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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-06124
LONE STAR INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE NO. 13-0982660
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
300 FIRST STAMFORD PLACE, P.O. BOX 120014
STAMFORD, CT 06912-0014
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 969-8600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH EACH CLASS REGISTERED
- -------------------------------------------------- --------------------------------------------------
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Common Stock, par value $1.00 New York Stock Exchange
per share
Common Stock Purchase Rights New York Stock Exchange
Common Stock Purchase Warrants New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant at March 20, 1997: approximately $396,030,000.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of Securities under a plan
confirmed by a court. Yes [X] No [ ]
The number of shares outstanding of each of the registrant's classes of
common stock as of March 20, 1997: Common Stock, par value $1.00 per share --
10,988,737 shares.
PORTIONS OF THE PROXY STATEMENT OF THE REGISTRANT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 15, 1997 ARE INCORPORATED IN PART III OF THIS
REPORT.
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TABLE OF CONTENTS
PART I
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PAGE
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Item 1. Business................................................................................ 1
Item 2. Properties.............................................................................. 7
Item 3. Legal Proceedings....................................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders..................................... 8
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters............... 9
Item 6. Selected Financial Data................................................................. 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations... 11
Item 8. Consolidated Financial Statements and Supplementary Data................................ 17
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.... 44
PART III
Item 10. Directors and Executive Officers of the Registrant...................................... 44
Item 11. Executive Compensation.................................................................. 44
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................... 44
Item 13. Certain Relationships and Related Transactions.......................................... 44
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................ 44
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PART I
ITEM 1. BUSINESS.
THE COMPANY
Lone Star is a cement, construction aggregates and ready-mixed concrete
company with operations in the midwestern, southwestern and eastern United
States. Lone Star's cement operations consist of five plants in the Midwest and
Southwest, a slag cement grinding facility in New Orleans and a 25% interest in
Kosmos Cement Company, a partnership which owns and operates one cement plant in
Kentucky and one in Pennsylvania ("Kosmos"). The Company's five wholly-owned
cement plants produced approximately 3.9 million tons of cement during 1996,
which approximates the rated capacity of the plants. Lone Star's construction
aggregates operations consist of two quarries in New York State. The Company's
ready-mixed concrete business owns or leases and operates several facilities in
the Memphis, Tennessee area. The Company had approximately $367.7 million in net
sales in 1996, with cement, construction aggregates and ready-mixed concrete
operations representing approximately 75%, 13% and 12%, respectively, of such
net sales.
Lone Star Industries, Inc. 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. On April 14,
1994, the Company emerged from proceedings under Chapter 11 of the United States
Bankruptcy Code. 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. Unless the context otherwise requires, as
used herein "Company" and "Lone Star" mean Lone Star Industries, Inc. together
with its consolidated subsidiaries.
CEMENT OPERATIONS
Portland cement is the primary binding material used in the production of
concrete. The principal raw materials used in the manufacture of cement are
limestone or other calciferous 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 utilizing either of two basic methods, a "wet" or 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 wet process has
the advantage of greater ease in the handling and mixing of the raw materials,
however additional heat, and therefore fuel, is required to evaporate the
moisture before the raw materials can react to form clinker. The dry process, a
newer more fuel efficient technology, excludes the addition of water into the
process. Dry process plants are either pre-heater plants, in which hot air is
recycled from the rotary kiln to pre-heat materials, or are precalciner plants,
in which separate burners are added to accomplish a significant portion of the
chemical reaction prior to the introduction of the raw materials into the kiln.
Whether a wet or dry method is utilized, the manufacture of cement is
energy intensive, and the cost of such energy accounts for approximately one
fourth of a cement plant's total manufacturing costs. Energy cost, and in
particular coal, varies on a regional basis due in large part to transportation
costs. In addition, the low value-to-weight ratio of cement and its constituent
raw materials results in relatively high transportation costs, creating a
largely regional business. As a result, proximity to sources of fuel and raw
materials, as well as markets, are important aspects in the profitability of a
cement plant. While subject to fluctuation and interruption resulting from
adverse weather and other factors, distribution by water is generally the least
expensive method of transporting cement.
Lone Star's cement operations consist principally of the production of Type
I portland cement at the Company's five owned cement plants and the distribution
of that cement through the Company's 14 owned or leased distribution terminals.
Other products manufactured at certain of these plants include Type III portland
cement, which is a high early strength cement required in certain applications,
and specialty cements, such as masonry and oil well cement. Slag cement, a
by-product of iron blast furnaces that may be utilized in certain instances in
lieu of portland cement, is ground
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and distributed from the Company's New Orleans plant. The Company also purchases
cement from both domestic and international sources for domestic resale. In
addition, Lone Star owns a 25% interest in Kosmos, which owns and operates one
cement plant in Kentucky and one in Pennsylvania.
All of Lone Star's five cement plants are fully integrated from limestone
mining through cement production, and the Company estimates that it has
limestone reserves sufficient to permit operation of its plants at current
levels of production for periods ranging from 30 to 100 years. Adequate supplies
of other raw materials such as gypsum, shale, clay and sand are owned, leased or
available for purchase by Lone Star. The Company believes that its plants have
adequate sources from which to purchase power and fuel.
The following table sets forth certain information regarding Lone Star's
cement plants and their markets.
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PLANT LOCATION PROCESS FUEL PRINCIPAL MARKET AREA
- ------------------------------------- TONS OF --------------- ---------------------- -------------------------------
RATED ANNUAL
CEMENT CAPACITY
---------------
(IN THOUSANDS)
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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 Indianapolis and other areas of
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 Chicago and other areas of
Northern and Central Illinois;
S. Wisconsin
Maryneal, Texas...................... 520 Dry/Preheater Coal-Coke-Natural Gas W. Texas; Dallas, Texas
Kosmos Cement Company:
Kosmosdale, Kentucky............... 700 Dry/Preheater Coal-Oil Kentucky; S. Indiana;
S. Ohio; W. Virginia
Pittsburgh, Pennsylvania........... 360 Wet Coal W. Pennsylvania;
W. Virginia; E. Ohio
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Cape Girardeau Complex. Lone Star's Cape Girardeau, Missouri plant is
located on the Mississippi River, and its related terminals are located along
the Mississippi and certain of its tributaries. Approximately 80% of the plant's
cement production is shipped up and down these rivers via 16 owned barges,
enabling the plant to serve a relatively wide market. Trucks and rail are also
available to transport product. The Cape Girardeau plant includes a modern
dry/precalciner kiln and burns hazardous waste fuels. These fuels at times have
provided up to 30% of the annual energy needs of the plant and have reduced
production costs. See "Business -- Environmental Regulation". The distribution
terminals supporting the Cape Girardeau plant are located in St. Louis,
Missouri; Brandon, Mississippi; Paducah, Kentucky; Nashville and Memphis,
Tennessee; and New Orleans, Louisiana. In addition to its other customers, this
complex supplies cement to Lone Star's ready-mixed concrete operations in
Memphis, Tennessee.
Greencastle Complex. Lone Star's Greencastle plant is located
approximately 40 miles southwest of Indianapolis, Indiana and is the nearest
cement plant to this market, providing a freight cost advantage. Product is
transported by truck to Indianapolis and by truck or rail to other markets. A
portion of the Greencastle plant's production is a high quality Type III
portland cement which commands a premium price relative to Type I portland
cement, the Company's primary product. Although the Greencastle plant utilizes
the wet process of clinker production, the relative fuel inefficiency of this
process is offset in part by the plant's relatively low power and coal costs and
relatively high labor productivity. This plant also burns hazardous waste fuels.
See "Business -- Environmental Regulation". The Greencastle complex has
distribution terminals located in Fort Wayne and Elkhart, Indiana; and has a
warehousing and distribution arrangement in Itasca, Illinois.
Pryor Complex. The Pryor plant is located approximately 50 miles northeast
of Tulsa, Oklahoma and serves the Kansas; Oklahoma; and Dallas, Texas markets by
truck and rail. A portion of the plant's product is transported by barge. This
plant produces both portland and oil well cement. The plant has relatively low
power costs due to its proximity to two
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low cost sources. The complex has distribution terminals located near Wichita
and Kansas City, Kansas; near Oklahoma City, Oklahoma; and in Dallas, Texas.
Oglesby Complex. The Oglesby plant is located approximately 100 miles from
Chicago and serves that and other northern and central Illinois construction
markets by truck and rail. The complex has a distribution terminal located in
Milwaukee, Wisconsin.
Maryneal Complex. The Maryneal plant produces both portland and oil well
cement and serves the western Texas market by truck and rail. The complex has a
distribution terminal located in Amarillo, Texas and also shares the use of the
Dallas terminal with the Company's Pryor plant.
Kosmos Cement Company. Lone Star owns a 25% interest in Kosmos, which owns
and operates a cement plant in Kosmosdale, Kentucky and one in Pittsburgh,
Pennsylvania. Southdown, Inc., a publicly-traded cement company, owns the
remaining 75% interest and is responsible for managing day-to-day operations.
All major decisions relating to Kosmos, however, require unanimous approval of
its management committee which includes a Lone Star representative.
New Orleans Facility. The New Orleans facility, which is located on a
canal off the Gulf Intercoastal Waterway and can accommodate oceangoing vessels,
is the site of a former Lone Star cement plant. The facility now consists of a
slag cement grinding and storage facility, a distribution terminal used for
receiving and storing cement from the Company's Cape Girardeau and Pryor plants
as well as from international sources and a stevedoring operation which includes
a transloading system for moving phosphate materials between barges and
railcars. Cement distributed through this facility is sold directly from the New
Orleans facility or from a terminal in Brandon, Mississippi.
CONSTRUCTION AGGREGATES OPERATIONS
Lone Star, through its wholly-owned subsidiary New York Trap Rock
Corporation ("New York Trap Rock"), quarries and processes construction
aggregates, including manufactured sand, crushed stone and other stone products,
at two locations in New York State. Lone Star's total estimated annual
production capacity is approximately 5.5 million tons and total estimated
reserves are in excess of 350 million tons. Sales volume in 1996 approximated
4.8 million tons.
The following table sets forth certain information regarding Lone Star's
construction aggregates operations:
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ESTIMATED
MINIMUM
RESERVES
PLANT LOCATION TYPE OF AGGREGATE ----------------
- --------------------------------------------------- ESTIMATED ANNUAL -------------------- (YEARS)
PRODUCTION CAPACITY
-------------------
(IN THOUSAND TONS)
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Clinton Point, New York............................ 4,500 Wappingers Dolomite 60
West Nyack, New York............................... 1,100 Diabase Trap Rock 80
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Clinton Point Plant. The Clinton Point plant is located on the Hudson
River near the City of Poughkeepsie, New York, approximately 65 miles from the
New York metropolitan area. The Company transports approximately 80% of this
plant's product down the Hudson River via a fleet of 119 owned barges to
customers located throughout the New York City metropolitan area. The remaining
product is delivered by truck to the local market surrounding the plant. Access
to the Hudson River enables the plant to distribute its product to a relatively
wide area. A large majority of the plant's product is sold to ready-mixed
concrete and asphalt producers, with the remainder sold for roadway projects and
specialty use such as rip rap for the construction of jetties. The Wappingers
Dolomite produced by this quarry is frequently blended with stone from other
quarries to meet certain pavement skid resistance specifications. The Company
currently purchases granite for this purpose under an agreement in effect until
October 1997, and believes that thereafter it will have adequate sources from
which to purchase stone to blend.
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, primarily to
counties surrounding the quarry location. The West Nyack plant currently is not
cost competitive, and the Company is reviewing options regarding this quarry and
the rest of New York Trap Rock, including the construction of a modern plant in
West Nyack, at an expected capital cost of approximately $25 million, and/or the
sale of New York Trap Rock.
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READY-MIXED CONCRETE OPERATIONS
Ready-mixed concrete, a versatile building material used in almost all
construction, is produced by mixing stone, sand, water and admixtures with
cement. The proximity of Lone Star's ready-mixed concrete operations to its Cape
Girardeau cement complex has enabled them to become vertically integrated,
purchasing cement from Lone Star plants as well as outside suppliers, and has
allowed the Company to become a major supplier of ready-mix and other concrete
products in the Memphis, Tennessee area. In March 1997, the Company sold its
ready-mix and other concrete products operations in central Illinois. In 1996,
the Company (including its central Illinois operations) sold approximately
650,000 cubic yards of ready-mixed concrete to a variety of end users.
CONSTRUCTION INDUSTRY CONDITIONS
The markets for the Company's products are highly competitive. Portland
cement is largely a commodity product, and due to this lack of product
differentiation, the Company competes with domestic and international sources of
cement largely on the basis of price. Accordingly, cement prices and the level
of the Company's profitability are very sensitive to small shifts in supply and
demand in the Company's markets, and the Company's ability to compete
effectively is dependent on its operating costs being at acceptable levels. To a
lesser extent, other competitive factors such as service, delivery time and
proximity to customers affect the Company's performance.
Construction spending and cement consumption historically have fluctuated
widely. Demand for cement is derived primarily from public (infrastructure)
construction, residential construction and commercial/industrial construction,
which are highly cyclical and, in turn, are influenced by prevailing economic
conditions, including availability of public
funds and interest rate levels. Moreover, due to cement's low value-to-weight
ratio, the industry is largely regional, with sales in a given market dependent
on regional demand which is tied to local economic factors that may fluctuate
more widely than those of the United States as a whole. In addition, the supply
of cement from domestic and foreign sources can vary from region to region and
over time. As a result, even though the Company sells in more than one area of
the country, its operating results are subject to significant fluctuation. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". While sales by Lone Star directly to federal, state and local
governmental agencies are not significant, customers of Lone Star are engaged in
a substantial amount of construction in which government funding is a component.
According to statistics compiled by the United States Bureau of Mines, the
1980's was a period of relatively high cement imports, which the Company
attributes in large part to low ocean shipping rates and excess foreign capacity
relative to demand, factors that typically affect the level of cement imports.
This high level of imports negatively affected the selling price of cement in
many regional markets, and published sources indicate that, despite strong U.S.
demand for cement, cement prices remained in a narrow range during this period.
As a result of petitions filed by domestic cement producers beginning in 1989,
anti-dumping orders were imposed on cement imported from Mexico and Japan and
Venezuelan exporters signed a suspension agreement requiring them not to export
to the United States at dumped prices. The United States Department of Commerce
conducts annual administrative reviews to determine the actual anti-dumping
duties to be assessed under the anti-dumping orders. Notwithstanding amendments
to the anti-dumping provisions enacted as a result of the Uruguay Round of world
trade negotiations under the General Agreement on Tariffs and Trade ("GATT") and
significant lobbying and litigation by Mexican cement producers, which are
ongoing, the Company believes that the U.S. anti-dumping law currently provides
effective remedies against unfairly priced imports. The existing anti-dumping
orders and suspension agreement have contributed substantially to an improvement
in the condition of the U.S. cement industry. The anti-dumping orders and the
suspension agreement are scheduled to remain in effect at least until January 1,
2000 and may continue thereafter if petitioners prevail in "sunset reviews"
before the Commerce Department and the U.S. International Trade Commission.
Recent improvement in the performance of the United States economy, coupled with
lower imports, has led to a more favorable supply/demand ratio for cement
suppliers, which enabled the Company to implement price increases in both 1995
and 1996. The Company has announced more modest cement price increases of $1 to
$3 per ton effective April 1997.
According to published sources, 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 ten largest companies account
for approximately 60% of the total productive capacity. Due in part to the
existing anti-dumping relief, increases in the production capacity of the
industry have recently been accomplished through modifications to existing
facilities, and
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competitors of Lone Star have announced plans to make capital expenditures to
expand and modernize certain existing facilities and, in one case, build a new
"greenfield" cement plant. The relatively high cost of new plants and the
requisite lengthy permitting process, however, may cause significant new
domestic production capacity to be costly to producers.
Construction spending and cement consumption are seasonal, particularly in
the Company's northern markets where colder weather affects construction
activity. Other adverse weather conditions such as flooding, which can interrupt
production and transportation of cement, and extreme heat, which can affect
concrete pouring, also affect the Company's operations.
CUSTOMERS AND MARKETING; BACKLOG
The Company's customer base primarily consists of ready-mixed concrete
producers, prestressed concrete producers, other concrete product producers and
highway construction firms. Taken as a whole, no single customer of the Company
accounted for more than 10% of total sales during 1996. The marketing effort for
the Company's cement, construction aggregates and ready-mixed concrete
operations is handled by a local sales force. Most purchases of the Company's
products are done on a spot basis, and accordingly, order backlogs are not
significant.
ENVIRONMENTAL REGULATION
The Company is subject to extensive, stringent and complex federal, state
and local laws, regulations and ordinances pertaining to the quality and the
protection of the environment and human health and safety, requiring the Company
to devote substantial time and resources in an effort to maintain continued
compliance. Many of the laws and regulations apply to the Company's former
activities, properties and facilities as well as its current operations. Changes
to such regulations or the enactment of new regulations in the future could
require the Company to undertake capital improvement projects or to cease or
curtail certain operations or could otherwise substantially increase the
capital, operating and other costs associated with compliance. Moreover, there
can be no assurances 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
relating to matters as to which the Company is currently unaware. For instance,
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 was amended in 1990 to provide for a uniform federal
regulatory scheme governing control of air pollutant emissions and permit
requirements. In addition, certain 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. As a result of the 1990
amendments to the Clean Air Act, the Company is required to apply for federal
operating permits for each of its cement manufacturing facilities at various
dates ranging from 1996 through 1999. 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, the EPA will identify maximum available
control technology ("MACT") for the reduction of emissions of air toxics from
cement manufacturing facilities. On March 20, 1996, the EPA announced proposed
separate, more stringent MACT standards for those cement manufacturing
facilities (like Lone Star's Greencastle and Cape Girardeau plants) that burn
hazardous waste fuels ("HWF"). These standards are subject to public comment and
are not anticipated by the Company to be effective prior to early 1998 and
thereafter will be implemented over a three-year period. They are extremely
lengthy and complex and, depending on their terms when they become effective,
could have the effect of limiting or eliminating the use of HWF at one or both
facilities. The Company anticipates that standards for facilities burning fossil
fuels will be initially proposed in the second quarter of 1997.
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The 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 that
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. 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. However, on January 31, 1995, the EPA
issued a regulatory determination regarding the need for regulatory controls on
the management, handling and disposal of CKD. Generally, the EPA regulatory
determination provides that the EPA intends to draft and promulgate regulations
imposing controls on the management, handling and disposal of CKD that will be
based largely on selected components of the existing RCRA hazardous waste
regulatory program, tailored to address the specific regulatory concerns posed
by CKD. The EPA regulatory determination further provides that new CKD
regulations will be designed both to be protective of the environment and to
minimize the burden on cement manufacturers. While it is not possible to predict
at this time precisely what new regulatory controls on the management, handling
and disposal of CKD or what increased costs (or range of costs) would be
incurred by the Company to comply with these requirements, the EPA announced in
1996 that regulations will be promulgated through a rulemaking scheduled to be
completed in late 1997, and that, thereafter, these rules would become effective
in 1998 and thereafter will be implemented over a three-year period. The types
of controls being considered by the EPA include fugitive dust emission controls,
restrictions for landfills located in sensitive areas, groundwater monitoring,
standards for liners and caps, metals limits and corrective action for currently
active units.
In 1995, the State of Indiana made a determination that the CKD stored at
the Company's Greencastle plant is a Type I waste and requested that the Company
apply for a formal permit for an on-site landfill for the CKD. The Company
understands that similar notices were sent to other cement manufacturers in the
State of Indiana. The Company is protesting this determination through legal
channels and has received a stay to allow it to demonstrate that current
management practices pose no threat to the environment. The Company believes
that the State's determination ultimately will be reversed or the Company will
receive the needed permit or other adequate relief, such as an agreed order
requiring certain additional waste management procedures that are less stringent
than those generally required for Type I wastes. If the Company is not
successful in this regard, however, like other Indiana cement producers, the
Greencastle plant could incur substantially increased operating and capital
costs.
The Cape Girardeau, Missouri and Greencastle, Indiana plants, which are the
Company's two cement manufacturing facilities using HWF as a cost-saving energy
source, are subject to strict federal, state and local requirements governing
hazardous waste treatment, storage and disposal facilities, including those
contained in the federal Boiler and Industrial Furnace Regulations promulgated
under RCRA (the "BIF Rules"). These facilities qualify for and operate 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, in the past Lone Star has been involved in
certain environmental enforcement proceedings seeking civil penalties and
injunctive relief for past non-compliance, and there can be no assurances that
the Company 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 continue to burn HWF.
The Company is currently engaged in the process of securing the permit
required under RCRA and the BIF Rules for the Cape Girardeau plant. The Company
anticipates that the Greencastle plant also will go through this permitting
process in 1997. These permits are a requirement to enable Lone Star 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 the Company will be successful in securing a final RCRA permit
for either or both of its HWF facilities. In addition, if received, the permits
could contain terms and conditions with which the Company cannot comply or could
require the Company to install and operate costly control technology equipment.
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. While, as noted above, wastes produced by the Company generally are
not classified as hazardous wastes, many of the raw materials, by-products and
wastes
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currently and previously produced, used or disposed of by the Company or its
predecessors contain chemical elements or components that have been designated
as hazardous substances or which otherwise may cause environmental
contamination. Hazardous substances are or have been used or produced by the
Company in connection with its cement manufacturing operations (e.g. grinding
compounds, refractory bricks), quarrying operations (e.g. blasting materials),
equipment operation and maintenance (e.g. lubricants, solvents, grinding aids,
cleaning aids, used oils), and hazardous waste fuel burning operations. Past
operations of the Company have resulted in releases of hazardous substances at
sites currently or formerly owned by the Company and certain of its subsidiaries
or where waste materials generated by the Company have been disposed. CKD and
other materials were placed in depleted quarries and other locations for many
years. The Company has been named by the EPA as a potentially responsible party
for the investigation and remediation of several Superfund sites. Available
factual information indicates that the Company's disposal of waste at these
Superfund sites (other than sites that have been remediated or as to which the
Company has entered into settlement agreements with the EPA) was small or
non-existent, and the Company may have certain defenses arising out of its
reorganization. The Company has received a letter from EPA Region 4 reasserting
a claim for approximately $830,000 of oversight costs and accrued interest
associated with the Company's cleanup of the site of a former woodtreating
operation in Dania, Florida. The Company is contesting this claim. The Company
is also reviewing certain of its inactive properties to determine if any
remedial action may be required at these sites.
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 construction aggregates facilities is
governed by the federal Mine Safety and Health Act ("MSHA") and at other Company
operations is governed by the federal Occupational Safety and Health Act
("OSHA").
EMPLOYEES
As of December 31, 1996, the Company had approximately 1,450 employees. Of
these employees, approximately 940 hourly employees at all Company operations
other than certain cement distribution terminals and the New Orleans slag cement
and stevedoring operations, were represented by labor unions. During 1996, there
were no labor disruptions at any of the Company's facilities. The Company
believes that its relationship with its employees generally has been good.
Multi-year collective bargaining agreements that commence in 1996 covering
hourly paid employees at four of the Company's five cement plants and related
distribution terminals and the hourly employees at its construction aggregates
operations were successfully renegotiated. The agreements covering hourly
employees at one cement plant and one cement distribution terminal in Texas will
be renegotiated in 1997. The Company does not anticipate any unusual
circumstances or difficulties in obtaining these replacement contracts, however,
there can be no assurances in this regard.
BANKRUPTCY REORGANIZATION PROCEEDINGS AND LIQUIDATING SUBSIDIARY
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 proceedings were precipitated by a variety of factors
including generally depressed economic and business conditions, increasingly
restricted sources of financing, potential litigation exposure and potential
liabilities relating to environmental matters, retiree benefits and pension
obligations. On April 14, 1994, the Company emerged from these proceedings and
was reorganized around its core domestic operations, implementing a
comprehensive organizational and financial restructuring through which it closed
certain facilities, reduced management, strategically disposed of assets,
rejected or modified agreements, settled litigations, implemented settlements
relating to certain retiree medical and life insurance benefits, pension and
financing obligations, and improved operating procedures at its ongoing
operations.
ITEM 2. PROPERTIES.
Lone Star's main operations are conducted at its plants and distribution
terminals described in Item 1 above. Lone Star owns its five cement plants, its
slag grinding and storage facility and a majority of the distribution terminals
supporting these plants. With respect to those distribution terminals not owned,
Lone Star holds a land lease for the underlying real property and owns the
facilities located on such property. There is one additional distribution
terminal that is leased to a third party. Lone Star owns its aggregate
operations. 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
7
<PAGE> 10
satisfactory alternative sites. The Company leases executive offices in
Stamford, Connecticut and owns or leases certain sales and other offices in
various locations within its market areas in the United States.
ITEM 3. LEGAL PROCEEDINGS.
From time to time the Company is named as a defendant in lawsuits asserting
product liability for which the Company maintains insurance coverage. In this
regard, the Company is one of many defendants, including several cement
manufacturers, named in two product liability lawsuits in southern Texas that
allege that cement is an unreasonably dangerous product that has injured a large
number of plaintiffs. The Company believes this type of litigation is totally
without merit and plans to contest the lawsuits vigorously. The Company has also
been named in a lawsuit asserting that it has successor liability for certain
defunct subsidiaries which allegedly manufactured faulty prestressed "double
tees" resulting in property damage to a retail store (and consequent loss of
business) in south Florida during Hurricane Andrew in 1992. In late 1995, an
office building in Boston, Massachusetts, constructed in 1983 using concrete
pilings produced by San-Vel Concrete Corporation, an inactive Lone Star
subsidiary ("San-Vel"), was demolished by order of the City of Boston based upon
an engineering report that the pilings were unreliable. In March 1997, the owner
of the demolished building brought suit against San-Vel and the Company
alleging, among other things, that San-Vel was negligent in producing, and that
it breached representations relating to, the pilings. At the request of the City
of Boston, San-Vel has provided a list of the approximate twenty-five other
buildings built in that City between 1980 and 1990 using San-Vel pilings. The
City has reportedly inspected these buildings visually, without noting any
apparent piling failure. Engineering studies also have reportedly been
conducted, and the Company has not received the results of these studies. The
Company believes that the cement component of the concrete used to produce the
pilings in certain of these buildings, including the demolished building, was
produced by it at one of its formerly owned cement plants. There has been no
indication that the cement was defective. The Company plans to contest this
lawsuit vigorously, and believes that it has good defenses to the lawsuit,
however the litigation is at a very preliminary stage, and no assurances as to
its ultimate outcome can be given. All of these matters are being defended by
the Company's insurers.
For information concerning certain environmental matters involving the
Company, see "Business -- Environmental Regulation".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company.
<TABLE>
<CAPTION>
OFFICE AND YEAR IN WHICH INDIVIDUAL FIRST BECAME AN EXECUTIVE
NAME AGE OFFICER
- ---------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
David W. Wallace............ 73 Chairman of the Board and Chief Executive Officer (1991)
William M. Troutman......... 56 President and Chief Operating Officer (1986)
Roger J. Campbell........... 60 Vice President -- Cement Operations (1986)
William J. Caso............. 52 Vice President -- Taxes and Insurance (1994)
Pasquale P. Diccianni....... 55 Vice President -- Aggregate Operations (1988)
Thomas S. Hoelle............ 45 Vice President -- Planning (1994)
Gerald F. Hyde, Jr.......... 54 Vice President -- Personnel and Labor Relations (1983)
James W. Langham............ 37 Vice President, General Counsel and Secretary (1995)
Harry M. Philip............. 48 Vice President -- Cement Manufacturing (1994)
Michael W. Puckett.......... 52 Vice President -- Cement Sales and Concrete Operations (1985)
William E. Roberts.......... 57 Vice President, Chief Financial Officer, Controller and Treasurer
(1988)
</TABLE>
All of the executive officers' terms of office continue until the next
annual meeting of the Company's stockholders and until their successors 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,
except for Mr. Langham, who for more than five years prior to joining the
Company was an attorney in New York City.
8
<PAGE> 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock and related purchase rights and its warrants are
listed on the New York Stock Exchange ("NYSE"). The following table sets forth
the high and low sales prices for the common stock and warrants in composite
transactions as reported on the NYSE as well as dividend information relating to
the common stock.
<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
------------------------ ------------
HIGH LOW DIVIDENDS HIGH LOW
---- --- --------- ---- ---
<S> <C> <C> <C> <C> <C>
1995
First Quarter................... $20 3/4 $17 1/4 $ -- $ 7 1/4 $6
Second Quarter.................. 21 7/8 19 1/2 0.05 8 1/8 6 1/2
Third Quarter................... 24 5/8 21 3/8 0.05 9 7/8 7 1/2
Fourth Quarter.................. 25 1/4 22 1/2 0.05 9 5/8 8
1996
First Quarter................... $30 1/2 $24 1/4 $0.05 $14 3/8 $8 3/4
Second Quarter.................. 37 1/4 29 1/4 0.05 20 13 1/4
Third Quarter................... 34 28 3/4 0.05 17 3/8 14
Fourth Quarter.................. 38 1/2 31 7/8 0.05 21 3/8 16
</TABLE>
On March 20, 1997, the last reported sale price of the common stock and
warrants was $39 3/8 per share and $22 3/4 per warrant, respectively. As of
March 20, 1997, the Company had approximately 1,846 holders of record of common
stock and 2,733 holders of record of warrants.
The Company's financing agreements, and a revolving credit facility
currently being negotiated, contain certain restrictive covenants which, among
other things, could have the effect of limiting the payment of dividends and the
repurchase of common stock and warrants. Approximately $64.0 million is
currently available for such payments under the most restrictive of such
covenants.
9
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data are derived from the Consolidated
Financial Statements of the Company. The data should be read in conjunction with
the Consolidated Financial Statements, related Notes and other financial
information included herein:
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
------------------------------------------ -------------------------------------
FOR THE NINE FOR THE FOR THE
FOR THE YEAR FOR THE YEAR MONTHS THREE MONTHS YEAR ENDED
ENDED ENDED ENDED ENDED DECEMBER 31,
(IN THOUSANDS EXCEPT PER SHARE DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, --------------------
AMOUNTS) 1996 1995 1994 1994 1993 1992
------------ ------------ ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales....................... $367,673 $323,008 $261,645 $ 33,709 $240,071 $ 230,098
Income (loss) before
reorganization items, income
taxes, and cumulative effect
of changes in accounting
principles and extraordinary
item.......................... $ 81,770 $ 53,376 $ 45,133 $ (3,170) $ 6,196 $ (42,429)
Income (loss) before cumulative
effect of changes in
accounting principles and
extraordinary item............ $ 81,770 $ 35,762 $ 29,333 $ (150,638) $(35,258) $ (45,428)
Net income (loss)............... $ 54,160 $ 35,762 $ 29,333 $ (23,118) $(36,040) $(164,342)
PER COMMON SHARE
Primary:
Income (loss) before cumulative
effect of changes in
accounting principles and
extraordinary item............ $ 4.02 $ 2.66 $ 2.22 n/m(1) $ (2.42) $ (3.03)
Net income (loss)............... $ 4.02 $ 2.66 $ 2.22 n/m(1) $ (2.47) $ (10.18)
- ---------------------------------------------------------------------------------------------------------------------
Shares outstanding at December
31............................ 10,713 11,477 12,000 n/m 16,645 16,644
- ---------------------------------------------------------------------------------------------------------------------
Cash dividends per common
share......................... $ 0.20 $ 0.15 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
------------------------------------------------------ DECEMBER 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, ----------------------
1996 1995 1994 1994 1993 1992
------------ ------------ ------------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION AT END OF
PERIOD:
Total assets...................... $562,151 $477,465 $553,320 $ 579,411 $924,885 $952,649
Long-term debt:
Senior notes(2)................. $ 50,000 $ 78,000 $ 78,000 $ 78,000 -- --
Asset proceeds notes............ -- $ 4,399 $ 87,000 $ 112,000 -- --
Production payment................ -- -- $ 19,966 $ 20,963 $ 2,000 $ 4,000
Liabilities subject to Chapter 11
proceedings..................... -- -- -- -- $627,938 $611,129
Redeemable preferred stock........ -- -- -- -- $ 37,500 $ 37,500
Common shareholders' equity....... $264,282 $159,740 $122,463 $ 93,313 $ 12,348 $ 59,698
</TABLE>
- ---------------
(1) Earnings per share for the three months ended March 31, 1994 are not
meaningful and prior period per share amounts are not comparable to the
successor company per share amounts due to reorganization and revaluation
entries and the issuance of 12 million shares of new common stock (See Note
1 of Notes to Financial Statements).
(2) See Note 9 of Notes to Financial Statements.
10
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FINANCIAL CONDITION
On March 12, 1997, the Company redeemed $28.0 million of its $78.0 million
10% senior notes. The notes were paid from cash on hand. In addition, the
Company entered into a long-term private placement agreement for $50 million and
notified noteholders that the balance of the 10% senior notes will be redeemed
in April 1997. The redemptions are at par plus accrued interest and will result
in lower interest costs.
In March 1997, the Company sold its central Illinois ready-mixed and other
concrete operations, including inventories, for about $10.5 million which
approximated book value.
The Company has various deferred tax assets arising from operating loss
carryforwards, various credit carryforwards and reserves not yet deductible for
tax purposes. Upon emergence from bankruptcy, the Company provided a full
valuation allowance against these assets. Based on the current expectation that
the Company is more likely than not to generate enough future taxable income to
utilize at least a portion of these deferred tax assets, the Company in 1996,
reduced this valuation allowance by $81.9 million. This was a direct result of
the significant improvement in earnings realized by the Company since it emerged
from bankruptcy proceedings in 1994. The benefit from this reduction is shown as
an increase in additional paid-in capital in accordance with the provisions of
AICPA Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code". In 1996, the Company realized
approximately $25.0 million in cash savings from the utilization of these
deferred tax assets, principally net operating loss carryforwards.
During 1996, as part of its stock repurchase program, the Company purchased
272,401 shares in open market transactions at a cost of $8.5 million and
purchased 700,000 shares of its common stock in private transactions at a cost
of $25.2 million.
The Company contributed a total of $15.4 million to its hourly and salaried
pension plans during 1996 and as a result, the Pension Benefit Guarantee
Corporation has released all liens on Company properties it has held since the
Company's bankruptcy proceedings.
In June 1996, the remaining $4.4 million of the asset proceeds notes were
redeemed by Rosebud Holdings, Inc., the Company's liquidating subsidiary
established in the Company's bankruptcy proceedings. The asset proceeds notes
were paid in full, one year ahead of their maturity date. Total interest and
principal payments of approximately $155.2 million were paid on the notes.
In April 1994, the Company entered into a three-year, renewable, $35.0
million revolving credit agreement, which was collateralized by inventory,
receivables, collection proceeds and certain intangible assets. Although the
Company has used the letter of credit facility provided by the credit agreement,
it has never borrowed under the credit agreement. In March 1997 the Company
canceled this agreement and plans to replace the agreement with a new $100.0
million unsecured revolving credit facility which will allow the Company to
borrow funds at lower interest rates and increase the Company's ability to
repurchase common stock and warrants.
Analysis of Cash Flows and Working Capital
Cash flows from operating activities of $96.2 million for the year ended
December 31, 1996 primarily reflect income from operations, changes in working
capital and $15.4 million of pension plan contributions. The utilization of net
operating loss carryforwards in 1996 reduced cash taxes otherwise payable by
approximately $25.0 million. At December 31, 1996, the Company had net operating
loss carryforwards of approximately $180.0 million, which are expected to reduce
future cash taxes by an additional $63.0 million over time.
During the year ended December 31, 1996, the Company used $42.3 million for
investing activities, primarily representing capital expenditures.
Net cash outflows from financing activities of $32.7 million for the year
ended December 31, 1996 primarily reflect the repurchase of 972,401 shares of
its common stock for $33.7 million as well as the payment of dividends. These
cash outflows were partly offset by proceeds from exercise of stock options and
warrants.
11
<PAGE> 14
Working capital on December 31, 1996 was $77.0 million as compared to $81.7
million on December 31, 1995. Current assets increased $23.0 million primarily
due to higher marketable securities and accounts and notes receivable balances.
Also contributing to the increase in current assets was the net effect of the
reduction of a valuation allowance resulting in a $51.0 million deferred tax
asset at December 31, 1996 of which $3.6 million is classified as current (See
Note 20). Current liabilities increased $27.7 million primarily due to the
reclassification of $28.0 million of senior notes to current liabilities,
reflecting the March 1997 redemption.
Investments in joint ventures decreased $1.6 million as cash distributions
paid from Kosmos Cement Company exceeded the Company's share of equity earnings.
Net property, plant and equipment increased $15.0 million reflecting capital
expenditures partly offset by depreciation. The long-term pension liability
decreased $6.8 million, primarily reflecting contributions made during 1996 in
excess of current expenses.
