
which shall be appointed by the Company, one by you, and the third by both you
and the Company jointly; provided, however, that, if you and the Company do not
select the third arbitrator within such 30-day period, such third arbitrator
shall be chosen by the AAA as soon as practicable
4
<PAGE> 5
following notice to the AAA by the parties of their inability to choose such
third arbitrator.
c. Decisions of such arbitral tribunal shall be in
accordance with the laws of the State of Connecticut (excluding the conflicts
of law rules which require the application of any other law). The award of any
such arbitral tribunal shall be final (except as otherwise provided by the laws
of the State of Connecticut and the Federal laws of the United States, to the
extent applicable). Judgment upon such award may be entered by the prevailing
party in any state or Federal court sitting in Connecticut or any other court
having jurisdiction thereof, or application may be made by such party to any
such court for judicial acceptance of such award and an order of enforcement.
d. The Company shall reimburse you for all costs,
including reasonable attorney's fees, in connection with any proceeding
(whether or not in arbitration) to obtain or enforce any right or benefit under
this Agreement in which you are the prevailing party.
5
<PAGE> 6
8. All notices, communications, etc., shall be sent to:
(a) Corporate Secretary
Lone Star Industries, Inc.
300 First Stamford Place
Stamford, CT 06912
(b) Pasquale P. Diccianni
24 Mohawk Road
Ramsey, NJ 07446
Very truly yours,
LONE STAR INDUSTRIES, INC.
By /s/ David W. Wallace
------------------------------
Read and Agreed to:
/s/ Pasquale P. Diccianni
- ----------------------------------------
Pasquale P. Diccianni
6
<PAGE> 1
EXHIBIT 10.22
-------------
REGISTRATION RIGHTS AGREEMENT
among
LONE STAR INDUSTRIES, INC.,
METROPOLITAN LIFE INSURANCE COMPANY
METROPOLITAN INSURANCE AND ANNUITY COMPANY
AND
TCW SPECIAL CREDITS, AS AGENT AND NOMINEE
OF THE ENTITIES SET FORTH IN SCHEDULE I HERETO
Dated as of July 18, 1994
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT, dated as of July 18, 1994,
among LONE STAR INDUSTRIES, INC., a Delaware corporation (the "Company"),
METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation ("MetLife"),
METROPOLITAN INSURANCE AND ANNUITY COMPANY, a Delaware corporation ("MIAC"),
TCW Special Credits, as agent and nominee of the entities set forth on Schedule
I attached hereto ("TCW"), and any of MetLife's, MIAC's or TCW's successors,
assigns and transferees (MetLife, MIAC, TCW and their successors, assigns and
transferees are individually referred to as an "Investor" and collectively
referred to as the "Investors").
1. Background. The Company has issued to MetLife, MIAC and TCW in
connection with consummation of the Company's plan of reorganization (the
"Plan") 10% Senior Notes Due 2003 ("Senior Notes"), shares of the Company's
common stock, par value $1.00 per share (the "Common Stock"), and warrants to
purchase Common Stock ("Warrants"). Upon exercise of Warrants the Company will
issue shares of Common Stock (the "Warrant Common Stock") to the entity
exercising Warrants (all such Senior Notes, Common Stock, Warrants and Warrant
Common Stock held by MetLife, MIAC and TCW or any other Investor being
hereinafter referred to as the "Registrable Securities").
2. Registration Under Securities Act, etc.
2.1. Shelf-Registration Statement with respect to Registrable
Securities.
(a) Subject to the terms and conditions hereof, the Company
hereby covenants and agrees (i) to file a registration statement relating to
the Registrable Securities (the "Registration Statement") offering the
Registrable Securities on a delayed or continuous basis pursuant to Rule 415
under the Securities Act as soon as practicable after the date hereof, and in
any event within 45 days of the date hereof unless necessitated by some
material unforeseeable event, (ii) to use its best efforts to cause the
Registration Statement to become effective as promptly as practicable and (iii)
as to each Investor, to cause the Registration Statement to remain continuously
effective in order to permit the prospectus included therein to be usable by
such Investor until such time as in the opinion of counsel to such Investor or
the Company (so long as (i) such opinion is addressed and delivered to the
Investor and (ii) such opinion and the Company's Counsel are satisfactory to
the Investor), such Investor is not required to deliver a prospectus in
connection with the sale of Registrable Securities.
<PAGE> 3
(b) Registration Statement Form. The Registration Statement
shall be on Form S-1 under the Securities Act or such appropriate registration
form of the Commission as shall be selected by the Company upon filing of the
Registration Statement or at any time thereafter.
(c) Expenses. The Company will pay the Registration Expenses
in connection with the Registration Statement.
2.2. Registration Procedures.
(a) In connection with the Registration Statement, the Company
covenants and agrees with each Investor that it will:
(i) prepare and file with the Commission such
amendments and supplements to the Registration Statement and the
prospectus used in connection therewith as may be necessary to keep
such Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of
all Registrable Securities covered by the Registration Statement for
the period during which the Registration Statement is required to
remain effective hereunder;
(ii) furnish to each Investor and each underwriter
of the securities being sold by each Investor, such number of
conformed copies of the Registration Statement and of each such
amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in the
Registration Statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424
under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, as such Investor or
underwriter may reasonably request;
(iii) use its best efforts (x) to register or
qualify all Registrable Securities covered by the Registration
Statement under such other securities or blue sky laws of such states
of the United States of America where an exemption is not available
and as the Investor or each underwriter of the securities being sold
by each Investor shall reasonably request, provided, however, that the
Company will not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process or to
taxation in any such
2
<PAGE> 4
jurisdiction where it is not then so subject, (y) to keep such
registration or qualification in effect for so long as the
Registration Statement remains in effect, and (z) to take any other
action which may be reasonably necessary or advisable to enable such
Investor or underwriter to consummate the disposition in such
jurisdictions of the securities to be sold by such Investor or
underwriter;
(iv) use its best efforts to cause all Registrable
Securities covered by the Registration Statement to be registered with
or approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the
Company and counsel to the Investor or underwriter to consummate the
disposition of such Registrable Securities;
(v) furnish to each Investor and underwriter a
signed counterpart of
(x) an opinion of counsel for the Company,
and
(y) a "comfort" letter signed by the
independent public accountants who have certified the
Company's financial statements included or incorporated by
reference in the Registration Statement
covering substantially the same matters with respect to the
Registration Statement (and the prospectus included therein) and, in
the case of the accountant's comfort letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountant's comfort letters delivered to the underwriters in
underwritten public offerings of securities (and dated the dates such
opinions and comfort letters are customarily dated in connection with
sales of securities pursuant to Rule 415) and, in the case of the
accountant's comfort letter, such other financial matters, and in the
case of the legal opinion, such other legal matters, as the Investor
or underwriter may reasonably request;
(vi) notify each Investor and underwriter at any
time when a prospectus relating thereto is required to be delivered
under the Securities Act, upon discovery that, or upon the happening
of any event as a result of which, in the judgment of the Company, the
prospectus included in the Registration Statement, as then in effect,
includes an
3
<PAGE> 5
untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, in the light of the circumstances under which
they were made, and promptly prepare and furnish to each Investor and
underwriter a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, in the
judgment of the Company and in the opinion of counsel to the Company,
as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made, and, in accordance
with Section 2.2(b) hereof, upon receipt of such notice no Investor
shall sell any Registrable Security until such an amendment or
supplement has been filed with the Commission; provided that the
Company shall not be required to amend the Registration Statement or
supplement the prospectus in the event that and for so long as (i) an
event occurs and is continuing as a result of which the Registration
Statement or the prospectus would, in the Company's good faith
judgment, contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made,
and (ii) the Company determines, in its good faith judgment, that the
disclosure of such an event at such time would materially adversely
affect the interests of the Company or its equityholders; provided,
however, that in no event shall the Company fail to amend the
Registration Statement or supplement the prospectus for more than 90
consecutive days during any 18-month period or such longer period as
the Investors may agree in accordance with Section 5 hereof;
(vii) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, promptly
furnish to each Investor and each underwriter a copy of any amendment
or supplement to the Registration Statement or prospectus and make
available to its security holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months,
but not more than eighteen months, beginning with the first day of the
Company's first fiscal quarter after the effective date of the
Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 of the
rules and regulations promulgated thereunder;
4
<PAGE> 6
(viii) provide and cause to be maintained a transfer
agent and registrar (which, in each case, may be the Company) for all
Registrable Securities covered by the Registration Statement from and
after a date not later than the effective date of such registration;
(ix) use its best efforts to list all Registrable
Securities covered by the Registration Statement on any national
securities exchange on which Registrable Securities of the same class
and, if applicable, series, covered by the Registration Statement are
then listed; and
(x) enter into such agreements (including an
underwriting agreement in customary form) and take such other actions
as sellers of such Registrable Securities shall reasonably request in
order to expedite or facilitate the disposition of such Registrable
Securities.
The Company may require each Investor and each underwriter to
furnish the Company such information regarding such seller and the distribution
of such securities as the Company may from time to time reasonably request in
writing.
(b) Each Investor agrees that upon receipt of any notice from
the Company of the happening of any event of the kind described in subdivision
(a)(vi) of this Section 2.2, such Investor will forthwith discontinue such
Investor's disposition of Registrable Securities pursuant to the Registration
Statement until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by subdivision (a) (vi) of this Section 2.2
and, if so directed by the Company, will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
Investor's possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
(c) If the Registration Statement refers to any Investor by
name or otherwise as the holder of any securities of the Company, then (whether
or not in the sole and exclusive judgment of such Investor, exercised in good
faith, such Investor is or might be deemed to be a controlling person of the
Company), such Investor shall have the right to require (i) the insertion
therein of language, in form and substance satisfactory to such Investor, to
the effect that the holding by such Investor of such securities is not to be
construed as a recommendation by such Investor of the investment quality of the
Company's securities covered thereby and that such holding does not imply that
such Investor will assist in meeting any future financial requirements
5
<PAGE> 7
of the Company, or (ii) in the event that such reference to such Investor by
name or otherwise is not required by the Securities Act or any similar federal
statute then in force, the deletion of the reference to such Investor.
(d) Restriction on Public Sale by Holder of Registrable
Securities. To the extent not inconsistent with applicable law, each holder of
Registrable Securities whose Registrable Securities are covered by a
Registration Statement agrees, if requested by the managing underwriter or
underwriters in any underwritten offering of securities of the Company, whether
or not the holder participates in that offering pursuant to Section 2.4, not to
effect any public sale or distribution of any of the Company's securities,
including a sale pursuant to the Registration Statement filed pursuant to
section 2.1 or pursuant to Rule 144 under the Securities Act except as part of
such underwritten registration) during the 10-day period prior to, and during
the 90-day period beginning on, the closing date of each underwritten offering
without the prior written consent of the managing underwriter; provided,
however, that no holder of Registrable Securities shall be obligated to comply
with any such request more than once in any consecutive two year period
beginning on the date hereof.
2.3. Preparation; Reasonable Investigation. In connection
with the preparation and filing of the Registration Statement under the
Securities Act pursuant to this Agreement, the Company will give the Investors,
any underwriters and their respective counsel and accountants or other agent
retained by any Investor or underwriter the opportunity to participate in the
preparation of the Registration Statement, each prospectus included therein or
filed with the Commission, and, to the extent practicable, each amendment
thereof or supplement thereto, and give each of them such access to all
pertinent financial and other records, pertinent corporate documents and
properties of the Company and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of
such Investors' or underwriters' counsel, to conduct a reasonable investigation
within the meaning of the Securities Act. In addition, the Company shall cause
appropriate officers, directors and employees from the Company to participate
in any security analysts meetings and "roadshows" as may be reasonably
requested by any such underwriter.
2.4. Incidental Registration.
6
<PAGE> 8
(a) If the Company at any time proposes to register any of
its securities under the Securities Act for sale for cash by the Company on any
form other than Form S-4 or S-8 (or any similar form then in effect), the
Company will give prompt written notice each such time to all Investors of its
intention to do so. Upon the written request of any such Investor made within
30 days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Investor and the
intended method of disposition thereof), the Company will permit such Investors
to participate in such distribution.
(b) If the Company's managing underwriter shall advise the
Company and the Investors electing to participate in such distribution as
provided in Section 2.4(a) in writing that the inclusion in any such
distribution of some or all of the Registrable Securities sought to be included
by the Investors requesting such participation creates a substantial risk that
the proceeds or price per unit the Company or such Investors will derive from
such distribution will be reduced or that the number of securities to be
distributed (including those sought to be registered at the instance of the
Company and any other party entitled to participate in such distribution as
well as those sought to be included in the distribution by the Investors) is
too large a number to be reasonably sold, the Company will include in such
distribution, to the extent of the number which the Company is so advised can
be sold in such offering, (i) first, the number of securities sought to be
included by the Company, (ii) second, the number of Registrable Securities
requested to be included in such registration by the Investors pro rata among
the Investors in proportion to the number of Registrable Securities sought to
be registered by each Investor and (iii) third, the number of securities sought
to be included in such registration by each other seller of securities pro rata
among such sellers in proportion to the number of securities sought to be
registered by all such sellers.
2.5. Indemnification.
(a) Indemnification by the Company. The Company hereby
agrees to indemnify and hold harmless, in the case of the Registration
Statement, each Investor, its directors, officers, partners, agents and
affiliates and each other Person, if any, who controls such Investor within the
meaning of the Securities Act (each, an "Investor Indemnified Person"), against
all losses, claims, damages, liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) or expenses (under the Securities
Act or common law or otherwise), joint or several,
7
<PAGE> 9
arising out of or based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, 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 in light of the circumstances in which they were made not
misleading, and the Company will reimburse such Investor and each such
director, officer, partner, agent or affiliate and controlling Person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument executed by or on behalf of such Investor specifically stating that
it is for use in the preparation thereof; and provided, further, that such
indemnity with respect to any untrue statement contained in or omission from a
preliminary prospectus shall not inure to the benefit of any Investor
Indemnified Person from whom the person asserting any such loss, claim, damage
or liability purchases the Registrable Securities that are the subject thereof
if such Investor Indemnified Person was obligated by law to deliver a final
prospectus to such person and the Company shall sustain the burden of proving
such person was not sent or given a copy of the final prospectus (or the final
prospectus as supplemented) at or prior to the written confirmation of the sale
of such Registrable Securities to such person and the untrue statement
contained in or omission from such preliminary prospectus was corrected in the
final prospectus (or the final prospectus as supplemented) and such delivery
would have eliminated any liability of such Investor Indemnified Person to such
person. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Investor or any such director,
officer, partner, agent or affiliate or controlling Person and shall survive
the transfer of such securities by such Investor.
(b) Indemnification by the Investor. In connection with the
Registration Statement, each Investor, severally and not jointly, hereby agrees
to indemnify and hold harmless (in the
8
<PAGE> 10
same manner and to the same extent as set forth in subdivision (a) of this
Section 2.5) the Company, each director of the Company, each officer of the
Company and each other Person, if any, who controls the Company within the
meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from the Registration Statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such Investor specifically stating that it is for
use in the preparation of the Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement; provided,
however, that the liability of such indemnifying party under this Section
2.4(b) shall be limited to the amount of proceeds received by such indemnifying
party in the offering giving rise to such liability. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such Investor.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section
2.5, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 2.5, except to the extent that the indemnifying party is prejudiced in
any material respect by such failure to give notice. In case any such action
is brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties is reasonably likely to exist in respect of such claim,
the indemnifying party shall be entitled to participate in and, jointly with
any other indemnifying party similarly notified to the extent that it may wish,
to assume the defense thereof, with counsel satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof
other than reasonable costs of investigation
9
<PAGE> 11
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties arises in respect of such
claim after the assumption of the defense thereof and the indemnified party
notifies the indemnifying party of such indemnified party's judgment and the
basis therefor. No indemnifying party shall be liable for any settlement of
any action or proceeding effected without its written consent, which consent
shall not be unreasonably withheld. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation.
(d) Contribution. If the indemnification provided for in
this Section 2.5 shall for any reason be held by a court to be unavailable to
an indemnified party under subparagraph (a) or (b) hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof, then, in
lieu of the amount paid or payable under subparagraph (a) or (b) hereof, the
indemnified party and the indemnifying party under subparagraph (a) or (b)
hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the Company and the prospective
sellers of Registrable Securities covered by the Registration Statement which
resulted in such loss, claims, damage or liability, or action in respect
thereof, with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
shall be appropriate to reflect the relative benefits received by the Company
and such prospective sellers from the offering of the securities covered by the
Registration Statement. 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. Such prospective sellers' obligations to contribute as
provided in this subparagraph (d) are several in proportion to the relative
value of their respective Registrable Securities covered by the Registration
Statement and not joint. In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any action or
claim effected without such Person's consent, which consent shall not be
unreasonably withheld.
10
<PAGE> 12
(e) Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subdivisions of this Section 2.5
(with appropriate modifications) shall be given by the Company and each
Investor with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 2.5 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
2.6. Investor Information.
(a) As soon as practicable after receipt of a written
request by the Company, each Investor shall provide to the Company such
information as it may reasonably require for the Registration Statement or any
amendment or supplement thereto.
3. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of any
such similar Federal statute.
"Investor" has the meaning set forth in the first paragraph of
this Agreement.
"Person" means a corporation, an association, a partnership,
an organization, a business, an individual, a governmental or political
subdivision thereof or a governmental agency.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all registration, filing and NASD
11
<PAGE> 13
fees, all listing fees, any allocation of Company personnel or other general
overhead expenses of the Company or other expenses for the preparation of
financial statements or other data, all fees and expenses of complying with
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of
counsel for the Company and of its independent public accountants, including
the expenses of "cold comfort" letters required by or incident to such
performance and compliance and other persons retained by the Company and
reasonable fees and disbursements of one counsel or firm of counsel chosen by
sellers of at least a majority in number of the shares of Common Stock and
Warrants and majority in principal amount of the Senior Notes constituting
Registrable Securities covered by the Registration Statement to represent all
sellers of Registrable Securities to be registered and any fees and
disbursements of underwriters customarily paid by issuers of securities
(excluding underwriting discounts and commissions); provided, however, that any
such counsel or firm of counsel must be acceptable to both MetLife and TCW for
so long as MetLife and TCW together own at least 20% of the outstanding shares
of Common Stock, 20% of the outstanding Warrants, or Senior Notes representing
at least 20% of the outstanding principal amount of the Senior Notes.
"Registrable Securities" has the meaning set forth in Section
1 hereof. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (a) the Registration Statement shall
have become effective under the Securities Act and such securities shall have
been disposed of in accordance with the Registration Statement, (b) they shall
have been sold as permitted by, and in compliance with, Rule 144 (or successor
provision) promulgated under the Securities Act, (c) they shall have been
otherwise transferred, and subsequent public distribution of them shall not
require registration of them under the Securities Act, (d) they shall have
ceased to be outstanding, or (e) the Investor(s) shall have received an opinion
satisfactory to it (or them) from counsel satisfactory to it (or them) to the
effect that subsequent public distribution of such securities shall not require
registration of them under the Securities Act.
"Registration Statement" has the meaning set forth in Section
2.1(a) hereof.
12
<PAGE> 14
"Securities Act" means the Securities Act of 1933, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such similar federal statute.
4. Rule 144. The Company shall timely file the reports required
to be filed by it under the Securities Act if registration under the Securities
Act is required and shall timely file the reports required to be filed by it
under the Exchange Act (including but not limited to the reports under Section
13 and Section 15(d) of Exchange Act referred to in subparagraph (c)(1) of Rule
144 adopted by the Commission under the Securities Act) and the rules and
regulations adopted by the Commission thereunder and shall take all actions to
enable the Investors to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such rule may be amended from time to time, or
(b) any similar Rule or regulation hereafter adopted by the Commission
including, without limiting the generality of the foregoing, filing on a timely
basis all reports required to be filed by the Exchange Act. Upon the request
of any Investor, the Company will deliver to such holder a written statement as
to whether it has complied with such requirements.
5. Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given unless the Company has obtained the
consent of all of the Investors.
6. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as Investor for purposes of any request or other action by
any Investor pursuant to this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
7. Notices. All communications provided for hereunder shall be
sent by courier or other overnight delivery service, shall be effective upon
receipt, and shall be addressed as follows:
13
<PAGE> 15
(a) if to the Investors, addressed to each of them at the
following addresses:
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
Attention: Treasurer
with copies to:
Metropolitan Life Insurance
Company Capital Markets Group
200 Park Avenue, 21st Floor
New York, NY 10166
Attention: Vice President
Telecopy: 212-692-5790
Metropolitan Insurance and Annuity Company
One Madison Avenue
New York, NY 10010
Attention: Treasurer
with copies to:
Metropolitan Life Insurance
Company Capital Markets Group
200 Park Avenue, 21st Floor
New York, NY 10166
Attention: Vice President
Telecopy: 212-692-5790
TCW Special Credits
c/o TCW Asset Management Company
865 South Figueroa Street, Suite 1800
Los Angeles, California 90017
Attention: Kenneth Liang, Vice President
Telecopy: (713) 244-0589
or at such other address as any Investor shall have furnished to the Company in
writing;
14
<PAGE> 16
(b) if to the Company, at the following address:
Lone Star Industries, Inc.
300 First Stamford Place
P.O. Box 120014
Stamford, CT 06912-0014
Attn: John J. Martin, Esq.
with copies to:
Proskauer Rose Goetz & Mendelsohn
1585 Broadway
New York, NY 10036
Attn: Lawrence H. Budish, Esq.
or at such other address as the Company shall have furnished to the Investors.
8. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. The Investors named in the first paragraph of this
Agreement (and not any other holder of Registrable Securities or any other
Person) shall be permitted, in connection with a transfer or disposition of
Registrable Securities to assign their rights under this Agreement. If an
Investor assigns its rights under this Agreement as provided herein, such
assignee shall be entitled to share in the rights of such Investor hereunder
provided that at the request of the Company, such assignee agrees to be subject
to all of the obligations of such Investor hereunder.
9. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. Governing Law. this Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
laws of the State of New York.
11. No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement. The Company has not previously entered into any agreement with
respect to any of its equity securities granting any registration rights to any
person.
15
<PAGE> 17
12. Recapitalizations, etc. In the event that any capital stock,
notes, or other securities are issued in respect of, in exchange for, or in
substitution for, any Registrable Securities by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any
other change in the Company's capital structure, appropriate adjustments shall
be made in this Agreement so as to preserve the original rights and obligations
of the parties hereto under this Agreement.
13. Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party to such action or
proceeding shall be entitled to recover reasonable attorneys' fees in addition
to any other available remedy.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered as of the date first above written.
LONE STAR INDUSTRIES, INC.
By /s/ David W. Wallace
----------------------------------
Name: David W. Wallace
Title: Chairman of the Board
METROPOLITAN LIFE INSURANCE
COMPANY
By /s/ Jacqueline D. Jenkins
----------------------------------
Name: Jacqueline D. Jenkins
Title: Asst. Vice-President
16
<PAGE> 18
METROPOLITAN INSURANCE AND ANNUITY
COMPANY
By /s/ Andrew T. Aoyama
----------------------------------
Name: Andrew T. Aoyama
Title: Assistant Vice-President
TCW SPECIAL CREDITS, AS AGENT AND
NOMINEE OF THE ENTITIES SET FORTH
IN SCHEDULE I HERETO
BY TCW ASSET MANAGEMENT COMPANY,
ITS MANAGING GENERAL PARTNER
By /s/ Richard Masson
----------------------------------
Name: Richard Masson
Title: Managing Director
By /s/ Kenneth Liang
----------------------------------
Name: Kenneth Liang
Title: Vice President
17
<PAGE> 1
EXHIBIT 10.23
-------------
SETTLEMENT AGREEMENT
between
LONE STAR INDUSTRIES, INC., et al.
DEBTORS AND DEBTORS-IN-POSSESSION
and
THE OFFICIAL COMMITTEE OF RETIRED EMPLOYEES
OF LONE STAR INDUSTRIES, INC., et al.
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
Preamble 1
1.0. Definitions 5
2.0. Continuation of Existing Plans 12
3.0. Establishment of VEBA and New Plans 12
4.0. Tax Matters 13
5.0. Set-Up Expenses 15
6.0. Quarterly Contributions to the VEBA 15
7.0. Claim 19
8.0. Adjustments 20
8A. Adjustment for Certain Post 1992 Retirees 21
8B. Post Effective Date Changes in Benefits 23
8C. Accuracy of Data 24
8D. Health Care Reform 25
8E. Clawback 30
8F. Early Termination 34
8G. Illegality 35
9.0. Allocation of Participant Premiums 38
10.0. Acceleration of VEBA Contributions 39
10.A. Events of Acceleration 39
10.B. Default Interest 41
10.C. Credit Rating Event of Default 43
10.D. Remedies 45
</TABLE>
<PAGE> 3
Page ii
<TABLE>
<CAPTION>
Section Page
<S> <C>
11.0. Material Adverse Change 48
12.0. Settlement of Claims for Past, Present or Future
Benefits From Existing Plans 49
13.0. Dispute Resolution 50
14.0. Cooperation of the Parties 51
15.0. Audits 53
16.0. Conditions Precedent to Effectiveness
of Agreement 54
17.0. Indemnifications and Liabilities 55
18.0. Miscellaneous 56
19.0. The Trustees 59
20.0 Amendments 60
21.0. Successors and Assigns 60
22.0. Collateral 61
Appendix A Quarterly Contribution Schedule
Exhibit 1 Existing Plans
Exhibit 2 Wyatt Valuation
Exhibit 3 Lone Star's letter describing Post Effective
Date Reductions in Certain Future Benefits
Exhibit 4 Health Care Reform Example
Exhibit 5 Schedule of Salaried Retirees Participating in
Existing Plans
</TABLE>
<PAGE> 4
SETTLEMENT AGREEMENT
This Settlement Agreement is made and entered into as
of this 4th day of February, 1994, by and among Lone Star
Industries, Inc., debtor and debtor-in-possession, and its
related debtors and debtors-in-possession in Case Nos. 90B21276
to 90B21286, 90B21334, and 90B21335 (collectively, the
"Debtors") and the Official Committee of Retired Employees (the
"Committee") which was appointed by the Bankruptcy Court in the
Debtors' Chapter 11 cases, pursuant to an Order entered in
accordance with Section 1114 of Title 11, United States Code
(the "Bankruptcy Code"), to act as the authorized representative
of the Debtors' Salaried Retirees -- i.e., those nonunion
employees who had retired prior to the Effective Date of the
Debtors' Plan of Reorganization dated November 5, 1993 (the
"Plan"), and who were participants in the Debtors' retiree
health, Medicare Part B premium reimbursement and death benefit
plans ("Existing Plans") in effect on December 10, 1990 (the
"Petition Date").
WHEREAS, after the Petition Date, the Debtors have
continued to provide unreduced retiree health, Medicare Part B
premium reimbursement and death benefits with respect to
Salaried Retirees under the Existing Plans;
<PAGE> 5
WHEREAS, the Debtors maintain that their liability
under the Existing Plans is a significant cost to the Debtors'
estates and that their various agreements with the Official
Committee of Unsecured Creditors and other creditor
constituencies regarding distributions under the Plan are
predicated upon a reduction of retiree benefits;
WHEREAS, in January 1992, the Debtors filed an
application with the Bankruptcy Court seeking the appointment of
a committee of retired employees to serve as the authorized
representative of the Salaried Retirees to commence negotiations
regarding modifications to retiree benefits pursuant to Section
1114(f) of the Bankruptcy Code;
WHEREAS, the Bankruptcy Court, by orders dated March
17, 1992 and July 17, 1992, appointed the Committee to serve as
the authorized representatives of the Salaried Retirees;
WHEREAS, in November 1992, the Debtors presented a
proposal to the Committee containing modifications to retiree
benefits of the Salaried Retirees under a newly devised retiree
benefits program;
WHEREAS, in April 1993 the Committee responded in
writing to the Debtors' proposal and challenged many of the
computations, statements and conclusions contained in the
Debtors' proposal while setting forth a counterproposal for the
treatment of the Debtors' retiree benefits;
-2-
<PAGE> 6
WHEREAS, although the Debtors rejected the
counterproposal, negotiations between the Committee and the
Debtors have continued, in good faith, in an attempt to reach a
mutually satisfactory treatment of the Debtors' retiree benefit
obligations;
WHEREAS, during these negotiations, the Debtors
contended that they had reserved the right to amend or terminate
at any time the Existing Plans for most Salaried Retirees who
retired after June 30, 1983. Moreover, the Debtors argued that
these Post-1983 Salaried Retirees do not have claims against the
Debtors' estates because they have no underlying legal or
contractual right to continued receipt of retiree benefits from
the Debtors;
WHEREAS, during these negotiations, the Committee
contended that under Sections 1114 and 1129(a)(13) of the
Bankruptcy Code, the Salaried Retirees had vested rights in the
health, Medicare Part B premium reimbursements and life
insurance benefits under the Existing Plans and that a threshold
question of whether a modification is "necessary" would have to
be decided under Section 1114 before the Existing Plans for any
Salaried Retirees could be terminated or otherwise modified.
And, during these negotiations, the Committee argued that such
modifications would not be necessary and thus impermissible
under Section 1114 and that, in any event, all of the Salaried
Retirees had claims against the Debtors' estates for the value
-3-
<PAGE> 7
of the lifetime retiree benefits to which they were entitled and
would not receive if those retiree benefits were terminated or
modified by the Debtors;
WHEREAS, the Debtors and the Committee desire to
settle in full their dispute, any pending claims, and any claims
or causes of action that could or might be made or filed in the
future in any court, under either bankruptcy law, non-bankruptcy
law, contract, or otherwise concerning either unpaid retiree
benefits based on or arising from an alleged right to future
retiree benefits or benefits not paid as a result of changes,
adjustments, or modifications in benefits arising from this
Agreement; and
WHEREAS, the Debtors and the Committee believe that
the settlement set forth in this Agreement is in the best
interests of the Debtors' estates and the Salaried Retirees.
The Debtors recognize that the failure to resolve consensually
the issues addressed in this Agreement will be costly,
burdensome, and may delay the Debtors' scheduled emergence from
Chapter 11. Likewise, while the Committee might succeed in
challenging the Debtors' right to amend or terminate the
existing benefit plans, and/or in asserting claims for unpaid
retiree benefits, the many legal, practical, and economic
obstacles to success on these issues are recognized by the
Committee and, furthermore, the Salaried Retirees stand, both
collectively and individually, to receive benefits that are both
-4-
<PAGE> 8
more valuable (taking into account any claims that might be
alleged) and more certain than they would likely receive if a
settlement were not reached and any litigation and the Existing
Plans were simply allowed to go forward.
NOW, THEREFORE, the Debtors and the Committee do
hereby agree fully and finally to resolve any and all rights
and/or claims of the Salaried Retirees to continued receipt of
health, Medicare Part B premium reimbursement and death benefits
from the Debtors; and, as an essential part of the consideration
of this Agreement, unconditionally and irrevocably to resolve
any and all claims or causes of action for unpaid retiree
benefits that have been asserted or could be asserted in any
court against the Debtors by the Salaried Retirees.
Accordingly, the parties agree as follows:
1.0. Definitions. As used in this Agreement, the
capitalized terms below shall have the following meanings,
unless otherwise provided:
1.1. "Acceleration Date" means the date of the occurrence
of an Event of Acceleration.
1.2. "Agreement" means this Settlement Agreement, as may be
amended from time to time as provided in Section 20 herein.
1.3. "Asset Proceeds Notes" has the same meaning as that in
the Plan.
1.4. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978,
as amended.
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1.5. "Bankruptcy Court" means the United States
Bankruptcy Court for the Southern District of New York or such
court as may have jurisdiction over the matter involved.
1.6. "Business Day" means any day, other than a
Saturday, Sunday or "legal holiday" (as defined in Bankruptcy
Rule 9006(a)).
1.7. "Claim" means the $8.2 million general
unsecured Class 4B (as defined in the Plan) claim granted to the
Salaried Retirees by the Debtors pursuant to Section 7.1.
1.8. "Clawback" means Reorganized Lone Star's
termination of quarterly contributions to the VEBA and provision
of benefits under the Existing Plans to the Participants in the
New Plans immediately preceding the Clawback Date, pursuant to
Section 8E.
1.9. "Clawback Date" means the effective date
of Reorganized Lone Star's Clawback, which date must be at least
90, but no more than 360, days after the delivery of the
Clawback Notice.
1.10. "Clawback Notice" means Reorganized Lone
Star's advance written notice of a Clawback, as provided in Section 8E.
1.11. "Code" means the Internal Revenue Code of 1986, as amended.
1.12. "Collectively Bargained Exemption" means an exemption from
the account limits of Section 419A of the Code
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<PAGE> 10
by reason of Section 419A(f)(5)(A) of the Code relating to funds
maintained under collective bargaining agreements.
1.13. "Committee" means the Official Committee
of Retired Employees of Lone Star Industries, Inc. and its
related debtors and debtors-in-possession.
1.14. "Contribution Interruption" is defined in Section 8G.1.
1.15. "Contribution Interruption Notice" means the advance
written notice to the Trustees of a Contribution Interruption as provided
in Section 8G.1.
1.16. "Credit Rating Event of Default" means a default by
Reorganized Lone Star under Section 10C for failure to meet certain rating
requirements for its outstanding debt, as set forth in Section 10C.
1.17. "DOL" means the Department of Labor.
1.18. "Debtors" means, collectively, Lone Star Industries, Inc.
and its related debtors and debtors-in-possession.
1.19. "Disclosure Statement" means the Debtors' Amended Disclosure
Statement filed and approved by the Bankruptcy Court on November 5, 1993.
1.20. "Effective Date" has the same meaning as that in the Plan.
1.21. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
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1.22. "Event of Acceleration" means an event with respect
to Reorganized Lone Star as described in Section 10.A.
1.23. "Existing Plans" means the Debtors' health, Medicare
Part B premium reimbursement and life insurance plans for Salaried
Retirees as in effect on December 10, 1990. Copies of the Existing
Plans are attached hereto as Exhibit 1.
1.24. "Health Care Legislation" means the laws and regulations
described in Section 8D.1.
1.25. "IRS" means the Internal Revenue Service.
1.26. "Increased Health Care Costs" is defined in Section 8D.2.
1.27. "Lone Star" means Lone Star Industries, Inc., a Delaware
corporation, and means such corporation either as debtor or debtor and
debtor-in-possession and/or Reorganized Lone Star, depending on the
context of the use therefore.
1.28. "Material Adverse Change" means an amendment, modification
or change in the Plan from the terms existing under the Plan as of the date
of this Agreement which adversely affects the interests of the Salaried
Retirees under the Plan as a result of changes in structure, or the form or
amount of recoveries to the Debtors' creditors and equity holders.
1.29. "New Plans" means the welfare benefit plan or plans,
including any amendments thereto, that the Committee
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or the Trustees cause to be established, from time to time, for
Salaried Retirees on or after the VEBA Effective Date.
1.30. "Participant" means, at a given time, an individual
participating in the Existing Plans or New Plans, as the case may be.
1.31. "Petition Date" means December 10, 1990.
1.32. "Plan" means the Debtor's Modified Amended Consolidated
Plan of Reorganization filed with the Bankruptcy Court on November 5, 1993.
1.33. "Post-1983 Retirees" means those Salaried Retirees listed
as participants in the Existing Plans designated as Branches 911, 610,
609(b) and 815(b) in the Wyatt Valuation.
1.34. "Released Parties" means, collectively, the Debtors,
Reorganized Lone Star, Reorganized Debtors, the Existing Plans and underlying
trusts, all fiduciaries thereof, and their officers, directors, agents,
shareholders, related companies or entities, successors and assigns.
1.35. "Reorganized Debtors" has the same meaning as that in the Plan.
1.36. "Reorganized Lone Star" has the same meaning as that in the
Plan.
1.37. "Retiree Benefits" means such health, Medicare Part B premium
reimbursements, death and other welfare benefits as may from time to time be
provided under the New Plans.
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1.38. "Salaried Retirees" means the Debtors' nonunion
employees who have or will retire prior to the Effective Date and who
are Participants in the Existing Plans immediately preceding the Effective
Date.
1.39. "Securities" means the Lone Star debt instruments and
Reorganized Lone Star common stock to be issued with respect to the Claim.
1.40. "Senior Debt" means all indebtedness of Reorganized Lone
Star or the Reorganized Debtors for borrowed money or guarantees of any such
indebtedness or obligation outstanding at any time except indebtedness that
by its terms is subordinate or junior in right of payment to any other
indebtedness or obligation of Reorganized Lone Star or the Reorganized Debtors.
1.41. "Senior Notes" has the same meaning as that in the Plan.
1.42. "Subordinated Debt" means all indebtedness of Reorganized
Lone Star or the Reorganized Debtors for borrowed money or guarantees of any
such indebtedness or obligation outstanding at any time that by its term is
subordinate or junior in right of payment to any other indebtedness or
obligation of Reorganized Lone Star or the Reorganized Debtors.
1.43. "Transfer Date" means any date selected by the Trustees which
is on or after the earlier of: (i) January 1, 2033, or (ii) the January 1st
following the year in which there
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<PAGE> 14
are fewer than 150 Participants in the New Plans, in accordance
with Section 8F.
1.44. "Trustees" means the trustee and/or trustees of the VEBA,
which the Committee causes to be appointed prior to the VEBA Effective Date,
and any successors.
1.45. "VEBA" means a trust that the Committee causes to be created
and that is intended to qualify and be maintained as a voluntary employees'
beneficiary association under Section 501(c) (9) of the Code.
1.46. "VEBA Effective Date" means the earlier of: (i) the date which
is four months after the date this Agreement is executed by Lone Star and the
Committee, and (ii) the date the Trustees reasonably determine all steps
necessary to establish the New Plans, the VEBA and all other activities
necessary to operate and administer the New Plans have occurred; provided,
however, the VEBA Effective Date shall not be earlier than the Effective Date.
1.47. "VEBA Savings" is defined in Section 8D.2.
1.48. "Wyatt Valuation" means the January 1, 1993 valuation prepared
by the Debtor's actuary, The Wyatt Company, showing the present value of all
benefits under the Existing Plans for Salaried Retirees retiring before
January 1, 1993 of $57,316,000. (The Wyatt Valuation is attached hereto as
Exhibit 2.)
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<PAGE> 15
2.0. Continuation Of Existing Plans
------------------------------
2.1. Until the VEBA Effective Date, the Salaried
Retirees and their spouses and dependents shall continue to
participate in the Existing Plans, pursuant to the eligibility,
coverage, and other provisions of those plans in effect on
December 10, 1990. Coverage under the Existing Plans shall cease
as of the VEBA Effective Date; provided, however, that all expenses
incurred with respect to a hospital stay that began prior to the
VEBA Effective Date shall be covered by the Existing Plans, including
expenses that were incurred after the VEBA Effective Date with respect
to such hospital stay. The VEBA and the New Plans shall have no
responsibility or liability for any benefits required to be provided
under the Existing Plans under this Agreement.
2.2. On the VEBA Effective Date, all Participants in the
Existing Plans immediately prior to the Effective Date shall become
Participants in the New Plans in accordance with the terms and conditions
of the New Plans, the VEBA and this Agreement.
3.0. ESTABLISHMENT OF VEBA AND NEW PLANS
-----------------------------------
3.1. As soon as practical after this Agreement
is fully executed, the Committee shall cause the creation of the
VEBA, the appointment of Trustees for the VEBA, and the
establishment of New Plans pursuant to which the VEBA will
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<PAGE> 16
provide Retiree Benefits to the Salaried Retirees and their eligible spouses
and dependents.
3.2. The initial terms and conditions of the New Plans shall be
determined by the Committee in its sole discretion. After the VEBA Effective
Date, the New Plans may be amended, terminated and/or replaced in the sole
discretion of the Trustees (or such other persons as are appointed under the
terms of the VEBA), subject to the terms of the VEBA. The VEBA shall be
"administrator" and "plan sponsor" of the New Plans under ERISA Section
3(16)(A) and (B). The VEBA shall be responsible for complying with all
reporting and disclosure requirements under ERISA and the Code. The VEBA and
the New Plans shall have no responsibility or liability for benefits that are
not provided under the terms of the New Plans.
3.3. Except as otherwise provided in this Agreement, Lone Star
shall have no authority, control, responsibilities, duties, or liabilities
whatsoever with respect to the New Plan.
4.0. Tax Matters
-----------
4.1. As soon as practical following the establishment of the
VEBA, the Committee shall cause an application to be made to the IRS for a
dtermination that the VEBA is tax-exempt under Code 501(c)(9) and a private
letter ruling that the VEBA qualifies for a Collectively Bargained Exemption.
The Committee shall take such actions as are
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<PAGE> 17
reasonably necessary to obtain such favorable IRS determination
and ruling; provided, however, that the establishment and
operation of the New Plans and the VEBA and the obligation of
Lone Star to make contributions and to transfer cash and other
property pursuant to the Claim shall not be conditioned on
receiving such determination and/or ruling. The Committee shall
not be required to take any action to secure such favorable
determination and/or ruling that the Committee determines, in
its discretion, would adversely affect the New Plans or the
VEBA. Lone Star shall pay all reasonable expenses, upon receipt
of invoices, incurred by the Committee with respect to requesting
such IRS determination and ruling.
4.2. Commencing with the VEBA Effective Date,
the Trustees shall use their reasonable efforts to take such
actions and make such changes to the New Plans and the VEBA as
Reorganized Lone Star may, from time to time, reasonably request
in writing to the Trustees to preserve or enhance Reorganized
Lone Star's federal income tax deduction for contributions to
the VEBA; provided, however, that the Trustees determine, in
their sole discretion, that such actions and changes do not
adversely affect the New Plans or the VEBA. Reorganized Lone
Star shall pay all reasonable costs and expenses incurred by the
Trustees and the VEBA in analyzing and implementing such actions
and changes.
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<PAGE> 18
5.0. SET-UP EXPENSES
----------------
5.1. Debtor shall pay all reasonable expenses
("set-up expenses") that the Committee and Trustees may incur
prior to the Effective Date in establishing the VEBA and the New
Plans and communicating the terms, conditions and elections
applicable to the New Plans and this Agreement to all Salaried
Retirees and their spouses and dependents. Reorganized Lone
Star also shall pay, promptly upon receipt of invoices therefor,
all reasonable set-up expenses incurred by the Committee and
Trustees on or after the Effective Date up to $160,000. The
Committee and Trustees shall provide Reorganized Lone Star with
documentation supporting all set-up expenses incurred after the
Effective Date.
6.0. QUARTERLY CONTRIBUTIONS TO THE VEBA
------------------------------------
6.1. Unless otherwise provided in this
Agreement, Reorganized Lone Star shall pay, or cause to be paid,
to the VEBA quarterly contributions in the amounts set forth on
Appendix A hereto. Payments shall be made on the VEBA Effective
Date and on the first Business Day of each calendar quarter
thereafter. Notwithstanding the above, no payments shall be
made with respect to a calendar quarter ending prior to the VEBA
Effective Date. If the VEBA Effective Date does not occur on
the first day of a calendar quarter, the contribution for such
quarter shall equal the applicable contribution on Appendix A,
multiplied by a fraction, the numerator of which is the number
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<PAGE> 19
of days from (and including) the VEBA Effective Date to the end
of the quarter and the denominator of which is the total number
of days in such quarter.
6.2. If the VEBA is not operational by the VEBA
Effective Date, Reorganized Lone Star shall pay quarterly
contributions and, except to the extent otherwise provided in
Section 7.2 with respect to Securities, transfer cash and other
assets pursuant to the Claim to an escrow account established by
the Trustees (or, if there are no Trustees, the Committee) for
the benefit of the Salaried Retirees. Upon written notification
by the Trustees that the VEBA is operational, Lone Star shall
make all further quarterly contributions to the VEBA and the
assets in such escrow account shall be immediately transferred
to the VEBA.
6.3. Subject to the other provisions of this
Agreement, the Trustees may assign the right to receive any and
all future quarterly contributions by Reorganized Lone Star;
provided that such assignment shall not increase the obligations
of Reorganized Lone Star to make payments under this Agreement
or adversely affect Reorganized Lone Star's federal income tax
deduction for contributions to the VEBA.
6.4. Upon the written request of the Trustees,
Reorganized Lone Star shall advance the next quarterly
contribution to the VEBA, provided that the Trustees reasonably
determine that, as of the date that is ten days prior to such
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<PAGE> 20
request, the fair market value of the cash and other marketable
securities of the VEBA and any escrow accounts established
pursuant to this Agreement, reduced by the VEBA's estimated
incurred, but not reported, claims is smaller than the lesser of
$1,000,000 or the sum of the next two quarterly contributions.
Reorganized Lone Star shall pay such advance to the VEBA within
thirty days after receiving the Trustees' written request. Only
one such advance shall be allowed per calendar year and only to
the extent all prior advances have been fully repaid. Any such
advance shall bear interest at an 8.5% effective annual yield,
credited daily and, to the extent permitted by law, shall be
repaid through a reduction in Reorganized Lone Star's future
quarterly contributions to the VEBA by the amount of such
accrued interest, until the principal of such advance shall be
repaid. Principal repayment shall be through a reduction in
Reorganized Lone Star's future quarterly contributions due to
the VEBA, in such amounts, and with respect to such
contributions, as the Trustees reasonably determine cash flows
permit, but in any event no later than the final quarter(s)'
contributions. The amount of any reduction in quarterly
contribution pursuant to the immediately preceding sentence,
shall be specified by the Trustees in writing to Reorganized
Lone Star at least 5 Business Days prior to the date of such
contribution.
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<PAGE> 21
6.5. Reorganized Lone Star shall have the
option to prepay all future quarterly contributions to the VEBA
in a single cash amount equal to 110% of the discounted present
value (using an 8.5% discount factor) of all future quarterly
contributions. Upon such prepayment in full, quarterly
contributions to the VEBA shall immediately cease.
6.6. Except as otherwise provided in this
Agreement, all contributions, advances, prepayments and other
payments by Reorganized Lone Star to the VEBA shall be made in
cash, by wire transfer in immediately available funds, to an
account of the VEBA designated by the Trustees. Such
designation shall be made in writing to Lone Star at least two
Business Days before any such payment is due and, once made,
shall remain in effect until revised by the Trustees in writing
to Reorganized Lone Star.
6.7. Reorganized Lone Star shall have the right
to assign all or part of its obligations under this Agreement
upon 60 days advance written notice to the Trustees; provided,
however, that no such assignment shall prejudice or otherwise
diminish any of the rights or remedies of the Trustees or the
VEBA against Reorganized Lone Star and any such assignee, and
the assignee and Reorganized Lone Star shall be jointly and
severally liable with respect to any obligation assigned.
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7.0. Claim
7.1. In addition to the contributions to the
VEBA set forth in Section 6, the VEBA (and the Committee to the
extent that the transfer of Securities is restricted under
Section 7.2) on behalf of all Salaried Retirees, shall have a
general unsecured Class 4B (as defined in the Plan) claim
against the Debtors in the amount of $8.2 million ("Claim").
The Claim shall be treated and settled on the same recovery
basis, and combination of cash and securities, as all other
general unsecured claims under the Plan. To the extent that
there is an election of the form of the recovery with respect to
the Claim, the Committee may make such election.
7.2. The parties believe that the transfer of
Securities to the VEBA in settlement of the Claim is not a
prohibited transaction under ERISA and/or the Code.
Nevertheless, Lone Star shall use its reasonable efforts to
obtain an advisory opinion from the DOL that the transfer of
Securities to the VEBA as contemplated by the Settlement
Agreement will not result in a prohibited transaction under
ERISA and/or the Code or, an exemption from the prohibited
transaction restrictions from the DOL. If such opinion or
exemption is not obtained prior to the Effective Date, Lone Star
shall transfer such Securities to an escrow account, established
by Lone Star and maintained on behalf of the Committee for
benefit of the Salaried Retirees. The Committee shall have
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<PAGE> 23
complete discretion to direct the escrow agent to hold or
dispose of such Securities without limitation; provided,
however, that the Securities may not be transferred to the VEBA
until such time as the DOL issues a favorable opinion or
approves an exemption application or Lone Star otherwise
consents. Any assets held in the escrow account other than
Securities may be transferred to the VEBA at the direction of
the Committee. The Committee and the Trustees shall reasonably
cooperate with Lone Star in restructuring the format of the
receipt of Securities by the VEBA, in such manner as Lone Star
may reasonably request, provided such alternative format does
not in any manner materially adversely affect the value of the
Claim. Reorganized Lone Star agrees to pay all reasonable
expenses and costs of the Committee, the Trustees and the VEBA
with respect to this Section 7.2, including the escrow agents'
fees, provided that such expenses and costs were incurred during
the first seven years that such escrow account was in effect and
do not exceed, in the aggregate, $43,000.
7.3. Except as provided in Section 7.2 with
respect to certain transfers of Securities from the escrow
account to the VEBA, all assets issued to the VEBA pursuant to
the Claim shall be freely transferable.
8.0. Adjustments
8.1. Except as otherwise provided in this
Agreement, Lone Star's obligation to make quarterly
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<PAGE> 24
contributions and transfer cash and other assets in settlement
of the Claim to the VEBA shall not be reduced or discontinued
for any reason. Any adjustment that is made to the amount of
quarterly contributions and/or the Claim under Sections 8A, 8B,
8C, 8D and 17.2 shall be on the basis of the actuarial
assumptions and methodologies set forth in the Wyatt Valuation.
Appendix A shall be appropriately adjusted to reflect any change
in the amount of quarterly contributions under this Agreement.
Any increases in the Claim under this Agreement that occur after
the Effective Date, shall be satisfied by Reorganized Lone Star
promptly transferring the amount of such increase in cash to the
VEBA. Any decrease in the Claim under this Agreement that
occurs after the Effective Date, shall be satisfied by a
corresponding reduction in Reorganized Lone Star's next
quarterly contributions to the VEBA, to the extent permitted by
law.
8A.0. Adjustment for Certain Post 1992 Retirees
8A.1. The value of the quarterly contributions
and the Claim, as set forth in Sections 6.1 and 7.1, are based
upon the claims or causes of action based on or arising from the
rights of Salaried Retirees retiring on or before December 31,
1992 to retiree benefits under the Existing Plans. In addition,
the claims of all Salaried Retirees retiring after December 31,
1992 and before the Effective Date who are eligible to
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<PAGE> 25
participate in the Existing Plans are to be included in this
Agreement and these Salaried Retirees shall participate in the
New Plans. Accordingly, within 20 Business Days after the
Effective Date (and, in any event, at least 10 Business Days
prior to the VEBA Effective Date), Reorganized Lone Star shall
determine the number of Salaried Retirees retiring after
December 31, 1992 and before the Effective Date and the
actuarial present value of such Salaried Retirees' benefits
under the Existing Plans as of January 1, 1994, based on the
actuarial assumptions used in the Wyatt Valuation. The amount
of the quarterly contributions set forth in Appendix A shall be
increased on the basis of 64% of the cash flows produced by such
valuation for the post December 31, 1992 Salaried Retirees.
Further, within 20 Business Days after the Effective Date,
Reorganized Lone Star shall make an additional cash contribution
to the VEBA, representing the increased Claim due to such post
December 31, 1992 Salaried Retirees. The amount of such
contribution shall equal 12% of the present value benefit amount
for the post December 31, 1992 Salaried Retirees. Reorganized
Lone Star shall provide the Trustees with a written statement of
the present value amount, census data concerning the post
December 31, 1992 Salaried Retirees and any other information
necessary to review Reorganized Lone Star's determination under
this Section, within such 20 Business Day period. In the event
the Trustees disagree with Reorganized Lone Star's
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<PAGE> 26
determination, the quarterly contributions and Claim amount
shall be increased based upon Reorganized Lone Star's
determination, subject to further increase, if any, based on the
resolution of the dispute. Reorganized Lone Star shall pay the
VEBA's actuarial expenses incurred with respect to this Section
8A, subject to the limitations of Section 5.1.
8B.0. Post Effective Date Changes in Benefits
8B.1. Lone Star intends to institute reductions,
within 180 days after the Effective Date, in the
post-retirement health and life insurance benefits to be
provided to salaried active employees substantially as
summarized in the document attached as Exhibit 3. To the extent
such reductions do not occur within 180 days after the Effective
Date, then Reorganized Lone Star's quarterly contributions to
the VEBA and the amount of the Claim in each case to the extent
allocable to the Post-1983 Retirees, shall be increased
proportionately, based on the actuarial assumptions and
methodology set forth in the Wyatt Valuation. Reorganized Lone
Star shall provide the Trustees with verification that the
reduction in retiree benefits described in this Section 8B has
occurred or, if applicable, with a statement of the amount that
the quarterly contributions and Claim is to be increased, with
supporting calculations, within 270 days after the Effective
Date.
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<PAGE> 27
8C.0. Accuracy of Data
8C.1. Lone Star represents that (on behalf of
itself and its advisors), to its knowledge, all retiree census
data used in the Wyatt Valuation and in calculating the
quarterly contributions and Claim amount with respect to
Salaried Retirees retiring before January 1, 1993 is
substantially accurate and has been provided to the Committee or
its advisors. The Committee represents (on behalf of itself and
the Trustees of the VEBA and its advisors), that to its
knowledge, it has no reason to dispute, question or challenge
any of the census data provided by Lone Star (and its
advisors). In the event that any retiree census data provided
by Lone Star is determined to be inaccurate prior to the earlier
of the Confirmation Date or the VEBA Effective Date (and neither
the Committee, the Trustees of the VEBA, nor their advisors had
actual knowledge of such inaccuracy prior to the execution of
this Agreement), and all inaccuracies taken in the aggregate
would result in an increase or decrease in the present value of
the post-retirement medical benefits as of January 1, 1993, as
calculated under the actuarial assumptions used in the Wyatt
Valuation, by 2.5% or more, future quarterly contributions and
the Claim amount by Reorganized Lone Star shall be appropriately
adjusted to correct such inaccuracies, however, in no event
shall such adjustments exceed 5% of the future quarterly
contributions and the Claim amount. The Committee or the
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<PAGE> 28
Trustees may provide Lone Star with written notice of its belief
that there is an inaccuracy described in this Section 8D, and,
in the event that the parties cannot agree on the appropriate
adjustments, such dispute shall be resolved pursuant to
Section 13.
8D.0. Health Care Reform
8D.1. The parties recognize that health care
reform legislation is currently being reviewed at different
levels of government, and may result in the passage of laws and
regulations materially affecting the provision and funding of
medical benefits for the Salaried Retirees, spouses and eligible
dependents ("Health Care Legislation").
8D.2. In the event Reorganized Lone Star incurs
additional expenses pursuant to Health Care Legislation,
(whether in the form of new or expanded assessments, taxes,
premiums, setbacks, fees and/or otherwise) as a result of its
relationship or obligations to the VEBA or the Salaried Retirees
participating in the VEBA ("Increased Health Care Costs"), and,
as a Direct Result of the Health Care Legislation giving rise to
the Increased Health Care Costs, the VEBA experiences, with
respect to a calendar year, a reduction in its cost (taking into
account the net amount of any increased premiums or deductibles
imposed on the Participants as a Direct Result of such Health
Care Legislation) of providing its participants with the health
benefits then existing under the New Plans (or which at any time
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<PAGE> 29
within 270 days prior to the enactment of the Health Care
Legislation giving rise to the VEBA Savings, had been provided
under the New Plans), solely because of the substitution,
coordination and/or integration of the New Plans with the
benefit programs associated with the aforesaid Health Care
Legislation ("VEBA Savings"), then Reorganized Lone Star's
quarterly contributions to the VEBA with respect to the next
succeeding calendar year(s) shall be reduced by the lower of:
(a) the Increased Health Care Costs; or (b) the VEBA Savings,
for such year. For purposes of this Section 8D.2, "Direct
Result" means that "but for" the Health Care Legislation giving
rise to either: (i) the Increased Health Care Costs, the VEBA
would not have realized the VEBA Savings, or (ii) the VEBA
Savings, Lone Star would not have incurred the Increased Health
Care Costs. (An example of the application of this Section 8D
is attached as Exhibit 4.) In the event of a dispute as to the
VEBA Savings and/or Increased Health Care Costs for a given
calendar year, then Reorganized Lone Star's quarterly
contributions to the VEBA with respect to the next succeeding
calendar year(s) shall, pending resolution of said dispute, be
reduced by the lower of: (a) the amount of any undisputed
Increased Health Care Costs; or (b) the amount of any undisputed
VEBA Savings. Upon final resolution of said dispute,
Reorganized Lone Star's entitlement for any untaken quarterly
contribution reduction shall be effected through reduced future
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<PAGE> 30
contributions. In the event the quarterly contribution
reduction to which Reorganized Lone Star shall be entitled with
respect to the applicable calendar year cannot be taken in the
applicable succeeding calendar year (because a dispute has
delayed commencement of the reductions beyond the immediately
succeeding calendar year and/or because the amount of reduction
exceeds the remaining quarterly contribution(s) during said
immediately succeeding calendar year), then the next subsequent
quarterly contributions shall be reduced as necessary to make up
for any such shortfall.
