<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
JUNE 3, 1998
LAFARGE CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 0-11936 58-1290226
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
11130 Sunrise Valley Drive, Suite 300, Reston, Virginia 20191
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(703) 264-3600
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On June 3, 1998, Lafarge Corporation, a Maryland corporation (the
Registrant or the Company), acquired from its majority shareholder, Lafarge
S.A., a French corporation, certain construction materials operations in North
America formerly owned by Redland Aggregates North America and operated by
Western Mobile Inc., Redland Genstar Inc. and Redland Quarries Inc. (the
Acquisition). The U.S. operations were acquired pursuant to a Stock Purchase
Agreement dated June 3, 1998, among the Registrant, Lafarge S.A. and Redland
International Limited, providing for the acquisition of the stock of Redland,
Inc. for a purchase price of approximately $650 million. The Canadian operations
were acquired pursuant to an Acquisition Agreement dated June 3, 1998 among
Lafarge Canada Inc., a Canadian corporation and wholly-owned subsidiary of the
Registrant, Lafarge S.A. and Redland Quarries Inc. providing for the purchase of
certain assets for approximately $40 million.
The acquired operations include 64 aggregates operations, 34 ready-mixed
concrete plants and 29 asphalt plants located in Colorado, New Mexico, New York,
Maryland, Wyoming, the District of Columbia and Ontario. Lafarge S.A. acquired
control of these operations in December 1997 when it acquired the worldwide
operations of the British construction materials firm, Redland PLC. The acquired
businesses will operate under the Registrant's name.
As previously reported in the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997, the Acquisition was approved on March 16,
1998, by the Board of Directors of the Registrant based upon the recommendation
of a special committee of independent directors appointed to evaluate the
Acquisition. The price was negotiated on an arms-length basis and an investment
banking firm advised the special committee regarding the fairness of the price
and the terms of the Acquisition.
The Registrant intends to finance the U.S. portion of the Acquisition
through the issuance of long-term debt expected to be completed in the third
quarter. Until such time, interim financing has been obtained through a
short-term loan from Lafarge S.A., which accrues interest at the London
Interbank Offered Rate plus 30 basis points, has a maturity date of December 31,
1998 and may be prepaid at any time without penalty. The purchase price for the
Canadian portion of the Acquisition was paid by Lafarge Canada Inc. from
available cash.
-2-
<PAGE> 3
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired and Supplemental
Financial Statements.
<TABLE>
<CAPTION>
Page
----
<S> <C>
REDLAND BUSINESSES TO BE ACQUIRED BY LAFARGE CORPORATION
Audited financial statements of Redland Businesses to be Acquired as of
December 31, 1997. F-1
Unaudited financial statements of Redland Businesses to be Acquired as
of March 31, 1998. F-21
LAFARGE CORPORATION SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
Audited Supplemental Consolidated Financial Statements for the year
ended December 31, 1997. F-28
Unaudited Supplemental Condensed Consolidated Financial Statements as
of March 31, 1998. F-83
(b) Pro Forma Financial Information.
Unaudited pro forma condensed consolidated financial data reflecting
the Acquisition F-98
o Unaudited pro forma condensed consolidated income statement for
the year ended December 31, 1997 and for the three months ended
March 31, 1998 with accompanying notes. F-101
o Unaudited pro forma condensed consolidated balance sheet at March
31, 1998 with accompanying notes. F-103
(c) Exhibits.
Exhibit 2.1 - Stock Purchase Agreement dated June 3, 1998 among
Redland International Limited, Lafarge Corporation and
Lafarge S.A.
Exhibit 2.2 - Acquisition Agreement dated June 3, 1998 among
Redland Quarries Inc., 3489264 Canada Inc., 3489949
Canada Inc., Lafarge Canada Inc. and Lafarge S.A.
Exhibit 23.1 - Consent of Arthur Andersen LLP, independent public
accountants
Exhibit 27 - Supplemental Financial Data Schedule
(a) December 31, 1997
(b) March 31, 1998
</TABLE>
-3-
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 18, 1998 LAFARGE CORPORATION
By: /s/ Larry J. Waisanen
----------------------------------------
Larry J. Waisanen, Executive Vice
President and Chief Financial Officer
-4-
<PAGE> 5
AUDITED FINANCIAL STATEMENTS OF
REDLAND BUSINESSES TO BE ACQUIRED AS
OF DECEMBER 31, 1997
F-1
<PAGE> 6
AUDITED FINANCIAL STATEMENTS OF REDLAND
BUSINESSES TO BE ACQUIRED AS OF
DECEMBER, 31, 1997
The following financial information is included on the pages indicated:
Page
----
Report of Independent Public Accountants F-3
Combined Balance Sheet F-4
Combined Statement of Income F-5
Combined Statement of Shareholder's Equity F-6
Combined Statements of Cash Flows F-7
Notes to Combined Financial Statements F-8
F-2
<PAGE> 7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Redland Inc.:
We have audited the accompanying combined balance sheet of the Redland
Businesses to be Acquired (see Note 1) as of December 31, 1997, and the related
combined statements of income, shareholder's equity and cash flows for the year
then ended. These combined financial statements are the responsibility of
management of the businesses. Our responsibility is to express an opinion
on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined 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 audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Redland Businesses to be Acquired as of December 31, 1997, and the combined
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.
April, 15, 1998 (except with respect
to the matter discussed in the Note
entitled "Subsequent Event" as to
which the date is June 3, 1998)
F-3
<PAGE> 8
REDLAND BUSINESSES TO BE ACQUIRED
COMBINED BALANCE SHEET
AT DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Assets
Cash and cash equivalents $ 11,130
Receivables, net 72,719
Inventories 24,602
Deferred tax asset 16,409
Other current assets 8,261
-----------
Total current assets 133,121
Property, plant and equipment, net 415,864
Excess of cost over net tangible assets of businesses acquired, net 75,422
Other assets 13,738
-----------
Total Assets $ 638,145
===========
Liabilities and Shareholder's Equity
Short-term borrowings and current portion of long-term debt
to related parties $ 110,563
Accounts payable and accrued liabilities 88,838
Income taxes payable 930
-----------
Total current liabilities 200,331
Long-term debt to related parties 99,114
Long-term debt to third parties 2,906
Other long-term liabilities 96,867
-----------
Total liabilities 399,218
-----------
Commitments and contingencies
Common shares 5
Additional paid-in capital 170,239
Retained earnings 78,109
Foreign currency translation adjustments (9,426)
-----------
Total shareholder's equity 238,927
-----------
Total Liabilities and Shareholder's Equity $ 638,145
===========
</TABLE>
See Notes to Combined Financial Statements
F-4
<PAGE> 9
REDLAND BUSINESSES TO BE ACQUIRED
COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Net sales $ 517,056
---------
Costs and expenses
Cost of goods sold 406,310
Selling and administrative 51,632
Interest expense 16,936
Amortization of intangibles 7,177
Other (income) expense, net (5,200)
---------
Total costs and expenses 476,855
---------
Pre-tax income 40,201
Income taxes 16,473
---------
Net income $ 23,728
=========
</TABLE>
See Notes to Combined Financial Statements
F-5
<PAGE> 10
REDLAND BUSINESSES TO BE ACQUIRED
COMBINED STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Common Equity Interests
Common Shares
Balance at January 1 and December 31 $ 5
-----------
Additional Paid-In Capital
Balance at January 1 and December 31 $ 170,239
-----------
Retained Earnings
Balance at January 1 $ 54,381
Net Income 23,728
-----------
Balance at December 31 $ 78,109
-----------
Foreign Currency Translation Adjustments
Balance at January 1 $ (6,558)
Translation adjustments (2,868)
-----------
Balance at December 31 $ (9,426)
-----------
Total Shareholder's Equity $ 238,927
===========
</TABLE>
See Notes to Combined Financial Statements
F-6
<PAGE> 11
REDLAND BUSINESSES TO BE ACQUIRED
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash Flows From Operations
Net income $ 23,728
Adjustments to reconcile net income to net cash provided by
operations -
Depreciation, depletion, and amortization 36,884
Provision for bad debts 2,141
Deferred income taxes 6,068
Gain on sale of assets (7,123)
Other post-retirement benefits (232)
Other noncash charges and credits, net 2,748
Net change in operating working capital (see below)* (15,891)
-----------
Net Cash Provided by Operations 48,323
-----------
Cash Flows From Investing
Capital expenditures (28,829)
Acquisitions (16,940)
Proceeds from property, plant and equipment dispositions 7,123
Other 1,668
-----------
Net Cash Used for Investing (36,978)
-----------
Cash Flows From Financing
Repayment of long-term debt (8,337)
-----------
Net Cash Consumed by Financing (8,337)
-----------
Effect of exchange rate changes (220)
-----------
Net Increase in Cash and Cash Equivalents 2,788
Cash and Cash Equivalents at Beginning of Year 8,342
===========
Cash and Cash Equivalents at End of Year $ 11,130
===========
*Analysis of Changes in Working Capital Items
Receivables, net $ 5,351
Inventories 6,771
Other current assets (3,177)
Accounts payable and accrued liabilities (9,404)
Income taxes payable (15,432)
===========
Net Change in Operating Working Capital $ (15,891)
===========
</TABLE>
See Notes to Combined Financial Statements
F-7
<PAGE> 12
REDLAND BUSINESSES TO BE ACQUIRED
NOTES TO COMBINED FINANCIAL STATEMENTS
The Redland Businesses to be Acquired consist of the businesses of Western
Mobile, Inc., Redland Genstar, Inc., and the aggregate operations of Redland
Quarries, Inc. (collectively, "Redland") which are indirect wholly owned
subsidiaries of Redland PLC. Redland is engaged in the production and sale of
aggregates, ready-mixed concrete and asphalt and performs paving and related
contracting services. Redland operates primarily in the U.S. and owns two
quarry operations in Canada. The primary U.S. markets are in the western states
of Colorado and New Mexico and the northeast (Maryland and New York).
In December 1997, Lafarge S.A., the majority shareholder of Lafarge Corporation,
acquired Redland as part of obtaining the majority ownership of Redland PLC. On
March 17, 1998, Lafarge Corporation announced that it would purchase Redland
from Lafarge S.A. The financial statements presented herein reflect the
businesses being acquired by Lafarge Corporation. As Lafarge S.A. had not
acquired 95% or more of the common stock of Redland PLC by December 31, 1997,
these Redland financial statements do not reflect a push down of purchase
accounting adjustments recorded by Lafarge S.A.
ACCOUNTING AND FINANCIAL REPORTING POLICIES
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, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses. Actual results could differ from
these estimates.
Principles of Combination
The combined financial statements include the accounts of Redland, after the
elimination of intercompany transactions and balances. Investments in affiliates
in which Redland has less than a majority ownership are accounted for by the
equity method.
Foreign Currency Translation
The assets and liabilities of the Canadian aggregate operations of Redland
Quarries, Inc. are translated at the exchange rate prevailing at the balance
sheet date. Revenue and expense accounts for this subsidiary are translated
using the average exchange rate during the period. Foreign currency translation
adjustments are disclosed as a separate item in shareholder's equity.
Revenue Recognition
Revenue from the sale of aggregates, asphalt and concrete products is recorded
when the products are shipped. Revenue from road construction contracts is
recognized on the basis of units of work
F-8
<PAGE> 13
completed, while revenue from other indivisible lump sum contracts is recognized
by the percentage-of-completion method.
Cash and Cash Equivalents
Redland considers liquid investments purchased with an original maturity of
three months or less to be cash equivalents. Because of the short maturity,
their carrying amounts approximate fair value.
Inventories
Inventories are valued at lower of average cost or market.
Property, Plant and Equipment
Depreciation of property, plant and equipment is computed for financial
reporting purposes by the straight-line method over the estimated useful lives
of the assets. These lives range from three years on light mobile equipment to
40 years on certain buildings. Land and mineral deposits include depletable raw
material reserves on which depletion is recorded by the units-of-production
method.
Excess of Cost Over Net Tangible Assets of Businesses Acquired
The excess of cost over fair value of net tangible assets of businesses acquired
(goodwill) is amortized by the straight-line method over periods ranging from 25
to 40 years. Redland continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may not be
recoverable. In evaluating impairment, Redland estimates the sum of the expected
future cash flows, undiscounted and without interest charges, derived from such
goodwill over its remaining life. Redland believes that no impairment exists at
December 31, 1997. The amortization recorded for 1997 was $7.2 million.
Accumulated amortization at December 31, 1997 was $67.7 million.
Other Postretirement Benefits
Redland accrues the expected cost of retiree health care and life insurance
benefits and charges it to expense during the years that the employees render
service.
In addition, Redland accrues for benefits provided to former or inactive
employees after employment but before retirement when it becomes probable that
such benefits will be paid and when sufficient information exists to make
reasonable estimates of the amounts to be paid.
Income Taxes
Deferred income taxes are determined by the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109).
F-9
<PAGE> 14
Environmental Remediation Liabilities
When Redland determines that it is probable that a liability for environmental
matters has been incurred, an undiscounted estimate of the required remediation
costs is recorded as a liability in the financial statements, without offset of
potential insurance recoveries. Costs that extend the life, increase the
capacity or improve the safety or efficiency of Redland owned assets or are
incurred to mitigate or prevent future environmental contamination may be
capitalized. All other environmental costs are expensed when incurred.
Accounting Pronouncements Not Yet Effective
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130) and
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS 131). SFAS 130 requires that an
enterprise display comprehensive income, which for Redland is the total of net
income and the current year foreign currency translation adjustment, in its
financial statements. SFAS 131 requires that a public business enterprise report
financial and descriptive information about its reportable operating segments.
Application of these new standards is required in financial statements for
fiscal years beginning after December 15, 1997.
RECEIVABLES
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Trade and notes receivable $ 72,390
Retainage on long-term contracts 7,628
Allowances (7,299)
============
Total receivables, net $ 72,719
============
</TABLE>
INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Finished products $ 19,808
Raw materials and fuel 4,794
============
Total inventories $ 24,602
============
</TABLE>
F-10
<PAGE> 15
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Land and mineral deposits $ 264,504
Buildings, machinery and equipment 367,520
------------
Property, plant and equipment, at cost 632,024
Less accumulated depreciation and depletion (216,160)
------------
Total property, plant and equipment, net $ 415,864
============
</TABLE>
OTHER ASSETS
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Property held for sale $ 3,448
Investments in unconsolidated companies 2,531
Other 7,759
------------
Total other assets $ 13,738
============
</TABLE>
Property held for sale represents certain land that is carried at the lower of
cost or estimated net realizable value.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Trade accounts payable $ 42,197
Accrued payroll expense 11,672
Bank overdrafts 1,109
Other accrued expenses 33,860
------------
Total accounts payable and accrued liabilities $ 88,838
============
</TABLE>
F-11
<PAGE> 16
DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
-----------
<S> <C>
5.75% sweep account with an affiliate of Redland PLC, a related party $ 79,677
8.25% promissory note payable to an affiliate of Redland PLC, a related party;
interest payable semi-annually; principal payments of $20,000 on December 31,
1999 and $25,000 on December 31, 2000 and 2001 70,000
5.75% unsecured note with an affiliate of Redland PLC, a related party;
principal payments due equally on January 1, 1998 and 1999 60,000
Other 2,906
-----------
Subtotal $ 212,583
Less: short-term borrowings and current portion of long-term debt (110,563)
-----------
Total long-term debt $ 102,020
===========
</TABLE>
The fair value of debt at December 31, 1997 approximates the carrying value
included in the Combined Balance Sheet. The annual principal payment
requirements on debt, for each of the five years in the period ending December
31, 2002 are as follows (in thousands):
<TABLE>
<S> <C> <C>
1998 $ 110,563
1999 101,057
2000 389
2001 101
2002 115
Thereafter 358
---------
$ 212,583
=========
</TABLE>
F-12
<PAGE> 17
OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Deferred income taxes $ 45,658
Accrued postretirement benefits 24,531
Accrued pension liability 7,956
Other 18,722
------------
Total other long-term liabilities $ 96,867
============
</TABLE>
INCOME TAXES
Pre-tax income is summarized by country in the following table (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
------------
<S> <C>
United States $ 35,915
Canada 4,286
------------
Pre-tax income $ 40,201
============
</TABLE>
Income taxes of Redland PLC are allocated to the Redland Businesses to be
Acquired assuming these businesses were separate taxpayers.