Capital Expenditures
Capital expenditures of $42.6 million for 1996 were primarily for major
repairs, replacements and improvements of existing facilities, including
beginning construction of a modern clinker storage facility at the Cape
Girardeau, Missouri plant, the purchase of several barges to increase its
ability to transport cement by water and the completion of work on new finish
mill sections also at the Cape Girardeau plant. In addition, the Company
installed a rail car transfer system which will increase the volume and types of
materials to be transported at the New Orleans, Louisiana facility, replaced
barges at its New York construction aggregates operation, and is in the process
of building a new cement terminal at Oklahoma City. Other significant
expenditures include the purchase or refurbishment of crushing equipment,
clinker cooling systems, hopper cars, quarry loaders, haul trucks and other
mobile equipment.
In an effort to increase production, improve operating efficiencies and
reduce costs, the Company expects to make capital expenditures of approximately
$43.0 million in 1997. These projects include expanding the New Orleans,
Louisiana slag cement facility and expanding the Memphis, Tennessee cement
terminal, completing the clinker storage facility at Cape Girardeau and the
Oklahoma City cement terminal. Other significant expenditures include the
purchases of new barges for the New York construction aggregates operation and
other mobile equipment such as haul trucks, ready-mixed concrete trucks and rail
cars. Expenditures will also be made to upgrade existing computer and electrical
systems at various plants and facilities. The Company plans to fund its 1997
capital expenditures from cash on hand in addition to cash generated from
operations.
Other Information
The Company is subject to extensive, stringent and complex federal, state
and local laws, regulations and ordinances pertaining to the quality and the
protection of the environment and human health and safety, requiring the Company
to devote substantial time and resources in an effort to maintain continued
compliance. Many of the laws and regulations apply to the Company's former
activities, properties and facilities as well as its current operations. Changes
to such regulations or the enactment of new regulations in the future could
require the Company to undertake capital improvement projects or to cease or
curtail certain current operations or could otherwise substantially increase the
capital, operating and other costs associated with compliance. Moreover, there
can be no assurances 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
relating to matters as to which the Company is currently unaware. 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 (See
Note 24).
The Company believes that it has adequately provided for costs related to
its ongoing obligations with respect to known environmental liabilities.
Expenditures for environmental liabilities during 1996 did not have a material
effect on the financial condition or cash flows of the Company.
Multi-year collective bargaining agreements that commence in 1996 covering
hourly-paid employees at four of the Company's five cement plants and related
distribution terminals and the hourly employees at its construction aggregates
operations were successfully renegotiated. The agreements covering hourly
employees at one cement plant and one cement distribution terminal in Texas will
be renegotiated in 1997. The Company does not anticipate any unusual
circumstances or difficulties in obtaining the replacement contracts, however,
there can be no assurances in this regard.
12
<PAGE> 15
Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this annual report and Form 10-K
contain forward-looking statements within the meaning of Section 27A of the
Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These forward-looking statements are based on current expectations,
estimates and projections concerning the general state of the economy and the
industry and market conditions in certain geographic locations in which the
Company operates. Words such as "expects", "anticipates", "intends", "plans",
"believes", "estimates", and variations of such words and similar expressions
are intended to identify such forward-looking statements. These statements are
not guarantees of future performance and involve certain risks, uncertainties
and assumptions which are difficult to predict. Therefore, actual results and
outcomes may differ materially from what is expressed or forecasted in such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements as a result of new information, future
events or other factors.
The Company's business is cyclical and seasonal, the effects of which
cannot be accurately predicted (See "Business-Construction Industry Conditions"
of Item 1). Risks and uncertainties include changes in general economic
conditions (such as changes in interest rates), changes in economic conditions
specific to any one or more of the Company's markets (such as the strength of
local real estate markets and the availability of public funds for
construction), adverse weather, unexpected operational difficulties, changes in
governmental and public policy including increased environmental regulation, the
outcome of pending and future litigation, the successful negotiation of labor
contracts and the continued availability of financing in the amounts, at the
times, and on the terms required to support the Company's future business. Other
risks and uncertainties could also affect the outcome of the forward-looking
statements.
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Net Sales
Consolidated net sales of $367.7 million during 1996 were $44.7 million
higher than the prior-year results. The increase in net sales primarily reflects
cement price increases implemented in April 1996 and during 1995 combined with
higher cement shipments. In each of the years 1996 and 1995, the Company sold
approximately the rated capacity of its cement plants.
Cement sales of $274.6 million during 1996 were $37.2 million greater than
the prior-year results, primarily due to higher prices and shipments. Average
net realized selling prices were 6% higher than in 1995 and cement shipments for
1996 were 9% above 1995 levels due to strong demand for cement at all locations.
Sales of construction aggregates of $48.2 million during 1996 were
comparable to the 1995 results. This is primarily attributable to higher average
net realized selling prices, partly offset by a 7% decrease in overall
construction aggregate shipments. The reduction in sales reflects the sale of
the Nova Scotia, Canada quarry in 1995, partly offset by increased shipments to
the New York metropolitan area reflecting improved construction activity. In
1995, shipments from the New York Trap Rock operations were adversely affected
by the temporary closure of a customer's asphalt plant (for rebuilding
purposes), a sluggish concrete stone market and the decision not to compete on
certain low-price jobs.
The assets of the Nova Scotia quarry were sold in October 1995 for net
proceeds including working capital of about $11.4 million, which approximated
book value. This operation contributed sales of $8.1 million and an operating
loss of $0.4 million to the 1995 results.
Ready-mixed concrete and other operations sales during 1996 were $44.8
million, $7.5 million above the prior-year results primarily reflecting a 14%
increase in shipments in 1996. Shipments and selling prices for ready-mixed
concrete were above 1995 levels at all locations. The Company's central Illinois
ready-mixed and other concrete operations were sold in March 1997.
Net sales of cement, construction aggregates and ready-mixed concrete and
other products were 75%, 13% and 12%, respectively, of total sales in 1996.
13
<PAGE> 16
Gross Profit
Gross profit from the cement operations was $92.0 million in 1996 as
compared to gross profit of $72.7 million for 1995. Gross profit was higher than
the previous year at every plant in 1996. The favorable results reflect higher
cement selling prices and shipments in 1996.
Construction aggregates gross profit of $6.4 million during 1996 was $2.9
million above the prior year. The 1996 results primarily reflect higher average
selling prices and shipments and lower production costs at the New York
construction aggregates operations.
Gross profit from ready-mixed concrete and other construction products was
$8.6 million for 1996, a $2.9 million increase from the 1995 results. The
favorable results primarily reflect higher shipments and prices due to improved
construction activity.
Included in the calculation of gross profit are sales less cost of sales
including depreciation related to cost of sales (which excludes depreciation
related to facilities leased to third parties and depreciation on office
equipment, furniture and fixtures which are not related to the cost of sales).
Joint Ventures
Pre-tax income from joint ventures of $7.4 million during 1996 reflects the
results of the Kosmos Cement Company, a partnership in which the Company has a
25% interest. The results for 1996 were $0.7 million higher than the prior year
reflecting higher net realized selling prices and higher shipments.
Other Income
Other income of $3.0 million in 1996 decreased $1.0 million from 1995,
reflecting lower rental income resulting from sales of assets which had been
leased to third parties and lower interest earned on marketable securities.
Selling, General and Administrative Expenses
Selling, general and administrative expenses of $28.5 million during 1996
represent a decrease of $1.2 million over the prior-year expense. The savings in
selling, general and administrative expenses primarily reflect lower other
postretirement benefit expense related to current retirees. The lower other
postretirement benefit expense reflects the favorable experience for retiree
medical claims. Selling, general and administrative expenses for 1996 include
$4.6 million of other postretirement benefit costs related to the Company's
presently retired employees.
Interest Expense
Interest expense of $6.6 million in 1996 represents a decrease of $2.5
million over the prior-year expense. Capitalized interest was $1.3 million in
1996 and $0.3 million in 1995. The decrease in interest expense is primarily
attributable to the termination of the Company's production payment liability
during 1995 and higher capitalized interest in 1996.
Income Taxes
The income tax expense of $27.6 million during 1996, an increase of $10.0
million from the prior-year expense, primarily reflects higher pre-tax earnings
in 1996.
Net Income
Net income of $54.2 million, or $4.02 per share, during 1996 was $18.4
million, or $1.36 per share, higher than the prior-year results. This
improvement is primarily due to improved results in all product lines. Also
contributing to the favorable increase in net income for 1996 over the
prior-year results were lower selling, general and administrative expenses and
lower interest expense. The favorable results were partly offset by increased
income tax expense due to higher pre-tax earnings.
14
<PAGE> 17
1995 COMPARED TO PRO FORMA 1994
As of March 31, 1994, 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 which included adjustments for
bankruptcy-related cash transactions through the effective date, which for
accounting purposes was March 31, 1994, to properly reflect the reorganization.
As a result of fresh-start reporting and other operational, financial and other
actions taken in connection with the plan of reorganization becoming effective,
the Company's financial statements for the year ended December 31, 1995 are not
comparable to statements for the prior year.
To facilitate a meaningful comparison of the Company's operating
performance, the following discussion and analysis compares the results of the
historical year ended December 31, 1995 with the pro forma results for the 1994
period (See Note 22 for 1994 pro forma results).
Net Sales
Consolidated net sales of $323.0 million during 1995 were $16.1 million
higher than the prior-year pro forma results. The increase in net sales
primarily reflected cement price increases in 1995 and to a lesser extent, price
increases realized in 1994. Cement sales of $237.4 million during 1995 were
$24.2 million greater than the prior-year pro forma results, primarily due to
15% higher average cement net realized selling prices in 1995, the result of
price increases which began in 1994. Cement shipments for 1995 were 4% below
1994 levels.
Sales of construction aggregates of $48.4 million during 1995 were $1.8
million lower than the 1994 pro forma results. This decrease was primarily
attributable to lower shipments, particularly into the New York metropolitan
area, resulting from soft market conditions. The 9% decrease in overall
construction aggregates' shipments was partly offset by a 5% increase in average
selling prices.
Ready-mixed concrete and other operations sales during 1995 were $37.3
million, $6.3 million below the prior-year pro forma results. This reflects a
21% decrease in shipments resulting from unfavorable weather conditions
experienced during the second and third quarters of 1995 in the Midwest,
combined with soft market conditions. The decrease in shipments was partly
offset by a 12% increase in average selling prices.
Net sales of cement, construction aggregates and ready-mixed concrete and
other products were 73%, 15% and 12%, respectively, of total sales in 1995.
Gross Profit
Gross profit from cement operations was $72.7 million in 1995 as compared
to pro forma gross profit of $52.7 million for 1994. Gross profit at each plant
in 1995 was higher than the previous year. These results primarily reflect 15%
higher average cement net realized selling prices in 1995. Partly offsetting
these favorable results were higher overall per unit costs, reflecting higher
costs and production interruptions, particularly at the Maryneal, Texas cement
plant.
Construction aggregates gross profit of $3.5 million during 1995 increased
$1.1 million over the prior-year pro forma results. These results primarily
reflect lower finance costs associated with the purchase of the fleet of barges
which had previously been leased, along with a 5% increase in overall average
selling prices, partly offset by lower shipments in 1995 in the New York
metropolitan area due to soft market conditions. Shipments from the New York
Trap Rock operations were adversely affected by the temporary closure of a
customer's asphalt plant (for rebuilding purposes), a sluggish concrete stone
market, and the decision not to compete on certain low price jobs. Lower per
unit production costs associated with higher production volume efficiencies at
the Nova Scotia, Canada operation (which was sold in 1995) contributed to the
improved results. This operation contributed sales of $8.1 million and an
operating loss of $0.4 million to the 1995 results.
Gross profit from ready-mixed concrete and other construction products was
$5.7 million for 1995, a $0.1 million decrease from the 1994 pro forma results,
primarily reflecting a 21% decrease in overall ready-mixed concrete shipments,
partly offset by a 12% increase in overall average selling prices. Lower
ready-mixed concrete and concrete block shipments resulted from unfavorable
weather in the Midwest and soft market conditions, particularly in the central
Illinois area (these operations were sold in March 1997). Higher per unit costs
at all operations adversely affected 1995 gross profit.
15
<PAGE> 18
Joint Ventures
Pre-tax income from joint ventures of $6.7 million during 1995 reflects the
Company's 25% equity interest in the results of the Kosmos Cement Company. The
results for 1995 were $2.1 million higher than the prior-year pro forma results
reflecting higher net realized selling prices, partly offset by lower shipments.
Other Income
Other income of $4.0 million in 1995 decreased $1.0 million from the 1994
pro forma amount, reflecting lower rental income resulting from sales of assets
which had been leased to third parties, partly offset by proceeds from an
insurance settlement relating to a prior-year claim.
Selling, General and Administrative Expenses
Selling, general and administrative expenses of $29.7 million during 1995
represent a decrease of $2.4 million over the prior-year pro forma expense. The
savings in selling, general and administrative expenses primarily reflect lower
corporate headquarters expenses and lower other postretirement benefit expenses
in 1995. The savings in corporate headquarters expenses reflect a corporate
downsizing which occurred on June 30, 1994. The lower other postretirement
benefit expense was the result of favorable experience for retiree medical
claims. Selling, general and administrative expenses for 1995 include $5.7
million of other postretirement benefit costs related to the Company's presently
retired employees. Selling, general and administrative expenses for 1994
included $0.5 million relating to the filing of a registration statement.
Interest Expense
Interest expense of $9.1 million in 1995 approximated the prior-year pro
forma total. Capitalized interest was $0.3 million in 1995.
Income Taxes
Income tax expense was $17.6 million during 1995, an increase of $5.6
million from the prior-year pro forma expense, primarily reflecting higher taxes
resulting from higher pre-tax earnings in 1995. The provision for income taxes
for 1995 reflects a 33% effective tax rate as compared to a 35% tax rate for
1994. The reduction in the 1995 rate is due to a higher estimated percentage
depletion allowance.
Net Income
Net income of $35.8 million, or $2.66 per share, during 1995 was $13.6
million, or $0.90 per share, higher than the prior-year pro forma results.
Excluding the after-tax effect of $4.2 million related to a litigation recovery
included in the 1994 pro forma results, net income in 1995 was $17.8 million, or
$1.19 per share, higher than 1994. This improvement was primarily due to higher
cement results, reflecting 15% higher average net realized cement selling
prices, partly offset by lower results from the construction aggregates and
ready-mixed concrete operations. Also contributing to the favorable increase in
net income for 1995 over the prior-year pro forma results were higher earnings
from Kosmos Cement Company, lower overall cost of goods sold (associated with
the lower sales volumes in all major product lines) and decreased selling,
general and administrative expenses.
16
<PAGE> 19
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LONE STAR INDUSTRIES, INC.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants............................................................... 18
Consolidated Financial Statements:
Statements of Operations for the Years Ended December 31, 1996 and 1995, the Nine Months
Ended December 31, 1994 and the Three Months Ended March 31, 1994......................... 19
Balance Sheets -- December 31, 1996 and 1995............................................... 20
Statements of Changes in Common Shareholders' Equity for the Years Ended December 31, 1996
and 1995, the Nine Months Ended December 31, 1994 and the Three Months Ended March 31,
1994...................................................................................... 21
Statements of Cash Flows for the Years Ended December 31, 1996 and 1995, the Nine Months
Ended December 31, 1994 and the Three Months Ended March 31, 1994......................... 22
Notes to Financial Statements.............................................................. 23
Schedule:
II Valuation and Qualifying Accounts....................................................... 48
Consent of Independent Accountants.............................................................. 49
</TABLE>
The foregoing supporting schedule should be read in conjunction with the
consolidated financial statements and notes thereto in the Company's 1996 Form
10-K.
The presentation of individual condensed financial information of the
Company 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, 1996 and 1995.
Separate financial statements for the Company's fifty percent or less owned
affiliate are omitted because such subsidiary individually does not constitute a
significant subsidiary at December 31, 1996 and 1995.
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.
17
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
LONE STAR INDUSTRIES, INC.
We have audited the consolidated balance sheets of Lone Star Industries,
Inc. and Consolidated Subsidiaries (the "Company") as of December 31, 1996 and
1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for the years ended December 31, 1996 and 1995, and the
nine months ended December 31, 1994 (post-confirmation), and the three months
ended March 31, 1994 (pre-confirmation). We have also audited the Financial
Statement Schedule II included in this annual report on Form 10-K. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
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 also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Lone Star Industries, Inc. and Consolidated Subsidiaries as of December 31, 1996
and 1995, and the consolidated results of their operations and their cash flows
for the years ended December 31, 1996 and 1995, the nine months ended December
31, 1994 and the three months ended March 31, 1994 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
As discussed in Note 1, effective April 14, 1994, the Company was
reorganized under a plan confirmed by the United States Bankruptcy Court for the
Southern District of New York and adopted a new basis of accounting whereby all
remaining assets and liabilities were adjusted to their estimated fair values.
Accordingly, the consolidated financial statements for periods subsequent to the
reorganization are not comparable to the consolidated financial statements
presented for prior periods.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
February 3, 1997, except as to the
information presented in Note 9,
for which the date is March 21, 1997
18
<PAGE> 21
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR COMPANY COMPANY
------------------------------------------- ----------------
FOR THE FOR THE FOR THE NINE FOR THE THREE
YEAR ENDED YEAR ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1996 1995 1994 1994
------------ ------------ ------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Net sales............................... $367,673 $323,008 $ 261,645 $ 33,709
Joint venture income.................... 7,378 6,728 4,424 381
Other income, net....................... 3,007 4,040 3,820 2,691
-------- -------- -------- --------
378,058 333,776 269,889 36,781
-------- -------- -------- --------
Deductions from revenues:
Cost of sales........................... 237,114 217,942 177,005 29,694
Recovery of litigation settlements...... -- -- -- (6,500)
Selling, general and administrative
expenses............................. 28,508 29,734 23,749 9,836
Depreciation and depletion.............. 24,060 23,628 17,190 6,688
Interest expense (contractual interest
of $7,631 in the first quarter of
1994)................................ 6,606 9,096 6,812 233
-------- -------- -------- --------
296,288 280,400 224,756 39,951
-------- -------- -------- --------
Income (loss) before reorganization items
and income taxes........................ 81,770 53,376 45,133 (3,170)
Reorganization items:
Adjustments to fair value............... -- -- -- (133,917)
Other................................... -- -- -- (13,396)
-------- -------- -------- --------
Total reorganization items................ -- -- -- (147,313)
-------- -------- -------- --------
Income (loss) before income taxes and
extraordinary item...................... 81,770 53,376 45,133 (150,483)
Provision for income taxes.............. (27,610) (17,614) (15,800) (155)
-------- -------- -------- --------
Income (loss) before extraordinary item... 54,160 35,762 29,333 (150,638)
Extraordinary item: gain on discharge of
prepetition liabilities.............. -- -- -- 127,520
-------- -------- -------- --------
Income (loss) before preferred
dividends............................... 54,160 35,762 29,333 (23,118)
Provisions for preferred dividends...... -- -- -- (1,278)
-------- -------- -------- --------
Net income (loss) applicable to common
stock................................... $ 54,160 $ 35,762 $ 29,333 ($24,396)
======== ======== ======== ========
Weighted average common shares
outstanding............................. 11,290 11,990 12,000 n/m(a)
======== ======== ======== ========
Primary income per common share........... $ 4.02 $ 2.66 $ 2.22 n/m(a)
======== ======== ======== ========
Fully diluted income per common share..... $ 3.97 $ 2.62 $ 2.22 n/m(a)
======== ======== ======== ========
</TABLE>
- ---------------
(a) Earnings per share for the three months ended March 31, 1994 are not
meaningful and are not comparable to the Successor Company per share amounts
due to reorganization and revaluation entries and the issuance of 12 million
shares of new common stock.
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
19
<PAGE> 22
LONE STAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(DOLLARS IN THOUSANDS) 1996 1995
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash, including cash equivalents of $69,768 in 1996 and $47,323 in 1995...... $ 71,215 $ 50,049
Accounts and notes receivable, net........................................... 33,336 31,403
Inventories.................................................................. 53,869 55,476
Deferred tax asset........................................................... 3,611 --
Other current assets......................................................... 3,183 5,289
-------- --------
TOTAL CURRENT ASSETS............................................... 165,214 142,217
Joint ventures............................................................... 19,505 21,152
Property, plant and equipment, net........................................... 322,982 307,936
Deferred tax asset........................................................... 47,365 --
Other assets and deferred charges............................................ 7,085 6,160
-------- --------
TOTAL ASSETS....................................................... $562,151 $477,465
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................................. $ 12,562 $ 11,183
Accrued liabilities.......................................................... 44,238 47,320
Senior notes payable......................................................... 28,000 --
Other current liabilities.................................................... 3,436 2,064
-------- --------
TOTAL CURRENT LIABILITIES.......................................... 88,236 60,567
Senior notes payable......................................................... 50,000 78,000
Deferred income taxes........................................................ -- 6,688
Postretirement benefits other than pensions.................................. 132,219 131,226
Pensions..................................................................... -- 6,770
Other liabilities............................................................ 27,414 34,474
Contingencies (Notes 24 and 25)
-------- --------
TOTAL LIABILITIES.................................................. 297,869 317,725
-------- --------
Common stock, $1 par value. Authorized: 50,000,000 shares
Shares issued: 1996 -- 12,086,510; 1995 -- 12,080,844...................... 12,087 12,081
Warrants to purchase common stock............................................ 15,574 15,597
Additional paid-in capital................................................... 163,664 82,709
Retained earnings............................................................ 115,228 63,315
Treasury stock, at cost...................................................... (42,271) (13,962)
-------- --------
TOTAL SHAREHOLDERS' EQUITY......................................... 264,282 159,740
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................... $562,151 $477,465
======== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
20
<PAGE> 23
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR COMPANY COMPANY
--------------------------------------------- -------------
FOR THE FOR THE FOR THE NINE FOR THE THREE
YEAR ENDED YEAR ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
(IN THOUSANDS) 1996 1995 1994 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
COMMON STOCK
Balance at beginning of period................................... $ 12,081 $ 12,000 $ 12,000 $ 18,103
Exercise of warrants to purchase common stock.................. 6 4 -- --
Exercise of stock options...................................... -- 77 -- --
Conversions of $4.50 non-redeemable preferred stock............ -- -- -- 1
Cancellation of predecessor company stock pursuant to the plan
of reorganization............................................ -- -- -- (18,104)
Issuance of successor company stock pursuant to the plan of
reorganization............................................... -- -- -- 12,000
-------- -------- -------- ---------
Balance at end of period......................................... 12,087 12,081 12,000 12,000
WARRANTS TO PURCHASE COMMON STOCK
Balance at beginning of period................................... 15,597 15,613 15,613 --
Exercise of warrants to purchase common stock.................. (23) (16) -- --
Issuance pursuant to the plan of reorganization................ -- -- -- 15,613
-------- -------- -------- ---------
Balance at end of period......................................... 15,574 15,597 15,613 15,613
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period................................... 82,709 65,700 65,700 239,870
Exercise of warrants to purchase common stock.................. 122 90 -- --
Sales of treasury stock........................................ 3 3 -- --
Exercise of stock options, net of tax benefit.................. (1,059) 1,100 -- --
Reduction of tax valuation allowance........................... 81,889 15,816 -- --
Conversions of $4.50 non-redeemable preferred stock............ -- -- -- 3
Elimination of predecessor company additional paid-in-capital
pursuant to the plan of reorganization....................... -- -- -- (239,873)
Additional paid-in-capital of the successor company pursuant to
the plan of reorganization................................... -- -- -- 65,700
-------- -------- -------- ---------
Balance at end of period......................................... 163,664 82,709 65,700 65,700
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance at beginning of period................................... 63,315 29,333 -- (187,896)
Net income (loss).............................................. 54,160 35,762 29,333 (23,118)
Dividends...................................................... (2,247) (1,780) -- --
Elimination of accumulated deficit pursuant to the plan of
reorganization............................................... -- -- -- 211,014
-------- -------- -------- ---------
Balance at end of period......................................... 115,228 63,315 29,333 --
CUMULATIVE TRANSLATION ADJUSTMENT
Balance at beginning of period................................... -- (183) -- --
Translation adjustments........................................ -- 183 (183) --
-------- -------- -------- ---------
Balance at end of period......................................... -- -- (183) --
PENSION LIABILITY ADJUSTMENT
Balance at beginning of period................................... -- -- -- (21,157)
Revaluation in accordance with fresh-start reporting........... -- -- -- 21,157
-------- -------- -------- ---------
Balance at end of period......................................... -- -- -- --
TREASURY STOCK
Balance at beginning of period................................... (13,962) -- -- (36,572)
Repurchase of shares........................................... (33,719) (13,875) -- --
Shares issued under compensation plans......................... 11 -- -- --
Odd lot program net share purchases............................ -- (87) -- --
Stock options exercised........................................ 5,399 -- -- --
Cancellation pursuant to the plan of reorganization............ -- -- -- 36,572
-------- -------- -------- ---------
Balance at end of period......................................... (42,271) (13,962) -- --
-------- -------- -------- ---------
TOTAL COMMON SHAREHOLDERS' EQUITY, END OF PERIOD................. $ 264,282 $ 159,740 $ 122,463 $ 93,313
======== ======== ======== =========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
21
<PAGE> 24
LONE STAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR COMPANY COMPANY
--------------------------------------------- -------------
FOR THE FOR THE FOR THE NINE FOR THE THREE
YEAR ENDED YEAR ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
(IN THOUSANDS) 1996 1995 1994 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before extraordinary item.......................... $ 54,160 $35,762 $ 29,333 ($150,638)
Adjustments to arrive at net cash provided (used)
by operating activities:
Depreciation and depletion................................... 24,060 23,628 17,190 6,688
Recovery of litigation settlements......................... -- -- -- (6,500)
Tax benefit realized from utilization of predecessor
company deferred tax assets.............................. 25,419 15,816 13,646 --
Deferred income taxes...................................... -- -- 1,688 155
Changes in operating assets and liabilities:
Accounts and notes receivable.............................. (2,227) (1,012) (5,307) 22,157
Inventories and other current assets......................... 3,713 (14,626) (1,542) (17,189)
Accounts payable and accrued expenses........................ 967 (1,724) 2,820 (1,808)
Equity income, net of dividends received..................... 1,772 (2,978) (674) 619
Pension funding in excess of expense......................... (12,986) (7,806) (8,712) (6,422)
Adjustments to fair value.................................... -- -- -- 133,917
Other reorganization items................................... -- -- -- 13,396
Other, net................................................... 1,324 3,211 (3,052) 356
-------- ------- --------- ---------
Net cash provided (used) by operating activities before
reorganization items........................................... 96,202 50,271 45,390 (5,269)
Operating cash flows from reorganization items:
Interest received on cash accumulated because of Chapter 11
proceedings................................................ -- -- -- 1,998
Professional fees and administrative expenses................ -- -- (6,934) (5,849)
Professional fees escrow pursuant to the reorganization
plan....................................................... -- -- -- (12,431)
-------- ------- --------- ---------
Net cash used by reorganization items............................ -- -- (6,934) (16,282)
-------- ------- --------- ---------
Net cash provided (used) by operating activities................. 96,202 50,271 38,456 (21,551)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................. (42,640) (36,576) (16,480) (6,695)
Proceeds from sales of assets.................................... 319 15,406 22,275 2,457
-------- ------- --------- ---------
Net cash (used) provided by investing activities................. (42,321) (21,170) 5,795 (4,238)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options.......................... 3,145 1,177 -- --
Proceeds from exercise of warrants............................... 106 78 -- --
Purchase of treasury stock....................................... (33,719) (13,959) -- --
Dividends paid................................................... (2,247) (1,780) -- --
Cash distribution pursuant to the reorganization plan............ -- -- -- (200,451)
Transfer to liquidating subsidiary............................... -- -- -- (5,010)
Reduction of production payment.................................. -- (19,966) (1,000) (1,000)
-------- ------- --------- ---------
Net cash used by financing activities............................ (32,715) (34,450) (1,000) (206,461)
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............. 21,166 (5,349) 43,251 (232,250)
Cash and cash equivalents, beginning of period................... 50,049 55,398 12,147 244,397
-------- ------- --------- ---------
Cash and cash equivalents, end of period......................... $ 71,215 $50,049 $ 55,398 $ 12,147
======== ======= ========= =========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
Financial Statements.
22
<PAGE> 25
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Operations -- The Company 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). Lone
Star's cement operations consist of five cement plants in the midwestern and
southwestern regions of the United States, a slag cement facility in Louisiana
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 approximately 3.9 million tons of cement in 1996, which
approximates the rated capacity of such plants. The Company's construction
aggregates operations primarily served the construction markets in the New York
metropolitan area. The ready-mixed concrete business operates in the Memphis,
Tennessee area and during 1996, in central Illinois (which operations were sold
in March 1997). The Company had approximately $368,000,000 in net sales in 1996,
with cement, construction aggregates and ready-mixed concrete and other
construction products operations representing approximately 75%, 13% and 12%,
respectively, of such net sales.
Demand for cement is derived primarily from residential construction,
commercial and industrial construction and public (infrastructure) construction
which are highly cyclical and are influenced by prevailing economic conditions
including interest rates and availability of public funds. Due to cement's low
value-to-weight ratio, the industry is largely regional and regional demand is
tied to local economic factors that may fluctuate more widely than those of the
nation as a whole.
The markets for the Company's products are highly competitive and portland
cement is largely a commodity product. The Company competes with domestic and
international sources largely on the basis of price. To a lesser extent, other
competitive factors such as service, delivery time and proximity to customers
affect the Company's performance.
Basis of Presentation -- 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 using the equity method. Certain prior-period amounts have
been reclassified to conform with current-period presentation.
On February 17, 1994, with the approval of all voting classes of creditors
and equity holders, the United States Bankruptcy Court for the Southern District
of New York 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 plan became effective. For accounting
purposes, the effective date of the plan is considered to be March 31, 1994.
Upon emergence from its Chapter 11 proceedings, the Company issued new
common stock, warrants to purchase common stock and senior notes and created a
newly formed liquidating subsidiary, Rosebud Holdings Inc., and subsidiaries
(collectively "Rosebud" ), which issued certain asset proceeds notes to be
redeemed from the proceeds of sales of non-core assets.
The Company adopted "fresh-start" reporting in accordance with AICPA
Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP No. 90-7"), as of March 31,
1994. 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.
Cash and Cash Equivalents -- Cash equivalents include short-term, highly
liquid investments with original maturities of three months or less, and are
recorded at cost, which approximates market value.
Inventories -- Inventories are stated at the lower of cost or market. Cost
is determined principally by the weighted average cost method.
23
<PAGE> 26
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment -- Property, plant and equipment were stated
at fair market value as of March 31, 1994. Additions subsequent to March 31,
1994 are stated at cost. Property, plant and equipment are 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. In accordance with SOP No. 90-7, income tax
benefits recognized from preconfirmation net operating loss carryforwards were
used first to reduce reorganization value in excess of amounts allocable to
identifiable assets and then to increase additional paid-in capital (See Notes 7
and 20).
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 five-year final overall base compensation.
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, at a minimum, 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 Employee 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.
Postretirement Benefits Other Than Pensions -- The Company provides retiree
life insurance and health plan coverage to qualifying employees. The Company
accounts for these benefits on an accrual basis, under the provisions of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions". These plans are unfunded; however,
the Company makes defined quarterly contributions to the salaried retirees'
Voluntary Employees Beneficiary Association ("VEBA") trust per the settlement
agreement reached in the Company's bankruptcy proceedings (See Note 13).
Income Per Common Share -- Primary and fully diluted income per common
share is based on the weighted average number of shares outstanding in each year
and includes warrants to purchase common stock and dilutive stock options as
common stock equivalents. Due to the large number of outstanding common stock
equivalents, primary and fully diluted earnings per share of the successor
company are calculated using the modified treasury stock method. Primary and
fully diluted earnings per share for the year ended December 31, 1996 were based
on adjusted weighted average shares outstanding of 13,732,673 and adjusted net
income of $55,192,000 and $54,506,000, respectively. Primary and fully diluted
earnings per share for the year ended December 31, 1995 were based on adjusted
weighted average shares outstanding of 14,336,774 and adjusted net income of
$38,096,000 and $37,610,000, respectively.
Environmental Matters -- Accruals for environmental matters are recorded
when it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated, or if an amount is likely to fall within
a range and no amount within that range can be determined to be the better
estimate, the minimum amount of the range is recorded. Accruals for
environmental matters exclude claims for recoveries from insurance carriers and
other third parties until it is probable that such recoveries will be realized.
Recently Issued Accounting Pronouncements -- The Company adopted Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") as of January 1, 1996. The Company has chosen to
continue to apply Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and related interpretations in accounting for its
plans, and has opted to comply with the disclosure requirements of SFAS No. 123
(See Note 17).
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of". Adoption of this statement
did not have an effect on the Company's financial condition or results of
operations.
24
<PAGE> 27
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and revenue and expenses during the periods reported.
Estimates are used when accounting for allowance for uncollectable accounts
receivable, inventory obsolescence, depreciation, employee benefit plans, taxes
and contingencies, among others. Actual results could differ from these
estimates.
2. ACCOUNTS AND NOTES RECEIVABLE
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Trade accounts and notes receivable............................. $ 37,242 $ 35,712
Other receivables............................................... 1,193 1,627
-------- --------
38,435 37,339
Less: Allowance for doubtful accounts........................... 5,099 5,936
-------- --------
$ 33,336 $ 31,403
======== ========
</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.
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Finished goods.................................................. $ 24,913 $ 27,392
Work in process and raw materials............................... 5,347 6,812
Supplies and fuel............................................... 23,609 21,272
-------- --------
$ 53,869 $ 55,476
======== ========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
Land......................................................... $ 39,182 $ 37,529
Buildings and equipment...................................... 295,424 271,928
Construction in progress..................................... 16,753 8,779
Automobiles and trucks....................................... 32,515 27,255
Other........................................................ 100 100
-------- --------
383,974 345,591
Less accumulated depreciation and depletion.................. 60,992 37,655
-------- --------
$ 322,982 $ 307,936
======== ========
</TABLE>
25
<PAGE> 28
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Property, plant and equipment was revalued in accordance with fresh-start
reporting using the March 31, 1994 fair market values, as appraised, and
depreciation is determined based on the estimated remaining useful lives of the
assets.
5. INTEREST COSTS
Interest costs incurred during the years ended December 31, 1996 and 1995,
the nine months ended December 31, 1994 and the three months ended March 31,
1994 were $7,931,000, $9,358,000, $6,980,000 and $271,000, respectively.
Interest capitalized during the years ended December 31, 1996 and 1995, the nine
months ended December 31, 1994 and the three months ended March 31, 1994 was
$1,325,000, $262,000, $168,000 and $38,000, respectively. Interest paid during
the years ended December 31, 1996 and 1995, the nine months ended December 31,
1994 and the three months ended March 31, 1994 was $7,931,000, $9,654,000,
$4,724,000 and $20,000, respectively. The Company stopped accruing interest on
its unsecured prepetition debt during the Chapter 11 proceedings. Contractual
interest for the three months ended March 31, 1994 was $7,631,000.
6. KOSMOS CEMENT COMPANY
The Company's investment in and advances to joint ventures at December 31,
1996 and 1995 consists of its 25% investment in Kosmos Cement Company
("Kosmos"). Kosmos is a partnership with cement plants in Kosmosdale, Kentucky
and Pittsburgh, Pennsylvania.
The amount of cumulative unremitted earnings of joint ventures included in
consolidated retained earnings at December 31, 1996, was $1,880,000. During the
years ended December 31, 1996 and 1995 and the nine months ended December 31,
1994, $9,150,000, $3,750,000 and $3,750,000, respectively, of distributions were
received from Kosmos.
Summarized financial information of Kosmos as of and for the years ended
December 31, 1996 and 1995, the nine months ended December 31, 1994 and the
three months ended March 31, 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
AS OF AND FOR THE
----------------------------------------------------------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1995 1994 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Current assets........................... $ 27,368 $ 37,086 $ 26,302 $ 24,064
Property, plant and equipment, net....... 74,038 74,656 74,259 75,065
Cost in excess of net assets of
businesses acquired.................... 22,485 23,205 24,754 25,312
Current liabilities...................... (4,893) (5,404) (4,430) (3,375)
Other liabilities........................ (2,581) (2,871) (2,955) (3,457)
-------- -------- -------- --------
Net assets............................... $ 116,417 $ 126,672 $ 117,930 $ 117,609
-------- -------- -------- --------
Net sales................................ $ 88,300 $ 76,432 $ 65,184 $ 7,892
Gross profit............................. $ 26,935 $ 23,894 $ 17,306 $ 651
Net income (loss)........................ $ 26,345 $ 23,742 $ 15,321 $ (59)
</TABLE>
At December 31, 1996, 1995, and 1994 and March 31, 1994, the Company's
share of the underlying net assets of Kosmos Cement Company exceeded its
investment by $9,600,000, $10,516,000, $11,309,000 and $11,902,000,
respectively, and is being amortized over the estimated remaining life of the
assets.