8D.3. Upon written request by Reorganized Lone
Star to the Trustees, the Trustees shall direct the VEBA's
actuary to determine the amount, if any, of the VEBA Savings
with respect to a calendar year. The determination of the
VEBA's actuary shall be made in good faith and using reasonable
actuarial assumptions and modeling (and not by individual
benefit reviews). The VEBA's actuary shall provide Reorganized
Lone Star with its determination as to the amount, if any, of
such VEBA Savings and all assumptions, data and methodology
necessary for the same review to be performed by another
actuary. The VEBA's actuary shall provide the aforesaid
determination and information to Reorganized Lone Star as soon
as possible after the request for it is made, but in no event
later than 180 days following the Trustee's receipt of a written
request by Reorganized Lone Star that the determination be
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made. Within the same 180-day period, Reorganized Lone Star
shall provide to the Trustees the determination of the
independent certified public accountant retained to audit
Reorganized Lone Star's financial statements as to the amount,
if any, of the Increased Health Care Costs for the same calendar
year under review. The amount of such Increased Health Care
Costs shall be determined by such certified public accountant,
in good faith using standard accounting techniques. The
certified public accountant shall provide to the Trustees its
determination as to the existence and amount of the Increased
Health Care Costs and all data and methodology necessary for the
same review to be performed by the VEBA's certified public
accountant.
8D.4. Either party shall have the right to have
its own respective actuary or certified public accountant review
the data, assumptions and methodology used by the other's
professional in order to evaluate the validity of the rendered
determination. In the event the parties cannot reach agreement
as to the correctness of the determination of the other's
professional, then either party shall have the right to obtain a
final and binding evaluation of the data and the amount of the
VEBA Savings or Increased Health Care Costs, as the case may be,
by an independent actuary and/or certified public accountant, as
the case may be, as selected by the other two corresponding
professionals. The independent (third) actuary and/or certified
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public accountant selected by the parties' respective
professionals shall not determine its own amount, but rather
shall only have the authority to choose as between disputed
amounts determined by either the VEBA's or Reorganized Lone
Star's professional, choosing as between the more reasonable
overall. Reorganized Lone Star's written request that the
VEBA's actuary calculate the VEBA Savings with respect to a
calendar year must be received by the Trustees no earlier than
the last day of the applicable calendar year and no later than
one year after the last day of such calendar year. In the event
such written request is not delivered to the Trustees within
such one-year period, there shall be no reduction in Reorganized
Lone Star's contributions for Health Care Legislation with
respect to such calendar year.
8D.5. Reorganized Lone Star shall pay all of the
VEBA's reasonable expenses incurred with respect to making the
necessary determinations under this Section 8D, including the
costs of the VEBA's actuary, certified public accountant and
attorney; provided, however, Reorganized Lone Star only shall be
required to pay 50% of the VEBA's reasonable attorneys' fees and
expenses incurred with respect to resolution of any dispute
involving the independent actuary and/or certified public
accountant. The cost of the independent actuary and/or
certified public accountant selected to resolve any dispute
shall be shared equally by the VEBA and Reorganized Lone Star.
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The Trustees and Reorganized Lone Star shall cooperate with the
independent actuaries and certified public accountants in making
their determinations hereunder.
8E.0. Clawback
8E.1. Provided no Event of Acceleration has
occurred and is continuing (other than a Credit Rating Event of
Default), at any time after the Effective Date and upon at least
90 days (but no more than 360 days) advance written notice (the
"Clawback Notice") to each of the Participants in the VEBA and
the Trustees, Reorganized Lone Star may elect a Clawback and, as
of the Clawback Date specified in such notice, thereby terminate
all future quarterly contributions to the VEBA from and after
the Clawback Date, and (except to the extent one or more
individual's benefits may have been previously satisfied or such
individual is no longer a Participant in the VEBA) shall
reinstate the Existing Plans and provide health benefits,
Medicare Part B premium reimbursements and life insurance
benefits to each of the Salaried Retirees and their eligible
spouses and dependents at substantially the same or improved
levels (and eligibility criteria) as in effect under the
Existing Plans under which each such Salaried Retiree retired.
(A schedule of each Salaried Retiree and the Existing Plans in
effect on the date he retired is attached as Exhibit 5. Such
list shall be updated by Reorganized Lone Star for the post
December 31, 1992 Salaried Retirees within 20 Business Days
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after the Effective Date.) In the case of a Credit Rating Event
of Default, the Clawback may only be exercised if the advance
contribution provided in Section 10C has been paid in full.
8E.2. The Clawback Notice to each of the
Participants in the VEBA shall be sufficient if sent to the last
known address of each of the then current Participants in the
VEBA (with the identities and the addresses of such individuals
used by Reorganized Lone Star being the data then most recently
provided by the Trustees to Reorganized Lone Star).
8E.3. The Clawback election shall be irrevocable
once the written notice has been delivered to the Trustees and
the benefits to be provided by Reorganized Lone Star under the
Existing Plans starting on the Clawback Date shall be fully
vested and not subject to any reduction (but shall be subject to
modifications as provided in Section 8E.5). The Salaried
Retirees shall continue to be covered by the New Plans until the
Clawback Date. With respect to the preceding sentence, all
expenses incurred with respect to a hospital stay begun prior to
the Clawback Date, but continuing after such date, shall for
coverage purposes, be deemed to be continuing under the terms of
the VEBA provided New Plans coverage period.
8E.4. The Trustees shall not modify the New
Plans after receiving the Clawback Notice, if the effect of such
modification would be to increase the costs of the VEBA, or to
enter into long-term obligations or other long-term arrangements
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with respect to the VEBA outside of the ordinary and usual
course of business, except as may be required to maintain the
tax-exempt status of the VEBA or upon receiving the written
consent of Reorganized Lone Star, which consent shall not be
unreasonably withheld. In the event of a Clawback, Reorganized
Lone Star shall assume all liabilities of the VEBA after the
Clawback Date.
8E.5. Reorganized Lone Star shall at all times
have the right, at its sole discretion, to meet its obligations
to provide medical benefits after the Clawback Date through the
most cost-effective programs available to it, provided that the
Salaried Retirees and their eligible spouses and dependents, in
the aggregate with respect to each Existing Plan, receive
substantially the same or better benefits as would otherwise be
available to them under the Existing Plans. To this end,
Reorganized Lone Star may, in connection with a Clawback,
substitute, coordinate and/or integrate the benefits it provides
directly to the Salaried Retirees and their eligible spouses and
dependents with any other insurance programs or medical benefit
which presently exist or which may become available in the
future, whether such plan(s) are mandated by any governmental
entity or voluntarily available through any private, government
or quasi-government entity. Reorganized Lone Star shall
compensate the Salaried Retirees for the net amount of any
increased "premium" and/or "deductible" with respect to the
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applicable benefit that the Salaried Retirees and their eligible
spouses and dependents incur as the result of Reorganized Lone
Star's election to take advantage of any other such programs.
In redesigning a medical benefit program under this Section
8E.5, Reorganized Lone Star shall use its reasonable best
efforts to minimize any adverse income tax consequences to
Salaried Retirees provided it incurs no additional expense
(other than Reorganized Lone Star's professional fees incurred
with respect to such efforts) as a result. No redesign of a
medical benefit program by Reorganized Lone Star under this
Section 8E shall, except as otherwise required by applicable
law, or as expressly provided in the Existing Plans, restrict,
limit or penalize any Salaried Retiree, spouse or dependent from
choosing his or her own health care providers.
8E.6. Consistent with Reorganized Lone Star's
rights and obligations under this Agreement, Reorganized Lone
Star shall act with respect to the Clawback program and the
Existing Plans in good faith and in compliance with all
applicable laws and regulations.
8E.7. On and after the Clawback Date, the assets
of the VEBA shall continue to be used to satisfy the liabilities
of the VEBA; however, any assets remaining after all such
liabilities have been satisfied shall be used by the Trustees to
pay administrative expenses of the VEBA and, as directed in
writing by Reorganized Lone Star in accordance with applicable
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law, to provide benefits to the Salaried Retirees. If, upon a
Clawback, the VEBA's assets are insufficient to satisfy all of
its liabilities, Reorganized Lone Star shall assume all
remaining liabilities of the VEBA after the VEBA's assets are
exhausted. Notwithstanding anything else in this Section 8E.7,
upon receipt of the Clawback Notice, the Trustees may elect to
segregate an amount of the VEBA's assets, which segregated
amount shall be used only to pay the administrative costs of the
VEBA incurred after the Clawback Date, including the costs
incurred in monitoring Reorganized Lone Star's compliance under
Section 8E, and such segregated amount shall not be available to
provide benefits to Salaried Retirees under the Clawback program
as directed by Reorganized Lone Star. The segregated amount
shall not exceed $80,000 and must be applied within 5 years
after the Clawback Date.
8F.0. Early Termination
8F.1. At any time on or after the Transfer Date,
and upon at least 90 days advance written notice by the
Trustees, Reorganized Lone Star's obligations to make
contributions to the VEBA shall cease and Reorganized Lone Star
shall be required to include any remaining Salaried Retirees and
their eligible spouses and dependents in the post-retirement
welfare benefit plans it maintains for retired salaried
employees retiring at that time. The Salaried Retirees and
their eligible spouses and dependents shall participate in such
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plans in accordance with the same terms and eligibility
conditions that are applicable to other salaried retirees
participating in such plans. Any funds remaining in the VEBA
after all liabilities of the VEBA have been satisfied shall be
applied by the Trustees to pay administrative expenses of the
VEBA and as directed in writing by Reorganized Lone Star to
provide benefits to retired salaried employees, as permitted by
applicable law.
8G.0. Illegality
8G.1. The following provisions of this Section
8G shall apply if, at any time before the occurrence of an Event
of Acceleration (other than a Credit Rating Event of Default),
it would be illegal for Reorganized Lone Star to make all or a
portion of a quarterly contribution to the VEBA ("Contribution
Interruption"). A Contribution Interruption shall be deemed to
occur only if Reorganized Lone Star provides the Trustees with
45 days advance written notice ("Contribution Interruption
Notice") of its good faith determination that its making of all
or any portion of the quarterly contributions to the VEBA would
be unlawful, including a detailed explanation of its position.
To the extent that a portion of Reorganized Lone Star's
quarterly contribution to the VEBA is lawful after a
Contribution Interruption, Reorganized Lone Star shall make such
contribution directly to the VEBA.
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8G.2. To the extent that such quarterly
contribution to the VEBA would be illegal, such quarterly
contribution shall be made by Reorganized Lone Star to an escrow
account established by Reorganized Lone Star for the benefit of
the Salaried Retirees. Funds held in the escrow account shall
be invested by the escrow agent as directed by the Trustees.
Any funds held in the VEBA during a Contribution Interruption
shall be applied at the sole discretion of the Trustees.
8G.3. Upon delivery of the Contribution
Interruption Notice, Reorganized Lone Star and the Trustees
shall promptly begin negotiations concerning a reformation of
this Agreement so that such contributions would no longer be
illegal. If within 90 days of receipt of the Contribution
Interruption Notice, the parties have not agreed on a
reformation of this Agreement, then either party shall have the
right to file an appropriate action in a court of competent
jurisdiction seeking a reformation of this Agreement, including
a ruling on the proper disposition of the funds held in the
escrow account.
8G.4. Notwithstanding anything else in this
Section 8G to the contrary, if at any time upon a Contribution
Interruption, the Trustees reasonably determine that the fair
market value of the cash and other marketable securities of the
VEBA (and excluding any escrow account) reduced by the VEBA's
estimated incurred, but not reported, claims does not exceed the
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lesser of $1,000,000 or the sum of the next two quarterly
contributions due, then, upon 30 days advance written request by
the Trustees, Reorganized Lone Star shall either assume
sponsorship of, or replicate, the New Plans at its own expense.
Reorganized Lone Star shall be liable for the benefit claims and
expenses incurred with respect to the New Plans during the
period it has assumed sponsorship or replication of the New
Plans and the VEBA shall be liable for claims and expenses
incurred while it is sponsor of the New Plans, regardless of
when such claims and expenses are reported or billed. No
quarterly contributions shall be payable by Reorganized Lone
Star to the VEBA and/or escrow account during the period from
the date of Reorganized Lone Star's assumed sponsorship or
replication of the New Plans until the date, if any, that
Reorganized Lone Star's sponsorship or replication of the New
Plans under this Section 8G ends.
8G.5. Reorganized Lone Star's sponsorship or
replication of the New Plans under this Section 8G shall
continue until such time as the Agreement can be reformed or the
Trustees' elect, upon written notice to Reorganized Lone Star,
to revoke the sponsorship or replication of the New Plans and to
reinstitute payments by Reorganized Lone Star to the escrow
account (and the VEBA, to the extent permitted). Nothing in
this Section 8G shall restrict or limit the rights of
Reorganized Lone Star to make the Clawback election described in
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Section 8G herein. During the period, if any, that Reorganized
Lone Star assumes sponsorship or replication of the New Plans,
Reorganized Lone Star shall not be permitted to make any
modifications to such New Plans without the written consent of
the Trustees.
8G.6. Reorganized Lone Star's failure to make
contributions to the VEBA upon a Contribution Interruption shall
not be deemed an Event of Acceleration provided Reorganized Lone
Star, as applicable, makes timely contributions to the escrow
account and/or the VEBA or assumes sponsorship of or replicates
the New Plans, under this Section 8G to the extent that such
contributions, if made directly to the VEBA, would be unlawful.
8G.7. If, and to the extent that, at any time
after a Contribution Interruption, Reorganized Lone Star
determines that the making of the quarterly contributions to the
VEBA are no longer unlawful, Reorganized Lone Star's quarterly
contributions to the VEBA shall resume and Reorganized Lone
Star's contributions to the escrow account (or the sponsorship
or replication of the New Plans, as applicable) shall cease.
8G.8. Reorganized Lone Star shall pay all
reasonable expenses of the VEBA and the Trustees, including the
escrow fees, incurred with respect to this Section 8G.
9.0. Allocation of Participant Premiums
9.1. On the VEBA Effective Date or as soon
thereafter as is reasonably practicable, Reorganized Lone Star
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shall pay to the VEBA any premiums paid by the Salaried Retirees
to Lone Star or Reorganized Lone Star for the provision of
benefits under the Existing Plans on or after the VEBA Effective
Date. Such premiums paid by Salaried Retirees with respect to
periods of time beginning before and ending after the VEBA
Effective Date shall be prorated based on the number of calendar
days in such periods.
10.0. Acceleration of Veba Contributions
10A. Events of Acceleration
10A.1. The occurrence of one or more of the
following events is an "Event of Acceleration":
(a) Reorganized Lone Star shall default in the
payment when due of any contribution to the VEBA and such amount
shall remain unpaid (in whole or in part) for a period of ten
(10) days after receipt by Reorganized Lone Star of a written
default notice; or
(b) Reorganized Lone Star shall (i) apply for
or consent to the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself or of
all or a substantial part of its property, (ii) make a general
assignment for the benefit of its creditors under any applicable
state or federal bankruptcy law, (iii) commence a voluntary case
under the Bankruptcy Code (as now or hereafter in effect), (iv)
file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up,
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or composition or readjustment of debts, (v) fail to controvert
in a timely and appropriate manner, or acquiesce in writing to,
any petition filed against it in an involuntary case under the
Bankruptcy Code, or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(c) a proceeding or case shall be commenced,
without the application or consent of Reorganized Lone Star, in
any court of competent jurisdiction, seeking (i) its
liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment
of a trustee, receiver, custodian, liquidator or the like of
Reorganized Lone Star or of all or any substantial part of its
assets, or (iii) similar relief in respect of Reorganized Lone
Star under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed,
or any order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in
effect, for a period of 30 or more days; or an order for relief
against Reorganized Lone Star shall be entered in an involuntary
case under the Bankruptcy Code; or
(d) any acceleration of the payment
obligations of Reorganized Lone Star under the 10% Senior Notes
Due 2003 to be issued by Reorganized Lone Star under the Plan.
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10B. Default Interest and Conditions for Rescission
of Event of Acceleration
10B.1 Upon the occurrence of an Event of
Acceleration (the "Acceleration Date") there shall be and become
payable by Reorganized Lone Star to the VEBA, without notice or
demand, an amount equal to the present value, based upon an 8.5%
discount factor, of all unremitted quarterly contributions.
Until such accelerated amount is paid in full, it will bear
interest from the Acceleration Date at an 8.5% effective annual
yield, credited daily on any unpaid balance. In the event that
there has not occurred a Credit Rating Event of Default before
the Acceleration Date, the unremitted quarterly contribution and
remaining present values as of each payment date are shown in
Appendix A. In the event that a Credit Rating Event of Default
has occurred, and an additional contribution has been made to
the VEBA as required under Section 10C, then the present value
of the unremitted contributions shall be based on the reduced
schedule of quarterly contributions (as hereinafter defined)
which had been recalculated to reflect such additional
contribution; provided; however, that nothing shall relieve or
impair Reorganized Lone Star's obligations to make payment in
full of the accelerated amount and all interest accrued and
accruing thereon.
10B.2. If at any time after the Acceleration
Date but before the last quarterly contribution to the VEBA
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shall have become due by the terms of this Agreement and before
any judgment or decree for the payment of the monies due in
respect of the accelerated amount, expenses of collection,
including the reasonable expenses of the VEBA and its counsel,
and all other amounts payable pursuant to this Agreement
(collectively the "Retiree Obligations") shall have been
obtained or entered: (a) Reorganized Lone Star shall have
deposited with the Trustees a sum sufficient to pay all interest
on the Retiree Obligations accrued from the Acceleration Date to
the date of payment and all quarterly contributions and expenses
of collection which have become due and payable in accordance
with this Agreement through the date of payment other than by
acceleration (including, without limitation, any payments due in
respect of a Credit Rating Event of Default) and any and all
other defaults under this Agreement shall have been remedied and
(b)(i) any acceleration of the Senior Notes shall have been
rescinded and annulled, (ii) the VEBA shall have received the
same consideration as the holders of the Senior Notes (if the
holders of the Senior Notes received any consideration in
connection with the rescission of the acceleration of the Senior
Notes), calculated on an equal and ratable basis, if the
consideration is in the form of collateral or security, or
calculated, if applicable, as the same percentage of Reorganized
Lone Star's remaining obligation to the VEBA as the
consideration received by the holders of the Senior Notes
calculated as a percentage of Reorganized Lone Star's remaining
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principal obligations on the Senior Notes taking into account a
present value analysis, consistently applied, and reduced by an
amount which, when calculated as a percentage of Reorganized
Lone Star's remaining obligations to the VEBA, is the same
amount calculated as a percentage of Reorganized Lone Star's
principal obligations on the Senior Notes of any reductions in
value agreed to by the holders of the Senior Notes in connection
with any rescission of acceleration, and (iii) the rights of the
VEBA and the Trustees, on behalf of the Salaried Retirees, shall
continue unaffected after the rescission of the acceleration,
then the acceleration of the Retiree Obligations shall be deemed
rescinded. In the event that the Trustees have any question as
to whether the consideration proposed to be paid to the VEBA in
connection with the rescission of the acceleration is equal and
ratable to that received by the holders of the Senior Notes, the
VEBA and Reorganized Lone Star shall retain an independent
investment banker to advise the Trustees as to equal and ratable
consideration and the decision of such investment banker shall
be final and binding upon all of the parties hereto.
Reorganized Lone Star shall be responsible for paying all
reasonable fees and costs of the independent investment banker
incurred in connection with its findings.
10C. Credit Rating Event of Default
10C.1 If at any time prior to December 31, 2069, when
the Senior Notes are no longer outstanding, the rating by
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Standard & Poor's for any outstanding Senior Debt of Reorganized
Lone Star is below BB-, or (if no Senior Debt is then
outstanding) if the rating on any Subordinated Debt outstanding
is below BB-, or (if there is no Subordinated Debt outstanding)
the rating of any Reorganized Lone Star commercial paper is
below B. (or if there is no commercial paper outstanding), the
senior implied rating of any bank debt outstanding is below BB-,
then a Credit Rating Event of Default shall have occurred. In
the event that Standard & Poor's, or its successor, is no longer
operating or refuses to rate the debt of Reorganized Lone Star,
then Reorganized Lone Star shall obtain a rating from another
nationally recognized rating agency ("Substitute Rating
Agency"). The provisions above regarding the Standard & Poor's
rating shall then apply to the equivalent rating category for
the Substitute Rating Agency. Within ten (10) days after the
occurrence of a Credit Rating Event of Default Reorganized Lone
Star shall promptly contribute to the VEBA, cash, in a sum equal
to the four quarterly payments, as shown in Appendix A which
immediately follow the last quarterly payment made by
Reorganized Lone Star. Reorganized Lone Star shall continue to
be obligated to make quarterly contributions to the VEBA after
the Credit Rating Event of Default, under the same payment
schedule in effect before such Event; provided, however, the
amount of each quarterly contribution shall be reduced by
multiplying the contribution by a fraction the numerator of
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which is the accelerated contribution and the denominator of
which is the present value of all future quarterly contributions
(using an 8.5% discount factor) before deducting therefrom the
accelerated payment. For example, if a Credit Rating Event of
Default were to occur on December 31, 2003, Reorganized Lone
Star would be required to promptly contribute the sum of the
quarterly contributions due January 1, April 1, July 1, and
October 1, 2004. That sum would equal $3,700,000. The amount
of each future quarterly contribution (with the next such
contribution due January 1, 2004), would be reduced by a
fraction equal to $3,700,000/$29,165,000 = .126864, where the
denominator of $29,165,000 equals the present value of all
future quarterly contributions before deduction of the
accelerated payment. For example, the payment due on January 1,
2004 would be reduced from $925,000 to $807,651 by subtracting
out .126864 x $925,000 = $117,349. The remaining present value
of all future quarterly contributions would be reduced from
$29,165,000 to $25,465,000.
10C.2 Subject to the notice provisos, any failure to
make payment upon a Credit Rating Event of Default shall
constitute a non-payment default and shall result in an Event of
Acceleration.
10.D. Remedies
10D.1 If an Event of Acceleration occurs and is
continuing, the Trustees may pursue any available remedy to
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collect all unremitted quarterly contributions and premiums, if
any, and interest on such unremitted contributions or to enforce
the performance of any provision of this Agreement.
10D.2 A delay or omission by the Trustees in
exercising any right or remedy accruing upon an Event of
Acceleration shall not impair the right or remedy or constitute
a waiver of or acquiescence in the Event of Acceleration. All
remedies are cumulative to the extent permitted by law.
10D.3 The Trustees may waive any Event of Acceleration
and its consequences hereunder. Upon any such waiver, such
Event of Acceleration shall be deemed to have been cured for
every purpose of this Agreement; but no such waiver shall extend
to any subsequent or other Event of Acceleration or impair any
right consequent thereon.
10D.4 If an Event of Acceleration occurs and is
continuing, the Trustees are authorized to recover judgment in
their own name and as trustees of an express trust against
Reorganized Lone Star for the whole amount of the unremitted
quarterly contributions and premium, if any, and interest on any
overdue amount and, to the extent lawful, interest 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 Trustees, their
agents and counsel.
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10D.5 The Trustees are 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 Trustees (including
any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustees, their agents and
counsel) allowed in any judicial proceedings relative to
Reorganized Lone Star (or any other obligor hereunder), its
creditors or its property and shall be entitled and empowered to
collect, receive and distribute any money or other property
payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized to make such
payments to the Trustees, and to pay to the Trustees, their
agents and counsel, and any other amount due the Trustees
hereunder.
10D.6 The Trustees shall have the power to institute
and to maintain such proceedings as they may deem expedient to
prevent any impairment of the Claim, the VEBA or any
contribution or payment to the VEBA by any acts which may be
unlawful or in violation of this Agreement and to protect their
interest and the interest of the VEBA hereunder, including power
to institute and maintain proceedings to restrain the
enforcement of or compliance with any governmental enactment,
rule or order that may be unconstitutional or otherwise invalid,
if the enforcement of or compliance with such enactment, rule or
order would impair the obligations hereunder, the VEBA estate or
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be prejudicial to the interests of the VEBA or the Trustees.
10D.7 Nothing in this Section shall impair or affect
the rights of Salaried Retirees to seek the appointment of an
authorized representative, as defined in Section 1114 of the
Bankruptcy Code, in any subsequent bankruptcy proceedings for
Reorganized Lone Star, its successors or assigns.
11.0. MATERIAL ADVERSE CHANGE
11.1. In the event that a Material Adverse
Change occurs prior to the Effective Date, this Agreement shall
be subject to renegotiation, at the request of the Committee. A
Material Adverse Change shall constitute sufficient grounds and
basis for the Committee to seek the entry of an order increasing
the retiree benefits of the Salaried Retirees pursuant to
Section 1114(g) of the Bankruptcy Code.
11.2. The following events shall not constitute
a Material Adverse Change within the meaning of this Agreement:
(a) Pre-Confirmation asset sales of non-core
assets by the Debtors;
(b) Variations in cash distributions to
creditors under the Plan solely as a result of the Plan
Confirmation Date occurring after January 1, 1994, as long as
the value of the Claim is not materially adversely affected;
(c) Any change(s) in the distribution to
current equity holders of the Debtors, provided that any
change(s) are consented to by the Official Committee of
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Unsecured Creditors and the treatment of the Claim, as a result
of any change(s), shall be the same as all other general
unsecured claims;
(d) Any change(s) as a consequence of
replacing the Debtors' projected operating results with the
Debtors' actual 1993 operating results in the Plan;
(e) A settlement by the Debtors with the
Pension Benefit Guaranty Corporation substantially on the terms
set forth in the Disclosure Statement;
(f) A settlement by the Debtors with the
Environmental Protection Agency substantially on the terms set
forth in the Disclosure Statement;
(g) A settlement by the Debtors regarding
production payment financing substantially on the terms set
forth in the Disclosure Statement;
(h) The accrual of interest on the Senior
Notes or the Asset Proceeds Notes as of January 31, 1994; and
(i) Any change(s) to the Plan solely as a
result of business or economic conditions which do not
materially decrease the value of the Claim.
12.0. Settlement of Claims for Past, Present or Future Benefits
From Existing Plans
12.1 Except as provided in Section 2.1 with
respect to eligible claims for benefits that are required to be
provided under the Existing Plans (including claims that may be
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disputed under the claims review procedures under the Existing
Plans), the Released Parties shall therefore be irrevocably and
unconditionally released and discharged from, and all Salaried
Retirees, their spouses, and dependents shall be deemed to have
waived and relinquished, any and all claims, demands, debts,
liabilities, obligations, actions, causes of action, suits, sums
of money, accounts, reckonings, covenants, contracts,
controversies, agreements, promises and rights whatsoever,
whenever arising, known or unknown, suspected or unsuspected,
contingent or fixed, liquidated or unliquidated, matured or
unmatured, in law, equity, bankruptcy, or otherwise, which the
Salaried Retirees, their spouses and dependents, or any person
or entity claiming from, through or under them, ever had, now
has, or hereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
connection with the Existing Plans and any successor or
predecessor plans, including, but not limited to, all medical
and death benefits, and any other benefit claims or costs
incurred by the Salaried Retirees, their spouses and their
dependents prior to the VEBA Effective Date.
13.0. Dispute Resolution
13.1. Except as provided in Sections 8D, 8G.3,
10 and 11, all disputes arising in connection with this
Agreement shall be finally settled under the then applicable
rules of the American Arbitration Association ("AAA"). Such
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<PAGE> 54
arbitration shall be conducted in New York City (or other
location mutually acceptable to the parties). Decisions of the
arbitrators shall be in accordance with the substantive laws of
the State of New York (excluding any of its conflict of laws
rules which require the application of the substantive laws of
any other jurisdiction). The arbitrators shall state the
reasons for their decision in writing.
13.2. The decision of any such arbitration
proceeding shall be final, conclusive and binding upon the
parties. Judgment upon such award may be entered in and
executed upon by the prevailing party in any court having
jurisdiction thereof, or application may be made by the
prevailing party to any such court for judicial acceptance of
such award and an order of enforcement. Each party shall pay
its own costs associated with any arbitration; however, at the
discretion of the arbitrators, all expenses of such arbitration
shall be paid by the losing party.
14.0. Cooperation of the Parties
14.1. Lone Star, the Committee, the Trustees and
their respective successors shall each reasonably cooperate to
effect the provisions of this Agreement, including obtaining the
determination and ruling from the IRS described in Section 4,
obtaining the DOL opinion or exemption described in Section 7.2,
obtaining the favorable judicial orders provided for in Section
16, and facilitating the transfer of records and administrative
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<PAGE> 55
functions from the Debtors and its administrators to the VEBA
and its administrators.
14.2. In addition, the Committee, the Trustees,
and their agents and successors shall provide copies of the
following documents to Reorganized Lone Star as soon as
reasonably practicable:
(a) The documents evidencing or creating the
VEBA, including any amendments;
(b) The documents evidencing or creating any
New Plan, including any amendments;
(c) The application on IRS Form 1024 for
recognition of the tax-exempt status of the VEBA (and any
related correspondence with the IRS);
(d) The request for a private letter ruling
from the IRS regarding the Collectively Bargained Exemption (and
any related correspondence with the IRS); and
(e) The information referred to in Section
14.4.
14.3. In addition, Reorganized Lone Star and its
agents and successors shall provide copies of the following
documents and information to the Committee and the Trustees as
soon as reasonably practicable:
(a) All notices, demands, suits, pleadings,
requests, motions, stipulations, briefs, judgments or orders
received, filed or entered in connection with any claim or
-52-
<PAGE> 56
challenge that any Salaried Retiree, spouse, or dependent is not
to be bound by the Order approving the Agreement;
(b) The request for a DOL advisory opinion or
exemption described in Section 7.2 (and related correspondence
with the DOL); and
(c) Notice of any pending sale or transfer
covered by Section 21.2 hereof as soon as possible after the
purchase agreement or other documents evidencing such sale have
been executed, and notice of the sale or transfer is
consummated, and documentation evidencing compliance with the
condition contained in Section 21.2 hereof.
(d) Upon request by the Trustees, the
documents evidencing or creating any welfare plans for salaried
retirees (including the plans referred to in Sections 8B and 8F).
14.4. The Trustees shall provide Reorganized
Lone Star (its successors, assigns and agents) with such cost
and census information concerning the New Plans, the VEBA and
the Salaried Retirees as Reorganized Lone Star may reasonably
request. Such information may include, but shall not be limited
to, details on plan designs applicable to all participants,
premium charges and contribution rates applicable to Salaried
Retirees and dependents, participant data, administrative costs,
required filings, and details on claims paid for each year.
Reorganized Lone Star shall pay any incremental costs and
expenses of the Trustees in providing such information.
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<PAGE> 57
15.0. Audits
Reorganized Lone Star and the VEBA (and their
respective successors, assigns and agents) shall have the
reasonable right during normal business hours to audit for
compliance with the terms of this Agreement and to verify the
accuracy of any notices provided to them by the Committee, the
Trustees or Reorganized Lone Star, or their respective agents or
successors, as the case may be. The Committee, the Trustees and
Reorganized Lone Star, and any of their agents shall be obliged
to cooperate with the conduct of such audits and verification
efforts, including, but not limited to, responding to reasonable
information requests. All reasonable expenses incurred by the
Committee, the Trustees, the VEBA and their advisors with
respect to any audit conducted on behalf of Reorganized Lone
Star shall be paid by Reorganized Lone Star.
16.0. Conditions Precedent to Effectiveness of Agreement
16.1. The effectiveness of this Agreement is
conditioned upon the confirmation of the Debtors' Plan,
substantially in the form submitted to the Bankruptcy Court on
November 5, 1993, subject to Section 11.2 of this Agreement, and
such other revisions therein to which the Committee may consent.
16.2. If the Bankruptcy Court enters an Order
approving the Agreement in its entirety but such an Order is
reversed or vacated in any part on appeal, then all parties
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<PAGE> 58
shall be irrevocably and unconditionally released and discharged
from their obligations arising under this Agreement.
16.3. Any and all voting rights of the Salaried
Retirees for any and all claims relating to the modification or
termination of retiree benefits shall only be waived upon the
happening of the following:
(a) the entry of a final non-appealable Order
approving this Agreement;
(b) the Committee is reconfirmed and certified
by the Bankruptcy Court as the authorized representative of the
Salaried Retirees; and
(c) the Debtors' Plan in substantially the
form submitted to the Bankruptcy Court on November 5, 1993 is
confirmed by final Order of the Bankruptcy Court.
17.0. Indemnifications and Liabilities
17.1. The VEBA and the New Plans shall have no
liability or other obligation with respect to any Salaried
Retiree, spouse, or dependent who is ever held by any court not
to be bound by an Order approving the Agreement. The cost of
defense of any such claims shall be paid by Lone Star, and Lone
Star or Reorganized Lone Star shall have complete control of the
defense of such claims. Lone Star or Reorganized Lone Star may
settle such a claim without the consent of the Committee or the
Trustees, provided, Lone Star or Reorganized Lone Star shall
promptly notify the Committee and/or the Trustees of such
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<PAGE> 59
settlement.
17.2. In the event that, by final judgment or
settlement, any Participant is not bound by the Order approving
this Agreement, then Reorganized Lone Star's quarterly
contributions to the VEBA and the amount of the Claim shall be
reduced by the amount of such contributions and Claim
attributable to such Participant. Such reduction shall be based
upon the actuarial assumptions used in the Wyatt Valuation. The
January 1, 1993 present value, as prepared by Wyatt, of each of
the four retired executives is contained in the letter from
Wyatt to Segal dated November 24, 1993, and is incorporated
herein by reference.
17.3. Reorganized Lone Star shall indemnify the
VEBA, the New Plans, the Trustees and the Committee for any loss
and expense incurred by the VEBA, the New Plans, the Trustee,
and/or the Committee with respect to a Salaried Retiree, or his
eligible spouse or dependent, who was not covered in the New
Plans due to the knowing failure of Lone Star to notify the
Committee or Trustees (or their actuarial consultant) of the
existence of such Salaried Retiree and to provide his last known
address.
18.0. Miscellaneous
18.1. This Agreement supersedes all previous
written or oral negotiations, commitments and writings between
the Debtors and the Committee.
-56-
<PAGE> 60
18.2. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State
of New York (excluding any of its conflict of laws rules which
require the application of the substantive laws of any other
jurisdiction), except to the extent that federal law controls
any subject matter of this Settlement Agreement, in which event
the federal law shall govern.
18.3. Lone Star acknowledges that if, after the
Effective Date, Reorganized Lone Star commences a voluntary
case, or an involuntary case is commenced, seeking relief under
the Bankruptcy Code, Reorganized Lone Star's obligation to make
quarterly contributions to the VEBA or, in the event of a
Clawback prior to such bankruptcy, to provide benefits under the
Existing Plans, may not be modified or reduced in any way,
except as expressly provided in this Agreement or Section 1114
of the Bankruptcy Code, and that such obligations are with
respect to "retiree benefits" as defined in Section 1114(a) of
the Bankruptcy Code.
18.4. This Agreement shall not be construed
either as an admission of liability by any party or as an
acknowledgment of the truth of any allegation asserted in any
matters concluded by this Agreement.
18.5. This Agreement has been intensively
negotiated, and the parties agree that no party is the "drafter"
thereof for purposes of any rule of construction to the effect
-57-
<PAGE> 61
that contracts are to be construed adversely to the drafter.
18.6. All notices to be provided to Lone Star
shall be directed to its general corporate offices to the
attention of the General Counsel. All notices to be provided to
the Committee, or to the VEBA, shall be directed to the Chairman
of the Committee, or the Trustees, whichever is applicable, and
to the counsel for the Committee, or VEBA, whichever is
applicable.
18.7. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original, but all of which shall together constitute one and the
same Agreement.
18.8. This Agreement constitutes the entire
understanding between the parties with respect to the subject
matter contemplated herein; and all prior agreements,
understandings, representations and statements, oral or written
(including the Summary of Material Terms of Settlement dated
November 29, 1993) are superseded by this Agreement and may not
be relied upon or used for any purpose in any arbitration or
legal proceeding pursuant to this Agreement.
18.9. Captions preceding the sections hereof are
inserted solely as a matter of convenience and in no way define
or limit the scope or intent of any provision hereof.
18.10. Notwithstanding anything in this
Agreement to the contrary, any offers or sales of Securities by
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<PAGE> 62
the Committee or Trustees (or their agents) shall comply with
all applicable federal and state securities laws.
19.0. The Trustees.
19.1. Reorganized Lone Star is not a fiduciary
of the VEBA within the meaning of Section 3(21) of ERISA. The
Trustees do not owe any fiduciary duties to Reorganized Lone
Star by virtue of their status as trustees of the VEBA.
Reorganized Lone Star shall not assert any claim or liability
for breach of fiduciary duties against the Trustees with respect
to the VEBA. To the extent permitted under ERISA and the terms
of the VEBA, the Trustees shall be indemnified and held harmless
by the VEBA and against any and all expenses, including
counsel fees and disbursements, or loss suffered by the Trustees
personally in connection with any action, suit or other
proceeding involving any claim, or in connection with any claim
or demand, which in any way, directly or indirectly, arises out
of or relates to this Agreement, the VEBA, the New Plans or
otherwise.
19.2. The selection and appointment of the Trustees
shall be governed by the VEBA. The initial terms of the VEBA
shall be established by the Committee and shall be subject to
amendment, from time to time, as set forth in the VEBA.
19.3. Except with respect to the Securities held in
escrow under Section 7.2, commencing on the Effective Date, the
Trustees, the Committee or any other authorized representative
appointed pursuant to Section 1114 of the Bankruptcy Code to
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<PAGE> 63
represent the interests of the Salaried Retirees, shall have
authority to enforce the performance by Reorganized Lone Star of
any provision of this Agreement.
20.0. Amendments
20.1 This Agreement may be amended, modified,
or waived only by a writing signed by the party or parties to
this Agreement or their successors sought to be charged by such
amendment, modification or waiver.
21.0. Successors and Assigns
21.1. This Agreement shall be binding upon and
inure to the benefit of the undersigned, and their respective
successors and assigns, and the Salaried Retirees, their
eligible spouses and dependents. For purposes of this
Agreement, the Trustees shall be deemed to be the successor to
the Committee.
21.2. Reorganized Lone Star shall not, other
than the transactions contemplated under the Plan, transfer or
lease all or substantially all of its assets to, any person
unless:
(1) the person assumes all of the obligations of
Reorganized Lone Star under this Agreement; and
(2) immediately after the transaction no Event
of Acceleration exists.
The surviving transferee or lessee shall be the successor to
Reorganized Lone Star under this Agreement, but Reorganized Lone
Star shall not be released from its obligations hereunder.
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<PAGE> 64
22.0 Collateral
22.1 Reorganized Lone Star's obligations to
make quarterly contributions to the VEBA and, in the event of a
Clawback, to provide benefits, shall be collateralized to the same
extent, if any, as contributions and/or benefits to be provided
in the Debtors' settlement with its Union retirees.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
<TABLE>
<S> <C>
WITNESS: LONE STAR INDUSTRIES, INC., et al.
Debtors and Debtors-in-Possession
/s/ illegible By /s/ David W. Wallace
David W. Wallace,
Chairman and Chief Executive
Officer
OFFICIAL COMMITTEE OF RETIRED
EMPLOYEES
/s/ Karen Walsh By /s/ Olaf Kayser
Olaf Kayser, Chairman
2760K
</TABLE>
-61-
<PAGE> 65
APPENDIX A
<PAGE> 66
Lone Star Industries, Inc. Appendix A
Retiree Life and Medical Benefits Page 1 of 4
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Quarterly PV of Future
Cash Payments as of
Year Payment January 1
<S> <C> <C>
1994 1,035,500 41,500,000
1995 1,063,500 40,668,000
1996 1,076,750 39,646,000
1997 1,085,000 38,483,000
1998 1,056,750 37,186,000
1999 1,030,750 35,897,000
2000 1,020,250 34,609,000
2001 989,750 33,256,000
2002 969,000 31,915,000
2003 945,000 30,548,000
2004 925,000 29,165,000
2005 912,250 27,750,000
2006 890,250 26,268,000
2007 862,000 24,753,000
2008 837,000 23,228,000
2009 808,750 21,678,000
2010 779,000 20,116,000
2011 744,250 18,546,000
2012 707,500 16,989,000
2013 668,000 15,454,000
2014 627,250 13,956,000
2015 583,000 12,501,000
2016 533,500 11,110,000
2017 488,750 9,808,000
2018 437,750 8,584,000
</TABLE>
11/24/93
<PAGE> 67
Lone Star Industries, Inc. Appendix A
Retiree Life and Medical Benefits Page 2 of 4
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Quarterly PV of Future
Cash Payments as of
Year Payment January 1
<S> <C> <C>
2019 395,000 7,470,000
2020 353,250 6,442,000
2021 313,250 5,502,000
2022 274,750 4,651,000
2023 239,750 3,889,000
2024 197,750 3,210,000
2025 167,500 2,651,000
2026 140,250 2,171,000
2027 116,250 1,765,000
2028 95,250 1,425,000
2029 77,250 1,145,000
2030 61,750 918,000
2031 49,250 735,000
2032 38,750 591,000
2033 30,500 478,000
2034 24,000 390,000
2035 19,000 322,000
2036 15,000 270,000
2037 12,250 230,000
2038 10,000 198,000
2039 8,500 173,000
2040 7,250 152,000
2041 6,500 134,000
2042 5,750 119,000
2043 5,250 104,000
</TABLE>
11/24/93
<PAGE> 68
Lone Star Industries, Inc. Appendix A
Retiree Life and Medical Benefits Page 3 of 4
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Quarterly PV of Future
Cash Payments as of
Year Payment January 1
<S> <C> <C>
2044 4,750 92,000
2045 4,250 80,000
2046 3,750 69,000
2047 3,250 59,000
2048 3,000 50,000
2049 2,500 41,000
2050 2,250 34,000
2051 2,000 27,000
2052 1,500 22,000
2053 1,250 17,000
2054 1,000 12,900
2055 750 9,600
2056 750 7,000
2057 500 5,000
2058 250 3,400
2059 250 2,300
2060 250 1,450
2061 100 880
2062 75 510
2063 50 270
2064 25 140
2065 10 60
2066 5 30
2067 2 10
2068 1 3
2069 1 1
2070 0 0
2071 0 0
2072 0 0
</TABLE>
11/24/93
<PAGE> 69
Appendix A
Page 4 of 4
Lone Star Industries, Inc.
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
Quarterly payments in the amount shown are due January 1, April 1, July 1, and
October 1. Present values shown represent the discounted value of future
payments, measured as of each January 1 inclusive of the payment then due.
Payments are discounted at an annual rate of 8.5%. Each year's quarterly
payments are discounted to January 1 using the factor .970123 = .25 x (1 +
V 1/4 + V 1/2 + V 3/4), where V = 1/1.085.
11/24/93
<PAGE> 70
EXHIBIT 1
<PAGE> 71
EXHIBIT 1
LONE STAR INDUSTRIES, INC.
SALARIED RETIREES
RETIREE MEDICAL AND LIFE INSURANCE PLAN SUMMARIES BY BRANCH
September 21, 1992
<PAGE> 72
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Executives
Eligible Group: Salaried Retirees - Executives
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 1 3 4
Spouses 1 2 3
- - -
Total 2 5 7
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
Full Coverage Comprehensive
Deductible - none
Coinsurance - 100%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - none
Out-patient Psychiatric - 100%
Prescription Drugs - 100%
Eye Examinations - 100%
Eye Glasses - 100%
Over Age 65:
Medicare Integration - Non-duplication of Benefits
Full Coverage Comprehensive
Deductible - none
Coinsurance - 100%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - none
Out-patient Psychiatric - 100%
Prescription Drugs - 100%
Eye Examinations - 100%
Eye Glasses - 100%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: 2 times pay
</TABLE>
1
<PAGE> 73
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 911
Eligible Group: Salaried Retirees - Lone Star after 1/1/90
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 50 16 66
Spouses 50 8 58
--- -- ---
Total 100 24 124
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
Comprehensive Plan:
Deductible - $150/2 per family per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - $1,400 per individual (includes deductible)
Annual Maximum - none
Lifetime Maximum - $1,000,000
Hospital Room & Board - 80% with Pre-admission Review (50%
without Pre-admission Review)
Surgical - 80% subject to Pre-admission Review for non-emergency
inpatient care
Extended Care Facility - 80% up to maximum of daily semi-private
room & board allowance
Out-patient Psychiatric - 80% up to $2,000 per calendar year
Prescription Drugs - 80%
Monthly Contributions (effective 1/1/90):
Retiree only - $8.30
Retiree and Spouse - $38.70
Retiree and Dependent - $38.70
Retiree and Multiple Dependents - 60.75
Over Age 65:
Medicare Integration - Maintenance of Benefits
Comprehensive Plan:
Deductible - $150/2 per family per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - $1,400 per individual (includes deductible)
</TABLE>
2
<PAGE> 74
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 911 (continued)
<TABLE>
<S> <C>
Comprehensive Plan (contd.):
Annual Maximum - none
Lifetime Maximum - $100,000
Out-patient Psychiatric - 80% up to $2,000 per calendar year
Prescription Drugs - 80%
Monthly Contributions (effective 1/1/90):
Retiree only - $0
Retiree and Spouse - $0
Retiree and Dependent - $38.70
Retiree and Multiple Dependents - 60.75
Medicare Part B:
No reimbursement
Life Insurance: Approximately 1 times pay decreasing to .5 times pay
</TABLE>
3
<PAGE> 75
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 610
Eligible Group: Salaried Retirees - Lone Star 7/1/84 - 1/1/90
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 235 225 460
Spouses 314 117 431
--- --- ---
Total 549 342 891
</TABLE>
Medical Plan:
<TABLE>
<S> <C>
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 365 at semi-private
Hospital Other Charges - full payment for 365 days
Surgical - 100% of Reasonable and Customary
X-ray & Lab - $100 per calendar year
Supplemental Accident - $150 per accident
Major Medical:
Deductible - $150/$450 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $50,000
Outpatient Psychiatric - 80% up to $2,000 per calendar year
Home Health Care - 80%
Prescription Drugs - 80%
Over Age 65:
Medicare Supplement
Medicare Integration: Maintenance of Benefits
Deductible - $150 per individual per calendar year plus Medicare Part
A & B Reimbursements
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $50,000
Out-patient Psychiatric - 80% up to $2,000 per calendar year
Home Health Care - 80%
Prescription Drugs - 80%
</TABLE>
4
<PAGE> 76
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 610 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: 1 times pay (2 times pay for executives)
</TABLE>
5
<PAGE> 77
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 609
Eligible Group: Salaried Retirees - Lone Star prior to 7/1/84
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 35 385 420
Spouses 58 317 375
-- --- ---
Total 93 702 795
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65 Base plus Major Medical Plan
Base:
Hospital Room and Board - 365 at semi-private
Hospital Other Charges - full payment for 365 days
Surgical - 100% of Reasonable and Customary
X-ray & Lab - $100 per calendar year
Supplemental Accident - $150 per accident
Major Medical:
Deductible - $75/$225 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $50,000
Outpatient Psychiatric - 80% up to $2,000 per calendar year
Home Health Care - 80%
Prescription Drugs - 80%
Over Age 65:
Medicare Supplement
Medicare Integration: Maintenance of Benefits
Deductible - $75 per individual per calendar year plus Medicare Part
A & B Reimbursements
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $50,000
Out-patient Psychiatric - 80% up to $2,000 per calendar year
Home Health Care - 80%
Prescription Drugs - 80%
</TABLE>
6
<PAGE> 78
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 609 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: 1 times pay (2 times pay for executives)
</TABLE>
7
<PAGE> 79
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 815
Eligible Group: Salaried Retirees - Marquette prior to 6/1/82
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 7 138 145
Spouses 15 122 137
-- --- ---
Total 22 260 282
</TABLE>
Medical Plan:
<TABLE>
<S> <C>
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days at semi-private in a 12 month
consecutive period
Hospital Other Charges - full payment for 120 days
Major Medical:
Deductible - $50 per Individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum -$15,000; $500 automatic reinstatement provision
Out-patient Psychiatric - 80% up to $2,000 per calendar year
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 120 days at semi-private in a 12 month
consecutive period
Hospital Other Charges - full payment for 120 days
Major Medical:
Deductible - $50 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $15,000; $500 automatic reinstatement provision
Out-patient Psychiatric - 80% up to $2,000 per calendar year
Prescription Drugs - 80%
</TABLE>
8
<PAGE> 80
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 815 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: 1 times pay
</TABLE>
9
<PAGE> 81
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 161
Eligible Group: Salaried Retirees - NYTR, PCA, PIN, PRM
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 43 43
Spouses 0 8 8
- -- --
Total 0 51 51
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
No company plan
Over Age 65:
No company plan
Medicare Part B:
Post-65 premium reimbursed at 100% ($381.60 in 1992). May not
apply to all retirees and spouses.
Life Insurance: Varies, most under $8,000.
</TABLE>
10
<PAGE> 82
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 16
Eligible Group: Salaried Retirees - Hawaii Cement
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 3 3
Spouses 0 0 0
- - -
Total 0 3 3
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
No company plan
Over Age 65:
No company plan
Medicare Part B:
No company reimbursement of premium.
Life Insurance: $4,000/$2,000
</TABLE>
11
<PAGE> 83
EXHIBIT 2
<PAGE> 84
EXHIBIT 2
July 20, 1993
Mr. Stuart I. Wohl
Actuarial Associate
The Segal Company
1920 N Street, N.W.
Suite 500
Washington, D.C. 20036-1601
Re: Lone Star Industries Retiree Benefits
Dear Stu:
The purpose of this letter is to provide you with a summary of our January 1,
1993 valuation of Lone Star Industries, Inc. retiree life and medical benefits
for current salaried retirees. In addition, we are providing the enclosed
diskette containing updated participant data as of 1/1/93 used in the
valuation.
The principal results of the valuation were as follows (in 000's):
<TABLE>
<CAPTION>
1/1/93 APBO 1993 Cash Flow
----------- --------------
<S> <C> <C>
Medical Benefits $ 34,769 $ 3,655
Medical Part B 5,410 442
Life Insurance 17,137 1,371
------------ ------------
Total 57,316 5,468
</TABLE>
A breakout of information by branch is attached for medical, Medicare Part
B, and life insurance benefits.
Participant data included 1,121 salaried retirees and 825 spouses/dependents
as of 1/1/93. This group includes individuals retiring both pre and post
petition, prior to 1/1/93. This data base has been updated and improved since
the prior valuation, particularly in regard to the number and ages of eligible
spouses. A layout of the data on our diskette is attached.
<PAGE> 85
Mr. Stuart I. Wohl
The Segal Company
July 20, 1993
Page 2
Actuarial assumptions used in the 1/1/93 valuation are shown on the attached
summary. Changes in assumptions made since the prior valuation include the
following:
o We have incorporated an explicit valuation of ASO administrative
fees, reflecting Lone Star's current agreement at $12.73 per
retiree per month, and assuming that these fees increase at 5.0%
per year. This approach replaces the "load" on net claims used
in our 1/1/92 valuation.
o We have updated the start rates used to value medical benefits by
(1) eliminating the expense load as indicated above, (2)
reflecting 1992 claims experience, and (3) adjusting spouses
start costs to reflect the significant revision to the number of
spouses included in the participant data.
o We have revised our assumption for Medicare Part B premium
reimbursement to explicitly reflect the increases for 1993 and
1994 incorporated into law. In the 1/1/92 valuation, we used a
flat 6.0% increase for all years. For the 1/1/93 valuation we
have used a higher rate of 12.2% for 1993 and 1994, combined with
a lower rate of 4.5% for subsequent years. This lower ultimate
rate is intended to reflect anticipated CPI.
Please let us know if you have any questions about the attached information.
Sincerely
/s/ Peter M. Carroll
Peter M. Carroll, FSA
Consulting Actuary
jv:001
Enclosures
cc: Jeffrey Levitan
Jeffrey Agnew
Gerald Hyde
William Roberts
Richard Murdock
Gary Tomaino
<PAGE> 86
Lone Star Industries, Inc.
Retiree Life and Medical Benefit Plans
Actuarial Valuation as of January 1, 1993
Summary of Actuarial Assumptions Used to Value
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
ASSUMPTION DESCRIPTION
<S> <C> <C>
Economic Discount Rate 8.5% per annum, compounded annually.
Assumptions
Demographic Mortality The UP84 Mortality Table, set back two
Assumptions years.
Medical Annual Medical Year Pre65 Post 65
Assumptions Trend 1993 17.0% 11.0%
1994 16.0% 10.5%
1995 15.0% 10.0%
1996 14.0% 9.5%
1997 13.0% 9.0%
1998 12.0% 8.5%
1999 11.0% 8.0%
2000 10.0% 7.5%
2001 9.0% 7.0%
2002 8.0% 7.0%
2003+ 7.0% 7.0%
Age Related
Medical Cost Scale Age Rate
55-71 3.5%
72 3.0%
73 2.5%
74 2.0%
75 1.5%
76 1.0%
77 .5%
78+ .0%
Medicare Part B Year Rate
Premium Increase 1993 12.2%
1994 12.2%
1995+ 4.5%
Expenses Current per capita charge ($12.73 per month
per retiree) assumed to increase at 5.0% per
year.
</TABLE>
July 20, 1993
<PAGE> 87
EXHIBIT 3
<PAGE> 88
LONE STAR INDUSTRIES, INC.
POST BANKRUPTCY
SALARIED RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 911 (Revised)
Eligible Group: Salaried Retirees
Medical Plan:
<TABLE>
<S> <C>
Under Age 65
o Deductible - $150/$300 per calendar year
Effective January 1 of each year, annual deductibles change by
medical trend
o Coinsurance - 80%/20%
o Out-of-Pocket Limits - $1,500. Effective January 1
of each year annual out-of-pocket limits change by
medical trend
o Annual Maximum - none
o Lifetime Maximum - $1,000,000
o Hospital Room & Board - 80% with Pre-admission
Review (50% without Pre-admission Review)
o Surgical - 80% subject to Pre-admission Review for
non-emergency inpatient care (50% without Pre-
admission Review)
o Out-patient Surgery - 80% subject to Pre-admission
Review for non-emergency care (50% without Pre-
admission Review)
o Extended Care Facility - 80% up to maximum of daily
semi-private room & board allowance
o Inpatient Mental and Nervous Disorders Benefit -
80% (including treatment for alcohol and drug
abuse) limited to $20,000 per year per individual
and $50,000 lifetime benefit maximum per
individual.
o Out-patient Psychiatric - 80% up to $2,000 per
calendar year
o Prescription Drugs - 80%
Monthly Contributions Projected
1/1/94
---------
Retiree Only $ 43.00
Retiree & Spouse 84.00
Retiree & Dependent 84.00
Retiree & Multiple Dependents 124.00
Effective January 1 of each year, monthly contributions change by
medical trend
</TABLE>
c:\llsirml
<PAGE> 89
Page 2
<TABLE>
<S> <C>
Over Age 65:
Comprehensive Plan:
o Medicare Integration - Maintenance of Benefits
o Deductible - $150/$300 per calendar year
Effective January 1 of each year, annual deductibles change by
medical trend
o Coinsurance - 80%/20%
o Out-of-Pocket Limits - $1,500. Effective January 1
of each year annual out-of-pocket limits change by
medical trend
o Annual Maximum - none
o Lifetime Maximum - $100,000
o Inpatient Mental and Nervous Disorders Benefit -
80% (including treatment for alcohol and drug
abuse) limited to $20,000 per year per individual
and $50,000 lifetime benefit maximum per
individual.
o Out-patient Psychiatric - 80% up to $2,000 per
calendar year
o Prescription Drugs - 80%
Monthly Contributions Projected
1/1/94
---------
Retiree Only $21.50
Retiree & Spouse 42.00
Retiree & Dependent 42.00
Retiree & Multiple Dependents 62.00
Effective January 1 of each year monthly contributions change by
medical trend
</TABLE>
<PAGE> 90
EXHIBIT 4
<PAGE> 91
EXHIBIT 4
EXAMPLES CONCERNING
VEBA SAVINGS
Example 1: January 1, 1995 - VEBA benefits include
prescription drugs for participants.