The provision for income taxes includes the following components (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
------------
<S> <C>
Current
United States $ 8,841
Canada 1,564
------------
Total current 10,405
------------
Deferred
United States 6,232
Canada (164)
------------
Total deferred 6,068
------------
Total income taxes $ 16,473
============
</TABLE>
F-13
<PAGE> 18
A reconciliation of taxes at the U.S. federal income tax rate to Redland's
actual income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
------------
<S> <C>
Taxes at the U.S. federal income tax rate $ 14,070
U.S./Canadian tax rate differential 125
Canadian tax incentives (291)
State and Canadian provincial income taxes, net of federal benefit
1,325
Other items 1,244
------------
Provision for income taxes $ 16,473
============
</TABLE>
Deferred income taxes reflect the tax consequences of "temporary differences"
between the amounts of assets and liabilities for financial reporting purposes
and such amounts as measured by tax law. These temporary differences are
determined in accordance with SFAS No. 109.
Temporary differences and carryforwards that give rise to deferred tax assets
and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Deferred tax assets:
Reserves and other liabilities $ 30,510
Other postretirement benefits 9,661
Tax loss carryforwards 3,572
Tax credit carryforwards 69
------------
Gross deferred tax assets 43,812
Valuation allowance (1,229)
------------
Net deferred tax assets 42,583
------------
Deferred tax liabilities:
Property, plant and equipment 71,156
Prepaid pension asset 250
Other 426
------------
Gross deferred tax liabilities 71,832
------------
Net deferred tax liability 29,249
Net deferred tax asset--current 16,409
------------
Net deferred tax liability--noncurrent $ 45,658
============
</TABLE>
A valuation allowance is provided to reduce the deferred tax assets to a level
which, more likely than not under the rules of SFAS No. 109, will be realized.
At December 31, 1997, Redland had federal net operating loss carryforwards of
approximately $5.9 million and state net operating loss carryforwards of
approximately $28.9 million. The net operating loss carryforwards are limited to
use in varying annual amounts through 2012.
F-14
<PAGE> 19
SEGMENT INFORMATION
Redland's single business segment includes the manufacture and sale of
aggregates, ready-mixed concrete and asphalt and performs paving and related
contracting services. In addition, Redland is engaged in road building and other
construction that use many of its own products.
Sales between the United States and Canada are accounted for at fair market
value. Income from operations equals net sales plus other income less cost of
goods sold, and selling and administrative expenses. It excludes interest
expense, interest income and income taxes. Financial information by country is
as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
------------
<S> <C>
Net Sales
United States $ 499,317
Canada 17,739
------------
Total net sales $ 517,056
============
Income from operations
United States $ 52,851
Canada 4,286
------------
Total income from operations $ 57,137
============
Identifiable assets
United States $ 568,157
Canada 69,988
------------
Total identifiable assets $ 638,145
============
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for interest and income taxes is as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
------------
<S> <C>
Interest $ 18,848
Income taxes
(net of refunds) $ 9,130
============
</TABLE>
F-15
<PAGE> 20
CAPITALIZATION OF REDLAND BUSINESSES
The following table summarizes the components of shareholder's equity in 1997
for each of the Redland Businesses to be Acquired.
(IN THOUSANDS)
<TABLE>
<CAPTION>
Western Quarries - Quarries -
Genstar Mobile NY Canada Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Common Shares $ 3 $ 2 -- -- $ 5
Additional Paid-In Capital $ 106,907 $ 63,332 -- -- $ 170,239
Retained Earnings $ (50,761) $ 45,762 $ 8,222 $ 74,886 $ 78,109
Foreign Currency Translation
Adjustment -- -- -- $ (9,426) $ (9,426)
</TABLE>
PENSION PLANS
Redland has several defined benefit and defined contribution retirement plans
covering substantially all employees. Benefits paid under the defined benefit
plans are generally based on either years of service and the employee's
compensation over the last few years of employment or years of service
multiplied by a contractual amount. Redland's funding policy is to contribute
amounts that are deductible for income tax purposes.
The following table summarizes the combined funded status of Redland's defined
benefit retirement plans and provides a reconciliation to the combined prepaid
pension asset and accrued pension liability recorded on Redland's Combined
Balance Sheet at December 31, 1997. The assumed settlement interest rates ranged
from 6.75 to 7.50 percent for Redland's U.S. plans and 6.75 percent for the
Canadian plans. The assumed rates of increase in future compensation levels used
in determining the actuarial present values of the projected benefit obligations
ranged from 4.0 to 4.5 percent per year, compounded annually for Redland's U.S.
plans and 4.25 percent for the Canadian plans. The expected long-term rate of
investment return on pension assets, which includes listed stocks and fixed
income securities, for each country was 8.5 percent for each year presented.
<TABLE>
<CAPTION>
December 31, 1997
(in thousands)
------------------------------
Assets Exceed Accumulated
Accumulated Benefits Exceed
Benefits Assets
------------ ------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligations $ 59,435 $ 7,843
Accumulated benefit obligations 63,079 8,231
============ ============
Projected benefit obligation for service rendered to date 72,017 9,025
Market value of plan assets 74,410 5,391
------------ ------------
Plan assets in excess of (less than) projected benefit obligations 2,393 (3,634)
Unrecognized net (gain) loss due to past experience different from prior
assumptions made (7,959) 1,332
Unrecognized prior service costs 680 508
Unrecognized net assets at transition to SFAS No. 87 (37) --
Additional minimum pension liability -- (1,239)
============ ============
Accrued pension liability $ (4,923) $ (3,033)
============ ============
</TABLE>
F-16
<PAGE> 21
Net retirement cost for the year includes the following components (in
thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
------------
<S> <C>
Service cost of benefits earned during the period $ 2,839
Interest cost on projected benefit obligation 5,097
Actual gain on plan assets (12,433)
Net amortization and deferral 6,880
------------
Total defined benefit plans cost 2,383
Defined contribution plans cost 537
------------
Net retirement cost $ 2,920
============
</TABLE>
Certain employees are also covered under multi-employer pension plans
administered by unions. Amounts included in the preceding table as defined
benefit plans retirement cost include contributions to such plans of $1.2
million for 1997. The data available from administrators of the multi-employer
plans are not sufficient to determine the accumulated benefit obligation nor the
net assets attributable to the multi-employer plans in which Redland employees
participate.
The defined contribution plans' costs in the preceding table relate to thrift
savings plans for eligible U.S. and Canadian employees. Under the provisions of
these plans, Redland matches a portion of each participant's contribution.
OTHER POSTRETIREMENT BENEFITS
Redland provides certain retiree health and life insurance benefits to eligible
employees who retire in the U.S. or Canada. Salaried participants generally
become eligible for retiree health care benefits when they retire from active
service at age 55 or later, although there are some variances by plan or unit in
Canada and the U.S. benefits, eligibility and cost-sharing provisions for hourly
employees vary by location and/or bargaining unit. Generally, the health plans
pay a stated percentage of most medical/dental expenses reduced for any
deductible, copayment and payments made by government programs and other group
coverage. These plans are unfunded. An eligible retiree's health care benefit
coverage is coordinated in Canada with Provincial Health and Insurance Plans and
in the U.S., after attaining age 65, with Medicare. Certain retired employees of
businesses acquired by Redland are covered under other care plans that differ
from current plans in coverage, deductibles and retiree contributions.
In the U.S., salaried retirees and dependents under age 65 have a $1,000,000
health care lifetime maximum benefit. At age 65 or over, the maximum is $50,000.
Lifetime maximums for hourly retirees are governed by the location and/or
bargaining agreement in effect at the time of retirement. In Canada, some units
have maximums, but in most cases there are no lifetime maximums. In some units
in Canada, spouses of retirees have lifetime medical coverage.
F-17
<PAGE> 22
In Canada, both salaried and nonsalaried employees are generally eligible for
life insurance benefits. In the U.S., life insurance is provided for a number of
hourly retirees as stipulated in their hourly bargained agreements but not for
salaried retirees except those of certain acquired companies.
The following table sets forth the plans' combined status reconciled with the
accrued postretirement benefit cost included in Redland's Combined Balance Sheet
(in thousands):
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Accumulated postretirement benefit obligation
Retirees $ 12,737
Fully eligible active participants 3,676
Other active participants 4,759
------------
Total accumulated postretirement benefit obligation 21,172
Unrecognized net gain 1,884
Unrecognized prior service cost 1,475
------------
Accrued postretirement benefit cost $ 24,531
============
</TABLE>
Net periodic postretirement benefit cost includes the following components (in
thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
------------
<S> <C>
Service cost of benefits earned during the period $ 263
Interest cost on accumulated postretirement benefit obligation 1,258
Net amortization (736)
------------
Net periodic postretirement benefit cost $ 785
============
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation differs between U.S. and Canadian plans. For
pre-65 retirees in the U.S., the assumed rate ranged from 7.0 to 9.1 percent,
decreasing to 5.5 percent over 9 years. For pre-65 retirees in Canada, the
assumed rate was 9.1 percent, decreasing to 5.5 percent over 9 years. For
post-65 retirees in the U.S., the assumed rate ranged from 7.0 to 7.3 percent
over 9 years, decreasing to 5.5 percent over 9 years with a Medicare assumed
rate for the same group of 6.8 percent, decreasing to 5.5 percent over 9 years.
For post-65 retirees in Canada, the assumed rate was 8.8 percent, decreasing to
5.5 percent over 9 years. If health care cost trend rate assumptions were
increased by one percent, the accumulated postretirement benefit obligation as
of December 31, 1997 would be increased by 7.4 to 21.1 percent for U.S. plans
and 0.5 percent for Canadian plans. The effect of this change on the net
periodic postretirement benefit cost for 1997 would be an increase of 9.0 to
23.8 percent for U.S. plans and 12.3 percent for Canadian plans.
For 1997, the weighted average discount rates used to determine the accumulated
postretirement benefit obligations ranged from 7.0 to 7.5 percent for U.S. plans
and was 6.75 percent for Canadian plans, respectively.
F-18
<PAGE> 23
COMMITMENTS AND CONTINGENCIES
Redland leases office space and certain equipment which extend through 2016.
Total lease expense for 1997 was $2,857,000. Future minimum annual lease
commitments for all noncancelable leases are as follows (in thousands):
<TABLE>
<S> <C>
1998 $ 4,576
1999 3,717
2000 3,296
2001 2,725
2002 3,854
Thereafter 18,022
---------
Total $ 36,190
=========
</TABLE>
Redland self insures for workers' compensation, automobile and general liability
claims up to a maximum per claim. The undiscounted estimated liability is
accrued based on a determination by an outside actuary. This determination is
impacted by assumptions made and actual experience.
Redland has been notified by the EPA that it is one of several potentially
responsible parties for clean-up costs at waste disposal sites. The ultimate
costs related to such matters and Redland's degree of responsibility in some of
these matters is not presently determinable.
When Redland determines that it is probable that a liability for environmental
matters or other legal actions has been incurred, an estimate of the required
remediation or other costs is recorded as a liability in the combined financial
statements. Management has concluded that the possibility of material liability
in excess of the amounts reported on the balance sheet is remote.
In addition, Redland is involved in certain other legal actions and claims. It
is the opinion of management that all legal and environmental matters will be
resolved without material effect on Redland's combined financial statements.
ACQUISITIONS
On August 8, 1997, Redland acquired certain assets of R.E. Monks Concrete
Company. The assets purchased include concrete delivery equipment, aggregate
inventories and concrete batch plants located near Colorado Springs, Colorado.
The purchase agreement also includes the right to lease certain properties to be
used for aggregate mining.
On January 30, 1998, Redland purchased certain assets of Southwest Ready Mix,
Inc. in southwest Colorado. The assets purchased include mineral reserves,
concrete delivery equipment, aggregate inventories and concrete batch plants.
F-19
<PAGE> 24
SUBSEQUENT EVENT
On June 3, 1998, Lafarge Corporation acquired Redland from Lafarge S.A. for $690
million, subject to working capital adjustments. Redland debt balances with
related parties outstanding, as described in the Debt footnote, were
extinguished as part of the transaction.
F-20
<PAGE> 25
UNAUDITED FINANCIAL STATEMENTS OF REDLAND
BUSINESSES TO BE ACQUIRED AS OF
MARCH 31, 1998
F-21
<PAGE> 26
UNAUDITED FINANCIAL STATEMENTS OF
REDLAND BUSINESSES TO BE ACQUIRED
AS OF MARCH 31, 1998
The following financial information is included on the pages indicated:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Condensed Combined Statements of Income F-23
Condensed Combined Balance Sheets F-24
Condensed Combined Statements of Cash Flows F-25
Notes to Condensed Combined Financial Statements F-26
</TABLE>
F-22
<PAGE> 27
REDLAND BUSINESSES TO BE ACQUIRED
CONDENSED COMBINED STATEMENTS OF INCOME (LOSS)
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------- |||---------------------
THREE MONTHS ENDED ||| THREE MONTHS ENDED
MARCH 31, 1998 ||| MARCH 31, 1997
(SUCCESSOR) ||| (PREDECESSOR)
-------------------- ||| --------------------
<S> <C> ||| <C>
NET SALES $ 67,484 ||| $ 57,010
-------------------- ||| --------------------
|||
COST AND EXPENSES |||
|||
Cost of goods sold 68,211 ||| 58,885
Selling and administrative 11,431 ||| 10,931
Amortization of intangibles 2,581 ||| 1,432
Other expense (income), net 730 ||| 252
-------------------- ||| --------------------
|||
Total income (loss) from operations (15,469)||| (14,490)
-------------------- ||| --------------------
|||
Interest expense 3,585 ||| 3,814
-------------------- ||| --------------------
|||
PRE-TAX INCOME (LOSS) (19,054)||| (18,304)
Income tax benefit (expense) 7,467 ||| 7,505
-------------------- ||| --------------------
|||
NET INCOME (LOSS) $ (11,587)||| $ (10,799)
==================== ||| ====================
</TABLE>
See Notes to Condensed Combined Financial Statements.
F-23
<PAGE> 28
REDLAND BUSINESSES TO BE ACQUIRED
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 ||| DECEMBER 31
1998 ||| 1997
(SUCCESSOR) ||| (PREDECESSOR)
------------ ||| ------------
<S> <C> ||| <C>
ASSETS (Unaudited) |||
|||
Cash and cash equivalents $ 899 ||| $ 11,130
Receivables, net 58,751 ||| 72,719
Inventories 31,246 ||| 24,602
Other current assets 32,395 ||| 24,670
------------ ||| ------------
Total current assets 123,291 ||| 133,121
|||
Property, plant and equipment, (less accumulated |||
depreciation and depletion of $7,547 and $216,160) 411,787 ||| 415,864
Excess of cost over net assets of |||
businesses acquired, net 305,283 ||| 75,422
|||
Other assets 21,766 ||| 13,738
------------ ||| ------------
TOTAL ASSETS $ 862,127 ||| $ 638,145
============ ||| ============
|||
LIABILITIES AND SHAREHOLDERS' EQUITY |||
|||
Short-term borrowings and current portion of long-term |||
debt to related parties $ 139,423 ||| $ 110,563
|||
Accounts payable and accrued liabilities 78,646 ||| 88,838
Income taxes payable 1,361 ||| 930
------------ ||| ------------
Total current liabilities 219,430 ||| 200,331
|||
Long-term debt to related parties 83,141 ||| 102,020
Other long-term liabilities 90,318 ||| 96,867
------------ ||| ------------
Total liabilities 392,889 ||| 399,218
------------ ||| ------------
|||
Common shares -- ||| 5
Additional paid-in-capital 480,323 ||| 170,239
Retained earnings (11,587) ||| 78,109
Foreign currency translation adjustments 502 ||| (9,426)
------------ ||| ------------
Total shareholders' equity 469,238 ||| 238,927
------------ ||| ------------
TOTAL LIABILITIES AND SHAREHOLDERS' |||
EQUITY $ 862,127 ||| $ 638,145
============ ||| ============
</TABLE>
See Notes to Condensed Combined Financial Statements.