7. DEFERRED TAX ASSET
As of December 31, 1995, the Company had various net deferred tax assets of
approximately $98,000,000. These tax assets were made up primarily of the
expected future tax benefit of net operating loss carryforwards, various credit
carryforwards and reserves not yet deductible for tax purposes. A valuation
allowance was provided in full against these net deferred tax assets upon the
Company's emergence from bankruptcy when fresh-start reporting was adopted.
26
<PAGE> 29
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During 1996, the Company reduced the valuation allowance related to the
remaining net tax assets by $81,889,000. The reduction reflects the Company's
expectation that it is more likely than not that it will generate at least
enough future taxable income to utilize this amount of net deferred tax assets.
The benefit from this reduction was recorded as an increase in additional
paid-in capital in accordance with SOP No. 90-7.
During 1996, approximately $25,000,000 of net deferred tax assets were
utilized.
8. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
--------------- ---------------
<S> <C> <C>
Postretirement benefits other than pensions................. $ 7,563 $ 7,800
Insurance................................................... 3,862 4,113
Interest.................................................... 3,270 3,270
Payroll and vacation pay.................................... 3,123 3,398
Pensions.................................................... 2,317 5,900
Taxes other than income taxes............................... 1,899 2,494
Other....................................................... 22,204 20,345
------- -------
$44,238 $47,320
======= =======
</TABLE>
9. SENIOR NOTES PAYABLE
In April 1994, the Company issued $78,000,000 of ten year senior unsecured
notes due July 31, 2003, which bear interest at a rate of 10% per annum. In
March 1997, the Company redeemed $28,000,000 of these senior notes and called
for the early redemption of the remaining $50,000,000 in the second quarter of
1997, using the entire proceeds of its new private placement of senior notes
described below. The redemptions will be at par plus accrued interest.
In March 1997, the Company issued $50,000,000 of 7.31% senior notes due
2007. The note purchase agreement imposes certain operating and financial
restrictions on the Company. Such restrictions limit, among other things, the
ability of the Company to incur additional indebtedness, create liens, engage in
mergers and acquisitions, purchase the Company's capital stock and warrants and
pay dividends. Commencing in the year 2001, the Company is required to make
annual principal payments of $7,142,857.
10. CREDIT AGREEMENT
In April 1994, the Company entered into a three-year $35,000,000 revolving
credit agreement. Although the Company has used the letter of credit facility
provided by the credit agreement, it has never borrowed under the credit
agreement. In March 1997, the Company canceled this agreement and plans to
replace the agreement with a new $100,000,000 unsecured revolving credit
facility which will allow the Company to borrow funds at lower interest rates
and increase the Company's ability to repurchase common stock and warrants.
11. LEASES
Net rental expense for the years ended December 31, 1996 and 1995, the nine
months ended December 31, 1994 and the three months ended March 31, 1994 was
$3,237,000, $4,908,000, $4,894,000 and $755,000, respectively. Minimum rental
commitments under all non-cancelable leases principally pertaining to land,
buildings and equipment are as follows: 1997-$1,449,000; 1998-$1,047,000;
1999-$794,000; 2000-$137,000; 2001-$122,000; after 2001-$536,000. Certain leases
include options for renewal or purchase of leased property.
27
<PAGE> 30
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A subsidiary of the Company was leasing its Florida cement plant with an
original term of approximately twenty years at an 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.
12. 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 five-year final
average base 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 a minimum, 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 ERISA.
Net periodic pension cost of defined benefit plans included the following
components (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE FOR THE NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1995 1994 1994
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Interest cost......................... $ 10,214 $ 10,104 $7,377 $ 2,477
Service cost -- benefit accrued during
the period.......................... 1,938 1,627 1,379 407
Actual return on plan assets.......... (18,803) (28,824) (3,938) (2,338)
Net amortization and deferral......... 9,019 20,469 (2,125) 1,029
------- ------- ------ ------
Net pension cost...................... $ 2,368 $ 3,376 $2,693 $ 1,575
======= ======= ====== ======
</TABLE>
The following tables present the plans' funded status and amounts
recognized in the accompanying consolidated balance sheets at December 31, 1996
and 1995 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------------- ----------------------------------
OVER- OVER- UNDER-
FUNDED FUNDED FUNDED
PLANS PLANS PLANS
----------------------- --------------- ----------------
<S> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits.................... $ 135,686 $51,668 $ 91,115
Non-vested benefits................ 4,290 1,389 3,364
-------- -------- --------
Accumulated benefit obligation....... $ 139,976 $53,057 $ 94,479
-------- -------- --------
Projected benefit obligation......... $ 144,968 $53,057 $ 99,905
Plan assets at fair value............ 172,715 59,290 91,658
-------- -------- --------
Projected benefit obligation (in
excess of) less than plan assets... 27,747 6,233 (8,247)
Unrecognized prior service cost...... 4,518 12 4,165
Unrecognized net gain................ (31,948) (8,013) (6,819)
-------- -------- --------
Pension asset/(liability)............ $ 317 $(1,768) $(10,901)
======== ======== ========
</TABLE>
All of the Company's pension plans were overfunded as of December 31, 1996.
The weighted average discount rates of 7.5% and 7.0% for 1996 and 1995,
respectively, and the rate of annual increase in future compensation levels of
4.5% for 1996 and 1995, were used in determining the actuarial present values of
the projected benefit obligation. The expected long-term rate of return on plan
assets was 8.0% for both 1996 and 1995.
28
<PAGE> 31
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Upon adoption of fresh-start reporting, pension liabilities were recorded
based on the unfunded projected benefit obligation as of March 31, 1994. All
outstanding unamortized and unrecognized items as of March 31, 1994 were
recognized and recorded on the Company's consolidated balance sheet.
Certain union employees are covered under union sponsored multi-employer
pension plans pursuant to collective bargaining agreements. Multi-employer
pension expenses and contributions to the plans in the years ended December 31,
1996 and 1995, the nine months ended December 31, 1994 and the three months
ended March 31, 1994 were approximately $300,000, $300,000, $200,000 and
$50,000, respectively.
In accordance with the plan of reorganization, future obligations were
secured by the grant to the Pension Benefit Guaranty Corporation ("PBGC") of a
mortgage on the Oglesby, Illinois cement plant and a security interest in the
Kosmos Cement Company partnership. In 1996, the Company contributed $15,354,000
to its pension plans. As a result, the PBGC has released the mortgage and
security interest.
13. 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 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 only 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.
Upon adoption of fresh-start reporting, postretirement benefit liabilities
were recorded based on the unfunded accumulated postretirement benefit
obligation as of March 31, 1994. All outstanding unamortized and unrecognized
postretirement benefit items as of March 31, 1994 were recognized and recorded
on the Company's consolidated balance sheet.
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 established a Voluntary Employees
Beneficiary Association ("VEBA"), a tax-exempt trust, and 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. The Company made contributions of $4,428,000,
$4,378,000 and $3,705,000 to the VEBA during the years ended December 31, 1996
and 1995 and the nine months ended December 31, 1994.
Net periodic postretirement benefit cost for the years ended December 31,
1996 and 1995, the nine months ended December 31, 1994 and the three months
ended March 31, 1994 included the following components (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
YEAR YEAR NINE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1995 1994 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Service cost -- benefits attributed to
service during the period............ $1,603 $1,548 $1,536 $ 557
Interest cost on accumulated
postretirement benefit obligation.... 7,618 8,595 6,786 2,896
Net amortization and deferral.......... (1,783) (1,182) -- 22
------ ------ ------ ------
Net periodic postretirement benefit
cost................................. $7,438 $8,961 $8,322 $3,475
====== ====== ====== ======
</TABLE>
29
<PAGE> 32
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Benefits paid, including VEBA contributions, were approximately $6,681,000,
$7,255,000, $6,749,000 and $2,195,000 for the years ended December 31, 1996 and
1995, the nine months ended December 31, 1994 and the three months ended March
31, 1994, respectively.
The actuarial and recorded liabilities for these postretirement benefits,
none of which have been funded, are as follows at December 31, 1996 and 1995 (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees..................................................... $ 76,181 $ 88,341
Fully eligible active plan participants...................... 14,697 18,652
Other active plan participants............................... 12,318 15,160
-------- --------
Accumulated postretirement benefit obligation.................. 103,196 122,153
Unrecognized net gain.......................................... 36,586 16,873
-------- --------
Accrued postretirement benefit cost............................ 139,782 139,026
Less current portion........................................... 7,563 7,800
-------- --------
Long-term accrued post-retirement benefit cost................. $ 132,219 $ 131,226
======== ========
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% and 7.0% for 1996 and 1995,
respectively. Compensation levels are assumed to increase annually at a rate of
4.5% in both 1996 and 1995.
For measurement purposes, a 10.5% annual medical rate of increase is
assumed for 1997 for both pre-medicare and post-medicare claims; the rate is
assumed to decrease 1/2% each year to 6.0% per year after 2005. 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, 1996 by approximately $7,224,000 and the aggregate
of the service and interest cost components of net periodic postretirement
benefit cost for the year ended December 31, 1996 by approximately $941,000.
30
<PAGE> 33
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
14. COMMON STOCK
In April 1994, the Company authorized 25,000,000 shares of $1.00 par value
common stock and issued 12,000,000 shares of that common stock. In 1995, the
authorized number of shares of common stock was increased from 25,000,000 to
50,000,000. Transactions in common stock are as follows:
<TABLE>
<CAPTION>
COMMON TREASURY
SHARES SHARES
--------- --------
<S> <C> <C>
Balance, March 31, 1994................................................ 12,000,000 --
Exercise of warrants................................................... 16 --
---------- ---------
Balance, December 31, 1994............................................. 12,000,016 --
Exercise of warrants................................................... 4,140 --
Exercise of options.................................................... 76,688 --
Odd lot program net share purchases.................................... -- 4,157
Purchase of shares..................................................... -- 600,000
---------- ---------
Balance, December 31, 1995............................................. 12,080,844 604,157
Exercise of warrants................................................... 5,666 --
Exercise of options.................................................... -- (204,565)
Purchase of shares..................................................... -- 974,317
Stock issued under compensation plans.................................. -- (400)
---------- ---------
Balance, December 31, 1996............................................. 12,086,510 1,373,509
========== =========
</TABLE>
At December 31, 1996, the Company has reserved 5,979,754 shares of its
authorized but unissued common stock for possible future issuance in connection
with the exercise of the warrants to purchase common stock (3,993,504 shares)
and the exercise of stock options (1,986,250 shares).
Since the second quarter of 1995, the Company has paid a $0.05 per share
quarterly cash dividend. In addition, on February 20, 1997, the Board of
Directors declared a $0.05 dividend per common share, payable on March 17, 1997
to shareholders of record as of March 1, 1997. The Company's financing
agreements, and the revolving credit facility currently being negotiated,
contain certain restrictive covenants which, among other things, could have the
effect of limiting the payment of dividends and the repurchase of common stock
and warrants. Approximately $64,000,000 is currently available for such payments
under the most restrictive of such covenants (See Notes 9 and 10).
As part of a stock repurchase program, in 1996 the Company purchased
272,401 shares of treasury stock in open market transactions for $8,457,000 and
purchased 700,000 shares of its common stock in private transactions for
$25,200,000. In 1995, the Company repurchased 600,000 shares of its common stock
for $13,875,000. An additional 1,916 shares were received, in lieu of cash, by
the Company in connection with the exercise of certain employee stock options.
In 1995, the Board of Directors approved a plan to repurchase common stock
from shareholders who own less than 100 shares, and to allow shareholders to
increase their shares owned up to 100 shares. No brokerage commissions were
incurred by shareholders related to these transactions. A total of 24,454 shares
were tendered for sale by the shareholders and shareholders purchased 20,297
shares, under this program.
15. WARRANTS TO PURCHASE COMMON STOCK
In April 1994, the Company issued 4,003,333 warrants to purchase common
stock at an exercise price of $18.75 per share. Each warrant entitles the holder
thereof to purchase one share of common stock. The warrants are non-callable,
non-redeemable and expire on December 31, 2000. As of December 31, 1996,
3,993,504 warrants were outstanding.
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
31
<PAGE> 34
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 from the declaration of
regular cash dividends.
16. STOCKHOLDER RIGHTS PLAN
In November 1994, the Board of Directors adopted a Stockholder Rights Plan
("rights plan") under which stock purchase rights were distributed as a dividend
to holders of common stock payable to the shareholders of record on December 19,
1994. Management believes that the rights plan represents a means of deterring
abusive and coercive takeover tactics not offering an adequate price to all
stockholders, and seeks to ensure that stockholders realize the long-term value
of their investments.
The rights plan provides that if, subject to certain exemptions, any person
or group acquires 15% or more of the Company's common stock, each right not
owned by a 15% or more stockholder or related parties will entitle its holder to
purchase, at the right's then current exercise price, shares of common stock
having a value of twice the right's then current exercise price. This right to
purchase common stock at a discount will not be triggered by a person's or
group's acquisition of 15% or more of the common stock pursuant to a tender or
exchange offer which is for all outstanding shares at a price and on terms that
the Board of Directors determines (prior to acquisition) to be adequate and in
the best interests of the Company and its stockholders. In addition, this right
will not be triggered by the stockholdings of certain existing stockholders.
Under the rights plan, holders of the rights will initially be entitled to
buy one-tenth of a share of the Company's common stock at an exercise price of
$70.00 for each whole share which a holder of rights may purchase. Until a
person or group acquires 15% or more of the common stock or commences a tender
or exchange offer for 15% or more of the common stock, the rights will attach to
and trade with the common stock. The rights will expire in the year 2004.
The Company may redeem the rights, at the option of the Board of Directors,
at a redemption price of $0.01 per right at any time prior to the acquisition by
any person or group of 15% or more of the common stock. In addition, after a
person or group has acquired 15% or more of the common stock but before any
person or group has acquired 50% or more of the common stock, the Company may
exchange shares of common stock for rights.
17. STOCK COMPENSATION PLANS
At December 31, 1996, the Company had three stock-based compensation plans,
which are described below. As of January 1, 1996, the Company adopted Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). The Company has chosen to continue to apply
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its plans. Accordingly,
no compensation cost has been recognized for its stock option plans. Had
compensation cost for the Company's stock-based compensation plans been
determined consistent with SFAS No. 123, the Company's net income and earnings
per share for the years ended December 31, 1996 and 1995 would not have been
materially different than those reported. The pro forma effect of stock option
grants on net income for 1996 and 1995 may not be representative of the pro
forma effect on net income in future years due to the small number of options
granted during 1995 and 1996 and the exclusion of option grants made prior to
1995.
Under the Management Stock Option Plan ("Management Plan"), the Company has
granted options to its employees for 700,000 shares of common stock. Under the
Directors Stock Option Plan ("Directors Plan"), the Company may grant options to
its Directors for up to 50,000 shares of common stock. Under the 1996 Long Term
Incentive Plan ("Incentive Plan"), the Company may grant up to 1,500,000 stock
options and/or stock appreciation rights to its employees. Under all plans, the
exercise price of each option must be equal to or greater than the market price
of the Company's stock on the date of grant, and an option's maximum term is ten
years. Options granted under the
32
<PAGE> 35
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Management Plan vest over a three-year period and options granted under the
Directors Plan become vested after six months. Options granted under the
Incentive Plan become vested after a minimum of one year from the grant date.
A summary of the status of the Company's Management and Directors Plans (no
options were granted under the Incentive Plan in 1996) as of and for the years
ended December 31, 1996 and 1995 and the nine months ended December 31, 1994 is
presented below:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
EXERCISE OPTIONS OPTIONS
PRICE OUTSTANDING EXERCISABLE
-------- -------- --------
<S> <C> <C> <C>
Balance, March 31, 1994.................................... $ -- -- --
Options granted.......................................... $ 15.378 706,000 368,754
-------- --------
Balance, December 31, 1994................................. $ 15.378 706,000 368,754
Options granted.......................................... $ 21.355 31,000 --
Options exercised........................................ $ 15.375 (77,185) (77,185)
Options which became exercisable......................... $ 15.939 -- 125,004
Options expired or canceled.............................. $ 15.375 (25,000) (12,500)
-------- --------
Balance, December 31, 1995................................. $ 15.670 634,815 404,073
Options granted.......................................... $ 34.313 6,000 --
Options exercised........................................ $ 15.375 (204,565) (204,565)
Options which became exercisable......................... $ 16.598 -- 124,242
-------- --------
Balance, December 31, 1996................................. $ 16.065 436,250 323,750
======== ========
</TABLE>
Options available for future grants under the Directors' Plan were 32,000
and 38,000 at December 31, 1996 and 1995, respectively. Options available for
future grants under the Incentive Plan were 1,500,000 at December 31, 1996.
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
DECEMBER 31, 1996 -----------------------------------------
----------------------- REMAINING OPTION EXERCISE PRICES
NUMBER NUMBER CONTRACTUAL -----------------------
RANGE OF EXERCISE PRICES OUTSTANDING EXERCISABLE LIFE OUTSTANDING EXERCISABLE
- -------------------------------- ------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
$15.375-$15.688 399,250 299,250 7.5 years $15.380 $15.381
$20.750-$21.50 31,000 18,500 8.5 years $21.355 $21.257
$34.313 6,000 6,000 9.5 years $34.313 $34.313
------- -------
436,250 323,750
======= =======
</TABLE>
18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1996 (in thousands). In
accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments", the fair value of a
financial instrument is the amount at which the instrument could be exchanged in
a current transaction between willing parties.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------
CARRYING FAIR
AMOUNT VALUE
--------- ---------
<S> <C> <C>
Financial assets:
Cash and cash equivalents..................................... $ 71,215 $ 71,215
Financial liabilities:
Senior notes payable.......................................... $ 78,000 $ 79,268
</TABLE>
33
<PAGE> 36
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amounts shown in the table are included in the accompanying
consolidated balance sheet under the indicated captions.
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 cash equivalents -- the carrying amount approximates fair value
because of the short maturity of those instruments.
Senior notes payable -- the fair value of long-term debt is based on quoted
market prices. As of December 31, 1996 the senior notes were trading at 101.625%
of face value.
19. OTHER INCOME, NET
Other income, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
YEAR YEAR NINE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1995 1994 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Rental income.......................... $ 200 $ 507 $1,105 $2,184
Interest income on investments......... 2,523 2,783 1,266 179
Other interest income.................. 29 74 49 160
Other, net............................. 255 676 1,400 168
------ ------ ------ ------
$3,007 $4,040 $3,820 $2,691
====== ====== ====== ======
</TABLE>
34
<PAGE> 37
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
20. INCOME TAXES
Provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE FOR THE NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1995 1994 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Federal:
Current.................................. $ (1,314) $ (1,098) $ -- $ 635
-------- -------- -------- ---------
Deferred:
Difference between tax and book
depreciation........................ (3,402) (1,308) 3,548 3,348
Sale of assets........................ (2,467) (7,868) (9,716) --
Investment and other credits.......... (1,139) 864 (7,790) (851)
Net operating loss carryforward....... (8,453) (1,308) (2,388) 37,526
Restructuring and other reserves...... (6,204) (10,184) (4,946) 12,578
Change in valuation allowance......... 75,109 18,504 21,295 (53,249)
Other, net............................ (3,543) 1,300 (3) 13
-------- -------- -------- ---------
Total deferred........................... 49,901 -- -- (635)
-------- -------- -------- ---------
Reduction of reorganization value........ -- -- (13,830) --
Increase in additional paid-in capital... (71,289) (14,196) -- --
-------- -------- -------- ---------
Total federal.............................. (22,702) (15,294) (13,830) --
-------- -------- -------- ---------
Foreign:
Current.................................. -- -- (16) (5)
-------- -------- -------- ---------
Total foreign.............................. -- -- (16) (5)
-------- -------- -------- ---------
State and local:
Current.................................. (877) (700) (750) (150)
Deferred................................. (4,031) -- (1,204) --
Change in valuation allowance............ 10,600 -- -- --
Increase in additional paid-in capital... (10,600) (1,620) -- --
-------- -------- -------- ---------
Total state and local...................... (4,908) (2,320) (1,954) (150)
-------- -------- -------- ---------
$ (27,610) $ (17,614) $ (15,800) $ (155)
======== ======== ======== =========
</TABLE>
As of December 31, 1996, the Company has investment tax credit
carryforwards for federal income tax purposes of $4,559,000 which expire at
various dates through 2001. The Company also has regular tax and alternative
minimum tax net operating loss carryforwards of approximately $180,000,000 and
$33,000,000, respectively, which expire at various dates through 2009 and an
alternative minimum tax credit carryforward of $6,800,000. 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" resulted
from the issuance of equity securities by the Company as part of its plan of
reorganization (See Note 1). Such an "ownership change" limits the use of a
portion of the Company's carryforwards which could result in their expiration.
Accordingly, under Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", a valuation allowance has been applied to a
portion of these carryforwards.
35
<PAGE> 38
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following is a schedule of consolidated pre-tax income (loss) and a
reconciliation of income taxes computed at the U.S. statutory rate to the
provision for income taxes (in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE FOR THE NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1995 1994 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income (loss) before income taxes.......... $ 81,770 $ 53,376 $ 45,133 $ (22,963)
-------- -------- -------- --------
Tax (provision) benefit computed at
statutory rates.......................... (28,620) (18,681) (15,796) 8,037
Differences resulting from:
Foreign subsidiaries, net................ -- (140) (175) (294)
Restructuring............................ -- -- -- 45,212
State tax, net........................... (3,190) (2,320) (1,954) (150)
Other, including percentage depletion.... 4,200 3,527 2,125 --
Valuation allowance...................... -- -- -- (52,960)
-------- -------- -------- --------
$ (27,610) $ (17,614) $ (15,800) $ (155)
======== ======== ======== ========
</TABLE>
Components of net deferred tax assets (liabilities) as of December 31, 1996
and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Current tax assets related to:
Reserves not yet deducted....................................... $ 4,524 $ 8,711
Valuation allowance............................................. (913) (8,711)
-------- --------
Net current tax assets............................................ 3,611 --
Non-current tax assets related to:
Reserves not yet deducted....................................... 4,134 6,611
Reserve for retiree benefits.................................... 46,277 45,817
Loss carryforwards.............................................. 62,953 70,334
Investment tax credits.......................................... 4,559 5,940
Alternative minimum tax credits................................. 6,817 6,575
Net state....................................................... 6,698 13,694
-------- --------
131,438 148,971
Non-current tax liabilities related to:
Fixed assets.................................................... (54,194) (50,317)
Other........................................................... (14,932) (6,688)
Domestic joint ventures......................................... (2,967) (8,763)
-------- --------
(72,093) (65,768)
Valuation allowance............................................. (11,980) (89,891)
-------- --------
Total long-term net assets (liabilities).......................... 47,365 (6,688)
-------- --------
Total net federal tax assets (liabilities)........................ $ 50,976 $ (6,668)
======== ========
</TABLE>
36
<PAGE> 39
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In accordance with AICPA Statement of Position No. 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code", income tax
benefits recognized from preconfirmation net operating loss carryforwards and
other tax assets were used first to reduce the reorganization value in excess of
amounts allocable to identifiable assets and then increase additional paid-in
capital.
Net income taxes paid during the years ended December 31, 1996 and 1995,
the nine months ended December 31, 1994 and the three months ended March 31,
1994 were $812,000, $395,000, $86,000 and $756,000, respectively.
21. ASSET DISPOSITIONS
In March 1997, the Company sold its central Illinois ready-mixed and other
concrete operations, including inventories, for about $10,500,000 which
approximated book value.
In December 1995, the Company sold its concrete railroad cross-tie plant
and office building in Denver, Colorado for $2,250,000, which approximated book
value.
In October 1995, the Company sold the assets of its Nova Scotia, Canada
aggregate quarry including working capital for $11,408,000, which approximated
book value.
In February, March and June 1995, the Company sold the assets of its hollow
metal door/hardware business in Illinois, a piece of surplus property in
Mississippi and a cement terminal in Florida for $290,000, $325,000 and
$390,000, respectively. The Company had been leasing the terminal to the buyer
prior to the sale.
In June 1994, the Company sold its interest in a cement plant located in
Florida for $21,750,000, which approximated book value. The plant had been
leased to a third party and was purchased by the lessee.
The operations sold in 1997, 1995 and 1994 contributed the following
results for the period through their respective dates of disposition (in
thousands):
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE FOR THE NINE THREE
YEAR ENDED YEAR ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1995 1994 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales............................... $ 21,613 $ 24,512 $ 26,820 $ 3,168
Pre-tax income (loss)................... $ 1,846 $ 33 $ 117 $ (1,015)
</TABLE>
37
<PAGE> 40
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
22. 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 plan (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 its Chapter 11 bankruptcy
proceedings and adopted fresh-start reporting prior to January 1, 1994. The pro
forma data is unaudited.
LONE STAR INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<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 17.5 57.5
-------- ------- -------
Loss before reorganization items................................. (3.2) (7.7) (10.9)
Reorganization items:
Adjustments to fair value...................................... (133.9) 133.9 --
Other.......................................................... (13.4) 13.4 --
-------- ------- -------
Total reorganization items....................................... (147.3) 147.3 --
-------- ------- -------
Loss before income taxes and extraordinary item.................. (150.5) 139.6 (10.9)
Credit (provision) for income taxes.............................. (0.2) 4.0 3.8
-------- ------- -------
Loss before extraordinary item................................... (150.7) 143.6 (7.1)
Extraordinary item: gain on discharge of prepetition
liabilities.................................................... 127.5 (127.5) --
-------- ------- -------
Loss before provision for preferred dividends.................... $ (23.2) $ 16.1 $ (7.1)
======== ======= =======
Primary and fully diluted loss per common share.................. $ (0.59)
=======
</TABLE>
38
<PAGE> 41
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following pro forma condensed financial information for the year ended
December 31, 1994 illustrates the estimated operating results as if the Company
had emerged from its Chapter 11 proceedings and adopted fresh-start reporting
prior to January 1, 1994 by combining the pro forma results for the three months
ended March 31, 1994 and the actual results for the nine months ended December
31, 1994.
LONE STAR INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACTUAL
PRO FORMA RESULTS FOR PRO FORMA
RESULTS FOR THE NINE RESULTS
THE THREE MONTHS FOR THE
MONTHS ENDED YEAR ENDED
ENDED DECEMBER DECEMBER
MARCH 31, 31, 31,
1994 1994 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Net sales..................................................... $ 45.3 $ 261.6 $ 306.9
Joint venture income.......................................... 0.1 4.5 4.6
Other income.................................................. 1.2 3.8 5.0
------ ------ ------
46.6 269.9 316.5
------ ------ ------
Deductions from revenues:
Cost of sales................................................. 47.4 177.0 224.4
Recovery of litigation settlement............................. (6.5) -- (6.5)
Selling, general and administrative........................... 8.3 23.8 32.1
Depreciation and depletion.................................... 6.1 17.2 23.3
Interest expense.............................................. 2.2 6.8 9.0
------ ------ ------
57.5 224.8 282.3
------ ------ ------
Income (loss) before income taxes............................... $ (10.9) $ 45.1 34.2
====== ======
Provision for income taxes...................................... (12.0)
------
Net income...................................................... $ 22.2
======
Primary income per common share................................. $ 1.76
======
Fully diluted income per common share........................... $ 1.75
======
</TABLE>
The above pro forma condensed financial information includes estimated
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
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 forma consolidated operating results for the three
months ended March 31, 1994 and the year ended December 31, 1994.
The operating results of the assets and liabilities which were transferred
to a liquidating subsidiary 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.
39
<PAGE> 42
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
Interest expense related to long-term debt, including the senior notes of
the reorganized company, has been included in the pro forma statements of
operations.
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.
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.
All Chapter 11 reorganization items included in the historical statements
of operations have been eliminated from the pro forma statements of operations.
The extraordinary gain on discharge of pre-petition liabilities has been
eliminated.
The pro forma statements of operations have been adjusted, in accordance
with the requirements of fresh-start reporting, to reflect the reduction in
expenses resulting from bankruptcy-related settlements, including settlements
reached with the PBGC and retirees.
23. 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,
include the following (in thousands):
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED
MARCH 31,
1994
------------
<S> <C>
Professional fees and administrative expenses.................................. $ (15,431)
Interest income................................................................ 2,035
---------
(13,396)
Adjustments to fair value...................................................... (133,917)
---------
$ (147,313)
=========
</TABLE>
Professional fees and administrative expenses related to the Chapter 11
proceedings were expensed as incurred. Interest income represents interest
earned on cash accumulated as a result of the Chapter 11 proceedings.
24. ENVIRONMENTAL MATTERS
The Company is subject to extensive, stringent and complex federal, state
and local laws, regulations and ordinances pertaining to the quality and the
protection of the environment and human health and safety, requiring the Company
to devote substantial time and resources in an effort to maintain continued
compliance. Many of the laws and regulations apply to the Company's former
activities, properties and facilities as well as its current operations. Changes
to such regulations or the enactment of new regulations in the future could
require the Company to undertake capital improvement projects or to cease or
curtail certain current operations or could otherwise substantially increase the
capital, operating and other costs associated with compliance. Moreover, there
can be no assurances that judicial or administrative
40
<PAGE> 43
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
proceedings, seeking penalties or injunctive relief, will not be brought against
the Company for alleged non-compliance with applicable environmental laws and
regulations relating to matters as to which the Company is currently unaware.
For instance, 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 Clean Air Act was amended in 1990 to provide for a uniform federal
regulatory scheme governing control of air pollutant emissions and permit
requirements. In addition, certain 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. As a result of the 1990
amendments to the Clean Air Act, the Company is required to apply for federal
operating permits for each of its cement manufacturing facilities at various
dates ranging from 1996 through 1999. 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, the EPA will identify maximum available
control technology ("MACT") for the reduction of emissions of air toxics from
cement manufacturing facilities. On March 20, 1996, the EPA announced proposed
separate, more stringent MACT standards for those cement manufacturing
facilities (like Lone Star's Greencastle and Cape Girardeau plants) that burn
hazardous waste fuels ("HWF"). These standards are subject to public comment and
are not anticipated by the Company to be effective prior to early 1999 and
thereafter will be implemented over a three-year period. They are extremely
lengthy and complex and, depending on their terms when they become effective,
could have the effect of limiting or eliminating the use of HWF at one or both
facilities. The Company anticipates that standards for facilities burning fossil
fuels will be initially proposed in the second quarter of 1997.
The 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 that
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. 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. However, on January 31, 1995, the EPA
issued a regulatory determination regarding the need for regulatory controls on
the management, handling and disposal of CKD. Generally, the EPA regulatory
determination provides that the EPA intends to draft and promulgate regulations
imposing controls on the management, handling and disposal of CKD that will be
based largely on selected components of the existing RCRA hazardous waste
regulatory program, tailored to address the specific regulatory concerns posed
by CKD. The EPA regulatory determination further provides that new CKD
regulations will be designed both to be protective of the environment and to
minimize the burden on cement manufacturers. While it is not possible to predict
at this time precisely what new regulatory controls on the management, handling
and disposal of CKD or what increased costs (or range of costs) would be
incurred by the Company to comply with these requirements, the EPA announced in
1996 that regulations will be promulgated through a rulemaking scheduled to be
completed in late 1997, and that, thereafter, these rules would become effective
in 1998 and thereafter will be implemented over a three-year period. The types
of controls being considered by the EPA include fugitive dust emission controls,
restrictions for landfills located in sensitive areas, groundwater monitoring,
standards for liners and caps, metals limits and corrective action for currently
active units.
In 1995, the State of Indiana made a determination that the CKD stored at
the Company's Greencastle plant is a Type I waste and requested that the Company
apply for a formal permit for an on-site landfill for the CKD. The Company
understands that similar notices were sent to other cement manufacturers in the
State of Indiana. The Company is protesting this determination through legal
channels and has received a stay to allow it to demonstrate that current
management practices pose no threat to the environment. The Company believes
that the State's determination ultimately will be reversed or the Company will
receive the needed permit or other adequate relief, such as an agreed order
requiring certain additional waste management procedures that are less stringent
than those generally required for
41
<PAGE> 44
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Type I wastes. If the Company is not successful in this regard, however, like
other Indiana cement producers, the Greencastle plant could incur substantially
increased operating and capital costs.
The Cape Girardeau, Missouri and Greencastle, Indiana plants, which are the
Company's two cement manufacturing facilities using HWF as a cost saving energy
source, are subject to strict federal, state and local requirements governing
hazardous waste treatment, storage and disposal facilities, including those
contained in the federal Boiler and Industrial Furnace Regulations promulgated
under RCRA (the "BIF Rules"). These facilities qualified for and operate 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, in the past Lone Star has been involved in
certain environmental enforcement proceedings seeking civil penalties and
injunctive relief for past non-compliance, and there can be no assurances that
the Company 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 continue to burn HWF.
The Company is currently engaged in the process of securing the permit
required under RCRA and the BIF Rules for the Cape Girardeau plant. The Company
anticipates that the Greencastle plant also will go through this permitting
process in 1997. These permits are a requirement to enable Lone Star 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 the Company will be successful in securing a final RCRA permit
for either or both of its HWF facilities. In addition, if received, the permits
could contain terms and conditions with which the Company cannot comply or could
require the Company to install and operate costly control technology equipment.
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. While, as noted above, wastes produced by the Company generally are
not classified as hazardous wastes, many of the raw materials, by-products and
wastes currently and previously produced, used or disposed of by the Company or
its predecessors contain chemical elements or components that have been
designated as hazardous substances or which otherwise may cause environmental
contamination. Hazardous substances are or have been used or produced by the
Company in connection with its cement manufacturing operations (e.g. grinding
compounds, refractory bricks), quarrying operations (e.g. blasting materials),
equipment operation and maintenance (e.g. lubricants, solvents, grinding aids,
cleaning aids, used oils), and hazardous waste fuel burning operations. Past
operations of the Company have resulted in releases of hazardous substances at
sites currently or formerly owned by the Company and certain of its subsidiaries
or where waste materials generated by the Company have been disposed. CKD and
other materials were placed in depleted quarries and other locations for many
years. The Company has been named by the EPA as a potentially responsible party
for the investigation and remediation of several Superfund sites. Available
factual information indicates that the Company's disposal of waste at these
Superfund sites (other than sites that have been remediated or as to which the
Company has entered into settlement agreements with the EPA) was small or
non-existent, and the Company may have certain defenses arising out of its
reorganization. The Company has received a letter from EPA Region 4 reasserting
a claim for approximately $830,000 of oversight costs and accrued interest
associated with the Company's cleanup of the site of a former woodtreating
operation in Dania, Florida. The Company is contesting this claim. The Company
is also reviewing certain of its inactive properties to determine if any
remedial action may be required at these sites.
The December 31, 1996 consolidated balance sheet includes accruals of
$6,600,000 which represent the Company's current estimate of its liability
related to future remediation costs at sites where known environmental
conditions exist. The Company believes these reserves to be adequate for known
environmental matters.
42
<PAGE> 45
LONE STAR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
25. LITIGATION
From time to time the Company is named as a defendant in lawsuits asserting
product liability for which the Company maintains insurance coverage. In this
regard, the Company is one of many defendants, including several cement
manufacturers, named in two product liability lawsuits in southern Texas that
allege that cement is an unreasonably dangerous product that has injured a large
number of plaintiffs. The Company believes this type of litigation is totally
without merit and plans to contest the lawsuits vigorously. The Company has also
been named in a lawsuit asserting that it has successor liability for certain
defunct subsidiaries which allegedly manufactured faulty prestressed "double
tees" resulting in property damage to a retail store (and consequent loss of
business) in south Florida during Hurricane Andrew in 1992. In late 1995, an
office building in Boston, Massachusetts, constructed in 1983 using concrete
pilings produced by San-Vel Concrete Corporation, an inactive Lone Star
subsidiary ("San-Vel"), was demolished by order of the City of Boston based upon
an engineering report that the pilings were unreliable. In March 1997, the owner
of the demolished building brought suit against San-Vel and the Company
alleging, among other things, that San-Vel was negligent in producing, and that
it breached representations relating to, the pilings. At the request of the City
of Boston, San-Vel has provided a list of the approximate twenty-five other
buildings built in that City between 1980 and 1990 using San-Vel pilings. The
City has reportedly inspected these buildings visually, without noting any
apparent piling failure. Engineering studies also have reportedly been
conducted, and the Company has not received the results of these studies. The
Company believes that the cement component of the concrete used to produce the
pilings in certain of these buildings, including the demolished building, was
produced by it at one of its formerly owned cement plants. There has been no
indication that the cement was defective. The Company plans to contest this
lawsuit vigorously, and believes that it has good defenses to the lawsuit,
however the litigation is at a very preliminary stage, and no assurances as to
its ultimate outcome can be given. All of these matters are being defended by
the Company's insurers.
26. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 is as follows (in
thousands except per share data):
<TABLE>
<CAPTION>
QUARTER
---------------------------------------
1996 FIRST SECOND THIRD FOURTH
--------------------------------------------------------- ------- -------- -------- -------
<S> <C> <C> <C> <C>
Net sales................................................ $52,987 $102,307 $118,349 $94,030
Gross profit............................................. $ 2,208 $ 31,989 $ 42,993 $29,771
Net income (loss)........................................ $(3,276) $ 17,263 $ 25,346 $14,827
------- -------- -------- -------
Primary net income (loss) per common share............... $ (0.29) $ 1.26 $ 1.86 $ 1.13
------- -------- -------- -------
Fully diluted net income (loss) per common share......... $ (0.29) $ 1.26 $ 1.86 $ 1.13
------- -------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
QUARTER
----------------------------------------
1995 FIRST SECOND THIRD FOURTH
-------------------------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Net sales............................................... $ 52,711 $ 87,553 $100,611 $82,133
Gross profit............................................ $ 427 $ 26,563 $ 31,478 $23,491
Net income (loss)....................................... $ (5,082) $ 12,133 $ 18,122 $10,589
------- -------- -------- -------
Primary net income (loss) per common share.............. $ (0.42) $ 0.89 $ 1.30 $ 0.79
------- -------- -------- -------
Fully diluted net income (loss) per common share........ $ (0.42) $ 0.89 $ 1.30 $ 0.78
------- -------- -------- -------
</TABLE>
- ---------------
(1) Gross profit is net of depreciation expense relating to cost of sales of
$23,598,000 and $23,107,000, in the years ended December 31, 1996 and 1995,
respectively.
(2) Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share in 1996
and 1995 does not equal the total computed for the year due primarily to the
use of the modified treasury stock method throughout the two years except
for the first quarter of 1996 and 1995 in which the result was anti-dilutive
and the effect of the repurchase of common stock by the Company.
43
<PAGE> 46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
The information required by Part III (Items 10-13) is incorporated herein
by reference to the captions "Election of Directors," "Executive Compensation"
and "Security Ownership of Certain Beneficial Owners and Management" in the
Company's definitive proxy statement which pursuant to Regulation 14A will be
filed not later than 120 days after the end of the fiscal year covered by this
Report. Certain information relating to the Company's executive officers is
included in Part I of this Report under the caption "Executive Officers of
Registrant."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Report:
1. FINANCIAL STATEMENTS AND SCHEDULE: See Index to Financial
Statements and Schedule on page 17 of this Report.
2. EXHIBITS:
<TABLE>
<C> <S>
2.1 -- Voluntary Petition for Relief under Chapter 11 of the United States Bankruptcy
Code dated December 10, 1990 (incorporated herein by reference on Exhibit 28A
of the Registrant's Annual Report on Form 10-K for the 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).
2.3 -- Modification of Debtor's Plan of Reorganization (incorporated herein by
reference to Exhibit 2 of the Registrant's Current Report on Form 8-K dated
March 1, 1994).
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 year ended December 31, 1993).
3.1 -- Amended and Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 3.1 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994).
3.2 -- Certificate of Amendment of Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit 3.1 of the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995).
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 quarter ended June 30,
1994).
4.1 -- Form of Note Purchase Agreement, dated as of March 10, 1997, relating to the
Company's $50 million principal amount of 7.31% Senior Notes Due 2007 (filed
herewith).
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 quarter ended June
30, 1994).
4.3 -- Rights Agreement, dated as of November 10, 1994, between Lone Star Industries,
Inc. and Chemical Bank (incorporated herein by reference to the Registrant's
Form 8-A, dated November 17, 1994).
</TABLE>
44
<PAGE> 47
<TABLE>
<C> <S>
10.1 -- 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. (incorporated herein by reference to Exhibit
10.23 of the Registrant's Registration Statement on Form S-1, File Number
33-55377).
10.2 -- Agreement, dated as of March 11, 1994, by and between the Debtors and the
Unions (incorporated herein by reference to Exhibit 10.25 of the Registrant's
Registration Statement on Form S-1, File Number 33-55377).
10.3 -- 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 (incorporated
herein by reference to Exhibit 10.22 of the Registrant's Registration Statement
on Form S-1, File Number 33-55377).
10.4 -- Rights Agreement, dated as of November 10, 1994, between Lone Star Industries,
Inc. and Chemical Bank (incorporated herein by reference to the Registrant's
Form 8-A, dated November 17, 1994).
*10.5 -- Amended and Restated Employment Agreement, dated as of February 1, 1996,
between David W. Wallace and Lone Star Industries, Inc. (incorporated by
reference to Exhibit 10.6 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995).
*10.6 -- Amended and Restated Employment Agreement, dated as of February 1, 1996 (the
"Troutman Employment Agreement"), between William M. Troutman and Lone Star
Industries, Inc. (incorporated by reference to Exhibit 10.8 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.6(i) -- Amendment No. 1, effective August 1, 1996, to the Troutman Employment Agreement
(filed herewith).
*10.7 -- Amended and Restated Agreement, dated November 20, 1996, between William M.
Troutmen and Lone Star Industries, Inc. (filed herewith).
*10.8 -- 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 quarter
ended June 30, 1994).
*10.9 -- 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
quarter ended June 30, 1994).
*10.10 -- Form of "Change of Control" agreement for certain executive officers of Lone
Star Industries, Inc. (incorporated herein by reference to Exhibit 10.14 of the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
*10.11 -- 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 quarter ended June 30,
1994).
*10.12 -- 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 quarter ended June 30,
1994).
*10.13 -- 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 quarter ended June 30, 1994).
*10.14 -- 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).
*10.15 -- Lone Star Industries, Inc. Employees Stock Purchase Plan (incorporated herein
by reference to Appendix B of the Registrant's Definitive Proxy Statement,
dated May 11, 1994).
*10.16 -- 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).
</TABLE>
45
<PAGE> 48
<TABLE>
<C> <S>
*10.17 -- Lone Star Industries, Inc. 1996 Long Term Incentive Plan (incorporated herein
by reference to Appendix A of the Registrant's Definitive Proxy Statement,
dated April 1, 1996).
*10.18 -- Lone Star Industries, Inc. Supplemental Executive Retirement Plan, effective
July 1, 1996 (filed herewith).
*10.19 -- Lone Star Industries, Inc. Executive Incentive Plan (filed herewith).
*10.20 -- Lone Star Industries, Inc. Voluntary Deferred Compensation Plan for
Non-Employee Directors (incorporated herein by reference to Appendix B of the
Registrant's Definitive Proxy Statement, dated April 1, 1996).
11 -- Statement re computation of per share earnings (filed herewith).
12 -- Statement re computation of per share earnings to fixed charges (filed
herewith).
21 -- Subsidiaries of the Company (filed herewith).
23 -- Consent of Coopers & Lybrand L.L.P. (filed herewith).
27 -- Financial Data Schedules (filed herewith).
</TABLE>
(b) Reports on Form 8-K.
Not applicable.
- ---------------
* Indicates management contract or compensatory plan or arrangement.
46
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
LONE STAR INDUSTRIES, INC.
By: /s/ JAMES W. LANGHAM
-------------------------------------
JAMES W. LANGHAM
Vice President, General
Counsel and Secretary
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE OR CAPACITY DATE
- ------------------------------------- ---------------------------------------------- ---------------
<C> <S> <C>
/s/ DAVID W. WALLACE Director, Chairman of the Board and Chief March 24, 1997
- ------------------------------------- Executive Officer
DAVID W. WALLACE
/s/ JAMES E. BACON Director March 24, 1997
- -------------------------------------
JAMES E. BACON
/s/ THEODORE F. BROPHY Director March 24, 1997
- -------------------------------------
THEODORE F. BROPHY
/s/ ARTHUR B. NEWMAN Director March 18, 1997
- -------------------------------------
ARTHUR B. NEWMAN
/s/ ALLEN E. PUCKETT Director March 12, 1997
- -------------------------------------
ALLEN E. PUCKETT
/s/ ROBERT G. SCHWARTZ Director March 25, 1997
- -------------------------------------
ROBERT G. SCHWARTZ
/s/ WILLIAM M. TROUTMAN Director, President and Chief Operating March 26, 1997
- ------------------------------------- Officer
WILLIAM M. TROUTMAN
Director
- -------------------------------------
JACK R. WENTWORTH
/s/ WILLIAM E. ROBERTS Vice President, Chief Financial Officer, March 26, 1997
- ------------------------------------- Controller and Treasurer
WILLIAM E. ROBERTS
</TABLE>
47
<PAGE> 50
LONE STAR INDUSTRIES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995, THE NINE MONTHS ENDED
DECEMBER 31, 1994 AND THE THREE MONTHS ENDED MARCH 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE --------------------------
AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(2) DEDUCTIONS(1) PERIOD
- ------------------------------------------- --------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts deducted
from notes and accounts receivable....... $ 5,936 270 1,401 2,508 $5,099
====== === === ===== ======
FOR THE YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts deducted
from notes and accounts receivable.... $ 7,226 399 509 2,198 $5,936
====== === === ===== ======
FOR THE NINE MONTHS ENDED DECEMBER 31, 1994
Allowance for doubtful accounts deducted
from notes and accounts receivable.... $ 8,843 700 54 2,371 $7,226
====== === === ===== ======
FOR THE THREE MONTHS ENDED MARCH 31, 1994
Allowance for doubtful accounts deducted
from notes and accounts receivable.... $ 8,913 260 15 345 $8,843
====== === === ===== ======
</TABLE>
- ------------------------
(1) Deductions in the years ended December 31, 1996 and 1995, and the nine
months ended December 31, 1994 primarily represent uncollectible
accounts charged off. Deductions in the three months ended March 31,
1994 also include certain adjustments related to the Company's
emergence from its Chapter 11 proceedings.
(2) Represents recoveries of accounts previously charged off, and reserves
related to dispositions.
48
<PAGE> 51
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Lone Star Industries, Inc. on Form S-3 (File No. 33-55377) and S-8 (File Nos.
33-55277, 33-55261, 33-55229, 333-11057 and 333-11059) of our report, dated
February 3, 1997, which includes an explanatory paragraph related to the
Company's reorganization effective April 14, 1994, accompanying the consolidated
financial statements and financial statement schedule of Lone Star Industries,
Inc. and Consolidated Subsidiaries as of December 31, 1996 and 1995, and for the
years ended December 31, 1996 and 1995, the nine months ended December 31, 1994
and the three months ended March 31, 1994, which report is included in this
Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
March 24, 1997
[RECYCLED LOGO]
49
<PAGE> 52
<TABLE>
<S> <C>
BOARD OF DIRECTORS CORPORATE HEADQUARTERS AND
INVESTOR RELATIONS
DAVID W. WALLACE Lone Star Industries, Inc.
Chairman & Chief Executive Officer 300 First Stamford Place
P.O. Box 120014
WILLIAM M. TROUTMAN Stamford, CT 06912-0014
President & Chief Operating Officer Attn: Thomas S. Hoelle,
Vice President--Planning
JAMES E. BACON Telephone: (203) 969-8600
Former Executive Vice President Fax: (203) 969-8546
and Director
United States Trust Company OPERATIONS OFFICES
162 Old Mill Road
THEODORE F. BROPHY West Nyack, NY 10994
Former Chairman & Chief Executive and
Officer 8902 Vincennes Circle
GTE Corporation Suite A
Indianapolis, IN 46268
ARTHUR B. NEWMAN
Member JOINT VENTURE
Blackstone Group Holdings L.L.C. Kosmos Cement Company
15301 Dixie Highway
ALLEN E. PUCKETT Kosmosdale, KY 40272
Chairman Emeritus
Hughes Aircraft Company SECURITY LISTINGS
Lone Star common shares and
ROBERT G. SCHWARTZ common share warrants are listed
Former Chairman, President on the New York Stock Exchange.
and Chief Executive Officer The trading symbols are:
Metropolitan Life Insurance Company Common Stock LCE
Warrants LCE WS
JACK R. WENTWORTH AUDITORS
Arthur M. Weimer Professor Emeritus Coopers & Lybrand L.L.P.
and Former Dean of Graduate
School of Business TRANSFER AGENT, REGISTRAR
Indiana University AND DIVIDEND DISBURSING AGENT
FOR COMMON STOCK
ChaseMellon Shareholder Services,
L.L.C. Overpeck Centre
</TABLE> 85 Challenger Road
P.O. Box 590
Ridgefield Park, NJ 07660
Telephone: (800) 851-9677
<PAGE> 53
[LONE STAR LOGO]
Lone Star Industries, Inc.
300 First Stamford Place
Stamford, CT 06912
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
--------- ----------------------------------------------------------------------- -----
<C> <C> <S> <C>
2.1 -- Voluntary Petition for Relief under Chapter 11 of the United States
Bankruptcy Code dated December 10, 1990 (incorporated herein by
reference on Exhibit 28A of the Registrant's Annual Report on Form 10-K
for the 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).
2.3 -- Modification of Debtor's Plan of Reorganization (incorporated herein by
reference to Exhibit 2 of the Registrant's Current Report on Form 8-K
dated March 1, 1994).
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 year ended December 31,
1993).
3.1 -- Amended and Restated Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.1 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994).
3.2 -- Certificate of Amendment of Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.1 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995).
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 quarter ended
June 30, 1994).
4.1 -- Form of Note Purchase Agreement, dated as of March 10, 1997, relating
to the Company's $50 million principal amount of 7.31% Senior Notes Due
2007 (filed herewith).
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 quarter ended June 30, 1994).
4.3 -- Rights Agreement, dated as of November 10, 1994, between Lone Star
Industries, Inc. and Chemical Bank (incorporated herein by reference to
the Registrant's Form 8-A, dated November 17, 1994).
10.1 -- 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. (incorporated herein by
reference to Exhibit 10.23 of the Registrant's Registration Statement
on Form S-1, File Number 33-55377).
10.2 -- Agreement, dated as of March 11, 1994, by and between the Debtors and
the Unions (incorporated herein by reference to Exhibit 10.25 of the
Registrant's Registration Statement on Form S-1, File Number 33-55377).
10.3 -- 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 (incorporated herein by reference to Exhibit 10.22 of
the Registrant's Registration Statement on Form S-1, File Number
33-55377).
10.4 -- Rights Agreement, dated as of November 10, 1994, between Lone Star
Industries, Inc. and Chemical Bank (incorporated herein by reference to
the Registrant's Form 8-A, dated November 17, 1994).
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
Exhibit Description Page
--------- ----------------------------------------------------------------------- -----
<C> <C> <S> <C>
*10.5 -- Amended and Restated Employment Agreement, dated as of February 1,
1996, between David W. Wallace and Lone Star Industries, Inc.
(incorporated by reference to Exhibit 10.6 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995).
*10.6 -- Amended and Restated Employment Agreement, dated as of February 1, 1996
(the "Troutman Employment Agreement"), between William M. Troutman and
Lone Star Industries, Inc. (incorporated by reference to Exhibit 10.8
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.6(i) -- Amendment No. 1, effective August 1, 1996, to the Troutman Employment
Agreement (filed herewith).
*10.7 -- Amended and Restated Agreement, dated November 20, 1996, between
William M. Troutmen and Lone Star Industries, Inc. (filed herewith).
*10.8 -- 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 quarter ended June 30, 1994).
*10.9 -- 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 quarter ended June 30, 1994).
*10.10 -- Form of "Change of Control" agreement for certain executive officers of
Lone Star Industries, Inc. (incorporated herein by reference to Exhibit
10.14 of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
*10.11 -- 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 quarter
ended June 30, 1994).
*10.12 -- 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 quarter
ended June 30, 1994).
*10.13 -- 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 quarter ended June 30, 1994).
*10.14 -- 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).
*10.15 -- Lone Star Industries, Inc. Employees Stock Purchase Plan (incorporated
herein by reference to Appendix B of the Registrant's Definitive Proxy
Statement, dated May 11, 1994).
*10.16 -- 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).
*10.17 -- Lone Star Industries, Inc. 1996 Long Term Incentive Plan (incorporated
herein by reference to Appendix A of the Registrant's Definitive Proxy
Statement, dated April 1, 1996).
*10.18 -- Lone Star Industries, Inc. Supplemental Executive Retirement Plan,
effective July 1, 1996 (filed herewith).
*10.19 -- Lone Star Industries, Inc. Executive Incentive Plan (filed herewith).
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
Exhibit Description Page
--------- ----------------------------------------------------------------------- -----
<C> <C> <S> <C>
*10.20 -- Lone Star Industries, Inc. Voluntary Deferred Compensation Plan for
Non- Employee Directors (incorporated herein by reference to Appendix B
of the Registrant's Definitive Proxy Statement, dated April 1, 1996).
11 -- Statement re computation of per share earnings (filed herewith).
12 -- Statement re computation of per share earnings to fixed charges (filed
herewith).
21 -- Subsidiaries of the Company (filed herewith).
23 -- Consent of Coopers & Lybrand L.L.P. (filed herewith).
27 -- Financial Data Schedules (filed herewith).
</TABLE>
(b) Reports on Form 8-K.
Not applicable.
- ---------------
* Indicates management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
LONE STAR INDUSTRIES, INC.
7.31% Senior Notes due 2007
NOTE PURCHASE AGREEMENT
Dated as of March 10, 1997
<PAGE> 2
Table of Contents
Page
----
1. AUTHORIZATION OF NOTES....................................................1
1.1. The Notes.........................................................1
1.2. The Subsidiary Guarantee..........................................1
2. SALE AND PURCHASE OF NOTES................................................1
3. CLOSING...................................................................2
4. CONDITIONS TO CLOSING.....................................................2
4.1. Representations and Warranties....................................2
4.2. Performance; No Default...........................................3
4.3. Compliance Certificates...........................................3
4.4. Opinions of Counsel...............................................3
4.5. Subsidiary Guarantee..............................................3
4.6. Purchase Permitted by Applicable Law, etc.........................3
4.7. Sale of Notes to Other Purchaser..................................4
4.8. Payment of Special Counsel Fees...................................4
4.9. Private Placement Number..........................................4
4.10. Changes in Corporate Structure...................................4
4.11. Contemporaneous Transactions.....................................4
4.12. Proceedings and Documents........................................5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................5
5.1. Organization; Power and Authority.................................5
5.2. Authorization, etc................................................5
5.3. Disclosure........................................................5
5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates....................................................6
5.5. Financial Statements..............................................7
5.6. Compliance with Laws, Other Instruments, etc......................7
5.7. Governmental Authorizations, etc..................................7
5.8. Litigation; Observance of Agreements, Statutes and Orders.........7
5.9. Taxes.............................................................8
5.10. Title to Property; Leases........................................8
5.11. Licenses, Permits, etc...........................................9
5.12. Compliance with ERISA............................................9
5.13. Private Offering by the Company.................................10
5.14. Use of Proceeds; Margin Regulations.............................11
5.15. Existing Debt; Future Liens.....................................11
5.16. Foreign Assets Control Regulations, etc.........................12
5.17. Status Under Certain Statutes...................................12
5.18. Environmental Matters...........................................12
6. REPRESENTATIONS OF THE PURCHASER.........................................13
6.1. Purchase of Notes................................................13
6.2. Source of Funds..................................................13
7. INFORMATION AS TO THE COMPANY............................................14
<PAGE> 3
7.1. Financial and Business Information...............................14
7.2. Officer's Certificate............................................17
7.3. Inspection.......................................................18
8. PREPAYMENT OF THE NOTES..................................................19
8.1. Required Prepayments.............................................19
8.2. Optional Prepayments.............................................19
8.3. Required Prepayment in Connection with a Change in Control.......20
8.4. Allocation of Partial Prepayments................................22
8.5. Maturity; Surrender, etc.........................................22
8.6. Purchase of Notes................................................22
8.7. Make-Whole Amount................................................22
9. AFFIRMATIVE COVENANTS....................................................24
9.1. Compliance with Law..............................................24
9.2. Insurance........................................................24
9.3. Maintenance of Properties........................................24
9.4. Payment of Taxes and Claims......................................25
9.5. Corporate Existence, etc.........................................25
9.6. Redemption of 10% Senior Notes...................................25
10. NEGATIVE COVENANTS......................................................26
10.1. Maintenance of Financial Conditions.............................26
10.2. Priority Debt...................................................26
10.3. Liens...........................................................27
10.4. Covenants Relating to Other Debt................................29
10.5. Asset Dispositions..............................................30
10.6. Merger, Consolidation, Amalgamation, etc........................31
10.7. Restricted Investments..........................................32
10.8. Transactions with Affiliates....................................32
10.9. Lines of Business...............................................32
11. EVENTS OF DEFAULT.......................................................32
12. REMEDIES ON DEFAULT, ETC................................................35
12.1. Acceleration....................................................35
12.2. Other Remedies..................................................36
12.3. Rescission......................................................36
12.4. No Waivers or Election of Remedies, Expenses, etc...............36
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES...........................37
13.1. Registration of Notes...........................................37
13.2. Transfer and Exchange of Notes..................................37
13.3. Replacement of Notes............................................38
14. PAYMENTS ON NOTES.......................................................38
14.1. Place of Payment................................................38
14.2. Home Office Payment.............................................38
15. EXPENSES, ETC...........................................................39
15.1. Transaction Expenses............................................39
15.2. Survival........................................................40
(ii)
<PAGE> 4
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT............40
17. AMENDMENT AND WAIVER....................................................40
17.1. Requirements....................................................40
17.2. Solicitation of Holders of Notes................................41
17.3. Binding Effect, etc.............................................41
17.4. Notes held by Company, etc......................................41
18. NOTICES.................................................................42
19. REPRODUCTION OF DOCUMENTS...............................................42
20. CONFIDENTIAL INFORMATION................................................43
21. SUBSTITUTION OF PURCHASER...............................................44
22. MISCELLANEOUS...........................................................44
22.1. Successors and Assigns..........................................44
22.2. Construction....................................................44
22.3. Payments Due on Non-Business Days...............................45
22.4. Severability....................................................45
22.5. Accounting Terms................................................45
22.6. Counterparts....................................................45
22.7. Governing Law...................................................45
Exhibit 1.1 -- Form of 7.31% Senior Note due 2007
Exhibit 1.2 -- Form of Subsidiary Guarantee
Exhibit 4.4(a) -- Form of Opinion of Counsel for the Company and the
Guarantor
Exhibit 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
Schedule A -- Names and Addresses of Purchasers
Schedule B -- Defined Terms
Schedule 5.3 -- Disclosure Documents
Schedule 5.4 -- Subsidiaries
Schedule 5.5 -- Financial Statements
Schedule 5.11 -- Licenses, etc.
Schedule 5.15 -- Existing Debt
Schedule 10.8 -- Existing Investments
(iii)
<PAGE> 5
LONE STAR INDUSTRIES, INC.
300 First Stamford Place
Stamford, CT 06912
7.31% Senior Notes due 2007
As of March 10, 1997
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
LONE STAR INDUSTRIES, INC., a Delaware corporation (the "COMPANY"),
agrees with you as follows:
1. AUTHORIZATION OF NOTES.
1.1. THE NOTES.
The Company has duly authorized the issue and sale of $50,000,000
aggregate principal amount of its 7.31% Senior Notes due 2007 (the "NOTES"),
each such note to be in the form set out in Exhibit 1.1. As used herein, the
term "NOTES" shall mean all notes originally delivered pursuant to this
Agreement and the Other Agreement referred to below and all notes delivered in
substitution or exchange for any such note and, where applicable, shall include
the singular number as well as the plural. Certain capitalized and other terms
used in this Agreement are defined in Schedule B; references to a "Schedule" or
an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit
attached to this Agreement.
1.2. THE SUBSIDIARY GUARANTEE.
The Notes and the obligations of the Company hereunder and under the
Other Agreement will be unconditionally guaranteed by New York Trap Rock
Corporation, a Delaware corporation (the "SUBSIDIARY GUARANTOR") and a
Wholly-Owned Subsidiary of the Company, pursuant to a subsidiary guarantee
substantially in the form of Exhibit 1.2 (the "SUBSIDIARY GUARANTEE"). Under
circumstances described in Section 10.5 the Company may be entitled to obtain
the release of the Subsidiary Guarantee in respect of a Transfer of all or
substantially all of the capital stock or assets of the Subsidiary Guarantor.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at the
Closing provided for in Section 3, Notes in
<PAGE> 6
2
the principal amount specified opposite your name in Schedule A at the purchase
price of 100% of the principal amount thereof. Contemporaneously with entering
into this Agreement, the Company is entering into a separate Note Purchase
Agreement (the "OTHER AGREEMENT") identical with this Agreement with the other
purchaser named in Schedule A (the "OTHER PURCHASER"), providing for the sale at
such Closing to the Other Purchaser of Notes in the principal amount specified
opposite its name in Schedule A. Your obligation hereunder and the obligation of
the Other Purchaser under the Other Agreement are several and not joint
obligations and you shall have no obligation under the Other Agreement and no
liability to any Person for the performance or non-performance by the Other
Purchaser thereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchaser shall occur at the offices of Willkie Farr & Gallagher, One
Citicorp Center, 153 East 53rd Street, New York, NY 10022 at 10:00 a.m., New
York time, at a closing (the "CLOSING") on March 21, 1997 or on such other
Business Day thereafter on or prior to March 26, 1997 as may be agreed upon by
the Company and you. At the Closing the Company will deliver to you the Notes to
be purchased by you in the form of a single Note (or such greater number of
Notes in denominations of at least $1,000,000 as you may request) dated the date
of the Closing and registered in your name (or in the name of your nominee),
against delivery by you to the Company or its order of immediately available
funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to account number
3750529621 at NationsBank, Dallas, Texas, ABA number 111000012.
If at the Closing the Company shall fail to tender such Notes to you
as provided above in this Section 3, or any of the conditions specified in
Section 4 shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you
at the Closing is subject to the fulfillment to your satisfaction, prior to or
at the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
<PAGE> 7
3
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and after giving effect to the issue and
sale of the Notes no Default or Event of Default shall have occurred and be
continuing. Since the date of this Agreement no Control Event or Change in
Control shall have occurred and neither the Company nor any Subsidiary shall
have entered into any transaction that would have been prohibited by Section
10.2, 10.3, 10.5 or 10.7 had such Sections applied since such date.
4.3. COMPLIANCE CERTIFICATES.
(a) Officer's Certificate. The Company shall have delivered to you
an Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2, 4.10 and 4.11 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to you
a certificate of the Secretary or an Assistant Secretary certifying as to the
resolutions attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of this Agreement and the Other Agreement
and the Notes.
4.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory
to you, dated the date of the Closing (a) from James W. Langham, Esq., General
Counsel of the Company, substantially in the form set forth in Exhibit 4.4(a)
and covering such other matters incident to the transactions contemplated hereby
as you or your counsel may reasonably request (and the Company hereby instructs
its counsel to deliver such opinion to you), and (b) from Willkie Farr &
Gallagher, your special counsel in connection with such transactions,
substantially in the form set forth in Exhibit 4.4(b) and covering such other
matters incident to such transactions as you may reasonably request.
4.5. SUBSIDIARY GUARANTEE.
The Subsidiary Guarantee, dated as of a date on or before the date
of the Closing, shall have been executed and delivered by the Subsidiary
Guarantor in the form hereinabove recited and shall be in full force and effect.
4.6. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (a) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting
<PAGE> 8
4
limited investments by insurance companies without restriction as to the
character of the particular investment, (b) not violate any applicable law or
regulation (including without limitation Regulation G, T or X of the Board of
Governors of the Federal Reserve System) and (c) not subject you to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted.
4.7. SALE OF NOTES TO OTHER PURCHASER.
The Company shall sell to the Other Purchaser and the Other
Purchaser shall purchase the Notes to be purchased by them at the Closing as
specified in Schedule A.
4.8. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall
have paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.9. PRIVATE PLACEMENT NUMBER.
A Private Placement Number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
4.10. CHANGES IN CORPORATE STRUCTURE.
The Company shall not have changed its jurisdiction of incorporation
or been a party to any merger or consolidation or succeeded to all or any
substantial part of the liabilities of any other entity at any time following
the date of the most recent financial statements referred to in Schedule 5.5.
4.11. CONTEMPORANEOUS TRANSACTIONS.
On or before the date of the Closing the Company shall have (a)
given irrevocable written notice to The CIT Group/Business Credit, Inc.
terminating the Existing Credit Facility (subject only to the expiration or
waiver of the minimum notice period as provided by said Facility) and (b) given
the trustee under the Indenture, dated as of March 29, 1994, relating to the 10%
Senior Notes a proper notice of redemption of all outstanding 10% Senior Notes
at par on the earliest possible redemption date following such notice as
provided by said Indenture.
<PAGE> 9
5
4.12. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws the State of Delaware, and is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the Other
Agreement and the Notes and to perform the provisions hereof and thereof.
5.2. AUTHORIZATION, ETC.
This Agreement and the Other Agreement and the Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3. DISCLOSURE.
The Company is subject to the reporting requirements of the Exchange
Act and has delivered to you copies of all reports and proxy statements required
to be filed by the Company with the Securities and Exchange Commission under the
Exchange Act since December 31, 1995, all as described on Schedule 5.3
(collectively the "SEC REPORTS"). This Agreement, the SEC Reports and the other
documents, certificates or writings delivered to you by or
<PAGE> 10
6
on behalf of the Company in connection with the transactions contemplated hereby
and described in Schedule 5.3 (the "DISCLOSURE DOCUMENTS"), and the financial
statements listed in Schedule 5.5, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. Since December 31, 1995, there has been no change in the
financial condition, operations, business, properties or prospects of the
Company or any Subsidiary, except changes disclosed in the Disclosure Documents
or in the financial statements listed in Schedule 5.5 and other changes that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company that could
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the Disclosure Documents.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists of the Company's (i) Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock, or similar equity
interests outstanding owned by the Company and each other Subsidiary, (ii)
Affiliates, other than Subsidiaries, and (iii) directors and senior officers.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified as a foreign corporation and
is in good standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each such Subsidiary
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease and to transact the business it transacts
and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
in Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
<PAGE> 11
7
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.
5.5. FINANCIAL STATEMENTS.
The Company has delivered to you copies of the financial statements
of the Company and its Subsidiaries listed in Schedule 5.5. All of said
financial statements (including in each case the related schedules and notes)
fairly present in all material respects the consolidated financial position of
the Company and its Subsidiaries as of the respective dates specified in such
Schedule and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Notes and by the Subsidiary Guarantor of the Subsidiary
Guarantee will not (i) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of the Company or any Subsidiary under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement, lease, corporate charter or by-laws, or any
other agreement or instrument to which the Company or any Subsidiary is bound or
by which the Company or any Subsidiary or any of their respective properties may
be bound or affected, (ii) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to the Company or any
Subsidiary (iii) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or any
Subsidiary.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority (other than informational filings)
is required in connection with the execution, delivery or performance by the
Company of this Agreement or the Notes or by the Subsidiary Guarantor of the
Subsidiary Guarantee.
5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in the Disclosure Documents, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the
<PAGE> 12
8
Company or any Subsidiary or any property of the Company or any Subsidiary in
any court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9. TAXES.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (a) the amount of which is not
individually or in the aggregate Material or (b) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of federal, state or
other taxes for all fiscal periods are adequate. No federal income tax
liabilities of the Company and its Subsidiaries are currently being contested by
the Internal Revenue Service and all fiscal years up to and including the fiscal
year ended December 31, 1992, are closed under Section 6501 of the Code.
5.10. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and marketable title to
their respective real properties and good and sufficient title to their
respective other properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
listed on Schedule 5.5 or purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are
<PAGE> 13
9
valid and subsisting and are in full force and effect in all material respects.
5.11. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, proprietary
software, service marks, trademarks and trade names, or rights thereto,
that individually or in the aggregate are Material, without known conflict
with the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, proprietary software, service mark,
trademark, trade name or other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, proprietary software,
service mark, trademark, trade name or other right owned or used by the
Company or any of its Subsidiaries.
5.12. COMPLIANCE WITH ERISA.
(a) The Company and each of its ERISA Affiliates have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any of
its ERISA Affiliates has incurred any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in section 3 of ERISA), and no event, transaction or
condition has occurred or exists that could reasonably be expected to result in
the incurrence of any such liability by the Company or any of its ERISA
Affiliates, or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any of its ERISA Affiliates, in either case pursuant to
Title I or IV of ERISA or to such penalty or excise tax provisions or to section
401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not
be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under
each of the pension Plans qualified under Section 401 of the Code (other than
Multiemployer Plans), determined as of the end of such Plan's most recently
ended plan year on the basis of the actuarial assumptions specified for funding
purposes in such Plan's most recent actuarial valuation report, did not exceed
the aggregate current value of the assets
<PAGE> 14
10
of such Plan allocable to such benefit liabilities by more than $250,000 in the
aggregate. The term "benefit liabilities" has the meaning specified in section
4001 of ERISA and the terms "CURRENT VALUE" and "PRESENT VALUE" have the meaning
specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(d) The accumulated postretirement benefit obligation (determined as
of the last day of the Company's most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is approximately $103.2 million.
(e) With respect to each employee benefit plan, if any, disclosed by
you in writing to the Company in accordance with Section 6.2(c), neither the
Company nor any "affiliate" of the Company (as defined in section V(c) of the
QPAM Exemption) has at this time, nor has exercised at any time during the
immediately preceding year, the authority to appoint or terminate the "QPAM" (as
defined in Part V of the QPAM Exemption) disclosed by you to the Company
pursuant to Section 6.2(c) as manager of any of the assets of any such plan or
to negotiate the terms of any management agreement with such QPAM on behalf of
any such plan, and the Company is not an "affiliate" (as so defined) of such
QPAM. The Company is not a party in interest with respect to any employee
benefit plan disclosed by you in accordance with Section 6.2(b) or 6.2(e). The
execution and delivery of this Agreement and the Subsidiary Guarantee and the
issuance and sale of the Notes at the Closing hereunder will not involve any
prohibited transaction (as such term is defined in section 406(a) of ERISA and
section 4975(c)(1)(A)-(D) of the Code), that could subject the Company or any
holder of a Note to any tax or penalty on prohibited transactions imposed under
said section 4975 of the Code or by section 502(i) of ERISA. The representation
by the Company in the preceding sentence of this Section 5.12(e) is made in
reliance upon and subject to the accuracy of your representation in Section 6.2
as to the source of the funds used to pay the purchase price of the Notes to be
purchased by you.
5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes, the Subsidiary Guarantee or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any person other than you, the Other
Purchaser and not more than ten other Institutional Investors, each of which
<PAGE> 15
11
has been offered the Notes at a private sale for investment. Neither the Company
nor anyone acting on its behalf has taken, or will take, any action that would
subject the issuance or sale of the Notes or the issuance of the Subsidiary
Guarantee to the registration requirements of Section 5 of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the net proceeds of the sale of the Notes to
redeem all of the outstanding 10% Senior Notes within 45 days after the Closing.
No part of the proceeds from the sale of the Notes hereunder will be used, and
no part of the proceeds from the issuance of the 10% Senior Notes was used,
directly or indirectly, for the purpose of buying or carrying any margin stock
within the meaning of Regulation G of the Board of Governors of the Federal
Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading
in any securities under such circumstances as to involve the Company in a
violation of Regulation X of said Board (12 CFR 224) or to involve any broker or
dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock
does not constitute more than 5% of the value of the consolidated assets of the
Company and its Subsidiaries and the Company does not have any present intention
that margin stock will constitute more than 5% of the value of such assets. As
used in this Section , the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR
CARRYING" shall have the meanings assigned to them in said Regulation G.
5.15. EXISTING DEBT; FUTURE LIENS.
(a) Schedule 5.15 sets forth a complete and correct list of all
outstanding Debt of the Company and its Subsidiaries as of January 31, 1997,
since which date there has been no Material change in the amounts, interest
rates, sinking funds, installment payments or maturities of the Debt of the
Company or its Subsidiaries. Neither the Company nor any Subsidiary is in
default, and no waiver of default is currently in effect, in the payment of any
principal or interest on any Debt of the Company or such Subsidiary and no event
or condition exists with respect to any such Debt of the Company or any
Subsidiary that would permit (or that with the giving of notice or the lapse of
time, or both, would permit) one or more Persons to cause such Debt to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor
any Subsidiary has agreed or consented to cause or permit in the future (upon
the happening of a contingency or otherwise) any of its property, whether now
owned or hereafter acquired, to be subject to a Lien not permitted by Section
10.2.
<PAGE> 16
12
5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use
of the proceeds thereof will violate the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.18. ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
in the Disclosure Documents,
(a) neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of violation
of Environmental Laws or damage to the environment emanating from,
occurring on or in any way related to real properties now or formerly
owned, leased or operated by any of them or to other assets or their use,
except, in each case, such as could not reasonably be expected to result
in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them and has not disposed of any Hazardous Materials in
a manner contrary to any Environmental Laws in each case in any manner
that could reasonably be expected to result in a Material Adverse Effect;
and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance with
applicable Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
<PAGE> 17
13
6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE OF NOTES.