May 5, 1995 - "Health Care Legislation" is
enacted to include prescription drugs as
covered under Medicare, with an "effective
date" as of January 1, 1998.
Since prescription drugs are covered under
"New Plans" within the 270-day window period
prior to the enactment of Health Care
Legislation relating to such benefit, subject
to the procedures specified in paragraph 1 (a)
Reorganized Lone Star's contributions with
respect to the years beginning January 1, 1999
would be reduced by the lesser of the amount
of "VEBA Savings" or the amount of the
corresponding "Increased Health Care Costs."
In subsequent years, any reduction would be
calculated notwithstanding any subsequent
modifications to the VEBA's benefits to
terminate, reduce or modify prescription drug
benefits (i.e., the VEBA Savings would assume
prescription drugs continue to be available
under the VEBA).
Example 2: January 1, 1995 - VEBA amended to exclude
prescription drugs for participants.
December 15, 1995 - Federal legislation is
enacted to include prescription drugs as
covered under Medicare, with an "effective
date" of January 1, 1996.
Since the New Plans did not provide
prescription drugs within the 270-day window
period, Lone Star cannot reduce its
contributions to the VEBA, regardless of its
corresponding Increased Health Care Costs.
<PAGE> 92
EXHIBIT 5
<PAGE> 93
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- --------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### CARMINE MURATORE M 5/12/34 EXE
###-##-#### JEROME BENNETT M 10/20/22 EXE
###-##-#### JAMES STEWART M 2/8/22 EXE
###-##-#### ROBERT HUTTON M 4/28/21 EXE
###-##-#### ROGER MARTEL M 6/10/26 911
###-##-#### NELSON RASH M 11/8/34 911
###-##-#### ROBERT F SULLIVAN M 4/1/36 911
###-##-#### FRANCIS FACCHETTI M 1/17/22 911
###-##-#### BETTY ADAMS F 2/25/38 911
###-##-#### SUZANNE LUDWIG M 9/19/34 911
###-##-#### JEROME PIMPIS M 1/24/32 911
###-##-#### FRANCIS D CUTRESS M 3/11/29 911
###-##-#### THELMA LANKOWSKI F 12/1/32 911
###-##-#### FRANCIS F SABOURIN M 2/11/32 911
###-##-#### MARY K MEDEIROS F 8/10/25 911
###-##-#### JAMES O'SULLIVAN M 8/5/38 911
###-##-#### ALFRED W ACKER M 1/3/30 911
###-##-#### CHESTER BETTINI M 7/6/33 911
###-##-#### WILLIAM QUIMBY M 6/27/29 911
###-##-#### JAMES T SCHULER M 3/1/32 911
###-##-#### DOUGLAS K ROWELL M 6/13/59 911
###-##-#### CONRAD J GORDON M 7/29/37 911
###-##-#### SANDRA L KNOWLTON F 6/4/35 911
###-##-#### BOHUSLAV VODICKA M 7/17/29 911
###-##-#### ARVID KALNS M 11/25/22 911
###-##-#### ARTHUR ALBIN M 9/4/30 911
###-##-#### CLARENCE BYARD M 12/22/30 911
###-##-#### JAN E MERVA M 2/19/36 911
###-##-#### TOMAS MENDEZ M 8/29/35 911
###-##-#### GEORGE C CARELLA M 9/13/27 911
###-##-#### M ARAGON M 7/16/16 911
###-##-#### JACQUES D MUNTZ M 5/18/40 911
###-##-#### EMELIE C MAIOLO F 6/18/37 911
###-##-#### HERMAN ORFINI M 2/27/26 911
###-##-#### ROBERT HIGGINS M 11/8/34 911
###-##-#### MARION UHLER M 9/10/27 911
###-##-#### PAUL L SCHMUCK M 11/16/25 911
###-##-#### ARLENE SMITH F 8/31/28 911
###-##-#### FRANK L STAMPF M 7/1/29 911
###-##-#### BETTY HESS F 7/23/26 911
###-##-#### JOHN B BAINES M 7/3/27 911
###-##-#### LONNIE HARCUM M 9/19/29 911
###-##-#### BAYARD M CALL M 5/4/30 911
###-##-#### JOHN SKEEL M 12/4/31 911
</TABLE>
Page 1 1/3/94
<PAGE> 94
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- --------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### FREDERICK AUKEMAN M 9/13/28 911
###-##-#### DAVID BAILEY M 1/23/36 911
304.34-9853 KENNETH ARCHER M 4/29/35 911
###-##-#### RICHARD ALBRIGHT M 9/18/27 911
###-##-#### IRIS DUCLOS F 10/15/34 911
###-##-#### ROBERT L MOORE M 8/19/33 911
###-##-#### ROBERT J LASIK M 10/24/30 911
###-##-#### GERALD J FORBES M 11/22/30 911
###-##-#### WALLACE G IRMSCHER M 1/22/23 911
###-##-#### PAUL BISHOP M 9/4/35 911
###-##-#### DANIEL ALDERMAN M 8/6/30 911
###-##-#### HARRY J GARFIELD M 6/9/29 911
###-##-#### GEORGE MILLARD M 11/20/32 911
###-##-#### WILLIAM D HINSHAW M 11/14/26 911
###-##-#### ROBERT STEVERSON M 11/10/26 911
###-##-#### LOGAN BOREN M 1/24/24 911
###-##-#### OLLIE E BILLINGS M 2/5/28 911
###-##-#### LAMONT T. GATES M 2/16/34 911
###-##-#### LENNIS DORION M 1/7/26 911
###-##-#### GEORGE K FRAMNES M 7/14/41 911
###-##-#### CHARLES GREEN M 12/29/33 911
###-##-#### GEORGE NEWBY M 4/10/36 911
###-##-#### BOB DARE M 4/24/39 911
###-##-#### BERNARD BOYD M 7/21/32 911
###-##-#### HUGO GUILARTE A 9/3/35 911
###-##-#### WILLIAM D MAY M 1/29/28 911
###-##-#### CHARLES RATLIFF M 9/10/31 911
###-##-#### WILLIAM M ELSEY M 10/2/27 911
###-##-#### WAYLAND PETTY M 2/15/35 911
###-##-#### ThOMAS HAVNES M 7/24/31 911
###-##-#### DOMINIC TEDESCO M 6/13/27 911
###-##-#### RICHARD F YOUNGERMAN M 12/14/24 911
###-##-#### GLENN D WALTON M 9/12/25 911
###-##-#### HARRY HOLZAPFEL M 3/24/32 911
###-##-#### GILBERT KOCH M 6/23/29 911
###-##-#### OSCAR K DAGGS M 7/19/25 911
###-##-#### GORDON JOHNSON M 5/20/29 911
###-##-#### JOHN DUNN M 4/24/29 911
###-##-#### LOBERTA M DONOVAN F 9/15/36 911
###-##-#### TWILA J WILLIAMS F 6/20/29 911
###-##-#### FRANCIS PETERSON M 11/1/33 911
###-##-#### MELQUIA DESROMERO M 1/9/28 911
###-##-#### FRANCIS E PURCELL M 4/6/31 911
###-##-#### WILLIAM KIRKPATRICK M 11/19/27 911
</TABLE>
Page 2 1/3/94
<PAGE> 95
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- --------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### NELSON RASH M 11/8/34 911
###-##-#### A GUENETTE M 11/3/27 610
###-##-#### RONALD DIONNE M 8/4/33 610
###-##-#### J JOSEPH M 1/27/30 610
###-##-#### DONALD W PUBLICOVER M 5/26/27 610
###-##-#### W DALE M 3/13/23 610
###-##-#### EDWARD VASILE M 8/2/19 610
###-##-#### P BARRY M 8/8/29 610
###-##-#### R C TANDUS F 1/20/22 610
###-##-#### R DOLHAM M 12/16/21 610
###-##-#### JOHN J. MCGONAGLE M 1/22/22 610
###-##-#### JOHN J GRAHAM M 7/3/22 610
###-##-#### I MULLIN F 11/14/19 610
###-##-#### H HOLDEN M 10/29/25 610
###-##-#### A KERKMANN M 4/13/25 610
###-##-#### EDWARD D WILLETTE M 11/1/30 610
###-##-#### M KOSTURKO F 6/26/30 610
###-##-#### M NAPPI F 3/11/22 610
###-##-#### M NICOLETTI F 4/6/29 610
###-##-#### ALBERT BERBERICH M 4/19/32 610
###-##-#### J NORIEGA M 6/30/30 610
###-##-#### A IMHOFF M 8/22/25 610
###-##-#### F DE LA VIESCA M 2/3/21 610
###-##-#### D MCDONOUGH M 4/18/28 610
###-##-#### T CARLOUGH M 9/29/20 610
###-##-#### JOHN A KEENAN M 4/1/28 610
###-##-#### B SCHUERGER F 9/25/20 610
###-##-#### LOUIS VASCO M 6/28/27 610
###-##-#### G BICKEL M 4/29/24 610
###-##-#### FRANCIS VANDYKE M 4/4/25 610
###-##-#### CHRISTOPHE MEANY M 12/9/28 610
###-##-#### THOMAS DULLAHAN M 10/27/33 610
###-##-#### K RELYEA M 3/28/21 610
###-##-#### JOHN STUBBS M 4/9/30 610
###-##-#### R NENNI M 3/25/31 610
###-##-#### B KETTERER M 7/2/24 610
###-##-#### JANET F FRUSCIANTE F 2/20/51 610
###-##-#### R READ M 6/16/20 610
###-##-#### A CARBONE M 4/13/23 610
###-##-#### J KANE M 8/17/23 610
###-##-#### C FREY M 8/10/30 610
###-##-#### J DRISCOLL M 8/16/23 610
###-##-#### BRUCE SINKEY M 12/28/25 610
###-##-#### R FIDURA M 8/16/31 610
</TABLE>
Page 3 1/3/94
<PAGE> 96
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### R RAU M 10/30/28 610
###-##-#### S HELLSTROM M 10/28/24 610
###-##-#### F DELANEY M 11/1/22 610
###-##-#### JOSEPH HOGAN M 5/10/28 610
###-##-#### CHENG H CHIN M 12/19/27 610
###-##-#### GEORGE SEGNIT M 8/11/23 610
###-##-#### E ANDERSON M 4/26/29 610
###-##-#### EDWIN D SWEENEY M 10/1/33 610
###-##-#### ROBERT MOON M 3/11/27 610
###-##-#### J BAIOCCO M 2/13/32 610
###-##-#### T CODD M 9/7/32 610
###-##-#### DONALD MELIUS M 12/19/26 610
###-##-#### D DENNO M 8/28/19 610
###-##-#### R PAGANO M 3/21/34 610
###-##-#### W RUDOLPH M 6/21/31 610
###-##-#### T PRICE M 12/23/19 610
###-##-#### E WINTLE M 3/28/33 610
###-##-#### N RAMBLER F 10/23/24 610
###-##-#### GERALD A ETMAN M 12/9/29 610
###-##-#### H GREEN M 6/10/27 610
###-##-#### PETER ANDERSEN M 11/1/30 610
###-##-#### W HENRICK M 1/14/26 610
###-##-#### C LOMAX F 2/28/26 610
###-##-#### J FOSTER M 11/4/29 610
###-##-#### W SHAW M 7/21/25 610
###-##-#### R EBNER M 2/8/31 610
###-##-#### VICTOR BURTON M 3/1/27 610
###-##-#### J SUEIRAS M 5/2/26 610
###-##-#### S WOODRING M 7/15/22 610
###-##-#### T EGNOT M 5/16/33 610
###-##-#### D BOHONAS M 3/11/32 610
###-##-#### ELMER BAUER M 7/6/18 610
###-##-#### RUDOLPH MARKOVITZ M 2/10/26 610
###-##-#### R SEARLES M 4/3/28 610
###-##-#### CHARLES SKRAPITS M 10/18/27 610
###-##-#### J BLANK M 8/14/27 610
###-##-#### BERNARD SAHENE M 5/21/27 610
###-##-#### J SCHLEGEL M 4/15/20 610
###-##-#### L HAVICE M 5/14/15 610
###-##-#### RUSSELL J JOHNSON M 4/24/23 610
###-##-#### W PAUKOVITZ M 10/27/22 610
###-##-#### S MAGDITCH M 6/3/20 610
###-##-#### CARL CASEY M 6/29/30 610
###-##-#### WAYNE FULLERTON M 6/21/30 610
</TABLE>
Page 4 1/3/94
<PAGE> 97
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### H WEIDMAN M 3/6/24 610
###-##-#### P RIONDET M 2/24/28 610
###-##-#### R BOEHMER M 6/22/24 610
###-##-#### W CLEMENTS M 6/28/33 610
###-##-#### JOHN MALLOY M 11/14/26 610
###-##-#### J HOFFERT M 3/28/24 610
###-##-#### CHARLIE FEHNEL M 3/11/24 610
###-##-#### ANDREW KOHAN M 6/19/24 610
###-##-#### CATHERINE HECKMAN F 3/9/25 610
###-##-#### KERMIT LILLY M 7/9/26 610
###-##-#### G BOWARD M 8/24/32 610
###-##-#### RICHARD T. JACKSON M 8/6/31 610
###-##-#### JEANNE M REESER F 12/1/28 610
###-##-#### GENE B. KELLER M 8/9/30 610
###-##-#### JOHN KELLER M 6/30/26 610
###-##-#### DONALD KLICK M 4/23/31 610
###-##-#### J EDWARDS M 12/26/24 610
###-##-#### W MACLIN M 10/8/23 610
###-##-#### K MORRIS M 10/12/27 610
###-##-#### ROBERT A. CRAVEN M 2/28/29 610
###-##-#### JAMES PARKERSON M 1/9/24 610
###-##-#### HERBERT H CLARK M 1/18/35 610
###-##-#### RAY GRUBBS M 1/16/34 610
###-##-#### L WRENN M 10/5/26 610
###-##-#### W WALKER M 2/27/28 610
###-##-#### A POTTS M 10/20/21 610
###-##-#### EDDIE M MINSON M 7/15/30 610
###-##-#### C MYERS M 4/8/29 610
###-##-#### BRUCE C COPAL M 11/6/32 610
###-##-#### A DAVIDSON M 4/20/32 610
###-##-#### J PEARSON F 2/20/34 610
###-##-#### HAZEL P TAYLOR F 9/18/20 610
###-##-#### W UTLEY M 4/7/27 610
###-##-#### H DAVIS M 10/16/17 610
###-##-#### T MELTON M 7/2/23 610
###-##-#### H REID M 4/27/26 610
###-##-#### P MOSS M 5/11/26 610
###-##-#### JACK L MARTIN M 9/21/27 610
###-##-#### G RIDGWELL M 11/2/29 610
###-##-#### H WELCH M 1/27/33 610
###-##-#### J SAWYER M 12/17/22 610
###-##-#### J MEADOR M 11/20/24 610
###-##-#### M OVERBY F 6/13/22 610
###-##-#### JOHN W HARRIS M 9/1/25 610
</TABLE>
Page 5 1/3/94
<PAGE> 98
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### K WILLIAMS M 8/19/26 610
###-##-#### D OVERBY M 6/12/30 610
###-##-#### J PEEBLES M 12/15/30 610
###-##-#### V ALL M 5/15/28 610
###-##-#### R BRUGH M 3/15/31 610
###-##-#### THOMAS R DEAL M 3/10/31 610
###-##-#### W AUSTIN M 12/4/32 610
###-##-#### R BARTOL M 4/24/36 610
###-##-#### M HUDGINS M 10/17/37 610
###-##-#### D GOFFIGAN M 10/2/23 610
###-##-#### K BURTON M 12/28/25 610
###-##-#### WALTER GRAY M 9/24/27 610
###-##-#### JOHN G GRAY M 12/25/29 610
###-##-#### W WHITEHURST M 8/6/28 610
###-##-#### L PERKINS M 11/19/29 610
###-##-#### G GRANT M 8/22/31 610
###-##-#### R DOXEY M 3/21/28 610
###-##-#### J WEST M 2/10/22 610
###-##-#### C RIDDLE M 3/31/26 610
###-##-#### WALTER EADS M 5/19/25 610
###-##-#### C PURKINS M 6/19/25 610
###-##-#### B DIGGS M 4/1/28 610
###-##-#### R LEE M 5/18/29 610
###-##-#### C DILLON M 10/27/28 610
###-##-#### C HEDRICK M 10/11/27 610
###-##-#### F SAUVAGER M 8/27/22 610
###-##-#### FREDERICK MCCARTHY M 3/1/28 610
###-##-#### N WASHER M 8/6/26 610
###-##-#### M WOOD M 2/23/33 610
###-##-#### S SPRINKEL M 8/24/32 610
###-##-#### M MILLIKEN F 9/12/19 610
###-##-#### DANIEL C. NAFF M 5/19/19 610
###-##-#### THOMAS HARPER M 5/25/20 610
###-##-#### K JENS M 4/22/20 610
###-##-#### R LYNCH M 10/27/22 610
###-##-#### P HAYWOOD F 1/2/23 610
###-##-#### R MAYTON M 12/6/28 610
###-##-#### J BURBRIDGE M 8/10/31 610
###-##-#### THOMAS WORKMAN M 8/10/31 610
###-##-#### CARL HANCOCK M 7/27/23 610
###-##-#### A HINN M 4/3/22 610
###-##-#### T COX M 3/1/23 610
###-##-#### J HARRISON M 1/25/23 610
###-##-#### J KUBE F 7/28/29 610
</TABLE>
Page 6 1/3/94
<PAGE> 99
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### MINNIE WAGEMAKER F 7/16/29 610
###-##-#### PAULINE WOOD F 9/2/24 610
###-##-#### M MASON M 5/27/33 610
###-##-#### J SIMPSON M 7/3/36 610
###-##-#### H LAMM M 8/18/24 610
###-##-#### C LLEWELLYN M 9/12/28 610
###-##-#### O TURNER M 2/8/26 610
###-##-#### NEIL A MACDONALD M 1/22/28 610
###-##-#### WILLIAM H WASHINGTON M 4/25/20 610
###-##-#### R ROWE M 4/18/36 610
###-##-#### W HOWARD M 6/14/26 610
###-##-#### C CONNOR M 9/15/24 610
###-##-#### J MEETZE M 3/27/27 610
###-##-#### J ADAMS M 5/10/30 610
###-##-#### PHILLIP B LINDLER M 6/7/31 610
###-##-#### W BICKLEY M 8/25/37 610
###-##-#### L ASHFORD M 3/2/23 610
###-##-#### J PARK M 11/9/31 610
###-##-#### M CORLEY M 3/13/21 610
###-##-#### S BROWN M 4/3/28 610
###-##-#### JOHN KOOPMAN M 3/19/25 610
###-##-#### J BENNETT M 6/15/30 610
###-##-#### J WOODS M 10/24/24 610
###-##-#### USHER WINSLETT M 7/16/32 610
###-##-#### D SCHLEY M 7/29/29 610
###-##-#### B #66DREW M 4/20/22 610
###-##-#### F HUTCHESON M 4/12/27 610
###-##-#### O GONZALEZ M 4/2/28 610
###-##-#### E FUENTES M 12/3/33 610
###-##-#### ISRAEL PORRAS M 2/8/18 610
###-##-#### J DOLCATER M 6/21/20 610
###-##-#### GUILLERMO FERNANDEZ M 6/25/28 610
###-##-#### A MIRANDA M 2/19/33 610
###-##-#### C HOLMES M 9/13/28 610
###-##-#### R BUCKNER M 4/5/31 610
###-##-#### JULIO MARTIN M 12/18/28 610
###-##-#### ROSENDO COSTERO M 7/10/34 610
###-##-#### GLENDAL R GOTHARD M 6/5/33 610
###-##-#### ALTON R MARKINS M 11/22/26 610
###-##-#### DORMAN KERNS M 3/11/27 610
###-##-#### HANS RUEGGER M 4/22/31 610
###-##-#### H BONSTEEL M 12/11/21 610
###-##-#### R TAYLOR M 5/23/30 610
###-##-#### W MEISTER M 3/24/22 610
</TABLE>
Page 7 1/3/94
<PAGE> 100
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### RAYMOND R EVANS M 1/18/28 610
###-##-#### CONARD SHINN M 4/21/27 610
###-##-#### MARION GOODMAN M 4/12/27 610
###-##-#### SAMUEL J. MAJOR M 7/11/18 610
###-##-#### E GILMAN M 4/15/32 610
###-##-#### V BROWN M 6/22/20 610
###-##-#### C COOPER M 1/16/25 610
###-##-#### HAROLD L RODGERS M 10/29/28 610
###-##-#### H GILLASPY M 6/22/28 610
###-##-#### PHILIP E GOODE M 2/3/18 610
###-##-#### M BROWN F 5/9/24 610
###-##-#### JAMES E RADICAN M 4/20/30 610
###-##-#### G REED M 10/17/23 610
###-##-#### C NEWGENT M 4/1/26 610
###-##-#### J GIBBS M 9/8/25 610
###-##-#### B PRITCHAAD M 8/13/24 610
###-##-#### KENNETH NORMAN M 12/5/26 610
###-##-#### R MCKAMEY M 7/2/34 610
###-##-#### R GRUBB M 7/22/30 610
###-##-#### ROBERT W WALLACE M 2/12/31 610
###-##-#### G BALDWIN M 12/13/33 610
###-##-#### P O'CONNELL M 2/29/20 610
###-##-#### G FOX M 7/23/25 610
###-##-#### WILLIAM D DAVIS M 12/5/26 610
###-##-#### W CUMMINGS M 4/4/20 610
###-##-#### J KEEN M 6/3/23 610
###-##-#### H BUCKLEY M 8/14/27 610
###-##-#### EMORY J. FEKETY M 4/26/22 610
###-##-#### GEORGE M. CUNNINGHAM M 9/24/27 610
###-##-#### OSCAR MILLER M 10/12/26 610
###-##-#### G BOERKE M 11/1/30 610
###-##-#### L RUTKOWSKI M 1/3/25 610
###-##-#### P ANGELLO M 5/30/26 610
###-##-#### C WIGGINTON M 3/16/30 610
###-##-#### ERNEST KIERAS M 1/27/26 610
###-##-#### C BOLINE F 12/17/33 610
###-##-#### ERNST BUTTIKER M 6/20/31 610
###-##-#### ROBERT F KIZER M 9/7/34 610
###-##-#### R SCOTT M 7/19/30 610
###-##-#### D CAUDILL M 11/9/28 610
###-##-#### J DAY M 6/24/24 610
###-##-#### DENNIS KASH M 11/19/27 610
###-##-#### W WALKER M 11/21/38 610
###-##-#### R GARLAND M 5/5/25 610
</TABLE>
Page 8 1/3/94
<PAGE> 101
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### MARION BILLINGS F 5/9/21 610
###-##-#### C MCCLINTON Y 4/9/24 610
###-##-#### ROBERT D BLANTON M 8/6/25 610
###-##-#### STERLING LATHEM M 1/21/28 610
###-##-#### L WHITE M 11/15/30 610
###-##-#### B JOHNSON M 2/6/28 610
###-##-#### D GODWIN M 1/30/23 610
###-##-#### O STRICKLAND M 10/14/22 610
###-##-#### E KOSTELECKY M 7/23/23 610
###-##-#### C YOUNG M 11/21/30 610
###-##-#### T DALE M 4/13/28 610
###-##-#### ROBERT E PATRICK M 11/4/29 610
###-##-#### J MOTES M 4/11/34 610
###-##-#### JOHN CALDWELL M 12/24/23 610
###-##-#### DEWEY MYERS M 4/28/27 610
###-##-#### WILLARD LOCKHART M 9/7/30 610
###-##-#### A BRANSTETTER M 12/3/24 610
###-##-#### JOE D. LEE M 2/3/26 610
###-##-#### ROBERT A HALL M 1/28/21 610
###-##-#### G SCHNEIDER M 8/7/22 610
###-##-#### P LETO M 3/10/33 610
###-##-#### SIDNEY P FUNCK M 6/8/31 610
###-##-#### A LAUER M 10/6/32 610
###-##-#### E ROBIN M 5/22/30 610
###-##-#### C BURNS M 2/28/18 610
###-##-#### MARION PORTER M 10/2/28 610
###-##-#### ARNOLD H MCQUEEN M 9/30/27 610
###-##-#### J EBERHARDT M 6/28/27 610
###-##-#### JOSEPH E MCCLENDON M 7/31/28 610
###-##-#### B HAYNES M 5/27/20 610
###-##-#### THOMAS STEEN M 5/11/27 610
###-##-#### ADAM R STAFFORD M 10/30/24 610
###-##-#### L DUPRE M 6/8/27 610
###-##-#### N HOLLARD F 11/6/34 610
###-##-#### LOUIS HYMEL M 8/6/24 610
###-##-#### S CARROLL F 2/26/24 610
###-##-#### D KALTENBACH M 11/13/24 610
###-##-#### W RINGGOLD M 4/2/21 610
###-##-#### LOUIS F JUNG M 9/24/26 610
###-##-#### JAMES SIMONEAUX M 8/7/26 610
###-##-#### ROBERT E OWENS M 3/20/33 610
###-##-#### BOB L BRANDON M 3/10/30 610
###-##-#### L LONDON M 2/6/21 610
###-##-#### G MADDEN M 12/18/23 610
</TABLE>
Page 9 1/3/94
<PAGE> 102
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### A CHALMERS M 7/9/23 610
###-##-#### W BATES M 8/13/27 610
###-##-#### C BATES M 4/24/25 610
###-##-#### E MEISELL M 1/18/18 610
###-##-#### BENNIE ROBINSON M 11/25/19 610
###-##-#### J STELLE M 7/28/22 610
###-##-#### D CROWDER M 4/6/24 610
###-##-#### J ROUTH M 5/18/32 610
###-##-#### O FREEMAN M 8/15/24 610
###-##-#### W GILMORE M 10/19/19 610
###-##-#### M MAXWELL F 2/27/24 610
###-##-#### HOYLE E HENDLEY M 8/9/26 610
###-##-#### J CROOKS M 11/22/32 610
###-##-#### FLOYD LEWIS M 7/20/29 610
###-##-#### W LEE M 10/9/32 610
###-##-#### L WOSTAREK M 10/26/23 610
###-##-#### J ADAMS M 1/14/24 610
###-##-#### GLEN F PRESNELL M 8/25/28 610
###-##-#### ROBERT WHITMAN M 2/6/29 610
###-##-#### A CUNNINGHAM M 8/18/30 610
###-##-#### J VICKERY M 12/3/32 610
###-##-#### J RASBERRY M 7/16/32 610
###-##-#### CHARLES ROBERSON M 1/25/27 610
###-##-#### FRANK BARFIELD M 7/3/25 610
###-##-#### HERSHEL R SUGG M 3/16/25 610
###-##-#### R ZETZMAN M 8/18/24 610
###-##-#### JAMES A NEAL M 1/23/31 610
###-##-#### F ROWNEY M 1/9/33 610
###-##-#### CHARLES D COPPINGER M 9/16/23 610
###-##-#### J BATLA M 11/1/28 610
###-##-#### H WILLIAMS M 2/28/30 610
###-##-#### W ORDNER M 9/1/32 610
###-##-#### V EWING M 6/14/22 610
###-##-#### B SUTTLES M 4/15/27 610
###-##-#### B MANNING M 6/19/33 610
###-##-#### ERNEST SHELLEY M 3/8/34 610
###-##-#### ERIC BURNETT M 3/29/28 610
###-##-#### K LAIR M 7/31/32 610
###-##-#### A CRAWFORD M 9/2/25 610
###-##-#### L NEUENDORFF M 6/15/29 610
###-##-#### E SIMMONS M 9/24/22 610
###-##-#### JACK BRICE M 9/23/25 610
###-##-#### H SCRUGGS M 1/27/28 610
###-##-#### R CLINTON M 2/24/25 610
</TABLE>
Page 10 1/3/94
<PAGE> 103
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### E WIENKEN M 5/18/30 610
###-##-#### HENRY E GLASER M 9/24/23 610
###-##-#### FRANK MITCHELL M 3/22/23 610
###-##-#### G BRADLEY M 9/16/24 610
###-##-#### G BETHEL M 8/2/28 610
###-##-#### G PHILLIPS M 5/17/24 610
###-##-#### M NEUENDORFF M 11/16/23 610
###-##-#### W KIRKHAM M 10/2/27 610
###-##-#### L SEBESTA M 8/19/32 610
###-##-#### J PERRY M 3/6/29 610
###-##-#### D HOUSTON M 6/23/29 610
###-##-#### B WARZON M 10/6/30 610
###-##-#### RAYMOND L FOERSTER M 8/1/31 610
###-##-#### ELO STOCK M 7/16/25 610
###-##-#### G MONTGOMERY M 9/24/24 610
###-##-#### FRANK N CARTER M 3/19/27 610
###-##-#### JIMMY ODEN M 8/7/33 610
###-##-#### V MAYHEW F 6/8/23 610
###-##-#### A CAYWOOD M 2/18/26 610
###-##-#### L CHRISTENSON M 1/13/26 610
###-##-#### ROBERT E DRAKE M 9/1/28 610
###-##-#### E WILLIAMS M 11/10/33 610
###-##-#### B CRUMP F 12/15/35 610
###-##-#### ROBERT FLEMING M 2/24/27 610
###-##-#### F MORAN F 8/13/25 610
###-##-#### LOREN LAMB M 1/16/29 610
###-##-#### NYLE LARSON M 9/5/19 610
###-##-#### L GJENVICK M 8/28/26 610
###-##-#### A SIMENGAARD M 7/11/27 610
###-##-#### CARL E NINNEMAN M 6/19/30 610
###-##-#### J KLUVER M 11/15/26 610
###-##-#### ERNA JONES M 12/24/21 610
###-##-#### DONALD M SCHAEFER M 11/5/30 610
###-##-#### R NELSON M 5/28/19 610
###-##-#### DONALD H ALBEE M 1/16/24 610
###-##-#### J MENGWASSER M 1/9/34 610
###-##-#### L SMITH M 1/25/23 610
###-##-#### MARY H ANDREWS F 12/5/21 610
###-##-#### T COLEMAN M 9/30/29 610
###-##-#### MARVIN SMITH M 8/10/28 610
###-##-#### W SIEBERG M 3/19/25 610
###-##-#### BARNEY S RICKETTS M 3/16/27 610
###-##-#### ARNOLD KETTERLING M 11/26/28 610
###-##-#### KENNETH WILES M 6/27/27 610
</TABLE>
Page 11 1/3/94
<PAGE> 104
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### CALVIN RADCLIFF M 7/18/27 610
###-##-#### A BUDY M 11/16/17 610
###-##-#### CLIFFORD WLEACH M 1/18/37 610
###-##-#### L BASEL M 11/29/28 610
###-##-#### O CROOK M 12/6/28 610
###-##-#### M LEE F 3/5/25 610
###-##-#### L STRANSKY M 12/9/28 610
###-##-#### DENNIS DUNIVAN M 5/27/28 610
###-##-#### CHARLES GOVE M 5/12/27 610
###-##-#### D STEADMAN M 11/16/29 610
###-##-#### EDWIN GALLACHER M 5/5/24 610
###-##-#### H WITTKE M 8/3/36 610
###-##-#### GERALD HAWLEY M 12/1/26 610
###-##-#### D KNESAL F 1/1/21 610
###-##-#### P STOMS M 5/23/26 610
###-##-#### V WALTON F 3/3/27 610
###-##-#### H CASTILLO M 3/1/34 610
###-##-#### E BERTANA M 1/25/29 610
###-##-#### L CHU M 4/9/21 610
###-##-#### ROBERT LIPPI M 4/30/24 610
###-##-#### CHARLES H MEADERS M 7/13/25 610
###-##-#### TOM SAUNDERS M 8/23/25 610
###-##-#### E MCSWEENEY M 8/1/20 610
###-##-#### ALYCIA GODDARD F 10/26/26 610
###-##-#### VERNER DAVIDSON M 2/27/22 610
###-##-#### F SMALES M 10/7/14 610
###-##-#### M ROMERO M 11/10/20 610
###-##-#### D WEEKS M 12/4/29 610
###-##-#### ROBERT C. HUGHES M 2/19/15 610
###-##-#### MAYES O KEY M 3/3/26 610
###-##-#### LUDWIG BOYADJIAN M 9/3/22 610
###-##-#### EVELYN ROYALS M 2/11/27 610
###-##-#### C GARNIN M 4/18/15 610
###-##-#### E GIDEON F 5/30/21 610
###-##-#### JOHN COLOMBINI M 5/23/22 610
###-##-#### R THARRATT M 5/17/23 610
###-##-#### D IRVINE M 9/26/26 610
###-##-#### J LOSER M 1/22/36 610
###-##-#### A BROWN M 12/14/21 610
###-##-#### A SPERRY M 11/18/20 610
###-##-#### G TALLEY M 12/24/25 610
###-##-#### G SIMS M 9/26/27 610
###-##-#### EARL H RHODES M 9/8/27 610
###-##-#### M MERRELL M 5/9/26 610
</TABLE>
Page 12 1/3/94
<PAGE> 105
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### CHARLEEN RUBITSKY F 10/29/35 610
###-##-#### KENNETH A CARDOZA M 4/16/28 610
###-##-#### P SOUZA F 11/21/25 610
###-##-#### K NISHIHARA M 8/11/28 610
###-##-#### ROBERT M KOGA M 7/31/15 610
###-##-#### P HAUCK M 7/11/22 610
###-##-#### J WORK M 2/6/22 610
###-##-#### W NEAL M 10/11/23 610
###-##-#### P RAMBIN M 6/22/25 610
###-##-#### PAUL R GRIFFIN M 3/17/33 610
###-##-#### CATHERINE RANSOM F 7/29/07 609a
###-##-#### PATRICIA JENKINS F 12/4/20 609a
###-##-#### W HALDAS M 2/19/17 609a
###-##-#### JOSEPH A DOOLEY M 6/1/23 609a
###-##-#### GWEN TUCKER F 12/1/13 609a
###-##-#### NICHOLAS LIBERATOR M 6/19/16 609a
###-##-#### G AGOVINO M 2/27/18 609a
###-##-#### ROY RASMUSSEN M 3/9/13 609a
###-##-#### OLAF P. KAYSER M 9/15/21 609a
###-##-#### RUTH KOLLATH F 3/14/19 609a
###-##-#### M ELEANOR DAILEY F 4/29/17 609a
###-##-#### ALFRED T KHOURY M 1/29/18 609a
###-##-#### J COURTNEY M 8/20/15 609a
###-##-#### STEPHNAIE BUDGE F 7/3/08 609a
###-##-#### VICENTA CABRAL F 1/16/17 609a
###-##-#### IRVING TUCKER M 4/4/14 609a
###-##-#### EVELYN PALEN F 10/3/16 609a
###-##-#### H PATTERSON F 11/14/94 609a
###-##-#### WALTER F LAW M 4/11/02 609a
###-##-#### MICHAEL TROJAN M 3/29/22 609a
###-##-#### A HOLT F 6/9/16 609a
###-##-#### A FUSARO M 11/18/20 609a
###-##-#### JOHN BRAKER M 10/19/07 609a
###-##-#### J GASCHEL M 3/22/13 609a
###-##-#### FERDINAND CONTE M 6/23/11 609a
###-##-#### JAMES GORMAN M 1/27/06 609a
###-##-#### EARL JOHNS M 6/8/01 609a
###-##-#### LEONARD R PRITCHARD M 2/27/07 609a
###-##-#### MATHILDA SMITH F 7/14/07 609a
###-##-#### ARTHUR LARSON M 11/11/06 609a
###-##-#### ROBERT KELLERHOUSE M 5/10/21 609a
###-##-#### WILLIAM JARNEY M 5/28/12 609a
###-##-#### P ALVAREZ M 10/18/23 609a
###-##-#### DOROTHY PETERSON F 3/2/06 609a
</TABLE>
Page 13 1/3/94
<PAGE> 106
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### MILTON SCHEIBER M 9/11/16 609a
###-##-#### WILLIAM B HURLEY M 8/20/27 609a
###-##-#### ROBERT J. JAGER M 11/30/04 609a
###-##-#### ROSEMARIE RIGANO F 10/10/23 609a
###-##-#### E MAEXNER M 5/24/24 609a
###-##-#### A DISTEPHANO M 5/12/15 609a
###-##-#### L HENDERSON M 2/1/17 609a
###-##-#### RALPH LEWIS M 12/25/30 609a
###-##-#### JOHN J. MCEVOY M 8/6/23 609a
###-##-#### W MCKENNEY M 9/15/27 609a
###-##-#### F MARTIN F 1/18/99 609a
###-##-#### R DARCY F 6/9/24 609a
###-##-#### EUGENE POPE M 5/17/18 609a
###-##-#### B BERNE F 3/16/12 609a
###-##-#### ALFRED GIANNOTTI M 8/19/15 609a
###-##-#### FRANK LONGO M 9/9/29 609a
###-##-#### W ODELL M 5/29/20 609a
###-##-#### WILLIAM SMULLEN M 6/15/12 609a
###-##-#### THOMAS MC DERMOTT M 2/14/07 609a
###-##-#### EDWARDS BRAND M 3/29/20 609a
###-##-#### RAYMOND HOY M 5/16/20 609a
###-##-#### R GUSTAFSON M 7/3/17 609a
###-##-#### P BROOKS F 2/6/16 609a
###-##-#### NELL SCHWARZ F 6/3/15 609a
###-##-#### STEWART S FRITTS M 5/26/11 609a
###-##-#### HENRY MARTINEZ M 10/16/20 609a
###-##-#### HENRY MCCRAY M 10/24/25 609a
###-##-#### HOMER SHICK M 1/18/11 609a
###-##-#### HARRY KEMERY M 4/22/22 609a
###-##-#### JAMES M CHRISTY M 1/31/05 609a
###-##-#### CLARENCE ESPANGLER M 1/14/10 609a
###-##-#### T KIDD M 11/1/14 609a
###-##-#### NORMAN H ROTH M 10/1/01 609a
###-##-#### NORMAN H ROTH M 10/27/01 609a
###-##-#### JOHN C. KAVCAK M 5/25/14 609a
###-##-#### J DROSNOCK M 3/22/15 609a
###-##-#### HERMAN FISCHL M 6/23/13 609a
###-##-#### ELWOOD STOFFLET M 8/25/18 609a
###-##-#### JOHN KOWALCHUK M 1/18/16 609a
###-##-#### ORLANDO SCARAMUCCI M 5/23/23 609a
###-##-#### WILLIAM M RUTT M 9/23/19 609a
###-##-#### FRANK CZUBEK M 12/3/16 609a
###-##-#### R BREINIG M 12/22/19 609a
###-##-#### F BEADELL M 6/9/19 609a
</TABLE>
Page 14 1/3/94
<PAGE> 107
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### OCIE JACKSON M 4/2/21 609a
###-##-#### S GERA M 3/11/10 609a
###-##-#### HARVEY SAUNDERS F 11/12/09 609a
###-##-#### JAMES SANDERS M 1/21/23 609a
###-##-#### CHARLES E ROBERTS M 10/13/21 609a
###-##-#### RUDOLPH MANOR M 11/20/23 609a
###-##-#### MARGIE SPICER F 12/7/23 609a
###-##-#### WALTER C JOYNES M 10/13/09 609a
###-##-#### CLYDE C WATERFIELD M 1/14/04 609a
###-##-#### R GOODMAN M 2/17/17 609a
###-##-#### ALFRED C. HOWELL M 4/27/26 609a
###-##-#### ROBERT E JOHNSTON M 9/15/07 609a
###-##-#### ALEXANDER MYERS M 8/13/16 609a
###-##-#### MARVIN SIMMONS M 6/11/21 609a
###-##-#### WILLIAM CHIPLEY M 7/2/20 609a
###-##-#### E BABCOCK M 9/30/13 609a
###-##-#### R BARGAMIN M 8/23/11 609a
###-##-#### WILLIE A STAYLOR M 2/11/07 609a
###-##-#### E GOURLEY M 8/30/14 609a
###-##-#### L GRAY M 4/17/23 609a
###-##-#### THELMA FORD F 8/28/14 609a
###-##-#### WILLIAM WEBSTER M 8/3/18 609a
###-##-#### MURIEL FRIDLEY M 1/13/18 609a
###-##-#### J BELOTE M 4/1/13 609a
###-##-#### JESSIE SNYDER F 12/16/06 609a
###-##-#### EARL GRAY M 10/13/13 609a
###-##-#### L HARPER M 7/19/29 609a
###-##-#### RICHARD B.THOMPSON M 9/18/20 609a
###-##-#### G HARRELL M 9/1/14 609a
###-##-#### H HOFHEIMER M 12/28/06 609a
###-##-#### JOSEPH B SADLER M 11/29/19 609a
###-##-#### JOSEPH EICHER M 7/15/11 609a
###-##-#### H DOBBS M 8/17/24 609a
###-##-#### JAMES A CADDY M 2/9/12 609a
###-##-#### DAVID F SCARBOROUGH M 8/9/13 609a
###-##-#### CAROLYN ELLICOTT F 10/14/17 609a
###-##-#### DAVID CORLEY M 3/23/16 609a
###-##-#### ALBERT CHANDLER M 6/23/17 609a
###-##-#### V BLACKWELL F 1/1/17 609a
###-##-#### NELLIE SHARPE F 4/4/18 609a
###-##-#### W DAVIS M 10/22/20 609a
###-##-#### LESTER J RAWLS M 3/15/10 609a
###-##-#### O GRAHAM M 10/15/16 609a
###-##-#### G GORE M 8/22/23 609a
</TABLE>
Page 15 1/3/94
<PAGE> 108
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### GEORGE CATES M 12/21/16 609a
###-##-#### C BERRY M 7/28/18 609a
###-##-#### FRANCIS E MCMILLAN M 6/29/15 609a
###-##-#### CURTIS PIPPINS M 9/24/24 609a
###-##-#### MADELINE DANTON F 7/1/36 609a
###-##-#### VERNON FOSTER M 9/29/17 609a
###-##-#### CHARLES ROGERS M 10/4/17 609a
###-##-#### LESTER VONTRESS M 4/22/13 609a
###-##-#### KATHLEEN PERRY F 3/19/25 609a
###-##-#### MARY LOU ETTER F 8/26/17 609a
###-##-#### JOHN KNIGHT M 8/2/07 609a
###-##-#### LOUIS WALBRING M 10/14/21 609a
###-##-#### RICHARD HOLMQUIST M 12/3/15 609a
###-##-#### I PATTERSON F 1/24/00 609a
###-##-#### LEWIS E DAVIS M 12/30/24 609a
###-##-#### JOHN L FREEMAN M 12/8/25 609a
###-##-#### ENID M JOHNSON F 3/18/35 609a
###-##-#### JOHN KRINGEL M 10/1/13 609a
###-##-#### I DENNY F 6/26/12 609a
###-##-#### ROBERT L. MILLER M 5/27/19 609a
###-##-#### PAUL E CRABTREE M 1/20/17 609a
###-##-#### JOSEPH SZABO M 12/14/19 609a
###-##-#### EVERETT HUYETT M 10/11/19 609a
###-##-#### JAMES E. FOSTER M 3/29/20 609a
###-##-#### EARL SWARTZ M 9/23/18 609a
###-##-#### CLAIBORNE VAN ZANDT M 7/15/05 609a
###-##-#### L ENGSTROM M 9/30/14 609a
###-##-#### DOROTHY FABER F 9/12/19 609a
###-##-#### RALPH CERVENY M 7/19/10 609a
###-##-#### A ALLEN M 2/18/14 609a
###-##-#### W BAILEY M 4/20/14 609a
###-##-#### ELMER PORTER M 8/28/18 609a
###-##-#### O DANIELS M 5/12/14 609a
###-##-#### IRA F. HOWARD M 4/5/09 609a
###-##-#### CLYDE L. GURLEY M 8/31/16 609a
###-##-#### FRANK MILSTEAD M 8/24/08 609a
###-##-#### JAMES R WALLACE M 2/5/25 609a
###-##-#### J DARLEY M 1/31/28 609a
###-##-#### E HAND M 6/29/25 609a
###-##-#### SEABORN D COLLINS M 6/26/09 609a
###-##-#### JAMES RUSSELL M 7/15/19 609a
###-##-#### LOUIS WILLIAMs M 7/10/22 609a
###-##-#### LAWRENCE SISK M 2/5/17 609a
###-##-#### PAUL E SAWYER M 10/30/13 609a
</TABLE>
Page 16 1/3/94
<PAGE> 109
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### E CUMMINGS M 7/28/19 609a
###-##-#### EULA M. GRAY F 1/30/08 609a
###-##-#### EDGAR L STINE M 10/17/12 609a
###-##-#### BEVERLY FORBES F 1/25/18 609a
###-##-#### CY BRUNNER M 5/14/17 609a
###-##-#### JOHN C. LlPPMIN M 8/11/17 609a
###-##-#### MARION LACOUR M 5/27/24 609a
###-##-#### J CROCKETT M 8/14/12 609a
###-##-#### CEDRIC RICHE M 9/8/21 609a
###-##-#### E DELANEY M 6/10/25 609a
###-##-#### P NEWELL M 12/26/13 609a
###-##-#### ALBERT C JONES M 3/6/21 609a
###-##-#### GILMER ENGLEHARDT M 9/1/12 609a
###-##-#### MAJORIE COCHRAN F 9/27/16 609a
###-##-#### GORDON LAPORTE M 7/6/21 609a
###-##-#### JAMES L JENKINS JR M 11/14/26 609a
###-##-#### LUTHER LEWIS M 12/25/27 609a
###-##-#### B HARTHCOCK M 11/24/14 609a
###-##-#### FRANK DALTON M 7/1/20 609a
###-##-#### L BELCHER M 8/22/18 609a
###-##-#### JOHN L. MARLIN M 7/23/22 609a
###-##-#### ORVILLE TODD M 12/2/20 609a
###-##-#### P HOFFMAN M 8/22/05 609a
###-##-#### W HURST M 11/7/18 609a
###-##-#### A. GEORGE BIGGS M 11/14/14 609a
###-##-#### A BIETENDORF M 4/13/08 609a
###-##-#### B CRABTREE M 12/16/10 609a
###-##-#### OLLIE STAGGS M 7/30/06 609a
###-##-#### JERRY JONES M 4/8/22 609a
###-##-#### DANIEL WEBER M 2/11/24 609a
###-##-#### HAROLD J. HOWELL M 5/3/10 609a
###-##-#### LEWIS E CARTER M 9/21/17 609a
###-##-#### CECIL J. NUNNELLY M 5/14/21 609a
###-##-#### THOMAS KRAL M 8/19/09 609a
###-##-#### G HENRY F 2/15/08 609a
###-##-#### ARTHUR MEYERS M 1/30/06 609a
###-##-#### ODDIE WILLIAMS M 4/29/15 609a
###-##-#### WILLIAM RUDD M 10/17/20 609a
###-##-#### GILLIS DRAKE M 9/9/23 609a
###-##-#### J HERRINGTON M 4/23/15 609a
###-##-#### EUGENE HORD M 11/2/11 609a
###-##-#### AGNES FATHEREE M 4/8/18 609a
###-##-#### ALBERT G JONES M 4/24/13 609a
###-##-#### ERNESTINE STONE F 6/8/11 609a
</TABLE>
Page 17 1/3/94
<PAGE> 110
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### RUSSELL CASHION M 1/9/18 609a
###-##-#### C BERTSCH M 7/3/32 609a
###-##-#### JOEL G WHITSON M 7/20/37 609a
###-##-#### THOMAS EATON M 10/23/12 609a
###-##-#### H GAJESKE M 11/26/16 609a
###-##-#### JASPER MAYWALD M 9/12/21 609a
###-##-#### BURNICE SANDERS M 6/19/30 609a
###-##-#### ALVIE WARD M 8/1/16 609a
###-##-#### S BEARD M 4/15/14 609a
###-##-#### MARY M LYNN M 9/26/11 609a
###-##-#### ELMER HILLIN M 7/10/19 609a
###-##-#### G BREEDEN M 3/5/20 609a
###-##-#### ALTON HARRELL M 1/1/33 609a
###-##-#### WALTER J TUCKER M 11/6/13 609a
###-##-#### MILDRED I ABLES F 11/3/19 609a
###-##-#### RAYE LADD M 9/1/22 609a
###-##-#### CLYDE RADNEY M 11/13/02 609a
###-##-#### IRVIN S COOK M 9/17/08 609a
###-##-#### LLOYD E ARNOLD M 3/10/07 609a
###-##-#### LUCIUS TAYLOR M 12/31/17 609a
###-##-#### EUNICE L JOHANSEN F 6/1/18 609a
###-##-#### ROY H PETERSON M 2/24/16 609a
###-##-#### JOHN A. HEILLMAN M 4/6/15 609a
###-##-#### MARY MUTOLO F 2/29/16 609a
###-##-#### JOSEPH HELMS M 2/22/10 609a
###-##-#### CATHRYN POTTER F 11/6/21 609a
###-##-#### WILFRED MITCHELL M 6/8/15 609a
###-##-#### WILLIAM A TINBERG M 9/8/04 609a
###-##-#### CARL WASSON M 2/2/22 609a
###-##-#### LAWRENCE KSLOAN M 1/31/21 609a
###-##-#### F BUNDY M 8/22/15 609a
###-##-#### RICHARD J HUFF M 12/7/20 609a
###-##-#### WILBUR YOUNG M 12/5/17 609a
###-##-#### KENNETH STOTLER M 6/14/07 609a
###-##-#### JOHN LIVIE M 10/7/06 609a
###-##-#### L FULLER M 2/16/16 609a
###-##-#### MARGARET WILEN F 2/9/05 609a
###-##-#### RALPH ROBEY M 8/6/10 609a
###-##-#### VANCE S TJOSSEM M 7/31/04 609a
###-##-#### MARION R WOGLUM F 10/12/11 609a
###-##-#### PHYLLIS HANEL F 2/15/05 609a
###-##-#### NOBLE PETERSON M 3/24/98 609a
###-##-#### MAGNUS MILLER M 5/10/13 609a
###-##-#### BERNICE HAGAN F 3/31/18 609a
</TABLE>
Page 18 1/3/94
<PAGE> 111
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### ROBERT TAYLOR M 12/7/20 609a
###-##-#### G DALE M 7/20/07 609a
###-##-#### MARION UELAND M 1/1/15 609a
###-##-#### MABEL ONKELS F 7/18/07 609a
###-##-#### L KAIVO M 4/2/13 609a
###-##-#### NEAL CHEETHAM M 3/4/10 609a
###-##-#### F MRZLIKAR M 4/30/16 609a
###-##-#### FORREST C.HOOD M 10/19/13 609a
###-##-#### DALE DENNY M 11/14/16 609a
###-##-#### THOMAS STOKES M 4/1/21 609a
###-##-#### W BONA M 3/16/21 609a
###-##-#### GEORGE T. BIGGS M 3/22/23 609a
###-##-#### ROSS FARR M 5/20/24 609a
###-##-#### H CASSIDY M 11/14/11 609a
###-##-#### RAY P JOHNSON M 4/1/14 609a
###-##-#### BYRON HEMPHILL M 6/21/14 609a
###-##-#### ROBERT F KOHEN M 3/3/19 609a
###-##-#### ROBERT KAUFMAN M 10/21/10 609a
###-##-#### RENO CAIRO M 6/23/12 609a
###-##-#### CHARLES E DAWE M 1/18/21 609a
###-##-#### SING TSZE YUE M 9/15/10 609a
###-##-#### A GAZZANO F 10/23/08 609a
###-##-#### HORACE STREET M 11/3/12 609a
###-##-#### MARIE SNEDDEN F 3/12/21 609a
###-##-#### D BURNS F 3/18/29 609a
###-##-#### BEATRICE WEAVER F 5/19/23 609a
###-##-#### THOMAS SMART M 11/8/09 609a
###-##-#### MANUEL NETTO M 5/15/15 609a
###-##-#### PAUL ANKENY M 5/1/17 609a
###-##-#### EDITH MICHEL F 4/7/14 609a
###-##-#### LENA NATOLE F 8/28/12 609a
###-##-#### H BEARD M 3/20/14 609a
###-##-#### J PEARSON M 6/4/14 609a
###-##-#### RUTH G BAUMAN F 9/10/11 609a
###-##-#### WILBUR MACDONALD M 6/8/07 609a
###-##-#### LOUIS MARANTA M 5/30/12 609a
###-##-#### EDWARD HOWARD M 11/2/14 609a
###-##-#### NANCY MARTINEZ F 7/1/21 609a
###-##-#### E MOORE F 6/5/18 609a
###-##-#### H MITCHELL M 11/30/10 609a
###-##-#### ALASTAIR GARDINER M 3/1/17 609a
###-##-#### AGNES F BIRKELAND F 12/16/14 609a
###-##-#### NANCY ISRAEL F 4/21/53 609a
###-##-#### CLAIRE CALDERA F 11/19/16 609a
</TABLE>
Page 19 1/3/94
<PAGE> 112
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### L GROSS M 3/30/13 609a
###-##-#### RICHARD NOLTE M 1/16/18 609a
###-##-#### GARY P. MINOR M 5/19/07 609a
###-##-#### VIRGINA MARTELANZ F 11/8/12 609a
###-##-#### FRANCIS W NEVIS M 7/6/11 609a
###-##-#### E BERNARD M 2/1/18 609a
###-##-#### L PAULSON F 9/9/30 609a
###-##-#### JOHN WADDILL M 8/21/21 609a
###-##-#### MORRIS L WILLIAMS M 12/22/13 609a
###-##-#### DONALD B PIPER M 1/23/17 609a
###-##-#### SHIGERO NAKANO M 3/21/14 609a
###-##-#### JOHN R PROCTOR M 9/18/28 609a
###-##-#### W FORD M 12/10/08 609a
###-##-#### H LUCKIE M 1/26/20 609a
###-##-#### JOHN B. OLIVER M 4/19/08 609a
###-##-#### HELEN J PRICE F 3/3/15 609a
###-##-#### ROBERT REPASS M 10/22/24 609a
###-##-#### J DAVIES M 10/19/23 609a
###-##-#### OVILA A ROY M 12/10/18 609b
###-##-#### EDWARD MAJEWSKI M 7/30/21 609b
###-##-#### DONALD HALSTED M 2/27/27 609b
###-##-#### LESTER FISH M 3/8/20 609b
###-##-#### THOMAS S MCFADDEN M 12/19/19 609b
###-##-#### SAM DONOFRIO M 3/2/21 609b
###-##-#### WILLIAM PFLEEGER M 5/1/21 609b
###-##-#### ORTWIN MEYER M 3/16/24 609b
###-##-#### STEVE LAMPMAN M 8/12/21 609b
###-##-#### ANTHONY J RENO M 7/9/18 609b
###-##-#### ALEXANDER PERRY JR M 4/1/21 609b
###-##-#### HOWARD J. EBERT M 9/7/21 609b
###-##-#### HEINARD LIIK M 7/20/21 609b
###-##-#### EDWARD QUIST M 10/3/20 609b
###-##-#### W BRANAGAN M 1/11/19 609b
###-##-#### JOE A ROSNER M 3/4/22 609b
###-##-#### ARNOLD F TRAUPMAN M 3/29/18 609b
###-##-#### CLINTON S OTTINGER M 8/21/21 609b
###-##-#### LOUIS G WALDEN M 10/3/30 609b
###-##-#### W BOYER M 5/13/18 609b
###-##-#### DALE KLIPPLE M 11/20/33 609b
###-##-#### MORRELL B SHORTER M 3/8/19 609b
###-##-#### JAKE STOGSDILL M 11/15/21 609b
###-##-#### WILLIAM L PEERY M 1/14/22 609b
###-##-#### PALMER ROBBINS M 12/24/21 609b
###-##-#### G BOYKIN M 11/12/21 609b
</TABLE>
Page 20 1/3/94
<PAGE> 113
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### J BLAND M 3/16/24 609b
###-##-#### VICTOR M WEST M 2/5/34 609b
###-##-#### J GRADY F 11/13/19 609b
###-##-#### JAMES MITCHELL M 5/1/34 609b
###-##-#### R PARHAM M 10/31/33 609b
###-##-#### REUBEN KRONSTADT M 12/1/18 609b
###-##-#### EARL T WILLIAMS M 5/7/28 609b
###-##-#### BETTY L PETERS F 2/5/25 609b
###-##-#### JOSEPH H BOLL M 10/6/21 609b
###-##-#### GLENFORD H LESLIE M 5/4/26 609b
###-##-#### GEORGE EMERICK M 9/12/32 609b
###-##-#### M BALZARINI F 7/28/21 609b
###-##-#### JOHN M COOK M 7/9/15 609b
###-##-#### RAYMOND J. HERMES M 1/17/23 609b
###-##-#### WALTER FASSLER M 9/19/22 609b
###-##-#### THEODORE MAVES M 5/28/29 609b
###-##-#### RICHARD A SKERRITT M 9/20/22 609b
###-##-#### VIRGINIA D COLLINS F 11/7/20 609b
###-##-#### CORNELIA WILKINSON F 12/29/21 609b
###-##-#### HERBERT WEBB M 2/8/30 609b
###-##-#### CLAIRE SPANGLER M 9/10/34 609b
###-##-#### JOSEPH T MCDONNELL M 6/10/17 609b
###-##-#### RAYMOND P NELSON M 3/9/27 609b
###-##-#### MARY B. MERRITT F 2/27/17 609b
###-##-#### VIRDIE LITTLEJOHN M 6/11/25 609b
###-##-#### A HERRIN M 4/29/28 609b
###-##-#### A HAMILTON M 8/1/21 609b
###-##-#### LONDREW BROCK M 1/10/20 609b
###-##-#### F GAMBRELL F 11/25/20 609b
###-##-#### FRANCIS M EUBANKS M 2/22/21 609b
###-##-#### MAJORY M ELLIS F 9/19/21 609b
###-##-#### S HUGHES M 10/28/25 609b
###-##-#### ALTON HUELSEBUSCH M 6/8/27 609b
###-##-#### FLOYD M LEACH M 4/14/22 609b
###-##-#### GERALD ALLISON M 1/5/23 609b
###-##-#### ULMER R. HEWETT M 8/27/25 609b
###-##-#### CLAYTON NESS M 6/14/21 609b
###-##-#### JOSEPH GOCKEL M 12/16/24 609b
###-##-#### DOROTHY LAMB F 1/4/33 609b
###-##-#### ROBERT L. HUNZE M 1/20/19 609b
###-##-#### ROBERT EMMER M 12/31/21 609b
###-##-#### ORDHA L. KIBLER F 4/11/22 609b
###-##-#### D DESMARTEAU M 1/17/21 609b
###-##-#### WILLIAM S THOMAS M 4/12/21 609b
</TABLE>
Page 21 1/3/94
<PAGE> 114
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### DONALD HOWE M 5/21/20 609b
###-##-#### G VOLLEN M 7/19/08 609b
###-##-#### JOSEPH T COAN M 8/27/21 609b
###-##-#### RICHARD L WOODS M 2/1/19 609b
###-##-#### HENNING H SORENSEN M 6/26/23 609b
###-##-#### GERALD BAKER M 11/10/22 609b
###-##-#### NELLIE E. FRANK F 10/1/19 609b
###-##-#### R COLELLA M 7/6/26 609b
###-##-#### W CUNNINGHAM M 2/28/23 609b
###-##-#### HARVEY G RICHARDSON M 7/30/28 609b
###-##-#### KATHLEEN HONIGBAUM F 12/7/22 609b
###-##-#### MORRIS ELSNAB M 8/9/21 609b
###-##-#### JOHN OBERG M 6/16/28 609b
###-##-#### VIRGINIA HAAS F 2/2/24 609b
###-##-#### PATRICK L BUNDS M 2/1/33 609b
###-##-#### KAY K. KIYOHIRO F 12/14/18 609b
###-##-#### CURTIS F PLANK M 7/22/10 815a
###-##-#### FRANCIS L SMITH F 11/17/10 815a
###-##-#### HENRY ULRICH M 12/1/16 815a
###-##-#### ROBERT A WILLIAMS M 9/16/22 815a
###-##-#### GERTRUDE BOBLOWSKI F 10/22/22 815a
###-##-#### JOHN ENGELIN M 7/21/15 815a
###-##-#### ALBERT WAGNER M 11/12/09 815a
###-##-#### LEWIS E WINGERT M 3/28/16 815a
###-##-#### EUGENE P SNYDER M 10/6/19 815a
###-##-#### HENRY J. HAFFNER M 7/25/17 815a
###-##-#### HERBERT L. MCCLINTOCK M 8/29/08 815a
###-##-#### BENJAMIN B COOPER M 6/29/13 815a
###-##-#### GILBERT A PLUME M 11/11/17 815a
###-##-#### WOODROW D POOLE M 7/1/15 815a
###-##-#### OWEN L WIDDOWS M 11/28/11 815a
###-##-#### ALFRED R POOLE M 12/10/18 815a
###-##-#### MARGARET FILIPOVITZ F 1/30/11 815a
###-##-#### C DONAHUE M 11/9/15 815a
###-##-#### CHARLES F. KAUFFMAN M 11/15/25 815a
###-##-#### EMMETT L. LYTTON M 9/9/09 815a
###-##-#### EDWIN NOLAND M 2/15/16 815a
###-##-#### C HAWKINS M 4/29/00 815a
###-##-#### HANCEL C. KING M 3/28/11 815a
###-##-#### WILLIS FRANKLIN M 11/30/12 815a
###-##-#### MARY JO JONES F 3/26/15 815a
###-##-#### MARSHALL SHETTER M 5/20/23 815a
###-##-#### ROBERT M JACOBS M 1/9/19 815a
###-##-#### R MARKEL M 3/1/25 815a
</TABLE>
Page 22 1/3/94
<PAGE> 115
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### WALTER J WARTALSKI M 3/17/08 815a
###-##-#### LORETTA ANDERSON F 6/25/08 815a
###-##-#### LOREN BUTTON M 3/30/15 815a
###-##-#### HENRY AUER M 6/13/15 815a
###-##-#### WALTER ZIBAS M 11/2/12 815a
###-##-#### WALTER F WALIGORD M 10/27/13 815a
###-##-#### JOYCE SMITH F 5/21/14 815a
###-##-#### PAUL E DUNCAN M 11/7/10 815a
###-##-#### LEONARD JOHNSON M 9/3/15 815a
###-##-#### RICHARD M DRATHS M 10/13/21 815a
###-##-#### MARIE F BREEN F 7/20/06 815a
###-##-#### ROBERT A THOMPSON M 8/22/14 815a
###-##-#### EMILY I STRONACH F 7/30/18 815a
###-##-#### EDWARD E STORMER M 5/19/12 815a
###-##-#### ELMER L PAULS M 4/25/10 815a
###-##-#### WALTER SCOTT M 7/17/22 815a
###-##-#### STEPHEN C. KERNAN M 8/17/18 815a
###-##-#### LOUIS R FORBRICH M 6/11/09 815a
###-##-#### LUCILLE SIPIORA F 2/14/20 815a
###-##-#### J GISLASON M 3/28/16 815a
###-##-#### G MELBY M 1/25/06 815a
###-##-#### CHARLES PAINE M 6/6/14 815a
###-##-#### SARGI JEREB M 2/17/14 815a
###-##-#### JOSEPH J BUKOVIC M 5/16/13 815a
###-##-#### M BARTZ M 2/9/17 815a
###-##-#### M CUMMINGS F 2/13/12 815a
###-##-#### DALE A PHILLIPS M 10/16/22 815a
###-##-#### ROBERT MORRISON M 1/21/20 815a
###-##-#### ROY J. HUBERT M 3/20/09 815a
###-##-#### JAMES H. HAWKINS M 3/15/14 815a
###-##-#### HERMAN FLOYD M 11/10/16 815a
###-##-#### EMMETT E WISEMAN M 8/15/15 815a
###-##-#### FATE R. LETT M 5/13/13 815a
###-##-#### FRANK B FOSTER M 2/27/26 815a
###-##-#### CHARLES SYLER M 12/24/18 815a
###-##-#### WILLIAM P. HUGGINS M 8/7/14 815a
###-##-#### LUCIE R ARNOLD M 11/26/06 815a
###-##-#### E GRANT M 6/8/23 815a
###-##-#### VAUGHN A WILLIAMS M 2/16/23 815a
###-##-#### BURTON A JONES M 10/4/15 815a
###-##-#### J MOODY M 9/14/20 815a
###-##-#### H HANSEN M 11/10/16 815a
###-##-#### LOUIS B PAZZI M 6/19/19 815a
###-##-#### ALEX V WOLFF M 6/10/13 815a
</TABLE>
Page 23 1/3/94
<PAGE> 116
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### ALICE M CRITZ M 10/27/07 815a
###-##-#### WILLIAM J PENLY M 4/15/13 815a
###-##-#### BYRON F WEBB M 2/28/28 815a
###-##-#### AUGUST EILBERT M 5/8/12 815a
###-##-#### MERLE E PEPPERS M 12/21/14 815a
###-##-#### KEITH C ALBERTSON M 8/22/08 815a
###-##-#### GERALD M MELTON M 2/1/19 815a
###-##-#### EUGENE A. KEMP M 8/15/17 815a
###-##-#### JAMES P MCCONVILLE M 6/10/14 815a
###-##-#### JAMES C. GRIFFIN M 7/15/11 815a
###-##-#### GLENDON FOSTER M 9/25/14 815a
###-##-#### JESSIE J TODD M 3/27/13 815a
###-##-#### WILLIAM M. LEWIS M 3/6/06 815a
###-##-#### ANDERSON L. HAYDEN M 2/14/13 815a
###-##-#### J DAY M 2/18/12 815a
###-##-#### JAMES E. HASTINGS M 1/25/20 815a
###-##-#### ALBERT C. MAEVERS M 3/4/04 815a
###-##-#### JOHN TARR M 9/12/10 815a
###-##-#### HAROLD B CLARK M 2/3/18 815a
###-##-#### CHARLES E SAVER M 11/19/14 815a
###-##-#### ANTON HEURING M 7/7/09 815a
###-##-#### ZENITH WAREING M 4/1/08 815a
###-##-#### JOHN E MADDEN M 3/4/21 815a
###-##-#### ELMER J LORMAN M 3/24/12 815a
###-##-#### HERMAN A SOMMERFIELD M 4/24/11 815a
###-##-#### JOSEPH ROSSI M 4/7/16 815a
###-##-#### ATTILIO STRAPPONI M 7/5/18 815a
###-##-#### GRAYDON P REYNOLDS M 11/25/15 815b
###-##-#### MICHAEL FRANTANGELO M 11/24/15 815b
###-##-#### PAUL E HUFFER M 12/9/09 815b
###-##-#### ARIAN A CAMPANELLA M 5/28/21 815b
###-##-#### LEONA SEELY F 12/20/23 815b
###-##-#### REGINALD HOLLADAY M 11/6/19 815b
###-##-#### ROBERT B WHITE M 3/1/26 815b
###-##-#### RALPH R UPTON M 1/23/24 815b
###-##-#### ROY E CAGLE M 4/10/36 815b
###-##-#### L DEAN F 4/7/23 815b
###-##-#### HELEN A. HURT F 1/22/26 815b
###-##-#### DENVER J BURNS M 9/10/21 815b
###-##-#### DAVID LEWIS M 2/10/16 815b
###-##-#### L VROMAN M 7/29/07 815b
###-##-#### WILLIAM GREATHOUSE M 1/8/20 815b
###-##-#### ROBERT H SHAUGHNESSY M 12/14/31 815b
###-##-#### ROBERT H THOMAS M 3/24/20 815b
</TABLE>
Page 24 1/3/94
<PAGE> 117
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### JOHN A. MORRIS M 6/16/18 815b
###-##-#### BERNARD C CLIPPARD M 10/22/23 815b
###-##-#### ELLIS A PEARSON M 7/20/16 815b
###-##-#### FLOYD HARTMAN M 2/8/26 815b
###-##-#### M MOON F 5/24/19 815b
###-##-#### B FLOYD F 3/4/20 815b
###-##-#### WALLACE A WILLIAMS M 8/1/27 815b
###-##-#### EARL B WATKINS M 9/1/27 815b
###-##-#### D OVERBY M 10/31/25 815b
###-##-#### RODNEY O PERKINS M 4/28/25 815b
###-##-#### VAN M RENFROE M 12/2/28 815b
###-##-#### WILLIAM H BRADLEY M 9/4/26 815b
###-##-#### J MASHBURN M 1/1/28 815b
###-##-#### WILLIAM E. NORTON M 6/30/13 815b
###-##-#### LOUIS J BRAUN M 2/28/25 815b
###-##-#### L ROWLETT M 10/24/21 815b
###-##-#### WILLIAM F STONE M 4/1/20 815b
###-##-#### HENRY L RESTARICK M 5/11/19 815b
###-##-#### W WALLACE M 5/22/40 800
###-##-#### S ANGELO M 7/18/36 800
###-##-#### JAMES NEELY M 9/8/29 800
###-##-#### ELIOT BARTHOLOMEW M 3/4/03 161
###-##-#### T SMITH M 5/11/09 161
###-##-#### G SMITH M 8/31/05 161
###-##-#### E SPIES F 1/28/08 161
###-##-#### ANTHONY BOVA M 6/30/04 161
###-##-#### R KELLY M 8/7/98 161
###-##-#### E ROEHR F 11/16/99 161
###-##-#### C BARRY M 10/30/05 161
###-##-#### A WHITE M 11/12/07 161
###-##-#### M TURRONE F 5/3/06 161