F-24
<PAGE> 29
REDLAND BUSINESSES TO BE ACQUIRED
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
----------------------||| -------------------
THREE MONTHS ||| THREE MONTHS
ENDED MARCH 31, 1998 ||| ENDED MARCH 31, 1997
(SUCCESSOR) ||| (PREDECESSOR)
-------------------- ||| --------------------
<S> <C> ||| <C>
CASH FLOWS FROM OPERATIONS |||
|||
Net Income (Loss) $ (11,587) ||| $ (10,799)
Adjustments to reconcile net income (loss) to net cash provided |||
by operations: |||
Depreciation, depletion and amortization 10,128 ||| 7,663
Provision for doubtful accounts 193 ||| 410
Gain on sale of assets (80) ||| (1,192)
Other post-retirement benefits 9 ||| (64)
Deferred income taxes (7,569) ||| --
Other non-cash charges and credits, net 281 ||| 316
Changes in working capital (3,937) ||| (16,174)
-------------------- ||| --------------------
Net cash provided by operations (12,562) ||| (19,840)
-------------------- ||| --------------------
|||
CASH FLOWS FROM INVESTING |||
|||
Capital expenditures (2,038) ||| (3,182)
Acquisitions (8,373) ||| (12,733)
Proceeds from property, plant and equipment |||
dispositions 80 ||| 1,192
Other 484 ||| 1,192
-------------------- ||| --------------------
Net cash used for investing (9,847) ||| (13,531)
-------------------- ||| --------------------
|||
CASH FLOWS FROM FINANCING |||
|||
Net increase (decrease) in long-term borrowings |||
(includes current portion) 9,981 ||| 31,396
-------------------- ||| --------------------
Net cash provided (consumed) by financing 9,981 ||| 31,396
-------------------- ||| --------------------
Effect of exchange rate changes 2,197 ||| 4
-------------------- ||| --------------------
|||
NET INCREASE (DECREASE) IN CASH AND |||
CASH EQUIVALENTS (10,231) ||| (1,971)
CASH AND CASH EQUIVALENTS AT |||
THE BEGINNING OF THE PERIOD 11,130 ||| 8,342
-------------------- ||| --------------------
|||
CASH AND CASH EQUIVALENTS AT |||
THE END OF THE PERIOD $ 899 ||| $ 6,371
==================== ||| ====================
|||
ANALYSIS OF CHANGES IN WORKING |||
CAPITAL ITEMS |||
Receivables, net $ 13,867 ||| $ 16,138
Inventories (6,535) ||| (1,423)
Other current assets (134) ||| (1,880)
Accounts payable and accrued liabilities (11,233) ||| (15,567)
Income taxes payable 98 ||| (13,442)
-------------------- ||| --------------------
|||
CHANGES IN WORKING CAPITAL $ (3,937) ||| $ (16,174)
==================== ||| ====================
</TABLE>
See Notes to Condensed Combined Financial Statements.
F-25
<PAGE> 30
REDLAND BUSINESSES TO BE ACQUIRED
Notes to Condensed Combined Financial Statements
1. The Redland businesses to be acquired consist of the businesses of Western
Mobile, Inc., Redland Genstar, Inc., and the aggregate operations of
Redland Quarries, Inc. (collectively, "Redland"), which are indirect wholly
owned subsidiaries of Redland PLC. Redland is engaged in the production and
sale of aggregates, ready-mixed concrete and asphalt and performs paving
and related contracting services. Redland operates primarily in the U.S.
and owns two quarry operations in Ontario, Canada. The primary U.S. markets
are in the western states of Colorado and New Mexico and the northeast
(Maryland and New York).
In December 1997, Lafarge S.A., the majority shareholder of Lafarge
Corporation, acquired Redland as part of obtaining the majority ownership
of Redland PLC. On March 17, 1998, Lafarge Corporation announced that it
would purchase Redland from Lafarge S.A. The financial statements presented
herein reflect the businesses being acquired by Lafarge Corporation. As
Lafarge S.A. had not acquired 95% or more of the common stock of Redland
PLC by December 31, 1997, the 1997 Redland financial statements are
presented on a predecessor basis and do not reflect a push down of purchase
accounting adjustments recorded by Lafarge S.A. In early 1998, Lafarge S.A.
completed the acquisition of all of the outstanding stock of Redland PLC
and, accordingly, the 1998 Redland financial statements are presented on a
successor basis and reflect push down of purchase accounting adjustments
recorded by Lafarge S.A. These purchase accounting adjustments are
preliminary and may be subject to change.
2. The condensed combined financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. As a
result, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Redland believes that
the disclosures made are adequate to make the information presented not
misleading. These condensed combined financial statements should be read in
conjunction with the December 31, 1997 combined financial statements and
related notes included in this Form 8-K.
3. Because of seasonal, weather-related conditions in most of Redland's
marketing areas, earnings of any one quarter should not be considered as
indicative of results to be expected for a full fiscal year or any other
interim period.
4. Substantially all U.S. inventories are valued at average cost. At March 31,
1998 and 1997, inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
----------- -----------
<S> <C> <C>
Finished products $ 23,934 $ 19,808
Raw materials and fuel 7,312 4,794
----------- -----------
Total inventories $ 31,246 $ 24,602
=========== ===========
</TABLE>
F-26
<PAGE> 31
5. Cash paid during the period for interest and taxes, is as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months
Ended March 31
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Interest $ 2,649 $ 3,375
Income Taxes (net of refunds) $ 208 $ 7,673
</TABLE>
6. In 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130). SFAS 130 requires that an enterprise display comprehensive
income, which for the company is the total of net income and the current
year foreign currency translation adjustment.
Comprehensive income consist of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net loss $ (11,587) $ (10,799)
Foreign currency translation adjustments 502 (661)
---------- ----------
Comprehensive loss $ (11,085) $ (11,460)
========== ==========
</TABLE>
7. Redland has been notified by the EPA that it is one of several potentially
responsible parties for clean-up costs at waste disposal sites. The
ultimate costs related to such matters and Redland's degree of
responsibility in some of these matters is not presently determinable.
When Redland determines that it is probable that a liability for
environmental matters or other legal actions has been incurred, an estimate
of the required remediation or other costs is recorded as a liability in
the financial statements. As of March 31, 1997, a liability was recorded
for environmental obligations. Management has concluded that the
possibility of material liability in excess of the amounts reported in the
balance sheet is remote.
In addition, Redland is involved in certain other legal actions and claims.
It is the opinion of management that all legal and environmental matters
will be resolved without material effect on Redland's combined financial
statements.
8. In the opinion of management, the accompanying condensed combined financial
statements reflect all adjustments (which included only normal recurring
adjustments) necessary to present fairly Redland's financial position as of
the applicable dates and the results of its operations and its cash flows
for the interim periods presented.
9. On June 3, 1998, Lafarge Corporation acquired Redland from Lafarge S.A. for
$690 million, subject to working capital adjustments. Redland debt balances
outstanding to related parties were extinguished as part of the
transaction.
F-27
<PAGE> 32
LAFARGE CORPORATION
AUDITED SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1997
F-28
<PAGE> 33
Item 6.
SUPPLEMENTAL SELECTED CONSOLIDATED FINANCIAL DATA
The table below summarizes the supplemental selected financial information for
the Company. As discussed in the footnotes to the December 31, 1997 financial
statements, 1997 balance sheet information includes the Redland acquisition
accounted for similar to a pooling of interests.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
(in millions except as indicated by an *)
Years Ended December 31
-------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results
Net Sales $ 1,806.4 $ 1,649.3 $ 1,472.2 $ 1,563.3 $ 1,494.5
========== ========== ========== ========== ==========
Income Before the Following Items: $ 300.9 $ 236.4 $ 185.4 $ 141.9 $ 70.2
Interest expense, net (6.6) (14.1) (15.2) (28.8) (42.7)
Income taxes (112.3) (81.4) (40.6) (32.5) (21.6)
---------- ---------- ---------- ---------- ----------
Net Income 182.0 140.9 129.6 80.6 5.9
Depreciation, depletion and amortization 106.3 100.5 94.3 103.6 115.0
Other items not affecting cash 47.7 (33.4) (105.6) (36.2) 34.0
---------- ---------- ---------- ---------- ----------
Net Cash Provided by Operations $ 336.0 $ 208.0 $ 118.3 $ 148.0 $ 154.9
========== ========== ========== ========== ==========
Total Assets $ 2,774.9 $ 1,813.0 $ 1,713.9 $ 1,651.4 $ 1,687.7
========== ========== ========== ========== ==========
Financial Condition at Year End
Working capital $ (127.2) $ 394.9 $ 448.6 $ 402.3 $ 315.4
Property, plant and equipment, net 1,290.2 867.7 797.0 751.9 880.7
Other assets 535.2 213.0 198.3 192.4 221.8
---------- ---------- ---------- ---------- ----------
Total Net Assets $ 1,698.2 $ 1,475.6 $ 1,443.9 $ 1,346.6 $ 1,417.9
========== ========== ========== ========== ==========
Long-term debt $ 135.2 $ 161.9 $ 268.6 $ 290.7 $ 373.2
Other long-term liabilities 307.3 203.2 194.3 214.5 253.0
Shareholders' equity 1,255.7 1,110.5 981.0 841.4 791.7
---------- ---------- ---------- ---------- ----------
Total Capitalization $ 1,698.2 $ 1,475.6 $ 1,443.9 $ 1,346.6 $ 1,417.9
========== ========== ========== ========== ==========
Common Equity Share Information
Net income - basic* $ 2.56 $ 2.02 $ 1.89 $ 1.19 $ 0.10
Net income - diluted* $ 2.54 $ 1.95 $ 1.82 $ 1.18 $ 0.10
Dividends* $ 0.42 $ 0.40 $ 0.375 $ 0.30 $ 0.30
Book value at year end* $ 17.51 $ 15.79 $ 14.17 $ 12.34 $ 11.84
Average shares and equivalents outstanding 71.1 69.8 68.7 67.7 61.1
Shares outstanding at year end 71.7 70.4 69.2 68.2 66.9
========== ========== ========== ========== ==========
Statistical Data
Capital expenditures $ 124.0 $ 124.8 $ 121.9 $ 95.4 $ 58.4
Acquisitions $ 8.8 $ 83.5 $ 29.3 $ 4.7 $ 15.2
Net income as a percentage of net sales* 10.1% 8.5% 8.8% 5.2% 0.4%
Return on average shareholders' equity * 15.4% 13.5% 14.2% 9.9% 0.8%
Long-term debt as a percentage of total capitalization* 8.0% 11.0% 18.6% 21.6% 26.3%
Number of employees at year end* 9,800 6,800 6,600 6,500 7,400
Exchange rate at year end (Cdn. to U.S.)* 0.699 0.730 0.733 0.713 0.755
Average exchange rate for year (Cdn. to U.S.)* 0.722 0.733 0.729 0.732 0.775
========== ========== ========== ========== ==========
</TABLE>
F-29
<PAGE> 34
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF SUPPLEMENTAL FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
supplemental consolidated financial statements and notes thereto:
MANAGEMENT'S DISCUSSION OF SUPPLEMENTAL INCOME
The Supplemental Consolidated Statements of Income summarize the Company's
operating performance for the past three years. To facilitate analysis, sales
and operating profit are discussed by product line and are summarized in the
table on page F-31, (in millions).
The Company's three product lines are:
Cement - the production and distribution of portland and specialty cements and
cementitious materials, and the processing of fuel-quality waste and alternative
raw materials for use in cement kilns.
Construction materials - the production and distribution of ready-mixed
concrete, construction aggregates, other concrete products, and the construction
and paving of roads.
Gypsum wallboard - the production and distribution of gypsum wallboard and
related products.
Product line results for 1996 and 1995 have been restated to reflect the
reclassification of fuel-quality waste and alternative raw materials from
Construction Materials to Cement.
F-30
<PAGE> 35
<TABLE>
<CAPTION>
Years Ended December 31
------------------------------------------
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Net Sales
Cement $ 1,050.5 $ 996.2 $ 928.0
Construction materials 785.4 750.0 651.8
Gypsum 92.1 24.0 --
Eliminations (121.6) (120.9) (107.6)
---------- ---------- ----------
Total Net Sales $ 1,806.4 $ 1,649.3 $ 1,472.2
========== ========== ==========
Gross Profit
Cement $ 329.9 $ 291.2 $ 252.7
Construction materials 119.8 101.5 70.2
Gypsum 21.5 4.7 --
---------- ---------- ----------
Total
471.2 397.4 322.9
---------- ---------- ----------
Operational Overhead and
Other Expenses
Cement (71.1) (66.3) (66.9)
Construction materials (39.8) (41.6) (36.1)
Gypsum (8.3) (2.3) --
---------- ---------- ----------
Total (119.2) (110.2) (103.0)
---------- ---------- ----------
Income From Operations
Cement 258.8 224.9 185.8
Construction materials 80.0 59.9 34.1
Gypsum 13.2 2.4 --
---------- ---------- ----------
Total Operating Profit
352.0 287.2 219.9
Corporate and unallocated
expenses (51.1) (50.8) (34.5)
---------- ---------- ----------
Total Income From Operations $ 300.9 $ 236.4 $ 185.4
========== ========== ==========
Identifiable Assets
Cement $ 795.2 $ 777.0 $ 793.0
Construction materials 1,455.4 615.6 565.2
Gypsum 71.8 70.7 --
Corporate and unallocated assets 452.5 349.7 355.7
---------- ---------- ----------
Total Assets $ 2,774.9 $ 1,813.0 $ 1,713.9
========== ========== ==========
</TABLE>
F-31
<PAGE> 36
YEAR ENDED DECEMBER 31, 1997
NET SALES
The Company's net sales increased 10 percent in 1997 to $1,806.4 million from
$1,649.3 million in 1996. Canadian net sales were $769.5 million, up 9 percent.
U.S. net sales increased 10 percent to $1,036.9 million. The improvement in both
Canada and the U.S. was primarily due to increased product shipments, higher
cement and ready-mixed concrete prices, and the Company's gypsum wallboard
operations which in its first full year of operation (acquired September 1996)
added $92.1 million of sales in the U.S.
Net sales from the Company's cement operations were $1,050.5 million, an
increase of 5 percent due to higher shipments and prices. Cement sales volumes
escalated 2 percent to 12.9 million tons, while net realization (delivered price
per ton to customer less freight) increased 4 percent. U.S. net sales increased
4 percent reflecting continued high levels of infrastructure spending and paving
work as well as strength in both the residential and nonresidential sectors.
Cement shipments advanced 1 percent as most major markets posted gains. Net
realization increased 4 percent. In Canada, net sales were 10 percent higher.
Cement shipments and net realization (excluding exchange rate fluctuation)
increased 6 percent and 4 percent, respectively. In eastern Canada, cement sales
volumes declined 2 percent; however, net realization increased 3 percent. Higher
shipments in Ontario (13 percent) due to an increase in residential and
commercial construction were offset by declines in Quebec (weak economic
conditions) and in the Atlantic provinces due to higher shipments in 1996 to the
Confederation Bridge project which was completed in early 1997. In western
Canada, cement shipments were 17 percent higher reflecting gains in all major
markets except British Columbia. Substantially higher shipments in the Prairie
provinces (up 31 percent) because of strong housing starts and higher spending
levels in the oil and gas and farming sectors more than offset a 3 percent
decline in British Columbia (softening of demand).