You represent that you are purchasing the Notes for your own account
or for one or more separate accounts maintained by you or for the account of one
or more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "SOURCE") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account", as such
term is defined in Prohibited Transaction Exemption ("PTE") 95-60 (issued
July 12, 1995), and there is no plan with respect to which the aggregate
amount of such general account's reserves and liabilities for the
contracts held by or on behalf of such plan and all other plans maintained
by the same employer (and affiliates thereof as defined in section V(a)(1)
of PTE 95-60) or by the same employee organization (in each case
determined in accordance with PTE 95-60) exceeds or will exceed 10% of the
total of all reserves and liabilities of such general account (determined
in accordance with PTE 95-60, exclusive of separate account liabilities,
plus any applicable surplus) as of the date of the Closing; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (b), no employee benefit plan or group
of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption),
<PAGE> 18
14
no employee benefit plan's assets that are included in such investment
fund, when combined with the assets of all other employee benefit plans
established or maintained by the same employer or by an affiliate (within
the meaning of section V(c)(1) of the QPAM Exemption) of such employer or
by the same employee organization and managed by such QPAM, exceed 20% of
the total client assets managed by such QPAM, the conditions of Part I(c)
and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person
controlling or controlled by the QPAM (applying the definition of
"control" in section V(e) of the QPAM Exemption) owns a 5% or more
interest in the Company and (i) the identity of such QPAM and (ii) the
names of all employee benefit plans whose assets are included in such
investment fund have been disclosed to the Company in writing pursuant to
this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to
this paragraph (e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such
terms in section 3 of ERISA.
7. INFORMATION AS TO THE COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to you (so long as you shall be obligated
to purchase, or shall hold, Notes hereunder) and to each other holder of Notes
that is an Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies
of
(i) a consolidated (and consolidating if otherwise
available) balance sheet of the Company and its Subsidiaries as
at the end of such quarter, and
(ii) consolidated (and consolidating if otherwise available)
statements of income, changes in shareholders' equity and cash flows
of the Company and its Subsidiaries, for such quarter and (in the
case of
<PAGE> 19
15
the second and third quarters) for the portion of the fiscal year
ending with such quarter,
setting forth in each case in comparative form the consolidated figures
for the corresponding periods in the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP applicable to
quarterly financial statements generally, and certified by a Senior
Financial Officer as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above
of copies of the Company's Quarterly Report on Form 10-Q prepared in
compliance with the requirements therefor and filed with the Securities
and Exchange Commission shall be deemed to satisfy the requirements of
this Section 7.1(a);
(b) Annual Statements -- within 105 days after the end of each
fiscal year of the Company, duplicate copies of
(i) a consolidated (and consolidating if otherwise available)
balance sheet of the Company and its Subsidiaries as at the end of
such year, and
(ii) consolidated (and consolidating if otherwise available)
statements of income, changes in shareholders' equity and cash flows
of the Company and its Subsidiaries for such year,
setting forth in each case in comparative form the consolidated figures
for the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and accompanied by
(A) an opinion thereon of independent public accountants of
recognized national standing, which opinion shall state that such
consolidated financial statements present fairly, in all material
respects, the financial position of the companies being reported
upon and their results of operations and cash flows and have been
prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards, and
that such audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if they are aware
that any such condition or event then
<PAGE> 20
16
exists, specifying the nature and period of the existence thereof
(it being understood that such accountants shall not be liable,
directly or indirectly, for any failure to obtain knowledge of any
Default or Event of Default unless such accountants should have
obtained knowledge thereof in making an audit in accordance with
generally accepted auditing standards or did not make such an
audit),
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant's certificate described in clause
(B) above, shall be deemed to satisfy the requirements of this Section
7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy
statement sent by the Company or any Subsidiary generally to its
shareholders or to its creditors (other than the Company or another
Subsidiary), and (ii) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such holder),
and each prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission and of each press
release and other statement made available generally by the Company or any
Subsidiary to the public concerning developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in any
event within five days after a Responsible Officer becomes aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action with respect
to a claimed default of the type referred to in Section 11(f), a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
(e) Notice of Control Event -- promptly and in any event within 10
Business Days after a Responsible Officer becomes aware of the occurrence
of a Control Event, a written notice specifying the nature and period of
existence of such Control Event and what action the Company is taking or
proposes to take with respect thereunder (including without limitation
pursuant to Section 8.3);
(f) ERISA Matters -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any
<PAGE> 21
17
of the following, a written notice setting forth the nature thereof and
the action, if any, that the Company or an ERISA Affiliate proposes to
take with respect thereto:
(i) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations thereunder,
for which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by the Company or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such Multiemployer
Plan; or
(iii) any event, transaction or condition that could result
in the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax provisions,
if such liability or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably be expected to
have a Material Adverse Effect;
(g) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any federal or state Governmental Authority
relating to any order, ruling, statute or other law or regulation that
could reasonably be expected to have a Material Adverse Effect; and
(h) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes or the ability of the Subsidiary
Guarantor to perform its obligations under the Subsidiary Guarantee, in
each case as from time to time may be reasonably requested by any such
holder of Notes.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to you or a holder of
Notes pursuant to Section 7.1(a) or Section 7.1(b)
<PAGE> 22
18
shall be accompanied by a certificate of a Senior Financial Officer setting
forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.1 through 10.9, inclusive,
during the quarterly or annual period covered by the statements then being
furnished (including with respect to each such Section , where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as
the case may be, permissible under the terms of such Sections , and the
calculation of the amount, ratio or percentage then in existence); and
(b) Default -- a statement that such Senior Financial Officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and conditions
of the Company and its Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being furnished to the date
of the certificate and that such review shall not have disclosed the
existence during such period of any condition or event that constitutes a
Default or an Event of Default or, if any such condition or event existed
or exists (including without limitation any such event or condition
resulting from the failure of the Company or any Subsidiary to comply with
any Environmental Law), specifying the nature and period of existence
thereof and what action the Company shall have taken or proposes to take
with respect thereto.
7.3. INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the other offices and
properties of the Company and each Subsidiary, all at such reasonable
times and as often as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of
<PAGE> 23
19
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts
with their respective officers and independent public accountants (and by
this provision the Company authorizes said accountants to discuss the
affairs, finances and accounts of the Company and its Subsidiaries), all
at such times and as often as may be requested.
8. PREPAYMENT OF THE NOTES.
In addition to the payment of the entire unpaid principal amount of
the Notes at the final maturity thereof, the Company will make required, and may
make optional, prepayments in respect of the Notes as hereinafter provided.
8.1. REQUIRED PREPAYMENTS.
On March 21, 2001 and each March 21 thereafter to and including
March 21, 2006, the Company will prepay $7,142,857 principal amount (or such
lesser principal amount as shall then be outstanding) of the Notes, such
prepayment to be made at the principal amount to be prepaid, together with
accrued interest thereon to the date of such prepayment, without premium and
allocated as provided in Section 8.4, provided that upon any partial prepayment
of the Notes pursuant to Section 8.2 or 8.3, the principal amount of each
required prepayment of the Notes becoming due under this Section 8.1 on and
after the date of such prepayment, shall be reduced in the same proportion as
the aggregate unpaid principal amount of the Notes is reduced as a result of
such prepayment.
8.2. OPTIONAL PREPAYMENTS.
The Company may, at its option and upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes (in a
minimum amount of $100,000 in connection with a Debt Prepayment Application and
in all other cases in a minimum amount of $5,000,000 and in multiples of
$1,000,000) at the principal amount so prepaid, together with interest accrued
thereon to the date of such prepayment, plus the Make-Whole Amount determined
for the prepayment date with respect to such principal amount. The Company will
give each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify the date fixed for
such prepayment (which shall be a Business Day), the aggregate principal amount
of the Notes to be prepaid on such date, the principal amount of Notes (if any)
held by such holder to be prepaid (determined in accordance with Section 8.4)
and the interest to be paid on the prepayment date with respect to such
principal amount being prepaid.
<PAGE> 24
20
Each such notice of prepayment shall be accompanied by a certificate
of a Senior Financial Officer as to the estimated Make-Whole Amount due in
connection with such prepayment (calculated as if the date of such notice were
the date of the prepayment), setting forth the details of such computation. Two
Business Days prior to such prepayment of Notes, the Company shall deliver to
each holder of the Notes a certificate of a Senior Financial Officer specifying
the calculation of such Make-Whole Amount as of the specified prepayment date.
8.3. REQUIRED PREPAYMENT IN CONNECTION WITH A CHANGE IN CONTROL.
Promptly and in any event within ten Business Days after becoming
aware of an actual or impending Change in Control (including without limitation
a Control Event), the Company will give each holder of Notes written notice of
prepayment of all outstanding Notes, which notice shall (a) refer specifically
to this Section 8.3, (b) describe the actual or impending Change in Control in
reasonable detail and specify the actual or estimated Change in Control
Prepayment Date and the Response Date (as respectively defined below) in respect
of such actual or impending Change in Control, (c) specify (subject to the
occurrence of an impending Change in Control) the date of such prepayment (the
"CHANGE IN CONTROL PREPAYMENT DATE"), which in the case of an actual Change in
Control shall be a Business Day not less than 30 nor more than 60 days after the
date of such notice, (d) specify the estimated Make-Whole Amount (if any) that
is applicable in connection with such prepayment (calculated as if the date of
such notice were the Change in Control Prepayment Date), including details of
such calculations, and (e) specify that each holder of a Note may reject such
prepayment in respect of all or any portion of the Notes held by such holder by
giving written notice of such rejection to the Company at least five days prior
to the Change in Control Prepayment Date in respect of an actual Change in
Control and at least two days prior to the estimated Change in Control
Prepayment Date in respect of an impending Change in Control (subject to
deferral as below provided, the "REJECTION DATE").
The Company will also give each holder of Notes prompt written
notice of any substantial change in the terms of the transaction in respect of
any impending Change in Control, which notice shall also specify the date (not
less than five Business Days after the date of such notice) to which the
Rejection Date is deferred in respect of such change. Unless the holder of any
Note shall specify that such holder's notice of rejection given pursuant to this
Section 8.3 is irrevocable, each such deferral of the Rejection Date by the
Company shall be deemed to rescind such holder's action (rejection or waiver or
deemed waiver of such holder's rejection right, as the case may be) in respect
of an impending Change in Control and shall give rise to a new right to reject
such prepayment as aforesaid on or before the new Rejection Date. The failure by
any such holder to respond in
<PAGE> 25
21
writing to such notice of prepayment on or before the Rejection Date as
originally specified in connection with an actual Change in Control or the
Rejection Date as finally determined in respect of an impending Change in
Control shall be deemed to be a waiver of such rejection right by such holder
with respect to all Notes held by such holder in respect of such Change in
Control.
The obligation of the Company to prepay Notes pursuant to this
Section 8.3 in respect of an impending Change in Control is subject to the
occurrence of the Change in Control in respect of which such notice of
prepayment is given. In the event that such Change in Control does not occur on
the estimated Change in Control Prepayment Date in respect thereof, the
prepayment shall be deferred until and shall be made on the date on which such
Change in Control occurs. The Company shall keep each holder of Notes reasonably
and timely informed of (i) any such deferral of the date of prepayment, (ii) the
date on which such Change in Control and the prepayment are expected to occur,
and (iii) any determination by the Company that efforts to effect such Change in
Control have ceased or been abandoned (in which case the notice of prepayment
given pursuant to this Section 8.3 in respect of such Change in Control shall be
deemed rescinded).
The Company will not take any action that results in the
consummation of an actual Change in Control unless (i) notice of prepayment in
respect of such Change in Control shall have been given pursuant to this Section
8.3 at least 45 days prior to such action and (ii) contemporaneously with the
occurrence of such Change in Control the Company prepays Notes pursuant to this
Section 8.3.
Two Business Days prior to the Change in Control Prepayment Date
(or, in case of an impending Change in Control, as soon as practicable after the
closing date for such Change in Control and the Make-Whole Amount are each
determined), the Company shall deliver to each holder of a Note a certificate of
a Senior Financial Officer specifying the calculation of the Make-Whole Amount
for the Notes (or portions thereof) being prepaid as of the Change in Control
Prepayment Date.
On the Change in Control Prepayment Date (and subject to the actual
occurrence of any impending Change in Control) the Company will prepay all Notes
as to which such prepayment has not been so rejected, at the unpaid principal
amount thereof, together with interest accrued thereon to the Change in Control
Prepayment Date, plus an amount equal to the Make-Whole Amount, if any, with
respect to each such Note.
If any holder shall reject such prepayment as of the final Rejection
Date in respect thereof, such holder shall be deemed to have waived its rights
under this Section 8.3 to require prepayment of all Notes held by such holder in
respect of such Change in Control but not in respect of any subsequent Change in
Control. No delay or failure by the Company in the
<PAGE> 26
22
giving of notice pursuant to this Section 8.3 in respect of any actual or
impending Change in Control shall relieve the Company of its obligations under
this Section 8.3 in respect of the occurrence of such Change in Control.
8.4. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes pursuant to
Section 8.1 or 8.2, the principal amount of the Notes to be prepaid shall be
allocated among all the Notes at the time outstanding in proportion, as nearly
as practicable, to the respective unpaid principal amounts thereof.
8.5. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.6. PURCHASE OF NOTES.
The Company will not, and will not permit any Affiliate to,
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes.
8.7. MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or 8.3 or has
become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of
any Note, the amount obtained by discounting
<PAGE> 27
23
all Remaining Scheduled Payments with respect to such Called Principal
from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted financial
practice and at a discount factor (applied on the same periodic basis as
that on which interest on the Notes is payable) equal to the Reinvestment
Yield with respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, 0.50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business Day
preceding the Settlement Date with respect to such Called Principal, on
the display designated as "Page 500" on the Telerate Access Service (or
such other display as may replace Page 500 on Telerate Access Service) for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date, or (ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day preceding
the Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill quotations
to bond-equivalent yields in accordance with accepted financial practice
and (b) interpolating linearly between (1) the actively traded U.S.
Treasury security with a maturity closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with a maturity closest to and less than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum of
the products obtained by multiplying (a) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by (b)
the number of years (calculated to the nearest one-twelfth year) that will
elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal (including without limitation the applicable
<PAGE> 28
24
portion of any required prepayments) if no payment of such Called
Principal were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next succeeding
scheduled interest payment will be reduced by the amount of interest
accrued to such Settlement Date and required to be paid on such Settlement
Date pursuant to Section 8.2, 8.3 or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or 8.3 or has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including without limitation Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2. INSURANCE.
The Company will and will cause each of its Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
9.3. MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to maintain
and keep, or cause to be maintained and kept, their respective properties in
good repair, working order
<PAGE> 29
25
and condition (other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Subsidiary from discontinuing
the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claim if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
9.5. CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Section 10.5, the Company will at all
times preserve and keep in full force and effect the corporate existence of each
of its Subsidiaries (unless merged into the Company or a Subsidiary) and all
rights and franchises (as franchisee) of the Company and its Subsidiaries
unless, in the good faith judgment of the Company, the termination of or failure
to preserve and keep in full force and effect such corporate existence, right or
franchise could not, individually or in the aggregate, have a Material Adverse
Effect.
9.6. REDEMPTION OF 10% SENIOR NOTES.
The Company will redeem all outstanding 10% Senior Notes within 45
days after the Closing.
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10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. MAINTENANCE OF FINANCIAL CONDITIONS.
The Company will not at any time permit
(a) Consolidated Net Worth to be less than the sum of (i)
$185,000,000 plus (ii) 50% of Consolidated Net Income for each fiscal year
(beginning with the fiscal year ending on December 31, 1997) for which
Consolidated Net Income is positive,
(b) Consolidated Income Available for Fixed Charges for any period
of four consecutive fiscal quarters (beginning with the four quarters
ending on March 31, 1997) to be less than 200% of Consolidated Fixed
Charges for such period, or
(c) Consolidated Debt at any time to exceed 55% of Consolidated
Capitalization.
10.2. PRIORITY DEBT.
The Company will not and will not permit any Subsidiary to create,
assume, incur, guarantee or otherwise become liable in respect of any Priority
Debt unless, immediately after giving effect thereto and to the application of
the proceeds of such Priority Debt, the aggregate amount of Priority Debt does
not exceed 15% of Consolidated Net Worth.
As used herein, "PRIORITY DEBT" means (without duplication) (a) all
secured Debt not permitted under clauses (a) through (j) of Section 10.3, (b)
all Debt and Preferred Stock of Subsidiaries (other than Debt or Preferred Stock
owing to or held by the Company or a Wholly-Owned Subsidiary or Debt of the
Company guaranteed by the Subsidiary Guarantor) and (c) all Attributable Debt of
the Company and its Subsidiaries with respect to all Sale and Leaseback
Transactions (other than Attributable Debt in respect of an obligation owed to
the Company or a Wholly-Owned Subsidiary).
For purposes of this Section 10.2, a Subsidiary shall be deemed to
have incurred Debt or Attributable Debt in respect of any obligation previously
owed to the Company or to a Wholly-Owned Subsidiary and to have issued Preferred
Stock previously held by the Company or a Wholly-Owned Subsidiary on the date
the obligee or holder ceases for any reason to be the Company or a Wholly-Owned
Subsidiary, and a Person that hereafter becomes a Subsidiary shall be deemed at
that time to have incurred all of its outstanding Debt and Attributable Debt and
to have issued all of its outstanding Preferred Stock.
<PAGE> 31
27
10.3. LIENS.
The Company will not and will not permit any Subsidiary to directly
or indirectly create, incur, assume or permit to exist (upon the happening of a
contingency or otherwise) any Lien on or with respect to any property or asset
(including without limitation any document or instrument in respect of goods or
accounts receivable) of the Company or such Subsidiary, whether now owned or
held or hereafter acquired, or any income or profits therefrom (whether or not
provision is made for the equal and ratable securing of the Notes in accordance
with the last paragraph of this Section ), or assign or otherwise convey any
right to receive income or profits, except
(a) Liens for taxes, assessments or other governmental charges which
are not yet due and payable or the payment of which is not at the time
required by Section 9.4,
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Liens, in each case
incurred in the ordinary course of business for sums not yet due and
payable or the payment of which is not at the time required,
(c) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business (i) in connection with
workers' compensation, unemployment insurance and other types of social
security or retirement benefits, or (ii) to secure (or to obtain letters
of credit that secure) the performance of tenders, statutory obligations,
surety bonds, appeal bonds (not in excess of $10,000,000) bids, leases
(other than Capital Leases), performance bonds, purchase, construction or
sales contracts and other similar obligations, in each case not incurred
or made in connection with the borrowing of money, the obtaining of
advances or credit or the payment of the deferred purchase price of
property,
(d) any attachment or judgment Lien, unless the judgment it secures
(i) shall not, within 30 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not have
been discharged within 30 days after the expiration of any such stay or
(ii) exceeds $10,000,000,
(e) leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case
incidental to, and not interfering with, the ordinary conduct of the
business of the Company or any of its Subsidiaries, provided that such
Liens do not in the aggregate materially detract from the value of such
property,
<PAGE> 32
28
(f) Liens on property or assets of the Company or a Subsidiary
securing Debt owing to the Company or to a Wholly-Owned Subsidiary,
(g) Liens existing on the date of the Closing and described in
Schedule 5.15, provided that prior to termination of the Existing Credit
Facility the Company will not borrow under said Facility and all Liens
securing Debt under said Facility shall be discharged forthwith after such
termination and in any event within 45 days after the date of the Closing,
(h) Liens created to secure all or any part of the purchase price,
or to secure Debt incurred or assumed to pay all or any part of the
purchase price or cost of construction, of tangible property (or any
improvement thereon) acquired or constructed by the Company or a
Subsidiary after the date of the Closing, provided that
(i) any such Lien shall extend solely to the item or items of
such property (or improvement thereon) so acquired or constructed
and, if required by the terms of the instrument originally creating
such Lien, other property (or improvement thereon) which is an
improvement to or is acquired for specific use in connection with
such acquired or constructed property (or improvement thereon) or
which is real property being improved by such acquired or
constructed property (or improvement thereon),
(ii) the principal amount of the Debt secured by all such
Liens in respect of any such property shall at no time exceed an
amount equal to the lesser of (A) the cost to the Company or such
Subsidiary of the property (or improvement thereon) so acquired or
constructed and (B) the Fair Market Value (as determined in good
faith by the board of directors of the Company) of such property (or
improvement thereon) at the time of such acquisition or
construction, and
(iii) any such Lien shall be created contemporaneously with,
or within 180 days after, the acquisition or construction of such
property,
(i) any Lien existing on property of a Person immediately prior to
its being consolidated with or merged into the Company or a Subsidiary or
its becoming a Subsidiary, or any Lien existing on any property acquired
by the Company or any Subsidiary at the time such property is so acquired
(whether or not the Debt secured thereby shall have been assumed),
provided that (i) no such Lien shall have been created or assumed in
contemplation of such consolidation or merger or such Person's becoming a
Subsidiary or such acquisition of property, and (ii) each such
<PAGE> 33
29
Lien shall extend solely to the item or items of property so acquired and,
if required by the terms of the instrument originally creating such Lien,
other property which is an improvement to or is acquired for specific use
in connection with such acquired property,
(j) any Lien renewing, extending or refunding any Lien permitted by
clause (g), (h) or (i) above, provided that (i) the principal amount of
Debt secured by such Lien immediately prior to such extension, renewal or
refunding is not increased or the maturity thereof reduced, (ii) such Lien
is not extended to any other property, and (iii) immediately after such
renewal, extension or refunding no Default or Event of Default would
exist, and
(k) other Liens not otherwise permitted by clauses (a) through (j)
above, provided that after giving effect thereto and to the Debt secured
by any such Lien the aggregate amount of Priority Debt does not exceed 15%
of Consolidated Net Worth.
For purposes of this Section 10.3 any Lien existing in respect of property at
the time such property is acquired or in respect of property of a Person at the
time such Person is acquired, consolidated or merged with or into the Company or
a Subsidiary shall be deemed to have been created at that time.
If, notwithstanding the prohibition contained in this Section 10.3,
the Company shall or shall permit any Subsidiary to directly or indirectly
create, incur, assume or permit to exist any Lien, other than those Liens
permitted by the provisions of clauses (a) through (k) above the Company will
make or cause to be made effective provision whereby the Notes will be secured
equally and ratably with any and all other obligations thereby secured, such
security to be pursuant to agreements reasonably satisfactory to the Required
Holders and, in any such case, the Notes shall have the benefit, to the fullest
extent that, and with such priority as, the holders of the Notes may be entitled
under applicable law, of an equitable Lien on such property. Such violation of
this Section 10.3 will constitute an Event of Default, whether or not provision
is made for an equal and ratable Lien pursuant to this paragraph.
10.4. COVENANTS RELATING TO OTHER DEBT.
If the Company shall at any time enter into a new credit facility
requiring, or amend or modify any then existing credit facility to provide, that
the Company comply with financial covenants generally of the nature of, but more
restrictive than, the financial covenants contained in this Agreement, each such
financial covenant, and each event of default relating to such financial
covenant or other provision to such effect, and each related definition, in such
facility (as amended or modified from time to time thereafter) shall be deemed
<PAGE> 34
30
to be incorporated by reference in this Agreement, mutatis mutandis, as if then
set forth herein in full. Promptly from time to time after entering into any
such facility (or any amendment or modification thereof) the Company will
furnish a copy thereof (or a copy of the financial covenant, event of default or
other provision that is incorporated by reference in this Agreement as
aforesaid) to each holder of a Note; and without limiting the immediate
effectiveness of each such financial covenant, event of default or other
provision, the Company will concurrently execute and deliver to each holder of a
Note an instrument, in form and substance reasonably satisfactory to the
Majority Holders, modifying this Agreement by adding or modifying, as the case
may be, the full text of such financial covenant, event of default or other
provision as so incorporated by reference in this Agreement.
For purposes of this Section 10.4 the entering into by the Company
of a credit facility with NBD Bank, N.A., as agent, and one or more lending
banks, having financial covenants substantially as described in the Indicative
Term Sheet of First Chicago Capital Markets, Inc. dated February 27, 1997,
heretofore furnished to you, shall not be subject to the requirements of this
Section 10.4, provided that any amendment or modification from time to time of
the financial covenants contained in such credit facility shall be subject to
the requirements of this Section 10.4.
10.5. ASSET DISPOSITIONS.
The Company will not and will not permit any Subsidiary to make any
sale, transfer or lease (as lessor) or other disposition of any of its property
(a "TRANSFER") other than:
(a) any Transfer
(i) from a Subsidiary to the Company or a Wholly-Owned
Subsidiary,
(ii) from the Company to a Wholly-Owned Subsidiary, or
(iii) from the Company to a Subsidiary (other than a
Wholly-Owned Subsidiary) or from a Subsidiary to another Subsidiary,
which in either case is for Fair Market Value,
so long as immediately before and immediately after giving effect to such
Transfer, no Default or Event of Default would exist;
(b) any other Transfer made in the ordinary course of business and
involving only property that is either (i) inventory held for sale or (ii)
equipment, fixtures, supplies or materials that is either obsolete or no
longer
<PAGE> 35
31
required in the operation of the business of the Company or any of its
Subsidiaries; and
(c) any other Transfer that in the good faith opinion of the Company
is in exchange for consideration having a Fair Market Value at least equal
to that of the property transferred and is in the best interest of the
Company or such Subsidiary, provided that in each case
(i) immediately after giving effect to such Transfer, (A) no
Default or Event of Default would exist and (B) the aggregate
Disposition Value of all property that was the subject of Transfers
permitted by this clause (c) would not exceed 10% of Consolidated
Total Assets during the period of 365 days then ending or 25% of
Consolidated Total Assets from the date of this Agreement to and
including the date of such Transfer (in each case based upon
Consolidated Total Assets as of the end of the then most recently
ended fiscal year of the Company), and
(ii) if (A) any portion of the Net Proceeds Amount in respect
of such Transfer is applied to a Debt Prepayment Application within
180 days after the effective date of such Transfer or (B) any
portion of the Net Proceeds Amount in respect of such Transfer is
applied to a Property Reinvestment Application then such portion of
the Net Proceeds Amount shall be deducted from the aggregate
Disposition Value calculated for purposes of clause (c)(i)(B) above
on and after the date the Net Proceeds Amount is so applied.
In case all or substantially all of the capital stock or assets of
the Subsidiary Guarantor is being disposed of in a Transfer in accordance with
the provisions of this Section 10.5, the Subsidiary Guarantor, at the Company's
request, shall be discharged from all of its obligations and liabilities under
the Subsidiary Guarantee by the Required Holders entering into a release in form
and substance reasonably satisfactory to the Required Holders, and you and each
other holder of a Note, by acceptance of such Note, agree to enter into such a
satisfactory release promptly upon request, except that this sentence shall not
apply (x) if a Default or Event of Default then exists, and (y) if any amount is
then due and payable under the Subsidiary Guarantee or (z) if the Subsidiary
Guarantor at the time is a guarantor of any other Debt of the Company that is
not also concurrently being released.
10.6. MERGER, CONSOLIDATION, AMALGAMATION, ETC.
The Company will not consolidate, amalgamate or merge with any other
corporation or convey, transfer or lease all or substantially all of its assets
in a single transaction or series
<PAGE> 36
32
of transactions to any Person unless (a) the Company shall be the continuing,
surviving or acquiring corporation and (b) immediately after giving effect to
such transaction, no Default or Event of Default would exist.
10.7. RESTRICTED INVESTMENTS.
The Company will not and will not permit any Subsidiary to make or
authorize any Restricted Investment if, after giving effect thereto, the
aggregate value of all Restricted Investments of the Company and its
Subsidiaries would exceed 10% of Consolidated Net Worth.
10.8. TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary to enter
into directly or indirectly any transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or exchange
of properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except (a) purchases of the
Company's outstanding shares or warrants, (b) Investments in Kosmos Cement
Company and (c) transactions in the ordinary course of business pursuant to the
reasonable requirements of the Company's or such Subsidiary's business, any such
purchase of shares, Investment or other transaction to be upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
be obtainable in a comparable arm's-length transaction with a Person not an
Affiliate.
10.9. LINES OF BUSINESS.
The Company will not and will not permit any Subsidiary to engage to
any substantial extent in any business other than the businesses in which the
Company and its Subsidiaries are engaged on the date of this Agreement as
described in the SEC Reports or substantially similar businesses.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) default in the payment of any principal or Make-Whole Amount, if
any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise;
or
(b) default in the payment of any interest on any Note and such
default shall have continued for more than five Business Days after such
payment becomes due and payable; or
(c) default in the performance of or compliance with any term
contained in Section 7.1(d), 8.3 or 9.6 or Sections
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33
10.1 to 10.7, inclusive (subject in the case of Section 10.4 to the same
grace periods, if any, as are contained in events of default with respect
to covenants incorporated by reference pursuant to said Section ); or
(d) default in the performance of or compliance with any term
contained herein (other than those referred to in paragraphs (a), (b) and
(c) of this Section 11) and such default is not remedied within 30 days
after a Responsible Officer obtains knowledge of such default; or
(e) any representation or warranty made in writing by or on behalf
of the Company or the Subsidiary Guarantor or by any officer of the
Company or the Subsidiary Guarantor in this Agreement or in any writing
furnished in connection with the transactions contemplated hereby proves
to have been false or incorrect in any material respect on the date as of
which made; or
(f) (i) the Company or any Subsidiary is in default (as principal or
as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Debt that is outstanding
in an aggregate principal amount of at least $5,000,000 beyond any period
of grace provided with respect thereto, or (ii) the Company or any
Subsidiary is in default in the performance of or compliance with any term
of any evidence of any Debt in an aggregate outstanding principal amount
of at least $5,000,000 or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of
such default or condition such Debt has become, or has been declared (or
one or more Persons are entitled to declare such Debt to be), due and
payable before its stated maturity or before its regularly scheduled dates
of payment, or (iii) as a consequence of the occurrence or continuation of
any event or condition (other than the passage of time or the right of the
holder of Debt to convert such Debt into equity interests), (x) the
Company or any Subsidiary has become obligated to purchase or repay Debt
before its regular maturity or before its regularly scheduled dates of
payment in an aggregate outstanding principal amount of at least
$5,000,000, or (y) one or more Persons have the right to require the
Company or any Subsidiary so to purchase or repay Debt in an aggregate
outstanding principle amount of at least $5,000,000; or
(g) the Company or any Significant Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they
become due, (ii) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or
any other petition in bankruptcy, for liquidation or to take advantage of
any bankruptcy, insolvency, reorganization, moratorium or other similar
law of any jurisdiction,
<PAGE> 38
34
(iii) makes an assignment for the benefit of its creditors, (iv) consents
to the appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part
of its property, (v) is adjudicated as insolvent or to be liquidated, or
(vi) takes corporate action for the purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any
Significant Subsidiary, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any Significant Subsidiary, or any such
petition shall be filed against the Company or any Significant Subsidiary
and such petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $2,000,000 are rendered against one or more of
the Company and its Significant Subsidiaries which judgments are not,
within 60 days after entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within 60 days after the expiration of such
stay; or
(j) the Subsidiary Guarantee shall cease to be in full force and
effect as an enforceable instrument or the Company or the Subsidiary
Guarantor (or any Person at its authorized direction or on its behalf),
except as contemplated by Section 10.5, shall assert in writing that the
Subsidiary Guarantee is unenforceable in any material respect; or
(k) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Company or any ERISA Affiliate that a
Plan may become a subject of any such proceedings, (iii) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in accordance with Title
IV of ERISA, shall exceed $10,000,000, (iv) the Company or any ERISA
Affiliate shall have incurred or is reasonably expected to
<PAGE> 39
35
incur any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans, (v)
the Company or any ERISA Affiliate withdraws from any Multiemployer Plan,
or (vi) the Company or any Subsidiary establishes or amends any employee
welfare benefit plan that provides post-employment welfare benefits in a
manner that would increase the liability of the Company or any Subsidiary
thereunder; and any such event or events described in clauses (i) through
(vi) above, either individually or together with any other such event or
events, could reasonably be expected to have a Material Adverse Effect; or
(l) the Subsidiary Guarantor shall cease to be a Wholly-Owned
Subsidiary, except as contemplated by Section 10.5.
As used in Section 11(k), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 has occurred, all the Notes then outstanding
shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
the Required Holders may at any time at its or their option, by notice or
notices to the Company, declare all the Notes at the time outstanding to be
immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided) and that the
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36
provision for payment of a Make-Whole Amount by the Company in the event that
the Notes are prepaid or are accelerated as a result of an Event of Default, is
intended to provide compensation for the deprivation of such right under such
circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing,
and irrespective of whether any Notes have become or have been declared
immediately due and payable under Section 12.1, the holder of any Note at the
time outstanding may proceed to protect and enforce the rights of such holder by
an action at law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in any Note, or
for an injunction against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
12.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to paragraph (b) or (c) of Section 12.1, the Required Holders, by
written notice to the Company, may rescind and annul any such declaration and
its consequences if (a) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and Defaults, other than
the non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and (c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15, the
Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including
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37
without limitation reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), within five Business
Days thereafter the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes. Notes shall not be transferred in denominations of
less than $500,000, provided that if necessary to enable the registration of
transfer by a holder of its entire holding of Notes, one Note may be in a
denomination of less than $500,000.
You agree that the Company shall not be required to register the
transfer of any Note to any Person (other than your nominee) or to any separate
account maintained by you unless the Company receive from the transferee a
representation to the Company (and appropriate information as to any separate
accounts or other matters) to the same or similar effect with respect to the
transferee as is contained in Section 6.2 or other assurances
<PAGE> 42
38
reasonably satisfactory to the Company that such transfer does not involve a
prohibited transaction (as such term is used in Section 5.12(e). You shall not
be liable for any damages in connection with any such representations or
assurances provided to the Company by any transferee.
13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to
it of the ownership of and the loss, theft, destruction or mutilation of any
Note (which evidence shall be, in the case of an Institutional Investor, notice
from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or any other Institutional
Investor, such Person's own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
within five Business Days thereafter the Company at its own expense shall
execute and deliver, in lieu thereof, a new Note, dated and bearing interest
from the date to which interest shall have been paid on such lost, stolen,
destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or
mutilated Note if no interest shall have been paid thereon.
14. PAYMENTS ON NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, premium, if any, and
interest becoming due and payable on the Notes shall be made at the principal
office of The Chase Manhattan Bank in New York City. The Company may at any
time, by notice to each holder of a Note, change the place of payment of the
Notes so long as such place of payment shall be either the principal office of
the Company in New York City or the principal office of a bank or trust company
in New York City.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to
<PAGE> 43
39
time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, you shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to Section
13.2. The Company will afford the benefits of this Section 14.2 to any
Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company agrees to pay all costs and expenses (including reasonable
attorneys' fees of your special counsel and, if reasonably required, local or
other counsel) incurred by you and the Other Purchaser or any holder of a Note
in connection with such transactions and in connection with any amendments,
waivers or consents under or in respect of this Agreement or the Notes (whether
or not such amendment, waiver or consent becomes effective), including without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this Agreement
or the Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company, the Subsidiary Guarantor or any other Subsidiary
or in connection with any work-out or restructuring of the transactions
contemplated hereby and by the Notes. The Company will pay, and will save you
and each other holder of a Note harmless from, all claims in respect of any
fees, costs or expenses if any, of brokers and finders (other than those
retained by you).
In furtherance of the foregoing, on the date of the Closing the
Company will pay or cause to be paid the reasonable fees, disbursements and
other regular charges (including estimated unposted disbursements and other
charges as of the date of the Closing) of your special counsel which are
reflected in the statement of such special counsel submitted to the Company on
or prior to the date of the Closing. The Company will also pay,
<PAGE> 44
40
promptly upon receipt of supplemental statements therefor, reasonable additional
fees, if any, and disbursements and other charges of such special counsel in
connection with the transactions hereby contemplated (including disbursements
and other charges unposted as of the date of the Closing to the extent such
disbursements and other charges exceed estimated amounts paid as aforesaid).
15.2. SURVIVAL.
The obligations of the Company under this Section 15 will survive
the payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive
the execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between you and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.
17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of
any term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21, or any defined term (as it is used
therein), will be effective as to you unless consented to by you in writing, and
(b) no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding affected thereby, (i) subject to the
provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or change the rate
or the time of payment or method of computation of interest or of the Make-Whole
Amount on, the Notes, (ii) change the percentage of the principal amount of the
Notes the holders of which are required to consent to any such
<PAGE> 45
41
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.