###-##-#### R MIDDLEMAS M 1/2/01 161
###-##-#### J ASKEW M 12/22/06 161
###-##-#### J RICHARDSON F 4/6/09 161
###-##-#### R STURDIVANT M 5/6/06 161
###-##-#### S FLOYD M 4/2/04 161
###-##-#### W MILLER M 12/14/10 161
###-##-#### E SHINGLER M 2/9/04 161
###-##-#### A WINTER M 5/18/02 161
###-##-#### SUZANNE CAVOSIE F 8/9/17 161
###-##-#### W FOX M 8/26/00 161
###-##-#### A SMITH M 5/10/96 161
###-##-#### J LOUGHNEY M 10/23/02 161
###-##-#### VERA A. MILLER M 3/24/18 161
</TABLE>
Page 25 1/3/94
<PAGE> 118
Lone Star Industries Inc. Exhibit 5
Retiree Life and Medical Benefits
Salaried Retirees as of January 1, 1993
<TABLE>
<CAPTION>
Social Security Date of
Number Name Sex Birth Branch
- ------------- ------------------ --- ------- ------
<S> <C> <C> <C> <C>
###-##-#### WILLIAM BRYANT M 10/1/01 161
###-##-#### JOHN A WERNER F 6/11/09 161
###-##-#### E SMATHERS F 5/26/02 161
###-##-#### R JOHNSTON M 6/25/13 161
###-##-#### BARBARA SWENSON F 11/3/20 161
###-##-#### ARTHUR MCKIM M 6/1/19 161
###-##-#### ZELDA LUCHSINGER F 12/29/05 161
###-##-#### HELEN RALPH F 2/13/14 161
###-##-#### JOHN F. FONTANELLA M 9/14/11 161
###-##-#### J DRISCOLL M 12/21/97 161
###-##-#### R MONI M 1/4/06 161
###-##-#### MARIO GIANETTI M 5/5/03 161
###-##-#### R BUSH M 5/7/04 161
###-##-#### A MASON M 12/1/05 161
###-##-#### JACK PRAEDER M 11/6/17 161
###-##-#### F NASH M 6/11/20 161
###-##-#### B PONTI M 8/11/15 161
###-##-#### MILDRED CASTRO F 11/21/04 161
###-##-#### P BURK M 12/4/18 16
###-##-#### CHARLES N. KIMURA M 12/1/17 16
###-##-#### H TANABE M 4/1/20 16
</TABLE>
Page 26 1/3/94
<PAGE> 1
EXHIBIT 10.24
-------------
SETTLEMENT AGREEMENT
by and between
Pension Benefit Guaranty Corporation
and
the Lone Star Group (as herein defined)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - DEFINITIONS 1
ARTICLE II - RECITALS 6
ARTICLE III - AGREEMENTS RELATING TO
TERMINATION OF PENSION PLANS 8
ARTICLE IV - PENSION PLAN FUNDING 9
ARTICLE V - PBGC'S SECURITY INTEREST 14
ARTICLE VI - COVENANT REGARDING SENIOR NOTES 17
ARTICLE VII - REPORTING REQUIREMENTS 19
ARTICLE VIII - REPRESENTATIONS AND WARRANTIES 21
ARTICLE IX - EVENTS OF DEFAULT 25
ARTICLE X - REMEDIES 28
ARTICLE XI - TERMINATION OF AGREEMENT 30
ARTICLE XII - GENERAL PROVISIONS 34
</TABLE>
<PAGE> 3
SETTLEMENT AGREEMENT
This Settlement Agreement is made as of April 12,
1994, by and between the Pension Benefit Guaranty Corporation and
the Lone Star Group (as hereinafter defined).
ARTICLE I
DEFINITIONS
Section 1.1. The following terms shall have the
meanings specified below unless the context clearly requires
otherwise:
(a) "Agreement" shall mean this Settlement
Agreement together with the Mortgage Agreement and Security
Agreement and all exhibits thereto, each as modified,
supplemented, or amended from time to time as provided herein;
(b) "Bankruptcy Court" shall mean the United
States Bankruptcy Court for the Southern District of New York;
(c) "Chapter 11 Proceedings" shall mean the
proceedings in re Lone Star Industries, Inc. and New York Trap
Rock Corporation, Et Al., Case Nos. 90 B 21276 to 90 B 21286, 90
B 21334 and 90 B 21335 (HS), now pending in the Bankruptcy Court;
(d) "Collateral" shall have the meaning set forth
in section 5.1 of this Agreement;
(e) "Contributing Sponsor" shall have the meaning
set forth in section 4001(a) (13) of ERISA, 29 U.S.C.
Section 1301(a) (13);
(f) "Controlled Group" shall have the meaning set
forth in section 4001(a) (14) of ERISA, 29 U.S.C. Section 1301(a) (14);
<PAGE> 4
(g) "Debtors" shall mean, collectively, Lone Star
Industries, Inc.; New York Trap Rock Corporation; San-Vel
Concrete Corporation; NYTR Transportation Corp.; Lone Star Cement
Inc.; Construction Materials Co.; I.C. Materials, Inc.; Lone Star
Prestress Concrete, Inc.; Lone Star Properties, Inc.; Southern
Aggregates, Inc.; Lone Star Transportation Corp.; Lone Star
Building Centers, Inc.; and Lone Star Building Centers (Eastern)
Inc.;
(h) "Disclosure Statement" shall mean the Modified
Amended Disclosure Statement filed by the Debtors with the
Bankruptcy Court on November 4, 1993;
(i) "Effective Date" shall have the meaning set
forth in the Modified Plan;
(j) "Environmental Laws" shall have the meaning
set forth in section 8.4 of this Agreement;
(k) "EBITDA" shall have the meaning set forth in
section 11.1 of this Agreement;
(l) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended, 29 U.S.C. Section 1001 et
seq.;
(m) "Event of Default" shall have the meaning set
forth in section 9.1 of this Agreement;
(n) "Forebearance Obligation" shall have the
meaning set forth in the Mortgage Agreement;
(o) "Forebearance Value" shall have the meaning
set forth in the Mortgage Agreement;
2
<PAGE> 5
(p) "Free Cash Flow" shall have the meaning set
forth in section 11.1 of this Agreement;
(q) "Interest Coverage Ratio" shall have the
meaning set forth in section 11.1 of this Agreement;
(r) "Kosmos Partnership" shall have the meaning
set forth in section 5.1 of this Agreement;
(s) "Kosmos Partnership Agreement" shall have the
meaning set forth in section 5.1 of this Agreement;
(t) "Lone Star Group" shall mean, at the time of
any determination under a provision contained herein, Lone Star
Industries, Inc. and all Persons under common control with Lone
Star Industries, Inc. within the meaning of section 4001(b) of
ERISA, 29 U.S.C. Section 1301(b), and sections 414(b) and (c) of the
Internal Revenue Code at such time of determination;
(u) "Minimum Funding Contributions" shall mean
those contributions required to be made to a pension plan under
section 302 of ERISA, 29 U.S.C. Section 1082, and section 412 of the
Internal Revenue Code, 26 U.S.C. Section 412;
(v) "Modified Plan" shall mean the Modified
Amended Consolidated Plan of Reorganization filed November 4,
1993, by the Debtors in the Chapter 11 Proceeding, as
subsequently amended and confirmed by the Bankruptcy Court;
(w) "Mortgage Agreement" shall mean the Mortgage,
Security Agreement, Assignment of Leases and Rents, and Financing
Statement dated April 12, 1994, between Lone Star Industries,
Inc. and PBGC;
3
<PAGE> 6
(x) "NewCo" shall have the meaning set forth in
the Modified Plan and shall also include any successors or
assigns thereto;
(y) "Oglesby Complex" shall have the meaning set
forth in section 5.1 of this Agreement;
(z) "Operating Profit" shall have the meaning set
forth in section 11.1 of this Agreement;
(aa) "PBGC" shall mean the Pension Benefit
Guaranty Corporation;
(bb) "Pension Plans" shall mean: (1) Lone Star
Industries, Inc. Salaried Employees Pension Plan; (2) New York
Trap Rock Corporation Pension Plan for Hourly Paid Employees; (3)
Lone Star Industries, Inc. Amended Pension Plan for Hourly
Employees; (4) Pension Plan for Hourly Employees at Pryor and New
Orleans; (5) Marquette Cement manufacturing Company Division Wage
Employees Revised Pension Plan; (6) Pension Plan for Hourly Paid
Employees of Lone Star Industries, Inc. at Dixon, Illinois;
(7) Marquette Company Pension Plan for Hourly Employees at the
Memphis Distributing Terminal; (8) Lone Star Industries, Inc.
Pension Plan for Hourly Employees at Salt Lake; (9) I.C.
Materials, Inc./Traver Supply Company Pension Plan; and (10) Lone
Star Florida Cement, Inc. Pension Plan for Hourly Employees;
(cc) "Person" shall mean any natural person,
corporation, partnership, joint venture, firm, association,
trust, or other entity;
4
<PAGE> 7
(dd) "Premiums" shall mean the premiums payable to
PBGC under sections 4006 and 4007 of ERISA, 29 U.S.C. Sections 1306-07;
(ee) "Reorganized Lone Star" shall have the
meaning set forth in the Modified Plan;
(ff) "Security Agreement" shall mean the
agreement, including all exhibits thereto, dated April 12, 1944,
granting PBGC a first priority interest in the Oglesby Complex
and the Kosmos Partnership, copies of which are attached hereto
as Exhibit A;
(gg) "Senior Notes" shall have the meaning set
forth in the Modified Plan, as such Senior Notes may be amended
from time to time, but shall also include any notes or other debt
obligations given in exchange for, or in any refinancing or
restructuring of, the Senior Notes;
(hh) "Statutory Minimum Funding Requirements"
shall mean the requirements set forth in section 302 of ERISA, 29
U.S.C. Section 1082, and section 412 of the Internal Revenue Code, 26
U.S.C. Section 412, and the regulations thereunder;
(ii) "Termination Liability" shall mean the
liability to PBGC described in section 4062(b) of ERISA, 29
U.S.C. Section 1362(b);
(ii) "Test Period" shall have the meaning set
forth in section 11.1 of this Agreement;
(kk) "Unfunded Benefit Liabilities" shall have the
meaning ascribed to the term "amount of unfunded benefit
5
<PAGE> 8
liabilities" in section 4001(a) (18) of ERISA, 29 U.S.C.
Section 1301(a) (18).
Section 1.2. With respect to all terms in this
Agreement, the singular includes the plural and the plural
includes the singular; references to agreements and other
contractual instruments include all subsequent amendments or
changes thereto made in accordance with their respective terms
and not prohibited by this Agreement; and references to Persons
include their permitted successors and assigns, to the extent
provided under applicable law.
Section 1.3. References herein to any statutory
section shall include any successor to such section, whether by
amendment or renumbering of such section.
ARTICLE II
RECITALS
Section 2.1. In December 1990, each of the Debtors
filed a voluntary petition for reorganization pursuant to
Chapter 11 of the Bankruptcy Code in the Bankruptcy Court.
Section 2.2. Each member of the Lone Star Group is
currently either the Contributing Sponsor or a member of the
Controlled Group of the Contributing Sponsor of the Pension
Plans.
Section 2.3. PBGC is a wholly owned United States
government corporation created under Title IV of ERISA. PBGC
6
<PAGE> 9
guarantees the payment of certain pension benefits upon
termination of a covered pension plan.
Section 2.4. Each of the Pension Plans is covered
under Title IV of ERISA.
Section 2.5. PBGC has informed the Lone Star Group of
its concern that, in the absence of this Agreement, confirmation
of the Debtors' Modified Plan could result in the possible long-
run loss of PBGC increasing unreasonably within the meaning of
section 4042(a) (4) of ERISA, 29 U.S.C. Section 1342(a) (4).
Accordingly, PBGC informed the Lone Star Group that it was
considering initiating termination of the Pension Plans under
section 4042 of ERISA.
Section 2.6. PBGC has asserted that, in the event of
termination of one or more of the Pension Plans, each member of
the Lone Star Group on the date of such termination would be
jointly and severally liable to PBGC for Termination Liability
relating to the terminated Pension Plan(s).
Section 2.7. PBGC has asserted that if all of the
Pension Plans were terminated as of May 31, 1993, the aggregate
amount of Termination Liability for all of the Pension Plans
would be $73,246,476.
Section 2.8. PBGC has filed proofs of claim in the
Chapter 11 Proceedings on behalf of itself and the Pension Plans.
Claim numbers 2789 through 2801, inclusive, were for the
Termination Liability that PBGC asserts would be owed to PBGC
upon termination of the Pension Plans. Claim numbers 2776
7
<PAGE> 10
through 2788, inclusive, were for Minimum Funding Contributions
PBGC asserted were owed to the Pension Plans and claim numbers
2802 through 2814, inclusive, were for Premiums PBGC asserted
were owed to PBGC.
Section 2.9. The Lone Star Group disputes that the
prospect of confirmation of the Modified Plan would provide
grounds for PBGC to terminate the Pension Plans and disputes
PBGC's calculation of the amount of the Termination Liability in
the event of termination of the Pension Plans.
Section 2.10. The Lone Star Group and PBGC have
conducted negotiations to address their concerns about the
effects of confirmation of the Modified Plan.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements set forth herein, the receipt,
adequacy, and sufficiency of which are hereby acknowledged, and
intending to be legally bound, PBGC and the Lone Star Group
hereby agree as follows:
ARTICLE III
AGREEMENTS RELATING TO TERMINATION OF PENSION PLANS
Section 3.1. PBGC shall not institute proceedings
under section 4042 of ERISA, 29 U.S.C. Section 1342, to terminate any
of the Pension Plans or to appoint a trustee for any of the
Pension Plans at any time prior to and including the Effective
Date.
8
<PAGE> 11
Section 3.2. The Lone Star Group and PBGC agree that,
with respect to confirmation of the Modified Plan, the
transactions contemplated by this Settlement Agreement alleviate
the concerns of a possible long-run loss to the PBGC increasing
unreasonably within the meaning of section 4042(a) of ERISA.
Section 3.3. Proofs of claim numbers 2776 through
2814, inclusive, filed by PBGC in the Chapter 11 Proceedings
shall be withdrawn with prejudice by PBGC no later than the
Effective Date, subject, however, to the Lone Star Group's having
performed its obligations under this Agreement as of the
Effective Date. Except as provided herein, neither such
withdrawal of PBGC's claims, nor PBGC's entering into this
Agreement, nor any other act or omission shall be construed as
having any effect or impact on rights PBGC may have with respect
to any of the Pension Plans after the Effective Date.
ARTICLE IV
PENSION PLAN FUNDING
Section 4.1. On the Effective Date, the Lone Star
Group shall pay (or cause the relevant Pension Plan or Pension
Plans to pay) to PBGC fifty-two thousand six hundred ninety-two
dollars and twenty-seven cents ($52,692.27) in past due Premiums
owed with respect to the Pension Plans.
Section 4.2. The Lone Star Group shall contribute
value to the Pension Plans in accordance with either Option A or
9
<PAGE> 12
Option B, as described below. PBGC in its sole discretion shall
choose Option A or Option B on or before the Effective Date.
Option A
The Pension Plans shall have allowed general unsecured
claims in the amount of twelve million two hundred thousand
dollars and no cents ($12,200,000.00). These claims will receive
the same treatment as other allowed general unsecured Class 4B
claims under the Modified Plan, except as set forth below. Any
cash and, subject to the limitations in section 407 of ERISA, New
Lone Star Common Stock payable on account of these claims shall
be immediately contributed by the Debtors to the Pension Plans.
Any other non-cash assets payable on account of these claims
(including any New Lone Star Common Stock that cannot be
immediately contributed to the Pension Plans because of the
limitations in section 407 of ERISA) shall be held by the Lone
Star Group (either in escrow or in general corporate funds) and
shall be contributed to the Pension Plans as soon as practicable
after the prohibited transaction exemption described in section
4.6 of this Agreement shall have been obtained from the
Department of Labor. If such prohibited transaction exemption is
denied or is not obtained within fifteen months of the Effective
Date, then, within ninety days thereafter, the Lone Star Group
shall cause such other non-cash assets to be sold and shall
collect the proceeds therefrom. Within thirty days of receiving
such proceeds, the Lone Star Group shall contribute an equivalent
amount of cash to the Pension Plans.
10
<PAGE> 13
Option B
PBGC, for the benefit of the Pension Plans, shall have
allowed general unsecured claims in the amount of twelve million
two hundred thousand dollars and no cents ($12,200,000.00). PBGC
may sell such claims on or before the Effective Date (through an
independent designated agent) for cash equal to the fair market
value of the claims; provided that if a price cannot be obtained
for such claims that is satisfactory to PBGC (in PBGC's sole
discretion), PBGC may rescind its choice of this Option B and
choose Option A instead. All cash proceeds from the sale of such
claims shall be held in escrow by such designated agent for the
benefit of the Pension Plans until the Effective Date and shall
be contributed to the Pension Plans on the Effective Date or as
soon as practicable thereafter (along with interest earned
thereon) in accordance with directions to be provided by Lone
Star Industries, Inc.
The allocation of the contributions required by this section
among the various Pension Plans (whether under Option A or
Option B) shall be made by the Debtors, provided that all such
contributions shall be made to those Pension Plans that have
Unfunded Benefit Liabilities. The contributions required under
this section shall be in addition to any contributions required
under sections 4.1 and 4.4 of this Agreement or required under
applicable law or otherwise required.
Section 4.3. The Lone Star Group shall maintain and
fund the Pension Plans in accordance with applicable law,
11
<PAGE> 14
including the Statutory Minimum Funding Requirements. Nothing in
this Agreement or in the Modified Plan shall be construed as
discharging, in whole or in part, such obligations of the Lone
Star Group to the Pension Plans under applicable law. Likewise,
nothing in this Agreement shall limit PBGC's rights under section
412(n) of the Internal Revenue Code.
Section 4.4. In addition to any amounts required to be
contributed to the Pension Plans to meet the Statutory Minimum
Funding Requirements or otherwise required to be contributed to
the Pension Plans, the Lone Star Group shall contribute to the
Pension Plans the excess, if any, of --
(a) the amounts that would be required to be
contributed to the Pension Plans to meet the
Statutory Minimum Funding Requirements if the
contributions arising from the allowed claims
described in section 4.2 of this Agreement had not
been included as a credit to the funding standard
account [26 U.S.C. Section 412(b)],
Over
(b) the amounts required to be contributed to the
Pension Plans to meet the Statutory Minimum
Funding Requirements,
PROVIDED that any amount required to be contributed under this
section 4.4 shall be reduced by the amortization charges
(including interest) that are attributable to the additional
benefit liabilities that must be recognized as a result of the
12
<PAGE> 15
decision in Monarch Cement Company V. Lone Star Industries, Inc.,
982 F.2d 1448 (10th Cir. 1992)
Section 4.5. If any contribution required under
section 4.4 would not be deductible under section 404 of the
Internal Revenue Code of 1986 in the year due, then such
contribution shall not be made in such year but instead shall be
made pro rata in the next two years in which it is deductible.
In determining such maximum deductible contributions, the actuary
shall calculate the current liability, as defined in section
412(1) (7) of the Internal Revenue Code, utilizing an interest
rate which shall be the lowest rate in the "permissible range"
specified in section 412(b)(5)(B)(ii)(I) of the Internal Revenue
Code. In no event, however, shall this section require an
interest rate lower than the rates used by PBGC to determine
Termination Liability.
Section 4.6. If PBGC chooses Option A under section
4.2 of this Agreement, the Lone Star Group shall, as soon as
practicable after the Effective Date, apply for an exemption
under section 408 of ERISA from the prohibited transaction rules
in sections 406 and 407 of ERISA with respect to the
contributions required under such Option A. The Lone Star Group
shall use its reasonable best efforts to obtain such exemption as
soon as possible.
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ARTICLE V
PBGC'S SECURITY INTEREST
Section 5.1. In order to secure their obligations to
PBGC for Termination Liability in the event of a termination of
one or more of the Pension Plans after the Effective Date and as
more fully set forth in the Mortgage Agreement and Security
Agreement, the Lone Star Group shall grant PBGC on or before the
Effective Date a continuing security interest of first priority
in all of the Lone Star Group's right, title, and interest in and
to the following property ("Collateral"):
(a) the Kosmos Cement Company Partnership ("Kosmos
Partnership") between Kosmos Cement Company, Inc. and Lone Star
Cement Inc. as evidenced by the Kosmos Cement Company Partnership
Agreement dated March 7, 1988, and as supplemented and amended by
(i) the Contribution Agreement between Kosmos Cement Company, a
Kentucky General Partnership, and Kosmos Cement Company, Inc., a
Delaware corporation, dated March 7, 1988; (ii) the Contribution
Agreement between Kosmos Cement Company, a Kentucky General
Partnership, and Lone Star Industries, Inc., a Delaware
Corporation, dated March 7, 1988; (iii) the Agreement and
Addendum to Partnership Agreement dated June 4, 1990, by and
among Moore McCormack Resources, Inc., as successor by merger to
Kosmos Cement Company, Inc., Lone Star Cement, Inc. and
Southwestern Portland Cement Company; and (iv) the First
Amendment to the Kosmos Cement Company Partnership Agreement
between Lone Star Cement Inc. and Southdown, Inc., as successor
14
<PAGE> 17
by merger to Moore McCormack Resources, Inc., dated October 14,
1992 ("Kosmos Partnership Agreement"); and
(b) the cement facility in Oglesby, LaSalle
County, Illinois, that is described in the Disclosure Statement
as the Oglesby Complex, to the extent described in the Mortgage
Agreement and Security Agreement ("Oglesby Complex").
To the extent set out in the Mortgage agreement and
Security Agreement, the Collateral shall include (except due to
substitution under section 5.2 of this Agreement) all proceeds of
any sale of part or all of the Oglesby Complex (excluding sales
in the ordinary course of business) or the Kosmos Partnership,
and all extraordinary dividends (as defined in section 1059(c) of
the Internal Revenue Code of 1986), insurance proceeds, and books
and records relating thereto; provided that the Collateral shall
not include de minimis insurance proceeds; and provided further
that, in the event of a catastrophic loss reimbursed by
insurance, the Lone Star Group may (x) substitute for insurance
proceeds other collateral of substantially equal value reasonably
satisfactory to PBGC, or (y) utilize all or substantially all of
such insurance proceeds to repair or replace such catastrophic
loss.
Section 5.2. To the extent set out in the Mortgage
Agreement and Security Agreement and except for sales, the repair
and replacement of equipment and the mainteNance of facilities in
the ordinary course of business, the Lone Star Group shall not
transfer, convey, sell, assign, or encumber any part of the
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<PAGE> 18
Collateral without PBGC's written consent (which consent shall
not be unreasonably withheld provided that the Lone Star Group
provides substitute collateral of substantially equal value) and
shall maintain the Collateral in accordance with applicable
provisions of the Mortgage Agreement and Security Agreement.
Section 5.3. Notwithstanding any provision of this
Agreement, the Mortgage Agreement or the Security Agreement to
the contrary:
(a) Neither the Forebearance Value nor the
Forebearance Obligation shall be due and payable until an Event
of Default pursuant to sections 11(a), (b) or (e) of the Mortgage
Agreement or sections 6.1(a) or (b) of the Security Agreement.
Neither the Forebearance Value nor the Forebearance Obligation
shall exceed the amount of the Termination Liability. The amount
of the Termination Liability shall not be limited by the
Forebearance Value or the Forebearance Obligation.
(b) In the event that all Pension Plans terminate
pursuant to sections 11(a) or (b) of the Mortgage Agreement or
section 6.1(a) of the Security Agreement and PBGC forecloses on
the Collateral, the Lone Star Group shall receive all proceeds of
the foreclosure sale which exceed the amount of the Termination
Liability.
(c) If less than all Pension Plans terminate upon an
Event of Default pursuant to sections 11(a) or (b) of the
Mortgage Agreement or section 6.1(a) of the Security Agreement
and PBGC forecloses on the Collateral, PBGC shall use the
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proceeds of the foreclosure sale to satisfy the Termination
Liability associated with the terminated Pension Plans and shall
retain as Collateral those proceeds of the foreclosure sale which
exceed such Termination Liability. Such Collateral shall be held
by PBGC subject to the rights, limitations and conditions,
including the right to substitute collateral, set forth in this
Agreement, the Mortgage Agreement and Security Agreement.
(d) The amount of the Forebearance Value and the
amount of the Forebearance Obligation shall not be binding on the
Lone Star Group and PBGC in any negotiations concerning
substitute collateral pursuant to section 5.2 of this Agreement.
(e) In no event shall the provisions of this section
5.3 supersede the provisions set forth at section 11.1 of this
Agreement.
(f) Nothing in the Mortgage Agreement or Security
Agreement shall expand the circumstances under which PBGC may
take possession of the Collateral, as expressly set forth in
section 10.2 of this Agreement, except for sections 11(a), (b)
and (e) of the Mortgage Agreement and sections 6.1(a) and (b) of
the Security Agreement.
ARTICLE VI
COVENANT REGARDING SENIOR NOTES
Section 6.1. If at any time Reorganized Lone Star (or
any other member of the Lone Star Group that is an obligor on the
Senior Notes) provides security to the holders of the Senior
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<PAGE> 20
Notes to secure the obligations evidenced thereby, then at the
same time Reorganized Lone Star (or such other obligor) shall
provide PBGC with a pro rata share of such security, pari passu
with the secured interest granted to the holders of the Senior
Notes, to secure the Lone Star Group's obligations to PBGC for
Termination Liability in the event of a termination of one or
more of the Pension Plans after the Effective Date. PBGC's pro
Rata share of such security shall be the fraction determined by
dividing (i) the Termination Liability that would be incurred if
all of the Pension Plans terminated on the date such security is
provided (reduced by the value of the Collateral as of such date,
as mutually agreed upon between PBGC and the Lone Star Group or,
if they are unable to agree on such value, as determined under
binding arbitration conducted under the auspices of the American
Arbitration Association) by (ii) the sum of such Termination
Liability (as so reduced) and the outstanding principal balance
on the Senior Notes. In providing such security, the Lone Star
Group shall use its best efforts to ensure that PBGC will have
the same priority and rights as a secured creditor as the holders
of the Senior Notes in the event that any member of the Lone Star
Group voluntarily files or has filed against it a bankruptcy
petition or insolvency proceeding in any federal or state court.
Section 6.2. All obligations under section 6.1 shall
terminate on the earlier of (i) the date that this Agreement
terminates pursuant to section 11.1, or (ii) the date that is the
tenth anniversary of the Effective Date.
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ARTICLE VII
REPORTING REQUIREMENTS
Section 7.1. The Lone Star Group shall provide PBGC
the following:
(a) for each of the Pension Plans, copies of all
Internal Revenue Service Forms 5500 when filed and all actuarial
valuation reports as soon as available;
(b) written notice within thirty calendar days
after the due dates that (i) it has made the Minimum Funding
Contributions and other contributions required under this
Agreement or otherwise, or (ii) it has failed to make such
contributions;
(c) copies of the quarterly financial statement on
Form 10-Q, annual report and Form 10-K for Lone Star Industries,
Inc. and its consolidated affiliates when filed with the SEC;
(d) not later than 120 days after the close of the
fiscal year of the Lone Star Group, a certification by the chief
financial officer of Lone Star Industries, Inc. of the Lone Star
Group's capital expenditures for its cement operations for the
previous fiscal year; and
(e) written notice that Reorganized Lone Star (or
any other member of the Lone Star Group that is an obligor on the
Senior Notes) has made a legally binding commitment to provide
security to the holders of the Senior Notes as soon as such
commitment or promise is made but in no event less than thirty
days before such security is provided.
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Section 7.2. For divestitures other than the
divestitures contemplated in the Modified Plan, the Lone Star
Group shall provide PBGC with written notice at least thirty days
prior to the effective date of any event as a result of which any
member of the Lone Star Group will cease to be a member of the
Lone Star Group if, immediately after the effective date of the
event, the total revenues, the total operating income, or the
total assets of the Lone Star Group would be less than ninety
percent of the total revenues, the total operating income, or the
total assets, respectively, of the Lone Star Group immediately
before the effective date of the event. For such purposes, all
events occurring in any 12-month period shall be treated as a
single event.
Section 7.3. The Lone Star Group shall provide PBGC
with written notice at least sixty days prior to the effective
date, to its knowledge, of any declaration of an extraordinary
dividend (as defined in section 1059(c) of the Internal Revenue
Code of 1986) by any member of the Lone Star Group or redemption,
in any twelve-month period, of an aggregate of ten percent or
more of the total combined voting power of all classes of stock
entitled to vote, or an aggregate of ten percent or more of the
total value of shares of all classes of stock, of any member of
the Lone Star Group.
Section 7.4. The Lone Star Group shall provide PBGC
prompt written notice, and in any event within fifteen business
days, after any member of the Lone Star Group obtains knowledge
20
<PAGE> 23
of the occurrence of any condition or event that constitutes an
Event of Default under this Agreement or that would constitute
such an Event of Default if not remedied.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1. Each member of the Lone Star Group
represents and warrants to PBGC, and PBGC represents and warrants
to each member of the Lone Star Group, that it has full power and
authority to enter into this Agreement and that this Agreement
constitutes a legal, valid, and binding obligation of each member
of the Lone Star Group and PBGC, enforceable against each member
of the Lone Star Group or PBGC, as the case may be, in accordance
with its terms.
Section 8.2. Each member of the Lone Star Group hereby
represents and warrants to PBGC that as of the Effective Date
there are no past due Minimum Funding Contributions owed to any
of the Pension Plans.
Section 8.3. Each member of the Lone Star Group hereby
represents and warrants to PBGC that as of the Effective Date the
Lone Star Group has no contractual obligations (other than those
arising under this Agreement) to contribute to the Pension Plans.
Section 8.4. Each member of the Lone Star Group hereby
represents and warrants to PBGC that --
(a) the individuals executing this Agreement on
behalf of the Lone Star Group have been duly authorized and
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<PAGE> 24
empowered to execute and deliver this Agreement on behalf of each
member of the Lone Star Group;
(b) the execution, delivery, and performance of
this Agreement by each of them (i) do not and will not violate,
conflict with, or result in a breach of any of the terms of any
indenture, agreement, or instrument to which any member of the
Lone Star Group is party or by which it is bound or constitute
(with notice or lapse of time or both) a default thereunder; and
(ii) to its best knowledge, do not and will not violate any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination, or award presently in effect;
(c) to its best knowledge, all information
furnished to PBGC by the Lone Star Group concerning the business
or financial condition of each member of the Lone Star Group is,
or was or will be at the time furnished, true and correct, and
all financial statements and projections concerning the Lone Star
Group that are or have been made available to PBGC have been
prepared in good faith;
(d) to its best knowledge, as of the Effective
Date there is no fact known to any member of the Lone Star Group
that would reasonably be expected to have a material and adverse
effect on the business, operations, assets, or financial
condition of the Lone Star Group, taken as a whole, that has not
been disclosed to PBGC;
(e) to its best knowledge, as of the Effective
Date there is no fact known to any member of the Lone Star Group
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<PAGE> 25
that would reasonably be expected to have a material and adverse
effect on the value of the Collateral that has not been disclosed
to PBGC;
(f) as of the date of this Agreement, the Lone
Star Group consists of each of the Debtors and each of the
following Persons: Utah Portland Quarries, Inc.; Rosebud
Holdings, Inc.; Rosebud Real Properties, Inc.; Rosebud Falcon
Corporation; Rosebud General Corporation; Lone Star Wyoming,
Inc.; Plastibeton Canada Inc.; G.M. Stewart Lumber Company, Inc.,
Coastline Petroleum Company, Inc.; Diamond Buildings Materials,
Inc.; Lone Star California, Inc.; Gotham Suffolk Stone
Corporation; Cornell Steamboat Company; Lone Star Hawaii, Inc.;
Lone Star Hawaii Cement Corporation; Lone Star Hawaii Properties,
Inc.; KCOR CORPORATION; Construction Aggregates Limited; Las
Colinas Corporation; Nazareth Cement Corporation; and Santa Cruz
Corporation;
(g) the operations of those members of the Lone
Star Group as shall fall within the definition of a "potentially
responsible party" under the Comprehensive Environmental
Response, Compensation and Liability Act or within the same or
similar definitions under all so-called "Superfund" or
"Superlien" laws, and all other federal, state, and local laws,
rules, regulations, orders, and decrees relating to or imposing
liabilities or standards of conduct concerning any hazardous
substances, pollutants, contaminants, or toxic or dangerous
wastes (collectively, "Environmental Laws") shall comply with all
23
<PAGE> 26
substantive requirements imposed thereby; provided, however, that
any such member of the Lone Star Group shall have the right to
assert any and all defenses and objections in any appropriate
forum to the imposition of any liability under the Environmental
Laws. To the knowledge of the Lone Star Group, the significant
and material pending environmental actions, proceedings, and
claims have been disclosed in the Disclosure Statement and the
Modified Plan;
(h) Lone Star Industries, Inc. or Lone Star Cement
Inc. has full corporate power and authority to grant PBGC a
security interest in the Collateral; and
(i) Lone Star Industries, Inc., New York Trap Rock
Corporation, and Lone Star Cement Inc. are duly organized,
validly existing, and, on the Effective Date, will be in good
standing under the laws of the states of their incorporation and
are duly qualified as foreign corporations, where required, in
those states or countries in which they conduct commercial
operations.
Section 8.5. Each member of the Lone Star Group hereby
represents and warrants that, as to each such member that is a
corporation --
(a) to its best knowledge, such corporation is (or
will be within sixty days after the Effective Date) duly
organized, validly existing, and in good standing under the laws
of the state of its incorporation and is (or will be within sixty
days after the Effective Date) duly qualified as a foreign
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<PAGE> 27
corporation, where required, in those states or countries in
which it conducts commercial operations; and
(b) the execution, delivery, and performance of
this Agreement does not and will not violate any of the
provisions of such corporation's articles of incorporation or by-
laws.
Section 8.6. Each member of the Lone Star Group hereby
represents and warrants that on or before the Effective Date, the
Lone Star Group shall have contributed six million dollars
($6,000,000) in cash to the Pension Plans in connection with
certain alleged prohibited transactions relating to the
sale/leaseback of certain real property in Rancho Cordova,
California.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.1. The occurrence of any of the following
events shall constitute an event of default ("Event of Default")
by the Lone Star Group under this Agreement:
(a) (i) actual termination of any of the Pension
Plans after the Effective Date in either a distress termination
under section 4041(c) of ERISA, 29 U.S.C. Section 1341(c), or an
involuntary termination under section 4042 of ERISA, 29 U.S.C.
Section 1342;
(ii) default under sections 11(b) or (e) of
the Mortgage Agreement;
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(iii) default under section 6.1(b) of the
Security Agreement;
(b) a material failure by the Lone Star Group to
make the payment to PBGC or the contributions to the Pension
Plans required by Article IV of this Agreement;
(c) a material default by the Lone Star Group in
the due performance or observance of any of the terms,
provisions, covenants, or agreements contained in this Agreement;
(d) any representation or warranty made by any
member of the Lone Star Group in this Agreement shall prove to
have been false or misleading in any material respect with
respect to the Lone Star Group, taken as a whole; or any
representation, warranty, statement, or information of any member
of the Lone Star Group contained in any report, certification,
financial statement, or other instrument furnished in connection
with or pursuant to this Agreement shall prove to have been
knowingly false or misleading in any material respect when so
made or furnished;
(e) a voluntary case or other proceeding shall be
commenced by any member of the Lone Star Group or an involuntary
petition or other proceeding shall be filed against any such
member in a court of competent jurisdiction seeking relief under
the Bankruptcy Code, as now constituted or hereafter amended, or
under any other federal or state bankruptcy, insolvency,
receivership, or similar law, or any dissolution, winding up, or
general assignment for the benefit of creditors (other than with
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respect to NewCo) shall be made or attempted by any such member,
in either case, that would have a material adverse effect upon
the Lone Star Group;
(f) to the extent not remedied by the Lone Star
Group within twenty business days after receipt of written notice
from PBGC, any damage, destruction, or encumbrance to or on any
of the Collateral or the making of any levy, seizure, or
attachment thereof or thereon that would have a material adverse
effect on the value of the Collateral, unless the Lone Star Group
(or the Kosmos Partnership, as the case may be) begins remedial
action within such twenty-day period and proceeds with such
remedial action diligently thereafter;
(g) to the extent not remedied by the Lone Star
Group within ten business days after receipt of written notice
from PBGC, the dissolution or termination of the Kosmos
Partnership, if at such time the Kosmos Partnership still
constitutes part of the Collateral, and such dissolution or
termination has a material adverse effect on the value of the
Collateral; or
(h) any member of the Lone Star Group shall
commence legal action asserting for any reason that this
Agreement is not a legal, valid, and binding obligation
enforceable in accordance with its terms; any lien purported to
be created by this Agreement shall for any reason cease to be in
full force and effect, resulting in a material adverse effect on
the value of the Collateral; or any lien purported to be created
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<PAGE> 30
by this Agreement shall, for any reason, be asserted by any
member of the Lone Star Group not to be a valid perfected
security interest in the Collateral.
ARTICLE X
REMEDIES
Section 10.1. Upon the occurrence of any Event of
Default, and at any time thereafter so long as the same shall be
continuing, PBGC may, at its option, take any or all of the
following actions as PBGC in its sole discretion shall determine:
(a) PBGC may apply for an order requiring
performance, whether for the specific performance of any term or
agreement hereof or for an injunction against the violation of
any of the terms or provisions hereof or for an appropriate show
cause order, it being agreed that a remedy of money damages will
be inadequate because the failure of the Lone Star Group to
comply strictly with the terms hereof would cause irreparable
injury to PBGC and the Pension Plans;
(b) PBGC may proceed to enforce its rights by any
other action, suit, remedy, or proceeding authorized or permitted
by this Agreement or by law or by equity;
(c) PBGC may proceed by appropriate court action
to recover damages to itself or to the Pension Plans, as
applicable, for the breach hereof; and
(d) PBGC may exercise any other right or remedy
that may be available to it under applicable law.
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Section 10.2. Upon the occurrence of any Event of
Default under section 9.1(a), and at any time thereafter so long
as the same shall be continuing, PBGC may, at its option, take
immediate possession of the Collateral and may enter upon the
premises of any member of the Lone Star Group with or without
process of law in order to take possession of, foreclose upon,
sell, assign, transfer, and deliver, to the extent permitted by
applicable law, all or any part of the Collateral, or any
interest therein, at any private sale or public auction with or
without demand, advertisement, or notice (except as may be
required by applicable law) of the date, time, and place of sale
and any adjournment thereof, for cash or credit or other
property, for immediate or future delivery and for such price or
prices and on such terms as PBGC, in its sole discretion, may
determine, or as may be required by applicable law, so long as
the applicable member of the Lone Star Group and the Kosmos
Partnership is afforded a commercially reasonable opportunity to
bid for all or such part of such Collateral. It is agreed that
thirty days' notice to the Lone Star Group of the date, time, and
place of any proposed sale by PBGC of all or any part of the
Collateral or interest therein is reasonable in order to provide
such opportunity to bid; provided that such agreement is not
intended to relieve PBGC of its obligation to foreclose in a
commercially reasonable manner, to the extent required by
applicable law; provided further that PBGC's right to collect
Termination Liability in the event of a termination of one or
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more of the Pension Plans after the Effective Date shall not be
limited to the rights granted in this Agreement with respect to
the Collateral or under Article VI. At any sale of the
Collateral, PBGC may bid for and purchase such property.
Section 10.3. PBGC shall not, by any act, delay,
omission, or otherwise, be deemed to have waived any of its
rights or remedies hereunder, and no waiver whatsoever shall be
valid unless in writing signed by PBGC and then, only to the
extent set forth therein. A waiver by PBGC of any right or
remedy hereunder on any one occasion shall not bar or prohibit
the exercise of any right or remedy that PBGC otherwise would
have had on any subsequent occasion.
Section 10.4. All rights, remedies, and powers granted
to PBGC herein or by applicable law shall be cumulative and may
be exercised singly or concurrently.
ARTICLE XI
TERMINATION OF AGREEMENT
Section 11.1. All terms, conditions, representations,
covenants, warranties, remedies and other provisions of this
Agreement, the Mortgage Agreement and Security Agreement shall
terminate and the Collateral shall be released on the earliest
of:
(a) the date that is thirty days after the date on
which the Lone Star Group has provided PBGC with a certification
by the enrolled actuary for the Pension Plans that none of the
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Pension Plans has any Unfunded Benefit Liabilities, provided that
PBGC reasonably agrees that none of the Pension Plans has any
Unfunded Benefit Liabilities;
(b) the date that is both after the tenth
anniversary of the Effective Date and thirty days after the date
on which the Lone Star Group has provided PBGC with a
certification by the enrolled actuary for the Pension Plans that
the aggregate amount of the Pension Plans' Unfunded Benefit
Liabilities does not exceed ten million dollars, provided that
PBGC reasonably agrees that the aggregate amount of the Pension
Plans' Unfunded Benefit Liabilities does not exceed ten million
dollars;
(c) the date on which the subordinated debt of
Lone Star Industries, Inc. is rated at least BBB by Standard &
Poor's Corporation or at least Baa by Moody's Investors Service,
Inc.; or
(d) the date that is thirty days after the date on
which the Lone Star Group shall provide PBGC with a certification
by a nationally recognized public accounting firm that the Lone
Star Group has satisfied each of the following criteria, provided
--------
that PBGC reasonably agrees that such criteria have been
satisfied:
(i) the Lone Star Group's cumulative capital
expenditures for cement operations for the Test Period
shall have exceeded $61.4 million;
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(ii) the Lone Star Group's cumulative EBITDA
for the Test Period shall have exceeded $221.138
million; and
(iii) the Lone Star Group's Interest Coverage
Ratio for the last four quarters of the Test Period
shall equal or exceed 2:1;
provided, however, that this Agreement shall not terminate if, at
the time otherwise provided above for termination, there exists
any material Event of Default under this Agreement.