The Company's net sales from construction materials operations were $785.4
million, a 5 percent increase. The improvement was attributed to higher
ready-mixed concrete and aggregate shipments and increased ready-mixed concrete
prices partially offset by the divestment at mid-year of the Quebec construction
operation. Ready-mixed concrete and aggregate volumes both climbed 7 percent.
Ready-mixed concrete shipments reached 7.4 million cubic yards in 1997 while
aggregate volumes rose to 43.1 million tons. In Canada, net sales increased 7
percent reflecting the higher volumes and ready-mixed concrete prices in western
Canada. Ready-mixed concrete sales volumes increased 11 percent. In eastern
Canada, sales volumes were 4 percent higher because of increased demand in
Ontario partially offset by lower shipments in Quebec (weak economic conditions)
and completion of the Confederation Bridge project in the Canadian Maritimes. In
the west, higher demand in the Prairie provinces (shipments up 42 percent)
pushed ready-mixed concrete sales volumes 17 percent higher, offsetting 7
percent lower shipments in British Columbia due to a softening of demand.
Aggregate volumes increased 14 percent mainly due to an improving economy in
Ontario and the high level of activity throughout western Canada, offset
somewhat by declines in the Atlantic provinces and Quebec. In the U.S., net
sales declined 1 percent. Ready-mixed sales volumes increased slightly (1
percent) as all major markets posted gains except Milwaukee where shipments
dropped 10 percent due to a slowdown
F-32
<PAGE> 37
in the residential construction sector. Aggregate shipments declined 6 percent
reflecting the divestment in early 1996 of a sand and gravel operation in
Pittsburgh, Pennsylvania, the negative impact of a workers' strike at the Mingo,
Ohio plant of a raw materials supplier which was settled in July, and the
termination of operations at a plant in Cleveland, Ohio. These declines were
partially offset by aggregate shipments of approximately .4 million tons from an
April 1997 acquisition in Kansas City, Missouri and a 6 percent increase in the
Milwaukee division due to higher external sales.
Net sales from the Company's gypsum operations were $92.1 million. Strong market
demand in the residential and commercial construction sectors led to strong
pricing as well as higher volumes. Wallboard shipments totaled 705 million
square feet, with both plants achieving record production levels.
GROSS PROFIT AND COST OF GOODS SOLD
The Company's gross profit as a percentage of net sales increased to 26 percent
from 24 percent in 1996. Cement gross profit was 31 percent compared to 29
percent. The improvement was the result of higher volumes and prices as well as
a 1 percent reduction in cash costs (excluding depreciation) per ton.
Construction materials gross profit increased by 2 percentage points to 15
percent. Higher ready-mixed concrete and aggregate volumes, coupled with higher
ready-mixed concrete prices in the U.S. and western Canada, were partially
offset by lower aggregate prices and increased material costs. Operating costs
were lower in eastern Canada, and the U.S. Ready-mixed concrete operations gross
profit per cubic yard rose 10 percent while aggregate operations gross profit
per ton improved 8 percent. The gross profit for gypsum wallboard was 23
percent, up 3 percent.
The Company's cement cost per ton is heavily influenced by plant capacity
utilization. The following table summarizes the Company's cement production (in
millions of tons) and the clinker production capacity utilization rate:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cement production 12.15 11.54
Clinker capacity utilization 89% 85%
=========== ===========
</TABLE>
Cement production was 5 percent higher than 1996. U.S. production totaled 7.4
million tons, up 5 percent. Clinker capacity utilization at U.S. plants
increased to 94 percent from 91 percent. The improvement was due to higher
production at a majority of the Company's U.S. cement plants as four plants
established clinker production records. However, the Company experienced
manufacturing setbacks at two U.S. plants which required higher purchases of
clinker to replace lost production. Canadian cement production was 4.7 million
tons, up 7 percent. Canadian clinker capacity utilization increased to 82
percent from 76 percent. These improvements were due to the record-setting kiln
performance at the Exshaw plant in western Canada.
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<PAGE> 38
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses were $161.0 million in 1997 compared with
$151.4 million in 1996. The increase was mainly due to the full year operation
of the Company's gypsum wallboard business in addition to higher professional
fees. Selling and administrative expenses as a percentage of net sales declined
to 8.9 percent in 1997 from 9.2 percent in 1996.
OTHER (INCOME) EXPENSE, NET
Other income and expense consists of items such as equity income, amortization
of intangibles and gains and losses from divestitures. Other expense, net was
$9.3 million in 1997 compared with $9.6 million in 1996.
PERFORMANCE BY LINE OF BUSINESS
The Company's operating profit from its cement operations (before corporate and
unallocated expenses) was $258.8 million, a $33.9 million improvement. Higher
sales volumes and prices were somewhat offset by higher plant costs and higher
clinker purchases in the U.S. The Company's Canadian operations reported an
operating profit of $100.9 million, $22.4 million better than in 1996 due to a 6
percent increase in cement shipments, 4 percent rise in net realization
(excluding exchange rate fluctuation) and higher prices for exports to U.S.
operations. Cement cash cost per ton was 3 percent lower due mostly to
improvements in operating efficiencies at the Exshaw plant in western Canada. In
the U.S., operating profit was $157.9 million, $11.5 million higher. The
improvement was due to moderately higher shipments (1 percent) and a 4 percent
increase in net realization partly offset by higher plant costs, clinker
purchases (to supplement production) and higher prices for imports from Canadian
operations. Three U.S. cement plants achieved lower cash costs per ton due to
improvements in operating efficiencies.
The Company's operating profit from construction materials operations (before
corporate and unallocated expenses) was $80.0 million, $20.1 million higher than
1996. The improvement was due to higher ready-mixed concrete and aggregate sales
volumes and an increase in ready-mixed concrete prices in the U.S. and western
Canada somewhat offset by higher material costs. The Canadian operations earned
$53.1 million, $15.0 million better, primarily reflecting higher ready-mixed
concrete and aggregate volumes. In eastern Canada, higher shipments in Ontario,
lower operating costs and increased prices in the Atlantic provinces were partly
offset by a slow Quebec economy and lower shipments in the Canadian Maritimes
due to completion of the Confederation Bridge project. Earnings in the west were
up because of increased demand in the Prairie provinces and higher ready-mixed
concrete prices somewhat offset by higher material and operating costs. U.S.
operations earned $26.9 million, $5.1 million better due to a 4 percent
improvement in ready-mixed concrete prices and lower operating costs resulting
from specific cost reduction initiatives implemented during 1996 and 1997. As a
result of these actions ready-mixed concrete and aggregate operating costs were
lower by 3 percent and 7 percent, respectively. These improvements were
partially offset by a 6 percent reduction in aggregate volumes.
F-34
<PAGE> 39
The Company's gypsum wallboard operations reported an operating profit of $13.2
million due to the strength of the U.S. commercial and residential construction
sectors, favorable pricing environment and record setting production at both
plants.
TOTAL INCOME FROM OPERATIONS
In 1997 total income from operations was $300.9 million, $64.5 million better
which reflects better results in all Company operations. The gypsum wallboard
operations contributed $13.2 million in its first full year of operation.
Operating profit from Canadian operations was $136.3 million, $31.6 million
better. The operating profit in the U.S. was $164.6 million, $32.9 million
better.
INTEREST EXPENSE
Interest expense decreased by $4.2 million in 1997 mainly due to lower average
debt. Interest capitalized was $1.4 million and $1.2 million in 1997 and 1996,
respectively.
INTEREST INCOME
Interest income increased $3.2 million in 1997 due to higher levels of
short-term investments throughout the year.
INCOME TAXES
Income tax expense increased from $81.5 million in 1996 to $112.3 million in
1997. Income taxes increased due to higher profits in the U.S. and Canada. The
Company's effective income tax rate was 38.2 percent in 1997 and 36.6 percent in
1996.
NET INCOME
The Company reported net income of $182.0 million in 1997 compared to 1996
income of $140.9 million. The improvement resulted from higher volumes in all of
the Company's product lines, higher cement and ready-mixed concrete prices and
lower net interest expense. These increases were partially offset by higher
cement plant costs, increases in U.S. clinker purchases, higher materials costs
in construction materials and increased selling and administrative expenses.
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<PAGE> 40
GENERAL OUTLOOK
Certain sections of this document include "forward-looking" statements based
upon current expectations that involve a number of business risks and
uncertainties. Although the Company believes that the statements are based upon
reasonable assumptions, there can be no assurance as to future results. The
factors that could cause results to differ materially include, but are not
limited to, national and regional economic conditions, levels of construction
spending in major markets, supply/demand structure of the industry, unfavorable
weather conditions during peak construction periods, and changes in
environmental regulations.
In 1998 the North American construction industry is expected to remain strong.
In the U.S., the Commerce Department estimates a modest increase in total
construction put in place. In addition, the recent passage of the Transportation
Equity Act for the 21st century (TEA - 21) could increase infrastructure
investment more than 40 percent, thereby significantly increasing the demand for
cement, ready-mixed concrete, aggregates and asphalt. The favorable
supply/demand situation should continue in the U.S. Canada's recovery is
expected to continue. Low interest rates and low inflation should contribute to
increased construction spending in 1998.
The U.S. Portland Cement Association is forecasting a modest drop in cement
consumption in 1998; however, the Company's U.S. cement operations expect
shipments to remain fairly stable with prices improving moderately. The Canadian
Portland Cement Association predicts that Canadian cement consumption should
increase in all regions of the country. As a result, shipments and prices in the
Company's Canadian cement operations are expected to increase.
In the Company's construction materials operations, the outlook for 1998 is
positive. In Canada, with economic conditions and interest rates remaining
favorable, construction spending is anticipated to rise. In the U.S. markets,
the Company expects little growth in volumes but greater savings from cost
efficiencies and better pricing.
The outlook for 1998 in the Company's gypsum wallboard operations is positive
because of the continued high level of residential and commercial construction
activity that is expected.
F-36
<PAGE> 41
YEAR ENDED DECEMBER 31, 1996
In the second quarter of 1995 the Company reached an agreement with Revenue
Canada Taxation related to the pricing of certain cement sales between its
operations in Canada and the U.S. for the years 1984 through 1994. The agreement
resulted in an increase in net sales and pre-tax income of U.S. $30.1 million in
Canada with corresponding adjustments in the U.S. Also because of this
agreement, during the third quarter of 1996 the Company recorded a U.S. $13.7
million adjustment for 1995. However, the impact of these adjustments on
consolidated net income was immaterial. Management's Discussion and Analysis
that follows excludes the impact of this agreement (except for the discussion on
income taxes).
NET SALES
The Company's net sales increased 12 percent in 1996 to $1,649.3 million from
$1,472.2 million in 1995. Canadian net sales were $706.4 million, up 7 percent,
while U.S. net sales increased 16 percent to $942.9 million. The improvement in
both Canada and the U.S. was primarily due to increased product shipments and
improved prices as well as the effect of acquisitions (in late 1995 and early
1996) in the construction materials operations. The purchase of two gypsum
wallboard plants in September 1996 also increased U.S. net sales.
The Company's net sales from cement operations were $996.2 million, an increase
of 7 percent due to higher shipments and prices. Cement sales volumes climbed
3.5 percent to 12.6 million tons, while net realization (delivered price per ton
to customer less freight) increased 4 percent from 1995 reflecting increases in
all three geographic regions served by the Company. Canadian net sales increased
8 percent mainly due to a 3 percent improvement in average selling prices
(excluding exchange rate fluctuation) coupled with a 5 percent rise in
shipments. In eastern Canada, cement sales volumes rose 2 percent due to higher
sales in the Atlantic provinces resulting from shipments to the Confederation
Bridge project. In Ontario, shipments were flat; however, in the last six months
of 1996, volumes rose 16 percent compared with those of the prior year. Quebec
showed a slight improvement in shipments of 1 percent. Net realization increased
4 percent due to a 6 percent and a 7 percent improvement in Ontario and Quebec,
respectively, partially offset by a 2 percent decline in the Atlantic provinces
due primarily to product and customer mix. Cement shipments in western Canada
were up 9 percent as all major markets posted increases, led by Alberta (up 13
percent). Construction activity in the Prairie provinces was positively impacted
by a bumper grain harvest, healthy oil drilling activity and demand from the
mining sector. In British Columbia, sales volumes increased 7 percent as the
economy showed steady improvement during 1996. In addition, the region benefited
from a work stoppage at a competitor's concrete operation. In the U.S., net
sales were 7 percent higher. Cement shipments and net realization increased 3
percent and 4 percent, respectively. Shipments increased despite weak activity
in the Northeast, the divestment of two cement terminals on the Ohio River and a
brief labor disruption on vessels that distribute the Company's products on the
Great Lakes.
Net sales from the Company's construction materials operations were $750.0
million, up 15 percent from 1995. The improvement was achieved by higher
ready-mixed concrete and aggregate shipments and an increase in ready-mixed
concrete prices in the U.S. From continuing
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<PAGE> 42
operations, ready-mixed concrete volumes increased 16 percent to 6.9 million
cubic yards and aggregate volumes climbed 4 percent to 40.1 million tons. In
Canada, ready-mixed concrete volumes increased 19 percent reflecting improved
economic activity, particularly in Ontario, coupled with the impact of
acquisitions in western Canada. Shipments to the Confederation Bridge project in
the Atlantic provinces were also higher. Aggregate volumes increased 7 percent
mainly from strong shipments in Ontario and throughout western Canada. These
increases were offset by an 18 percent decline in Quebec. Net sales in Canada
were 7 percent higher, primarily reflecting higher volumes. Net sales in the
U.S. increased 41 percent, mostly due to acquisitions and higher ready-mixed
concrete prices. Ready-mixed concrete shipments from continuing operations
increased 10 percent due to higher shipments in the New Orleans market because
of acquisitions. These increases were partially offset by a decline in St. Louis
that was due to the restructuring of operations to strengthen the competitive
position in the market. From continuing operations, aggregate shipments declined
2 percent mostly due to the divestment, in early 1996, of a sand and gravel
operation in Pittsburgh, Pennsylvania.
Net sales from the Company's gypsum operations that were acquired in September
1996 were $24.0 million. Strong demand for wallboard kept the newly acquired
plants operating at capacity.
GROSS PROFIT AND COST OF GOODS SOLD
The Company's gross profit as a percentage of net sales increased to 24 percent
in 1996 from 22 percent in 1995. Cement gross profit improved 2 percentage
points to 29 percent because both volumes and prices improved. Construction
materials gross profit increased by 2 percentage points to 13 percent as a
result of higher ready-mixed concrete and aggregate volumes, higher ready-mixed
concrete prices in the U.S. and lower operating costs. The gross profit margin
for gypsum wallboard was 20 percent.
The Company's cement cost per ton is heavily influenced by plant capacity
utilization. The following table summarizes the Company's cement production from
continuing operations (in millions of tons) and the clinker production capacity
utilization rate:
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------
1996 1995
-------- --------
<S> <C> <C>
Cement production 11.54 11.01
Clinker capacity utilization 85% 90%
======= =======
</TABLE>
Cement production increased 5 percent over 1995. U.S. production totaled 7.1
million tons, a 10 percent increase. Clinker capacity utilization at U.S. plants
was 91 percent in 1996 compared to 90 percent in 1995. In 1995 manufacturing
setbacks at some U.S. plants necessitated higher purchases of cement and clinker
to replace lost production. Canadian cement production was 4.4 million tons, a 3
percent decrease from 1995. Clinker capacity utilization in Canada fell to 76
percent in 1996 from 90 percent in 1995 primarily due to the planned extension
of kiln shutdowns at four plants because of high inventory levels at December
31, 1995.