17.2. SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the
<PAGE> 46
42
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of
its Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other address
as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth at
the beginning of this Agreement, to the attention of its Chief Financial
Officer, or at such other address as the Company shall have specified to
the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may hereafter
be executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same
<PAGE> 47
43
extent that it could contest the original, or from introducing evidence to
demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION"
means information delivered to you by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by you as
being confidential information of the Company or such Subsidiary, provided that
such term does not include information that (a) was publicly known or otherwise
known to you prior to the time of such disclosure, (b) subsequently becomes
publicly known through no act or omission by you or any person acting on your
behalf, (c) otherwise becomes known to you other than through disclosure by the
Company or any Subsidiary or (d) constitutes financial statements delivered to
you under Section 7.1 that are otherwise publicly available. You will maintain
the confidentiality of such Confidential Information in accordance with
procedures adopted by you in good faith to protect confidential information of
third parties delivered to you, provided that you may deliver or disclose
Confidential Information to (i) your directors, officers, trustees, employees,
agents, attorneys and affiliates (to the extent such disclosure reasonably
relates to the administration of the investment represented by your Notes), (ii)
your financial advisors and other professional advisors whose duties require
them to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 20, (iii) any other holder of any
Note, (iv) any Institutional Investor to which you sell or offer to sell such
Note or any part thereof or any participation therein (if such Person has agreed
in writing prior to its receipt of such Confidential Information to be bound by
the provisions of this Section 20), (v) any Person from which you offer to
purchase any security of the Company (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 20), (vi) any federal or state regulatory authority having
jurisdiction over you, (vii) the National Association of Insurance Commissioners
or any similar organization, or any nationally recognized rating agency that
requires access to information about your investment portfolio or (viii) any
other Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule, regulation or order
applicable to you, (x) in response to any subpoena or other legal process, (y)
in connection with any litigation to which you are a party or (z) if an Event of
Default has occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement. Each holder of a Note, by its acceptance of a Note, will be
deemed to
<PAGE> 48
44
have agreed to be bound by and to be entitled to the benefits of this Section 20
as though it were a party to this Agreement. On reasonable request by the
Company in connection with the delivery to any holder of a Note of information
required to be delivered to such holder under this Agreement or requested by
such holder (other than a holder that is a party to this Agreement or its
nominee), such holder will enter into an agreement with the Company embodying
the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement, such word shall no longer be
deemed to refer to such Affiliate, but shall refer to you, and you shall have
all the rights of an original holder of the Notes under this Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including without limitation any subsequent
holder of a Note) whether so expressed or not.
22.2. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
<PAGE> 49
45
22.3. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding (but without limiting the requirements in Sections 8.2 and 8.3
that notice of any optional prepayment specify a Business Day as the date fixed
for such prepayment), any payment of principal of or Make-Whole Amount (if any)
or interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next succeeding
Business Day, except for interest in respect of any principal then being paid or
prepaid (which interest shall accrue to, but not including, such following
Business Day).
22.4. SEVERABILITY.
Any provision of this Agreement that is 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 hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the fullest extent permitted by applicable law) not
invalidate or render unenforceable such provision in any other jurisdiction.
22.5. ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined in
this Agreement have the meanings respectively given to them in accordance with
GAAP. Except as otherwise specifically provided herein, all computations made
pursuant to this Agreement shall be made in accordance with GAAP and all balance
sheets and other financial statements with respect thereto shall be prepared in
accordance with GAAP. Except as otherwise specifically provided herein, any
consolidated financial statement or financial computation shall be done in
accordance with GAAP.
22.6. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.7. GOVERNING LAW.
This Agreement and the Notes 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 excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
<PAGE> 50
46
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
LONE STAR INDUSTRIES, INC.
By_______________________
Title:
The foregoing is hereby agreed
to as of the date thereof.
[PURCHASER]
By_______________________
Title:
<PAGE> 51
SCHEDULE A
This Schedule A shows the names and addresses of the Purchasers
under the foregoing Note Purchase Agreement and the Other Agreement referred to
therein and the respective principal amounts of Notes to be purchased by each.
Name and Address of Purchaser Principal Amount
- ----------------------------- ----------------
METROPOLITAN LIFE INSURANCE COMPANY $42,500,000
(1) All payments on account of the Notes
shall be made by wire transfer of Federal
or other immediately available funds to
its Account No. 002-2-410591 at The Chase
Manhattan Bank, Metropolitan Branch, 33
East 23rd Street, New York, NY 10010, ABA
#021000021, with sufficient information
setting forth (i) the name of the
Company, (ii) the maturity date, (iii)
the PPN: 542290 B# 7 of the Notes, (iv)
the amount of principal, interest and
premium, if any, and (v) the due date of
the payment being made.
(2) Address for all notices:
Metropolitan Life Insurance Company
334 Madison Avenue
P.O. Box 633
Convent Station, NJ 07961-0633
Attn: Vice President-Private Placement Unit
Telecopy: (201) 254-3050
(3) Tax Identification Number: 13-5581829
<PAGE> 52
2
Name and Address of Purchaser Principal Amount
- ----------------------------- ----------------
METROPOLITAN INSURANCE AND ANNUITY COMPANY $7,500,000
(1) All payments on account of the Notes
shall be made by wire transfer of Federal
or other immediately available funds to
its Account No. 002-1-072301 at The Chase
Manhattan Bank, Metropolitan Branch, 33
East 23rd Street, New York, NY 10010, ABA
#021000021, with sufficient information
setting forth (i) the name of the
Company, (ii) the maturity date, (iii)
the PPN: 542290 B# 7 of the Notes, (iv)
the amount of principal, interest and
premium, if any, and (v) the due date of
the payment being made.
(2) Address for all notices:
Metropolitan Life Insurance Company
334 Madison Avenue
P.O. Box 633
Convent Station, NJ 07961-0633
Attn: Vice President-Private Placement Unit
Telecopy: (201) 254-3050
(3) Tax Identification Number: 13-2876440
<PAGE> 53
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, (a) with respect to any Person
(including without limitation the Company), any other Person that at such time
directly or indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, such first Person, and (b) with
respect to the Company, any Person beneficially owning or holding, directly or
indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company and, for purposes of Section 8.6
and the definition of Debt Prepayment Application, neither you nor any other
Institutional Investor shall be deemed to be an Affiliate of the Company merely
because you and your Affiliates or such Institutional Investor and its
Affiliates, as the case may be, shall hold Notes and any other securities of the
Company.
"ATTRIBUTABLE DEBT" means, as to any particular lease relating to a
Sale and Leaseback Transaction, the total amount of Lease Rentals (discounted
semiannually from the respective due dates thereof in accordance with generally
accepted financial practice at the interest rate implicit in such lease if known
or, if not known, 10% per annum) required to be paid by the lessee under such
lease during the remaining term thereof.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City are required or authorized to be
closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which
the lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS" means with respect to any Person,
all outstanding obligations of such Person in respect of Capital Leases, taken
at the capitalized amount thereof accounted for as Debt in accordance with GAAP.
SCHEDULE B
<PAGE> 54
2
"CHANGE IN CONTROL" means such time as:
(a) after the date of this Agreement a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act on
the date of the Closing) (i) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of more than 45% of the total then
outstanding voting power of the capital stock of the Company, (ii) has
the right or the ability by voting right, contract or otherwise to elect
or designate for election a majority of the entire board of directors of
the Company or (iii) acquires all or substantially all of the properties
or assets of the Company; or
(b) during any period of 24 consecutive months, individuals
who at the beginning of such period constituted the board of directors of
the Company (together with any new directors whose election by such board
of directors, or whose nomination for election by the shareholders of the
Company, as the case may be, was approved by a vote of 66 2/3% of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was
previously so approved) cease for any reason (other than death or
disability) to constitute a majority of the board of directors of the
Company then in office.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"COMPANY" means Lone Star Industries, Inc., a Delaware corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED CAPITALIZATION" means, at any date, the sum of (a)
Consolidated Debt plus (b) Consolidated Net Worth.
"CONSOLIDATED DEBT" means, at any date, all Debt of the Company and
its Subsidiaries determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED FIXED CHARGES" for any period means the sum of (a)
Consolidated Interest Charges plus (b) Consolidated Lease Rentals.
"CONSOLIDATED INCOME AVAILABLE FOR FIXED CHARGES" for any period
means Consolidated Net Income plus all amounts deducted in the computation
thereof on account of (a) Consolidated Fixed Charges and (b) taxes imposed on or
measured by income or excess profits.
SCHEDULE B
<PAGE> 55
3
"CONSOLIDATED INTEREST CHARGES" for any period means the sum for the
Company and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, of all amounts deducted in computing Consolidated Net Income on
account of interest on Debt (including imputed interest in respect of
Capitalized Lease Obligations and amortization of debt discount and expense)
plus all amounts paid on account of capitalized or deferred interest but not
deducted in computing Consolidated Net Income.
"CONSOLIDATED LEASE RENTALS" for any period means the sum for the
Company and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, of all Lease Rentals required to be paid during such period.
"CONSOLIDATED NET INCOME" for any period means the net income of the
Company and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP, excluding
(a) extraordinary gains or losses, and
(b) any amount representing any interest in the undistributed
earnings of any other Person (other than a Subsidiary).
"CONSOLIDATED NET WORTH" means, at any date, on a consolidated basis
for the Company and its Subsidiaries (a) the sum of (i) the par or stated value
of capital stock (other than redeemable Preferred Stock) and warrants plus (ii)
capital in excess of par or stated value relating to capital stock (other than
redeemable Preferred Stock) plus (iii) retained earnings (or minus any retained
earning deficit) plus (or minus in the case of a deficit) (iv) any cumulative
translation adjustment minus (b) the sum of treasury stock, capital stock
subscribed for and unissued and other contra-equity accounts minus (c) to the
extent included in clause (a), all amounts properly attributable to minority
interests, if any, in the stock and surplus of Subsidiaries, all determined in
accordance with GAAP.
"CONSOLIDATED TOTAL ASSETS" means, at any time, the total assets of
the Company and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP, after eliminating all amounts properly attributable to
minority interests, if any, in the stock and surplus of Subsidiaries.
"CONTROL EVENT" means
(a) the execution by the Company or any of its Subsidiaries or
Affiliates of any agreement or letter of intent with respect to any
proposed transaction or event or series of transactions or events which,
individually or in the aggregate, may reasonably be expected to result in
a Change in Control,
SCHEDULE B
<PAGE> 56
4
(b) the execution of any written agreement which, when fully
performed by the parties thereto, would result in a Change in Control, or
(c) the making of any written offer by any person (as such term is
used in Section 13(d) and Section 14(d)(2) of the Exchange Act as in
effect on the date of the Closing) or related persons constituting a group
(as such term is used in Rule 13d-5 under the Exchange Act as in effect on
the date of the Closing) to the holders of the capital stock of the
Company, which offer, if accepted by the requisite number of holders,
would result in a Change in Control.
"DEBT" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money or its mandatory purchase,
redemption or other retirement obligations in respect of mandatorily
redeemable Preferred Stock,
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or
arising under any conditional sale or other title retention agreement with
respect to any such property),
(c) its Capitalized Lease Obligations,
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities),
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money),
(f) Swaps of such Person, and
(g) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (f) above.
Debt of any Person shall include all obligations of such Person of the character
described in clauses (a) through (g) above to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"DEBT PREPAYMENT APPLICATION" means, with respect to any Transfer of
property, the application by the Company of cash
SCHEDULE B
<PAGE> 57
5
in an amount equal to any portion of the Net Proceeds Amount with respect to
such Transfer to pay senior Debt of the Company (other than senior Debt owing to
the Company, any of its Subsidiaries or any Affiliate and Debt in respect of any
revolving credit or similar credit facility providing the Company or a
Subsidiary with the right to obtain loans or other extensions of credit from
time to time, except to the extent that in connection with such payment of Debt
the availability of credit under such credit facility is permanently reduced by
an amount not less than the amount of such proceeds applied to the payment of
such Debt), provided that in the course of making such application the Company
shall prepay pursuant to Section 8.2 a principal of the Notes at least equal to
the product of (x) the Net Proceeds Amount being so applied to the payment of
senior Debt multiplied by (y) a fraction the numerator of which is the unpaid
principal amount of the Notes at the time outstanding and the denominator of
which is the aggregate unpaid principal amount of all senior Debt of the
Company.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the giving of notice or the lapse of time, or both, become an
Event of Default.
"DEFAULT RATE" means that rate of interest that is the greater of
(i) 9.31% per annum and (ii) 2% above the rate of interest publicly announced by
The Chase Manhattan Bank from time to time at its principal office in New York
City as its prime rate.
"DISCLOSURE DOCUMENTS" is defined in Section 5.3.
"DISPOSITION VALUE" means at any time, with respect to any property
(a) in the case of property that does not constitute capital stock of any
Subsidiary, the book value thereof, determined at the time of such disposition
in good faith by the Company, and (b) in the case of property that constitutes
capital stock of any Subsidiary, an amount equal to that percentage of book
value of assets of the Subsidiary that issued such stock as is equal to the
percentage that the book value of such capital stock of such Subsidiary
represents of the book value of all of the outstanding capital stock of such
Subsidiary (assuming, in making such calculations, that all securities
convertible into such capital stock are so converted and giving full effect to
all transactions that would occur or be required in connection with such
conversion) determined at the time of the disposition thereof, in good faith by
the Company.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
SCHEDULE B
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6
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations promulgated
thereunder from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"EXISTING CREDIT FACILITY" means the Financing Agreement dated as of
April 13, 1994 among the Company, the Subsidiary Guarantor and The CIT
Group/Business Credit, Inc.
"FAIR MARKET VALUE" means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other
political subdivision of any thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary,
or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including without limitation obligations
incurred through an agreement, contingent or otherwise, by such Person:
SCHEDULE B
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7
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital
or other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including without limitation asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note,
(b) any holder of a Note holding (together with one or more of its Affiliates)
more than 2% of the aggregate principal amount of the Notes then outstanding,
and (c) any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.
"INVESTMENT" means any investment, made in cash or by delivery of
property, by the Company or any of its Subsidiaries (a) in any Person, whether
by acquisition of stock, indebtedness or other obligation or security, or by
loan, Guaranty, advance, capital contribution or otherwise, or (b) in any
property, provided that repurchases by the Company of its outstanding capital
stock or warrants shall not be deemed to be Investments.
SCHEDULE B
<PAGE> 60
8
"LEASE RENTALS" means, with respect to any period, the sum of the
rental and other obligations required to be paid during such period by the
Company or any Subsidiary as lessee under all leases of real or personal
property with an original non-cancellable lease term of one year or longer
(other than Capital Leases), excluding any amount required to be paid by the
lessee (whether or not therein designated as rental or additional rental) on
account of maintenance and repairs, insurance, taxes assessments, water rates
and similar charges, provided that, if at the date of determination, any such
rental or other obligations (or such portion thereof) are contingent or not
otherwise definitely determinable by the terms of the related lease, the amount
of such obligations (or such portion thereof) (i) shall be assumed to be equal
to the amount of such obligations for the period of 12 consecutive calendar
months immediately preceding the date of determination or (ii) if the related
lease was not in effect during such preceding 12-month period, shall be the
amount estimated by a Senior Financial Officer on a reasonable basis and in good
faith.
"LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or title
of any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other title retention agreement or Capital Lease, upon
or with respect to any property or asset of such Person (including in the case
of stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.7.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, (b) the ability of the Company to
perform its obligations under this Agreement and the Notes or (c) the validity
or enforceability of this Agreement, the Notes or the Subsidiary Guarantee.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"NET PROCEEDS AMOUNT" means, with respect to any Transfer of
property by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at the Fair
Market Value of such consideration at the time
SCHEDULE B
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9
of the consummation of such Transfer) received by such Person in respect
of such Transfer, minus
(b) all ordinary and reasonable out-of-pocket costs and expenses
actually incurred by such Person in connection with such Transfer.
"NOTES" is defined in Section 1.1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OTHER AGREEMENT" is defined in Section 2.
"OTHER PURCHASER" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"PERSON" or "PERSON" means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3)
of ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PREFERRED STOCK", as applied to any corporation, means shares of
such corporation that shall be entitled to preference or priority over any other
shares of such corporation in respect of either the payment of dividends or the
distribution of assets upon liquidation, or both.
"PRIORITY DEBT" is defined in Section 10.2.
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, inchoate
or otherwise.
"PROPERTY REINVESTMENT APPLICATION" means, with respect to any
Transfer of property, the application of a portion of the Net Proceeds Amount
from such Transfer to the acquisition by the Company or any Subsidiary of
operating assets to be used in the ordinary course of business by the Company or
such Subsidiary provided
SCHEDULE B
<PAGE> 62
10
(a) the board of directors of the Company shall have approved the
construction, acquisition or improvement of a non-current operating asset
within 12 months before or six months after such Transfer, and
(b) the Company or a Subsidiary shall have entered into a definitive
agreement for such construction, acquisition or improvement of a
non-current operating asset or shall have commenced such construction,
acquisition or improvement of a non-current operating asset within 12
months after such Transfer.
"PTE" is defined in Section 6.2.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued on March 13, 1984 by the United States Department of Labor.
"REQUIRED HOLDERS" means, at any time, the holders of at least a
majority in unpaid principal amount of the Notes at the time outstanding.
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any
other officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"RESTRICTED INVESTMENT" means all Investments other than
(a) Investments in property to be used in the ordinary course of
business of the Company and its Subsidiaries;
(b) Investments in current assets arising from the sale of goods and
services in the ordinary course of business of the Company and its
Subsidiaries;
(c) Investments in one or more Subsidiaries or any person that
concurrently with such Investment becomes a Subsidiary;
(d) Investments in Kosmos Cement Company;
(e) Investments existing on the date of this Agreement and described
in Schedule 10.8;
(f) Investments in United States Governmental Securities, provided
that such obligations mature within 365 days from the date of acquisition
thereof;
(g) Investments in certificates of deposit or banker's acceptances
maturing within one year from the date of acquisition thereof issued by
commercial banks or trust companies incorporated under the laws of the
United States or any state thereof or the District of Columbia, each of
SCHEDULE B
<PAGE> 63
11
which banks or trust companies shall, as of any date of determination,
have combined capital, surplus and undivided profits aggregating at least
$100,000,000 and be rated "A" or better by Standard & Poor's Rating
Service, a division of The McGraw Hill Companies, Inc., "A1" or better by
Moody's Investors Service Inc. or an equivalent rating by any other credit
rating agency of recognized national standing;
(h) Investments in commercial paper given the highest rating by a
credit rating agency of recognized national standing and maturing not more
than 270 days from the date of creation thereof;
(i) Investments in repurchase agreements not exceeding 90 days in
duration collateralized by obligations of the United States of America or
any agency or instrumentality thereof, entered into with a commercial bank
meeting the requirements of clause (g) above, provided that such
repurchase agreements are secured by a perfected transfer of and security
interest in such obligations; and
(j) Investments in tax-exempt obligations of any state of the United
States, or any municipality of any such state, in each case rated "AA" or
better by Standard & Poors Ratings Service, a division of The McGraw Hill
Companies, Inc., "Aa2" or better by Moody's Investors Service, Inc. or an
equivalent rating by any other credit rating agency of recognized national
standing, provided that such obligations mature within 365 days from the
date of acquisition thereof.
"SALE AND LEASEBACK TRANSACTION" means a transaction or series of
transactions pursuant to which the Company or any Subsidiary shall sell or
transfer to any Person (other than the Company or a Subsidiary) any property,
whether now owned or hereafter acquired, and, as part of the same transaction or
series of transactions, the Company or any Subsidiary shall rent or lease as
lessee (other than pursuant to a Capital Lease), or similarly acquire the right
to possession or use of, such property or one or more properties which it
intends to use for the same purpose or purposes as such property.
"SEC REPORTS" is defined in Section 5.3.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"SIGNIFICANT SUBSIDIARY" means, at any date, any Subsidiary of the
Company the assets of which have a book value of more than $1,000,000 (as
reflected in the Company's most recently audited consolidated balance sheet).
SCHEDULE B
<PAGE> 64
12
"SUBSIDIARY" means, as to any Person, any corporation, association
or other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"SUBSIDIARY GUARANTEE" is defined in Section 1.2.
"SUBSIDIARY GUARANTOR" is defined in Section 1.2.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"10% SENIOR NOTES" means the Company's 10% Senior Notes due 2003
issued in the aggregate original principal amount of $78,000,000.
"TRANSFER" is defined in Section 10.5.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary all of
the equity interests (except directors' qualifying shares) and voting interests
of which are owned by any one or more of the Company and the Company's other
Wholly-Owned Subsidiaries at such time.
SCHEDULE B
<PAGE> 65
EXHIBIT 1.1
[FORM OF NOTE]
LONE STAR INDUSTRIES, INC.
7.31% SENIOR NOTE DUE 2007
No. [_____] New York, New York
$[_______] [Date]
PPN: 542290 B# 7
FOR VALUE RECEIVED, the undersigned, LONE STAR INDUSTRIES, INC. (the
"COMPANY"), a Delaware corporation, hereby promises to pay to [_______________],
or registered assigns, the principal sum of [________________] DOLLARS on March
21, 2007 , with interest (computed on the basis of a 360-day year of twelve
30-day months) (a) from the date hereof on the unpaid balance thereof at the
rate of 7.31% per annum, payable semiannually on March 21 and September 21 in
each year, until the principal hereof shall have become due and payable, and (b)
on any overdue payment of principal, any overdue payment of interest (to the
extent permitted by applicable law) and any overdue payment of any premium or
Make-Whole Amount (as defined in the Note Purchase Agreements referred to
below), payable semiannually as aforesaid (or, at the option of the registered
holder hereof, on demand) at a rate per annum from time to time equal to the
greater of (i) 9.31% and (ii) 2% above the rate of interest publicly announced
by The Chase Manhattan Bank from time to time at its principal office in New
York City as its prime rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at said principal office of The Chase Manhattan Bank in New York City or
at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase Agreements referred to
below.
This Note is one of an issue of Senior Notes issued pursuant to
separate Note Purchase Agreements dated as of March 10, 1997 (as from time to
time amended, the "NOTE PURCHASE AGREEMENTS") between the Company and the
respective Purchasers named therein and is entitled to the benefits thereof.
This Note is also entitled to the benefits of a certain Subsidiary Guarantee
executed and delivered pursuant to the Note Purchase Agreements. Each holder of
this Note will be deemed, by its acceptance hereof, to have agreed to the
confidentiality provisions set forth in Section 20 of the Note Purchase
Agreements.
<PAGE> 66
2
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, and under
certain circumstances the Company may be required to prepay this Note in full,
all at the times and on the terms specified in the Note Purchase Agreements, but
not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable premium or Make-Whole Amount) and with the effect provided in the
Note Purchase Agreements.
This Note shall be construed and enforced in accordance with, and
the rights of the Company and the holder hereof shall be governed by, the laws
of the State of New York, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
LONE STAR INDUSTRIES, INC.
By_________________________
Title:
<PAGE> 67
EXHIBIT 1.2
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of March __, 1997 made by New York Trap
Rock Corporation, a Delaware corporation (the "GUARANTOR"), in favor of the
holders from time to time of the Notes referred to below (collectively the
"OBLIGEES").
WHEREAS, Lone Star Industries, Inc., a Delaware corporation (the
"COMPANY" or the "PARENT"), has entered into several Note Purchase Agreements
dated as of March 10, 1997 (as amended or otherwise modified from time to time,
collectively the "NOTE PURCHASE AGREEMENTS" and terms defined therein and not
otherwise defined herein are being used herein as so defined) with the
institutional purchasers listed in Schedule A thereto, pursuant to which the
Company proposes to issue and sell to such purchasers up to $50,000,000
aggregate principal amount of its 7.31% Senior Notes due 2007 (the "NOTES"); and
WHEREAS, it is a condition precedent to the purchase of the Notes by
such purchasers under the Note Purchase Agreements that the Guarantor shall
execute and deliver this Guarantee Agreement;
NOW, THEREFORE, in consideration of the premises the Guarantor
hereby agrees as follows:
SECTION 1. Guarantee. The Guarantor unconditionally and irrevocably
guarantees, as primary obligor and not merely as surety,
A. the punctual payment when due, whether at stated maturity, by
prepayment, by acceleration or otherwise, of all obligations of the
Company arising under the Note Purchase Agreements and the Notes,
including all extensions, modifications, substitutions, amendments and
renewals thereof, whether for principal, interest (including without
limitation interest on any overdue principal, premium and interest at the
rate specified in the Notes and interest accruing or becoming owing both
prior to and subsequent to the commencement of any proceeding against or
with respect to the Company under any applicable Debtor Relief Laws as
defined below), Make-Whole Amount, fees, expenses, indemnification or
otherwise, and
B. the due and punctual performance and observance by the Company of
all covenants, agreements and conditions on their part to be performed and
observed under the Note Purchase Agreements and the Notes;
(all such obligations are called the "GUARANTEED OBLIGATIONS"); provided that
the aggregate liability of the Guarantor hereunder
GUARANTEE AGREEMENT
<PAGE> 68
2
in respect of the Guaranteed Obligations shall not exceed at any time the lesser
of (1) the amount of the Guaranteed Obligations and (2) the maximum amount for
which the Guarantor is liable under this Guarantee Agreement without such
liability being deemed a fraudulent transfer under applicable Debtor Relief Laws
(as hereinafter defined), as determined by a court of competent jurisdiction. As
used herein, the term "DEBTOR RELIEF LAWS" means any applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar debtor relief laws affecting the rights of creditors
generally from time to time in effect.
The Guarantor also agrees to pay, in addition to the amount stated
above, any and all reasonable expenses (including reasonable counsel fees and
expenses) incurred by any Obligee in enforcing any rights under this Guarantee
Agreement or in connection with any amendment of this Guarantee Agreement.
Without limiting the generality of the foregoing, this Guarantee
Agreement guarantees, to the extent provided herein, the payment of all amounts
which constitute part of the Guaranteed Obligations and would be owed by any
other Person to any Obligee but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving such Person.
SECTION 2. Guarantee Absolute. The obligations of the Guarantor
under Section 1 of this Guarantee Agreement constitute a present and continuing
guaranty of payment and not of collectability and the Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
the Note Purchase Agreements and the Notes, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of any Obligee with respect thereto. The obligations of the
Guarantor under this Guarantee Agreement are independent of the Guaranteed
Obligations, and a separate action or actions may be brought and prosecuted
against the Guarantor to enforce this Guarantee Agreement, irrespective of
whether any action is brought against the Company or any other Person liable for
the Guaranteed Obligations or whether the Company or any other such Person is
joined in any such action or actions. The liability of the Guarantor under this
Guarantee Agreement shall be primary, absolute, irrevocable, and unconditional
irrespective of:
A. any lack of validity or enforceability of any Guaranteed
Obligation, the Note Purchase Agreements, any Note or any agreement or
instrument relating thereto;
B. any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from the Note Purchase
Agreements, any Note or this Guarantee Agreement;
GUARANTEE AGREEMENT
<PAGE> 69
3
C. any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure by the Guarantor or other Person liable, or any other guarantee,
for all or any of the Guaranteed Obligations;
D. any manner of application of collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any collateral or any other assets of the Company or any
other Subsidiary;
E. any change, restructuring or termination of the corporate
structure or existence of the Company or any other Subsidiary; or
F. any other circumstance (including without limitation any statute
of limitations) that might otherwise constitute a defense, offset or
counterclaim available to, or a discharge of, the Company or the
Guarantor.
This Guarantee Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Obligations is rescinded or must otherwise be returned by the
Company, or any other Person upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, all as though such payment had not been made.
SECTION 3. Waivers. The Guarantor hereby irrevocably waives, to the
extent permitted by applicable law:
A. promptness, diligence, presentment, notice of acceptance and any
other notice with respect to any of the Guaranteed Obligations and this
Guarantee Agreement;
B. any requirement that any Obligee or any other Person protect,
secure, perfect or insure any Lien or any property subject thereto or
exhaust any right or take any action against the Company or any other
Person or any collateral;
C. any defense, offset or counterclaim arising by reason of any
claim or defense based upon any action by any Obligee;
D. any duty on the part of any Obligee to disclose to the Guarantor
any matter, fact or thing relating to the business, operation or condition
of any Person and its assets now known or hereafter known by such Obligee;
and
E. any rights by which it might be entitled to require suit on an
accrued right of action in respect of any of the Guaranteed Obligations or
require suit against the Company or the Guarantor or any other Person.
GUARANTEE AGREEMENT
<PAGE> 70
4
SECTION 4. Waiver of Subrogation and Contribution. The Guarantor
shall not assert, enforce, or otherwise exercise (A) any right of subrogation to
any of the rights, remedies, powers, privileges or liens of the Company or any
other beneficiary against the Company or any other obligor on the Guaranteed
Obligations or any collateral or other security, or (B) any right of recourse,
reimbursement, contribution, indemnification, or similar right against the
Company, and the Guarantor hereby waives any and all of the foregoing rights,
remedies, powers, privileges and the benefit of, and any right to participate
in, any collateral or other security given to any Obligee or any other
beneficiary to secure payment of the Guaranteed Obligations, until such time as
the Guaranteed Obligations have been paid in full.
SECTION 5. Representations and Warranties. The Guarantor hereby
represents and warrants as follows:
A. The Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation.
The execution, delivery and performance of this Guarantee Agreement have
been duly authorized by all necessary action on the part of the Guarantor.
B. The execution, delivery and performance by the Guarantor of this
Guarantee Agreement will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in
respect of any property of the Guarantor or any Subsidiary of the
Guarantor under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which the Guarantor or any Subsidiary of the
Guarantor is bound or by which the Guarantor or any Subsidiary of the
Guarantor or any of their respective properties may be bound or affected,
(ii) conflict with or result in a breach of any of the terms, conditions
or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Guarantor or any
Subsidiary of the Guarantor or (iii) violate any provision of any statute
or other rule or regulation of any Governmental Authority applicable to
the Guarantor or any Subsidiary of the Guarantor.
C. The Guarantor and the Company are members of the same
consolidated group of companies and are engaged in related businesses and
the Guarantor will derive substantial direct and indirect benefit from the
execution and delivery of this Guarantee Agreement.
SECTION 6. Amendments, Etc. No amendment or waiver of any
provision of this Guarantee Agreement and no consent to any departure by the
Guarantor therefrom shall in any event be
GUARANTEE AGREEMENT
<PAGE> 71
5
effective unless the same shall be in writing and signed by the Required
Holders, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided that no
amendment, waiver or consent shall, unless in writing and signed by all
Obligees, (i) limit the liability of or release the Guarantor hereunder, (ii)
postpone any date fixed for, or change the amount of, any payment hereunder or
(iii) change the percentage of Notes the holders of which are, or the number of
Obligees, required to take any action hereunder.
SECTION 7. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and (A) by telecopy if
the sender on the same day sends a confirming copy of such notice by a
recognized overnight delivery service (charges prepaid), or (B) by registered or
certified mail with return receipt requested (postage prepaid), or (C) by a
recognized overnight delivery service (with charges prepaid). Such notice if
sent to the Guarantor shall be addressed to it at the address of the Guarantor
provided below its name on the signature page of this Guarantee Agreement or at
such other address as the Guarantor may hereafter designate by notice to each
holder of Notes, or if sent to any holder of Notes, shall be addressed to it as
set forth in the Note Purchase Agreements. Any notice or other communication
herein provided to be given to the holders of all outstanding Notes shall be
deemed to have been duly given if sent as aforesaid to each of the registered
holders of the Notes at the time outstanding at the address for such purpose of
such holder as it appears on the Note register maintained by the Company in
accordance with the provisions of Section 13.1 of the Note Purchase Agreements.
Notices under this Section 7 will be deemed given only when actually received.
SECTION 8. No Waiver; Remedies. No failure on the part of any
Obligee to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 9. Continuing Guarantee. This Guarantee Agreement is a
continuing guarantee of payment and performance and shall (A) remain in full
force and effect until payment in full of the Guaranteed Obligations and all
other amounts payable under this Guarantee Agreement, (B) be binding upon the
Guarantor, its successors and assigns and (C) inure to the benefit of and be
enforceable by the Obligees and their successors, transferees and assigns.
SECTION 10. Governing Law. This Guarantee Agreement shall be
construed and enforced in accordance with, and the rights of the Guarantor and
the Obligees shall be governed by, the laws of the State of New York excluding
choice-of-law
GUARANTEE AGREEMENT
<PAGE> 72
6
principles of the law of such State that would require the application of the
laws of a jurisdiction other than such State.
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee
Agreement to be duly executed and delivered as of the date first above written.
NEW YORK TRAP ROCK CORPORATION
By________________________
Title:
Address:
Attention:
Telephone:
Telecopy:
GUARANTEE AGREEMENT
<PAGE> 1
EXHIBIT 10.6(I)
AMENDMENT NO. 1
WHEREAS, the Company and the Executive are parties to an
Employment Agreement dated as of February 1, 1996 (the "Employment Agreement"),
and desire to amend the Employment Agreement; and
WHEREAS, Section 13 of the Employment Agreement permits
amendment thereof;
NOW, THEREFORE, in consideration of the mutual promises,
agreements and covenants hereby made, the mutual benefits to be derived from
this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby amend the
Employment Agreement as follows:
1. Effective August 1, 1996, the first sentence of Section 2
is amended to read as follows:
"Lone Star shall pay Executive a salary ("Salary") at the rate
of $350,000 per annum until the effective date of termination of this
Agreement."
2. Effective November 20, 1996, Section 3(b) is amended to
read as follows:
"(b) In the event that this Agreement is terminated
by the Executive pursuant to Section 4 below or Lone Star terminates this
Agreement pursuant to Section 3(a) above, Executive shall be entitled to a
severance payment in an amount
<PAGE> 2
equal to Executive's Salary for the period from the effective date of the
termination through the date one year (18 months, in the case of a termination
pursuant to Section 4) after the effective date of the termination (the
"Severance Period"). Severance shall be paid in lump sum on the effective date
of the termination. In addition, the Executive shall continue to receive life
insurance and medical insurance under the Company's Executive Medical Plan for
Active Employees (as in effect as of the date of this Agreement) provided
pursuant to Sections 5 and 6 hereof during the Severance Period (which is in
addition to, and not in lieu of, benefit continuation under the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA")). Severance pay pursuant to
this Section shall be in lieu of severance pay pursuant to any Lone Star
severance policy (except that the supplemental retirement benefit and all other
provisions of the Supplemental Agreement shall remain in full force and
effect)."
3. Effective November 20, 1996, Section 5 is amended to read
as follows:
"5. Executive shall participate in Lone Star's 401(k)
savings plan and vacation and holiday programs and other benefits in the same
manner as other executive salaried employees of Lone Star and in accordance with
the terms thereof; provided that Executive shall not participate in any short
term disability insurance plan, long term disability insurance plan or
supplemental executive retirement plan. Notwithstanding the foregoing, nothing
contained in this Agreement (including, without limitation, Section 12 below)
shall affect the force and effect of the Agreement, dated April 15, 1994, as
amended and restated on February 1, 1996 and as further amended
2
<PAGE> 3
and restated on November 20, 1996 between the Company and the Executive relating
to certain supplemental retirement, medical insurance, disability and other
benefits and rights, a copy of which is attached hereto as Exhibit A (the
"Supplemental Agreement")."
4. Effective November 20, 1996, the first paragraph of Section
6 is amended to read as follows:
"6. Following a Change in Control, as defined below,
the Executive, on thirty days written notice (which notice must be delivered
within twelve months after the Company gives the Executive notice of the Change
in Control or the Executive has actual knowledge of such Change in Control), may
terminate his employment with the Company. Upon any such termination, the
Executive shall be entitled to severance pay in an amount equal to thirty
months' Salary. In addition, the Executive shall continue to receive life
insurance and medical insurance under the Company's Executive Medical Plan for
Active Employees (as in effect as of the date of this Agreement) provided
pursuant to Sections 5 and 6 hereof during the Severance Period (which is in
addition to, and not in lieu of, benefit continuation under COBRA). Severance
pay pursuant to this Section shall be in lieu of severance pay pursuant to any
Lone Star policy or other agreement (except that the supplemental retirement
benefit and all other provisions of the Supplemental Agreement shall remain in
full force and effect) and all other obligations of the Company for severance
pay under this Agreement. For
3
<PAGE> 4
purposes of this Agreement a "Change in Control" shall be deemed to have
occurred upon the occurrence of any of the following events:"
By: /s/ William M. Troutman
Lone Star Industries, Inc.
Executive
By: /s/ David W. Wallace
Lone Star Industries, Inc.
Chairman of the Board
By: /s/ Jack Wentworth
Chairman of the
Compensation and Stock
Option Committee
4
<PAGE> 1
EXHIBIT 10.7
This AMENDED AND RESTATED AGREEMENT effective as of the 20th
day of November 1996, by and between Lone Star Industries, Inc., a corporation
organized under the laws of the State of Delaware with its principal office at
300 First Stamford Place, Stamford, Connecticut 06912 and its successors and
assigns (the "Corporation"), and William M. Troutman (the "Executive") residing
at 30 Thorp Drive, Weston, Connecticut 06883 (the "Agreement").