For purposes hereof, the following definitions shall
apply:
(A) "Test Period" shall mean the period January 1,
1994, through December 31, 1998, or, if the criteria in clauses
(i), (ii), and (iii) above have not been met as of December 31,
1998, the twenty quarters immediately preceding the date as of
which a determination is to be made;
(B) "EBITDA" shall mean pre-tax income or losses
plus depreciation, amortization and net interest excluding (i)
gains and losses on sales and other dispositions of assets other
than in the ordinary course of business, (ii) extraordinary or
non-recurring gains and losses, (iii) gains and losses from
purchases or redemptions of any debt and (iv) gains and losses
from changes in accounting principles;
(C) "Interest Coverage Ratio" shall mean the ratio
of Free Cash Flow to interest expense for a given period;
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(D) "Free Cash Flow" shall mean Operating Profit
plus depreciation (including depletion) and amortization less
capital expenditures; and
(E) "Operating Profit" shall mean sales minus the
following: cost of goods sold; selling, general, and
administrative expenses; and FAS 106 retiree expense; and shall
exclude extraordinary or non-recurring items not in the ordinary
course of business (such as but not limited to gains or losses
due to asset dispositions or changes in accounting methods) and
shall exclude operating earnings or losses and gains or losses
from the sale of non-core assets to be transferred to NewCo
pursuant to the Disclosure Statement.
Capital expenditures, income, interest expense, and
other accounting terms used in this subsection (d) but not
specifically defined herein shall be calculated using generally
accepted accounting principles (as promulgated by the American
Institute of Certified Public Accountants) and in a manner
consistent with the calculations of such items as reported on
page 6 of Section I of the Lone Star Group's June 1993 Business
Plan, it being understood that the intent of this subsection is
to compare the Lone Star Group's actual financial performance
with the financial projections set forth in such Business Plan.
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ARTICLE XII
GENERAL PROVISIONS
Section 12.1 This Agreement contains the entire and
exclusive agreement and understanding of the parties and
supersedes all prior agreements, understandings, commitments, and
proposals, oral or written, between the parties relating to the
subject matter hereof, and no other agreement or understanding
exists except as expressly set forth in this Agreement. The
parties agree that should a court be called upon to interpret any
provision of this Agreement, previous drafts shall not be used by
any party in any manner to support its interpretation. Each
party and counsel for each party here to have reviewed this
Agreement and have participated in its drafting and, accordingly,
the rule of construction to the effect that ambiguities are to be
resolved against the drafting party shall not apply in any
dispute over the interpretation of this Agreement.
Section 12.2. This Settlement Agreement shall be
interpreted in accordance with and governed by the law of the
State of New York, except to the extent preempted by federal law.
Section 12.3. For all purposes under this Agreement,
each member of the Lone Star Group hereby irrevocably appoints
Reorganized Lone Star with full power and authority as its agent
for receiving any notice required or permitted under this
Agreement and for service of process in respect of any action or
proceeding arising under or pertaining to this Agreement, and
PBGC acknowledges such irrevocable appointment. Notice to
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Reorganized Lone Star by PBGC provided in accordance with section
12.6 of this Agreement shall constitute notice to each member of
the Lone Star Group.
Section 12.4. Any lawsuit or action arising under or
pertaining to this Settlement Agreement shall be brought in the
United States District Court for the Southern District of New
York, provided that if such court lacks jurisdiction, such
lawsuit or action may be brought in any United States District
Court of competent jurisdiction; provided further that, prior to
substantial consummation of the Modified Plan, the Bankruptcy
Court shall have such jurisdiction as is necessary to consummate
the Modified Plan.
Section 12.5. This Agreement may not be modified or
amended except by a writing duly executed by the Lone Star Group
and PBGC.
Section 12.6. Any notice, consent, approval, or other
communication required or permitted under this Agreement shall be
in writing and shall be delivered by hand, by overnight courier
service, or by telecopy (with request for assurance of receipt in
a manner customary for such communications), or by certified or
registered mail, postage prepaid, and shall be deemed duly given
when so delivered or sent by telecopy or, if sent by overnight
courier service, on the first business day after dispatch or, if
sent by certified or registered mail, five business days after
the date of dispatch to the following addressees at the address
or telecopy number set forth below:
35
<PAGE> 38
To The PBGC: Director, Corporate Finance and
Negotiations Department
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005
Telecopy No.: 202-842-2643
To The Lone Star
Group: Senior Vice President, General Counsel
and Secretary
Lone Star Industries, Inc.
300 First Stamford Place
Stamford, Connecticut 06912-0014
Telecopy No.: 203-969-8590
or to such other Persons or addresses as any party may from time
to time designate by notice in accordance with this section to
the other party or parties. If the effective date of notice
shall fall upon a day that is not a business day, notice shall
not be deemed effective until the next business day.
Section 12.7. Any obligation of the Lone Star Group
under this Agreement shall be the joint and several obligation of
each Person who is a member of the Lone Star Group at the time
such obligation arises to the extent provided under ERISA;
provided that any determination as to whether a Person is jointly
and severally liable hereunder shall be made in the same manner
as such determinations are made under Title IV of ERISA with
respect to Termination Liability.
Section 12.8. Nothing in this Agreement shall limit or
impair the rights of PBGC or the Pension Plans with respect to
liens that may arise pursuant to section 412(n) of the Internal
Revenue Code of 1986.
36
<PAGE> 39
Section 12.9. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their permitted
successors and assigns. Notwithstanding the foregoing, no member
of the Lone Star Group shall have the right to assign any of its
rights or interest in this Agreement or delegate any obligation
under this Agreement without the prior written consent of the
PBGC. Any reference in this Agreement to any of the parties
shall be deemed to include the permitted successors and assigns
of such party.
Section 12.10. This Agreement may be executed in any
number of identical counterparts, each of which shall be an
original as against the party who signed it, and all of which
together shall constitute one and the same instrument. No party
to this Agreement shall be bound by this Agreement until a
counterpart has been executed by or on behalf of each party.
Section 12.11. The captions and the table of contents
in this Agreement have been inserted for convenience of reference
only and shall not in any way affect the meaning or construction
of any provision.
Section 12.12. Any provision of this Agreement that
shall be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions.
37
<PAGE> 40
Section 12.13. This Agreement is subject to approval
by the Bankruptcy Court and shall be null and void if not so
approved or if the Modified Plan does not become effective.
38
<PAGE> 41
PENSION BENEFIT GUARANTY CORPORATION
By: /s/ Andrea E. Schneider
Name: Andrea E. Schneider
Title: Director, Corporate Finance and
Negotiations Department
LONE STAR INDUSTRIES, INC., on behalf
of itself and each member of the
Lone Star Group
By: /s/ John J. Martin
Name: John J. Martin
Title: Sr. V.P.
<PAGE> 1
EXHIBIT 10.25
-------------
This Agreement entered into as of this 11th day of
March, 1994 (the "Agreement"), by and between the Debtors (as
defined below), and the Unions (as defined below).
WITNESSETH :
----------
WHEREAS, on the Filing Date (as defined below), certain
of the Debtors filed their voluntary petitions for relief
pursuant to Chapter 11 of Title 11, 11 U.S.C. Sections 101 et seq. (the
"Bankruptcy Code") in the Court (as defined below); and
WHEREAS, subsequent to the Filing Date, certain other
related Debtors filed their voluntary petitions for relief
pursuant to Chapter 11 of the Bankruptcy Code; and
WHEREAS, pursuant to Sections 1107(a) and 1108 of the
Bankruptcy Code, the Debtors are continuing to operate their
businesses and manage their properties as debtors-in-possession;
and
WHEREAS, on the Filing Date and thereafter, the
Bankruptcy Court entered orders authorizing the joint
administration of the Debtors' estates for procedural purposes;
and
WHEREAS, each of the Unions have acted independently
under Section 1114 of the Bankruptcy Code as the Authorized
Representative of its respective former retired members; and
<PAGE> 2
WHEREAS, on November 4, 1993, the Debtors filed a
modified amended consolidated plan of reorganization (the
"Modified plan") and related disclosure statement (the
"Disclosure Statement") with the Bankruptcy Court that described
the general contours of an agreement-in-principle which had been
reached between the Debtors and the Unions; and
WHEREAS, on November 5, 1993, the Bankruptcy Court
signed an Order approving the Disclosure Statement as containing
adequate information pursuant to Section 1125 of the Bankruptcy
Code; and
WHEREAS, on February 17, 1994, the Debtors' Modified
Plan was confirmed by the Bankruptcy Court; and
WHEREAS, the Debtors and the Unions have reached a
definitive agreement regarding post-retirement welfare benefits
for certain Union Retirees (as defined below); and
WHEREAS, the parties agree that this Agreement is in
the best interest of the Debtors and the Union Retirees.
NOW THEREFORE, in consideration of the mutual covenants
set forth herein, and for other good and valuable consideration
(receipt of which is hereby acknowledged), the Debtors and the
Unions hereby agree as follows:
2
<PAGE> 3
ARTICLE I
DEFINITIONS
Unless otherwise indicated below, all capitalized terms
in this Agreement shall have the meaning ascribed to such terms
in the Modified Plan.
1. "Allowed Claim" shall mean a general unsecured
Class 4B claim against the Debtors in the amount of $10.75
million ($10,750,000).
2. "Bankruptcy Code" shall mean the Bankruptcy Reform
Act of 1978, 11 U.S.C. Sections 101 et seq., as in effect on the Filing
Date, as the same thereafter has been and may be amended.
3. "Bankruptcy Court" shall mean the United States
Bankruptcy Court for the Southern District of New York.
4. "Basic Medical Benefits" shall mean such welfare
benefits provided to Union Retirees and their eligible spouses
and eligible dependents during the lifetimes of the Union
Retirees pursuant to collective bargaining agreements between one
or more of the Debtors and one or more of the Unions under the
Benefit Plans applicable to such individuals, other than
reimbursement for Medicare Part B premiums and life insurance
coverage.
5. "Benefit Plans" shall mean the various benefit
plans sponsored by certain of the Debtors listed in Exhibit A,
3
<PAGE> 4
annexed hereto, which on or after the Filing Date, have provided
benefits to Union Retirees.
6. "Chapter 11 Proceedings" shall mean the proceedings
In re Lone Star Industries, Inc. and New York Trap Rock
Corporation, et al., Case Nos. 90 B 21276 to 90 B 21286, 90 B
21334 and 90 B 21335 (HS), now pending in the Bankruptcy Court.
7. "Disclosure Statement" shall mean the Modified
Amended Consolidated Disclosure Statement, approved by the
Bankruptcy Court on November 5, 1993.
8. "Internal Revenue Code" shall mean the Internal
Revenue Code of 1986, as amended.
9. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
10. "Filing Date" shall mean December 10, 1990.
11. "Debtors" shall mean, collectively, New York Trap
Rock Corporation, Lone Star Industries, Inc., San-Vel Concrete
Corporation, NYTR Transportation Corp., Lone Star Cement, Inc.,
Construction Materials Co., I.C. Materials, Inc., Lone Star
Prestress Concrete, Inc., Lone Star Properties, Inc., Southern
Aggregates, Inc., and Lone Star Transportation Corp., (all of
which filed their respective voluntary petitions for
reorganization pursuant to Chapter 11 of the Bankruptcy Code on
the Filing Date); and Lone Star Building Centers, Inc., and Lone
Star Building Centers (Eastern), Inc., both of which filed their
4
<PAGE> 5
voluntary petitions for reorganization pursuant to Chapter 11 of
the Bankruptcy Code on December 21, 1990 for all pre-Effective
Date obligations). "Debtors" shall also mean the Reorganized
Debtors with respect to all post-Effective Date obligations.
12. "Modified Plan" shall mean the Debtors' Modified
Amended Consolidated Plan of Reorganization dated November 4,
1993, as confirmed by the Bankruptcy Court on February 17, 1994,
pursuant to Chapter 11 of the Bankruptcy Code, as well as any
exhibits annexed thereto and any documents incorporated by
reference therein, as the same may from time to time be amended
as and to the extent permitted by the Bankruptcy Court.
13. "Released Parties" shall mean, collectively, the
Debtors, Reorganized Lone Star, the Benefit Plans and underlying
trusts, all fiduciaries thereof, and their officers, directors,
agents, shareholders, related companies or entities, successors
and assigns.
14. "Supplemental Benefits" shall mean the Medicare
Part B premium reimbursement to which the Union Retirees and
their eligible dependents are entitled under the Benefit Plans,
and such other benefits as the Trustee(s) of the VEBA, in
consultation with the Unions or their representative, may elect
to provide from time to time.
15. "Trust Agreement" shall mean an agreement and
declaration of trust, approved by a representative selected by
5
<PAGE> 6
the Unions, which approval shall not be unreasonably withheld,
establishing and governing the VEBA.
16. "Trustee(s)" shall mean the Person(s) selected by
the Debtors under the Trust Agreement to be Trustee(s) of the
VEBA.
17. "Union Retirees" shall mean individuals previously
employed by the Debtors (i) who (a) retired under a plan, fund or
program maintained or established prior to the Filing Date
pursuant to a collective bargaining agreement in effect on and/or
prior to the Filing Date and (b) during the term of such
employment were represented by one or more of the Unions; and
(ii) for whom the Debtors are obligated under certain collective
bargaining agreements to provide certain benefits under the
Benefit Plans, but shall exclude individuals who retired under
collective bargaining agreements entered into subsequent to the
Filing Date, including individuals who retired under the
following collective bargaining agreements: IBB (Oglesby,
Milwaukee, Greencastle, Pryor and Bonner Springs facilities),
effective as of April 1, 1993; UPIU (Nazareth facility),
effective as of December 10, 1990; UPIU (Cape Girardeau, Paducah,
Nashville and Brandon facilities), effective November 27, 1993;
USWA (Maryneal and Dallas facilities), effective as of June 1,
1991; USWA (Memphis facility), effective as of October 1, 1993;
IBT, Local 445 (New York Trap Rock facility), effective as of
June 1, 1993; IUOE (New York Trap Rock facility), effective as of
6
<PAGE> 7
June 1, 1993, LIU, Local 60 (New York Trap Rock facility),
effective as of June 1, 1993.
18. "Unions" shall mean the International Brotherhood
of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and
Helpers ("IBB"); the United Paperworkers International Union
("UPIU"); the United Steelworkers of America ("USWA"); the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen
and Helpers, Local 445 ("IBT, Local 445"); the International
Union of Operating Engineers ("IUOE"); the International
Association of Machinists ("IAM"); and the Laborers International
Union of North American, Local 60 ("LIU, Local 60").
19. "VEBA" shall mean a voluntary employees'
beneficiary association, established, sponsored and administered
by the Debtors as an independent tax-exempt organization
satisfying the requirements of section 501(c) (9) of the Internal
Revenue Code for the purpose of providing Supplemental Benefits
for Union Retirees.
7
<PAGE> 8
ARTICLE II
UNION RETIREE MEDICAL BENEFITS
1. Basic Medical Benefits.
A. Continuation. The Debtors shall continue, on
and after the Effective Date, to provide Basic Medical Benefits
to Union Retirees and their eligible dependents.
B. Administration. The Debtors shall administer
the Basic Medical Benefits available to Union Retirees and their
eligible dependents in compliance with all applicable laws and
regulations and in a manner consistent with the current
administration under the Benefit Plans.
2. Supplemental Benefits.
A. Allowed Unsecured Claim. The Modified Plan
shall provide the Unions, as Authorized Representatives of the
Union Retirees and on behalf of the Union Retirees, with the
Allowed Claim for all Supplemental Benefits. The Unions, as the
Authorized Representatives of the Union Retirees are authorized
to sell the Allowed Claim in order to maximize the return to the
Union Retirees and/or ensure prompt payment of the value of the
Allowed Claim. The Unions may contribute the cash proceeds of
the Allowed Claim to the VEBA, and the VEBA shall accept such
cash proceeds if so contributed.
B. Establishment of VEBA. On or as soon as
practicable after the Effective Date, the Debtors shall establish
8
<PAGE> 9
the VEBA. The VEBA's sole purpose shall be to provide
Supplemental Benefits to those Union Retirees and their
dependents eligible under the Benefit Plans. Such Supplemental
Benefits shall become payable under the VEBA only upon payment by
the Unions of the cash proceeds of the Allowed Claim to the VEBA.
C. Eligibility. The Union Retirees and their
eligible dependents shall be eligible participants in the VEBA
during the lives of the Union Retirees.
D. Benefits. Subject to contribution to the VEBA
of the cash proceeds of the Allowed Claim, the VEBA shall provide
Supplemental Benefits to Union Retirees and their dependents
eligible under the Benefit Plans, which shall include
reimbursement for Medicare Part B premium payments. Supplemental
Benefits may not be amended or modified except as agreed to by
each of the Unions; provided that no such amendments or
modifications shall, in any manner, increase or decrease the
Debtors' financial obligations beyond the Allowed Claim.
E. Expenses and Benefits Administration. The
Trustees(s) shall administer and interpret the VEBA in compliance
with all applicable laws and regulations, and the Debtors shall
bear the costs of administering the VEBA.
F. Tax Qualification. The Debtors shall
promptly apply to the Internal Revenue Service to obtain an
appropriate ruling that the VEBA qualifies as a tax exempt fund
under Internal Revenue Code Section 501(c) (9).
9
<PAGE> 10
G. Release. As of the Effective Date, the
Released Parties shall thereafter be irrevocably and
unconditionally released and discharged from, and all Union
Retirees, their spouses, and dependents, shall be deemed to have
waived and relinquished, any and all claims, demands, debts,
liabilities, obligations, actions, causes of action, suits, sums
of money, accounts, reckonings, covenants, contracts,
controversies, agreements, promises and rights whatsoever, known
or unknown, suspected or unsuspected, contingent or fixed,
liquidated or unliquidated, matured or unmatured, in law, equity,
bankruptcy, or otherwise, which the Union Retirees, their spouses
and dependents, or any person or entity claiming from, through or
under them, thereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
connection with the provision of Supplemental Benefits on or
after the Effective Date; provided however, that the foregoing
release shall not apply to any claims for benefits for Medicare
Part B premiums that accrued prior to the Effective Date or to
any administrative obligations incurred in connection with the
VEBA.
3. Life Insurance. As of the date thirty (30) days
after the Effective Date (the "Release Date"), the Released
Parties shall thereafter be irrevocably and unconditionally
released and discharged from, and the Unions, on behalf of all
Union Retirees, their spouses, and dependents, shall be deemed to
have waived and relinquished, any and all claims, demands, debts,
liabilities, obligations, actions, causes of action, suits, sums
of money, accounts, reckonings, covenants, contracts,
10
<PAGE> 11
controversies, agreements, promises and rights whatsoever, known
or unknown, suspected or unsuspected, contingent or fixed,
liquidated or unliquidated, matured or unmatured, in law, equity,
bankruptcy, or otherwise, which the Union Retirees, their spouses
and dependents, or any person or entity claiming from, through or
under them, thereafter can, shall or may have against any of the
Released Parties by reason of, arising from, relating to, or in
connection with life insurance and death benefits accruing under
the Benefit Plans on or after the Release Date; provided however,
that the foregoing release shall not apply to any claims for life
insurance benefits under the Benefit Plans that accrued prior to
the Release Date.
ARTICLE III
-----------
CONDITIONS
1. Effectiveness. This Agreement shall be subject to
approval by the Bankruptcy Court and shall be effective upon such
approval.
2. Professional Fees. Subject to the Debtors' review
of appropriate documentation, the Debtors shall pay the Unions'
professional fees and expenses incurred for work related to the
Section 1114 litigation, negotiation, settlement and
implementation of the Union Retirees' Basic Medical and
Supplemental Benefits. Such fees and expenses shall not exceed
$635,000 (or such other amount approved by the Bankruptcy Court)
and shall include the fees and disbursements of the Unions'
Counsel, Cohen, Weiss and Simon, and Schneider, Goldberger, Cohen
Finn, Solomon, Leder & Montalbano (up to $15,000); the fees and
11
<PAGE> 12
disbursements of the Unions' financial advisors, Keilin & Bloom;
and the disbursements of the coordinator of the Unions' Section
1114 negotiations, the Industrial Union Department of the AFL-
CIO, and its constituent Unions. Such fees and expenses shall be
paid no later than 10 days after the Effective Date.
ARTICLE IV
-----------
ENFORCEMENT and MODIFICATIONS
1. Dispute Resolution.
A. Any and all disputes between the Debtors and
any of the Unions arising out of the underlying Benefit Plans
shall be resolved pursuant to the dispute resolution mechanism in
the collective bargaining agreement between the Debtors and such
Union.
B. Any and all disputes between the Debtors and
the Unions arising out of the interpretation or implementation of
this Settlement Agreement, unless covered under Section IV 1 A
above, shall be submitted to binding arbitration under the
Voluntary Labor Arbitration Rules of the American Arbitration
Association in the New York office of the American Arbitration
Association; provided however, each party shall bear its own
expenses in any such arbitration; provided further that the
parties shall equally share the costs of the arbitrator.
C. Any disputes with respect to the Modified
Plan shall be determined by the Bankruptcy Court.
2. Section 1114 Waivers. The Debtors waive any
rights that they may have, on or after the Effective Date, with
respect to the initiation or prosecution of any Section 1114
12
<PAGE> 13
proceeding under the Bankruptcy Code regarding the Benefit Plans
or the VEBA for Union Retirees and their eligible dependents.
ARTICLE V
---------
MISCELLANEOUS
1. Notice. Any notice, consent, approval, or other
communication required or permitted under this Agreement shall be
in writing and shall be delivered by hand, by overnight courier
service, or by telecopy (with request for assurance of receipt in
a manner customary for such communications), or by certified or
registered mail, postage prepaid, and shall be deemed duly given
when so delivered or sent by telecopy or, if sent by overnight
courier service, on the first business day after dispatch or, if
sent by certified or registered mail, five business days after
the date of dispatch, to the address or telecopy number set forth
below:
<TABLE>
<S> <C>
To the IBB, USWA, Ann O'Shea, Esq.
UPIU and IBT, Cohen, Weiss and Simon
Local 445: 330 West 42nd Street
New York, New York 10036
Telecopy Number: (212) 695-5436
To the IUOE, David Grossman, Esq.
and LIU, Local 60: Schneider, Goldberger, Cohen
Finn, Solomon, Leder & Montalbano
1150 Raritan Road
Cranford, New Jersey 07016
Telecopy Number: (908) 272-4540
To the IAM: Mark Schneider, Esq.
Assistant General Counsel
International Association of
Machinists and Aerospace
Workers
9000 Machinists Place
Upper Marlboro, Maryland 20772
Telecopy Number: (301) 967-4594
To the Debtors: Senior Vice President, General
Counsel and Secretary
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C>
Lone Star Industries, Inc.
300 First Stamford Place
Stamford, Connecticut
06912-0014
Telecopy Number: (203) 969-8590
</TABLE>
or to such other persons or addresses as any party may from time
to time designate by notice in accordance with this section to
the other party or parties. If the effective date of notice
should fall upon a day that is not a business day, notice should
not be deemed effective until the next business day.
2. Counterparts. This Agreement may be executed in
any number of identical counterparts, each of which shall be an
original as against the party who signed it, and all of which
together shall constitute one and the same instrument. No party
to this Agreement shall be bound by this Agreement until a
counterpart has been executed by or on behalf of such party.
3. Headings. The captions and the table of contents
in this Agreement have been inserted for convenience of reference
only and shall not in any way affect the meaning or construction
of any provision.
4. Assignment. The Debtors shall have the right to
assign all or part of its obligations under this Agreement with
60 days advance written notice to the Unions; provided however,
no such assignment shall prejudice any of the rights or remedies
of the Unions against the Debtors, and any such assignee and the
Debtors and the assignee shall be secondarily liable with respect
to any obligation assigned.
14
<PAGE> 15
5. Supersedes Prior Agreements. This Agreement shall
supersede all previous written or oral negotiations, commitments
and writings between the Debtors and the Unions in connection
with the Debtors' proceedings under Section 1114 of the
Bankruptcy Code. The parties agree that should a court or an
arbitrator be called upon to interpret any provision of this
Agreement, previous drafts shall not be used by any party, in any
manner, to support its interpretation.
6. Indemnity. For a period of five years after the
Effective Date (as defined in the Modified Plan) the Debtors
shall indemnify and hold harmless Keilin & Bloom and each of its
respective officers, directors, employees, partners and agents
(each an "Indemnified Party") to the full extent lawful, from and
against any losses, claims, damages or liabilities or actions,
including shareholder actions in respect thereof, relating to or
arising out of Keilin & Bloom's engagement hereunder, and will
reimburse each Indemnified Party for all reasonable expenses
(including reasonable fees and expenses of counsel) as they are
incurred by any such Indemnified Party in connection with
investigating, preparing for or defending any such action or
claim, whether or not in connection with pending or threatened
litigation; provided, however, that the Debtors will not be
responsible for any claims, liabilities, losses, damages or
expenses which are finally judicially determined to have resulted
primarily from such Indemnified Party's willful misconduct or
gross negligence; provided, however, the Debtors shall have no
obligation to indemnify the Indemnified Parties for any claim,
loss, damage, or liability or actions: (a) brought by the Unions;
15
<PAGE> 16
or (b) relating to the disposition of the Allowed Claim. The
foregoing indemnification shall be in addition to any right that
any Indemnified Party may have at common law or otherwise.
Notwithstanding anything to the contrary contained in this
Agreement, the provisions of this Article shall survive any
termination of this Agreement.
7. Governing Law. This Agreement shall be governed,
construed, regulated, enforced and administered in accordance
with the laws of the State of New York applicable to contracts
made and to be performed within the State of New York (without
giving effect to the principles thereof relating to the conflict
of laws), to the extent that such laws are not preempted by the
provisions of ERISA or any other applicable laws of the United
States.
8. Amendment. This Agreement shall not be amended
without the prior written consent of all signatories hereto.
IN WITNESS WHEREOF, the parties hereto (or their duly
authorized representatives) have duly executed or have caused
this Agreement to be duly executed by their respective
representatives, as the case may be, thereunto duly authorized as
of the day and year first above written.
<TABLE>
<S> <C>
LONE STAR INDUSTRIES, et al.
Debtors and Debtors-in-Possession
T. J. Roark By: /s/ John J.Martin
- ---------------------- ----------------------------
WITNESS JOHN J. MARTIN, ESQ.
Senior Vice President,
General Counsel and
Secretary
</TABLE>
16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto (or their duly
authorized representatives) have duly executed or have caused
this Agreement to be duly executed by their respective
representatives, as the case may be, thereunto duly authorized as
of the day and year first above written.
<TABLE>
<S> <C> <C>
LONE STAR INDUSTRIES, et al.
Debtors and Debtors-in-Possession
/s/ T. J. Roark By: /s/ John J. Martin
WITNESS JOHN J. MARTIN, ESQ.
Senior Vice President,
General Counsel and
Secretary
INTERNATIONAL BROTHERHOOD OF
BOILERMAKERS, IRON SHIP BUILDERS,
BLACKSMITHS, FORGERS AND HELPERS
Illegible By: /s/ Henry W. Bechtholdt
WITNESS Int. Vice President
UNITED PAPERWORKERS INTERNATIONAL
UNION
Allan Pitla By: /s/ Marvin M. Wright
WITNESS
UNITED STEELWORKERS OF AMERICA
Karen Fullman By: /s/ Paul V. Whitehead
WITNESS Assistant General Counsel
3/12/94
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
INTERNATIONAL BROTHERHOOD OF
TEAMSTERS, CHAUFFEURS,
WAREHOUSEMEN AND HELPERS,
LOCAL 445
/s/ Nancy L. Hughes By: /s/ Elmore V. Schuler
WITNESS Elmore V. Schuler, Secretary-Treasurer
Notary #4868088
County of Orange
Term expires 08/18/94
INTERNATIONAL UNION OF
OPERATING ENGINEERS
Illegible By: /s/ David Grossman, Esq.
WITNESS David Grossman, Esq.
INTERNATIONAL ASSOCIATION OF
MACHINISTS
Illegible
WITNESS By: /s/ Mark Scheid
LABORERS INTERNATIONAL UNION
OF NORTH AMERICAN, LOCAL 60
Illegible By: /s/ David Grossman, Esq.
WITNESS David Grossman, Esq.
</TABLE>
18
<PAGE> 19
Exhibit A
<PAGE> 20
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 166
Eligible Group: Hourly Retirees - New York Trap Rock
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 16 45 61
Spouses 23 31 54
-- -- ---
Total 39 76 115
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board- 100% of first 90 days; 50% thereafter for
next 90 days
Hospital Other Charges - 100% of first 90 days; 50% thereafter for
next 90 days
Surgical - $550 schedule
Emergency Outpatient - Up to $150 per calendar year; applicable to
accident or sickness
Hospital Doctor Visits - 1st day, $15; 2nd day, $10; 3rd through 7th day,
$7.50; 8th through 14th day, $7; 15th through 70th day, $6; 71st
through 201st day, $5. Limitations apply to specific illnesses.
Major Medical:
Deductible - $50 per person per year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $100,000
Out-patient Psychiatric - 50%, maximum $2,000
Prescription Drugs - 80%
Over Age 65:
Comprehensive Plan
Medicare Integration - Maintenance of Benefits (modified to increase
Medicare offset by redefining Medicare "Reasonable cost" to be
actual expense)
</TABLE>
<PAGE> 21
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 166 (continued)
<TABLE>
<S> <C>
Comprehensive Plan (contd.)
Deductible- $50 per person per year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $100,000
Out-patient Psychiatric - 50%
Prescription Drugs -80%, maximum $2,000
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $5,000
</TABLE>
2
<PAGE> 22
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 912
Eligible Group: Hourly Retirees Nazareth after 4/1/90
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 3 0 3
Spouses 3 0 3
- - -
Total 6 0 6
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
Comprehensive Plan:
Deductible - $125/$250 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - $1,250 per individual (not including deductible)
Annual Maximum - none
Lifetime Maximum - $1,000,000
Hospital Room & Board - 80% with Pre-admission Review (50%
without Preadmission Review)
Surgical - 80% subject to Pre-admission Review for non-emergency
inpatient care
Extended Care Facility - 80% up to maximum of daily semi-private
room & board allowance
Out-patient Psychiatric - 80% up to $2,000 per calendar year
Prescription Drugs - 80%
Monthly Contributions (effective 4/90):
Retiree only - $7.50
Retiree and Spouse - $35
Retiree and Dependent - $35
Retiree and Multiple Dependents - $55
Over Age 65:
Medicare Integration: Maintenance of Benefits
Comprehensive Plan:
Deductible - $125/$250 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - $1,250 per individual (not including deductible)
</TABLE>
3
<PAGE> 23
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 912 (continued)
<TABLE>
<S> <C>
Comprehensive Plan (contd.)
Annual Maximum - none
Lifetime Maximum - $100,000
Out-patient Psychiatric - 80% up to $2,000 per calendar year
Prescription Drugs - 80%
Monthly Contributions (effective 4/90):
Retiree only - $0
Retiree and Spouse - $750
Retiree and Dependent - $750
Retiree and Multiple Dependents - $35
Medicare Part B:
No reimbursement
Life Insurance: $4,000
</TABLE>
4
<PAGE> 24
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 913
Eligible Group: Hourly Retirees - Boilermakers after 4/1/91
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 2 0 2
Spouses 1 0 1
- - -
Total 3 0 3
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
Comprehensive Plan:
Deductible - $125/$250 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $1,000,000
Hospital Room & Board - 80% with Pre-admission Review (50%
without Pre-admission Review)
Surgical - 80% subject to Pre-admission Review for non-emergency
inpatient care
Extended Care Facility - 80% up to maximum of daily semi-private
room & board allowance
Out-patient Psychiatric - 80% up to $1,000 per calendar year
Prescription Drugs - 80%
Monthly Contributions (effective 4/1/92):
Retiree only - $6
Retiree and Spouse - $25
Retiree and Dependent - $25
Retiree and Multiple Dependents - $40
Over Age 65:
Medicare Integration: Maintenance of Benefits
Comprehensive Plan:
Deductible - $125/$250 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
</TABLE>
5
<PAGE> 25
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 913 (continued)
<TABLE>
<S> <C>
Major Medical (contd.)
Lifetime Maximum - $100,000
Out-patient Psychiatric - 80% up to $1,000 per calendar year
Prescription Drugs - 80%
Monthly Contributions (effective 4/1/92):
Retiree only - $0
Retiree and Spouse - $0 ($6 spouse under 65)
Retiree and Dependent - $6
Retiree and Multiple Dependents - $40
Medicare Part B:
No reimbursement
Life Insurance: $4,000
</TABLE>
6
<PAGE> 26
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 914
Eligible Group: Hourly Retirees - IWNA after 12/1/91
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 0 0
Spouses 0 0 0
- - -
Total 0 0 0
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
Comprehensive Plan:
Deductible - $125/$250 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $1,000,000
Hospital Room & Board - 80% with Pre-admission Review (50%
without Pre-admission Review)
Surgical - 80% subject to Pre-admission Review for non-emergency
inpatient care
Extended Care Facility - 80% up to maximum of daily semi-private
room & board allowance
Out-patient Psychiatric - 80% up to $1,000 per calendar year
Prescription Drugs - 80%
Monthly Contributions (effective 12/1/92):
Retiree only - $6
Retiree and Spouse - $25
Retiree and Dependent - $25
Retiree and Multiple Dependents - $40
Over Age 65:
Medicare Integration: Maintenance of Benefits
Comprehensive Plan:
Deductible - $125/$250 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
</TABLE>
7
<PAGE> 27
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 914 (continued)
<TABLE>
<S> <C>
Comprehensive Plan (contd.):
Annual Maximum - none
Lifetime Maximum - $100,000
Out-patient Psychiatric - 80% up to $1,000 per calendar year
Prescription Drugs - 80%
Monthly Contributions (effective 12/1/92):
Retiree only - $0
Retiree and Spouse - $0 ($6 spouse under 65)
Retiree and Dependent - $25
Retiree and Multiple Dependents - $40
Medicare Part B:
No reimbursement
Life Insurance: $4,000
</TABLE>
8
<PAGE> 28
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 915
Eligible Group: Hourly Retirees - Maryneal after 6/1/92
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 0 0
Spouses 0 0 0
- - -
Total 0 0 0
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
Comprehensive Plan:
Deductible - $125/$250 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $1,000,000
Hospital Room & Board - 80% with Pre-admission Review (50%
without Pre-admission Review)
Surgical - 80% subject to Pre-admission Review for non-emergency
inpatient care
Extended Care Facility - 80% up to maximum of daily semi-private
room & board allowance
Out-patient Psychiatric - 80% up to $1,000 per calendar year
Prescription Drugs - 80%
Monthly Contributions (effective 6/1/92):
Retiree only - $5
Retiree and Spouse - $22
Retiree and Dependent - $22
Retiree and Multiple Dependents - $34
Over Age 65:
Medicare Integration: Maintenance of Benefits
Comprehensive Plan:
Deductible - $125/$250 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
</TABLE>
9
<PAGE> 29
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 915 (contd.)
<TABLE>
<S> <C>
Comprehensive Plan (contd.):
Annual Maximum - none
Lifetime Maximum - $100,000
Out-patient Psychiatric - 80% up to $1,000 per calendar year
Prescription Drugs - 80%
Monthly Contributions (effective 6/1/92):
Retiree only - $0
Retiree and Spouse - $7.50
Retiree and Dependent - $7.50
Retiree and Multiple Dependents - $35
Medicare Part B:
No reimbursement
Life Insurance: $4,000
</TABLE>
10
<PAGE> 30
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 622
Eligible Group: Hourly Retirees - Lone Star after 5/1/81
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 122 191 313
Spouses 160 136 296
--- --- ---
Total 282 327 609
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment for 365 days
Surgical - 100% of Reasonable and Customary
X-Ray & Lab - $100 per calendar year
Hospital Doctor Visits - $10 per day up to $800 per illness
Major Medical:
Deductible - $100 per illness, 3 month accumulation period, 24 month
benefit period
Coinsurance - 90%/10%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $7,500
Out-patient Psychiatric - 50% up to $500 per calendar year
Prescription Drugs - 90%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment for 365 days
Surgical - 100% of Reasonable and Customary
X-Ray & Lab - $100 per calendar year
Hospital Doctor Visits - $10 per day up to $800 per illness
Major Medical:
Deductible - $100 per illness, 3 month accumulation period, 24 month
benefit period
Coinsurance - 90%/10%
</TABLE>
11
<PAGE> 31
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 622 (continued)
<TABLE>
<S> <C>
Major Medical (contd.):
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $7,500
Out-patient Psychiatric - 50% up to $500 per calendar year
Prescription Drugs - 90%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000
</TABLE>
12
<PAGE> 32
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 621
Eligible Group: Hourly Retirees - Lone Star 5/1/78 - 5/1/81
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 21 93 114
Spouses 33 71 104
-- -- ---
Total 54 164 218
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment for 365 days
Surgical - 100% of Reasonable and Customary
X-ray and Lab - $100 per calendar year
Hospital Doctor Visits - $10 per day up to $800 per illness
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 90%/10%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $500 per calendar year
Prescription Drugs - 90%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment for 365 days
Surgical - 100% of Reasonable and Customary
X-ray and Lab- $100 per calendar year
Hospital Doctor Visits - $10 per day up to $800 per illness
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 90%/10%
Out-of-Pocket Limits - none
</TABLE>
13
<PAGE> 33
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 621 (continued)
<TABLE>
<S> <C>
Major Medical (contd.):
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $500 per calendar year
Prescription Drugs - 90%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000
</TABLE>
14
<PAGE> 34
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 620
Eligible Group: Hourly Retirees - Lone Star 5/1/76 - 5/1/78
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 2 56 58
Spouses 5 49 54
- -- ---
Total 7 105 112
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment for 365 days
Surgical - 100% of Reasonable and Customary
X-ray and Lab - $75 per calendar year
Hospital Doctor Visits - $8 per visit up to $600 per illness
Major Medical:
Deductible - $100 per illness, 3 month accumulation period, limit of 3
per family
Coinsurance - 90%/10%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $500 per calendar year
Prescription Drugs - 90%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment for 365 days
Surgical - 100% of Reasonable and Customary
X-ray and Lab - $75 per calendar year
Hospital Doctor Visits - $8 per visit up to $600 per illness
Major Medical:
Deductible - $100 per illness, 3 month accumulation period, limit of 3
per family
</TABLE>
15
<PAGE> 35
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 620 (continued)
<TABLE>
<S> <C>
Major Medical (contd.):
Coinsurance - 90%/10%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $500 per calendar year
Prescription Drugs - 90%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000
</TABLE>
16
<PAGE> 36
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 619
Eligible Group: Hourly Retirees - Lone Star 5/1/74 - 5/1/76
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 1 39 40
Spouses 2 36 38
- -- ---
Total 3 75 78
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment for 365 days
Surgical - $1,000 CRVS, $5 conversion factor
X-ray and Lab - $75 per illness
Hospital Doctor Visits - $5 per visit up to 120 visits per illness
Obstetrical - $100 Normal Delivery; $250 Caesarean; $75 Miscarriage
Major Medical:
Deductible - $100 per illness, 3 month accumulation period, limit of 3
per family
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $500 per calendar year - 80% up
to $1,000
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment for 365 days
Surgical - $1,000 CRVS, $5 conversion factor
X-ray and Lab - $75 per illness
Hospital Doctor Visits - $5 per visit up to 120 visits per illness
Obstetrical - $100 Normal Delivery; $250 Caesarean; $75 Miscarriage
</TABLE>
17
<PAGE> 37
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 619 (continued)
<TABLE>
<S> <C>
Major Medical:
Deductible - $100 per illness, 3 month accumulation period, limit of 3
per family
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $500 per calendar year - 80% up
to $1,000
Prescription Drugs - 80%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000
</TABLE>
18
<PAGE> 38
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 618
Eligible Group: Hourly Retirees - Lone Star 5/1/71 - 5/1/74
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 5 67 72
Spouses 8 61 69
-- --- ---
Total 13 128 141
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days at semi-private
Hospital Other Charges - full payment for 120 days
Surgical - $500 schedule
X-ray and Lab - $75 per illness
Hospital Doctor Visits - $4 per visit up to 120 visits per illness
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 80% up to $1,000 per calendar year
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 120 days at semi-private
Hospital Other Charges - full payment for 120 days
Surgical - $500 schedule
X-ray and Lab - $75 per illness
Hospital Doctor Visits - $4 per visit up to 120 visits per illness
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
</TABLE>
19
<PAGE> 39
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 618 (continued)
<TABLE>
<S> <C>
Major Medical (contd.):
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 80% up to $1,000 per calendar year
Prescription Drugs - 80%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000
</TABLE>
20
<PAGE> 40
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 617
Eligible Group: Hourly Retirees - Lone Star 1/1/70 - 5/1/71
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 1 13 14
Spouses 5 7 12
- -- ---
Total 6 20 26
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days at semi-private
Hospital Other Charges - full payment for 120 days
Surgical - $450 schedule
X-ray and Lab - $75 per illness
Hospital Doctor Visits - $4 per visit up to 120 visits per illness
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500
Private Room Limit - actual charge
Out-patient Psychiatric - 80% of actual charges up to $1,000 per
calendar year
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 120 days at semi-private
Hospital Other Charges - full payment for 120 days
Surgical - $450 schedule
X-ray and Lab -$75 per illness
Hospital Doctor Visits - $4 per visit up to 120 visits per illness
</TABLE>
21
<PAGE> 41
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 617 (continued)
<TABLE>
<S> <C>
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500
Private Room Limit - actual charge
Out-patient Psychiatric - 80% of actual charges up to $1,000 per
calendar year
Prescription Drugs - 80%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $3,500/$3,000
</TABLE>
22
<PAGE> 42
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 616
Eligible Group: Hourly Retirees - Lone Star 4/1/68 - 1/1/70
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 25 25
Spouses 0 25 25
- -- ---
Total 0 50 50
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days at semi-private
Hospital Other Charges - $700 maximum per calendar year
Surgical - $375 schedule, maximum of $350 payable in a calendar year
X-ray and Lab - employees, $50 per calendar year; dependents, $35 per
calendar year
Hospital Doctor Visits - $4 per visit up to 120 visits per calendar year
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500
Out-patient Psychiatric - 80% of actual charge up to $1,000 per
calendar year
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 120 days at semi-private
Hospital Other Charges - $700 maximum per calendar year
Surgical - $375 schedule, maximum of $350 payable in a calendar year
X-ray and Lab - employees, $50 per calendar year; dependents, $35 per
calendar year
Hospital Doctor Visits - $4 per visit up to 120 visits per calendar year
</TABLE>
23
<PAGE> 43
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 616 (continued)
<TABLE>
<S> <C>
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500
Out-patient Psychiatric - 80% of actual charge up to $1,000 per
calendar year
Prescription Drugs - 80%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $2,500
</TABLE>
24
<PAGE> 44
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 614
Eligible Group: Hourly Retirees - Lone Star 5/1/66 - 4/1/68
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 25 25
Spouses 0 20 20
- -- ---
Total 0 45 45
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days at semi-private
Hospital Other Charges - $700 maximum per calendar year
Surgical - $350 schedule, maximum of $350 payable in a calendar year
Hospital Doctor Visits - $3 per visit up to 120 visits per calendar year
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500
Out-patient Psychiatric - 80% of actual charge up to $1,000 per
calendar year
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 120 days at semi-private
Hospital Other Charges - $700 maximum per calendar year
Surgical - $350 schedule, maximum of $350 payable in a calendar year
Hospital Doctor Visits - $3 per visit up to 120 visits per calendar year
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
</TABLE>
25
<PAGE> 45
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 614 (continued)
<TABLE>
<S> <C>
Major Medical (contd)
Annual Maximum - none
Lifetime Maximum - $2,500
Out-patient Psychiatric - 80% of actual charge up to $1,000 per
calendar year
Prescription Drugs - 80%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $2,500
</TABLE>
26
<PAGE> 46
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 613
Eligible Group: Hourly Retirees - Lone Star 11/1/63 - 5/1/66
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 8 8
Spouses 0 7 7
- -- --
Total 0 15 15
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board -70 days per calendar year at $18 per day
Hospital Other Charges - $360 maximum per calendar year
Surgical - $300 schedule, maximum of $300 payable in a calendar year
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500
Out-patient Psychiatric - 80% of actual charge up to $1,000 per
calendar year
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 70 days per calendar year at $18 per day
Hospital Other Charges - $360 maximum per calendar year
Surgical - $300 schedule, maximum of $300 payable in a calendar year
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500
Out-patient Psychiatric - 80% of actual charge up to $1,000 per
calendar year
Prescription Drugs - 80%
</TABLE>
27
<PAGE> 47
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 613 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $2,000
</TABLE>
28
<PAGE> 48
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 612
Eligible Group: Hourly Retirees - Lone Star 5/1/56 - 11/1/63
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 1 1
Spouses 0 1 1
- -- --
Total 0 2 2
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 60 days per calendar year at $13 per day
Hospital Other Charges - $300 maximum per calendar year
Surgical - $250 schedule, maximum of $250 payable in a calendar year
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500
Out-patient Psychiatric - 80% of actual charges up to $1,000 per
calendar year
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 60 days per calendar year at $13 per day
Hospital Other Charges - $300 maximum per calendar year
Surgical - $250 schedule, maximum of $250 payable in a calendar year
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500
Out-patient Psychiatric - 80% of actual charges up to $1,000 per
calendar year
Prescription Drugs - 80%
</TABLE>
29
<PAGE> 49
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 612 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $2,000
</TABLE>
30
<PAGE> 50
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 611
Eligible Group: Hourly Retirees - Lone Star 1/1/49 - 5/1/56
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 3 3
Spouses 1 2 3
-- -- --
Total 1 5 6
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
Base Plan:
Hospital Room and Board - 31 days per calendar year at $10 per day
Hospital Other Charges - $100 maximum per calendar year
Surgical - $200 schedule, maximum of $200 payable in a calendar year
Over Age 65:
Medicare Integration: Maintenance of Benefits
Base Plan:
Hospital Room and Board - 31 days per calendar year at $10 per day
Hospital Other Charges - $100 maximum per calendar year
Surgical - $200 schedule, maximum of $200 payable in a calendar year
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $2,500
</TABLE>
31
<PAGE> 51
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 449
Eligible Group: Hourly Retirees - Cement after 5/1/81
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 119 185 304
Spouses 183 95 278
--- --- ---
Total 302 280 582
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment up to 365 days
Surgical - 100% of Reasonable and Customary
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 90%/10%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $7,500
Out-patient Psychiatric - 50% up to $500 per calendar year
Prescription Drugs - 90%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment up to 365 days
Surgical - 100% of Reasonable and Customary
Major Medical:
Deductible - $100 per illness, 3 month accumulation period
Coinsurance - 90%/10%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $7,500
Out-patient Psychiatric - 50% up to $500 per calendar year
Prescription Drugs - 90%
</TABLE>
32
<PAGE> 52
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 449 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000
</TABLE>
33
<PAGE> 53
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 848
Eligible Group: Hourly Retirees - Cement 5/1/76 - 5/1/81
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 42 158 200
Spouses 57 105 162
--- --- ---
Total 99 263 362
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment up to 365 days
Surgical - 100% of Reasonable and Customary
Major Medical:
Deductible - $100/$300 per calendar year
Coinsurance - 90%/10%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $500 per calendar year
Prescription Drugs - 90%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment up to 365 days
Surgical - 100% of Reasonable and Customary
Major Medical:
Deductible - $100/$300 per calendar year
Coinsurance - 90%/10%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $500 per calendar year
Prescription Drugs - 90%
</TABLE>
34
<PAGE> 54
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 848 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000
</TABLE>
35
<PAGE> 55
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 847
Eligible Group: Hourly Retirees - Cement 5/1/74 - 5/1/76
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 5 52 57
Spouses 6 31 37
-- -- --
Total 11 83 94
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital - Room and Board - 365 days at semi-private
Hospital - Other Charges - full payment up to 365 days
Surgical - $1,000 maximum benefit, CRV
Major Medical:
Deductible - $100/$300 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment up to 365 days
Surgical - $1,000 maximum benefit, CRV
Major Medical:
Deductible - $100/$300 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
</TABLE>
36
<PAGE> 56
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 847 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000
</TABLE>
37
<PAGE> 57
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 845
Eligible Group: Hourly Retirees - Cement 5/1/70 - 5/1/74
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 6 72 78
Spouses 4 47 51
-- --- ---
Total 10 119 129
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days at semi-private
Hospital Other Charges - full payment up to 120 days
Surgical - $495 maximum per calendar year
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $3,000; no reinstatement provision
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 120 days at semi-private
Hospital Other Charges - full payment up to 120 days
Surgical - $495 maximum benefit per calendar year
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $3,000; no reinstatement provision
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
</TABLE>
38
<PAGE> 58
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 845 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000/$3,500
</TABLE>
39
<PAGE> 59
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 844
Eligible Group: Hourly Retirees - Cement 5/1/67 - 5/1/70
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 17 17
Spouses 0 13 13
-- --- ---
Total 0 30 30
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days at $15 per day
Hospital Other Charges - up to $700 in a 12 month consecutive period
Surgical - $375 maximum benefit in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500; no reinstatement provision
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 120 days at $15 per day
Hospital Other Charges - up to $700 in a 12 month consecutive period
Surgical - $375 maximum benefit in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500; no reinstatement provision
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
</TABLE>
40
<PAGE> 60
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 844 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $3,000
</TABLE>
41
<PAGE> 61
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 843
Eligible Group: Hourly Retirees - Cement 5/1/66 - 5/1/67
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 8 8
Spouses 0 5 5
-- --- ---
Total 0 13 13
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days at $15 per day
Hospital Other Charges - up to $700 in a 12 month consecutive period
Surgical - $250 maximum benefit in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500; no reinstatement provision
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 120 days at $15 per day
Hospital Other Charges - up to $700 in a 12 month consecutive period
Surgical - $250 maximum benefit in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500; no reinstatement provision
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
</TABLE>
42
<PAGE> 62
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 843 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $2,500
</TABLE>
43
<PAGE> 63
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 842
Eligible Group: Hourly Retirees - Cement 5/1/63 - 5/1/66
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 4 4
Spouses 0 1 1
- - -
Total 0 5 5
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days at $15 per day
Hospital Other Charges - up to $150 in a 12 month consecutive period
Surgical - $250 maximum benefit in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500; no reinstatement provision
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 120 days at $15 per day
Hospital Other Charges - up to $150 in a 12 month consecutive period
Surgical - $250 maximum benefit in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500; no reinstatement provision
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
</TABLE>
44
<PAGE> 64
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 842 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $2,000
</TABLE>
45
<PAGE> 65
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 841
Eligible Group: Hourly Retirees - Cement 5/1/59 - 5/1/63
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 3 3
Spouses 0 1 1
- - -
Total 0 4 4
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 31 days at $10 per day in a 12 month
consecutive period
Hospital Other Charges - up to $100 in a 12 month consecutive period
Surgical - $200 maximum benefit in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum- $2,500; no reinstatement provision
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 31 days at $10 per day in a 12 month
consecutive period
Hospital Other Charges - up to $100 in a 12 month consecutive period
Surgical - $200 maximum benefit in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500; no reinstatement provision
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
</TABLE>
46
<PAGE> 66
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 841 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $1,500/$2,000
</TABLE>
47
<PAGE> 67
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 840
Eligible Group: Hourly Retirees - Cement prior to 5/1/59
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 1 1
Spouses 0 0 0
- - -
Total 0 1 1
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
Base Plan:
Hospital Room and Board - 31 days at $10 per day in a 12 month
consecutive period
Hospital Other Charges - up to $100 in a 12 month consecutive period
Surgical - $200 maximum benefit in a 12 month consecutive period
Over Age 65:
Medicare Integration: Maintenance of Benefits
Base Plan:
Hospital Room and Board - 31 days at $10 per day in a 12 month
consecutive period
Hospital Other Charges - up to $100 in a 12 month consecutive period
Surgical - $200 maximum benefit in a 12 month consecutive period
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $1,500
</TABLE>
48
<PAGE> 68
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 450
Eligible Group: Hourly Retirees - Memphis - all
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 1 3 4
Spouses 1 3 4
- - -
Total 2 6 8
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 31 days at $15 per day in a 12 month
consecutive period
Hospital Other Charges - up to $150 in a 12 month consecutive period
Surgical - $240 maximum benefit in a 12 month consecutive period
Major Medii:al:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $2,500; no reinstatement provision
Prescription Drugs - 80%
Out-patient psychiatric - 50%
Over Age 65: No coverage for dependents
Medicare Integration - Maintenance of Benefits
Base:
Hospital Room and Board - Medicare deductible during the first 60
days; 1/4 of the Medicare deductible on the 61st to 90th days;
semi-private and unlimited SHS of the 91st to 120 days
Surgical - 30% of R&C
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000; no reinstatement provision
Prescription Drugs - 80%
Out-patient psychiatric - 50%
</TABLE>
49
<PAGE> 69
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 450 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $2,000
</TABLE>
50
<PAGE> 70
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 452
Eligible Group: Hourly Retirees - Pittsburgh after 9/1/73 - other
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 1 7 8
Spouses 0 4 4
- -- --
Total 1 11 12
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
Base Plan:
Hospital Room and Board - 70 days at $40 per day
Hospital Other Charges - up to $750 per disability
Surgical - $300 benefit maximum
Over Age 65:
Base Plan:
Medicare Integration - Maintenance of Benefits
Hospital Room and Board - 70 days at $40 per day
Hospital Other Charges - up to $750 per disability
Surgical - $300 benefit maximum
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000
</TABLE>
51
<PAGE> 71
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 453
Eligible Group: Hourly Retirees - Pittsburgh after 9/1/78 (age 62 or more at
retirement)
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 18 18
Spouses 3 13 16
- -- --
Total 3 31 34
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days per disability at semi-private
Hospital Other Charges - up to $750 per disability
Surgical - $1,000 benefit maximum per calendar year
Major Medical:
Deductible - $100/$200 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000; medical evidence reinstatement prior to
age 65
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
Over Age 65: Medicare Supplement
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 100% of Medicare Part A deductible
61st through 90th day, 100% at semi-private
91st through 120th day, 100% at semi-private
Surgical - 30% of Reasonable and Customary
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50%
Prescription Drugs - 80%
</TABLE>
52
<PAGE> 72
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 453 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000
</TABLE>
53
<PAGE> 73
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 457
Eligible Group: Hourly Retirees - Pittsburgh after 9/1/79 (with 30 or more
years of service at retirement) and
other groups
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 12 7 19
Spouses 15 3 18
-- -- --
Total 27 10 37
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
Comprehensive Plan:
Deductible - $125/2 per family per calendar year
Coinsurance - 90%/10%
Out-of-Pocket Limits - $1,000 per individual (deductible not included)
Annual Maximum - none
Lifetime Maximum - $400,000; $40,000 automatic restoration provision
Outpatient Surgery - 100%
Inpatient Surgery - 90% with a second opinion where required; 80%
without a second opinion where required
Out-patient Psychiatric - 90% up to $1,000 per calendar year
Prescription Drugs - 90%
Over Age 65:
Comprehensive Plan:
Medicare Integration - Maintenance of Benefits
Deductible -$125/2 per family per calendar year
Coinsurance - 90%/10%
Out-of-Pocket Limits - $1,000 per individual (deductible not included)
Annual Maximum - none
Lifetime Maximum - $400,000; $40,000 automatic restoration provision
Outpatient Surgery - 100%
Inpatient Surgery - 90% with a second opinion where required; 80%
without a second opinion where required
Out-patient Psychiatric - 90% up to $1,000 per calendar year
Prescription Drugs - 90%
</TABLE>
54
<PAGE> 74
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 457 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $20,000 until age 65, at age 65 reduce to $4,000
</TABLE>
55
<PAGE> 75
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 854
Eligible Group: Hourly Retirees - Superior 5/1/63 - 7/1/75
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 9 9
Spouses 0 5 5
- -- --
Total 0 14 14
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 31 days at $20 per day in a 12 month
consecutive period
Hospital Other Charges - up to $100 in a 12 month consecutive period
Surgical - $200 maximum in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000; for every $1,000 of benefits paid, lifetime
maximum is restored $1,000. (Last restoration is at age 65)
Out-patient Psychiatric - 50% up to $1,000
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 31 days at $20 per day in a 12 month
consecutive period
Hospital Other Charges - up to $100 in a 12 month consecutive period
Surgical - $200 maximum in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
</TABLE>
56
<PAGE> 76
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 854 (continued)
<TABLE>
<S> <C>
Major Medical (contd.)