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<PAGE> 43
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses were $151.4 million in 1996 compared to
$141.1 million in 1995. The increase resulted mainly from acquisitions coupled
with higher professional fees. Selling and administrative expenses as a
percentage of net sales declined to 9.2 percent in 1996 from 9.6 percent in
1995.
OTHER (INCOME) EXPENSE, NET
Other income and expense consists of items such as equity income, amortization
of intangibles and gains and losses from divestitures. Other expense, net was
$9.6 million in 1996 compared with income of $3.5 million in 1995. The change
primarily reflects lower gains from the sale of nonstrategic assets.
RESTRUCTURING
During 1996 and 1995 the Company spent $2.3 million and $4.6 million,
respectively, which was charged to the previously provided restructuring
accrual. The restructuring, which resulted in the separation of approximately
300 employees since inception of the plan, was completed in 1996. The savings
from the restructuring (mostly from the termination of employees), after
reduction for savings related to operations that have been divested, totaled
approximately $20 million pre-tax in 1996. This reduction is in line with
management's original expectations.
PERFORMANCE BY LINE OF BUSINESS
The Company's operating profit from cement operations (before corporate and
unallocated expenses) was $224.9 million, $39.1 million higher than in 1995.
Results were better primarily due to higher sales volumes and prices and lower
imports to supplement production at clinker producing plants in the Company's
U.S. market. Operating profit from Canadian operations was $78.5 million, $15.0
million better than 1995. The improvement was due to a 5 percent increase in
cement shipments, a 4 percent escalation in net realization (excluding exchange
rate fluctuation) and higher prices for exports to U.S. operations. Partially
offsetting these improvements were planned reductions in clinker production due
to high inventory levels at December 31, 1995, and higher fuel costs at the
Exshaw and Richmond plants in western Canada. The Company's U.S. operations
reported an operating profit of $146.4 million, a $24.1 million increase from
1995's profit due to an increase in shipments and prices and lower imports to
supplement production. This improvement was somewhat offset by higher prices for
imports from Canadian operations.
The Company's operating profit from construction materials operations (before
corporate and unallocated expenses) was $59.9 million, $25.8 million better than
1995. The improvement was achieved by higher ready-mixed concrete and aggregate
sales volumes, an increase in ready-mixed concrete prices in the U.S., lower
operating costs and lower expenses related to the implementation of a new
financial reporting and management information system. The Company's Canadian
operations contributed $38.1 million, up $16.6 million. Market conditions in the
second half of the year improved. Ready-mixed concrete and aggregate volumes
were
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<PAGE> 44
higher and operating costs were lower due to specific cost reduction actions
implemented in each region. U.S. operations earned $21.8 million compared to
$12.6 million in 1995. Earnings improved in all markets, particularly in the
Midwest which was hampered in 1995 by flooding. Results were boosted by higher
ready-mixed concrete prices, lower operating costs, acquisition of the remaining
interest in a ready-mixed concrete and building materials supplier, and other
late 1995 and 1996 acquisitions.
The Company's recently acquired gypsum wallboard operations reported an
operating profit of $2.4 million. Earnings were greater than expected due to
favorable market conditions.
TOTAL INCOME FROM OPERATIONS
The 1996 total income from operations was $236.4 million, $51.0 million better
than 1995. All of the Company's six cement and construction materials regions
reported better results. The recently acquired gypsum wallboard operations added
to operating earnings. Divestment gains were lower. Operating profit from
Canadian operations was $104.7 million, $29.2 million better. The operating
profit from U.S. operations was $131.7 million, $21.8 million better.
INTEREST EXPENSE
Interest expense decreased by $3.0 million in 1996 mainly due to lower average
debt and capitalized interest on construction in progress. Capitalized interest
was $1.2 million and $2.1 million in 1996 and 1995, respectively.
INTEREST INCOME
Interest income declined $1.8 million in 1996 due to lower interest rates.
INCOME TAXES
The following analysis of income taxes includes the impact of the Revenue Canada
Taxation agreement related to the pricing of certain cement sales between the
Company's operations in the U.S. and Canada. Income tax expense increased from
$40.6 million in 1995 to $81.5 million in 1996. In the U.S., taxes were $37.4
million higher due to improved earnings, the absence of a non-recurring credit
recorded in 1995 and the impact of adjustments relative to the Revenue Canada
Taxation agreement. In the third quarter of 1995, the U.S. tax provision was
lowered by $23.0 million due to a reduction of the valuation allowance recorded
in 1992 against the Company's U.S. deferred tax assets. In Canada, taxes
increased $3.5 million due to higher earnings that were mostly offset by the
impact of adjustments relative to the Revenue Canada Taxation agreement. The
Company's effective income tax rate was 36.6 percent in 1996 and 23.8 percent in
1995.
NET INCOME
Net income in 1996 was $140.9 million compared to net income of $129.6 million
in 1995. Excluding the effect of the non-recurring tax credit of $23.0 million
taken in the third quarter of
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<PAGE> 45
1995, earnings in 1996 were $34.3 million better than 1995. The improvement was
mainly due to higher volumes in the Company's major product lines, higher cement
and U.S. ready-mixed concrete prices, lower operating costs in construction
materials operations and lower imports to supplement production in the U.S.
These increases were partially offset by lower divestments gains and lower
clinker production in Canada.
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<PAGE> 46
OTHER FACTORS AFFECTING THE COMPANY
YEAR 2000
Like many companies, the Company has business application software programs that
were developed over the years and computer infrastructure including computerized
devices that could be affected by the "Year 2000" issue. These programs, which
include operational and financial systems, were generally written using two-year
digits to define the applicable year rather than four-year digits. Any of the
programs that have time sensitive software may recognize a date using "00" as
the Year 1900 rather than the Year 2000. This error could result in the computer
shutting down or performing incorrect computations.
Excluding the acquisition of Redland, the Company has completed an initial
Compliance Assessment of the potential impact of the Year 2000 on computer
applications, operating software and hardware and has developed an
implementation plan to resolve the issue. The plan includes the replacement of
certain equipment and modification of certain software to recognize the turn of
the century. The plan is currently expected to result in estimated non-recurring
spending over the next two years of approximately $9 million to $15 million.
The Company is currently completing the process of identifying the systems and
infrastructure within the Redland operations that could be affected by the Year
2000 and developing an implementation program.
The Company believes, with appropriate replacement or modification, it will be
able to operate its time-sensitive business-application software programs and
infrastructure through the turn of the century.
ENVIRONMENTAL MATTERS
The Company's operations, like those of other companies engaged in similar
businesses, involve the use, release, discharge, disposal, and cleanup of
substances regulated under increasingly stringent federal, state, provincial,
and/or local environmental protection laws. Many of the regulations are
technically and legally complex, posing significant compliance challenges. The
Company's environmental compliance program includes an environmental policy and
an environmental ethics policy that are designed to provide corporate direction
for all operations and employees, an environmental audit and follow-up program,
routine compliance oversight of the Company's facilities, environmental guidance
on key issues confronting the Company, routine training and exchange of
information by environmental professionals, an environmental recognition award
program, and routine and emergency reporting systems.
The Company has been and is presently involved in certain environmental
enforcement matters in both the U.S. and Canada. Management's practice is to
attempt to actively resolve such matters with the appropriate government
authorities. In certain circumstances, notwithstanding management's belief that
a particular alleged violation poses no significant threat to the environment,
the Company may decide to resolve such matters by entering into a consent
agreement and/or paying a penalty.
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<PAGE> 47
The Company currently operates three U.S. cement plants using fuel-quality
wastes that are subject to emission limits and other requirements under the
federal Resource Conservation and Recovery Act (RCRA) and Boiler and Industrial
Furnaces (BIF) regulations (Alpena, Michigan; Paulding, Ohio; and Fredonia,
Kansas). The other BIF requirements include a permitting process, extensive
recordkeeping of operational parameters and raw materials and waste-derived
fuels use, demonstration of financial capability to cover future closures and
spill cleanups, and corrective action requirements for other solid waste
management units at the facilities. The Company's three BIF cement plants have
submitted, in a timely manner, formal Part B permit applications, which is the
first step in the permitting process. The Fredonia plant has completed its trial
burn to establish permit limitations to be incorporated into the second step,
the final Part B permit. The Company received a draft of the proposed Part B
permit in December of 1997 and anticipates a public hearing during the first
quarter of 1998. The Paulding plant will be conducting its trial burn in May
1998; the Alpena plant, in 1999.
The U.S. Environmental Protection Agency (EPA) is in the process of revising its
BIF regulations. Proposed revisions of the BIF regulations were published in May
1996, citing both RCRA and Clean Air Act authority. The proposal relies heavily
on maximum achievable control technology (MACT) requirements of Title III of the
Clean Air Act Amendments of 1990 in conjunction with the risk-based authority of
RCRA. The proposed standards are based on technologies from a "pool" of the top
12 environmental performers of existing facilities that use fuel-quality waste
as a supplemental fuel. The Company's Alpena plant was a MACT pool facility; it
uses a baghouse as its primary air pollution control device. The Paulding plant
recently installed a baghouse and is in the process of installing a bypass
system that will likely enable it to meet the final standards when they are
promulgated. The Company has actively participated in the regulatory process to
help formulate revised BIF standards that are reasonable, cost-effective, and
comply with the RCRA and Clean Air Act. In the past year, EPA has reopened the
rulemaking process to solicit public comment on new data and proposed regulatory
approaches, i.e., particulate matter continuous emission monitoring systems. A
final regulation is not anticipated before December 1998; existing BIF
facilities would then have up to three years to meet the new standards or cease
using hazardous waste as a supplemental fuel.
A by-product of many of the Company's cement manufacturing plants is cement kiln
dust (CKD). CKD has been excluded from regulations as a hazardous waste under
the so-called Bevill amendment to the RCRA until the EPA completes a study of
CKD, determines whether it should be regulated as a hazardous waste, and issues
appropriate implementing regulations. In January 1995 the EPA issued a
regulatory determination in which it found that certain CKD management practices
create unacceptable risks that require additional regulation. The EPA
specifically identified the potential for groundwater contamination from CKD
management in karst terrain, fugitive emissions from CKD handling and
management, and surface water/stormwater runoff from CKD management areas. In
March 1995 the Company joined other cement manufacturers in submitting to the
EPA a proposed enforceable agreement for managing CKD. After a lengthy legal
review, the EPA decided that it lacks the legal authority to enter into an
F-43
<PAGE> 48
enforceable agreement. In 1996 the EPA announced that it was recommencing the
process of developing CKD management standards using industry standards as the
technical starting point and Subtitle C of RCRA as its legal authority. The
Company believes it is inappropriate for the EPA to develop CKD standards under
Subtitle C of RCRA. The Company and other cement manufacturers, through their
trade association, have been working with the EPA and various states to develop
an approach for implementation of CKD management standards using state solid
waste authority rather than federal Subtitle C authority.
The EPA has advised that it will likely propose some form of a CKD management
standard in 1998. Should the EPA ultimately proceed to promulgate highly
tailored CKD management standards, the Company is likely to incur additional
capital costs and operational expenses to meet these new standards. In order to
mitigate the longer-term impact of CKD regulation at the federal and/or state
levels, the Company has undertaken a program to assess its management practices
for CKD at operational and inactive facilities in both the U.S. and Canada. The
Company has also been voluntarily taking remedial steps and instituting
management practices consistent with the industry practices for CKD management
as well as assessing and modifying process operations, evaluating and using
alternative raw materials, and implementing new technologies to reduce the
generation of CKD.
As with many industrial companies in the U.S. and Canada, the Company has been
involved in certain remedial actions to clean up or to close certain historical
waste disposal and/or contaminated sites, as required by federal, provincial,
and/or state laws. In addition, the Company has voluntarily initiated cleanup
activities at certain of its properties in order to mitigate long-term liability
exposure and/or to facilitate the sale of such property. The Company routinely
reviews all its active properties, as well as its idle properties, to determine
whether remediation is required, the adequacy of accruals for such remediation,
and the status of all remediations. It has been the Company's experience that,
over time, sites are added to and removed from the remediation list as cleanup
actions are finalized and, where necessary, governmental signoff is obtained, or
when it is determined that no governmental action will be initiated.
The Company is currently involved in two federal Superfund remediations. At one
site the remedial activities are complete, long-term maintenance and monitoring
are under-way, partial contribution has been obtained from financially viable
parties and claims against insurance carriers are being pursued. At the other
site, the potentially responsible parties named by the EPA have initiated a
third-party action against some 47 other parties including the Company. The suit
alleges that in 1969 a predecessor company of the Company sold equipment that
may have contained hazardous substances that may now be present at the site. It
appears that the largest disposer of hazardous substances at this site is the
U.S. Department of Defense, and that numerous other large disposers of hazardous
substances are associated with this site. Because this matter relates to events
far in the past by a predecessor entity, and because of the large number of
parties involved in the site, it is difficult to evaluate potential liability
with respect to this site. However, the Company believes that its ultimate
liability will not be material.
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<PAGE> 49
The Clean Air Act Amendments of 1990 require the EPA to develop air toxics
regulations for a broad spectrum of industrial sectors, including portland
cement manufacturing. New MACT standards are to be established that will require
plants to install the best feasible control equipment for certain hazardous air
pollutants, thereby significantly reducing air emissions. The Company is
actively participating with other cement manufacturers in working with the EPA
to define test protocols, better define the scope of MACT standards, determine
the existence and feasibility of various technologies, and develop realistic
emission limitations and continuous emissions monitoring/reporting requirements
for the cement industry. It is expected that the EPA will develop proposed
standards for existing and new facilities and publish them for review and public
comment by early 1998. Final MACT regulations are anticipated in 1999 and
existing facilities will then have three years to meet the standards or close
down operations. The Company's proposed new Sugar Creek, Missouri, plant must
meet the new MACT standards at the time of startup. Management believes that
several of its plants will likely be required to upgrade and/or replace existing
air pollution control and/or emissions monitoring equipment as a result of MACT
regulations. Management will not be able to determine the cost of such new
equipment until the EPA proposes the MACT emission standards.
Title V of 1990 Clean Air Act Amendments may potentially result in significant
capital expenditures and operational expenses for the Company. The Clean Air Act
Amendments established a new federal operating permit and fee program for many
manufacturing operations. Under the Act, the Company's U.S. operations deemed to
be "major sources" of air pollution must submit detailed permit applications and
pay recurring permit fees. As part of this process, the Company's
representatives have been discussing permit application requirements with the
respective state agencies having ultimate responsibility for review and issuance
of federal and/or state operating permits. The new permitting requirements
primarily affect the Company's cement manufacturing, gypsum wallboard and
waste-fuel operations. The Company has submitted or will be submitting
applicable permit applications.
In July 1997 the EPA promulgated revisions to two National Ambient Air Quality
Standards under the Clean Air Act -- particulate matter and photochemical
oxidants (ozone). Because of the nature of the Company's operations, the
proposed addition of a particulate matter standard that will regulate particles
2.5 microns or less in diameter, and the regulation of nitrogen oxides emissions
as the precursor pollutants to ozone, is of potential concern. Implementation of
these new standards will not immediately have an impact on industrial
operations. The first step is a several-year data collection and analysis
activity by the states to determine whether or not the state will be able to
meet the new standards. If a state is unable to demonstrate that it attains the
standards, it will then be required to modify its air quality implementation
plan to describe actions to meet the new standards. This initial phase will take
several years to complete. It is presently unknown whether states in which the
Company operates will be able to meet the new standards, how the states will
modify their implementation plans to demonstrate compliance and/or the ultimate
technology and cost impact on the Company's operations.