W I T N E S S E T H:
WHEREAS, the Executive is currently employed as President and
Chief Operating Officer at the Corporation; and
WHEREAS, the Corporation and the Executive previously entered
into an employment agreement, dated August 17, 1987 (the "1987 Agreement") which
provided for certain supplemental retirement benefits for the Executive and his
spouse; and
WHEREAS, the Corporation and the Executive entered into a
subsequent employment agreement, dated June 26, 1990 (the "1990 Agreement")
which also provided for supplemental retirement benefits for the Executive and
his spouse; and
WHEREAS, the 1987 Agreement and the 1990 Agreement also
provided the Executive, his spouse and eligible dependents with enhanced health
and medical coverage; and
WHEREAS, on December 10, 1990 the Corporation and certain of
its subsidiaries filed in this Court (the "Bankruptcy Court") their respective
voluntary petitions for reorganization under Chapter 11 of Title 11 of the
United States Code; and
WHEREAS, subsequently, on December 21, 1990, Lone Star
Building Centers, Inc. and Lone Star Building Centers (Eastern), Inc. filed
their respective voluntary petitions under Chapter 11 of the Bankruptcy Code;
and
WHEREAS, the 1990 Agreement was rejected by the Corporation,
with the Executive's consent, by order of the U.S. Bankruptcy Court, dated March
28, 1991; and
<PAGE> 2
WHEREAS, on or about June 26, 1991, the Executive filed a
proof of claim against the Corporation asserting, among other things, contingent
and unliquidated damages resulting from the rejection of the 1990 Agreement; and
WHEREAS, on April 14, 1994, the Bankruptcy Court approved a
settlement with respect to the Executive's claims relating the supplemental
retirement and medical benefits in exchange for the assumption of certain
obligations by the Corporation; and
WHEREAS, on April 14, 1994, the Corporation and the Executive
entered into an Agreement (the "1994 Agreement") to provide certain supplemental
and medical benefits; and
WHEREAS, on February 1, 1996, the Corporation and the
Executive amended and restated the 1994 Agreement (the "1996 Agreement"); and
WHEREAS, the Corporation and the Executive desire to amend the
1996 Agreement.
NOW, THEREFORE, in consideration of the agreements hereinafter
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 "ANNUAL RETIREMENT BENEFIT" shall mean 50% of the sum of
Salary and Bonus, and shall be reduced for any year by the amounts paid to
Executive or Spouse from the Annuity or Plan for such year, and shall be payable
monthly.
1.2 "ANNUITY" shall mean National Home Life Assurance Company
Policy Number N101058 (August 7, 1989).
1.3 "BONUS" shall mean the greater of: (i) $125,000 or (ii)
the average annual bonus received by the Executive for the three fiscal years
prior to the Termination Date.
2
<PAGE> 3
1.4 "BOARD" shall mean the Board of Directors of the
Corporation or its duly authorized committee.
1.5 "DISABILITY" shall mean Executive's inability, because of
physical or mental incapacity, to perform in a competent manner executive duties
of a nature equivalent to the duties the Executive currently performs for a
period of ninety (90) days.
1.6 "DISCONTINUATION DATE" shall mean the date of the later to
occur of: (i) the death of the Executive; or (ii) the death of the Spouse.
1.7 "EMPLOYMENT AGREEMENT" shall mean the employment agreement
between the Executive and the Corporation, dated February 1, 1996, as amended.
1.8 "PLAN" shall mean the Lone Star Industries, Inc. Salaried
Employees Pension Plan.
1.9 "QUALIFIED DEPENDENTS" shall mean the Executive's: (i)
spouse, if not divorced or legally separated from the Executive; (ii) children
under the age of (A) 19 or (B) 23 if a full-time student, unmarried, and not
employed on a regular and full-time basis, and dependent on the Executive for
support; provided however, if due proof is received within 31 days of the day
the Qualified Dependent has reached his maximum age that he is incapable of
self-sustaining employment by reason of mental retardation or physical handicap,
the child shall continue to be deemed a dependent after such birthday, for
purposes of only accident and health coverage; and (iii) legally adopted
children, or children living in a parent-child relationship and primarily
dependent on the Executive.
1.10 "SALARY" shall mean the greater of: (i) the Executive's
base salary immediately prior to the Termination Date or (ii) $350,000.
1.11 "SPOUSE" shall mean the Executive's legal spouse on the
Termination Date.
1.12 "TERMINATION DATE" shall mean the date of the earlier to
occur of the date the Executive: (i) attains age 65; or (ii) ceases to be an
employee of the Corporation including, without limitation, by reason of a
Disability. The Executive
3
<PAGE> 4
agrees that the Annual Retirement Benefit cannot commence under this Agreement
prior to the end of any period for which the Executive has received (or is
receiving) active salary continuation.
ARTICLE II
2.1 AMOUNT OF BENEFITS.
(a) The Corporation agrees that the Annual Retirement
Benefit payable to the Executive at age 65 shall not be less than $237,500.
(b) Except as provided below, the Annual Retirement
Benefit shall be paid to Executive commencing at age 65 and shall continue until
the Discontinuation Date.
2.2 BENEFITS PAYABLE BEFORE AGE 65. Effective upon the
Termination Date, the Executive may elect to receive the Annual Retirement
Benefit from the Corporation on or at any time after the date the Executive
attains the age of 55; provided however, such benefits shall be reduced by one
twelfth (1/12) of 5% for each complete month by which the commencement of the
Annual Retirement Benefit precedes the Executive's attainment of age 62. No such
reduction in benefits shall occur on or after the date the Executive attains the
age of 62. The benefits shall be paid until the Discontinuation Date.
2.3 BENEFITS PAYABLE ON DISABILITY. In the event of
Executive's Disability at any age prior to the commencement of the Annual
Retirement Benefit, the Annual Retirement Benefit shall commence immediately and
shall continue until the Discontinuation Date. There shall be no reduction in
benefits for Executive's age at date of Disability.
2.4 BENEFITS PAYABLE UPON DEATH. In the event of Executive's
death prior to the Termination Date, the Annual Retirement Benefit shall be paid
to the Spouse until the Discontinuation Date. Benefits paid to the Spouse shall
be reduced by one-twelfth (1/12) of 5% for each complete month that Executive's
age at death is less than age 62.
2.5 PAYMENT OF BENEFITS. There shall be no reduction in the
Annual Benefit payable under this Agreement due to the age of the Spouse. All
payments under
4
<PAGE> 5
this Agreement shall be made to the Executive until his death, and then to the
Spouse for her life if she survives the Executive.
2.6 PURCHASE OF ANNUITY. The Corporation agrees to purchase
within thirty days after the Termination Date, an annuity from a reputable
provider of annuities rated at least "AA" by Standard & Poors for the Executive
and the Spouse which provides, together with annual amounts paid to the
Executive or Spouse from the Plan and Annuity, for an annual retirement benefit
to Executive and his Spouse equal to the Annual Retirement Benefit called for by
this Agreement. Within 30 days after the purchase of such annuity, the
Corporation shall pay the Executive an amount equal to the federal income taxes
which shall be payable by the Executive upon receipt of the annuity, said amount
to be grossed up to reflect the additional taxes payable due to the receipt of
said payment. The retirement benefits provided by the annuity shall be adjusted
for this payment of federal income taxes so that the after tax retirement
benefits provided by the annuity are at least equal to the after tax retirement
benefits the Executive would have received from the Corporation had the
Corporation paid the retirement benefits directly rather than provide the
retirement benefits through the annuity.
ARTICLE III
HEALTH AND MEDICAL BENEFITS
From the date hereof until the Discontinuation Date, the
Corporation agrees to provide the Executive with life insurance and the
Executive and Qualified Dependents with medical insurance at no cost to the
Executive and Qualified Dependents at least equal to the life and medical
insurance provided to senior elected officers of the Corporation; provided
however, upon the earlier to occur of the Executive's attainment of age 65 or
the Executive's application for a pension benefit under the Plan, the medical
benefits provided to the Executive and Qualified Dependents shall be at least
equal to the medical benefits described in the Executive Medical and Life
Insurance Plan - William Troutman and Qualified Dependents, effective March 1,
1996, (the "SPD"), the terms of which are incorporated by reference herein.
The Corporation agrees to use its best efforts to provide the
benefits listed on the SPD to the Executive and his spouse in a manner that will
not result in any income inclusion under federal, state or local tax law. To the
extent, any such income inclusion results to either the Executive or his spouse,
the Executive and his spouse (as the case may be) shall receive an annual
payment from the Corporation to fully pay for the federal, state or local tax on
such income inclusion (a "Gross-up Payment") as well as
5
<PAGE> 6
any income inclusion from the Gross-up Payment based on the highest marginal tax
rate on the payment, so that neither the Executive nor his Spouse have any
federal, state or local tax liability as a result of participation in the
Executive Medical Plan described in the SPD. For each year, such payment shall
be made no later than January 31st of the following year.
This section shall survive any termination of this Agreement.
ARTICLE IV
4.1 DISPUTE RESOLUTION.
(a) The Executive hereby agrees that any dispute relating to
this Agreement arising between the Executive (and/or the Spouse) and the
Corporation (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 proceeding, including the rendering of an
award, shall take place in Stamford, Connecticut, (or such other location
mutually agreed upon by the Corporation and the Executive (and/or the Spouse))
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 the Executive, and the third by both
the Company and the Executive (and/or the Spouse) jointly; provided, however,
that, if the Company and the Executive (and/or the Spouse) do not select the
third arbitrator within such 30-day period, such third arbitrator shall be
chosen by the AAA as soon as practicable 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). Judgement 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.
6
<PAGE> 7
(d) The Corporation shall reimburse the Executive and
Spouse for all costs, including reasonable attorneys' fees, in connection with
any arbitration hereunder in which the Executive (and/or the Spouse) is the
prevailing party.
ARTICLE V
MISCELLANEOUS
5.1 UNFUNDED PLAN. This Agreement is unfunded and shall at all
times remain unfunded until required pursuant to Section 2.6. The obligations of
the Corporation with respect to the benefits payable hereunder shall be paid out
of the Corporation's general assets and shall not be secured. At its discretion,
the Corporation may establish one or more trusts, with such trustees as the
Board may appoint, for the purpose of providing payment of such benefits. Such
trust or trusts may be irrevocable, but the assets thereof shall be subject to
the claims of the Corporation's creditors. To the extent any benefits provided
under the Agreement are actually paid from any such trust, the Corporation shall
have no further obligation with regard thereto, but to the extent not so paid,
such benefit shall remain the obligation of, and shall be paid by the
Corporation. To the extent that any person acquires a right to receive payments
from the Corporation under this agreement, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.
5.2 NO EFFECT ON EMPLOYMENT. Nothing contained herein shall be
construed as adversely affecting, in any manner, the terms and conditions of the
Executive's employment including, without limitation, the terms and conditions
of the Employment Agreement; provided however, in the event there are any
conflicts between this Agreement and the Employment Agreement regarding
supplemental retirement benefits and life and medical insurance, the terms of
this Agreement shall prevail.
5.3 PAYMENTS NOT COMPENSATION. Any compensation payable under
this Agreement shall not be deemed salary or other compensation to the Executive
for the purposes of computing benefits to which he may be entitled under any
pension plan or other arrangement of the Corporation for the benefit of its
employees.
5.4 NO REDUCTION IN PLAN BENEFITS. Nothing in this Agreement
shall reduce the benefits to which the Executive and the Spouse are entitled
under the Plan.
7
<PAGE> 8
5.5 INVALIDITY. In case any provision of this Agreement shall
be illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Agreement shall be construed and
enforced as if such illegal and invalid provision never existed.
5.6 WITHHOLDING OF TAXES. The Corporation shall have the right
to make such provisions as it deems necessary or appropriate to satisfy any
obligations it may have to withhold federal, state or local income or other
taxes incurred by reason of payments pursuant to this Agreement.
5.7 BINDING AFFECT. This Agreement shall be binding upon and
inure to the benefit of the Corporation, including any purchaser of all or
substantially all of the assets of the Corporation and the surviving entity of
any merger or consolidation to which the Corporation is a party and the
Executive and his heirs, executors, administrators and legal representatives.
5.8 NO ASSIGNMENT. Except as provided herein, the benefits
payable under this Agreement shall not be subject to alienation, transfer,
assignment, garnishment, execution or levy of any kind, and any attempt to cause
any benefits to be so subjected shall not be recognized.
5.9 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Corporation has caused this Agreement
to be executed by its duly authorized officers and the Executive has hereunto
set his hand and seal as of the date first above written.
By: /s/ William M. Troutman
Lone Star Industries, Inc.
Executive
By: /s/ David W. Wallace
Lone Star Industries, Inc.
Chairman of the Board
By: /s/ Jack Wentworth
Chairman of the
Compensation and Stock
Option Committee
8
<PAGE> 1
EXHIBIT 10.18
LONE STAR INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
EFFECTIVE JULY 16, 1996
<PAGE> 2
LONE STAR INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
Section
ARTICLE I - DEFINITIONS
Accrued Benefit....................................................1.1
Actuarial Equivalent or Actuarially Equivalent Basis...............1.2
Annuity Starting Date..............................................1.3
Beneficiary........................................................1.4
Board of Directors.................................................1.5
Change of Control..................................................1.6
Code...............................................................1.7
Committee..........................................................1.8
Company............................................................1.9
Deferred Compensation Benefit.....................................1.10
Eligibility Service...............................................1.11
ERISA.............................................................1.12
Freeze Date.......................................................1.13
Lone Star.........................................................1.14
Lone Star Salaried Pension Plan...................................1.15
Participant.......................................................1.16
Plan..............................................................1.17
Plan Year.........................................................1.18
Subsidiary........................................................1.19
Voting Securities.................................................1.20
ARTICLE II - ELIGIBILITY
Initial Eligibility................................................2.1
Frozen Participation...............................................2.2
Renewed Eligibility................................................2.3
ARTICLE III - DEFERRED COMPENSATION BENEFIT
Entitlement to Deferred Compensation Benefit.......................3.1
Form and Time of Payment...........................................3.2
Calculation of Deferred Compensation Benefit.......................3.3
ARTICLE IV - PROVISIONS RELATING TO ALL BENEFITS
This Article Controls Other Plan Provisions........................4.1
Termination of Employment..........................................4.2
Expenses Incurred in Enforcing the Plan............................4.3
<PAGE> 3
Section
ARTICLE V - ADMINISTRATION
Committee Appointment..............................................5.1
Committee Organization and Voting..................................5.2
Powers of the Committee............................................5.3
Committee Discretion...............................................5.4
Reimbursement of Expenses..........................................5.5
Administrator......................................................5.6
ARTICLE VI - ADOPTION BY SUBSIDIARIES
Procedure For and Status After Adoption............................6.1
Termination of Participation By Adopting Subsidiary................6.2
ARTICLE VII - AMENDMENT AND/OR TERMINATION
Amendment or Termination of the Plan...............................7.1
No Retroactive Effect on Awarded Benefits..........................7.2
Effect of Termination..............................................7.3
ARTICLE VIII - FUNDING
Payments Under This Plan are the Obligation
of the Company...................................................8.1
Plan May Be Funded Through Life Insurance
Owned by the Company.............................................8.2
Participants Must Reply Only on General
Credit of the Company...........................................8.3
ARTICLE IX - MISCELLANEOUS
Responsibility for Distributions and Withholding of Taxes..........9.1
Limitation of Rights...............................................9.2
Facility of Payment Rules..........................................9.3
Nonalienation of Benefits..........................................9.4
Reliance Upon Information..........................................9.5
Severability.......................................................9.6
Notice.............................................................9.7
Gender and Number..................................................9.8
Governing Law......................................................9.9
Headings..........................................................9.10
Claims and Appeals Procedures.....................................9.11
Enforceable Contract..............................................9.12
<PAGE> 4
LONE STAR INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Lone Star Industries, Inc. ("Lone Star") previously
established the Lone Star Industries, Inc. Supplemental Executive Retirement
Plan (the "SERP") to provide certain highly compensated management personnel a
supplement to their retirement pay so as to retain their loyalty and to offer a
further incentive to them to maintain and increase their standard of
performance; and
WHEREAS, Lone Star retained the right in Section 7.1 of the SERP to
amend the SERP from time to time; and
WHEREAS, Lone Star has determined to completely amend and restate the
SERP as provided herein; NOW,
NOW, THEREFORE, the Lone Star Industries, Inc. Supplemental Executive
Retirement Plan is amended and restated to provide as follows:
1
<PAGE> 5
ARTICLE I
DEFINITIONS
1.1 ACCRUED BENEFIT.
(a) PENSION ACCRUED BENEFIT. "Pension Accrued Benefit"
means as of any given date the Participant's accrued benefit as
determined under Section 2.1 (or any successor provision) of the
Lone Star Salaried Pension Plan, as in effect on that date.
(b) SERP ACCRUED BENEFIT. "SERP Accrued Benefit" means as
of any given date the Deferred Compensation Benefit determined
under Section 3.3 of this Plan as of that date.
Both the Pension Accrued Benefit and the SERP Accrued Benefit
shall be determined using the actuarial factors used as of that date to compute
benefits under the Lone Star Salaried Pension Plan. If there is no Lone Star
Salaried Pension Plan, then the actuarial factors to be used shall be those
actuarial factors as are selected by the actuarial firm, which last serviced the
Lone Star Salaried Pension Plan prior to its termination or merger, as being
then appropriate had the Lone Star Salaried Pension Plan remained in existence
at its last level of benefits and with its last participant census.
1.2 ACTUARIAL EQUIVALENT OR ACTUARIALLY EQUIVALENT BASIS.
"Actuarial Equivalent" or "Actuarially Equivalent Basis" means an equality in
value of the aggregate amounts expected to be received under different forms of
payment based on the same mortality and interest assumptions. For this purpose,
the mortality and interest rate assumptions used in computing benefits under the
Lone Star Salaried Pension Plan will be used. If there is no Lone Star Salaried
Pension Plan, then the actuarial assumptions to be
2
<PAGE> 6
used will be those used to compute benefits under the successor qualified
defined benefit plan, if any, but if there is no successor qualified defined
benefit plan, the actuarial assumptions will be those last used to compute
benefits under the Lone Star Salaried Pension Plan or any successor qualified
defined benefit plan.
1.3 ANNUITY STARTING DATE. "Annuity Starting Date" means the first
day of the first period for which an amount is payable as an annuity under the
Lone Star Salaried Pension Plan, or in the case of a benefit not payable in the
form of an annuity, the first day on which all events have occurred which
entitle the Participant to a benefit under the Lone Star Salaried Pension Plan.
1.4 BENEFICIARY. "Beneficiary" means
(a) the Participant's surviving spouse, if any; and for
this purpose, a surviving former spouse of the Participant shall
be treated as the Participant's surviving spouse and any spouse of
the Participant shall not be treated as the Participant's
surviving spouse to the extent required by a qualified domestic
relations order under Section 206(d) of ERISA; or
(b) if the Participant has no surviving spouse, the
person, trust or other entity (or any combination of persons,
trusts or other entities) designated by the Participant to receive
any amount distributed under this Plan upon the death of the
Participant before a Deferred Compensation Benefit becomes payable
to him under Section 3.2; or, if none,
(c) the Participant's estate.
1.5 BOARD OF DIRECTORS. "Board of Directors" means the Board of
Directors of Lone Star.
1.6 CHANGE OF CONTROL. "Change of Control" shall mean and be
deemed to have occurred upon the occurrence of any one of the following events:
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(a) Any acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act")) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of shares of common stock of
Lone Star ("LSI Common Stock") and/or other voting securities of
Lone Star entitled to vote generally in the election of directors
("Outstanding LSI Voting Securities") after which acquisition such
individual, entity or group is the beneficial owner of twenty
percent (20%) or more (or, with respect to any 20% or more holder
prior to such acquisition, any acquisition by such 20% holder of
1% or more) of either (i) the then outstanding shares of LSI
Common Stock or (ii) the Outstanding LSI Voting Securities;
excluding, however, the following:
(iii) (A) any acquisition of LSI Common Stock or
Outstanding LSI Voting Securities by Lone Star; (B) any
acquisition of LSI Common Stock or Outstanding LSI Voting
Securities by an employee benefit plan (or related trust)
sponsored or maintained by Lone Star or by any of its
subsidiaries; or (C) any acquisition of LSI Common Stock
or Outstanding LSI Voting Securities by any corporation
pursuant to a reorganization, merger, consolidation or
similar corporate transaction (in each case, a "Corporate
Transaction") if the conditions described in Section
1.6(c)(i)-(iii) below are satisfied; or
(iv) any transaction in which the Chief Executive
Officer and the President of Lone Star (both as of
September 1, 1996, and subject to health related
availability) (A) retain their current positions with the
surviving company immediately after such transaction and
(B) will immediately after such transaction beneficially
own an aggregate (for both such executives), directly or
indirectly (including, without limitation, ownership by
family members, trusts or foundations for or controlled by
family members), of more than 5% of either the (I) then
outstanding shares or common stock of the surviving
company and/or (II) the other voting securities of the
surviving company entitled to vote generally in the
election of directors (any transaction under this Section
1.6(a)(iv) is hereinafter referred to as a "Management
Event").
(b) A change in composition of the Board of Directors
(other than in connection with a Management Event) such that the
individuals who, as of September 1, 1996, comprise a class of
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directors of the Board of Directors (the members of each class of
directors of the Board of Directors as September 1, 1996, shall be
hereinafter referred to as an "Incumbent Class" and the members of
all of the Incumbent Classes shall be hereinafter collectively
referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the class; provided, however,
for purposes of this Section 1.6(b), that any individual who
becomes a member of an Incumbent Class subsequent to September 1,
1996, whose election, or nomination for election by Lone Star
stockholders, was approved in advance or contemporaneously with
such election by a vote of at least a majority of those
individuals who are members of the Incumbent Board and a majority
of those individuals who are members of such Incumbent Class (or
deemed to be such pursuant to this proviso) shall be considered as
though such individual were a member of the Incumbent Class; and
provided further, that any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors or an actual
or threatened tender offer for Lone Star shares or similar
transaction or other contest for corporate control (other than a
tender offer by Lone Star) shall not be so considered as a member
of the Incumbent Class; or
(c) The approval by Lone Star stockholders of a Corporate
Transaction or, if consummation of such Corporate Transaction is
subject, at the time of the approval by Lone Star stockholders, to
the consent of any government or governmental agency, the
obtaining of such consent (either explicitly or implicitly);
excluding, however, a Management Event or a Corporate Transaction
pursuant to which (i) all or substantially all of the individuals
and entities who are the beneficial owners, respectively, of the
outstanding shares of LSI Common Stock and Outstanding LSI Voting
Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than eighty percent
(80%) of, respectively, the outstanding shares of common stock of
the corporation resulting from that Corporate Transaction and the
combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of
directors; (ii) no Person (other than Lone Star, any employee
benefit plan (or related trust) sponsored or maintained by Lone
Star or by any of its subsidiaries or by the corporation resulting
from such Corporate Transaction, or any Person
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beneficially owning, immediately prior to such Corporate
Transaction, directly or indirectly, twenty percent (20%) or more
of the outstanding shares of LSI Common Stock or Outstanding LSI
Voting Securities, as the case may be) will beneficially own,
directly or indirectly, twenty percent (20%) or more of,
respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the
combined voting power of the then outstanding securities of such
corporation entitled to vote generally in the election of
directors; and (iii) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of board
of directors of the corporation resulting from such Corporate
Transaction; or
(d) The approval of Lone Star stockholders of (i) a
complete liquidation or dissolution of Lone Star, or (ii) the sale
or other disposition of all or substantially all of the assets of
Lone Star; excluding, however, such a sale or other disposition to
a corporation (A) in connection with a Management Event or (B)
with respect to which following such sale or other disposition,
(I) more than eighty percent (80%) of,
respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors
will be then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of
the outstanding shares of LSI Common Stock and Outstanding
LSI Voting Securities immediately prior to such sale or
other disposition;
(II) no Person (other than Lone Star and any
employee benefit plan (or related trust) sponsored or
maintained by Lone Star or any of its subsidiaries or by
such acquiring corporation and any Person beneficially
owning, immediately prior to such sale or other
disposition, directly or indirectly, twenty percent (20%)
or more of the outstanding shares of LSI Common Stock or
Outstanding LSI Voting Securities, as the case may be)
will beneficially own, directly or indirectly, twenty
percent (20%) or more of, respectively, the then
outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally
in the election of directors; and
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(III) individuals who were members of the
Incumbent Board will constitute at least a majority of the
members of the board of directors of such corporation.
1.7 CODE. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
1.8 COMMITTEE. "Committee" means the persons who are from time to
time serving as members of the committee administering this Plan.
1.9 COMPANY. "Company" means Lone Star Industries, Inc. and any of
its subsidiary companies.
1.10 DEFERRED COMPENSATION BENEFIT. "Deferred Compensation
Benefit" means the benefit payable to or on behalf of a Participant under the
terms of this Plan.
1.11 ELIGIBILITY SERVICE. "Eligibility Service" means service with
Lone Star and its Subsidiaries for which the Participant is awarded credit under
the Lone Star Salaried Pension Plan for vesting purposes. If the Participant is
terminated under circumstances which qualify him for a total disability benefit
under the Lone Star Salaried Pension Plan, Eligibility Service shall continue to
be awarded for vesting purposes only until the Participant attains 65, unless
the Participant is terminated for total disability while the Participant's
participation in this Plan is frozen, in which case no additional Eligibility
Service shall be awarded.
1.12 ERISA. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.13 FREEZE DATE. "Freeze Date" means the last day of the Plan
Year prior to
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the Plan Year during which a Participant initially became ineligible to continue
to participate in this Plan, as provided in Section 2.2.
1.14 LONE STAR. "Lone Star" means the Lone Star Industries, Inc.,
the sponsor of this Plan.
1.15 LONE STAR SALARIED PENSION PLAN. "Lone Star Salaried Pension
Plan" means the Lone Star Industries, Inc. Salaried Employees' Pension Plan, as
amended from time to time, a defined benefit plan qualified under Section 401(a)
of the Code.
1.16 PARTICIPANT. "Participant" means an employee of a Company who
is eligible for and is participating in the Plan, or a former employee of a
Company who has a SERP Accrued Benefit under this Plan.
1.17 PLAN. "Plan" means the Lone Star Industries, Inc.
Supplemental Executive Retirement Plan set forth in this document, as amended
from time to time.
1.18 PLAN YEAR. "Plan Year" means a one year period which
coincides with the fiscal year of the Lone Star Salaried Pension Plan.
1.19 SUBSIDIARY. "Subsidiary" means any wholly owned subsidiary of
Lone Star.
1.20 VOTING SECURITIES. "Voting Securities" means any security
which ordinarily possesses the power to vote in the election of the Board of
Directors without the happening of any precondition or contingency.
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ARTICLE II
ELIGIBILITY
2.1 INITIAL ELIGIBILITY. Any employee of any Company who is
designated by either the Board of Directors or the Compensation and Stock Option
Committee of the Board of Directors as a member of a select group of management
or highly compensated employees shall be eligible to participate in this Plan.
However, William M. Troutman and John J. Martin are not eligible to participate
in this Plan.
2.2 FROZEN PARTICIPATION. If an employee who is a Participant
later becomes ineligible to continue to participate his SERP Accrued Benefit
will be frozen as of the day before the day he becomes ineligible to continue to
participate in this Plan. He will become entitled to that frozen SERP Accrued
Benefit when he fulfills the requirements of Section 3.1, in which case his
frozen SERP Accrued Benefit will be payable at the time and in the form set out
in Section 3.2.
2.3 RENEWED ELIGIBILITY. If an employee who is a Participant
becomes ineligible to continue to participate but remains employed by a Company
and then later again becomes eligible to participate, the Participant shall be
treated for all purposes as though he had not had his participation interrupted.
Thereafter he will become entitled to benefits as before when he fulfills the
requirements of Section 3.1.
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ARTICLE III
DEFERRED COMPENSATION BENEFIT
3.1 ENTITLEMENT TO DEFERRED COMPENSATION BENEFIT. The Participant
shall become entitled to a Deferred Compensation Benefit as of whichever of the
following dates occurs first:
(a) CHANGE OF CONTROL: the date of a Change of Control at
which time the Participant shall be fully vested in his SERP
Accrued Benefit, whether or not he is fully vested in his Pension
Accrued Benefit;
(b) PLAN TERMINATION: the date the Board of Directors
terminates the Plan at which time the Participant shall be fully
vested in his SERP Accrued Benefit whether or not he is fully
vested in his pension accrual benefit.
(c) BENEFIT ENTITLEMENT UNDER THE LONE STAR SALARIED
PENSION PLAN: the date the Participant becomes fully vested in his
benefit under the Lone Star Salaried Pension Plan, or becomes
entitled to a disability retirement benefit under the Lone Star
Salaried Pension Plan (unless he later becomes ineligible for the
disability benefit).
The Participant's Beneficiary shall become entitled to a Deferred
Compensation Benefit as of the date of the Participant's death (and the
Participant shall not be entitled to a Deferred Compensation Benefit) if the
Participant dies before his Annuity Starting Date, whether or not the
Participant is vested in his benefit under the Lone Star Salaried Pension Plan.
3.2 FORM AND TIME OF PAYMENT. The Deferred Compensation Benefit
shall be payable in a lump sum distribution as of whichever of the following
dates occurs first (the "Payment Date"):
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(a) CHANGE OF CONTROL OR PLAN TERMINATION: simultaneously
with or prior to the date of a Change of Control, (it being
specifically agreed that any bonuses or salary being paid as a
result of the change of control, whether paid prior to, on or
after the date of the consummation of the change of control, shall
be included in the calculation of the deferred compensation
benefit hereunder) and or termination of the Plan by the Board of
Directors, whichever occurs first (but not more than fifteen (15)
days prior to the change of control or Plan termination, whichever
occurs first);
(b) DEATH: as soon as practicable after the Participant's
death, if the Participant dies before his Annuity Starting Date;
(c) BENEFIT COMMENCEMENT UNDER THE LONE STAR SALARIED
PENSION PLAN: otherwise, on the Participant's Annuity Starting
Date under the Lone Star Salaried Pension Plan.
The Company shall pay the entire Deferred Compensation Benefit to
the Participant or to the Participant's Beneficiary, subject to the same
conditions and limitations as are set out in the Lone Star Salaried Pension
Plan, except as otherwise provided in this Plan. Should there be any dispute
about the proper commencement date for benefit payments under the Lone Star
Salaried Pension Plan, the resolution of that dispute for purposes of the Lone
Star Salaried Pension Plan shall be conclusively deemed to be the resolution of
that same dispute for purposes of this Plan.
3.3 CALCULATION OF DEFERRED COMPENSATION BENEFIT. The Deferred
Compensation Benefit payable to or on behalf of the Participant, shall be the
Lump Sum Value as of the Participant's Payment Date of the excess of (a) over
(b), where:
(a) is the Participant's Pension Accrued Benefit as of his
Payment Date, or in the case of a Participant with a frozen SERP
Accrued Benefit, as of his Freeze Date, computed, however,
(i) without taking into account the limitation on
compensation set out in Code Section 401(a)(17); and
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(ii) by taking into account all bonuses paid to the
Participant by the Company after July 16, 1996.
(b) is the Participant's Pension Accrued Benefit as of
that same date, computed under the terms and provisions of the
Lone Star Salaried Pension Plan as then in effect.
The Lump Sum Value as of the Participant's Payment Date of the
excess of (a) over (b) shall be determined as follows.
(c) First, the two Pension Accrued Benefits under (a) and
(b) above will each be converted to a benefit payable at the
earliest retirement age then possible for the Participant under
the Lone Star Salaried Pension Plan (his "ERATP"). This conversion
will be accomplished:
(i) in the case of a Deferred Compensation Benefit
payable under Section 3.2(a), (c) or (d) to a Participant
with at least 10 years of Eligibility Service and whose
ERATP precedes his 62nd birthday, by reducing each such
Pension Accrued Benefit by 1/12 of 5% for each complete
month by which the Participant's ERATP precedes his 62nd
birthday; and
(ii) otherwise, by converting each such Pension
Accrued Benefit to its Actuarial Equivalent as of the
Participant's ERATP.
(d) Second, the excess of (a) over (b), reduced or
converted as described above, shall be determined.
(e) Third, the Lump Sum Value of this excess as of the
Participant's Payment Date shall then be computed using either
(i) the mortality and interest rate assumptions
specified in Part I of Appendix C (or any successor
provision) of the Lone Star Salaried Pension Plan, or
(ii) the mortality and interest rate assumptions
specified in Part II of Appendix C (or any successor
provision) of the Lone Star Salaried Pension Plan,
whichever provides the greater benefit.
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ARTICLE IV
PROVISIONS RELATING TO ALL BENEFITS
4.1 THIS ARTICLE CONTROLS OTHER PLAN PROVISIONS. The provisions of
this Article will control over all other provisions of this Plan.
4.2 TERMINATION OF EMPLOYMENT. Termination of employment for any
reason prior to the Participant's vesting under Section 3.1 will cause the
Participant and all Beneficiaries holding under the Participant to forfeit all
interest in and under this Plan.
4.3 EXPENSES INCURRED IN ENFORCING THE PLAN. The Company shall pay
a Participant, or a deceased Participant's Beneficiary, for all legal fees and
expenses incurred in seeking to obtain or enforce any benefit provided by this
Plan.
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ARTICLE V
ADMINISTRATION
5.1 COMMITTEE APPOINTMENT. The Committee will be appointed by the
Board of Directors. The Committee shall be comprised of the Company's President
and Chief Operating Officer; the Company's Vice President, General Counsel and
Secretary; the Company's Vice President, Personnel and Labor Relations and the
Company's Vice President and Chief Financial Officer, who shall serve until they
resign or are removed by the Board of Directors. Any member of the Committee may
resign by giving at least 30 days written notice to the Chairman of the Board of
Directors. The Board of Directors may remove any member of the Committee by
written notice, which removal shall be effective as of the date specified in the
notice, and appoint one or more replacement or additional Committee members from
time to time. The Board of Directors is not required to give any advance notice
of such removal.
5.2 COMMITTEE ORGANIZATION AND VOTING. The Committee will select
from among its members a chairman who will preside at all of its meetings and
will elect a secretary without regard to whether that person is a member of the
Committee. The secretary will keep all records, documents and data pertaining to
the Committee's supervision and administration of this Plan. A majority of the
members of the Committee will constitute a quorum for the transaction of
business and the vote of a majority of the members present at any meeting will
decide any question brought before the meeting. In addition, the Committee may
decide any question by vote, taken without a meeting, of a
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majority of its members. A member of the Committee who is also a Participant
will not vote or act on any matter relating solely to himself.
5.3 POWERS OF THE COMMITTEE. The Committee will have the exclusive
responsibility for the general administration of this Plan according to the
terms and provisions of this Plan and will have all powers necessary to
accomplish those purposes, including but not by way of limitation the right,
power and authority:
(a) to make rules and regulations for the administration
of this Plan;
(b) to construe all terms, provisions, conditions and
limitations of this Plan;
(c) to correct any defect, supply any omission or
reconcile any inconsistency that may appear in this Plan in the
manner and to the extent it deems expedient to carry this Plan
into effect for the greatest benefit of all parties at interest;
(d) to resolve all controversies relating to the
administration of this Plan, including but not limited to:
(i) differences of opinion arising between the
Company and a Participant except when the difference of
opinion relates to the entitlement to, the amount of or
the method or timing of payment of a benefit affected by a
Change of Control, in which event it shall be decided by
judicial action; and
(ii) any question it deems advisable to determine
in order to promote the uniform administration of this
Plan for the benefit of all parties at interest; and
(e) to delegate to the Company's principal employee
benefits manager and his staff, or to the Company's Treasurer and
his staff, or to both, any of the Committee's duties and powers,
whether discretionary or ministerial, and to delegate to any
officer or employee, or to any other agent with suitable knowledge
and experience, any of
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its ministerial duties and powers. Any such delegation shall be
accomplished by resolution of the Committee, with written notice
thereof given to the person or persons to whom the duties and
powers are delegated. Any such delegation may be canceled or
modified in the same manner at any time.
5.4 COMMITTEE DISCRETION. The Committee in exercising any power or
authority granted under this Plan or in making any determination under this Plan
shall perform or refrain from performing those acts using its sole discretion
and judgment. Subject to the terms of this Plan, any decision made by the
Committee or any refraining to act or any act taken by the Committee in good
faith shall be final and binding on all parties. The Committee's decision shall
never be subject to de novo review. Notwithstanding the foregoing, the
Committee's decisions, refraining to act or acting is to be subject to judicial
review for those incidents occurring during the Plan Year in which a Change of
Control occurs and during the next three succeeding Plan Years.
5.5 REIMBURSEMENT OF EXPENSES. The Committee members will serve
without compensation for their services but will be reimbursed by Lone Star for
all expenses properly and actually incurred in the performance of their duties
under this Plan.
5.6 ADMINISTRATOR. For all purposes of ERISA, the administrator of
the Plan is Lone Star Industries, Inc. The administrator has the final
responsibility for compliance with all reporting and disclosure requirements
imposed under all applicable federal or state laws and regulations.