Annual Maximum - none
Lifetime Maximum - $2,500; no reinstatement provision
Out-patient Psychiatric - 50% up to $1,000
Prescription Drugs - 80%
Medicare Part B:
Post-65 benefit premium reimbursed at 100%
($381.60 in 1992)
Life Insurance: $1,500
</TABLE>
57
<PAGE> 77
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 455
Eligible Group: Hourly Retirees - Superior after 7/1/77 (less than age 62 at
retirement)
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 5 6 11
Spouses 8 2 10
-- - --
Total 13 8 21
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 31 days at $20 per day in a 12 month
consecutive period
Hospital Other Charges - up to $100 in a 12 month consecutive period
Surgical - $200 maximum in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000; for every $1,000 of benefits paid, lifetime
maximum is restored $1,000. (Last restoration is at age 65)
Out-patient Psychiatric - 50% up to $1,000
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 31 days at $20 per day in a 12 month
consecutive period
Hospital Other Charges - up to $100 in a 12 month consecutive period
Surgical - $200 maximum in a 12 month consecutive period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
</TABLE>
58
<PAGE> 78
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 455 (continued)
<TABLE>
<S> <C>
Major Medical (contd.)
Annual Maximum - none
Lifetime Maximum - $5,000; no reinstatement provision
Out-patient Psychiatric - 50% up to $1,000
Prescription Drugs - 80%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $3,000
</TABLE>
59
<PAGE> 79
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 456
Eligible Group: Hourly Retirees - Superior after 7/1/77 (age 62 or more at
retirement)
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 12 12
Spouses 1 9 10
- -- --
Total 1 21 22
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 120 days at semi-private in a 12 month
consecutive period
Hospital Other Charges - up to $750 in a 12 month consecutive period
Surgical - $1,000 maximum benefit in a 12 month consecutive period
Major Medical:
Deductible - $100/$200 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000; medical evidence reinststement prior to
age 65
Out-patient Psychiatric - 50% up to $1,000
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 120 days at semi-private in a 12 month
consecutive period
Hospital Other Charges - up to $750 in a 12 month consecutive period
Surgical - $1,000 maximum benefit in a 12 month consecutive period
Major Medical:
Deductible - $100/$200 per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
</TABLE>
60
<PAGE> 80
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 456 (continued)
<TABLE>
<S> <C>
Major Medical (contd.):
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $1,000
Prescription Drugs - 80%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $3,000
</TABLE>
61
<PAGE> 81
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 128
Eligible Group: Hourly Retirees - North Texas Aggregate
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 20 20
Spouses 3 17 20
- -- --
Total 3 37 40
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 70 days at semi-private
Hospital Other Charges - $400
Surgical - 100% of Reasonable and Customary
Major Medical:
Deductible - $100 per individual
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $2,000 per calendar year
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 70 days at semi-private
Hospital Other charges - $400
Surgical - 100% of Reasonable and Customary
Major Medical:
Deductible - $100 per individual
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $5,000
Out-patient Psychiatric - 50% up to $2,000 per calendar year
Prescription Drugs - 80%
</TABLE>
62
<PAGE> 82
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 128 (continued)
<TABLE>
<S> <C>
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $2,000
</TABLE>
63
<PAGE> 83
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 199
Eligible Group: Hourly Retirees - Gulf Aggregate (11/1/81 - 3/29/85)
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 1 29 30
Spouses 1 19 20
- -- --
Total 2 48 50
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Base plus Major Medical Plan
Base:
Hospital Room and Board - 70 days at $75 per day
Hospital Other Charges - $400 plus 80% of the next $2,000
Surgical - $600 maximum benefit
Hospital Doctor Visits -$4 per day, maximum 70 days
Supplemental Accident - up to $300 per accident; 90 day
accumulation period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $50,000
Out-patient Psychiatric - 50% up to $750 per calendar year
Prescription Drugs - 80%
Over Age 65: Base plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Base:
Hospital Room and Board - 70 days at $75 per day
Hospital Other Charges - $400 plus 80% of the next $2,000
Surgical - $600 maximum benefit
Hospital Doctor Visits - $4 per day, maximum 70 days
Supplemental Accident - up to $300 per accident; 90 day
accumulation period
Major Medical:
Deductible - $100 per individual per calendar year
Coinsurance - 80%/20%
</TABLE>
64
<PAGE> 84
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 199 (continued)
<TABLE>
<S> <C>
Major Medical (contd.):
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $50,000
Out-patient Psychiatric - 50% up to $750 per calendar year
Prescription Drugs - 80%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $1,500
</TABLE>
65
<PAGE> 85
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 615
Eligible Group: Hourly Retirees - Concrete, Washington
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 0 10 10
Spouses 0 5 5
- -- --
Total 0 15 15
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65:
No company plan offered
Over Age 65:
No company plan offered
Medicare Part B:
No reimbursement of premium
Life Insurance: $2,500
</TABLE>
68
<PAGE> 86
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 910
Eligible Group: Hourly Retirees - Davenport
Participants as of 1/1/92:
<TABLE>
<CAPTION>
Under 65 Over 65 Total
-------- ------- -----
<S> <C> <C> <C>
Retirees 12 70 82
Spouses 18 51 69
-- --- --
Total 30 121 151
</TABLE>
<TABLE>
<S> <C>
Medical Plan:
Under Age 65: Blue Cross plus Major Medical Plan
Blue Cross:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment for 365 days
Surgical- N/A
Major Medical:
Deductible - $100/$300
Coinsurance - 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $30,000
Out-patient Psychiatric - none
Supplemental Accident - $300
Prescription Drugs - 80%
Over Age 65: Blue Cross plus Major Medical Plan
Medicare Integration: Maintenance of Benefits
Blue Cross:
Hospital Room and Board - 365 days at semi-private
Hospital Other Charges - full payment for 365 days
Surgical-N/A
Major Medical:
Deductible - $100/$300
Coinsurance- 80%/20%
Out-of-Pocket Limits - none
Annual Maximum - none
Lifetime Maximum - $30,000
Out-patient Psychiatric - none
</TABLE>
70
<PAGE> 87
LONE STAR INDUSTRIES, INC.
RETIREE MEDICAL AND LIFE INSURANCE BENEFITS
Branch 910
<TABLE>
<S> <C>
Major Medical (cont.):
Supplemental Accident - $300
Prescription Drugs - 80%
Medicare Part B:
Post-65 benefit premium reimbursed at 100% ($381.60 in 1992)
Life Insurance: $4,000/$2,500
</TABLE>
71
<PAGE> 1
EXHIBIT 10.26
-------------
Confirmation Deed. No Additional Consideration.
No Documentary Stamps are Required Under
68 O.S. Section 3202.3
SECOND AMENDED AND RESTATED
CONVEYANCE
OF
PRODUCTION PAYMENT
Dated as of March 29, 1994
LONE STAR INDUSTRIES, INC.
to
JOHN FOUHEY, AS TRUSTEE FOR SELLECK HILL TRUST
Approximately 131,000,000 Tons of Limestone
Return recorded counterparts to: Nancy L. Sanborn, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
<PAGE> 2
SECOND AMENDED AND RESTATED
CONVEYANCE OF PRODUCTION PAYMENT
THIS CONVEYANCE OF PRODUCTION PAYMENT dated as of
March 29, 1994 from LONE STAR INDUSTRIES, INC., a Delaware
corporation ("WI Owner"), to JOHN FOUHEY, AS TRUSTEE FOR
SELLECK HILL TRUST, a New York trust ("PP Owner"), amending
and restating the existing Amended and Restated Conveyance
of Production Payment dated as of September 1, 1988 (the
"Existing Conveyance") among the WI Owner and the PP Owner.
W I T N E S S E T H :
WHEREAS, the Existing Conveyance provides for the
conveyance by WI Owner to PP Owner of WI's interest in
approximately 131,000,000 tons of limestone and mineral
deposits located near Pryor, Oklahoma and Greencastle,
Indiana.
WHEREAS, the parties hereto desire to amend and
restate the Existing Conveyance to conform its terms and
conditions to the terms and conditions of the Second Amended
and Restated Term Loan Agreement dated as of March 29, 1994
among the PP Owner, Morgan Guaranty Trust Company of New
York, as Agent (the "Agent"), and the banks listed on the
signature pages thereof, as amended as of the date hereof;
NOW, THEREFORE, the parties hereto agree as
follows:
2
<PAGE> 3
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The terms defined in
this Section 1.1 shall have the respective meanings
specified for all purposes of this Conveyance:
"Application Date" shall mean each January 31 and
July 31 during the term of this Conveyance, commencing
January 31, 1994 or, if any such day is not a Business
Day, the first Business Day thereafter.
"Application Period" shall mean, with respect to
each Application Date, the 24-month period ending on
the most recent of the June 30 or December 31
immediately preceding such Application Date.
"Business Day" shall mean any day except a
Saturday, Sunday or other day on which commercial banks
in New York City are authorized by law to close.
"Default" shall have the meaning set forth in
Section 6.1 hereof.
"Direct Costs" shall mean those Production
Expenses that are out-of-pocket costs but shall not
include any payments on account of the Production
Payment or on account of any royalties, overriding
royalties or any other payments out of production.
"Effective Date" shall mean the date in which this
Second Amended and Restated Conveyance becomes
effective as specified in Section 8.1.
3
<PAGE> 4
"Exhibit A" shall mean Exhibit A attached hereto
and made a part hereof, being the description of the
Subject Interests in Oklahoma.
"Exhibit B" shall mean Exhibit B attached hereto
and made a part hereof, being the description of the
Subject Interests in Indiana.
"Expense and Interest Agreement" shall mean the
Amended and Restated Expense and Interest Agreement
dated as of September 1, 1988, as amended, between WI
Owner and PP Owner.
"First Marketable Product" shall mean cement or
any other product which constitutes "first marketable
product" (as that term is used in the Regulations in
effect on the date hereof under Section 613(c) of the
Internal Revenue Code of 1986, as amended) derived from
Subject Minerals.
"Indiana Quarries" shall mean the Subject
Interests described in Exhibit B attached hereto
located adjacent to WI Owner's Greencastle, Indiana
cement plant.
"Marketing Contract" shall mean the Second Amended
and Restated Marketing Contract of even date herewith
between WI Owner and PP Owner.
"Mortgage" shall mean the Amended and Restated
Mortgage, Deed of Trust and Security Agreement dated as
4
<PAGE> 5
of September 1, 1988, as amended, between PP Owner and
Morgan Guaranty Trust company of New York, as Agent.
"Oklahoma Quarries" shall mean the Subject
Interests described in Exhibit A attached hereto
located adjacent to WI Owner's Pryor, Oklahoma cement
plant.
"Operating Equipment" shall mean all machinery,
equipment, facilities and structures of every character
owned or leased by WI Owner, now or hereafter included
in or located on or adjacent to the Subject Interests
and useful in:
(1) exploring, developing, mining,
equipping, operating or maintaining the Subject
Interests; or
(2) mining, producing, treating, storing or
handling PP Minerals in preparation for processing
into First Marketable Product or for sale by WI
Owner to third parties; or
(3) storing, marketing, transporting or
handling PP Minerals;
provided, however, that the term "Operating Equipment"
shall not include hopper cars.
"Option Agreement" shall mean the Amended and
Restated Option Agreement dated as of September 1,
1988, as amended, between WI Owner and PP Owner.
5
<PAGE> 6
"Plants" shall mean the existing cement plants and
related facilities adjacent to the Subject Interests
and all other building, structures, facilities,
machinery and equipment of every character owned or
leased by WI Owner, now or hereafter located adjacent
to the Subject Interests and useful in:
(1) processing PP Minerals into First
Marketable Product; or
(2) storing, marketing, transporting or
handling First Marketable Product or the products
that are derived from PP Minerals and are in
stages of production, manufacturing or processing
prior to the stage of being First Marketable
Product;
provided, however, that the term "Plants" shall not
include hopper cars.
"PP Minerals" shall mean all Subject Minerals
contained in or underlying the Oklahoma and Indiana
Quarries.
"PP Owner" shall mean John Fouhey (or any
successor appointed pursuant to the Trust Agreement),
as trustee for Selleck Hill Trust.
"Prime Rate" shall mean the rate of interest
publicly announced by Morgan Guaranty Trust Company of
New York in New York City from time to time as its
"Prime Rate".
6
<PAGE> 7
"Production Expenses" shall mean costs and
expenses of every character whatsoever (including
rentals and royalties) incurred for or payable in
connection with
(1) exploring, developing, mining,
equipping, operating or maintaining the Subject
Interests; or
(2) mining, producing, treating, storing or
handling PP Minerals in preparation for processing
into First Marketable Product or for sale by WI
Owner to third parties' or
(3) processing PP Minerals into First
Marketable Product; or
(4) storing, marketing, transporting or
handling PP minerals, First Marketable Product or
the products that are derived from PP Minerals and
are in stages of production, manufacture or
processing prior to the stage of being First
Marketable Product.
"Production Payment" shall mean the interest in
the Subject Minerals that is conveyed to PP Owner
hereunder, together with all rights, titles, interests,
estates, remedies, powers and privileges appurtenant or
incident thereto or set forth herein.
"Production Taxes" shall mean all ad valorem taxes
and all severance, gross receipts, production,
7
<PAGE> 8
occupation, mining, conservation, excise, sales,
recording and other taxes, fees, assessments and other
governmental charges of every character whatsoever (but
excluding income, franchise and similar taxes imposed
on PP Owner), and together with any interest and
penalties payable in connection therewith, that are (i)
imposed or assessed with respect to or measured by or
charged against or otherwise attributable to the
Subject Interests, the Subject Minerals or the proceeds
or value thereof to be deducted from the proceeds of
sales of Subject Minerals, PP Minerals or First
Marketable Product.
"Revenue" shall have the meaning given to such
term in the Marketing Contract.
"Selleck Hill Trust" shall mean that certain trust
created under New York law for the benefit of the
University of Pennsylvania Law School by means of a
Declaration of Trust executed the 19th day of April
1982, by John Fouhey, as Grantor and as Trustee.
"Subject Interests" shall mean the fee lands
described in Exhibits A and B attached hereto and made
a part hereof together with all mineral leases and
other interests of whatsoever nature in said lands;
subject, however, to the restrictions, exceptions,
reservations, conditions, limitations, interests and
other matter, if any, set forth in such Exhibits. The
8
<PAGE> 9
term "Subject Interests" shall include (i) each Subject
Interest, as enlarged as a result of the discharge or
removal of any restrictions, exceptions, reservations,
conditions, limitations, interest and other matters, if
any, affecting such Subject Interest and (ii) any and
all renewals and extensions of any Subject Interest,
but shall not include timber located on the Subject
Interests or any interest therein.
"Subject Minerals" shall mean all limestone, shale
and other minerals on or underlying or mined, produced
or derived from the Subject Interests (excluding
timber).
"Term Loan Agreement" shall mean the Second
Amended and Restated Term Loan Agreement of even date
herewith among PP Owner, Morgan Guaranty Trust Company
of New York, TCW Special Credits, The Chase Manhattan
Bank (National Association) and Wells Fargo Bank, N.A.
(the "Banks"), and Morgan Guaranty Trust Company of New
York, as agent thereunder for the Banks (the "Agent").
"Trustee" shall mean John Fouhey as trustee under
the Declaration of Trust executed the 19th day of April
1982, which created the Trust, and his successors and
assigns.
"WI Owner" shall mean Lone Star Industries, Inc.,
a Delaware corporation.
9
<PAGE> 10
SECTION 1.2. Other Terms. Terms used but not
defined herein shall have the meanings set forth in the
Marketing Contract, the Term Loan Agreement and the
Mortgage.
ARTICLE II
THE PRODUCTION PAYMENT
SECTION 2.1. Conveyance of the Production
Payment. WI Owner for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged,
does hereby grant, bargain, sell, convey, assign, transfer
and set over to PP Owner as the Production Payment:
The PP Minerals together with the right and
easement, appurtenant to PP Owner's interest in the PP
Minerals, to enter upon the Subject Interests and to
mine, produce, derive, sell, use or dispose of PP
Minerals; provided, however, that the existence of said
right and easement shall not impair the use of the
Subject Interests, Operating Equipment and Plants for
the purposes for which the Subject Interests, Operating
Equipment and Plants are held or were acquired by WI
Owner;
TO HAVE AND TO HOLD unto PP Owner subject to the terms,
provisions, exceptions, covenants and agreements hereinafter
set forth.
10
<PAGE> 11
SECTION 2.2. Limitations and Conditions. For the
discharge of the Production Payment, PP Owner shall look
exclusively to the PP Minerals and WI Owner's obligations as
to purchasing, mining, processing, marketing, storing and
transporting hereunder and under the Marketing Contract, and
WI Owner's personal liability to PP Owner with respect to
the Subject Interests and Production Payment shall be
limited to, but not less than, any liability arising out of
any breach of any of the representations, warranties,
covenants, agreements and obligations of WI Owner hereunder
and under the Marketing Contract and the Expense and
Interest Agreement.
SECTION 2.3. Term of Production Payment. The
Production Payment shall continue and remain in full force
and effect until WI Owner shall have purchased, mined,
produced and delivered all of the PP Minerals, free and
clear of all Production Expenses and Production Taxes.
SECTION 2.4. Discharge of Production Payment.
After all of the PP Minerals shall have been purchased,
mined, produced and delivered and the PP Owner shall have
received a certificate of a firm of mining engineers
satisfactory to it to the effect that all PP Minerals have
been mined and produced, the Production Payment shall
terminate. Upon termination of the Production Payment, all
rights, titles, interests, powers, remedies and privileges
herein conveyed shall terminate and vest in WI Owner and,
11
<PAGE> 12
upon the request and at the expense of WI Owner, PP Owner
shall execute and deliver such instrument or instruments as
may be necessary or appropriate to evidence the discharge
and termination of the Production Payment.
SECTION 2.5. Purchase of Production Payment. In
consideration of the conveyance of WI Owner to PP Owner of
the Production Payment pursuant to this Conveyance, and
execution and delivery of the Marketing Agreement and the
Expense and Interest Agreement by the WI Owner, PP Owner
hereby agrees to amend the terms of the Existing Term Loan
Agreement. To the fullest extent permitted by law, WI Owner
hereby irrevocably and unconditionally waives and
relinquishes (i) any express or implied vendor's lien, and
any other lien, charge or encumbrance, that would otherwise
be imposed on or affect the Production Payment and (ii) with
respect to the obligations of WI Owner under this
Conveyance, the Marketing Contract, the Expense and Interest
Agreement and the Option Agreement, any setoff,
counterclaim, credit, recoupment, defense, abatement,
suspension, reduction and other right or claim that WI Owner
may have against PP Owner as a result of or arising out of
the failure of PP Owner to pay any amount on account of the
purchase of the Production Payment or otherwise.
12
<PAGE> 13
ARTICLE III
COVENANTS OF WI OWNER
SECTION 3.1. Recording of Conveyance and
Mortgage. WI Owner shall at its own expense record, file
and register this Conveyance in the real property records in
the States of Oklahoma and Indiana (or shall cause the same
to be done) and shall record, file and register in whatever
offices and jurisdictions are appropriate every other
agreement, instrument or document that may be required by
law or advisable in order to perfect, preserve and protect
the Production Payment (including any amendment or
supplement thereto) and the lien, assignment and security
interest created or intended to be created by the Mortgage
or by any amendment or supplement thereto (or shall cause
the same to be done). WI Owner shall promptly furnish PP
Owner evidence of every such recording, filing and
registration.
SECTION 3.2. Operation of the Subject Interests,
the Operating Equipment and the Plant. WI Owner covenants
and agrees that, so long as the Production Payment remains
in full force and effect,
(a) it will at its own expense cause:
A. each Subject Interest to be maintained,
developed and mined for the production of Subject
Minerals in a good and minerlike manner and in
accordance with sound mining practices and in
13
<PAGE> 14
compliance with all applicable Federal, state and local
laws, rules, regulations, approvals, waivers, licenses,
permits, consents, orders and decrees (except those
being diligently contested in good faith and except
when such failure to comply would not interfere
materially with the operation, value or use of the
Subject Interests, any item of Operating Equipment, the
Plants or the PP Minerals or affect materially title
thereto), and all repairs, renewals or improvements of,
or additions to, such Subject Interests needful to such
ends to be promptly made;
B. each Subject Interest which does not
constitute fee lands to be kept in full force and
effect, free of cancellation or forfeiture;
C. all Production Expenses to be paid punctually
when due or, as to any thereof that are being contested
in good faith and as to which the failure to pay would
not subject PP Owner to any substantial risk relating
to PP Owner's interest in the PP Minerals, promptly
after the final determination of such contest;
D. the Plants and all Operating Equipment to be
operated in accordance with the standards of a prudent
operator and in compliance with all Federal, state and
local laws, rules, regulations, approvals, waivers,
licenses, permits, consents, orders and decrees, except
those being diligently contested in good faith and
14
<PAGE> 15
except where such failure to comply would not interfere
materially with the operation, use or value of the
Subject Interests, any item of Operating Equipment, the
Plants or the PP Minerals;
E. the Plants and all Operating Equipment to be
kept in good and efficient operating condition and all
repairs, renewals, replacements and improvements
thereof, and additions thereto, needful to such end to
be promptly made;
F. all Production Taxes to be rendered, reported
and paid punctually before the same become delinquent
or, as to any thereof that are being contested in good
faith and as to which the failure to pay would not
subject PP Owner to any substantial risk relating to PP
Owner's interest in the PP Minerals, promptly after the
final determination of such contest;
G. the Subject Interests, the Operating
Equipment, the Plants, the Production Payment, the PP
Minerals, the Revenue and the proceeds of sale of First
Marketable Product to be kept free and clear of liens,
charges, encumbrances or security interests of every
character other than:
(i) taxes constituting a lien but not yet
due and payable (and not affecting the Revenue or
such proceeds);
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(ii) defects or irregularities of title or
liens, charges, encumbrances or security interests
that are not such as to interfere materially with
the operation, value or use of, as the case may
be, the Subject Interests, any item of Operating
Equipment, the Plants, the PP Minerals, the
Revenue or the proceeds affected thereby or as to
affect materially title thereto;
(iii) operating agreements entered into in the
ordinary course of business and sales contracts
permitted by the Marketing Contract;
(iv) those set forth or referred to in
Exhibits A and B attached hereto;
(v) liens (not interfering with the
operation or use of the Plants or any item of
Operating Equipment) presently existing on the
Operating Equipment or the Plants and liens (not
interfering with the operation or use of the
Plants or any item of Operating Equipment)
extending or renewing any such lien so long as (x)
the amount secured thereby is not greater than the
amount secured by the lien being renewed or
extended and (y) no new assets are subject thereto
as a result of such extension or renewal;
(vi) liens (not interfering with the use or
operation of the Plants) on Operating Equipment,
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on machinery and equipment included in the Plants
and on improvements or additions to the Plants
made or acquired subsequent to the date hereof and
any liens (not interfering with the use or
operation of the Plants) renewing or extending any
such lien upon the same Operating Equipment or
machinery and equipment or on renewals and
additions thereto so long as (x) the amount
secured thereby is not greater than the amount
secured by the lien being renewed or extended and
(y) no new assets are subject thereto as a result
of such extension or renewal;
(vii) liens (not interfering with the use or
operation of the Plants) securing any claims for
labor, materials and supplies and any other claims
of mechanics, workmen or suppliers incident to the
completion of construction of the Plants;
(viii) those consented to in writing by PP
Owner; and
(ix) liens (not interfering with the use or
operation of the Plants) on inventory (as defined
in Article 9 of the Uniform Commercial Code but
only to the extent accounted for as inventory in
WI Owner's financial records) located at the
Plants or related storage facilities and liens on
accounts receivable arising from the sale of such
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inventory, which liens secure indebtedness, in an
aggregate principal amount not in excess of
$35,000,000, incurred under the Working Capital
Facility;
H. written notice to be given to PP Owner of
every adverse claim or demand made by any Person
affecting the Subject Interests, the Subject Minerals,
the PP Minerals, the Operating Equipment, the Plants or
the proceeds of sale of First Marketable Product in any
manner whatsoever, or of any proceedings instituted
with respect thereto, and all necessary, reasonable and
proper steps to be diligently taken to protect and
defend the Subject Interests, the Subject Minerals, the
PP Minerals, the Operating Equipment, the Plants and
such proceeds of sale against any such adverse claim or
demand, including but not limited to the employment of
counsel for the prosecution or defense of litigation
and the contest or release and discharge of any such
adverse claim or demand but not in such a manner so as
to affect adversely the Subject Interests, the Subject
Minerals, the PP Minerals, the Operating Equipment, the
Plants and such proceeds of sale;
I. the following insurance to be carried with
insurance companies of recognized standing in
reasonable amounts satisfactory to PP Owner with
respect to the Subject Interests, the Operating
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<PAGE> 19
Equipment and the Plants: (i) workmen's compensation
insurance, except where WI Owner self insures in a
manner satisfactory to the governing State authorities,
and public liability and property damage insurance in
respect of all activities in which WI Owner or PP Owner
might incur personal liability for the death or injury
of an employee or third person or for damage to or
destruction of another's property, (ii) business
interruption insurance to the extent that it is
maintained on other domestic cement plants owned by WI
Owner and its subsidiaries and (iii) to the extent such
insurance is carried by others engaged in similar
undertakings in the same general area or areas in which
the Subject Interests are located, insurance in respect
of all Operating Equipment and the Plants against loss
or damage by fire, lightning, hail, tornado, explosion,
earthquake and other similar risks; provided that, as
to insurance required by (ii) and (iii) above, PP Owner
and the Banks shall be named in the policies as named
insureds and loss payees and shall be entitled to
receive the proceeds thereof as their interests may
appear unless, with their consent, such proceeds are
expended to rehabilitate Subject Interests or Operating
Equipment or to reconstruct a Plant;
J. PP Owner, the Trustee, the Agent and the Banks
to be indemnified against all liabilities, losses and
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expenses resulting from earthquakes or fires resulting
from such earthquakes affecting the Plant, Operating
Equipment and the Subject Interests (it being
understood that the foregoing is not intended to limit
the generality of Section 7.11); and
K. all PP Minerals to be delivered to, and stored
at, the Plant of WI Owner adjacent to the Subject
Interests from which such PP Minerals are mined, free
and clear of all Production Expenses, Production Taxes
and other costs and expenses of any kind, for sale,
processing and marketing pursuant to the Marketing
Contract; and
(b) it will use its best efforts to obtain and
maintain the effectiveness of all approvals, waivers,
licenses, permits and consents of any Federal, state or
local governmental body necessary or appropriate for the
performance of this Conveyance or the Marketing Contract or
the operation of the Plants.
SECTION 3.3. Inspections. WI Owner shall permit
any one or more representatives designated by PP Owner to
inspect, at any reasonable time and upon reasonable terms,
the Subject Interests, the facilities or operations thereon,
the Operating Equipment, the Plants and the records of WI
Owner pertaining thereto or to the Production Payment and to
its compliance with the provisions of this Conveyance, of
20
<PAGE> 21
the Marketing Contract and of the Expense and Interest
Agreement.
SECTION 3.4. Reports to PP Owner. For the
purpose of this Section 3.4, all terms in quotation marks
shall have the meanings given them under, and shall be
calculated according to, Section 613(c) of the Internal
Revenue Code of 1986, as amended and the Regulations
thereunder as in effect on the date hereof. So long as the
Production Payment remains in full force and effect, WI
Owner at its own expense shall furnish to PP Owner and to
the Agent in such number of copies as the Agent may
reasonably request:
A. Not later than September 15 of each year, the
following reports prepared by WI Owner, setting forth
for each Plant for the preceding calendar year,
prepared in accordance with WI Owner's customary
accounting procedures (including its customary
procedures for accrual of income and expenses),
(i) a statement showing all proceeds of
sales of First Marketable Product and, if any, of
PP Minerals pursuant to Sections 3 and 4 of the
Marketing Contract and showing all relevant
Production Expenses, and
(ii) a statement showing all proceeds of
sales of First Marketable Product and, if any, of
PP Minerals pursuant to Sections 3 and 4 of the
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<PAGE> 22
Marketing Contract and subtracting therefrom only
those relevant Production Expenses that are Direct
Costs.
B. Prior to the end of each calendar year, a
projection for the next calendar year, prepared in
accordance with WI Owner's customary accounting
procedures (including its customary procedures for
accrual of income and expenses),
(i) of all proceeds of sales of First
Marketable Product and, if any, of PP Minerals
pursuant to Sections 3 and 4 of the Marketing
Contract and of all relevant Production Expenses,
and
(ii) of all proceeds of sales of First
Marketable Product and, if any, of PP Minerals
pursuant to Sections 3 and 4 of the Marketing
Contract and subtracting therefrom only those
relevant Production Expenses that are Direct
Costs.
C. By September 15 of each year a calculation of
the Mining Ratio to be used on the next January 31 and
July 31 Application Dates and any different Mining
Ratio used in determining Revenue during the
Application Period preceding such July 31 Application
Date, showing relevant detail of "mining" and
"non-mining" costs.
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<PAGE> 23
D. At least three full Business Days before each
Application Date, a report showing for the Application
Period preceding such Date,
(i) the quantities of Subject Minerals
utilized by WI Owner to fulfill its requirements
for limestone or for any other raw material
containing limestone at the Plants or otherwise
taken by WI Owner for its own use;
(ii) for all Application Dates, for the last
six months of the Application Period preceding
such Date
(a) the proceeds of sales of First
Marketable Product, showing the price and
quantity sold,
(b) the Mining Ratio currently
applicable,
(c) the Revenue from the sale of First
Marketable Product,
(d) the Revenue from the sale, if any,
of PP Minerals to third parties, showing the
price per ton and number of tons sold,
(e) all Production Taxes for which PP
Owner is liable and that WI Owner paid for PP
Owner's account;
(iii) for all Application Dates, the Revenue
from the sale of First Marketable Product and the
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<PAGE> 24
Revenue from the sale of PP Minerals to third
parties generated during all the months of the
Application Period prior to the last six months,
but not previously applied in accordance with
Section 2.01 of the Mortgage;
(iv) the total Revenue for the Application
Period which would be payable as the purchase
price for PP Minerals under the circumstances
described in clause (ii) of Section 6 of the
Marketing Contract for application on the
Application Date in accordance with Section 2.01
of the Mortgage;
(v) the amount of the purchase price of PP
Minerals under the Marketing Contract to be
applied on such Application Date and the portion
of such purchase price, if any, which exceeds
Revenue for the most recent six months of the
relevant Application Period.
E. Not later than May 1 of each year, a
certificate signed by any Vice President and an
accounting officer of WI Owner as to, for the preceding
calendar year, the non-existence of the events or
conditions referred to in Section 2.11 of the Term Loan
Agreement and the non-existence of any Default referred
to herein or any Default referred to in the Mortgage
(or any event or condition which with the giving of
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<PAGE> 25
notice or lapse of time, or both, would become such a
Default). Such certificate shall include the data and
calculations upon which the accounting officer has
based the certification regarding Section 2.11 of the
Term Loan Agreement. In addition, such certificate
shall make specific reference to Section 2(a) of the
Marketing Contract and shall state whether WI Owner is
in full compliance with the covenant contained therein.
F. Promptly after the same are available, copies
of all (1) financial statements, notices, reports and
proxy materials sent to stockholders of WI Owner and
(2) regular and periodic reports filed by WI Owner with
the Securities and Exchange Commission (or any
governmental agency succeeding to the functions of such
Commission).
G. Promptly after the occurrence thereof, notice
of any event or condition referred to in Section 2.11
of the Term Loan Agreement or any Default referred to
herein or any Default referred to in the Mortgage (or
any event or condition which with the giving of notice
or lapse of time, or both, would become such a
Default).
H. Such other detailed information as PP Owner
may reasonably request concerning the Subject
Interests, the Operating Equipment and the Plants, the
development, maintenance and operation thereof and the
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<PAGE> 26
mining, production, processing and marketing of PP
Minerals or First Marketable Product therefrom or
therewith.
No report or other information furnished by WI
Owner to PP Owner pursuant to this Section will contain, to
WI Owner's best knowledge, any untrue statement of a
material fact or omit to state any material fact necessary
in order to make the statements contained therein not
misleading, PP Owner and WI Owner being agreed that an
estimate or projection is not to be considered a fact for
purposes of this sentence. All estimates, projections,
reports or other information furnished by WI Owner to PP
Owner pursuant to this Section will be prepared with
reasonable care and will be carefully reviewed by the
employees of WI Owner having responsibility for such matters
and will be based on all relevant data and facts in the
possession of WI Owner.
ARTICLE IV
CESSATION OF PRODUCTION; SALE
SECTION 4.1. Cessation of Production. For the
purpose of this Section 4.1, all terms in quotation marks
(except for the term "in paying quantities", which is
defined herein) shall have the meanings given them under,
and shall be calculated according to, Section 613(c) of the
Internal Revenue Code of 1986, as amended, and the
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<PAGE> 27
Regulations thereunder as in effect on the date hereof.
Except as permitted by Sections 4.3 and 6.1 (iii) of this
Conveyance, WI Owner shall not permanently close either of
the Plants or cease production from any of the Subject
Interests for more than a total of 120 days in any period of
twelve consecutive months unless all of the following
conditions are satisfied:
A. The continued production from such Subject
Interests would result in a permanent loss on a cash
basis.
(i) A permanent loss shall be deemed to
occur if, but only if, the following condition
exists and reasonably appears to be permanent: No
deposit is included in such Subject Interest that
is capable or that could, by WI Owner's observing
the covenants in Section 3.2 hereof and in Section
2 of the Marketing Contract, be made capable of
producing PP Minerals "in paying quantities". For
the purpose of this Section, a deposit shall be
deemed to be capable of producing "in paying
quantities" unless the deposit is not capable of
producing PP Minerals yielding First Marketable
Product the estimated proceeds of sale of which
(assuming observance by WI Owner of the covenants
in Section 3.2 hereof and in Section 2 of the
Marketing Contract) would, when combined with the
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estimated proceeds of any other sales of PP
Minerals from such Subject Interest pursuant to
the Marketing Contract, exceed during the
remaining term of production from such deposit the
Direct Costs of "mining" and "non-mining"
operations involved in producing such First
Marketable Product plus the Direct Costs of
"mining" the PP Minerals from such Subject
Interest otherwise sold pursuant to the Marketing
Contract.
(ii) At least 30 days in advance of the
effectuation of any plan to permanently close
either of the Plants or cease production from any
of the Subject Interests WI Owner shall give to PP
Owner written notice of such plan and shall
present to PP Owner the data projections,
estimates, calculations and evidence that WI Owner
has used to reach its conclusion that continued
production from such Subject Interest would, under
the provisions of this Section 4.1, produce a
permanent loss on a cash basis. Unless PP Owner
shall elect to exercise its rights under Section
4.1(A)(iii), WI Owner may upon the passage of 30
(but not later than 90) days after giving such
notice permanently close the designated Plant or
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cease production from the designated Subject
Interest as contemplated by such notice.
(iii) Upon receipt of such notice, PP Owner
shall have the right within 30 days to give WI
Owner notice of PP Owner's intention to select an
independent Person (the "Consultant"), who shall
be expert in the methods of mining and operating
properties and facilities of the character of the
Subject Interests, the Operating Equipment and the
Plants, in order to review the plan of WI Owner to
effect any such closing of any of the Plants or
cessation of production. PP Owner shall nominate
a Consultant within 60 days following the receipt
of the aforesaid notice from WI Owner, but the
nomination shall not become final until WI Owner
shall have approved the nomination or until WI
Owner and PP Owner shall have mutually agreed upon
a Consultant. The Consultant shall have the right
to examine the information contained in the
aforesaid notice from WI Owner and shall have the
further right to conduct any inspection permitted
by Section 3.3, all for the purpose of
ascertaining the data and information relevant to
any decision to permanently close either of the
Plants or cease production from any of the Subject
Interests. At the end of such examination and
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inspection, which shall be conducted with
reasonable promptness, the Consultant shall render
a written report approving or disapproving WI
Owner's conclusions as to the existence of the
requisite conditions and WI Owner's plan. Such
report shall set forth the data, projections,
estimates, calculations and evidence the
Consultant regards as the basis for his judgment.
The Consultant's approval or disapproval shall be
final and binding upon WI Owner and PP Owner. WI
Owner may, subject to the provisions of Subsection
(B) of this Section 4.1, upon the passage of 30
(but not later than 90) days after receipt by WI
Owner and PP Owner of the Consultant's report
giving any such approval permanently close the
designated Plant or cease production from the
designated Subject Interest or both. If the
Consultant's report disapproves WI Owner's
conclusions as to the existence of the requisite
conditions and WI Owner's plan (and during the
period prior to delivery of such report), WI Owner
shall be precluded from ceasing production from
such Subject Interest.
B. WI Owner has, prior to such 120th day, paid to
PP Owner, as consideration for the cessation of WI
Owner's obligations under the Marketing Contract, an
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amount of money equal to the fair market value of the
Plant or Plants to be closed (as of a date at least
five but no more than 25 days prior to such 120th day)
as determined by a qualified independent appraiser
satisfactory to both WI Owner and PP Owner. Such
appraiser shall base his valuation upon, among other
relevant considerations, the fact that both WI Owner
and the Consultant will have concluded that continued
production from the Subject Interest in question would
produce a permanent loss on a cash basis.
The signature or joinder of PP Owner to
instruments effecting any disposition or cessation of
production hereunder shall not be necessary.
SECTION 4.2. Production After Cessation of
Production. No action taken by WI Owner pursuant to Section
4.1 shall terminate or otherwise discharge the Production
Payment (and, in any such event, the PP Minerals shall
continue to be subject to the Production Payment). If WI
Owner or any other Person commences production from any
Subject Interest (or portion thereof) from which WI Owner
had ceased production pursuant to Section 4.1, PP Owner
shall continue to own the Production Payment and be entitled
to receive the purchase price of PP Minerals as though this
Conveyance, the Marketing Contract and the Expense and
Interest Agreement remained operative and in full force and
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effect at all times with respect to the Subject Interest in
question.
SECTION 4.3. Sales or Disposition. WI Owner
shall not sell, transfer or otherwise dispose of the whole
or any portion of the Plants or all or substantially all of
the Operating Equipment or the whole or any portion of the
Subject Interests without the prior written consent of PP
Owner, except that:
A. WI Owner may sell or transfer the Plants, the
Operating Equipment and the Subject Interests in a
single transaction to a purchaser or transferee which
is a directly owned subsidiary of WI Owner of which WI
Owner owns at least 95% of all the outstanding capital
stock and which, without releasing WI Owner from its
obligations under this Conveyance, the Marketing
Contract and the Expense and Interest Agreement,
effectively assumes all the obligations of WI Owner
hereunder and thereunder pursuant to an instrument
satisfactory to PP Owner. Prior to any sale or
transfer by WI Owner of any outstanding capital stock
of any subsidiary to which such a sale or transfer has
been made pursuant to the foregoing sentence or the
sale or transfer by such subsidiary of any of its
capital stock, which sale or transfer would result in
WI Owner owning less than 95% of the outstanding
capital stock of such subsidiary, WI Owner shall cause
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such subsidiary to reconvey the Plants, the Operating
Equipment and the Subject Interests to WI Owner free
and clear of any Liens other than Liens existing on the
date of initial conveyance to such subsidiary or
otherwise permitted pursuant to Section 3.2(a)(G); and
B. WI Owner may sell or otherwise dispose of any
item of Operating Equipment if, concurrently with such
sale or other disposition, WI Owner acquires and
maintains the use of, by purchase, lease or otherwise,
other Operating Equipment of comparable utility for use
on or adjacent to the Subject Interests.
ARTICLE V
WARRANTIES
SECTION 5.1. Warranties by WI Owner. WI Owner
hereby warrants to PP Owner that:
A. WI Owner is a corporation duly incorporated,
validly existing and in good standing under the laws of
the State of Delaware and is duly licensed or qualified
to do business in the States of Oklahoma and Indiana.
WI Owner has full right and authority to grant,
bargain, sell, convey, assign, transfer and set over to
PP Owner the Production Payment and to execute, deliver
and perform this Conveyance, the Marketing Contract and
the Expense and Interest Agreement. No action, suit or
proceeding is pending or, to the best knowledge of WI
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<PAGE> 34
Owner, threatened (and WI Owner knows of no valid basis
therefor) before any court or any governmental body or
agency which, if such action, suit or proceeding were
adversely determined, might materially adversely affect
WI Owner's rights, titles and interests in the Subject
Interests, PP Owner's rights, titles and interests in
the PP Minerals and the Production Payment or the
ability of WI Owner to perform its obligations under
this Conveyance, the Marketing Contract and the Expense
and Interest Agreement.
B. Neither Exhibit A nor Exhibit B attached
hereto contains any untrue statement of a material fact
or omits to state any material fact necessary in order
to make the statements contained therein not
misleading.
C. At the date of this Conveyance, WI Owner
holds good and marketable title to each Subject
Interest, the Operating Equipment and the Plants free
and clear of all liens, charges and encumbrances of any
character whatsoever except for those permitted by
Section 3.2(a)(G). Pursuant to this Conveyance, PP
Owner is acquiring good and marketable title to the PP
Minerals and the Production Payment free and clear of
all liens, charges and encumbrances of any character
whatsoever, except insofar as any lien, charge or
encumbrance on the Subject Interests permitted by
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<PAGE> 35
Section 3.2(a)(G) may be considered to be a lien,
charge or encumbrance on the PP Minerals and the
Production Payment.
D. Each of the Subject Interests which does not
constitute a fee land is valid and subsisting and in
full force and effect; the Production Payment is
dischargeable out of the PP Minerals; and no material
default now exists with respect to any Subject
Interests and WI Owner has not received any notice of
any default or claimed default with respect to any of
the Subject Interests. All Production Expenses and
Production Taxes of which WI Owner has knowledge and
which have accrued prior to the date hereof have been
duly paid or provided for.
E. All exploration, development, mining and
related operations on each Subject Interest have been
conducted prior to the date of this Conveyance in
compliance with all applicable laws, rules, regulations
and permits and judgments, orders and decrees of any
court or governmental body or agency except to the
extent that WI Owner's failure to have so complied
prior to the date hereof would not after the date
hereof subject any such Subject Interest to any
material detriment in the future under such laws,
rules, regulations, permits, judgments, orders and
decrees.
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<PAGE> 36
F. WI Owner hereby covenants and binds itself,
its successors and assigns, to warrant and forever
defend the title to the Subject Interests, the
Operating Equipment, the Plants and the Production
Payment, together with the PP Minerals and proceeds of
sale of First Marketable Product and all rights,
titles, interests, estates, remedies, powers and
privileges appurtenant or incident to the Production
Payment, unto PP Owner, and unto PP Owner's successors,
assigns and mortgagees, against the claims and demands
of every Person whomsoever claiming or to claim the
same or any part thereof (other than liens permitted by
Section 3.2(a)(G)). This Conveyance is made with full
substitution and subrogation of PP Owner in and to all
covenants and warranties by others heretofore given or
made in respect to the Subject Interests, the Operating
Equipment and the Plants, or any part thereof. The
covenants and warranties of this Section shall survive
the discharge of the Production Payment.
G. The consolidated balance sheet of WI Owner and
its consolidated subsidiaries at December 31, 1992 and
the related consolidated statements of operations and
changes in common shareholders' equity and cash flows
for twelve months ended that date certified by Coopers
& Lybrand, copies of which have been delivered to PP
Owner, fairly present the consolidated financial
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<PAGE> 37
condition of WI Owner and its consolidated subsidiaries
at such date and the consolidated results of their
operations and changes in financial position for such
period; and except as disclosed in the Modified Amended
Disclosure Statement Regarding Debtors' Modified
Amended Consolidated Plan of Reorganization dated
November 4, 1993 or in WI Owner's quarterly report on
Form 10-Q for the quarterly period ending September 30,
1993, no material adverse change has occurred in the
business, assets, financial condition or consolidated
results of operations of WI Owner and its consolidated
subsidiaries since December 31, 1992.
H. No Default specified in Section 6.1 of this
Conveyance and no occurrence that, with the giving of
notice or lapse of time or both, would become a Default
has occurred and is continuing.
I. Federal income tax returns of WI Owner and its
subsidiaries included in WI Owner's consolidated return
have been closed through the fiscal year ended December
31, 1989. WI Owner has filed all Federal income tax
returns and all other material tax returns which are
required to be filed by it and has paid or provided for
all taxes due pursuant to such returns or pursuant to
any assessment received by it. The charges, accruals
and reserves on the books of WI Owner in respect of
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<PAGE> 38
taxes or other governmental charges are, in the opinion
of WI Owner, adequate.
J. None of the proceeds received by WI Owner
pursuant to this Conveyance will be used, directly or
indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any
"margin stock", within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System.
WI Owner is not engaged principally, or as one of its
important activities, in the business of extending
credit for the purpose of purchasing or carrying any
such margin stock within the meaning of such Regulation
U.
SECTION 5.2. Warranties by PP Owner. PP Owner
hereby warrants to WI Owner that:
A. Selleck Hill Trust is a trust duly created and
validly existing under New York law. PP Owner has full
right and authority to execute and deliver this
Conveyance, the Marketing Contract and the Expense and
Interest Agreement and to perform PP Owner's
obligations hereunder and thereunder. No action, suit
or proceeding is pending against PP Owner or Selleck
Hill Trust or, to the best knowledge of PP Owner,
threatened before any court or any governmental body or
agency which, if such action, suit or proceeding were
adversely determined, might materially adversely affect
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<PAGE> 39
the ability of PP Owner to perform his obligations
under this Conveyance or the Marketing Contract.
B. PP Owner shall not acquire or own any property
other than the Production Payment and shall not conduct
any activity unrelated to the owning of such Production
Payment.
ARTICLE VI
REMEDIES OF PP OWNER
SECTION 6.1. Defaults. If one or more of the
following events, herein called "Defaults", shall have
occurred and be continuing, PP Owner shall be entitled, but
shall not be obligated, to exercise any one or more of the
remedies set forth in Section 6.2 hereof:
(i) any representation, warranty or certification
made by WI Owner in this Conveyance, the Marketing
Contract or the Expense and Interest Agreement, or in
any certificate, report or other document delivered by
WI Owner pursuant to this Conveyance, the Marketing
Contract or the Expense and Interest Agreement, shall
prove to have been incorrect in any material respect-
when made; or
(ii) WI Owner shall fail to perform or observe any
covenants or conditions provided in this Conveyance,
the Marketing Contract or the Expense and Interest
Agreement to be performed or observed by WI Owner and
such failure shall continue unremedied for more than 30
39
<PAGE> 40
days after written demand for performance is made by PP
Owner to WI Owner, provided, however, that a failure to
perform or observe any of the covenants in Subsection
(B) or (G) of Section 3.2(a) hereof, Section 4.1
hereof, Sections 3 and 6 of the Marketing Contract or
Section 2 of the Expense and Interest Agreement shall
constitute a Default upon the occurrence of such
failure and without the need for any demand for
performance by PP Owner; or
(iii) WI Owner shall have ceased production at
either of the Plants for more than a total of 120 days
in any period of twelve consecutive months for any
reason whatsoever or shall have permanently closed
either of the Plants (unless such cessation or closing
is pursuant to the provisions of Section 4.1 or Section
4.3 hereof), provided that any such cessation of
production shall not be a Default if, on or prior to
the 120th day, WI Owner has executed and delivered to
PP Owner WI Owner's binding and irrevocable commitment
to make advance payments towards purchases of less than
all of the PP Owner's interest in the PP Minerals
pursuant to Section 2 of the Option Agreement on each
succeeding Application Date in an amount equal to the
amount by which the prepayment of the principal due on
each such date under the Term Loan Agreement exceeds
the amount of the purchase price paid under the
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Marketing Contract with respect to each such date
(which shall be in such form and contain such terms and
conditions as shall be satisfactory to PP Owner),
provided, further, that such commitment shall be
terminated on the first Application Date, if any, with
respect to which the purchase price paid under the
Marketing Contract equals or exceeds the required
prepayment of principal due on such Application Date;
or
(iv) WI Owner shall commence a voluntary case or
other proceeding (other than the Chapter 11 cases of
New York Trap Rock Corporation, Lone Star Industries,
Inc., et al., in the Southern District of New York,
case nos. 90B 21276 to 90B 21286, 90B 21334 and
90B 21335) seeking liquidation, reorganization or other
relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its
property, or shall consent to any such relief or to the
appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall
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<PAGE> 42
take any corporate action to authorize any of the
foregoing; or
(v) an involuntary case or other proceeding shall
be commenced against WI Owner seeking liquidation,
reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for
relief shall be entered against WI Owner under the
federal bankruptcy laws as now or hereafter in effect;
or
(vi) this Conveyance, the Marketing Contract, the
Option Agreement or the Expense and Interest Agreement
shall be rejected in the bankruptcy proceeding of WI
Owner.
In the event that a Default, or an event which,
with the giving of notice or lapse of time or both, would
become a Default, occurs WI Owner shall promptly, and in no
event later than 10 Business Days after such occurrence,
notify the Agent in writing of the nature of such Default or
such event, as the case may be, and the action WI Owner
proposes to take in connection therewith.
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<PAGE> 43
SECTION 6.2. Remedies of PP Owner. Under the
circumstances specified in Section 6.1, PP Owner, in
addition to any other lawful remedies available to it, shall
have the following rights and remedies:
A. PP Owner shall have the continuing right,
privilege and option (but shall be under no duty)
(i) to effect performance or observance, on
behalf and at the expense of WI Owner, of any
covenant, agreement or undertaking herein or in
the Marketing Contract or in the Expense and
Interest Agreement that has not been performed or
observed by WI Owner;
(ii) to take possession and control of and to
operate the Subject Interests, the Operating
Equipment and the Plants;
(iii) notwithstanding the Marketing Contract,
to market and sell PP Minerals or First Marketable
Product and to retain out of the proceeds of such
sales amounts equal to the amounts due PP Owner
under the Marketing Contract, and PP Owner shall
have complete discretion over the price at which
it may choose to market and sell PP Minerals and
First Marketable Product; and
(iv) to advance funds and incur and pay bills
for expenses incurred in connection with any of
the foregoing actions and to reimburse itself for
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<PAGE> 44
such expenses, together with interest at the Prime
Rate out of the proceeds of sales of PP Minerals
and First Marketable Product, and all such
payments shall not be deemed proceeds received and
realized by PP Owner. To the extent such
reimbursement shall be insufficient to pay such
expenses, WI Owner shall reimburse PP Owner upon
demand by PP Owner for all amounts so expended by
PP Owner, together with interest thereon at the
Prime Rate from the date of such payment;
provided, however; that WI Owner shall have no
obligation to reimburse PP Owner for any expenses
which WI Owner by reason of the provisions of
Section 4.1 hereof would have no obligation to
incur; and
(v) to proceed by a suit or suits in equity
or at law for the specific performance or
observance of any covenant or agreement of WI
Owner contained herein or in the Marketing
Contract or in the Expense and Interest Agreement,
for aid in the execution of any power herein
granted, for the appointment of a receiver for the
Subject Interests, the Operating Equipment, the
Plants and the PP Minerals or for the enforcement
of any other appropriate legal or equitable
remedy.
44
<PAGE> 45
B. All rights and remedies to which PP Owner
shall have become entitled under Subsection (A) of this
Section 6.2 by virtue of a Default specified in Section
6.1 hereof shall terminate at the earlier of (i) the
time when the Production Payment is discharged or
terminates or (ii) the time when no Default shall be
continuing and all amounts then due and payable to or
for the benefit of PP Owner under this Conveyance, the
Marketing Contract and the Expense and Interest
Agreement, including this Section 6.2, shall have been
duly paid in full.
C. All rights, powers and remedies to which PP
Owner shall have become entitled under Subsection (A)
of this Section 6.2 by virtue of a Default specified in
Section 6.1 hereof may be exercised only to the extent
that the exercise thereof does not violate any
applicable law, and all such rights, powers and
remedies are intended to be limited to the extent
necessary so that they will not render this Conveyance
invalid, unenforceable or not entitled to be recorded,
registered or filed under any applicable law.
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<PAGE> 46
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Further Assurances. PP Owner and WI
Owner shall execute and deliver all such additional
instruments, notices and documents and shall do all such
further acts as may be necessary more fully to assure to
each party all of the respective rights and interests herein
granted or reserved or intended to be granted or reserved.
SECTION 7.2. Sale or Mortgage of Production
Payment. Nothing herein contained shall in any way limit
the right of PP Owner to sell, convey, assign or mortgage
the Production Payment in whole or in part. If PP Owner
shall at any time execute a deed of trust, mortgage or
security agreement (including, without limitation, the
Mortgage) covering all or any part of the Production Payment
as security for any obligation, the trustee, mortgagee or
secured party therein named or the holders of the
obligations thereby secured shall be entitled, to the extent
such deed of trust, mortgage or security agreement shall
provide, to exercise all rights, titles, interests, estates,
remedies, powers and privileges appurtenant or incident to
the Production Payment and to give or withhold all approvals
and consents required to be obtained from PP Owner
hereunder. WI Owner acknowledges receipt of an executed
copy of the Mortgage and notice of the contents thereof,
including, without limitation, the authorizations and
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<PAGE> 47
directions from PP Owner to WI Owner with respect to the
payment directly to the Agent of moneys and amounts to
become due to PP Owner from WI Owner.
SECTION 7.3. Production Payment Not a Security
Interest. In no event shall this Conveyance or the
Marketing Contract, taken individually or together, be
deemed to have created a security interest of any nature
whatsoever (including, without limitation, a security
interest within the meaning of Section 1-201(37) of the
Uniform Commercial Code as adopted by the State of New York)
on behalf of PP Owner in First Marketable Product or any
other products derived from PP Minerals or in the proceeds
therefrom or in the Operating Equipment or the Plants or in
any other property or property rights either presently held
or hereafter acquired by WI Owner.
SECTION 7.4. Notices. Any notice, report or
other instrument given hereunder shall be deemed
sufficiently given if in writing and delivered to the Person
entitled to receive such notice, report or other instrument
or to an officer of such Person, or deposited, registered or
certified with postage prepaid in the United States mail, or
sent by telegram, charges prepaid, addressed to such Person
at the address stated in this Conveyance, if any, or such
other address as such Person shall have designated by
written notice to the Person giving such notice, report or
other instrument.
47
<PAGE> 48
SECTION 7.5. Successors and Assigns. All the
covenants and agreements of WI Owner and PP Owner herein and
in the Marketing Contract and the Expense and Interest
Agreement contained shall be binding upon and inure to the
benefit of their respective successors and assigns, and in
particular shall inure to the benefit of any mortgagees of
PP Owner.
SECTION 7.6. Limitation on Liability. Under no
circumstances whatsoever shall the incorporators, officers
or directors of WI Owner be personally liable for any claim
based on this Conveyance.
SECTION 7.7. Amendments, Waiver, etc. Neither
this Conveyance nor the Marketing Contract nor the Expense
and Interest Agreement nor any provision hereof or thereof
may be amended, modified, waived, discharged or terminated
orally, but only by a statement in writing signed by each
Person against which enforcement of the amendment,
modification, waiver, discharge or termination is sought.
No failure or delay by PP Owner in exercising any right,
remedy, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.