F-45
<PAGE> 50
An evolving issue of significance to the Company in the U.S. and Canada is
global climate change, or CO2 stabilization/reduction. In December 1997 the
United Nations held an international convention in Kyoto, Japan to take further
international action to ensure CO2 stabilization and/or reduction after the turn
of the century. The conference agreed to a protocol to the United Nations
Framework Convention on Climate Change originally adopted in May 1992. The
protocol establishes quantified emission reduction commitments for certain
developed countries, including the U.S. and Canada, and certain countries that
are undergoing the process of transition to a market economy. These reductions
are to be obtained by 2008-2012. The protocol will be available for signature by
member countries starting in the spring of 1998. The protocol will require
Senate ratification and enactment of implementing legislation before it becomes
effective in the United States. The conference will resume in November 1998 to
continue work on issues not fully resolved in the Kyoto Protocol. The
consequences of CO2 reduction measures for cement producers are potentially
significant because CO2 is generated from combustion of fuels such as coal and
coke in order to generate the high temperatures necessary to manufacture cement
clinker (which is then ground with gypsum to make cement). In addition, CO2 is
generated in the calcining of limestone to make cement clinker. Any imposition
of raw material or production limitations or fuel-use or carbon taxes could have
a significant impact on the cement manufacturing industry. The Canadian cement
industry, including the Company, has entered into a voluntary commitment with
the Canadian government to annually improve energy efficiency 0.7% per ton of
clinker from 1990 to 2000. In the U.S., the Company in 1996 joined the EPA's
Climate Wise program. This voluntary program is geared to promote energy
efficiency in industrial operations and thereby reduce or stabilize the CO2
emissions that result from the generation of electricity. It will not be
possible to determine the impact on the Company until governmental requirements
are defined and/or the Company can determine whether emission offsets and/or
credits are obtainable, and whether alternative cementitious products can be
substituted.
Because of differences between requirements in the U.S. and Canada and the
complexity and uncertainty of existing and future environmental requirements,
permit conditions, costs of new and existing technology, potential remedial
costs and insurance coverages, and/or enforcement-related activities and costs,
it is difficult for management to estimate the ultimate level of Company
expenditures related to environmental matters. While amounts accrued and paid in
the past have not been material, the Company's capital expenditures and
operational expenses for environmental matters have increased and are likely to
increase in the future. The Company cannot determine at this time whether
capital expenditures and other remedial action that the Company may be required
to undertake to comply with the changing environmental protection laws will
materially affect its capital expenditures or earnings. However, with respect to
known environmental contingencies, the Company has recorded provisions for
estimated probable liabilities and does not believe that the ultimate resolution
of such matters will have a material effect on the Supplemental Consolidated
Financial Statements.
F-46
<PAGE> 51
MANAGEMENT'S DISCUSSION OF SUPPLEMENTAL CASH FLOWS
The Supplemental Consolidated Statements of Cash Flows summarize the Company's
main sources and uses of cash. These statements show the relationship between
the operations presented in the Supplemental Consolidated Statements of Income
and liquidity and financial resources depicted in the Supplemental Consolidated
Balance Sheets.
The Company's liquidity requirements arise primarily from the funding of its
capital expenditures, working capital needs, debt service obligations and
dividends. The Company has met its operating liquidity needs primarily through
internal generation of cash and expects to do so in the future. However, because
of the seasonality of the Company's business, cash balances decline in the first
two calendar quarters. Short-term borrowings are generally used to fund seasonal
operating requirements.
The net cash provided by operations for each of the three years presented
reflects the Company's net income adjusted for noncash items. Depreciation and
depletion increased in 1997 due to the full year impact of the gypsum wallboard
acquisition and other capital projects completed in 1996 and in 1997.
Depreciation and depletion increased from 1995 to 1996 due to higher capital
spending and acquisitions. Deferred income taxes affected the operating cash
flow primarily because of a 1995 decrease in the valuation allowance and the
1996 and 1997 realization of certain deferred tax assets. The changes in working
capital are discussed in Management's Discussion of Financial Position.
Cash flows from investing consist primarily of capital expenditures and
acquisitions offset by proceeds from property, plant and equipment dispositions.
Investing activities include $11.1 million of cash obtained through the Redland
acquisition. Capital investments by product line, including acquisitions, were
as follows (in millions):
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Cement $ 74.2 $ 74.2 $ 97.1
Construction materials 52.4 68.3 53.0
Gypsum 3.3 63.8 --
Other 2.9 2.0 1.1
========== ========== ==========
Total capital investments $ 132.8 $ 208.3 $ 151.2
========== ========== ==========
</TABLE>
Capital expenditures (including the Redland acquisition and other acquisitions
already completed or in process) are expected to be approximately $1.07 billion
in 1998. The Company intends to invest in projects that maintain or improve the
performance of its plants as well as in acquisition opportunities that will
enhance the Company's competitive position in the U.S. and Canada. In September
1996 the Company acquired G-P Gypsum Corp.'s (a subsidiary of Georgia Pacific
Corporation) gypsum wallboard manufacturing plants in Buchanan, New York, and
Wilmington, Delaware. In October 1995 the Company announced plans to build
cement plants to replace existing facilities in Richmond, British Columbia, and
Sugar Creek, Missouri. The Company projects a capital investment of
approximately $105 million for the Richmond plant, which is
F-47
<PAGE> 52
expected to be completed in 1999. The Sugar Creek plant and a deep limestone
quarry are expected to cost approximately $150 million and to become operational
in the year 2000.
On June 3, 1998, the Company consummated the acquisition of a number of
construction materials businesses from Lafarge S.A., its majority shareholder,
for $690 million, subject to working capital adjustments. A short-term loan of
$650 million was obtained from Lafarge S.A. on June 3, 1998 to finance the
acquisition. Interest on the loan was at LIBOR plus 30 basis points. The Company
expects to repay the loan through the issuance of $650 million in long-term
public debt expected to be completed in the third quarter.
Capital spending and dividend requirements are anticipated to be funded by
existing cash and cash flows from operations, supplemented by short-term
borrowings as needed. In August 1996 the Company sold two cement terminals on
the Ohio River and in May 1996 the Company sold a sand and gravel operation in
Pittsburgh, Pennsylvania. In 1995 the Company sold its equity interest in a
Texas aggregate operation. During 1997 and 1996, the Company's proceeds from the
sale of nonstrategic assets, surplus land and other miscellaneous items totaled
$18.9 million and $29.1 million, respectively.
Excluding the additional Redland debt reflected on the next page, the Company
has reduced its net debt by $146.4 million during the three years ended December
31, 1997. This reduction was the result of improved earnings from operations,
proceeds from the divestment of nonstrategic assets and moderate levels of
capital spending. The reduction of debt in 1997 is mainly attributable to the
retirement of medium-term notes and $50 million of related party debt. In
December 1996 the Company redeemed all the $100 million outstanding 7%
Convertible Debentures dated July 1, 1988. The redemption price was 101.4% of
the principal amount plus accrued interest. As a result of the redemption, the
Company incurred a pretax charge of $2.2 million in the fourth quarter of 1996
($1.3 million after taxes).
The Company has access to a wide variety of short-term and long-term financing
alternatives in both the U.S. and Canada and has bilateral revolving credit
facilities with six institutions for total commitments of $150 million. At
December 31, 1997 no amounts were outstanding under these credit facilities.
F-48
<PAGE> 53
MANAGEMENT'S DISCUSSION OF SUPPLEMENTAL FINANCIAL POSITION
The Supplemental Consolidated Balance Sheets summarize the Company's financial
position at December 31, 1997 and 1996.
Lafarge S.A., the majority stockholder of the Company acquired Redland PLC in
December 1997. The Company acquired Redland from Lafarge S.A. on June 3, 1998
for $690 million, subject to working capital adjustments. Since the Company
acquired Redland from its parent, the acquisition was accounted for similar to a
pooling of interests for financial reporting purposes. Accordingly, Redland
assets and liabilities acquired by the Company from Lafarge S.A. were
transferred to the Company at Lafarge S.A.'s historical cost, which approximates
the purchase price paid by the Company. The accompanying supplemental
consolidated balance sheet for the year ended December 31, 1997 includes a
combination of the accounts of Redland and the Company retroactive to the date
of acquisition of Redland by Lafarge S.A.
The following table illustrates the combination of the financial statements of
Lafarge Corporation and the Redland businesses acquired.
<TABLE>
<CAPTION>
Year Ended December 31, 1997
-----------------------------------------------------------
Lafarge Acquisition Total
Corporation Redland(A) Adjustments(B) Consolidated
---------- ---------- -------------- ------------
<S> <C> <C> <C> <C>
Current assets $ 815,968 $ 133,478 $ -- $ 949,446
Property, plant and equipment, net 876,744 413,438 -- 1,290,182
Excess of cost over net tangible
assets of businesses acquired, net 27,859 307,628 -- 335,487
Other assets 178,486 21,250 -- 199,736
---------- ---------- ----------- ----------
Total Assets $1,899,057 $ 875,794 $ -- $2,774,851
========== ========== =========== ==========
Current liabilities $ 295,732 $ 201,415 $ (110,563) $ 386,584
Payable to Lafarge S.A. -- -- 690,000 690,000
Long-term debt 132,337 102,020 (99,114) 135,243
Other long-term liabilities 215,300 92,036 -- 307,336
---------- ---------- ----------- ----------
Total liabilities 643,369 395,471 480,323 1,519,163
---------- ---------- ----------- ----------
Total Shareholders' Equity 1,255,688 480,323 (480,323) 1,255,688
---------- ---------- ----------- ----------
Total Liabilities and Shareholders'
Equity $1,899,057 $ 875,794 $ -- $2,774,851
========== ========== ============ ==========
</TABLE>
The items in columns (A) and (B) above represent the changes in the Lafarge
Corporation balance sheet related to the Redland businesses acquired by the
Company.
F-49
<PAGE> 54
The following discussion addresses changes within the Company's balance sheet
from December 31, 1996 to December 31, 1997, excluding the impact of the
Redland acquisition unless otherwise noted.
The value reported for Canadian dollar denominated net assets decreased from
December 31, 1996 as a result of a decline in the value of the Canadian dollar
relative to the U.S. dollar. At December 31, 1997 the U.S. dollar equivalent of
a Canadian dollar was $.70 versus $.73 at December 31, 1996.
Working capital, excluding cash, short-term investments, current portion of
long-term debt and the impact of exchange rate changes, decreased $40.4 million
from December 31, 1996 to December 31, 1997. Accounts receivable decreased $25.9
million primarily due to improved collections, mainly in eastern Canada.
Net property, plant and equipment increased $9.0 million during 1997. The impact
of exchange rate changes was approximately $14.5 million. Depreciation and
divestments were $99.9 million and $9.0 million, respectively. Capital
expenditures and acquisitions of fixed assets totaled $132.4 million. The excess
of cost over net tangible assets of businesses acquired relates primarily to a
1981 U.S. acquisition and the 1997 acquisition of Redland.
The Company's capitalization, after considering the Redland acquisition, is
summarized in the following table:
<TABLE>
<CAPTION>
December 31
------------------------------
1997 1996
------------------------------
<S> <C> <C>
Long-term debt 8.0% 11.0%
Other long-term liabilities 18.1% 13.8%
Shareholders' equity 73.9% 75.2%
---------- ----------
Total capitalization 100.0% 100.0%
========== ==========
</TABLE>
The increase in shareholders' equity is discussed in Management's Discussion of
Supplemental Shareholders' Equity. The decline in long-term debt is discussed in
Management's Discussion of Supplemental Cash Flows.
F-50
<PAGE> 55
MANAGEMENT'S DISCUSSION OF SUPPLEMENTAL SHAREHOLDERS' EQUITY
The Supplemental Consolidated Statements of Shareholders' Equity summarize the
activity in each component of shareholders' equity for the three years
presented. In 1997 shareholders' equity increased by $145.1 million, mainly from
net income of $182.0 million and $18.7 million from exercise of stock options
partially offset by a decrease in foreign currency translation adjustments of
$34.0 million (resulting from a decrease in the value of the Canadian dollar
relative to the U.S. dollar) and dividend payments, net of reinvestments, of
$23.0 million.
Shareholders' equity increased $129.6 million in 1996 due to net income of
$140.9 million partially offset by dividend payments, net of reinvestments, of
$12.2 million.
Common equity interests include common shares and the Lafarge Canada Inc.
exchangeable shares, which have comparable voting, dividend, and liquidation
rights. Common shares are traded on the New York Stock Exchange under the ticker
symbol "LAF" and on the Toronto Stock Exchange and the Montreal Exchange. The
exchangeable shares are traded on the Montreal Exchange and the Toronto Stock
Exchange under the ticker symbol "LCI.PR.E."
The following table reflects the range of high and low closing prices of common
shares by quarter for 1997 and 1996 as quoted on the New York Stock Exchange:
<TABLE>
<CAPTION>
Quarters Ended
-----------------------------------------------------------
March June Sept. Dec.
31 30 30 31
------- ------- ------- ---------
<S> <C> <C> <C> <C>
1997 Stock Prices
High $24 3/8 $25 7/8 $33 $33 9/16
Low 20 1/8 22 1/8 24 3/4 25 13/16
1996 Stock Prices
High $19 3/8 $21 3/4 $20 7/8 $20 3/8
Low 18 1/4 18 5/8 18 1/8 18 1/4
</TABLE>
Dividends are summarized in the following table (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Years Ended December 31
------------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Common equity dividends $ 30,019 $ 28,008 $ 25,898
Less dividend reinvestments (7,010) (15,843) (15,784)
---------- ---------- ----------
Net cash dividend payments $ 23,009 $ 12,165 $ 10,114
========== ========== ==========
Common equity dividends per share $ .42 $ .40 $ .375
========== ========== ==========
</TABLE>
F-51
<PAGE> 56
MANAGEMENT'S DISCUSSION OF SUPPLEMENTAL SELECTED FINANCIAL DATA
The Supplemental Selected Consolidated Financial Data (F-29) provide
both a reference for some data frequently requested about the Company and a
useful record for reviewing trends.
The Company's net sales increased by 5 percent from 1993 to 1994 due to
increases in cement and ready-mixed concrete shipments and higher cement prices.
Net sales were reduced by the declining value of the Canadian dollar relative to
the U.S. currency and divestments. Net sales declined 6 percent in 1995 due to
divestments, weak construction activity in Canada and poor weather in the fourth
quarter relative to 1994, partially offset by higher cement prices. The
Company's net sales increased 12 percent in 1996 due to higher product shipments
and prices as well as the effect of acquisitions (in late 1995 and early 1996)
in the construction materials operations. Net sales also improved from the entry
into the gypsum wallboard business. Net sales in 1997 increased 10 percent
mainly due to increased product shipments, higher cement and ready-mixed
concrete prices, and full year operation of the gypsum wallboard business. See
Management's Discussion of Income for additional details on net sales.
Inflation has not been a significant factor in the Company's sales or earnings
growth because of low inflation rates in recent years and because the Company
continually attempts to offset the effect of inflation by improving operating
efficiencies, especially in the areas of selling and administrative expenses,
productivity and energy costs. The ability to recover increasing costs by
obtaining higher prices for the Company's products varies with the level of
activity in the construction industry and the availability of products to supply
a local market.
Net cash provided by operations consists of net income (loss) adjusted primarily
for depreciation and a restructuring provision and related payments in 1994 and
1993. The Company is in a capital-intensive industry and as a result recognizes
large amounts of depreciation. The Company has used the cash provided by
operations essentially to expand its markets, improve the performance of its
plants and other operating equipment, and to reduce debt.
Capital expenditures and acquisitions, excluding the Redland acquisition,
totaled $666.0 million over the past five years. Significant investments during
the period included: the purchase of two gypsum wallboard manufacturing
facilities; a variety of cement plant projects to increase production capacity
and reduce costs; the installation of receiving and handling facilities of
substitute fuels and raw materials; the building and purchasing of additional
distribution terminals and water transportation facilities to extend markets and
improve existing supply networks; the acquisition of ready-mixed concrete plants
and aggregate operations; and the modernization of the construction materials
mobile equipment fleet.