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ARTICLE VI
ADOPTION BY SUBSIDIARIES
6.1 PROCEDURE FOR AND STATUS AFTER ADOPTION. Any Subsidiary may,
with the approval of the Committee, adopt this Plan by appropriate action of its
board of directors. The terms of this Plan will apply separately to each
Subsidiary adopting this Plan and its Participants in the same manner as is
expressly provided for Lone Star and its Participants except that the powers of
the Board of Directors and the Committee under this Plan will be exercised by
the Board of Directors of Lone Star alone. Each Company will bear the cost of
providing Deferred Compensation Benefits under this Plan for its own
Participants. Lone Star will initially pay the costs of the Plan each Plan Year.
However, each adopting Subsidiary will then be billed back for the actuarially
determined costs pertaining to it in accordance with the appropriate Financial
Accounting Standards Board pronouncements. It is intended that the obligation of
Lone Star and each Subsidiary with respect to its Participants will be the sole
obligation of the Company that is employing the Participant and will not bind
any other Company.
6.2 TERMINATION OF PARTICIPATION BY ADOPTING SUBSIDIARY. Any
Subsidiary adopting this Plan may, by appropriate action of its board of
directors, terminate its participation in this Plan. The Committee may, in its
discretion, also terminate a Subsidiary's participation in this Plan at any
time. The termination of the participation in this Plan by a Subsidiary will
not, however, affect the rights of any Participant who is working or has worked
for the Subsidiary as to benefits previously accrued by the Participant under
this Plan without his consent.
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ARTICLE VII
AMENDMENT AND/OR TERMINATION
7.1 AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors,
or the Committee as its delegatee, may amend this Plan at any time by an
instrument in writing without the consent of any Participant or Company. The
Board of Directors may delegate its authority to approve ministerial Plan
amendments to the Committee. Any such delegation shall be made by resolution of
the Board of Directors with written notice of the delegation provided to the
Committee. The Board of Directors has the sole right to terminate this Plan at
any time by an instrument in writing without the consent of any Participant or
Company, except that the Plan shall terminate automatically following a Change
of Control.
7.2 NO RETROACTIVE EFFECT ON AWARDED BENEFITS. No amendment will
(a) affect the rights of any Participant to the retirement benefit provided in
Article III previously accrued by the Participant or (b) will change any
Participant's rights under any provision relating to a Change of Control after
the date which is six months prior to the first public announcement of a
transaction that results in a Change of Control, without the Participant's
consent. Subject to clause (b) of the immediately preceding sentence, the Board
of Directors retains the right at any time to change in any manner or to
discontinue all Deferred Compensation Benefits but only as to benefits that
accrue after the later of the date the amendment is adopted or becomes
effective.
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7.3 EFFECT OF TERMINATION. If this Plan is terminated no further
Deferred Compensation Benefit will accrue. The Deferred Compensation Benefits
accrued to the date of termination will be payable within 15 days as provided in
Sections 3.1(a) and 3.2(a).
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ARTICLE VIII
FUNDING
8.1 PAYMENTS UNDER THIS PLAN ARE THE OBLIGATION OF THE COMPANY.
The Company will pay the benefits due the Participants under this Plan.
8.2 PLAN MAY BE FUNDED THROUGH LIFE INSURANCE OWNED BY THE
COMPANY. It is specifically recognized by both the Company and the Participants
that the Company may, but is not required to, purchase life insurance so as to
accumulate assets sufficient to fund the obligations of the Company under this
Plan. Should the Company do so, no Participant will have any right to any such
policy.
8.3 PARTICIPANTS MUST RELY ONLY ON GENERAL CREDIT OF THE COMPANY.
It is also specifically recognized by both the Company and the Participants that
this Plan is only a general corporate commitment and that each Participant must
rely upon the general credit of the Company for the fulfillment of its
obligations under this Plan. Under all circumstances the rights of Participants
to any asset held by the Company will be no greater than the rights expressed in
this Plan. Nothing contained in this Plan will constitute a guarantee by the
Company that the assets of the Company will be sufficient to pay any Deferred
Compensation Benefit under this Plan or would place the Participant in a secured
position ahead of general creditors of the Company. The Plan does not create any
lien, claim, encumbrance, right, title or other interest of any kind in any
Participant in any asset held by the Company or designated to be used for
payment of any of its obligations created
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in this Plan. No policy or other specific asset of the Company has been or will
be set aside, transferred to any trust or pledged for the performance of the
Company's obligations under this Plan in any way which would remove the policy
or asset from being subject to the general creditors of the Company.
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ARTICLE IX
MISCELLANEOUS
9.1 RESPONSIBILITY FOR DISTRIBUTIONS AND WITHHOLDING OF TAXES. The
Committee will furnish information to the Company last employing the Participant
concerning the amount and form of distribution to any Participant entitled to a
distribution so that the Company may make the distribution required. It will
also calculate the deductions from the amount of the benefit paid under this
Plan for any taxes required to be withheld by federal, state or local government
and will cause them to be withheld. If a Participant has accrued a benefit under
this Plan while in the service of more than one Company, each Company for which
the Participant was working will reimburse the disbursing agent for the amount
attributable to the benefit earned while the Participant was in the Eligibility
Service of that Company if it has not already provided that funding to the
disbursing agent.
9.2 LIMITATION OF RIGHTS. Nothing in this Plan will be construed:
(a) to give a Participant any right with respect to any
benefit except in accordance with the terms of this Plan;
(b) to limit in any way the right of the Company to
terminate a Participant's employment with the Company at any time;
(c) to evidence any agreement or understanding, expressed
or implied, that the Company will employ a Participant in any
particular position or for any particular remuneration; or
(d) to give a Participant or any other person claiming
through him any interest or right under this Plan other than that
of an unsecured general creditor of the Company.
9.3 FACILITY OF PAYMENT RULES. Should a Participant become
incompetent or
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should a Participant designate a Beneficiary who is a minor or incompetent, the
Committee is authorized to pay the Deferred Compensation Benefit to the guardian
of the incompetent Participant, or to the parent or guardian of the minor, or
directly to the minor or to apply those funds for the benefit of the incompetent
Participant or minor in any manner the Committee determines in its sole
discretion. If a Deferred Compensation Benefit is payable to the Participant
under Section 3.2 at his death, the Deferred Compensation Benefit shall be paid
to the Participant's Beneficiary.
9.4 NONALIENATION OF BENEFITS. No right or benefit provided in
this Plan shall be transferable by the Participant. No right or benefit under
this Plan will be subject to anticipation, alienation, sale, assignment, pledge,
encumbrance or charge, except as provided in a qualified domestic relations
order under Section 206(d) of ERISA ("QDRO") specifically naming this Plan, and
any other attempt to anticipate, alienate, sell, assign, pledge, encumber, or
charge the same will be void. No right or benefit under this Plan will in any
manner be liable for or subject to any debts, contracts, liabilities or torts of
the person entitled to such benefits. If any Participant or any Beneficiary
becomes bankrupt or attempts to anticipate, alienate, sell, assign, pledge,
encumber or charge any right or benefit under this Plan, other than pursuant to
a QDRO, that right or benefit shall, in the discretion of the Committee, cease.
In that event, the Committee may have the Company hold or apply the right or
benefit or any part of it to the benefit of the Participant or Beneficiary, his
or her spouse, children or other dependents or any of them in any manner and in
any proportion the Committee believes to be proper in its sole and absolute
discretion, but the Committee is not required to have the Company do so.
23
<PAGE> 27
9.5 RELIANCE UPON INFORMATION. The Committee will not be liable
for any decision or action it takes in good faith in connection with its
administration of this Plan. Without limiting the generality of the foregoing,
any decision or action taken by the Committee when it relies upon information
supplied it by any officer of the Company, the Company's legal counsel, the
Company's actuary, the Company's independent accountants or other advisors in
connection with the administration of this Plan will to that extent be deemed to
have been taken in good faith.
9.6 SEVERABILITY. If any term, provision, covenant or condition of
this Plan is held to be invalid, void or otherwise unenforceable, the rest of
this Plan will remain in full force and effect and will in no way be affected,
impaired or invalidated.
9.7 NOTICE. Any notice or filing required or permitted to be given
to the Committee or a Participant will be sufficient if it is in writing and is
either hand-delivered or sent by U.S. mail to the principal office of the
Company or to the residential mailing address of the Participant. Notice will be
deemed to be given as of the date of in-hand delivery or if delivery is by mail,
as of the date shown on the postmark.
9.8 GENDER AND NUMBER. If the context requires it, words of one
gender when used in this Plan will include the other gender, and words used in
the singular or plural will include the other.
9.9 GOVERNING LAW. The Plan will be construed, administered and
governed in all respects by the laws of the State of Delaware.
24
<PAGE> 28
9.10 HEADINGS. The headings in this Plan are for reference
purposes only and shall not affect in any way the meaning or interpretation of
the Plan's provisions.
9.11 CLAIMS AND APPEALS PROCEDURES. When a Deferred Compensation
Benefit is due, the Participant or Beneficiary ("claimant") should submit a
claim to the personnel or other office of the Company designated by the
Committee to receive claims. That office shall provide the information and forms
necessary to enable the claimant to submit a claim for benefits.
(a) Disputes: In the event a claim is denied, or in the
event no action is taken on the claim within 90 days, specific
procedures are available to insure that the claimant's side of the
dispute is given full consideration. If the Committee notifies the
claimant in writing during the initial 90-day period, the period
may be extended for a period up to 180 days after the initial
receipt of the claim.
(i) First, the claimant shall be notified of a
denial as soon as possible after receipt of a claim. This
notice shall set forth the specific reasons for the
denial. It shall also explain the claim review procedure
under the Plan.
(ii) Second, a claimant is entitled to a full
review of his claim after he has been notified of a
denial. A claimant desiring a review must make a written
request to the Committee requesting a review. The written
request may include whatever comments or arguments the
Participant wishes to submit. During the review, the
claimant may represent himself or appoint a representative
to do so and shall have the right to inspect all documents
pertaining to the issue.
(b) Deadline For Requesting Review of Denied Claim: A
request for a review must be filed with the Committee within 90
days after the claim for benefits was first denied. Otherwise, a
review cannot be granted and the denial of benefits shall be
final.
25
<PAGE> 29
(c) Rendering of Decision By Committee:
(i) The Committee shall render its decision within 60
days after receipt of the request for review.
(ii) In the event special circumstances require an
extension of time, the decision shall be rendered no later
than 120 days after the receipt of the request.
(iii) The decisions of the Committee shall be in
writing. They shall include specific reasons for whatever
action has been taken, and shall include specific
references to the Plan provisions on which the decision is
based.
9.12 ENFORCEABLE CONTRACT. The Company and the Board of Directors
intend that this Plan constitutes an enforceable contract between the Company
and each Participant and the Company and the Board of Directors intend to vest
rights in each Participant as a third party beneficiary. In order to advise the
Participants of these rights, a copy of the Plan and any amendments thereto
shall be delivered to each Participant.
IN WITNESS WHEREOF, the Company has executed this document on this
5th day of March, 1997, effective as of July 1, 1996.
LONE STAR INDUSTRIES, INC.
By /s/ William M. Troutman
________________________________
Title: President and Chief
____________________________
Operating Officer
26
<PAGE> 1
Exhibit 10.19
LONE STAR INDUSTRIES, INC.
EXECUTIVE INCENTIVE PLAN
1. Establishment
Lone Star Industries, Inc. (the "Company") hereby establishes this
Incentive Award Plan for its executive officers, which shall be known as the
Lone Star Industries, Inc. Executive Award Plan (the "Plan").
2. Purpose
The Company's general philosophy for the compensation of its executives
is based on the premise that levels and types of compensation should be
established to support the Company's business strategy and long-term development
and enhance stockholder value. Such compensation must also be competitive with
that offered by comparable companies in order to attract, retain and reward
executives capable of achieving those objectives. Consistent with this
philosophy, this Plan is being implemented to augment base salaries and stock
option programs for certain of the Company's executive officers.
3. Definitions
The terms, as used herein shall have the following meanings:
a. "Annual Base Salary" shall mean the total annual base compensation
paid by the Company to a Participant on January 1 of a Plan Year without
reduction for any amounts withheld pursuant to participation in a qualified
"cafeteria plan" under Section 125 of the Code (such as pre-tax salary reduction
for contributions to the 401(k) Savings Plan and contributions toward
participation in a flexible medical insurance program). Annual Base Salary shall
not
<PAGE> 2
include any Company contribution or matching under the Company's 401(k)
Savings Plan or the Company's Employee Stock Purchase Plan nor shall it include
any amount paid or accruing to a Participant under any other premium or overtime
payment plan or extraordinary remuneration, expense allowances, imputed income
or other similar amounts.
b. "Board" shall mean the Board of Directors of Lone Star Industries,
Inc.
c. "Change in Control" shall mean and be deemed to have occurred upon
the occurrence of any of the following events:
(i) Any acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934 (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of shares of common
stock of the Company (the "Common Stock") and/or other voting
securities of the Company entitled to vote generally in the
election of directors ("Outstanding Company Voting
Securities") after which acquisition such individual, entity
or group is the beneficial owner of twenty percent (20%) or
more (or, with respect to any 20% or more holder prior to such
acquisition, any acquisition by such 20% holder of 1% or more)
of either (1) the then outstanding shares of Common Stock or
(2) the Outstanding Company Voting Securities; excluding,
however, the following: (A) (1) any acquisition of Common
Stock or Outstanding Company Voting Securities by the Company,
(2) any acquisition of Common Stock or Outstanding Company
Voting Securities by an employee benefit plan (or related
trust) sponsored or maintained by the Company and (3) any
acquisition of Common Stock or Outstanding Voting Securities
by any corporation pursuant to a reorganization, merger,
consolidation or similar corporate transaction (in each case,
a "Corporate Transaction") if the conditions described in
clauses (1), (2) and (3) of paragraph (iii) of this Section
(i) are satisfied or (B) any transaction in which the Chief
Executive Officer and the President of the Company (both as of
2
<PAGE> 3
September 1, 1996 and subject to health related availability)
(1) retain their current positions with the surviving company
immediately after such transaction and (2) will immediately
after such transaction beneficially own an aggregate (for both
such executives), directly or indirectly (including, without
limitation, ownership by family members, trusts or foundations
for or controlled by family members), of more than 5% of
either the (a) then outstanding shares or common stock of the
surviving company and/or (b) the other voting securities of
the surviving company entitled to vote generally in the
election of directors (any transaction under the clause (B)
hereinafter referred to as a "Management Event").
(ii) A change in composition of the Board of
Directors of the Company (other than in connection with a
Management Event) such that the individuals who, as of
September 1, 1996, comprise a class of directors of the Board
(the members of each class as of September 1, 1996 shall be
hereinafter referred to as an "Incumbent Class" and the
members of all of the Incumbent Classes shall be hereinafter
collectively referred to as the "Incumbent Board") cease for
any reason to constitute at least a majority of the class;
provided, however, for purposes of this subSection that any
individual who becomes a member of an Incumbent Class
subsequent to September 1, 1996 whose election, or nomination
for election by the Company's stockholders, was approved in
advance or contemporaneously with such election by a vote of
at least a majority of those individuals who are members of
the Incumbent Board and a majority of those individuals who
are members of such Incumbent Class (or deemed to be such
pursuant to this proviso), shall be considered as though such
individual were a member of the Incumbent Class; but, provided
further, that any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board of Directors of the
Company or actual or threatened tender offer for shares of the
Company or similar transaction or other contest for
3
<PAGE> 4
corporate control (other than a tender offer by the Company)
shall not be so considered as a member of the Incumbent Class;
or
(iii) The approval by the stockholders of the Company
of a Corporate Transaction or, if consummation of such
Corporate Transaction is subject, at the time of such approval
by stockholders, to the consent of any government or
governmental agency, the obtaining of such consent (either
explicitly or implicitly); excluding, however, a Management
Event or a Corporate Transaction pursuant to which (1) all or
substantially all of the individuals and entities who are the
beneficial owners, respectively, of the outstanding shares of
Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than eighty
percent (80%) of, respectively, the outstanding shares of
common stock of the corporation resulting from such Corporate
Transaction and the combined voting power of the outstanding
voting securities of such corporation entitled to vote
generally in the election of directors, (2) no Person (other
than the Company, any employee benefit plan (or related trust)
of the Company or the corporation resulting from such
Corporate Transaction and any Person beneficially owning,
immediately prior to such Corporate Transaction, directly or
indirectly, twenty (20%) or more of the outstanding shares of
Common Stock or Outstanding Company Voting Securities, as the
case may be) will beneficially own, directly or indirectly,
twenty percent (20%) or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the then
outstanding securities of such corporation entitled to vote
generally in the election of directors and (3) individuals who
were members of the Incumbent Board will constitute at least a
majority of the members of board of directors of the
corporation resulting from such Corporate Transaction; or
(iv) The approval of the stockholders of the Company
of (1) a complete liquidation or dissolution of the Company or
(2) the sale or other disposition of all or substantially all
of the assets of the Company; excluding, however, such a sale
4
<PAGE> 5
or other disposition to a corporation (A) in connection with a
Management Event or (B) with respect to which following such
sale or other disposition, (1) more than eighty percent (80%)
of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors will be then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding shares of
Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition, (2) no
Person (other than the Company and any employee benefit plan
(or related trust) of the Company or such corporation and any
Person beneficially owning, immediately prior to such sale or
other disposition, directly or indirectly, twenty percent
(20%) or more of the outstanding shares of Common Stock or
Outstanding Company Voting Securities, as the case may be)
will beneficially own, directly or indirectly, twenty percent
(20%) or more of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(3) individuals who were members of the Incumbent Board will
constitute at least a majority of the members of the board of
directors of such corporation.
d. "Code" shall mean the Internal Revenue Code of 1986, as amended.
e. "Committee" shall mean the Compensation and Stock Option Committee
of the Board or, if that committee ceases to exist, the Board. Actions to be
taken by the Committee hereunder shall be taken by a majority of the Committee,
as the case may be, in writing or by a majority of the attendees of a meeting at
which a quorum is present. In the event of a Change in Control, the Committee
shall be constituted for all purposes hereunder by the individuals that were
members of the Committee immediately prior to the first announcement of the
transaction that resulted in the Change of Control.
5
<PAGE> 6
f. "Company" shall mean Lone Star Industries, Inc.
g. "Incentive Award" shall mean an award payable to a Participant
pursuant to the Plan.
h. "Participant" shall mean each officer of Lone Star Industries, Inc.
involved in cement and concrete operations and/or corporate headquarters who are
listed on Exhibit A hereto, as such exhibit may be amended from time to time in
the manner contemplated in Section 4 of this Plan.
i. "Performance Factors" shall mean the specific goals, targets and
objectives established by the Committee for a Plan Year which in respect of Plan
Year 1996 are set forth on Exhibit B. The Committee may, at any time after the
end of a Plan Year, establish new Performance Factors for the next Plan Year and
update Exhibit B to reflect these Performance Factors. In the event that the
Committee does not take such action, the Performance Factors for the preceding
Plan Year shall remain in effect.
j. "Peer Group" shall mean Lafarge Corporation, Medusa Corporation and
Southdown Inc.
k. "Plan Year" shall mean each successive calendar year during which
the Plan is in effect, commencing with calendar year 1996.
4. Eligibility for Award and Limitations
Each Participant shall participate in the Plan. The list of
Participants may be changed at any time pursuant to action of the Committee. In
such event, (i) unless otherwise determined by the Committee in its sole
discretion at the time of such deletion, each Participant deleted shall continue
to be considered a Participant solely for the purpose of receiving an Incentive
Award in respect of the Plan Year, if any, that ended prior to the date of the
deletion for which such ex-Participant has not been paid his or her Incentive
Award and (ii) the Participants added or deleted
6
<PAGE> 7
shall be eligible to participate in an Incentive Award for the then current Plan
Year on a pro-rata (based on the number of days that have elapsed during the
then current Plan Year) or other basis to the extent that the Committee, in its
sole discretion, shall determine. Notwithstanding the foregoing, (i) no change
to the list of Participants shall affect a Participant's (or former
Participant's) right to full payment of an Incentive Award in respect of a
Change in Control for the Plan Year preceding the consummation of the Change in
Control and the Plan Year during which the Change in Control is consummated, all
to the extent provided in the immediately succeeding paragraph, and (ii) in the
event of a deletion of a Participant because of the Participant's death,
disability or normal retirement, any Incentive Award in respect of a Plan Year
ending prior to the death, disability or retirement shall be paid in full and an
Incentive Award for the Plan Year in effect on the date of death, disability or
retirement shall be made on a pro-rata basis (based on the number of days that
have elapsed during the then current Plan Year).
In the event of a Change in Control, any Incentive Award that would be
due and payable to Participants under the terms of this Plan (as in effect at
the earlier of the time of the announcement of the transaction resulting in the
Change in Control or the end of such Plan Year) for the Plan Year ending prior
to the consummation of the Change in Control shall be payable in full
simultaneously with or prior to the consummation of the Change in Control to
each person who was a Participant at the time of the announcement of the
transaction that resulted in the Change in Control, irrespective of whether or
not he or she is employed at the time of the consummation of the Change in
Control. In addition, in the event of a Change in Control, each person who was a
Participant at the time of the first announcement of the transaction that
resulted in the Change in Control, whether or not he or she is employed at the
time of the consummation of the Change in Control, shall be paid an Incentive
Award (simultaneously with or prior to the consummation of the Change in
Control) equal to 50% of (i) his or her Annual Base Salary in respect of the
Plan Year during which the Change in Control occurs or (ii) his or her Annual
Base Salary at the time of the announcement of the transaction resulting in the
Change in Control, whichever is higher. The Incentive Awards payable pursuant to
the preceding two sentences shall be in lieu of any other Incentive Awards in
respect of the applicable Plan Year hereunder.
7
<PAGE> 8
Except in the case of Incentive Awards payable in respect of a Plan
Year during which a Change in Control occurs as provided in the immediately
preceding paragraph (which shall become due and payable irrespective of whether
or not Performance Factors are met or the Company is profitable), no Participant
shall be eligible for an Incentive Award under this Plan for any Plan Year in
respect of which the Company reports a net loss.
5. Term of Plan
The term of the Plan shall be for the Plan Year commencing January 1,
1996 and each calendar year thereafter until terminated by the Committee in
accordance with Section 10(e).
6. The Plan
Incentive Awards shall be determined by the Committee by choosing a
percentage of each Participant's Annual Base Salary from the ranges provided in
the following tables based on the number of points the Participants have
received determined by levels of achievement of the Performance Factors.
<TABLE>
<CAPTION>
POINTS RANGE FOR
ACHIEVEMENT LEVEL OF PARTICIPANTS FOR THIS
EACH PERFORMANCE FACTOR PERFORMANCE FACTOR
----------------------- ---------------------
<S> <C>
Below 90% 0
90 - 95% 1 - 11
Above 95% - 100% 12 to 22
Above 100% 23 to 33
</TABLE>
The total number of points aggregated over all Performance Factors
shall be the same for each Participant.
<TABLE>
<CAPTION>
PERCENTAGE OF ANNUAL BASE
AGGREGATE NUMBER OF POINTS SALARY TO BE AWARDED
-------------------------- -------------------------
<S> <C>
1 - 22 0 - 20%
23 - 44 21% - 30%
45 - 66 31% - 40%
67 - 99 41% - 50%
</TABLE>
8
<PAGE> 9
The actual percentage of Annual Base Salary shall be fixed for each
Participant within the above guidelines and Participants may, in the Committee's
discretion, have different percentages.
7. Administration of the Plan
The Plan shall be administered by the Committee. No member of the
Committee while serving as such shall be a Participant. Subject to the terms and
conditions of this Plan, the Committee shall have the exclusive and final
authority in all determinations and decisions affecting the Plan and its
Participants. The Committee shall also have the authority to delegate such
responsibilities or duties as it deems desirable, and to make any other
determination that it believes necessary or advisable for the administration of
the Plan including, but not limited to:
(i) Approving the designation of eligible
Participants as contemplated in Section 4 of this Plan;
(ii) Changing the Performance Factors as contemplated
in Section 3(i) of this Plan;
(iii) Certifying attainment of Performance Targets
and other material terms, and
(iv) Establishing the percentage of Annual Base
Salary to be awarded to a Participant within the range of
percentages established in Section 6.
The Committee shall have the authority, in its sole discretion but not
inconsistent with the provisions of the Plan, to incorporate provisions in the
Performance Factors to adjust for (i) unusual or non-recurring events affecting
Lone Star Industries, Inc. or the financial statements of Lone Star Industries,
Inc., or (ii) changes to applicable laws, regulations, accounting principles or
accounting systems affecting the relative position of Lone Star Industries, Inc.
vis-a-vis members of the Peer Group.
9
<PAGE> 10
8. Right to Payment
Except (i) in the event of the death, disability or resignation of a
Participant to the extent provided in Section 4, (ii) in the event of a Change
in Control to the extent provided in Section 4, or (iii) as otherwise determined
by the Committee, in its sole discretion, either when it changes the list of
Participants as contemplated in Section 4 or otherwise, a Participant shall have
no right to receive an Incentive Award under this Plan unless he or she remains
in the employ of Lone Star Industries, Inc. at all times during the applicable
Plan Year and thereafter until the Incentive Awards are paid.
9. Payment of Award
Incentive Awards for a given Plan Year shall be paid to Participants in
cash no later than April 1 of the year following the Plan Year.
10. Miscellaneous Provisions
a. A Participant's rights and interests under this Plan may not be
sold, assigned, transferred, pledged or alienated.
b. In the case of a Participant's death, payment, if any, under the
Plan (in respect of any Plan Year already completed and in respect of the
pro-rata portion of the Plan Year during which the death occurs as contemplated
in Section 4) shall be made to his or her designated beneficiary, or in the
event no beneficiary is designated or surviving, the Participant's estate.
c. Neither this Plan nor any other action taken hereunder shall be
construed as giving an employee the right to be retained in the employ of the
Company.
d. The Company shall have the right to make such provisions as it deems
necessary or appropriate to satisfy any obligations it may have to withhold
federal, state, local or other taxes incurred by reason of payments made
pursuant to the Plan.
10
<PAGE> 11
e. The Company reserves the right, in its sole and absolute discretion,
to amend or terminate in whole or in part any or all of the provisions of this
Plan, without notice or hearing, provided, however, that no such amendment or
termination shall be made at any time after the date which is six (6) months
before the first announcement of any transaction that results in a Change in
Control to the extent such amendment or termination in any manner adversely
affects any Incentive Award to which a Participant would otherwise be entitled
under this Plan in respect of the Plan Year in which the Change in Control
occurs or any prior Plan Years.
f. The Company and the Board of Directors intend that this Plan
constitutes an enforceable contract between the Company and each Participant and
the Company and the Board of Directors intend to vest rights in each Participant
as a third party beneficiary. In order to advise the Participants of these
rights, a copy of the Plan and any amendments hereto (including any changes to
Exhibit A) shall be delivered to each Participant.
g. The Plan shall not be funded through any trust, insurance contract
or other funding vehicle. All the benefits and payments under the Plan shall be
made from the general assets of the Company. Accordingly, neither a Participant
nor any other person shall acquire by reason of the Plan any right in or title
to any specific assets, funds or property of the Company and shall only be a
general creditor.
h. The validity, interpretation, instruction and performance of this
Plan shall be governed by the laws of the State of Connecticut.
11
<PAGE> 1
LONE STAR INDUSTRIES, INC. EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Successor Company
For the For the For the Nine
Year Ended Year Ended Months Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
PER SHARE OF COMMON STOCK - PRIMARY
Income (loss) before cumulative effect of
changes in accounting principles $54,160 $35,762 $29,333
Less: Provisions for preferred dividends (4) -- -- --
------- ------- -------
Income (loss) before cumulative effect of
changes in accounting principles
applicable to common stock 54,160 35,762 29,333
Cumulative effect of changes in accounting principles,
net of taxes (3) -- -- --
Net interest expense reduction (1) 1,032 2,334 2,094
------- ------- -------
Net income (loss) applicable to common stock $55,192 $38,096 $31,427
======= ======= =======
Weighted average shares outstanding during period (5) 11,290 11,990 12,000
Options and warrants in excess of 20% limit (1) 2,442 2,347 2,132
------- ------- -------
Weighted average shares outstanding during period (5) 13,732 14,337 14,132
======= ======= =======
Income (loss) per common share:
Income (loss) before cumulative effect of
changes in accounting principles $ 4.02 $ 2.66 $ 2.22
Cumulative effect of changes in accounting principles -- -- --
------- ------- -------
Net income (loss) $ 4.02 $ 2.66 $ 2.22
======= ======= =======
PER SHARE OF COMMON STOCK ASSUMING FULL DILUTION
Income (loss) before cumulative effect of
changes in accounting principles $54,160 $35,762 $29,333
Plus: Net interest expense reduction (1) 346 1,848 2,008
------- ------- -------
Income (loss) before cumulative effect of
changes in accounting principles
applicable to common stock 54,506 37,610 31,341
Cumulative effect of changes in accounting principles,
net of taxes -- -- --
------- ------- -------
Net income (loss) applicable to common stock $54,506 $37,610 $31,341
======= ======= =======
Common shares outstanding at beginning of period
Weighted average shares outstanding during period 11,290 11,990 12,000
Conversion of $13.50 preferred shares
outstanding at beginning of period -- -- --
Conversion of $4.50 preferred shares
outstanding at beginning of period -- -- --
Stock options and warrants in excess of 20% limit (1) 2,442 2,347 2,132
Common shares issued from treasury stock -- -- --
------- ------- -------
Fully diluted shares outstanding(6) 13,732 14,337 14,132
======= ======= =======
Income (loss) per common share assuming full dilution:
Income (loss) before cumulative effect of
changes in accounting principles $ 3.97 $ 2.62 $ 2.22
Cumulative effect of changes in accounting principles -- -- --
------- ------- -------
Net income (loss) $ 3.97 $ 2.62 $ 2.22
======= ======= =======
<CAPTION>
Predecessor Company
For the Three For the Year Ended December 31,
Months Ended -------------------------------
March 31, 1994 1993 1992
-------------- -------- ---------
<S> <C> <C> <C>
PER SHARE OF COMMON STOCK - PRIMARY
Income (loss) before cumulative effect of
changes in accounting principles $(23,118) $(35,258) $ (45,428)
Less: Provisions for preferred dividends (4) 1,278 5,112 5,113
-------- -------- ---------
Income (loss) before cumulative effect of
changes in accounting principles
applicable to common stock (24,396) (40,370) (50,541)
Cumulative effect of changes in accounting principles,
net of taxes (3) -- (782) (118,914)
Net interest expense reduction (1) -- -- --
-------- -------- ---------
Net income (loss) applicable to common stock $(24,396) $(41,152) $(169,455)
======== ======== =========
Weighted average shares outstanding during period (5) n/m 16,644 16,641
Options and warrants in excess of 20% limit (1) -- -- --
-------- -------- ---------
Weighted average shares outstanding during period (5) n/m 16,644 16,641
======== ======== =========
Income (loss) per common share:
Income (loss) before cumulative effect of
changes in accounting principles n/m (2) $ (2.42) $ (3.03)
Cumulative effect of changes in accounting principles -- (0.05) (7.15)
-------- -------- ---------
Net income (loss) n/m (2) $ (2.47) $ (10.18)
======== ======== =========
PER SHARE OF COMMON STOCK ASSUMING FULL DILUTION
Income (loss) before cumulative effect of
changes in accounting principles $(23,118) $(35,258) $ (45,428)
Plus: Net interest expense reduction (1) -- -- --
-------- -------- ---------
Income (loss) before cumulative effect of
changes in accounting principles
applicable to common stock (23,118) (35,258) (45,428)
Cumulative effect of changes in accounting principles,
net of taxes -- (782) (118,914)
-------- -------- ---------
Net income (loss) applicable to common stock $(23,118) $(36,040) $(164,342)
======== ======== =========
Common shares outstanding at beginning of period n/m 16,644 16,621
Weighted average shares outstanding during period
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 45 46
Stock options and warrants in excess of 20% limit (1) n/m -- --
Common shares issued from treasury stock n/m -- 22
-------- -------- ---------
Fully diluted shares outstanding(6) n/m (2) 17,644 17,644
======== ======== =========
Income (loss) per common share assuming full dilution:
Income (loss) before cumulative effect of
changes in accounting principles n/m $ (2.00) $ (2.57)
Cumulative effect of changes in accounting principles -- (0.04) (6.74)
-------- -------- ---------
Net income (loss) n/m (2) $ (2.04) $ (9.31)
======== ======== =========
</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 have been calculated using the
modified treasury stock method for the years ended December 31, 1996 and
1995 and the nine months ended December 31, 1994.
(2) Earnings per share for the three months ended March 31, 1994 are not
meaningful due to reorganization and revaluation entries and the issuance
of 12 million shares of new common stock. Earnings per share amounts for
the successor company are not comparable to those of the predecessor
company.
(3) 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.
(4) 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.
(5) Common stock options are not reflected in primary earnings per share
computations for the years ended December 31, 1993 and 1992 because
their effect is not significant.
(6) 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 for the two years ended December 31, 1993 and 1992.
<PAGE> 1
EXHIBIT 12
LONE STAR INDUSTRIES, INC.
Statement Re Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Successor Company
For the For the For the Nine
Year Ended Year Ended Months Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Continuing Operations:
Earnings Available:
Income (loss) before provision
for income taxes $ 81,770 $ 53,376 $ 45,133
Less: Excess of earnings over dividends
of less than fifty percent owned
companies 0 (2,978) (674)
Capitalized interest (1,325) (262) (168)
-------- -------- --------
$ 80,445 $ 50,136 $ 44,291
======== ======== ========
Fixed Charges:
Interest expense (including capitalized
interest) and amortization of debt discount
and expenses $ 7,931 $ 9,358 $ 6,980
Portion of rent expense representative of an
interest factor 1,079 1,636 1,631
-------- -------- --------
Total Fixed Charges 9,010 10,994 8,611
-------- -------- --------
Total Earnings Available $ 89,455 $ 61,130 $ 52,902
======== ======== ========
Ratio of Earnings to Fixed Charges (1) 9.93 5.56 6.14
======== ======== ========
Earnings deficiency $ 0 $ 0 $ 0
======== ======== ========
<CAPTION>
Predecessor Company
For the Year
For the Three Ended December 31,
Months Ended ------------------------
March 31, 1994 1993 1992
-------------- -------- --------
<S> <C> <C> <C>
Continuing Operations:
Earnings Available:
Income (loss) before provision
for income taxes $(3,170) $ 6,196 $(42,429)
Less: Excess of earnings over dividends
of less than fifty percent owned
companies (75) 0 (294)
Capitalized interest (38) (195) (196)
------- -------- --------
$(3,283) $ 6,001 $(42,919)
======= ======== ========
Fixed Charges:
Interest expense (including capitalized
interest) and amortization of debt discount
and expenses $ 271 $ 1,832 $ 2,406
Portion of rent expense representative of an
interest factor 252 1,963 2,108
------- -------- --------
Total Fixed Charges 523 3,795 4,514
------- -------- --------
Total Earnings Available $(2,760) $ 9,796 $(38,405)
======= ======== ========
Ratio of Earnings to Fixed Charges (1) n/m 2.58 n/m
======= ======== ========
Earnings deficiency $(3,283) $ 0 $(42,919)
======= ======== ========
</TABLE>
(1) Any ratio with a value less than one is not meaningful to the exhibit, and
therefore is not disclosed.
<PAGE> 1
EXHIBIT 21
None
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Lone Star Industries, Inc. on Form S-3 (File No. 33-55377) and S-8 (File Nos.
33-55277, 33-55261, 33-55229, 333-11057 and 333-11059) of our report, dated
February 3, 1997, which includes an explanatory paragraph related to the
Company's reorganization effective April 14, 1994, accompanying the consolidated
financial statements and financial statement schedule of Lone Star Industries,
Inc. and Consolidated Subsidiaries as of December 31, 1996 and 1995, and for the
years ended December 31, 1996 and 1995, the nine months ended December 31, 1994
and the three months ended March 31, 1994, which report is included in this
Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
March 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,447
<SECURITIES> 69,768
<RECEIVABLES> 38,435
<ALLOWANCES> 5,099
<INVENTORY> 53,869
<CURRENT-ASSETS> 165,214
<PP&E> 383,974
<DEPRECIATION> 60,992
<TOTAL-ASSETS> 562,151
<CURRENT-LIABILITIES> 88,236
<BONDS> 78,000
0
0
<COMMON> 12,087
<OTHER-SE> 252,195
<TOTAL-LIABILITY-AND-EQUITY> 562,151
<SALES> 367,673
<TOTAL-REVENUES> 378,058
<CGS> 237,114
<TOTAL-COSTS> 289,682
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,606
<INCOME-PRETAX> 81,770
<INCOME-TAX> 27,610
<INCOME-CONTINUING> 54,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,160
<EPS-PRIMARY> 4.02
<EPS-DILUTED> 3.97
</TABLE>