SECTION 7.8. Separability. The parties hereto
agree, to the fullest extent they may effectively do under
applicable law, that in case any one or more of the
48
<PAGE> 49
provisions contained in this Conveyance or the Marketing
Contract or the Expense and Interest Agreement shall be
invalid, illegal or unenforceable in any respect, the
remaining provisions shall be construed in order to
effectuate the purposes hereof and thereof, and the
validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way
be affected or impaired thereby.
SECTION 7.9. Headings. The headings of the
Articles and Sections of this Conveyance, the Marketing
Contract and the Expense and Interest Agreement are inserted
for convenience only and shall not be deemed to constitute a
part of this Conveyance, the Marketing Agreement or the
Expense and Interest Agreement.
SECTION 7.10. Governing Law. This Conveyance
shall be deemed to be made under and shall be construed in
accordance with and governed by the laws of the State of New
York; provided, however, that the laws of the State of
Oklahoma and Indiana shall determine the nature of the
conveyance made in Section 2.1 hereof of the PP Minerals and
the rights to the Subject Interests located in each such
State and the legal requirements for due recordation of this
Conveyance and the Mortgage (to the extent that the
interests subject thereto constitute interests in real
property under such State's laws) and shall govern (to the
extent and only to the extent required by such State's laws)
49
<PAGE> 50
the rights to enforce the remedies of PP Owner herein
provided in respect of the Subject Interests.
SECTION 7.11. Indemnification. WI Owner shall
indemnify and hold harmless PP Owner, the Trustee
(individually and in his capacity as Trustee), the Agent and
the Banks with respect to any and all claims, liabilities,
expenses or losses incurred as a result of (a) the
execution, delivery, recordation or performance of this
Conveyance, the Marketing Contract, the Option Agreement,
the Term Loan Agreement, the Mortgage, the Expense and
Interest Agreement and all other documents and agreements
involved in the transactions contemplated hereby and
thereby, (b) the ownership of the Production Payment,
receipt of proceeds thereof or the ownership or operation of
the Subject Interests, the Operating Equipment or the Plants
(including without limitation reimbursement for any
restitution of proceeds of the Production Payment), (c) the
sale of First Marketable Product, PP Minerals, cement or
other product pursuant to the Marketing Contract, or (d) for
any and all taxes imposed on PP Owner or the Banks by the
State of Oklahoma, the State of Indiana or any municipality
or other subdivision thereof (but excluding income or
franchise taxes payable by the Banks for reasons other than
this transaction); provided, however, that WI Owner shall
not be required to indemnify PP Owner, the Agent or any Bank
for any act done by reason of the PP Owner's, the Agent's or
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<PAGE> 51
such Bank's own gross negligence, as the case may be. WI
Owner shall also reimburse PP Owner, the Trustee
(individually and in his capacity as Trustee), the Agent and
the Banks for any out-of-pocket costs and expenses of the
ongoing administration of this Conveyance, the Marketing
Contract, the Term Loan Agreement, the Expense and Interest
Agreement, the Trust Agreement and the Mortgage, including
without limitation any amendments, supplements or waivers in
connection therewith.
SECTION 7.12. Counterparts. This Conveyance may
be executed in several original counterparts, the provisions
of all of which shall be identical, except that to
facilitate recordation certain counterparts do not contain
the descriptions in Exhibits A and B of properties located
in a recording jurisdiction other than the jurisdiction in
which the particular counterpart is to be recorded.
Counterparts with complete property descriptions in such
Exhibits shall be lodged with PP Owner and the Agent. Each
of such counterparts shall for all purposes be deemed to be
an original, and all such counterparts shall together
constitute but one and the same Conveyance.
SECTION 7.13. Indiana Tax. WI Owner certifies
that no Indiana gross income tax is due or payable with
respect to this Conveyance.
SECTION 7.14. Section 636 of the Code. It is the
intention of the parties that the Production Payment be
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<PAGE> 52
treated for federal income tax purposes in accordance with
the provisions of Section 636 of the Internal Revenue Code
of 1986, as amended, as a carved out production payment, and
the proceeds of sale of the Production Payment payable under
Section 2.5 hereof are not pledged to the exploration or
development of the Subject Interests.
ARTICLE VIII
EFFECTIVENESS
SECTION 8.1. Conditions to Effectiveness. This
Agreement shall become effective on the date (the "Effective
Date") on which all of the following occurred:
(a) this Agreement shall have been executed and
delivered by each of the parties hereto; and
(b) the conditions to effectiveness specified in
Section 3.01 of the Term Loan Agreement shall have been
fulfilled.
52
<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have caused
this Instrument to be duly executed and the seal of WI Owner
to be affixed hereto as of the date first above written.
LONE STAR INDUSTRIES, Inc.
By: /s/ John J. Martin
Name: John J. Martin
Title: Senior Vice President,
General Counsel and
Secretary
Attest:
By: /s/ Kurt V. Blankmeyer
Name: Kurt V. Blankmeyer
Title: Assistant Secretary
The address of
LONE STAR INDUSTRIES, INC. is:
300 First Stamford Place
P.O. Box 120014
Stamford, Connecticut 06912
EXECUTED BY LONE STAR INDUSTRIES, INC.
IN THE PRESENCE OF
By: /s/ William E. Roberts By: /s/ Ramsay Moran
Name: William E. Roberts Name: Ramsay Moran
Title: Vice President, Chief Title: Vice President &
Financial Officer Assistant Treasurer
53
<PAGE> 54
JOHN FOUHEY, AS TRUSTEE
FOR SELLECK HILL TRUST
/s/ John Fouhey
The address of the Trustee is:
c/o Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
EXECUTED BY JOHN FOUHEY, AS TRUSTEE FOR SELLECK HILL TRUST,
IN THE PRESENCE OF
By: /s/ Karin S. Day By: /s/ Antony Wright
Name: Name:
Title: Title:
54
<PAGE> 55
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, Trisha A. McGuinness, a
notary public duly qualified, commissioned, sworn and acting
in and for the County and State aforesaid, hereby certify
that, on this 25th day of March, 1994:
There appeared before me the designated trustee of
the trust set opposite his name, such trust being a party to
the foregoing instrument: John Fouhey, the trustee of
Selleck Hill Trust, who resides at 1105 Park Avenue, Apt.
6B, New York, New York 10128.
(NEW YORK)
Before me personally came such person to me known,
who, being by me duly sworn, did depose and say that he
resides at the address set opposite his name; that he is the
duly appointed trustee of the aforesaid trust and executed
the foregoing instrument in such capacity pursuant to the
declaration of said trust.
(OKLAHOMA)
This instrument was acknowledged before me on
March 25, 1994 by John Fouhey, as Trustee of the Selleck
Hill Trust, a New York trust.
(INDIANA)
Before me, a notary public in and for said County
and State, personally appeared such person, known to me and
known by me to be the trustee of the trust set opposite his
name, and acknowledge the execution of the foregoing
instrument for and on behalf of said trust in its capacity
therein stated.
55
<PAGE> 56
IN WITNESS WHEREOF, I have hereunto set my hand
and official notarial seal in The City of New York, County
of New York, State of New York, this 25th day of March,
1994.
/s/ Trisha A. McGuinness
Notary Public
Trisha A. McGuinness
Notary Public, State of New York
No. 4909673
Qualified in New York County
Commission Expires 11/09/96
[Notary Seal]
56
<PAGE> 57
STATE OF CONNECTICUT )
:ss.: Stamford
COUNTY OF FAIRFIELD )
BE IT REMEMBERED that I, Gordie Murphy, a
notary public duly qualified, commissioned, sworn and acting
in and for the County and State aforesaid, hereby certify
that, on this 24th day of March, 1994:
There appeared before me severally each of the
following persons, each of them designated officers of Lone
Star Industries, Inc., a Delaware corporation, such
corporation being a party to the foregoing instrument: John
J. Martin, who acknowledged himself to be a Senior Vice
President of said corporation, who resides at 18 Azalea
Terrace, Cos Cob, Connecticut 06807 and Kurt V. Blankmeyer,
who acknowledges himself to be an Assistant Secretary of
said corporation, who resides at 144 Signal Hill Road,
Wilton, Connecticut 06897, at that each such person, being
authorized to do so, executed the foregoing instrument for
the purposes therein contained in such capacity.
(NEW YORK)
Before me personally came each such person to me
known, who, being by me duly sworn, did depose and say that
he resides at the address set opposite his name; that he is
the designated officer of the corporation set opposite his
name, the corporation described in and which executed the
foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is
such corporation's seal; and that it was so affixed by order
of the Board of Directors of said corporation, and that he
signed his name thereto by like order.
(OKLAHOMA)
This instrument was acknowledged before me on
March 24th, 1994 by John J. Martin, a Senior Vice President of
Lone Star Industries, Inc., a Delaware corporation, on
behalf of the corporation.
(INDIANA)
Before me, a notary public in and for said County
and State, personally appeared each such person, known to me
and known by me to be the designated officers of the
corporation set opposite their names, and acknowledged the
execution of the foregoing Instrument for and on behalf of
said corporation in the capacity stated therein.
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<PAGE> 58
IN WITNESS WHEREOF, I have hereunto set my hand
and official notarial seal in Stamford, County of Fairfield,
State of Connecticut, this day of March 24th, 1994.
Gordie Murphy
Notary Public
No. 63938 Expires 3/31/97
[Notary Seal]
This Conveyance was prepared by Nancy L. Sanborn,
Esq., c/o Davis Polk & Wardwell, attorneys at law, whose
address is 450 Lexington Avenue, New York, New York 10017.
58
<PAGE> 59
EXHIBIT A
The fee lands in MAYES COUNTY, STATE OF OKLAHOMA,
described as follows:
TRACT II:
The South Half of the Northeast Quarter of the
Southeast Quarter (S 1/2 NE 1/4 SE 1/4), and the
Southeast Quarter of the Southeast Quarter (SE 1/4
SE 1/4), and the West Half of the Southeast Quarter
(W 1/2 SE 1/4), in Section Twenty-Four (24), Township
Twenty-One (21) North, Range Nineteen (19) East of the
Indian Base and Meridian.
TRACT III:
All of Section Twenty-Five (25), LESS AND EXCEPT all
the Southeast Quarter of the Southwest Quarter (SE 1/4
SW 1/4), and also LESS AND EXCEPT the North 75 feet of
the N 1/2 SW 1/4 and the North 75 feet of the West 16
feet of the NW 1/4 NW 1/4 SE 1/4, in Township
Twenty-One (21) North, Range Nineteen (19) East of the
Indian Base and Meridian.
TRACT IV:
The Northeast Quarter (NE 1/4) and the Southeast
Quarter of the Northwest Quarter (SE 1/4 NW 1/4), of
Section Thirty-Six (36), Township Twenty-One (21)
North, Range Nineteen (19) East of the Indian Base and
Meridian.
TRACT V:
The West Half (W 1/2) of Section Thirty (30), (also
described as Lots 1, 2, 3 and 4, and the E 1/2 W 1/2 of
said Section), in Township Twenty-One (21) North, Range
Twenty (20) East of the Indian Base and Meridian.
TRACT VI:
The Northwest Quarter (NW 1/4) of Section Thirty-One
(31), (also described as Lot 1 and the E 1/2 NW 1/4 and
SW 1/4 NW 1/4 of said Section), Township Twenty-One
(21) North, Range Twenty (20) East of the Indian Base
and Meridian.
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<PAGE> 60
General Exceptions:
(1) Rights or claims of parties in possession not
shown by the public records.
(2) Encroachments, overlaps, boundary line disputes,
and any other matters which would be disclosed by
an accurate survey and inspection of the premises.
(3) Easements or claims of easements not shown by the
public records.
(4) Any lien, or right to a lien, for services, labor,
or material heretofore or hereafter furnished,
imposed by law and not shown by the public
records.
(5) Taxes or special assessments which are not shown
as existing liens by the public records.
Special Exceptions:
(6) Mortgage dated June 30, 1970, recorded in Book
407, Page 294 to the Commissioners of the Land
Office of the State of Oklahoma, which affects the
E 1/2 NW 1/4; Lot 2 (SW 1/4 NW 1/4); SW 1/4
NE 1/4; E 1/2 NW 1/4 SE 1/4, and E 1/2 SE 1/4,
Section 31, Township 21 North, Range 20 E.I.M.,
and S 1/2 NE 1/4 NE 1/4; SE 1/4 NE 1/4; W 1/2
NE 1/4, and SE 1/4 NW 1/4, Section 36, Township 21
North, Range 19 E.I.M., Mayes County, Oklahoma.
(7) Mortgage dated June 15, 1976, recorded in Book
512, Page 339 to Lee Kiesel and Martha Kiesel,
which affects the S 1/2 NE 1/4 NE 1/4, and, the
SE 1/4 NE 1/4 and, the W 1/2 NE 1/4, and, SE 1/4
NW 1/4 of Section 36, Township 21 North and Range
19 East; and, Lot 2 (otherwise known as SW 1/4
NW 1/4), and, the E 1/2 NW 1/4 of Section 31,
Township 21 North, Range 20 East of the Indian
Base and Meridian, Mayes County, Oklahoma.
(8) Covenants, easements, leases, and provisions of
instrument dated May 20, 1975, and recorded
December 18, 1975 in Book 502, Page 43.
(9) Rights-of-way for 12" and 4" pipelines in favor of
Oklahoma Natural Gas Company as acquired in
condemnation proceedings in the SE 1/4 SE 1/4 and
the SE 1/4 NE 1/4 SE 1/4 of Section 25. (affects
Tract III)
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<PAGE> 61
(10) Right-of-way easement for transmission line in
favor of the Public Service Company of Oklahoma,
recorded April 11, 1956 in Book 289, Page 225.
(affects Tract II and III)
(11) Right-of-way easement for electrical transmission
line in favor of the Public Service Company of
Oklahoma recorded December 10, 1963 in Book 334,
Page 149. (affects Tracts II and III)
(12) Easement for communication circuits and
transmission lines in favor of Southwestern Bell
Telephone Company recorded March 27, 1956 in Book
288, Page 207. (affects Tract III)
(13) Easement for roadway purposes in favor of the
Board of County Commissioners of Mayes County,
Oklahoma, recorded November 9, 1959 in Book 313,
Page 596. (affects part of Tract III)
(14) Right-of-way easement for meter regulator and
pipeline for transportation of gas in favor of
Oklahoma Natural Gas Company recorded December 9,
1959 in Book 314, Page 239. (affects part of
Tract III)
(15) Easement for transmission of electrical, telephone
and telegraph in favor of Public Service Company
of Oklahoma recorded January 18, 1960 in Book 315,
Page 59. (affects part of Tract III and IV)
(16) Easement for roadway purposes granted to the Board
of County Commissioners of Mayes County, Oklahoma
by deed dated February 2, 1939 and recorded March
7, 1939, Book 195, Page 365 over a strip or parcel
of land therein described, which is part of Tract
IV.
(17) Right-of-way utility easement in favor of Public
Service Company of Oklahoma recorded February 28,
1949 in Book 248, Page 606. (affects all of Tract
IV and other property)
(18) Easement for a Regulator and Junction Site with
right of ingress and egress in favor of Oklahoma
Natural Gas Company recorded March 29, 1956 in
Book 288, Page 229. (affects part of Tract IV)
(19) Easement for gas pipe line in favor of Oklahoma
Natural Gas Company recorded March 29, 1956 in
Book 288, Page 230.
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<PAGE> 62
(20) Right-of-way easement in favor of Public Service
Company of Oklahoma for transmission line recorded
April 11, 1956 in Book 289, Page 227. (affects
part of Tract V)
(21) Right-of-way easement in favor of Oklahoma Natural
Gas Company recorded February 20, 1964 in Book
346, Page 137. (affects part of Tract V)
(22) Transmission line easement in favor of Public
Service Company of Oklahoma recorded April 22,
1964 in Book 348, Page 133. (affects part of
Tract V and other property)
(23) Easement for roadway purposes in favor of Board of
County Commissioners of Mayes County recorded
January 31, 1939 in Book 195, Page 321.
(24) Flowage easement granted by Mayes County, Oklahoma
in favor of the United States of America, recorded
May 12, 1954, in Book 272, Page 412. (affects
Tract IV)
(25) Right-of-way easement for transmission lines and
poles recorded January 18, 1960, in Book 315, Page
58, in favor of Public Service Company of
Oklahoma. (affects part of Tract IV)
(26) Electric transmission line easement, recorded 2
September 1942, in Book 212, Page 480, in favor of
the Grand River Dam Authority. (affects Tract
III)
(27) Water pipe line easement recorded 23 April 1974,
in Book 472, Page 185, in favor of OKC Corp.
(affects Tract III)
(28) Right-of-way and easement granted to
Missouri-Kansas-Texas Railroad Company by
instrument recorded December 22, 1961 in Book 3 ,
Page 470. (affects Tract III)
(29) Easement and authority to install and construct
crossings upon public roadways granted by the
Board of County Commissioners of Mayes County,
Oklahoma to Missouri-Kansas-Texas Railroad Company
by Resolution recorded February 21, 1962 in Book
328, Page 593, over property depicted on drawings
attached to said instrument.
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<PAGE> 63
(30) Right-of-way easement for electrical transmission
line in favor of Public Service Company of
Oklahoma granted by deed from Oklahoma Cement
Company dated November 19, 1963 and recorded
December 10, 1963 in Book 344 at Page 149.
(31) Partial release of Easement and Covenant from
Public Service Company of Oklahoma to Oklahoma
Cement Company insofar as Easement recorded in
Book 344 at Page 149 prohibits construction of a
building within said Easement said release being
dated April 11, 1977 and recorded in Book 536,
Page 115 of the records of Mayes County, Oklahoma.
(32) Oil, gas, and other minerals of whatever kind or
nature, and all rights or interests therein; and
all rights of access, ingress or egress and all
other rights incidental to the ownership thereof
or any right or interest therein.
(33) Pledge and Security Agreement dated as of April
30, 1981 between Pryor Industrial Authority and
Morgan Guaranty Trust Company of New York.
(34) Two Lease Agreements dated as of April 30, 1981 by
and between Pryor Industrial Authority and Lone
Star Industries, Inc.
NOTE: All references herein to recording of
instruments or other documents affecting
title refer to matters filed for record
at the office of the County Clerk of
Mayes County, Oklahoma.
5
<PAGE> 64
EXHIBIT B
ALL OF THAT REAL ESTATE LOCATED IN TOWNSHIP FOURTEEN (14)
NORTH, RANGE FOUR (4) WEST, LOCATED IN PUTNAM COUNTY,
STATE OF INDIANA, DESCRIBED AS FOLLOWS:
1. All that part of the west half of the northeast quarter
of Section twenty-nine (29), which lies east of the east
line of the right of way of the Terre Haute and
Indianapolis Railway Company (now the P.C.C. & ST. L.
Railway Company) more particularly described as follows,
to wit: Beginning at the southeast corner of said half
quarter section thence west with the south line thereof
four (4) chains and fifty (50) links to the east line of
the said above described right of way, thence
northeastwardly with said east line of right of way to
the point of intersection of said line of right of way
with the east line of the said above described half
quarter section, thence south with the east line thereof
nine (9) chains and (9) links to the place of beginning,
containing two and two-one-hundredths (2.02) acres, more
or less.
ALSO
2. The east half of the southeast quarter of said Section
twenty-nine (29).
ALSO
3. The west half of the southwest quarter of Section
twenty-eight (28).
ALSO
4. The west half of the northwest quarter of Section
thirty-three (33).
ALSO
5. All that part of the east half of the northeast quarter
of Section thirty-two (32), which lies east of the east
line of the right of way of The Chicago, Indianapolis
and Louisville Railway Company.
ALSO
6. Part of the northwest quarter of the northeast quarter
of Section thirty-two (32), described as follows, to
wit: Beginning at the northeast corner of the said
above described quarter quarter section, thence south
with the east line thereof to the southeast corner
1
<PAGE> 65
thereof, thence west with the south line thereof two
(2) chains and eight (8) links to the east line of the
right of way of The Chicago, Indianapolis and
Louisville Railway Company, thence northwestwardly with
said east line of right of way to its point of
intersection with the north line of said above
described quarter quarter section, thence east with
said north line six (6) chains and six (6) links to the
place of beginning.
ALSO
7. A part of the west half of the southeast quarter of
Section twenty-nine (29), described as follows, to wit:
Beginning as the northeast corner of said half quarter
section, thence south with the east line thereof eleven
(11) chains and eighty one (81) links, thence north
seventy seven (77) degrees west seven (7) chains and
seventy (70) links to the east line of the right of way
of Terre Haute and Indianapolis Railroad Company (now
the P.C.C. and St. L. Railway Company) thence north
eastwardly with said east line of right of way to its
point of intersection with the north line of said half
quarter section, thence east with said north line four
(4) chains and fifty (50) links to the place of
beginning.
The amount of real estate hereinabove described
and conveyed containing in all three hundred and
eighteen and twenty nine hundredths (318.29) acres,
more or less.
ALSO
8. A part of the west half (1/2) of the southeast quarter
(1/4) of section twenty nine (29), and particularly
described in metes and bounds as follows, to wit:
Beginning at a stone on the east line of said half
quarter section which is two and ninety-two hundredths
(2.92) chains north of the southeast corner of said
half quarter; thence south seventy two and one fourth
(72.25) degrees west, six and fifty-six hundredths
(6.56) chains to a stone situated east thirty (30) feet
perpendicularly distant from the center line of the
rights of way of the Louisville, New Albany & Chicago
Railroad Company (now the Chicago, Indianapolis &
Louisville Railway); thence north with the and along
the east line of said rights of way eight and thirty
seven hundredths (8.37) chains to a stone; thence north
seventy-two and one fourth (72.25) degrees east eight
and thirty one hundredths (8.31) chains to a stone on
the east line of said half quarter section; thence
south with on and along the east line of said half
quarter section eight and fifty eight hundredths (8.58)
2
<PAGE> 66
chains to the place of beginning, excepting therefrom
however, a strip of land fifty (50) feet in width off
the south end thereof.
ALSO
9. The northeast quarter (1/4) of the southwest quarter
(1/4) of section twenty eight (28), containing forty
(40) acres more or less.
ALSO
10. All that part of the southwest quarter of the southeast
quarter of section twenty nine (29), bounded and
described as follows:
Beginning as the southeast corner of said quarter
quarter, and running thence north upon the line two
hundred and forty two and seventy two hundredths
(242.72) feet, to a stone, thence south seventy two and
one fourth (72 1/4) degrees west six (6) chains and
fifty six (56) links to a stone situated thirty (30)
feet from the center of the Louisville, New Albany and
Chicago Railroad; thence southward parallel with the
center line of said Railroad one hundred and forty nine
(149) feet to the south line of said quarter quarter,
thence east on said south line to the place of
beginning, containing two and twenty hundredths (2.20)
acres, more or less.
ALSO
11. All that part of the Southwest quarter of the Northeast
quarter of section Thirty two (32) that lies east of
and adjoining the right of way of the Louisville, New
Albany and Chicago Railroad and containing one and
one-half acres, more or less.
ALSO
12. The southeast quarter of the northwest quarter of
Section 33, containing 40 acres, more or less.
ALSO
13. The south half of the northeast quarter of the
northwest quarter of Section 33, containing 20 acres,
more or less.
ALSO
14. A part of the west half of the southeast quarter of
Section 28, and the west half of the northeast quarter
of Section 33 more particularly described to wit:
3
<PAGE> 67
Beginning at the southwest corner of the west half
of the southeast quarter of the aforesaid Section 28,
thence north 1266.5 feet with the west line of said
west half; thence east 33 feet; thence north 797.6 feet
to a point 555.4 feet south of the north line of said
west half; thence east 1023 feet, parallel to said
north line, to a point 248.91 feet west of the east
line of said west half; thence south 350 feet, parallel
to said east line; thence west 41.49 feet; thence south
300 feet; thence east 41.49 feet; thence south 733
feet; thence east 248.91 feet to the east line of said
west half; thence south 696.4 feet to the southeast
corner thereof; thence west 1310.2 feet to the point of
beginning, containing 55.69 acres, more or less.
ALSO
15. The west half of the northeast quarter of the aforesaid
Section 33, containing 80 acres, more or less.
ALSO
16. Part of the southwest quarter and part of the west half
of the southeast quarter, all in Section 33, more
particularly described, to-wit:
Beginning at the northeast corner of the west half
of the southeast quarter of Section 33; thence south
472 feet with the east line of said west half; thence
leaving said east line west 219.5 feet; thence south 1
degree 40 minutes west 94.0 feet; thence west 14.0
feet; thence south 61.0 feet; thence north 87 degrees
40 minutes west 275 feet; thence south 5 degrees 45
minutes east 559 feet; thence south 10 degrees east
223.08 feet; thence south 155.1 feet to a point which
is 1551.66 feet south and 421.08 feet west of the
northeast corner of the aforesaid west half; thence
west 1723.92 feet parallel to the north line of the
south half of said Section 33; thence north 231.66 feet
to the south line of the north half of the southwest
quarter of said Section 33; thence west 1815 feet to a
stone marking the southwest corner of the north half of
the southwest quarter of said Section 33; thence north
1324.95 feet to a stone marking the northwest corner of
the aforesaid southwest quarter; thence east 3962 feet
with the north line of the south half of said Section
33 to the point of beginning, containing 121 acres,
more or less.
ALSO
17. The southeast quarter of the southwest quarter of
section 28 and the north half of the northeast quarter
4
<PAGE> 68
of the northwest quarter of Section 33; also the
following passway or outlet to said lands in said
Section 28, to-wit:
Commencing at the northwest corner of the
southeast quarter or section 28; thence south, along
the half-section line, 82 rods; thence east 2 rods;
thence north 82 rods; thence west 2 rods to the place
of beginning; together with all right, title and
interest in and to the land lying within the bounds of
any public or private street or lane, or in the bed of
any stream of water adjoining the property to the
center line thereof.
ALSO
18. Beginning at a stone on the east line of the West half
of said southeast quarter of Section 29, said stone
being 1479.1 feet measured southwardly, along said east
line, from the northeast corner of said west half;
thence S. 0 degrees 20' E., (assumed bearing), along
said east line of west half, 392.1 feet; thence S. 78
degrees 47' W., 447.2 feet; thence N. 10 degrees 55'
W., 50.2 feet; thence S. 78 degrees 47' W., 100.3 feet
to the easterly line of the right of way of railroad of
the Monon Railroad; thence N. 10 degrees 55' W., along
said last-mentioned easterly line of right of way, 35.8
feet to a point in the easterly line of the right of
way of railroad of the Philadelphia, Baltimore and
Washington Railroad Company distant 50 feet eastwardly
at right angles from the center line of railroad of
said last-mentioned Railroad Company; thence N. 4
degrees 11' E., along said last-mentioned easterly line
of right of way parallel with said center line of
railroad, being by remaining land of said The
Philadelphia, Baltimore and Washington Railroad
Company, 316.0 feet; and thence N. 79 degrees 25' E.,
537.2 feet to the place of beginning.
ALSO
19. Beginning at a point on the north line of said
Northwest Quarter of the Southwest Quarter of Section
28, said point being 32 feet measured eastwardly, along
said north line, from the northwest corner of said
Northwest Quarter quarter; thence Due East (assumed
bearing), along said north line of Northwest Quarter
quarter, 468.9 feet to land of Lone Star Cement
Corporation, the following three courses and distances
being by said last-mentioned land: thence S. 45 degrees
W., 2270.8 feet; thence S. 45 degrees E. 40 feet;
thence S. 45 degrees W., 1007.5 feet to the east line
of the right of way of railroad of the Monon Railroad;
5
<PAGE> 69
thence N. 10 degrees 55' W., along said east line of
right of way, 458.5 feet; thence N. 78 degrees 47' E.,
100.3 feet; thence S. 10 degrees 55' E., 50.2 feet;
thence N. 78 degrees 47' E., 447.2 feet to the west
line of the East Half of said Southeast Quarter of
Section 29; thence N. 0 degrees 20' W., along said west
line, 551.4 feet to a point distant 1319.8 feet
measured southwardly, along said west line, from a
stone marking the northwest corner of said East Half;
and thence N. 46 degrees 38' E., by other land of said
Lone Star Cement Corporation, 1875.7 feet to the place
of beginning.
ALSO
20. A part of the East half of the Southeast quarter of
Section 32. Beginning at a stone marker in the
Northeast corner of the East half of the Southeast
quarter of Section 32; thence along the East quarter
section line South 2652.5 feet, more or less, to the
south line of the quarter section; thence West along
the South line of the quarter section 647 feet, more or
less, to the East right of way line of the Monon
Railroad; thence North 11 degrees 30 minutes West along
the East right of way line of the Monon Railroad 2697
feet, more or less, to the North line of the quarter
section; thence East 1187 feet, more or less, along the
North line of the quarter section to the place of
beginning.
ALSO
21. A part of the southwest quarter of the southwest
quarter of Section 33. Beginning at a stone marker in
the Northwest corner of the Southwest quarter of the
Southwest quarter of Section 33; thence East 997 feet,
more or less, along the North line of the Southwest
quarter of the Southwest quarter of Section 33; thence
South 1325 feet, more or less, to the South line of the
Southwest quarter of the Southwest quarter of Section
33; thence West 1010 feet, more or less, along said
South line to the West line of the Southwest quarter of
the Southwest quarter of Section 33, thence North 1325
feet, more or less, along said West line to the point
of beginning.
ALSO
22. Part of the West half of the Southeast quarter and of
the Southwest quarter of Section 33, described as
follows, to-wit: Beginning as the Southeast corner of
said West half quarter section, thence North on the
East line thereof a distance of 21 chains and 54 links;
thence North 87 degrees West 6 chains and 92 links;
6
<PAGE> 70
thence South 10 degrees East 3 chains and 38 links;
thence South 2 chains and 35 links to a point which is
3 chains and 51 links South of the North line of said
West half quarter section and 6 chains and 38 links
West of the East line of said West half quarter
section; thence West, parallel to the North Line of
said West half quarter section and the North line of
the Southwest quarter of said Section 33, a distance of
26 chains and 12 links, more or less, to the point 3
chains and 51 links South of the North line of the
Southeast quarter of the Southwest quarter of said
Section 33, thence South 16 chains and 60 links to the
South line of said Section 33, thence East on said
South line of said section, a distance of 32 chains and
50 links to the place of beginning.
And, a right-of-way extending from a point 6 chains and
92 links West of the East line of said tract and 2
chains and 23 links Northerly from the South line of
the Northwest quarter of the Southeast quarter of said
Section 33, to the middle of the branch, 30 feet wide.
EXCEPT THEREFROM, beginning at point which is 16.65
chains North of the Southeast corner of said half
quarter, thence North 4.89 chains; thence North 87
degrees West 6.92 chains; thence South 10 degrees East
3.38 chains; thence South 2.35 chains; thence North 86
degrees East 6.38 chains to the place of beginning,
containing 3 1/2 acres, more or less. Also, a
right-of-way extending from a point 6.92 chains West of
the East line of said tract and 2.23 chains Northerly
from the South line of the Northwest quarter of the
Southeast quarter of said Section 33 to the middle of
the branch, 30 feet in width.
ALSO, EXCEPT THEREFROM, beginning at a point on the
East line of said half quarter which is 16.65 chains
North of the Southeast corner of said half quarter,
thence South 86 degrees West 8.43 chains; thence South,
parallel to the East line of said half quarter, 1.614
chains; thence North 86 degrees East 8.43 chains;
thence North 1.614 chains to the place of beginning,
containing 1.36 acres, more or less.
ALSO
23. Parts of the southwest quarter of Section 33, described
as follows, to-wit: 10 acres off the east side of the
southwest quarter of the southwest quarter of said
Section 33 and 15 acres off the west side of the
southeast quarter of the southwest quarter of said
Section 33.
7
<PAGE> 71
ALSO
ALL OF THAT REAL ESTATE LOCATED IN TOWNSHIP THIRTEEN
(13) NORTH, RANGE FOUR (4) WEST, LOCATED IN PUTNAM
COUNTY, STATE OF INDIANA, DESCRIBED AS FOLLOWS:
24. Parts of the northwest quarter of Section 4, described
as follows, to-wit: The North end of the East half of
said quarter section above mentioned as follows:
Commencing at the Northeast corner of said East half of
said tract; thence South 16 chains and 96 links, more
or less, to a granite stone set 1 rod West of said East
line in the center of road; thence from point in road
West 20 chains and 10 links to a granite stone on the
West line of said East half quarter section; thence
North 16 chains and 96 links, more or less, to the
North line of said half quarter section; thence East 20
chains and 2 links, more or less, to the place of
beginning.
ALSO
25. The North end of the West half of the above mentioned
quarter section described as follows, to-wit:
Commencing at the northwest corner of said half quarter
section at the recorded stone; thence East on the North
line of said tract 20 chains and 2 links, more or less,
to the Northeast corner of said half quarter section;
thence South on the East line of said half quarter, a
distance of 27 chains and 77 links, more or less;
thence West 20 chains and 10 links to a granite stone
on the West line of said tract; thence North on the
said West line of said tract 27 chains and 78 links,
more or less, to the place of beginning.
Subject to all rights-of-way and easements of record on
the date hereof.
Subject to the Conveyance of Production Payment,
dated as of July 22, 1976.
Subject to any mineral reservation of record.
Subject to an exception for timber and any
interest therein, and any other minerals not
utilized in the production of First Marketable
Product, as defined in Section 1.1 of the
Conveyance of Production Payment.
8
<PAGE> 1
EXHIBIT 10.27
-------------
SECOND AMENDED AND RESTATED TERM LOAN AGREEMENT
dated as of
March 29, 1994
among
JOHN FOUHEY, AS TRUSTEE FOR SELLECK HILL TRUST
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
TCW SPECIAL CREDITS
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
WELLS FARGO BANK, N.A.
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent
<PAGE> 2
TABLE OF CONTENTS *
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions . . . . . . . . . . . . . . 2
1.02 Other Terms . . . . . . . . . . . . . . 9
1.03 Effectiveness . . . . . . . . . . . . . 9
ARTICLE II
THE LOANS
SECTION 2.01 Outstanding Loans; Borrowings . . . . . 10
2.02 Method of Borrowing . . . . . . . . . . 11
2.03 Notes . . . . . . . . . . . . . . . . . 13
2.04 Duration of Interest Periods . . . . . . 14
2.05 Interest Rates . . . . . . . . . . . . . 15
2.06 Required Prepayments . . . . . . . . . . 17
2.07 Optional Prepayments . . . . . . . . . . 18
2.08 General Provisions as to Payments . . . 19
2.09 Funding Losses . . . . . . . . . . . . . 19
2.10 Computation of Interest and Fees . . . . 20
2.11 Acceleration . . . . . . . . . . . . . . 20
2.12 Security; Notes and Other Obligations
Nonrecourse . . . . . . . . . . . . . 21
ARTICLE III
CONDITIONS TO EFFECTIVENESS; CONDITIONS TO BORROWINGS
SECTION 3.01 Conditions to Effectiveness . . . . . . 23
3.02 Conditions to Borrowing . . . . . . . . 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Existence and Power . . . . . . . . . . 26
4.02 Authorization; Contravention . . . . . . 26
4.03 Binding Effect . . . . . . . . . . . . . 27
4.04 Litigation . . . . . . . . . . . . . . . 27
4.05 Not an Investment Company . . . . . . . 28
* The Table of Contents is not part of this Agreement.
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE V
COVENANTS
SECTION 5.01 Maintenance of Existence . . . . . . . . 28
5.02 Payment of Taxes . . . . . . . . . . . . 28
5.03 Payment of Obligations . . . . . . . . . 29
5.04 Books and Records . . . . . . . . . . . 29
5.05 Scope of the Borrower's Business . . . . 30
5.06 Additional Indebtedness . . . . . . . . 30
5.07 Liens . . . . . . . . . . . . . . . . . 31
5.08 Liquidation and Sales of Assets . . . . 31
5.09 Inspection . . . . . . . . . . . . . . . 31
5.10 Recordation . . . . . . . . . . . . . . 31
5.11 Further Assurances . . . . . . . . . . . 32
5.12 Change of Location; Successor Trustee . 32
5.13 Use of Proceeds . . . . . . . . . . . . 33
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default . . . . . . . . . . . 33
ARTICLE VII
THE AGENT
SECTION 7.01 Appointment and Authorization . . . . . 36
7.02 Agent and Affiliates . . . . . . . . . . 37
7.03 Holders of Notes . . . . . . . . . . . . 37
7.04 Action by Agent . . . . . . . . . . . . 37
7.05 Consultation with Experts . . . . . . . 37
7.06 Liability of Agent . . . . . . . . . . . 38
7.07 Indemnification . . . . . . . . . . . . 39
7.08 Credit Decision . . . . . . . . . . . . 39
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
AFFECTING EURO-DOLLAR LOANS
Section 8.01 Basis for Determining Interest Rate
Inadequate or Unfair . . . . . . . . . 40
8.02 Illegality . . . . . . . . . . . . . . . 41
8.03 Increased Cost . . . . . . . . . . . . . 42
8.04 Prime Loans Substituted for
Affected Euro-Dollar Loans . . . . . . . 48
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices . . . . . . . . . . . . . . . . 49
9.02 No Waivers . . . . . . . . . . . . . . . 50
9.03 Expenses; Documentary Taxes . . . . . . 50
9.04 Sharing of Set-Offs . . . . . . . . . . 51
9.05 Amendments and Waivers . . . . . . . . . 53
9.06 Successors and Assigns . . . . . . . . . 53
9.07 Separability . . . . . . . . . . . . . . 54
9.08 New York Law . . . . . . . . . . . . . . 54
9.09 Counterparts . . . . . . . . . . . . . . 54
9.10 Authorization to Amend Related
Agreements . . . . . . . . . . . . . . 55
Schedule 1 - Principal Repayments
Schedule 2 - Loans on Effective Date
Exhibit A - Form of Domestic Note
Exhibit B - Form of Euro-Dollar Note
</TABLE>
iii
<PAGE> 5
SECOND AMENDED AND RESTATED
TERM LOAN AGREEMENT
AGREEMENT dated as of March 29, 1994 among John
Fouhey, as Trustee for Selleck Hill Trust (the "Trustee"),
Morgan Guaranty Trust Company of New York, TCW Special
Credits, The Chase Manhattan Bank (National Association) and
Wells Fargo Bank, N.A. (collectively, the "Banks"), and
Morgan Guaranty Trust Company of New York, as Agent (the
"Agent"), amending and restating the existing Amended and
Restated Term Loan Agreement dated as of September 1, 1988
(the "Existing Term Loan Agreement") among the Trustee, the
Banks and the Agent.
WHEREAS, the Existing Term Loan Agreement governs
loans to the Trustee made by the Banks; and
WHEREAS, Lone Star Industries, Inc. ("Lone Star"),
which is a party to various agreements related to the
Existing Term Loan Agreement, is on the date hereof a debtor
in possession under Chapter 11 of the United States
Bankruptcy Code; and
WHEREAS, in connection with the reorganization of
Lone Star the Trustee and the Banks wish to amend the
Existing Term Loan Agreement to, among other things, extend
the maturity of the loans outstanding hereunder, change the
interest rates applicable thereto and adjust the principal
amount of such loans to reflect interest accrued and unpaid
during the pendency of Lone Star's bankruptcy case;
<PAGE> 6
NOW, THEREFORE, the parties hereto agree as
follows:
ARTICLE I
-----------
DEFINITIONS
SECTION 1.01. Definitions. The following terms,
as used herein, have the following meanings:
"Agent" means Morgan Guaranty Trust Company of New
York in its capacity as agent for the Banks hereunder.
"Agreement" means this Second Amended and Restated
Term Loan Agreement dated as of March 29, 1994.
"Bankruptcy Cases" means the jointly administered
Chapter 11 cases of New York Trap Rock Corporation, Lone
Star Industries, Inc., et al., in the Bankruptcy Court, case
-- --
nos. 90 B 21276 to 90 B 21286, 90 B 21334 and 90 B 21335.
"Bankruptcy Court" means the United States
Bankruptcy Court for the Southern District of New York.
"Banks" means Morgan Guaranty Trust Company of New
York, TCW Special Credits, The Chase Manhattan Bank,
(National Association) and Wells Fargo Bank, N.A.
"Borrower" means John Fouhey (or any successor
appointed pursuant to the Trust Agreement), as Trustee for
Selleck Hill Trust, a New York trust. The Borrower may be
sometimes referred to herein as "PP Owner".
"Borrowing" means a borrowing hereunder consisting
of Loans which become outstanding to the Borrower at the
2
<PAGE> 7
same time from all Banks severally. A Borrowing is a "Prime
Borrowing" if such Loans are Prime Loans or a "Euro-Dollar
Borrowing" if such Loans are Euro-Dollar Loans.
"Conveyance" means the Second Amended and Restated
Conveyance of Production Payment, dated as of March 29,
1994, from Lone Star to the Borrower, as amended from time
to time.
"Court Order" means the order of the Bankruptcy
Court dated January 13, 1994 and entitled Order (i)
Approving a Settlement Between Lone Star Industries, Inc.
and Certain Entities Respecting Claims Asserted in
Connection with a Production Payment Conveyance Transaction,
(ii) Approving Amendments to Certain Documents Executed in
Connection with Such Transaction, and (iii) Authorizing Lone
Star Industries, Inc.'s Assumption of Such Agreements as
Amended Pursuant to Section 365 of the Bankruptcy Code.
"Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in
New York City are authorized by law to close.
"Domestic Lending Office" means, as to each Bank,
its office located at its address set forth on the signature
pages hereof (or identified on the signature pages hereof as
its Domestic Lending Office) or such other office as such
Bank may hereafter designate as its Domestic Lending Office
by notice to the Borrower and the Agent.
3
<PAGE> 8
"Domestic Notes" means promissory notes of the
Borrower, substantially in the form of Exhibit A hereto,
evidencing the obligation of the Borrower to repay the Prime
Loans.
"Effective Date" has the meaning set forth in
Section 1.03.
"Euro-Dollar Business Day" means any Domestic
Business Day on which commercial banks are open for
international business (including dealings in dollar
deposits) in London.
"Euro-Dollar Lending Office" means, as to each
Bank, its office or branch located at its address set forth
on the signature pages hereof (or identified on the
signature pages hereof as its Euro-Dollar Lending Office) or
such other branch (or affiliate) of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by
notice to the Borrower and the Agent.
"Euro-Dollar Loans" means any Loans to be made as
Euro-Dollar Loans pursuant to the applicable Notice of
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in
Section 2.05(b).
"Euro-Dollar Notes" means promissory notes of the
Borrower, substantially in the form of Exhibit B hereto,
evidencing the obligation of the Borrower to repay the
Euro-Dollar Loans.
4
<PAGE> 9
"Event of Default" has the meaning set forth in
Section 6.01.
"Existing Term Loan Agreement" means the Amended
and Restated Term Loan Agreement dated as of September 1,
1988 among the Borrower, the Banks and the Agent.
"Expense and Interest Agreement" means the Amended
and Restated Expense and Interest Agreement dated as of
September 1, 1988 between the Borrower and Lone Star, as
amended from time to time.
"Interest Period" means, with respect to each
Euro-Dollar Borrowing:
(i) initially, the period commencing on the date
of such Borrowing (which, in the case of any Borrowing
outstanding on the Effective Date, shall be deemed to
be the Effective Date) and ending three or six months
thereafter, as the Borrower may elect in the applicable
Notice of Borrowing; and
(ii) thereafter, each period commencing on the
last day of the next preceding Interest Period
applicable to such Borrowing and ending three or six
months thereafter, as the Borrower may elect pursuant
to Section 2.04;
provided that:
(a) any such Interest Period which would
otherwise end on a day which is not a Euro-Dollar
Business Day shall be extended to the next succeeding
5
<PAGE> 10
Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which
case such Interest Period shall end on the next
preceding Euro-Dollar Business Day;
(b) any such Interest Period which begins on the
last Euro-Dollar Business Day of a calendar month (or
on a day for which there is no numerically
corresponding day in the calendar month at the end of
such Interest Period) shall, subject to clauses (c) and
(d) below, end on the last Euro-Dollar Business Day of
a calendar month;
(c) any such Interest Period which begins before
the first Principal Repayment Date and would otherwise
end after the first Principal Repayment Date shall end
on the first Principal Repayment Date; and
(d) if any such Interest Period would otherwise
include a date on which a payment of principal of the
Loans is required to be made but does not end on such
date, then (i) the principal amount (if any) of each
Euro-Dollar Loan required to be repaid on such date
shall have an Interest Period ending on such date and
(ii) the remainder (if any) of each such Euro-Dollar
Loan shall have an Interest Period determined as set
forth above.
6
<PAGE> 11
"Lending Office" means as to any Bank its Domestic
Lending Office or its Euro-Dollar Lending Office, as the
context may require.
"Lien" means, with respect to any asset, (i) any
mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset or (ii) the
interest of a vendor or lessor under any conditional sale
agreement, financing lease or other title retention
agreement relating to such asset.
"Loan" means a Prime Loan or a Euro-Dollar Loan
and "Loans" means Prime Loans or Euro-Dollar Loans or both.
"Lone Star" means Lone Star Industries, Inc., a
Delaware corporation, and its successors and assigns.
"London Interbank Offered Rate" has the meaning
set forth in Section 2.05(b).
"Majority Banks" means at any time Banks holding
at least 51% of the aggregate unpaid principal amount of the
Notes.
"Marketing Contract" means the Second Amended and
Restated Marketing Contract dated as of March 29, 1994
between Lone Star and the Borrower, as amended from time to
time.
"Mortgage" means the Amended and Restated
Mortgage, Deed of Trust and Security Agreement dated as of
September 1, 1988 from the Borrower to the Agent, as amended
from time to time.
7
<PAGE> 12
"Note" means a Prime Note or a Euro-Dollar Note,
and "Notes" means the Prime Notes or the Euro-Dollar Notes
or both.
"Notice of Borrowing" has the meaning set forth in
Section 2.02.
"Option Agreement" means the Amended and Restated
Option Agreement dated as of September 1, 1988 between Lone
Star and the Borrower, as amended from time to time.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means the plan of reorganization for Lone
Star and its affiliated debtors as confirmed by the
Bankruptcy Court in the Bankruptcy Cases.
"Plan Effective Date" means the "Effective Date"
as this term is defined in the Plan.
"Prime Loan" means a Loan to be made as a Prime
Loan pursuant to the applicable Notice of Borrowing, Section
2.04(b) or Article VIII.
"Prime Rate" means the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York in
New York City from time to time as its Prime Rate.
"Principal Repayment Date" means each January 31
and July 31, commencing with January 31, 1994 and ending
with July 31, 1998.
8
<PAGE> 13
"Regulatory Change" has the meaning set forth in
Section 8.03(a).
"Related Agreements" means the Conveyance, the
Expense and Interest Agreement, the Marketing Contract, the
Option Agreement and the Mortgage.
"Trust" means Selleck Hill Trust, a New York
trust.
"Trust Agreement" means the Declaration of Trust
dated as of April 19, 1982 creating the Trust.
"Unsecured Indenture" means the Indenture dated as
of the Plan Effective Date between Lone Star and the
indenture trustee thereunder, governing the 10% Senior Notes
Due 2003 issued by Lone Star in accordance with the Plan, as
amended from time to time.
"WI Owner" means Lone Star.
"Working Capital Facility" means a credit facility
entered into between Lone Star and one or more financial
institutions on or after the Plan Effective Date, which
provides for the proceeds to be used for working capital
financing for Lone Star, as amended from time to time.
SECTION 1.02. Other Terms. Terms used but not
defined herein shall have the meanings set forth in the
Conveyance and the Marketing Contract.
SECTION 1.03. Effectiveness. This Agreement
shall become effective on the date (the "Effective Date") on
which the conditions of effectiveness specified in Section
9
<PAGE> 14
3.01 are met. On the Effective Date, the Existing Term Loan
Agreement shall be amended and restated in its entirety by
this Agreement and on and after such date the rights and
obligations of the parties hereto shall be governed by this
Agreement; provided that, except to the extent expressly set
forth herein, the effectiveness of this Agreement shall not
result in any waiver or modification of any rights of the
parties hereto with respect to or that arose during the
period prior to the Effective Date.
ARTICLE II
------------
THE LOANS
SECTION 2.01. Outstanding Loans; Borrowings.
(a) On the Effective Date. On the Effective
Date, the principal amount of the Loans outstanding under
the Existing Term Loan Agreement and all accrued and unpaid
interest thereon shall be restructured and shall thereafter
be outstanding as Loans in the principal amounts set forth
on Schedule 2. Such Loans shall be Prime Loans or Euro-
Dollar Loans as specified in the applicable Notice of
Borrowing delivered pursuant to Section 2.02. All Defaults
hereunder resulting from the commencement and continuation
of the Bankruptcy Cases shall be waived on the Effective
Date.
(b) After the Effective Date. Each Bank
severally agrees, on the terms and conditions set forth in
10
<PAGE> 15
this Agreement, to make, if the Borrower shall so request, a
new Loan to the Borrower concurrently (but not otherwise)
with any optional prepayment in full of the outstanding
Loans pursuant to Section 2.07 for the purpose of refunding
such outstanding Loans; provided that the principal amount
of such Bank's new Loan shall not exceed the principal
amount of its outstanding Loan being concurrently prepaid.
Each borrowing under this subsection (b) shall be made from
the several Banks ratably in proportion to the principal
amount of their outstanding Loans as set forth on Schedule
2. Amounts required to be prepaid pursuant to Section 2.06
or 2.11 shall not be reborrowed, and amounts repaid pursuant
to Section 8.02, 8.03 or 8.04 shall not be reborrowed except
as provided therein.
SECTION 2.02. Method of Borrowing. (a) The
Borrower shall give the Agent notice (a "Notice of
Borrowing") (i) at least four Euro-Dollar Business Days
prior to the Effective Date with respect to Loans to be
outstanding on the Effective Date and (ii) after the
Effective Date, at least three Domestic Business Days before
each Prime Borrowing and at least four Euro-Dollar Business
Days before each Euro-Dollar Borrowing, specifying:
(i) with respect to any Borrowing made after the
Effective Date, the date of such Borrowing, which shall
be a Domestic Business Day in the case of a Prime
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<PAGE> 16
Borrowing or a Euro-Dollar Business Day in the case of
a Euro-Dollar Borrowing,
(ii) with respect to any Borrowing made after the
Effective Date, the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing
are to be Prime Loans or Euro-Dollar Loans, and
(iv) if such Loans are to be Euro-Dollar Loans,
the duration of the initial Interest Period applicable
thereto, subject to the provisions of the definition of
Interest Period.
A Notice of Borrowing shall not be required in connection
with a Prime Borrowing made after the Effective Date
pursuant to Section 2.04(b) or Section 8.01. A Notice of
Borrowing that otherwise satisfies the requirements of this
Section 2.02(a) and is given by Lone Star in accordance with
its authority under Section 4 of the Expense and Interest
Agreement shall be treated as a Notice of Borrowing by the
Borrower.
(b) Upon receipt of the Notice of Borrowing, the
Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share of such Borrowing
and such Notice of Borrowing shall not thereafter be
revocable by the Borrower.
(c) Not later than 11:00 A.M. (New York City
time) on the date of each Borrowing, each Bank shall (except
as provided in subsection (d) of this Section) make
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<PAGE> 17
available its ratable share of such Borrowing, in Federal or
other funds immediately available in New York City, to the
Agent at its address specified in or pursuant to Section
9.01. Unless the Agent determines that any applicable
condition specified in Article III has not been satisfied,
the Agent will make the funds so received from the Banks
available to the Borrower at the Agent's aforesaid address.
(d) If any Bank makes a new Loan hereunder on a
day on which the Borrower is to repay all or any part of an
outstanding Loan from such Bank, such Bank shall apply the
proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be made
available by such Bank to the Agent as provided in
subsection (c) of this Section, or remitted by the Borrower
to the Agent as provided in Section 2.08, as the case may
be.
SECTION 2.03. Notes. (a) The Prime Loans of
each Bank shall be evidenced by a single Prime Note payable
to the order of such Bank for the account of its Domestic
Lending Office on July 31, 1998 in an amount equal to the
aggregate unpaid principal amount of such Bank's Prime
Loans.
(b) The Euro-Dollar Loans of each Bank shall be
evidenced by a single Euro-Dollar Note payable to the order
of such Bank for the account of its Euro-Dollar Lending
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<PAGE> 18
Office on July 31, 1998 in an amount equal to the aggregate
unpaid principal amount of such Bank's Euro-Dollar Loans.
(c) Upon receipt of each Bank's Notes pursuant to
Section 3.01(g), the Agent shall mail or otherwise arrange
for delivery of such Notes to such Bank. Each Bank shall
record, and prior to any transfer of its Notes shall endorse
on the schedules forming a part thereof appropriate
notations to evidence, the date and amount of each Loan made
by it and the date and amount of each payment of principal
made by the Borrower with respect thereto. Each Bank is
hereby irrevocably authorized by the Borrower so to endorse
its Notes and to attach to and make a part of any Note a
continuation of any such schedule as and when required.
SECTION 2.04. Duration of Interest Periods. (a)
The duration of the initial Interest Period for each
Euro-Dollar Borrowing shall be as specified in the
applicable Notice of Borrowing. The Borrower shall have the
option to elect a duration of three or six months for each
subsequent Interest Period applicable to such Borrowing, by
giving notice of such election to the Agent at least four
Euro-Dollar Business Days before the end of the immediately
preceding Interest Period applicable thereto.
(b) If the Agent does not receive a notice of
election for the duration of an Interest Period for a
Borrowing pursuant to subsection (a) above within the
applicable time limits specified therein, the Borrower shall
14
<PAGE> 19
be deemed to have elected to prepay such Borrowing in whole
pursuant to Section 2.07 on the last day of the current
Interest Period with respect thereto and to reborrow the
principal amount of such Borrowing on such date as a Prime
Borrowing.
(c) Notwithstanding the foregoing, the duration
of each Interest Period shall be subject to the provisions
of the definition of Interest Period.
SECTION 2.05. Interest Rates. (a) Each Prime
Loan shall bear interest on the outstanding principal amount
thereof, for each day from the date such Loan is made or
becomes outstanding pursuant to Section 2.01(a), as the case
may be, until it becomes due, at a rate per annum equal to
(i) on and after the Effective Date and prior to January 1,
1996, the Prime Rate for such day; and (ii) on and after
January 1, 1996, 1/4% plus the Prime Rate for such day.
Such interest shall be payable semi-annually on each January
31 and July 31, commencing on the first such date after such
Prime Loan is made. Any overdue principal of and, to the
extent permitted by law, overdue interest on any Prime Loan
shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 2% plus the
otherwise applicable rate for such day.
(b) Each Euro-Dollar Loan shall bear interest on
the outstanding principal amount thereof, for each Interest
Period applicable thereto, at a rate per annum equal to the
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<PAGE> 20
sum of the Euro-Dollar Margin plus the applicable London
Interbank Offered Rate. Such interest shall be payable for
each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, at intervals of
three months after the first day thereof.
"Euro-Dollar Margin" means (i) 1 3/4% prior to
January 1, 1996; and (ii) 2 1/2% on and after January 1,
1996.
The "London Interbank Offered Rate" applicable to
any Interest Period means the rate per annum at which
deposits in dollars are offered to Morgan Guaranty Trust
Company of New York in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar
Business Days before the first day of such Interest Period
in an amount approximately equal to the principal amount of
the Euro-Dollar Loan of such Bank to which such Interest
Period is to apply and for a period of time comparable to
such Interest Period.
(c) Any overdue principal of and, to the extent
permitted by law, overdue interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from
and including the date payment thereof was due to but
excluding the date of actual payment, at a rate per annum
equal to the sum of 2% plus the Euro-Dollar Margin plus the
rate per annum at which one day (or, if such amount due
remains unpaid more than three Euro-Dollar Business Days,
16
<PAGE> 21
then for such other period of time not longer than six
months as the Agent may elect) deposits in dollars in an
amount approximately equal to such overdue payment due to
Morgan Guaranty Trust Company of New York are offered to
such Bank in the London interbank market for the applicable
period determined as provided above.
(d) The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall give
prompt notice to the Borrower and the Banks of each rate of
interest so determined, and its determination thereof shall
be conclusive in the absence of manifest error.