F-52
<PAGE> 57
Item. 8.
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial information is included on the pages indicated:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants F-54
Supplemental Consolidated Balance Sheets F-55
Supplemental Consolidated Statements of Income F-56
Supplemental Consolidated Statements of Shareholders' Equity F-57
Supplemental Consolidated Statements of Cash Flows F-58
Notes to Supplemental Consolidated Financial Statements F-59
Supplemental Consolidated Valuation and Qualifying Accounts F-82
</TABLE>
F-53
<PAGE> 58
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Lafarge Corporation:
We have audited the accompanying supplemental consolidated balance sheets of
Lafarge Corporation and subsidiaries as of December 31, 1997 and 1996, and the
related supplemental consolidated statements of income, shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1997. The supplemental consolidated statements give retroactive effect back to
December 31, 1997 for the acquisition of certain construction materials
businesses on June 3, 1998, which has been accounted for similar to a pooling of
interests, as described on page F-59 of notes to supplemental consolidated
financial statements. These supplemental financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these supplemental financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the supplemental consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Lafarge Corporation and its subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1997, after giving retroactive effect
back to December 31, 1997 for the acquisition of the construction materials
businesses as described on page F-59 of notes to supplemental consolidated
financial statements, all in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic
supplemental consolidated financial statements taken as a whole. The
supplemental consolidated Schedule II (appearing on page F-82) is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic supplemental consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic supplemental consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic supplemental consolidated financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.
June 3, 1998
F-54
<PAGE> 59
LAFARGE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 174,163 $ 116,847
Short-term investments 155,368 92,496
Receivables, net 327,612 287,692
Inventories 233,972 205,804
Deferred tax asset 33,126 13,438
Other current assets 25,205 15,953
----------- -----------
Total current assets 949,446 732,230
Property, plant and equipment, net 1,290,182 867,723
Excess of cost over net tangible assets of businesses acquired, net 335,487 31,657
Other assets 199,736 181,369
=========== ===========
Total Assets $ 2,774,851 $ 1,812,979
=========== ===========
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities $ 321,450 $ 214,393
Income taxes payable 35,364 28,151
Short-term borrowings and current portion of long-term debt 29,770 44,821
Short-term borrowings from related parties -- 50,000
Payable to Lafarge S.A. 690,000 --
----------- -----------
Total current liabilities 1,076,584 337,365
Long-term debt 135,243 161,934
Other long-term liabilities 307,336 203,141
----------- -----------
Total liabilities 1,519,163 702,440
----------- -----------
Commitments and Contingencies
Common Equity Interests
Common shares ($1.00 par value; authorized 110.1 million
shares; issued 65.3 and 62.6 million shares, respectively) 65,268 62,590
Exchangeable shares (no par or stated value; authorized 24.3
million shares; issued 6.4 and 7.8 million shares, respectively) 45,259 53,817
Additional paid-in capital 649,082 615,993
Retained earnings 593,438 441,481
Foreign currency translation adjustments (97,359) (63,342)
----------- -----------
Total shareholders' equity 1,255,688 1,110,539
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,774,851 $ 1,812,979
=========== ===========
</TABLE>
See Notes to Supplemental Consolidated Financial Statements
F-55
<PAGE> 60
LAFARGE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales $ 1,806,351 $ 1,649,280 $ 1,472,159
Costs and expenses
Cost of goods sold 1,335,206 1,251,886 1,149,168
Selling and administrative 160,963 151,442 141,112
Amortization 3,748 2,996 2,361
Other expense (income), net 5,536 6,578 (5,868)
Interest expense 19,949 24,118 27,086
Interest income (13,285) (10,068) (11,867)
----------- ----------- -----------
Total costs and expenses 1,512,117 1,426,952 1,301,992
----------- ----------- -----------
Pre-tax income 294,234 222,328 170,167
Income taxes 112,258 81,462 40,554
----------- ----------- -----------
Net Income $ 181,976 $ 140,866 $ 129,613
=========== =========== ===========
Net Income Per Common Equity Share-Basic $ 2.56 $ 2.02 $ 1.89
=========== =========== ===========
Net Income Per Common Equity Share-Diluted $ 2.54 $ 1.95 $ 1.82
=========== =========== ===========
Dividends Per Common Equity Share $ 0.42 $ 0.40 $ 0.375
=========== =========== ===========
</TABLE>
See Notes to Supplemental Consolidated Financial Statements
F-56
<PAGE> 61
LAFARGE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------------------------------------------
1997 1996 1995
--------------------------------------------------------------------------------------
Amount Shares Amount Shares Amount Shares
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Common Equity Interests
Common Shares
Balance at January 1 $ 62,590 62,590 $ 60,735 60,735 $ 59,694 59,694
Issuance of Common Shares for:
Dividend reinvestment plans 256 256 814 814 812 812
Employee stock purchase plan 33 33 36 36 36 36
Exchange of Exchangeable Shares 1,421 1,421 810 810 59 59
Exercise of stock options 968 968 195 195 134 134
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31 $ 65,268 65,268 $ 62,590 62,590 $ 60,735 60,735
=========== =========== =========== =========== =========== ===========
Exchangeable Shares
Balance at January 1 $ 53,817 7,764 $ 58,311 8,501 $ 57,805 8,494
Issuance of Exchangeable
Shares for:
Dividend reinvestment plans 1,035 40 827 45 722 39
Employee stock purchase plan 180 26 190 28 182 27
Exchange of Exchangeable Shares (9,773) (1,421) (5,511) (810) (398) (59)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31 $ 45,259 6,409 $ 53,817 7,764 $ 58,311 8,501
=========== =========== =========== =========== =========== ===========
Additional Paid-In Capital
Balance at January 1 $ 615,993 $ 593,310 $ 576,054
Issuance of Common and/or
Exchangeable Shares for:
Dividend reinvestment plans 5,719 14,203 14,250
Employee stock purchase plan 1,241 1,154 1,001
Exchange of Exchangeable Shares 8,352 4,701 339
Exercise of stock options 17,777 2,625 1,666
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31 $ 649,082 $ 615,993 $ 593,310
=========== =========== =========== =========== =========== ===========
Retained Earnings
Balance at January 1 $ 441,481 $ 328,623 $ 224,908
Net Income 181,976 140,866 129,613
Dividends-common equity interests (30,019) (28,008) (25,898)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31 $ 593,438 $ 441,481 $ 328,623
=========== =========== =========== =========== =========== ===========
Foreign Currency Translation
Adjustments
Balance at January 1 $ (63,342) $ (60,001) $ (77,007)
Translation adjustments (34,017) (3,341) 17,006
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31 $ (97,359) $ (63,342) $ (60,001)
=========== =========== =========== =========== =========== ===========
Total Shareholders' Equity $ 1,255,688 $ 1,110,539 $ 980,978
=========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Supplemental Consolidated Financial Statements
F-57
<PAGE> 62
LAFARGE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operations
Net income $ 181,976 $ 140,866 $ 129,613
Adjustments to reconcile net income to net cash provided by
operations
Depreciation, depletion, and amortization 106,304 100,507 94,321
Provision for bad debts 2,365 255 588
Deferred income taxes 9,815 8,491 (25,101)
Gain on sale of assets (6,038) (4,085) (14,585)
Other noncash charges and credits, net 2,512 (156) (2,918)
Net change in operating working capital (see below)* 39,052 (37,847) (63,651)
----------- ----------- -----------
Net Cash Provided by Operations 335,986 208,031 118,267
----------- ----------- -----------
Cash Flows from Investing
Capital expenditures (123,970) (124,790) (121,882)
Acquisitions (8,817) (83,484) (29,319)
Purchases of short-term investments, net (62,872) (7,980) (34,016)
Proceeds from property, plant and equipment dispositions 18,947 29,126 34,628
Other 7,110 (203) 2,920
----------- ----------- -----------
Net Cash Used for Investing (169,602) (187,331) (147,669)
----------- ----------- -----------
Cash Flows From Financing
Repayment of long-term debt (16,758) (109,021) (24,314)
Short-term borrowings (77,850) 77,850 --
Issuance of equity securities, net 20,199 4,201 3,019
Dividends, net of reinvestments (23,009) (12,165) (10,114)
----------- ----------- -----------
Net Cash Consumed by Financing (97,418) (39,135) (31,409)
----------- ----------- -----------
Effect of exchange rate changes (11,650) (1,153) 4,189
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 57,316 (19,588) (56,622)
Cash and Cash Equivalents at Beginning of Year 116,847 136,435 193,057
----------- ----------- -----------
Cash and Cash Equivalents at End of Year $ 174,163 $ 116,847 $ 136,435
=========== =========== ===========
*Analysis of Changes in Operating Working Capital Items
Receivables, net $ 22,779 $ (20,015) $ 7,550
Inventories (7,692) 11,249 (31,147)
Other current assets (2,287) (97) (773)
Accounts payable and accrued liabilities 19,262 (25,479) (30,870)
Income taxes payable 6,990 (3,505) (8,411)
----------- ----------- -----------
Net Change in Operating Working Capital $ 39,052 $ (37,847) $ (63,651)
=========== =========== ===========
</TABLE>
See Notes to Supplemental Consolidated Financial Statements
F-58
<PAGE> 63
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
Together with its subsidiaries, Lafarge Corporation (Lafarge or the Company),
a Maryland corporation, is engaged in the production and sale of cement,
ready-mixed concrete, aggregates, other concrete products and gypsum wallboard.
Lafarge operates in the U.S. and its major operating subsidiary, Lafarge Canada
Inc. (LCI), operates throughout Canada. The primary U.S. markets are in the
midwestern, midsouth, northeastern, north-central and northwestern areas.
Lafarge's wholly owned subsidiary, Systech Environmental Corporation, supplies
cement plants with substitute fuels and raw materials. Lafarge S.A., a French
corporation, and certain of its affiliates (Lafarge S.A.) own a majority of the
voting securities of Lafarge.
Lafarge S.A., the majority stockholder of Lafarge acquired Redland PLC in
December 1997. The Company acquired certain Redland PLC businesses in North
America (Redland) from Lafarge S.A. on June 3, 1998 for $690 million, subject to
working capital adjustments. Since the Company acquired Redland from its parent,
the acquisition is accounted for similar to a pooling of interests for financial
reporting purposes. Accordingly, Redland assets and liabilities acquired by the
Company from Lafarge S.A. were transferred to the Company at Lafarge S.A.'s
historical cost, which approximates the purchase price paid by the Company. The
accompanying supplemental consolidated balance sheet, statement of cash flows
and statement of shareholders' equity for the year ended December 31, 1997
include a combination of the accounts of Redland and the Company retroactive to
the date of acquisition by Lafarge S.A. A payable to Lafarge S.A. for $690
million is recorded for the acquisition. There was no change to the 1997
statement of income as the impact was not material.
Generally accepted accounting principles prohibit giving effect to a business
combination accounted for similar to a pooling of interests in financial
statements that do not include the date of the combination's consummation. The
accompanying supplemental financial statements do not extend through the date of
consummation of the business combination (June 3, 1998). However, they will
become the historical consolidated financial statements of Lafarge after
financial statements covering the date of consummation of the business
combination are issued (i.e., upon release of the Company's second quarter 1998
consolidated financial statements).
The Redland businesses acquired consist of the businesses of Western Mobile Inc.
of Denver, Colorado; Redland Genstar Inc. of Towson, Maryland; and the aggregate
operations of Redland Quarries Inc. of Hamilton, Ontario. The operations being
acquired posted combined revenues of approximately $517 million in 1997.
Redland is engaged in the production and sale of aggregates, ready-mixed
concrete, asphalt and performs paving and related contracting services. Redland
operates primarily in the U.S. and owns two quarry operations in Ontario,
Canada. The primary U.S. markets are in the western states of Colorado and New
Mexico and the northeast (Maryland and New York).
F-59
<PAGE> 64
ACCOUNTING AND FINANCIAL REPORTING POLICIES
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, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses. Actual results could differ from
these estimates.
Principles of Consolidation
The supplemental consolidated financial statements include the accounts of
Lafarge and all of its majority-owned subsidiaries (the Company), after the
elimination of intercompany transactions, and the December 31, 1997 balance
sheet accounts of Redland. Investments in affiliates in which the Company has
less than a majority ownership are accounted for by the equity method. Certain
reclassifications have been made to the prior year financial statements to
conform to the 1997 presentation.
Foreign Currency Translation
The assets and liabilities of LCI and the Canadian operations of Redland are
translated at the exchange rate prevailing at the balance sheet date. Related
revenue and expense accounts for these subsidiaries are translated using the
average exchange rate during the period. Foreign currency translation
adjustments are disclosed as a separate item in shareholders' equity.
Revenue Recognition
Revenue from the sale of cement, concrete products, aggregates, and gypsum
wallboard is recorded when the products are shipped. Revenue from waste recovery
and disposal is recorded when the material is received, tested and accepted.
Revenue from road construction contracts is recognized on the basis of units of
work completed, while revenue from other indivisible lump sum contracts is
recognized using the percentage-of-completion method.
Derivative Financial Instruments
The Company, at times, uses derivative financial instruments (Derivatives) in
order to hedge the impact of changes in interest rates. These Derivatives are
not held or issued for trading purposes.
The Company is a party to an interest rate swap contract (Interest Swap)
requiring the Company to make a fixed interest rate payment and to receive a
floating interest rate payment from a commercial bank. This Interest Swap was
transacted in order to hedge a portion of the Company's floating interest rate
borrowings from significant changes in interest rates. The net difference in
interest payments is recognized over the life of the Interest Swap as a
component in the "Interest Expense" caption in the Consolidated Statements of
Income.
The Company also enters into forward contracts used to hedge interest rate
changes on debt. The differentials to be received or paid under such contracts
designated as forward interest rate hedges are recognized in income over the
life of the associated debt as adjustments to Interest Expense.
Cash and Cash Equivalents
The Company considers liquid investments purchased with an original maturity of
three months or less to be cash equivalents. Because of the short maturity,
their carrying amounts approximate fair value.
F-60
<PAGE> 65
Short-Term Investments
Short-term investments consist primarily of commercial paper with original
maturities beyond three months and fewer than 12 months. Such short-term
investments are carried at cost, which approximates fair value, due to the short
period of time to maturity.
Inventories
Inventories are valued at lower of cost or market. The Company's U.S. cement
inventories other than maintenance and operating supplies are stated at last-in,
first-out (LIFO) cost and all other inventories are valued at average cost.
Property, Plant and Equipment
Depreciation of property, plant and equipment is computed for financial
reporting purposes by the straight-line method over the estimated useful lives
of the assets. These lives range from three years on light mobile equipment to
40 years on certain buildings. Land and mineral deposits include depletable raw
material reserves on which depletion is recorded using the units-of-production
method.
Excess of Cost Over Net Tangible Assets of Businesses Acquired
The excess of cost over fair value of net tangible assets of businesses acquired
(goodwill) is amortized using the straight-line method over periods not
exceeding 40 years. Goodwill related to Redland businesses acquired will be
amortized over lives averaging 30 years. The Company continually evaluates
whether events and circumstances have occurred that indicate the remaining
estimated useful life of goodwill may warrant revision or that the remaining
balance of goodwill may not be recoverable. In evaluating impairment, the
Company estimates the sum of the expected future cash flows, undiscounted and
without interest charges, derived from such goodwill over its remaining life.
The Company believes that no impairment exists at December 31, 1997. The
amortization recorded for 1997, 1996 and 1995 was $3.7 million, $3.0 million and
$2.4 million, respectively. Accumulated amortization at December 31, 1997 and
1996 was $44.3 million and $40.6 million, respectively.
Other Postretirement Benefits
The Company accrues the expected cost of retiree health care and life insurance
benefits and charges it to expense during the years that the employees render
service.