(e) Morgan Guaranty Trust Company of New York (or
any successor bank appointed pursuant to Section 9.06(c))
agrees to use its best efforts to furnish quotations to the
Agent as contemplated hereby. If, with respect to any
Euro-Dollar Loan, Morgan Guaranty Trust Company of New York
(or any successor bank appointed pursuant to Section
9.06(c)) does not furnish a timely quotation, the provisions
of Section 8.01 shall apply.
SECTION 2.06. Required Prepayments. The Borrower
shall prepay, and there shall become due and payable, on
each Principal Repayment Date the amount set forth opposite
such Principal Repayment Date in Schedule 1; provided that
in any event the outstanding Loans shall be repaid in full
on the last Principal Repayment Date. Each such required
prepayment shall be applied to prepay the Loans of the
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<PAGE> 22
several Banks in proportion to their outstanding Loans. No
optional prepayment made pursuant to Section 2.07 shall
reduce the amount of any subsequent prepayment required by
this Section until the Loans have been paid in full.
SECTION 2.07. Optional Prepayments.
--------------------
(a) The Borrower may, upon at least three Domestic
Business Days' notice to the Agent, prepay the Prime Loans in
whole at any time, or from time to time in part in amounts
aggregating $1,000,000 or any multiple thereof, by paying the
principal amount to be prepaid together with accrued interest
thereon to the date of prepayment. Each such optional prepayment
shall be applied to prepay the Prime Loans of the several
Banks in proportion to their outstanding Loans.
(b) The Borrower may, upon at least four
Euro-Dollar Business Days' notice to the Agent, prepay on
the last day of any Interest Period the Euro-Dollar Loans to
which such Interest Period applies, in whole, or in part in
amounts aggregating $1,000,000 or any multiple thereof, by
paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment. Each
such optional prepayment shall be applied to prepay such
Euro-Dollar Loans of the several Banks in proportion to
their respective outstanding Loans, subject to Section 8.04.
(c) Upon receipt of a notice of prepayment
pursuant to this Section, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's ratable
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<PAGE> 23
share of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.08. General Provisions as to Payments.
The Borrower shall make each payment of principal of, and
interest on, the Loans hereunder, not later than 11:00 A.M.
(New York City time) on the date when due, in Federal or
other funds immediately available in New York City, to the
Agent at its address referred to in Section 9.01. The Agent
will promptly distribute to each Bank its ratable share of
each such payment received by the Agent for the account of
the Banks. Whenever any payment of principal of, or
interest on, the Prime Loans or of commitment fees shall be
due on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next succeeding
Domestic Business Day. Whenever any payment of principal
of, or interest on, the Euro-Dollar Loans shall be due on a
day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
SECTION 2.09. Funding Losses. If the Borrower
makes any payment of principal with respect to any Euro-
Dollar Loan (pursuant to Article VI or VIII or otherwise) on
any day other than the last day of an Interest Period
applicable thereto, or the end of an applicable period fixed
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<PAGE> 24
pursuant to Section 2.05(c), or if the Borrower fails to
borrow or prepay any Euro-Dollar Loans after notice has been
given to any Bank in accordance with Section 2.02(b) or
2.07(c), the Borrower shall reimburse each Bank on demand
for any resulting loss or expense incurred by it, including
(without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such
payment; provided that such Bank shall have delivered to the
Borrower a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the
absence of manifest error.
SECTION 2.10. Computation of Interest and Fees.
Interest on Prime Loans hereunder shall be computed on the
basis of a year of 365 days (or 366 days in a leap year) and
paid for the actual number of days elapsed (including the
first day but excluding the last day). Interest on
Euro-Dollar Loans shall be computed on the basis of a year
of 360 days and paid for the actual number of days elapsed,
calculated as to each Interest Period or period fixed
pursuant to Section 2.05(b) from and including the first day
thereof to but excluding the last day thereof.
SECTION 2.11. Acceleration. During any period
when any event or condition shall occur which results in the
acceleration of the maturity of any of Lone Star's
obligations under either the Unsecured Indenture or the
20
<PAGE> 25
Working Capital Facility or shall occur and be continuing
which enables (or, with the giving of notice or lapse of
time or both, would enable) the holder of such obligations
or any Person acting on behalf of such holder to accelerate
the maturity thereof, unless and until such event or
condition shall have been cured or waived in accordance with
the terms of the Unsecured Indenture of the Working Capital
Facility, as the case may be, then all amounts payable to
the Borrower pursuant to the Marketing Contract (which under
the terms thereof shall equal the greater of the amount of
principal then due and payable on the Notes and 100% of
Applicable Revenue until all amounts due under the Notes
shall have been paid in full) will be applied, first, to pay
-----
interest and principal then due on the Notes, and, second,
------
to prepay additional installments of principal of the Notes
in the inverse order of the maturities thereof.
SECTION 2.12. Security; Notes and Other
Obligations Nonrecourse.
(a) The Notes will be equally and ratably secured
by the Mortgage from the Borrower to the Agent covering all
of the Borrower's rights and interests in the Production
Payment, the Conveyance, the Option Agreement, the Expense
and Interest Agreement and the Marketing Contract.
(b) The Notes (and any other obligations or
liability arising under or out of this Agreement or the
Related Agreements or the transactions contemplated hereby
21
<PAGE> 26
and thereby, including, without limiting the generality of
the foregoing, any liability for the incorrectness of any
representation or warranty or for the failure to observe or
perform any term or condition herein or therein) shall be
without recourse to the Borrower (in his individual capacity
or otherwise) or the Trust, it being understood and agreed
that the Banks and any other holders of the Notes will look
solely to the property, rights and interests assigned to the
Agent under the Mortgage for payments of interest on, and
principal of, the Notes, for any other amounts which are or
may become payable by the Borrower and for the satisfaction
and discharge of any liabilities under or arising out of
this Agreement, the Notes and the Mortgage or the other
Related Agreements. The Borrower shall have no obligation
to observe or perform any term or condition binding upon the
Borrower or the Trust in this Agreement or the Related
Agreements that requires the incurrence of any out of pocket
expense or any liability therefor unless the Borrower has
received in advance from WI Owner or the Banks, or the
Borrower is satisfied in his sole and absolute discretion
that the Borrower will receive from WI Owner or the Banks,
funds in reimbursement therefor, pursuant to the Expense and
Interest Agreement or otherwise.
22
<PAGE> 27
ARTICLE III
CONDITIONS TO EFFECTIVENESS; CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to Effectiveness. The
Effective Date of this Agreement shall be the date on which
the following conditions shall have been satisfied:
(a) receipt by the Agent of duly executed
counterparts of this Agreement signed by the Borrower
and the Banks;
(b) each of the respective parties thereto has
delivered to the Agent executed counterparts of
amendments in form and substance satisfactory to the
Agent of the Mortgage, the Conveyance, the Marketing
Contract, the Expense and Interest Agreement and the
Option Agreement;
(c) The WI Owner has delivered to each Bank in
care of the Agent a certificate of the President or any
Vice President and the Chief Financial Officer of WI
Owner dated the Effective Date to the effect that
(i) the representations and warranties contained in
Section 5.1 of the Conveyance are true and correct (in
all material respects) as of the Effective Date and
(ii) no Default exists under the Conveyance, nor does
any condition or event exist which, with the giving of
notice or lapse of time or both, would become such a
Default; provided that such certificate may be
qualified by reference to any Default resulting from
23
<PAGE> 28
the commencement or continuation of the Bankruptcy
Cases;
(d) John J. Martin, Senior Vice President,
General Counsel and Secretary for WI Owner has
delivered to each Bank in care of the Agent his opinion
addressed dated the Effective Date, covering such
matters relating to the transactions contemplated by
this Agreement and the Related Agreements as the Agent
may reasonably request;
(e) Andrews Davis Legg Bixler Milsten & Price,
special local counsel for the Banks in Oklahoma, has
delivered to each Bank, in care of the Agent, their
opinion in form and substance satisfactory to the
Agent;
(f) Barnes & Thornburg, special local counsel for
the Banks in Indiana, has delivered to each Bank, in
care of the Agent, their opinion in form and substance
satisfactory to the Agent;
(g) receipt by the Agent for the account of each
Bank of a Prime Note and a Euro-Dollar Note, each duly
executed by the Borrower and dated the Effective Date.
Upon receipt of its Notes delivered pursuant to this
subsection (g), each Bank will cancel all of its notes
outstanding under the Existing Term Loan Agreement;
(h) the Bankruptcy Court shall have entered the
Court Order, which shall not have been stayed, and the
24
<PAGE> 29
time to appeal or seek review or rehearing of the Court
Order shall have expired and no appeal or motion for
review or rehearing shall be pending;
(i) the occurrence of the Effective Date on or
prior to April 15, 1994; and
(j) receipt by the Agent of all documents it may
reasonably request relating to the existence of the
Borrower and WI Owner, the authority for and the
validity of this Agreement and the Related Agreements,
the recording, filing and registration of the Mortgage
and Conveyance and any other matters relevant thereto,
all in form and substance satisfactory to the Agent.
SECTION 3.02. Conditions to Borrowing. The
obligation of each Bank to make any Loan hereunder is
subject to the satisfaction of the following conditions:
(i) the fact that the representations and
warranties of the Borrower contained in Article IV
hereof and in Article III of the Mortgage are true and
correct (in all material respects) on and as of the
date of such Borrowing with the same effect as though
made on and as of the date of such Borrowing;
(ii) the fact that the representations and
warranties of WI Owner contained in Section 5.1 of the
Conveyance are true and correct (in all material
respects) on and as of the date of such Borrowing with
25
<PAGE> 30
the same effect as though made on and as of the date of
such Borrowing;
(iii) the fact that immediately after such
Borrowing, no Event of Default and no event or
condition which, with the giving of notice or lapse of
time or both, would become an Event of Default, shall
have occurred and be continuing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Existence and Power. The Trust is
a New York trust duly created, validly existing and in good
standing under the laws of the State of New York and is not
required to be licensed or qualified to do business in any
other jurisdiction in order to conduct the business and own
the properties to be conducted and owned by it as
contemplated by this Agreement, and has all power and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now
conducted.
SECTION 4.02. Authorization; Contravention. The
execution, delivery and performance by the Borrower of this
Agreement, the Notes and the Related Agreements are within
the Borrower's powers, require no approval of or filing with
any governmental body, agency or official and do not
26
<PAGE> 31
contravene, or constitute a breach of or a default under,
any provision of applicable law or regulation or of the
Trust Agreement or of any agreement, judgment, injunction,
order, decree or other instrument binding upon the Borrower
or the Trust or result in the creation or imposition of any
Lien on any asset of the Trust except as set forth in
Section 5.07 hereof.
SECTION 4.03. Binding Effect. The Related
Agreements and this Agreement constitute valid and binding
agreements of the Borrower and the Notes constitute valid
and binding obligations of the Borrower.
SECTION 4.04. Litigation. There is no action,
suit or proceeding pending, or to the knowledge of the
Borrower, threatened against or affecting the Borrower or
the Trust before any court or arbitrator or any governmental
body, agency or official, an adverse decision in which might
materially adversely affect the Production Payment, the
rights, titles, interest, remedies, privileges and powers of
the Agent or the Banks under this Agreement, the Notes or
any of the Related Agreements or the ability of PP Owner to
perform its obligations under this Agreement, the Notes or
any of the Related Agreements or which in any manner
questions the validity of this Agreement, the Notes or any
of the Related Agreements.
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<PAGE> 32
SECTION 4.05. Not an Investment Company. The
Trust is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any amount
payable under any Note remains unpaid:
SECTION 5.01. Maintenance of Existence. The
Borrower shall cause the Trust to maintain its existence,
rights and privileges as a trust in the State of New York
and promptly to qualify and pay any franchise and other
taxes in any State if required by the law of such State for
the full exercise of the Borrower's rights and remedies or
the full performance of the Borrower's obligations under
this Agreement, the Notes and the Related Agreements.
SECTION 5.02. Payment of Taxes. The Borrower
shall cause all Production Taxes and all other taxes, fees,
assessments and governmental charges imposed on or asserted
against the Borrower or the Trust to be reported, rendered
and paid punctually before the same become delinquent (or,
as to any thereof that are being contested in good faith and
which, by not being paid, would not adversely affect the
holders of the Notes, promptly after the final determination
of such contest).
28
<PAGE> 33
SECTION 5.03. Payment of Obligations. The
Borrower shall duly and punctually pay without relief from
valuation and appraisement laws each and every obligation
owing by the Borrower under the Mortgage and this Agreement
and on account of the Notes in accordance with the terms
hereof and thereof.
SECTION 5.04. Books and Records. The Borrower
shall maintain at his office (a) copies of the Trust
Agreement, this Agreement and the Related Agreements, and
any amendments thereto or waivers thereunder; (b) copies of
each report, statement or other document sent to him by WI
Owner pursuant to the Conveyance, the Marketing Agreement,
the Option Agreement or the Expense and Interest Agreement;
(c) bank account records relating to the receipt and
disbursement of any payments made to him by WI Owner that
are not for the ultimate account of the Banks or the Agent;
(d) copies of any fiduciary returns filed by him with the
Internal Revenue Service or the Attorney General of the
State of New York; and (e) copies of correspondence relating
to the Trust. The Borrower will furnish to the Agent,
within 90 days after the close of each fiscal year of the
Trust, the balance sheet of the Trust as of the close of
such fiscal year and its surplus statement and income
statement for such fiscal year (all of which may be
unaudited and may be (x) prepared on a cash basis and (y)
exclude all items of receipt and disbursement which were for
29
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the ultimate account of the Banks or the Agent). The
Borrower shall also furnish or cause to be furnished to the
Agent information concerning the business and affairs of the
Borrower and financial condition of the Trust as the Agent
may from time to time reasonably request.
SECTION 5.05. Scope of the Borrower's Business.
The Borrower shall not acquire or own any property other
than the Production Payment and such other property that the
Borrower deems necessary or desirable to acquire or own in
order to complete and perform the transactions contemplated
by this Agreement, the Notes and the Related Agreements, and
shall not conduct any activity unrelated to the owning of
such Production Payment and such other property. In no
event shall the Borrower open or maintain an office or place
of business in the State in which the Subject Interests are
located. The Borrower shall make no distributions or grants
except as provided in the Trust Agreement, the Mortgage, the
Conveyance, the Option Agreement and herein.
SECTION 5.06. Additional Indebtedness. The
Borrower shall not create, incur, assume, guarantee or in
any manner become or remain liable in respect of any
indebtedness whether current or funded, direct or
contingent, other than:
(i) the Notes and other indebtedness to the
Banks; and
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(ii) taxes, fees, assessments and
governmental charges not delinquent or whose validity
is currently being contested in good faith by
appropriate proceedings consented to by the Agent.
SECTION 5.07. Liens. The Borrower shall not
create, assume or suffer to exist any Lien upon the
Production Payment, the Marketing Contract, the Option
Agreement or the Expense and Interest Agreement, other than
(i) the Lien created by the Mortgage and (ii) any Liens in
respect of indebtedness permitted by clauses (i) and (ii) of
Section 5.06 hereof.
SECTION 5.08. Liquidation and Sales of Assets.
The Borrower shall not directly or indirectly liquidate or
sell, transfer or otherwise dispose of all or substantially
all of the Trust's properties or assets.
SECTION 5.09. Inspection. The Borrower shall
permit the Agent or the Banks and any representatives of the
Agent or the Banks, at the Borrower's expense, to inspect
any of the Trust's properties, to examine the Borrower's
books and records and to make copies thereof or extracts
therefrom and to discuss the Borrower's affairs, finances or
accounts with its officers, all at such times and as often
as the Agent or the Banks may reasonably request.
SECTION 5.10. Recordation. The Borrower shall,
or shall arrange to have WI Owner, promptly record, file and
register the Conveyance and the Mortgage and every other
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agreement, instrument or document that may be required by
law or advisable in order to perfect, preserve and protect
the validity and effectiveness of the Conveyance and the
lien, assignment and security interest created or intended
to be created by the Mortgage or by any amendment or
supplement to the Conveyance or the Mortgage in such manner
and places and within such times as may be necessary to
perfect, preserve and protect such validity, effectiveness,
lien, assignment and security interest. The Borrower shall
itself, or shall arrange to have WI Owner, promptly furnish
to the Agent satisfactory evidence of every such recording,
filing and registration and, to the extent not contrary to
applicable law and not paid by WI Owner, shall bear the
expense thereof.
SECTION 5.11. Further Assurances. The Borrower
shall execute and deliver all such agreements, instruments,
notices, releases and other documents and shall do all such
other acts as may be necessary more fully to assure to the
Agent all of the rights, titles, interests, remedies, powers
and privileges granted under the Mortgage or intended so to
be.
SECTION 5.12. Change of Location; Successor
Trustee. The Borrower shall promptly notify the Agent upon
any change in the Borrower's place of business or upon any
appointment of a successor Trustee.
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SECTION 5.13. Use of Proceeds. The proceeds of
the loans made under this Agreement will be used by the
Borrower to finance the purchase price of the Production
Payment pursuant to the Conveyance. None of such proceeds
will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or
carrying any "margin stock", within the meaning of
Regulation U of the Board of Governors of the Federal
Reserve System. The Trust is not engaged principally, or as
one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying
any such margin stock within the meaning of such Regulation
U.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more
of the following events ("Events of Default") shall have
occurred and be continuing:
(a) the Borrower shall fail to pay when due any
principal of or interest on any Note;
(b) the Borrower shall fail to observe or perform
any covenant or agreement contained in this Agreement
or the Mortgage (other than those covered by clause (a)
above) and such failure shall continue unremedied for a
period of 30 days after written notice thereof shall
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have been given to the Borrower by the Agent at the
request of any Bank;
(c) any representation, warranty, certification
or statement made by the Borrower in this Agreement or
the Mortgage or in any certificate or other document
delivered pursuant to this Agreement or the Mortgage
shall prove to have been materially incorrect when
made;
(d) a Default under the Conveyance, the Marketing
Contract or the Expense and Interest Agreement shall
have occurred and be continuing, unless such Default,
in the opinion of the Majority Banks, shall not
materially impair the ability of the Borrower to repay
the principal of and interest on the Notes or any other
amounts payable provided under this Agreement or any of
the Related Agreements;
(e) the rights, titles, interests or privileges
of the Borrower or the Agent to the Production Payment
or any part thereof shall have become the subject
matter of litigation which, in the opinion of the
Majority Banks, has a reasonable probability of being
adversely determined and would, in such event, result
in substantial impairment or loss of the security
provided or intended to be provided by the Mortgage;
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(f) the Trust Agreement is amended or modified or
the existence of the Trust is terminated without the
prior written consent of the Agent;
(g) the Borrower shall commence a voluntary case
or other proceeding seeking liquidation, reorganization
or other relief with respect to the Trust or its debts
under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other
similar official of the Trust or any substantial part
of its property, or shall consent to any such relief or
to the appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against the Borrower or the Trust, or shall
make a general assignment for the benefit of creditors,
or shall fail generally to pay the debts of the Trust
as they become due, or shall take any action to
authorize any of the foregoing;
(h) an involuntary case or other proceeding shall
be commenced against the Borrower seeking liquidation,
reorganization or other relief with respect to the
Trust or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator,
custodian or other similar official of the Trust or any
substantial part of its property, and such involuntary
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case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower under the
federal bankruptcy laws as now or hereafter in effect;
or
(i) the Conveyance, the Marketing Contract, the
Option Agreement or the Expense and Interest Agreement
shall be rejected in the Bankruptcy Cases;
then, and in every such event, the principal of and accrued
interest on the Notes shall become immediately due and
payable in full without presentment, demand, protest, notice
of intention to accelerate, notice of acceleration or other
notice of any kind, all of which are hereby waived by the
Borrower, and the Agent shall be entitled to (and, at the
request of any Bank shall) take the actions and pursue the
remedies set forth in Article V of the Mortgage.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization.
Each Bank irrevocably appoints and authorizes Morgan
Guaranty Trust Company of New York to take such action as
agent on its behalf and to exercise such powers under this
Agreement, the Mortgage and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto and Morgan
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Guaranty Trust Company of New York hereby accepts such
appointment and agency.
SECTION 7.02. Agent and Affiliates. Morgan
Guaranty Trust Company of New York shall have the same
rights and powers under this Agreement as any other Bank and
may exercise or refrain from exercising the same as though
it were not the Agent, and Morgan Guaranty Trust Company of
New York and its affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with
the Borrower or any affiliate of the Borrower as if it were
not the Agent hereunder.
SECTION 7.03. Holders of Notes. The Agent may
treat the payee of any Note as the holder thereof until
notice of transfer shall have been filed with it signed by
such payee and in form satisfactory to the Agent.
SECTION 7.04. Action by Agent. The obligations
of the Agent under the Mortgage, this Agreement and the
Existing Term Loan Agreement are only those expressly set
forth herein and therein. Without limiting the generality
of the foregoing, the Agent shall not be required to take
any action with respect to any Event of Default or event or
condition which, with the giving of notice or lapse of time
or both, could constitute an Event of Default, except as
expressly provided in Article VI hereof.
SECTION 7.05. Consultation with Experts. The
Agent may consult with legal counsel (who may be counsel for
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the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or
experts.
SECTION 7.06. Liability of Agent. Neither the
Agent nor any of its directors, officers, agents, or
employees shall be liable for any action taken or not taken
by it under the Mortgage, this Agreement or the Existing
Term Loan Agreement or in connection herewith or therewith
(a) with the consent or at the request of the Majority Banks
or all the Banks, as the case may be, or (b) in the absence
of its own gross negligence or willful misconduct. Neither
the Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this
Agreement, the Existing Term Loan Agreement, the Notes or
any Related Agreement or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or
agreement of the Borrower or WI Owner; (iii) the
satisfaction of any condition specified in Article III
hereof, except receipt of items required to be delivered to
the Agent; or (iv) the validity, effectiveness or
genuineness of this Agreement, the Existing Term Loan
Agreement, the Notes or any Related Agreement or any other
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instrument or writing furnished in connection herewith
(including without limitation any item referred to in clause
(iii) above). The Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex
or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
SECTION 7.07. Indemnification. Each Bank shall,
ratably in accordance with its outstanding Loans, indemnify
the Agent (to the extent not reimbursed by the Borrower)
against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability
(except such as result from the Agent's gross negligence or
willful misconduct) that the Agent may suffer or incur in
connection with this Agreement, the Existing Term Loan
Agreement, the Notes or any Related Agreement or any action
taken or omitted by the Agent hereunder or thereunder.
SECTION 7.08. Credit Decision. Each Bank
acknowledges that it has, independently and without reliance
upon the Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any
other Bank, and based on such documents and information as
it shall deem appropriate at the time, continue to make its
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own credit decision in taking or not taking any action under
this Agreement.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
AFFECTING EURO-DOLLAR LOANS
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If with respect to any Interest
Period:
(i) the Agent is advised that deposits in dollars
(in the applicable amounts) are not being offered to
Morgan Guaranty Trust Company of New York with respect
to Euro-Dollar Loans in the relevant market for such
Interest Period, or
(ii) Banks holding Notes evidencing 50% or more in
aggregate principal amount of the affected Euro-Dollar
Loans advise the Agent that the London Interbank
Offered Rate as determined by the Agent will not
adequately and fairly reflect the cost to such Banks of
maintaining or funding their Euro-Dollar Loans for such
Interest Period,
the Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Agent notifies
the Borrower that the circumstances giving rise to such
suspension no longer exist, (a) the obligations of the Banks
to make Euro-Dollar Loans shall be suspended and (b) the
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Borrower shall repay in full the then outstanding principal
amount of each Euro-Dollar Loan together with accrued
interest thereon, on the last day of the then current
Interest Period applicable to such Loan. Concurrently with
repaying each such Euro-Dollar Loan of each Bank pursuant to
this Section, the Borrower shall borrow a Prime Loan in an
equal principal amount from such Bank and such Bank shall
make such a Prime Loan (except as otherwise provided in
Section 2.02(d)), unless the Borrower notifies the Agent at
least two Domestic Business Days before the date of such
repayment that it elects not to borrow any Prime Loans on
such date.
SECTION 8.02. Illegality. If, after the date of
this Agreement, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of
law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Bank (or
its Euro-Dollar Lending Office) to make, maintain or fund
its Euro-Dollar Loans and such Bank shall so notify the
Agent, the Agent shall forthwith give notice thereof to the
other Banks and the Borrower. Before giving any notice to
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the Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and
will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. Upon receipt of such notice,
the Borrower shall repay in full the then outstanding
principal amount of each Euro-Dollar Loan of such Bank,
together with accrued interest thereon, on either (a) the
last day of the then current Interest Period applicable to
such Euro-Dollar Loan if such Bank may lawfully continue to
maintain and fund such Euro-Dollar Loan to such day or (b)
immediately if such Bank may not lawfully continue to fund
and maintain such Euro-Dollar Loan to such day.
Concurrently with repaying each Euro-Dollar Loan of such
Bank, the Borrower shall borrow a Prime Loan in an equal
principal amount from such Bank, and such Bank shall make
such a Prime Loan.
SECTION 8.03. Increased Cost. (a) If (i)
Regulation D of the Board of Governors of the Federal
Reserve System as in effect on the date hereof or (ii) after
the date hereof, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance
by any Bank (or its Lending Office) with any request or
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directive (whether or not having the force of law) of any
such authority, central bank or comparable agency (a
"Regulatory Change"):
(A) shall subject any Bank (or its Lending
Office) to any tax, duty or other charge with respect
to its Euro-Dollar Loans, its Euro-Dollar Notes or its
obligation to make Euro-Dollar Loans, or shall change
the basis of taxation of payments to any Bank of the
principal of or interest on its Euro-Dollar Loans or
any other amounts due under this Agreement in respect
of its Euro-Dollar Loans or its obligation to make
Euro-Dollar Loans (except for changes in the rate of
tax on the overall net income of such Bank or its
Lending Office imposed by the jurisdiction in which
such Bank's principal executive office or Lending
Office is located); or
(B) shall impose, modify or deem applicable any
reserve (including, without limitation, any imposed by
the Board of Governors of the Federal Reserve System),
special deposit or similar requirement against assets
of, deposits with or for the account of, or credit
extended by, any Bank's Lending Office or shall impose
on any Bank (or its Lending Office) or on the United
States market for certificates of deposit or the London
interbank market any other condition affecting its
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Euro-Dollar Loans, its Notes or its obligation to make
Euro-Dollar Loans;
and the result of any of the foregoing is to increase the
cost to (or in the case of said Regulation D, to impose a
cost on) such Bank (or it Lending Office) of making or
maintaining any Euro-Dollar Loan, or to reduce the amount of
any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect
thereto, by an amount deemed by such Bank to be material,
then, within 15 days after demand by such Bank (with a copy
to the Agent), the Borrower shall pay for the account of
such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
Each Bank will promptly notify the Borrower and the Agent of
any event of which it has knowledge, occurring after the
date hereof, which will entitle such Bank to compensation
pursuant to this Section and will designate a different
Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in
the judgment of such Bank, be otherwise disadvantageous to
such Bank. A certificate of any Bank claiming compensation
under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount,
such Bank may use any reasonable averaging and attribution
methods.
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(b) Without limiting the effect of the foregoing,
(x) the Borrower shall pay for the account of
each Bank on the last day of each Interest Period with
respect to any Euro-Dollar Loan of such Bank (and, if such
Interest Period is longer than three months, at intervals of
three months after the first day thereof), so long as such
Bank shall be required to maintain reserves against
"Eurocurrency liabilities" under said Regulation D (or, so
long as such Bank may be required, by reason of any
Regulatory Change, to maintain reserves against any other
category of liabilities which includes deposits by reference
to which the interest rate on such Euro-Dollar Loans is
determined as provided in this Agreement or against any
category of extensions of credit or other assets of such
Bank which includes any such Euro-Dollar Loan) an additional
amount (determined by such Bank and notified to the Borrower
and the Agent, such determination to be conclusive absent
manifest error) with respect to each day during such
Interest Period equal to the product of the following:
(i) the principal amount of such Euro-Dollar Loan
outstanding on such day; and
(ii) the excess of
(A) a fraction the numerator of which is the
London Interbank Offered Rate (expressed as a
decimal) used in establishing the interest rate
with respect to such Interest Period for such Loan
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pursuant to the first sentence of Section 2.05(b)
and the denominator of which is one minus that
percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System or any
successor, for determining such reserve
requirements for such Bank, over
(B) such London Interbank Offered Rate (so
expressed); and
(iii) 1/360, and
(y) if interest is due for any day or period in
respect of overdue principal of and, to the extent permitted
by law, overdue interest ("overdue Euro-Dollar amounts") on
any Euro-Dollar Loan, the Borrower shall pay on such day (or
on the last day of such period) so long as such Bank shall
be required to maintain reserves against "Eurocurrency
liabilities" under said Regulation D (or, so long as such
Bank may be required, by reason of any Regulatory Change, to
maintain reserves against any other category of liabilities
which includes deposits by reference to which the interest
rate on Euro-Dollar Loans is determined as provided in this
Agreement or against any category of extensions of credit or
other assets of such Bank which includes any Euro-Dollar
Loans) an additional amount (determined by such Bank and
notified to the Borrower and the Agent, such determination
to be conclusive absent manifest error) with respect to such
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day (or each day during such period) equal to the product of
the following:
(i) such overdue Euro-Dollar amounts on such day;
and
(ii) the excess of
(A) a fraction the numerator of which is the
(expressed as a decimal) average of the rates per
annum used in establishing the interest rate with
respect to such day or period for such overdue
Euro-Dollar amounts pursuant to Section 2.05(c)
and the denominator of which is one minus that
percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System or any
successor, for determining such reserve
requirements for such Bank, over
(B) such average of the rates per annum (so
expressed) and
(iii) 1/360.
(c) If any Bank demands compensation under this
Section, the Borrower may at any time, upon at least five
Euro-Dollar Business Days' prior notice to such Bank through
the Agent, repay in full the then outstanding Euro-Dollar
Loans of such Bank, together with accrued interest thereon
to the date of prepayment. Concurrently with repaying such
Euro-Dollar Loans of such Bank, the Borrower shall borrow
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from such Bank a Prime Loan in an amount equal to the
aggregate principal amount of such Fixed Rate Loans, and
such Bank shall make such a Prime Loan.
Section 8.04. Prime Loans Substituted for Affected
Euro-Dollar Loans. If notice has been given to the Borrower
pursuant to Section 8.02 or 8.03 requiring Euro-Dollar Loans
of any Bank to be repaid, then unless and until such Bank
notifies the Borrower that the circumstances giving rise to
such suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by
such Bank as Euro-Dollar Loans shall be made instead as
Base Rate Loans (on which interest and principal shall
be payable contemporaneously with the related Euro-
Dollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been
repaid, all payments of principal which would otherwise
be applied to repay such Euro-Dollar Loans shall be
applied to repay its Prime Loans instead.
If such Bank notifies the Borrower that the circumstances
giving rise to such repayment no longer apply, the Borrower
shall borrow a Euro-Dollar Loan from such Bank on the first
day of the next succeeding Interest Period applicable to
each related Borrowing in the amount of the Euro-Dollar Loan
which would have been outstanding from such Bank as part of
such Borrowing if the provisions of Section 8.02 or 8.03 had
never applied, and concurrently with each such Borrowing
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shall repay an equal principal amount of such Bank's
outstanding Prime Loans.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and
other communications provided for in this Agreement or in
the Mortgage shall be in writing (including bank wire,
telex, or similar writing, except that notice of any
transfer or assignment of this Agreement pursuant to Section
9.06 shall, if given by telex, be confirmed in writing
transmitted by mail or manually delivered to the addressee)
and shall be given:
(i) if to any party hereto, to it at its address
or telex number set forth on the signature pages
hereof; and
(ii) if to any holder of a Note, other than a
Bank, to it at the address or telex number of the
original payee thereof or at the address or telex
number of any subsequent holder if notice of the
transfer of such Note and the name and the address or
telex number of such subsequent holder shall have been
given to the Agent and the Borrower;
or in any of the foregoing cases at such other or additional
address or telex number as such party or subsequent holder
may hereafter specify for the purpose by notice to the Agent
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and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in
this Section 9.01 and the appropriate answerback is
received, (ii) if given by mail, when received by the
addressee or (iii) if given by any other means, when
delivered at the address specified in this Section 9.01;
provided that notices to the Agent under Article II hereof
shall not be effective until received. Promptly upon the
receipt of any notice pursuant to the Mortgage, the
Conveyance or this Agreement, the Agent shall give a copy
thereof to each Bank.
SECTION 9.02. No Waivers. No failure or delay by
the Agent, any Bank or any subsequent holder of any Note in
exercising any right, power or privilege hereunder or under
such Note or the Mortgage shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies
herein and in the Mortgage provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes. The
Borrower shall pay (i) all out-of-pocket expenses of the
Agent, including fees and disbursements of special counsel
for the Banks, in connection with (a) the preparation of
this Agreement, the Notes and all Related Agreements, the
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enforcement, administration, amendment, discharge or
termination hereof or thereof, any waiver or consent
hereunder or thereunder, or any amendment hereof or thereof
or any default or alleged default hereunder or (b) any
litigation or the consent, release or discharge of any
adverse claim or demand made or brought by any Person other
than the Borrower or the Agent affecting in any manner
whatsoever the Subject Interests, the Production Payment,
the Subject Minerals or the Proceeds; and (ii) if an Event
of Default occurs, all out-of-pocket expenses incurred by
the Agent or the holder of any Note, including fees and
disbursements of counsel, in connection with such Event of
Default and collection and other enforcement proceedings
resulting therefrom. The Borrower shall indemnify the Banks
against any transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of
the execution and delivery of this Agreement, the Notes or
any Related Agreement except the Oklahoma mortgage tax, if
any, due on the Mortgage. Notwithstanding the foregoing,
payment by the Borrower of $100,000 on the Effective Date
shall be deemed to constitute payment in full of all amounts
incurred prior to the Effective Date that otherwise would be
payable by the Borrower pursuant to this Section 9.03.
SECTION 9.04. Sharing of Set-Offs. Each Bank
agrees that if it shall, by exercising any right of set-off
or counterclaim or otherwise, receive payment of a
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proportion of the aggregate amount of principal and interest
due with respect to any Note held by it which is greater
than the proportion received by any other Bank in respect of
the aggregate amount of principal and interest due with
respect to any Note held by such other Bank, the Bank
receiving such proportionately greater payment shall
purchase such participations in the Notes held by the other
Bank, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest
with respect to Notes held by Banks shall be shared by the
Banks pro rata; provided that nothing in this Section 9.04
shall impair the right of any Bank to exercise any right of
set-off or counterclaim it may have and to apply the amount
subject to such exercise to the payment of indebtedness of
the Borrower other than its indebtedness under the Notes.
The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to
the foregoing arrangements, may exercise rights of set-off
or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation
were a direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy,
insolvency or other similar law, any Bank receives a secured
claim in lieu of a set-off to which this Section would
apply, such Bank shall, to the extent practicable, exercise
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its rights in respect of such secured claim in a manner
consistent with the rights of the Banks entitled under this
Section 9.04 to share in the benefits of any recovery on
such secured claim.
SECTION 9.05. Amendments and Waivers. Any
provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is
signed by the Borrower and the Majority Banks (and, if the
rights or duties of the Agent are affected thereby, by the
Agent); provided that no such amendment or waiver shall,
unless signed by all the Banks affected thereby, (i) subject
any Bank to any additional obligation, (ii) reduce the
principal of or rate of interest on any Loan or any fees
hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder
or (iv) change the definition of Majority Banks or the
percentage of the aggregate unpaid principal amount of the
Loans, or the number of Banks, which shall be required for
the Banks or any of them to take any action hereunder.
SECTION 9.06. Successors and Assigns. (a) The
provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of each of the
Banks.
53
<PAGE> 58
(b) Any Bank which assigns or otherwise transfers
any interest in any of its rights under this Agreement and
its Notes shall give prompt notice thereof to the Agent and
the Borrower.
(c) If Morgan Guaranty Trust Company of New York
assigns or otherwise transfers its Notes to an unaffiliated
institution, or if the Euro-Dollar Loans of Morgan Guaranty
Trust Company of New York are repaid pursuant to Article
VIII, the Agent shall, in consultation with the Borrower and
with the consent of the Majority Banks, appoint another Bank
to furnish quotations for purposes of the definition of
"London Interbank Offered Rate".
SECTION 9.07. Separability. The parties hereto
agree, to the fullest extent they may effectively do so
under applicable law, that in case any one or more of the
provisions contained in this Agreement shall be invalid,
illegal or unenforceable in any respect, the remaining
provisions shall be construed in order to effectuate the
purposes hereof, and the validity, legality and
enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
SECTION 9.08. New York Law. This Agreement and
each Note shall be construed in accordance with and governed
by the law of the State of New York.
SECTION 9.09. Counterparts. This Agreement may
be signed in any number of counterparts, each of which shall
54
<PAGE> 59
be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
SECTION 9.10. Authorization to Amend Related
Agreements. Each of the Banks and the Agent hereby
authorizes the Trustee to execute the Related Agreements and
to perform any and all acts, including executing and
delivering such other agreements, certificates, documents
and instruments, deemed necessary or desirable by the
Trustee or counsel for the Trustee incidental to and in
furtherance of the transactions contemplated by this
Agreement and the Related Agreements.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective
authorized officers as of the day and year first above
written.
JOHN FOUHEY, AS TRUSTEE FOR
SELLECK HILL TRUST
By: /s/ John Fouhey
c/o Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
55
<PAGE> 60
BANKS
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Unn J. Boucher
Name: Unn J. Boucher
Title: Vice/President
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260
TCW SPECIAL CREDITS
By: TCW Asset Management Co.
By: /s/ Bruce A. Karsh
Name: Bruce A. Karsh
Title: Managing Director
By: /s/ Matthew S. Barrett
Name: Matthew S. Barrett
Title: Senior Vice-President
Trust Company of the West
865 South Figueroa
Suite 1800
Los Angeles, CA 90017
Attention: Matthew S. Barrett
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By: /s/ David H. Sabath
Name: David H. Sabath
Title: Associate
One Chase Manhattan Plaza - 7th Floor
New York, New York 10081
Attn: David H. Sabath
56
<PAGE> 61
WELLS FARGO BANK, N.A.
By: /s/ Linda T. Spradling
Name: Linda T. Spradling
Title: Vice President
Wells Fargo Bank, N.A.
420 Montgomery St.
San Francisco, California 94163
Attn: Linda Spradling
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: /s/ Unn J. Boucher
Name: Unn J. Boucher
Title: Vice President
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260
57
<PAGE> 62
Schedule 1
Principal Repayments
<TABLE>
<CAPTION>
Principal Repayment Amount of Each
Dates Required Repayment
<S> <C>
January 31 and July 31, 1994 $1.0 million
January 31 and July 31, 1995 $1.5 million
January 31 and July 31, 1996 $2.0 million
January 31 and July 31, 1997 $2.5 million
January 31, 1998 $3.4 million
July 31, 1998 Remaining unpaid
principal
</TABLE>
<PAGE> 63
Schedule 2
Loans On Effective Date
<TABLE>
<CAPTION>
Bank Amount
<S> <C>
Morgan Guaranty Trust Company
of New York $4,393,281.15
TCW Special Credits $8,786,562.30
The Chase Manhattan Bank $4,393,281.15
(National Association)
Wells Fargo Bank, N.A. $4,393,281.15
TOTAL $21,966,405.75
</TABLE>
<PAGE> 64
EXHIBIT A
PRIME NOTE
New York, New York
March , 1994
For value received, John Fouhey, as Trustee for
Selleck Hill Trust, a New York trust (the "Borrower"),
promises to pay on July 31, 1998, to the order of
(the "Bank"), for the account of its Domestic Lending
Office, the aggregate unpaid principal amount of all Prime
Loans outstanding from the Bank to the Borrower pursuant to
the Term Loan Agreement referred to below. The Borrower
promises to pay interest on the aggregate unpaid principal
amount of such Prime Loans on the dates and at the rate or
rates provided for in said Term Loan Agreement. All such
payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately
available funds at the office of Morgan Guaranty Trust
Company of New York, 60 Wall Street, New York, New York.
All Prime Loans outstanding from the Bank to the
Borrower pursuant to such Term Loan Agreement and all
repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, endorsed by the Bank
on the schedule attached hereto, or on a continuation of
such schedule attached to and made a part hereof.
This note is one of the Prime Notes referred to in
the Second Amended and Restated Term Loan Agreement dated as
of March 29, 1994 among the Borrower, the banks and other
institutions listed on the signature pages thereof and
Morgan Guaranty Trust Company of New York, as Agent.
Reference is made to such Term Loan Agreement for provisions
relating to the mandatory and optional prepayment hereof and
the acceleration of the maturity hereof.
Payment of this Note is secured by the Amended and
Restated Mortgage, Deed of Trust and Security Agreement
dated as of September 1, 1988, as amended, between the
Borrower and the Agent covering interests in certain
properties located in the State of Oklahoma and Indiana.
<PAGE> 65
This Note is without recourse to the Borrower or
to the Trustee (individually or otherwise), it being
understood and agreed that the holder of this Note will look
solely to the property, rights and interests assigned to the
Agent under the Amended and Restated Mortgage, Deed of Trust
and Security Agreement referred to above for payments of
interest on and principal of this Note.
This Note shall be governed by and construed in
accordance with the laws of the State of New York.
JOHN FOUHEY, AS TRUSTEE FOR
SELLECK HILL TRUST
By:
John Fouhey
2
<PAGE> 66
Prime Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- --------------------------------------------------------
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
- --------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
</TABLE>
3
<PAGE> 67
EXHIBIT B
EURO-DOLLAR NOTE
New York, New York
March , 1994
For value received, John Fouhey, as Trustee for
Selleck Hill Trust, a New York trust (the "Borrower"),
promises to pay on July 31, 1998, to the order of (the
"Bank"), for the account of its Euro-Dollar Lending Office,
the aggregate unpaid principal amount of all Euro-Dollar
Loans outstanding from the Bank to the Borrower pursuant to
the Term Loan Agreement referred to below. The Borrower
promises to pay interest on the aggregate unpaid principal
amount of such Euro-Dollar Loans on the dates and at the
rate or rates provided for in said Term Loan Agreement. All
such payments of principal and interest shall be made in
lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty
Trust Company of New York, 60 Wall Street, New York, New
York.
All Euro-Dollar Loans outstanding from the Bank to
the Borrower pursuant to such Term Loan Agreement and all
repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, endorsed by the Bank
on the schedule attached hereto, or on a continuation of
such schedule attached to and made a part hereof.
This note is one of the Euro-Dollar Notes referred
to in the Second Amended and Restated Term Loan Agreement
dated as of March 29, 1994 among the Borrower, the banks and
other institutions listed on the signature pages thereof and
Morgan Guaranty Trust Company of New York, as Agent.
Reference is made to such Term Loan Agreement for provisions
relating to the mandatory and optional prepayment hereof and
the acceleration of the maturity hereof.
Payment of this Note is secured by the Amended and
Restated Mortgage, Deed of Trust and Security Agreement
dated as of September 1, 1988, as amended, between the
Borrower and the Agent covering interests in certain
properties located in the State of Oklahoma and Indiana.
<PAGE> 68
This Note is without recourse to the Borrower or
to the Trustee (individually or otherwise), it being
understood and agreed that the holder of this Note will look
solely to the property, rights and interests assigned to the
Agent under the Amended and Restated Mortgage, Deed of Trust
and Security Agreement referred to above for payments of
interest on and principal of this Note.
This Note shall be governed by and construed in
accordance with the laws of the State of New York.
JOHN FOUHEY, AS TRUSTEE FOR
SELLECK HILL TRUST
By:
John Fouhey
2
<PAGE> 69
Euro-Dollar Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
<S> <C> <C> <C> <C>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
</TABLE>
3
<PAGE> 1
EXHIBIT 11
<TABLE>
LONE STAR INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
SUCCESSOR
COMPANY PREDECESSOR COMPANY
FOR THE THREE FOR THE THREE FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, MARCH 31, JUNE 30, JUNE 30,
------------- ------------- -------------- ------------
1994 1994 1993 1993
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
PER SHARE OF COMMON STOCK - PRIMARY
Income (loss) before cumulative effect of change
in accounting principles $7,914 $(23,118) $(28,287) $(41,862)
Less: Provisions for preferred dividends 0 1,278 1,278 2,556
------ -------- -------- --------
Income (loss) before cumulative effect of change
in accounting principles 7,914 (24,396) (29,565) (44,418)
Cumulative effect of change in accounting principles -- -- -- (782)
Net interest expense reduction(1) 670 -- -- --
------ -------- -------- --------
Net income (loss) applicable to common stock $8,584 $(24,396) $(29,565) $(45,200)
====== ======== ======== ========
Weighted average shares outstanding during period 12,000 n/m n/m n/m
Options and warrants in excess of 20% limit(1) 1,774 -- -- --
------ -------- -------- --------
Net weighted average shares outstanding during period 13,774 n/m(2) n/m(2) n/m(2)
====== ======== ======== ========
Income (loss) per common share:
Income (loss) before cumulative effect of change
in accounting principles $0.62 n/m n/m n/m
Cumulative effect of change in accounting principles -- -- -- --
------ -------- -------- --------
Net income (loss) $0.62 n/m(2) n/m(2) n/m(2)
====== ======== ======== ========
PER SHARE OF COMMON STOCK ASSUMING FULL DILUTION
Income (loss) before cumulative effect of change
in accounting principles $7,914 $(23,118) $(28,287) $(41,862)
Plus: Net interest expense reduction(1) 670 -- -- --
Less: Provisions for preferred dividends -- -- -- --
------ -------- -------- --------
Income (loss) before cumulative effect of change
in accounting principles 8,584 (23,118) (28,287) (41,862)
Cumulative effect of change in accounting principles -- -- -- (782)
------ -------- -------- --------
Net income (loss) $8,584 $(23,118) $(28,287) $(42,644)
====== ======== ======== ========
Common shares outstanding at beginning of period 12,000 n/m 16,644 16,644
Conversion of $13.50 preferred shares outstanding
at beginning of period -- n/m 955 955
Conversion of $4.50 preferred shares outstanding
at beginning of period -- n/m 44 45
Options and warrants in excess of 20% limit(1) 1,774 -- -- --
------ -------- -------- --------
Fully diluted shares outstanding 13,774 n/m(2) 17,643 17,644
====== ======== ======== ========
Income (loss) per common share assuming full dilution
Income (loss) before cumulative effect of changes
in accounting principles $0.62 n/m ($1.60) ($2.37)
Cumulative effect of changes in accounting principles -- -- -- (0.04)
------ -------- -------- --------
Net income (loss) $0.62 n/m(2) ($1.60) ($2.42)
====== ======== ======== ========
</TABLE>
(1) Due to the fact that the company's aggregate number of common stock
equivalents is in excess of 20% of its outstanding common stock, primary
and fully diluted earnings per share has been calculated using the modified
treasury stock method for the three months ended June 30, 1994.
(2) Earnings per share are not meaningful due to reorganization and revaluation
entries and the issuance of 12 million shares of new common stock.
<PAGE> 2
EXHIBIT 11
<TABLE>
LONE STAR INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OF COMMON STOCK - PRIMARY
- -----------------------------------
Loss before cumulative effect of changes
in accounting principles $(35,258) $(45,428) $(5,547) $(66,739) $(273,882)
Less: Provisions for preferred dividends(2) 5,112 5,113 5,114 5,119 5,122
-------- --------- -------- -------- ---------
Loss before cumulative effect of changes
in accounting principles applicable
to common stock (40,370) (50,541) (10,661) (71,858) (279,004)
Cumulative effect of changes in accounting
principles, net of taxes(1) (782) (118,914) -- -- --
-------- --------- -------- -------- ---------
Net loss applicable to common stock $(41,152) $(169,455) $(10,661) $(71,858) $(279,004)
======== ========= ======== ======== =========
Weighted average shares outstanding during period(3) 16,644 16,641 16,582 16,559 16,532
======== ========= ======== ======== =========
Loss per Common Share:
Loss before cumulative effect of
changes in accounting principles $(2.42) $(3.03) $(0.64) $(4.34) $(16.88)
Cumulative effect of changes in accounting principles (0.05) (7.15) -- -- --
-------- --------- -------- -------- ---------
Net loss $(2.47) $(10.18) $(0.64) $(4.34) $(16.88)
======== ========= ======== ======== =========
PER SHARE OF COMMON STOCK ASSUMING FULL DILUTION
- ------------------------------------------------
Loss before cumulative effect of changes
in accounting principles $(35,258) $(45,428) $(5,547) $(66,739) $(273,882)
Add: Interest expense and amortization of debt
issuance expense of the 5 1/8% convertible
debentures, net of tax effect -- -- -- -- 17
Less: Provisions for dividends -- -- -- -- --
-------- --------- -------- -------- ---------
Loss before cumulative effect of changes
in accounting principles applicable to common stock (35,258) (45,428) (5,547) (66,739) (273,899)
Cumulative effect of changes accounting principles,
net of taxes (782) (118,914) -- -- --
-------- --------- -------- -------- ---------
Net loss applicable to common stock $(36,040) $(164,342) $(5,547) $(66,739) $(273,899)
======== ========= ======== ======== =========
Common shares outstanding at beginning of period 16,644 16,621 16,560 16,558 16,512
Conversion of $13.50 preferred shares
outstanding at beginning of period 955 955 955 955 955
Conversion of $4.50 preferred shares
outstanding at beginning of period 45 46 48 50 55
Conversion of 5 1/8% debentures
outstanding at beginning of period -- -- -- -- 20
Stock options and awards -- -- -- -- 226
Common shares issued from treasury stock -- 22 58 -- --
Common shares reacquired during period -- -- -- -- (10)
-------- --------- -------- -------- ---------
Fully diluted shares outstanding(4) 17,644 17,644 17,621 17,563 17,758
======== ========= ======== ======== =========
Loss per common share assuming full dilution:
Loss before cumulative effect of
changes in accounting principles $(2.00) $(2.57) $(0.31) $(3.80) $(15.42)
Cumulative effect of changes in accounting principles (0.04) (6.74) -- -- --
-------- --------- -------- -------- ---------
Net loss $(2.04) $(9.31) $(0.31) $(3.80) $(15.42)
======== ========= ======== ======== =========
</TABLE>
(1) In 1992, the company adopted Statements of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions", and No. 109, "Accounting for Income Taxes", effective January 1,
1992. In the first quarter of 1993, Kosmos Cement Company, one of the
company's joint ventures, adopted SFAS No. 106.
(2) Provisions for preferred dividends are computed on an accrual basis and,
therefore, may differ from preferred dividends declared. Due to the Chapter
11 proceedings, the company stopped accruing for preferred stock dividends
as of September 15, 1990. However, the full year's amount of dividends are
included for this calculation.
(3) Common stock options are not reflected in primary earnings per share
computations because their effect is not significant.
(4) The computation of fully diluted earnings per share submitted herein is in
accordance with Regulation S-K item 601(b)(11) although it is contrary to
Paragraph 40 of APB Opinion No.15 because it produces anti-dilutive results.
<PAGE> 1
EXHIBIT 12
LONE STAR INDUSTRIES, INC.
STATEMENT RE COMPUTATION OF RATIO EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR
COMPANY PREDECESSOR COMPANY
FOR THE THREE FOR THE THREE FOR THE YEARS ENDED DECEMBER 31,
MONTHS ENDED MONTHS ENDED -------------------------------------------------------
JUNE 30, 1994 MARCH 31, 1994 1993 1992 1991 1990 1989
------------- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Continuing Operations:
Earnings Available:
Income (loss) before provision
for income taxes $11,999 $(3,170) $ 6,196 $(42,429) $2,948 $(85,774) $(342,899)
Less: Excess of earnings over dividends
of less than fifty percent owned
companies (1,269) (75) 844 (294) (817) (592) 160
Capitalized interest (40) (38) (195) (196) (1,310) (1,442) (3,715)
------- ------- ------- -------- ------ -------- ---------
10,690 (3,283) 8,845 (42,919) 821 (87,808) (348,454)
======= ======= ======= ======== ====== ======== =========
Fixed Charges:
Interest expense (including capitalized
interest) and amortization of
debt discount and expenses 2,259 271 1,832 2,406 4,612 45,247 53,841
Portion of rent expense representative
of an interest factor 447 600 1,963 2,108 2,218 2,463 3,372
------- ------- ------- -------- ------ -------- ---------
Total Fixed Charges 2,706 871 3,795 4,514 6,830 47,710 57,213
------- ------- ------- -------- ------ -------- ---------
Total Earnings Available $13,396 $(2,412) $10,640 $(38,405) $7,651 $(40,098) $(289,241)
======= ======= ======= ======== ====== ======== =========
Ratio of Earnings to Fixed Charges 4.95 (2.77) 2.80 (8.51) 1.12 (0.84) (5.06)
======= ======= ======= ======== ====== ======== =========
Earnings deficiency 0 (3,283) 0 (42,919) 0 (87,808) (346,454)
======= ======= ======= ======== ====== ======== =========
</TABLE>
<PAGE> 1
EXHIBIT 21
----------
SUBSIDIARIES OF THE COMPANY
Rosebud Holdings, Inc.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF OTHER INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 4, 1993,
relating to the financial statements of Lone Star Industries, Inc. International
Division. We also consent to the application of such report to the Financial
Statement Schedules for the Lone Star Industries, Inc. International Division
for the two years ended December 31, 1992, when such schedules are read in
conjunction with the financial statements referred to in our report. The audits
referred to in such report also included these schedules. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Stamford, Connecticut
August 29, 1994
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report, dated February 17, 1994, which includes explanatory paragraphs
related to the Company's ability to continue as a going concern and certain
remediation costs at environmental sites, accompanying the consolidated
financial statements and financial statement schedules of Lone Star Industries,
Inc. and Consolidated Subsidiaries as of December 31, 1993 and 1992 and for each
of the three years in the period ended December 31, 1993, and to the inclusion
in this registration statement of our report, dated August 10, 1994,
accompanying the consolidated balance sheet of Lone Star Industries, Inc. and
Consolidated Subsidiaries as of March 31, 1994.
We also consent to the reference to our Firm under the captions "Experts"
and "Financial Statements" in the Prospectus.
/s/ Coopers & Lybrand
Coopers & Lybrand L.L.P.
Stamford, Connecticut
August 31, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> QTR-1 QTR-2
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1993
<PERIOD-START> JAN-1-1994 APR-1-1994
<PERIOD-END> MAR-31-1994 JUN-30-1994
<CASH> 8,649 1,952
<SECURITIES> 3,498 26,843
<RECEIVABLES> 38,554 51,349
<ALLOWANCES> 8,843 8,975
<INVENTORY> 44,794 39,807
<CURRENT-ASSETS> 101,779 115,323
<PP&E> 332,263 316,799
<DEPRECIATION> 0 5,433
<TOTAL-ASSETS> 579,411 574,415
<CURRENT-LIABILITIES> 87,639 72,527
<BONDS> 208,463 212,463
<COMMON> 12,000 12,000
0 0
0 0
<OTHER-SE> 81,313 89,190
<TOTAL-LIABILITY-AND-EQUITY> 579,411 574,415
<SALES> 33,709 86,995
<TOTAL-REVENUES> 36,781 89,087
<CGS> 29,694 61,403
<TOTAL-COSTS> 46,218 74,869
<OTHER-EXPENSES> 140,813 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 233 2,219
<INCOME-PRETAX> (150,483) 11,999
<INCOME-TAX> 155 4,085
<INCOME-CONTINUING> (150,638) 7,914
<DISCONTINUED> 0 0
<EXTRAORDINARY> 127,520 0
<CHANGES> 0 0
<NET-INCOME> (24,396) 7,914
<EPS-PRIMARY> 0<F1> 0.62
<EPS-DILUTED> 0<F1> 0.62
<FN>
<F1>Earnings per share for the three months ended March 31, 1994 are not meaningful
due to the company's reorganization and revaluation entries and the issuance of
12 million shares of new common stock.
</FN>
</TABLE>