In addition, the Company accrues for benefits provided to former or inactive
employees after employment but before retirement when it becomes probable that
such benefits will be paid and when sufficient information exists to make
reasonable estimates of the amounts to be paid.
Income Taxes
Deferred income taxes are determined by the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109).
Environmental Remediation Liabilities
When the Company determines that it is probable that a liability for
environmental matters has been incurred, an undiscounted estimate of the
required remediation costs is recorded as a liability in the financial
statements, without offset of potential insurance recoveries. Costs that extend
the life,
F-61
<PAGE> 66
increase the capacity or improve the safety or efficiency of Company owned
assets or are incurred to mitigate or prevent future environmental contamination
may be capitalized. All other environmental costs are expensed when incurred.
Research and Development
The Company is committed to improving its manufacturing process, maintaining
product quality and meeting existing and future customer needs. These objectives
are pursued through various programs. Research and development costs, which are
charged to expense as incurred, were $7.2 million, $6.3 million and $6.6 million
for 1997, 1996 and 1995, respectively.
Interest
Interest of $1.4 million, $1.2 million and $2.1 million was capitalized in 1997,
1996, and 1995, respectively.
Net Income Per Common Equity Share
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128). This new
standard replaces primary earnings per share (EPS) with basic EPS and fully
diluted EPS with diluted EPS. The Company adopted this standard in 1997 and has
restated all prior periods (see Earnings Per Share note).
The calculation of basic net income per common equity share is based on the
weighted average number of Lafarge's common shares and the Exchangeable
Preference Shares of LCI (exchangeable shares) outstanding in each period. The
weighted average number of shares and share equivalents outstanding was (in
thousands) 71,128, 69,783 and 68,666 in 1997, 1996 and 1995, respectively.
The weighted average number of shares and share equivalents outstanding,
assuming dilution, was (in thousands) 71,695, 74,377 and 73,504 in 1997, 1996
and 1995, respectively, and assumed conversion of the Convertible Subordinated
Debentures (convertible debentures) in 1996 and 1995. The convertible debentures
were redeemed in 1996 as further explained in the Debt note.
Accounting for Stock-Based Compensation
The Company accounts for employee stock options using the method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Generally, no expense is recognized related to the Company's stock options
because the option's exercise price is set at the stock's fair market value on
the date the option is granted.
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123), by
making the required note disclosures (see Stock Option and Purchase Plans note).
Accordingly, adoption of this new standard has no impact on the Company's
reported financial position or operating results.
Accounting Pronouncements Not Yet Effective
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130) and
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related
F-62
<PAGE> 67
Information" (SFAS 131). SFAS 130 requires that an enterprise display
comprehensive income, which for the Company is the total of net income and the
current year foreign currency translation adjustment, in its financial
statements. SFAS 131 requires that a public business enterprise report financial
and descriptive information about its reportable operating segments. Application
of these new standards is required in financial statements for fiscal years
beginning after December 15, 1997.
Acquisitions
In September 1996, the Company acquired G-P Gypsum Corp.'s (a subsidiary of
Georgia-Pacific Corporation) gypsum wallboard plants in Buchanan, New York and
Wilmington, Delaware.
On June 3, 1998, the Company acquired Redland from its majority shareholder,
Lafarge S.A., for $690 million, subject to working capital adjustments. The
Company financed the purchase through available cash resources and a $650
million short-term note from Lafarge S.A. The Company anticipates repaying the
Lafarge S.A. short-term note through the issuance of $650 million in long-term
public debt.
Lafarge S.A. acquired Redland as part of its purchase of Redland PLC in December
1997. The following table illustrates Lafarge S.A.'s preliminary allocation of
the overall Redland PLC purchase price to Redland and the net book values
transferred to Lafarge as of December 31, 1997. This allocation, which is based
on outside appraisals, is preliminary and may be adjusted.
<TABLE>
<S> <C>
Current assets $ 133,478
Property, plant and equipment, including
$154,807 of mineral deposits $ 413,438
Goodwill (to be amortized over an average life
of 30 years) $ 307,628
Other assets $ 21,250
Other current liabilities $ 90,852
Long-term debt $ 2,906
Other long-term liabilities $ 92,036
</TABLE>
The following unaudited 1997 pro forma financial information for the Company
gives effect to the Redland acquisition as if Lafarge S.A. had purchased it on
January 1, 1997 (in thousands except for per share amounts). These pro forma
results have been prepared for comparative purposes only and include certain
adjustments, such as additional depreciation and depletion expense as a result
of a step-up in the basis of property, plant and equipment, and additional
amortization expense as a result of goodwill. The pro forma results of
operations is not necessarily indicative of the combined earnings and results of
operations had the acquisition been completed at the beginning of the year, nor
is such information necessarily indicative of future results of operations.
F-63
<PAGE> 68
<TABLE>
<CAPTION>
1997
-----------
(UNAUDITED)
<S> <C>
PRO-FORMA:
Net Sales $ 2,323,407
Net Income $ 184,434
Net Income per share - Basic $ 2.59
Net Income per share - Diluted $ 2.57
</TABLE>
RECEIVABLES
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Trade and notes receivable $ 342,760 $ 305,471
Retainage on long-term contracts 12,933 4,765
Allowances (28,081) (22,544)
---------- ----------
Total receivables, net $ 327,612 $ 287,692
========== ==========
</TABLE>
INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Finished products $ 123,774 $ 100,900
Work in process 8,483 13,711
Raw materials and fuel 55,341 45,550
Maintenance and operating supplies 46,374 45,643
---------- ----------
Total inventories $ 233,972 $ 205,804
========== ==========
</TABLE>
Included in the finished products, work in process and raw materials and fuel
categories are inventories valued using the LIFO method of $72.3 million and
$61.1 million at December 31, 1997 and 1996, respectively. If these inventories
were valued using the average cost method, such inventories would have decreased
by $5.1 million and $5.0 million, respectively.
F-64
<PAGE> 69
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Land and mineral deposits $ 370,111 $ 166,060
Buildings, machinery and equipment 1,908,653 1,652,942
Construction in progress 79,345 74,254
----------- -----------
Property, plant and equipment, at cost 2,358,109 1,893,256
Less accumulated depreciation and depletion (1,067,927) (1,025,533)
----------- -----------
Total property, plant and equipment, net $ 1,290,182 $ 867,723
=========== ===========
</TABLE>
OTHER ASSETS
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Long-term receivables $ 20,328 $ 17,082
Investments in unconsolidated companies 22,301 22,646
Prepaid pension asset 92,900 88,157
Property held for sale 29,880 19,594
Other 34,327 33,890
----------- -----------
Total other assets $ 199,736 $ 181,369
=========== ===========
</TABLE>
Property held for sale represents certain permanently closed cement plants and
land that are carried at the lower of cost or estimated net realizable value.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
December 31
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Trade accounts payable $ 117,777 $ 67,284
Accrued payroll expense 49,385 35,862
Bank overdrafts 10,076 14,328
Other accrued expenses 144,212 96,919
----------- -----------
Total accounts payable and accrued liabilities $ 321,450 $ 214,393
=========== ===========
</TABLE>
F-65
<PAGE> 70
DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Medium-term notes maturing in various amounts between 1998 and 2006, bearing
interest at fixed rates which range from 9.2 percent to 9.8 percent $ 122,000 $ 138,000
Tax-exempt bonds maturing in various amounts between 1998 and 2026, bearing
interest at floating rates which range from 4.2 percent to 6.8 percent 38,917 39,450
Short-term borrowings maturing in various amounts -- 27,850
Short-term borrowings from Lafarge S.A. and subsidiaries -- 50,000
Other 4,096 1,455
--------- ---------
Subtotal 165,013 256,755
Less short-term borrowings and current portion of long-term debt (29,770) (94,821)
--------- ---------
Total long-term debt $ 135,243 $ 161,934
========= =========
</TABLE>
The fair value of debt at December 31, 1997 and 1996, respectively, was
approximately $179.1 million and $267.7 million compared with $165.0 million and
$256.8 million included in the Consolidated Balance Sheets. This fair value was
estimated based on quoted market prices or current interest rates offered to the
Company for debt of the same maturity.
F-66
<PAGE> 71
The scheduled annual principal payment requirements on debt for each of the five
years in the period ending December 31, 2002 are as follows (in millions):
<TABLE>
<CAPTION>
Repayments
----------
<S> <C> <C>
1998 29.8
1999 24.6
2000 35.7
2001 30.5
2002 15.8
Thereafter 28.6
</TABLE>
A short-term loan of $650 million was obtained from Lafarge S.A. on June 3, 1998
to finance the acquisition. Interest on the loan is at LIBOR plus 30 basis
points. The Company expects to repay the loan through the issuance of $650
million of long-term public debt.
The Company has similar, bilateral revolving credit facilities with six
institutions for total commitments of $150 million extending through June 1,
2001. At the end of 1997 no amounts were outstanding. The Company is required to
pay annual commitment fees of 0.10 percent of the total amount of the
facilities. Borrowings made under the revolving credit facilities will bear
interest at variable rates based on a bank's prime lending rate or the
applicable LIBOR rate.
The Company's debt agreements require the maintenance of certain financial
ratios relating to fixed charge coverage and leverage. At December 31, 1997, the
Company was in compliance with these requirements.
In December 1996, the Company redeemed all of the outstanding $100 million 7%
Convertible Debentures dated July 1, 1988. The redemption price was 101.4
percent of the principal amount plus interest accrued to the redemption date.
As a result of the redemption, the Company incurred a pre-tax charge of $2.2
million in the fourth quarter 1996 ($1.3 million after tax or $.02 per share).
Approximately $.8 million of the pre-tax charge represented previously
unamortized debt issuance cost. If the redemption of the debentures had taken
place on January 1, 1996, diluted earnings per share would have increased by
$.06 to $2.01 for the year ended December 31, 1996.
At December 31, 1997, the Company maintained one $25 million (notional amount)
Interest Swap contract which matures in 1999. As of December 31, 1997, it
required the Company to pay a fixed rate of 8.7 percent in exchange for a
floating rate receipt of 5.8 percent. Throughout 1997, outstanding floating
interest rate borrowings exceeded the amount of this Interest Swap. Therefore,
no mark-to-market provision was recorded during the year.
The differences in swapped interest rates are paid every three months pursuant
to the Interest Swap contract. Although the Company is exposed to credit loss in
the event of nonperformance by the other party to the Interest Swap contract, it
does not anticipate nonperformance.
F-67
<PAGE> 72
Based on interest rates at December 31, 1997, the net termination cost for the
Company to unwind its Interest Swap was approximately $1.0 million.
As of June 3, 1998, Lafarge had entered into $600 million of interest rate
hedges known as "Treasury Rate Locks" for the purpose of fixing the interest
expense for the debt securities to be issued for the permanent financing of the
Redland acquisition. These will be unwound on the day that the debt securities
are priced on the public markets, generating a cash receipt or a cash payment,
depending upon the level of the appropriate Treasury rate on that day relative
to the day that the Treasury rate lock was executed. This amount, which will be
added or subtracted from the gross issuance proceeds, will change the effective
Treasury rate upon which the coupon for the securities is based, to the rate at
which the hedge instruments were executed. The Treasury locks were executed at
an average blended rate of 5.6595%.
The counterparties to derivative transactions are major financial institutions
with investment grade or better credit ratings; however, the Company is exposed
to credit risk with these institutions. This credit risk is generally limited to
the unrealized gains in such contracts should any of these counterparties fail
to perform as contracted. The Company considers the risk of counterparty default
to be minimal.
OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Deferred income taxes $ 111,969 $ 48,709
Minority interests 6,252 7,573
Accrued postretirement benefit cost 147,647 124,867
Accrued pension liability 21,800 16,898
Other 19,668 5,094
---------- ----------
Total other long-term liabilities $ 307,336 $ 203,141
========== ==========
</TABLE>
COMMON EQUITY INTERESTS
Holders of exchangeable shares have voting, dividend and liquidation rights that
parallel those of holders of the Company's common shares. The exchangeable
shares may be converted to the Company's common shares on a one-for-one basis.
Dividends on the exchangeable shares are cumulative and payable at the same time
as any dividends declared on the Company's common shares. The Company has agreed
not to pay dividends on its common shares without causing LCI to declare an
equivalent dividend in Canadian dollars on the exchangeable shares. Dividend
payments and the exchange rate on the exchangeable shares are subject to
adjustment from time to time to take into account certain dilutive events.
At December 31, 1997, the Company had reserved for issuance approximately 8.2
million common shares for the exchange of outstanding exchangeable shares.
Additional common equity shares are reserved to cover grants under the Company's
stock option program (4.3 million), employee stock purchase plan (.6 million)
and issuances pursuant to the Company's optional stock dividend plan (2.1
million).
OPTIONAL STOCK DIVIDEND PLAN
The Company has an optional stock dividend plan that permits holders of record
of common equity shares to elect to receive new common equity shares issued as
stock dividends in lieu of cash dividends on such shares. The common equity
shares are issued under the plan at 95 percent of the average market price, as
defined in the plan.
F-68
<PAGE> 73
STOCK OPTION AND PURCHASE PLANS
At December 31, 1997, the Company maintained two stock-based compensation plans
- - a fixed stock option plan and an employee stock purchase plan. The Company
applies APB Opinion No. 25 and related interpretations in accounting for these
plans. Accordingly, generally no compensation cost has been recognized for these
plans. If compensation cost for the Company's stock-based compensation plans had
been determined based on the fair value at the grant dates for awards under
those plans consistent with the method described by SFAS No. 123, the Company's
net income and earnings per share would have been reduced to the pro forma
amounts indicated as follows:
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
NET INCOME
As reported $ 181,976 $ 140,866 $ 129,613
Pro forma $ 180,402 $ 139,803 $ 129,090
BASIC EARNINGS PER SHARE
As reported $ 2.56 $ 2.02 $ 1.89
Pro forma $ 2.54 $ 2.00 $ 1.88
DILUTED EARNINGS PER SHARE
As reported $ 2.54 $ 1.95 $ 1.82
Pro forma $ 2.51 $ 1.94 $ 1.82
</TABLE>
The method of accounting under SFAS No. 123 has not been applied to options
granted prior to January 1, 1995. The pro forma compensation cost may not be
representative of that to be expected in future years.
Under the stock option plan, options to purchase the Company's common shares
have been granted to key employees and directors of the Company at option prices
based on the market price of the securities at the date of grant. One-fourth of
the employee options granted are exercisable at the end of each year following
the date of grant. Director options are exercisable based on the length of a
director's service on the Company's Board of Directors and become fully
exercisable when a director has served on the Board for over four years. The
options expire ten years from the date of grant.
The fair value of each option grant is estimated on the date of grant for
purposes of the pro forma disclosures shown above using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants made in 1997, 1996 and 1995, respectively: dividend yield of 1.90, 2.12
and 2.08 percent; expected volatility of 26.0, 37.0 and 38.4 percent; risk-free
interest rates of 6.47, 5.65, and 7.55 percent; and expected lives of 5.4 for
all three years.
F-69
<PAGE> 74
A summary of the status of the Company's fixed stock option plans as of December
31, 1997, 1996 and 1995, and changes during the years ended on these dates is
presented below:
<TABLE>
<CAPTION>
Years Ended December 31
------------------------------------------------------------------------------
1997 1996 1995
------------------------------------------------------------------------------
Average Average Average
Option Option Option
Shares Price Shares Price Shares Price
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance outstanding at
beginning of year 2,481,287 $ 17.87 2,319,837 $ 17.33 2,153,720 $ 17.06
Options granted 541,000 21.43 492,000 18.88 483,800 18.00
Options exercised (967,612) 16.50 (194,925) 14.47 (134,308) 13.41
Options canceled (70,625) 20.05 (135,625) 19.11 (183,375) 19.11
---------- ---------- ---------- ---------- ---------- ----------
Balance outstanding at
end of year 1,984,050 $ 19.43 2,481,287 $ 17.87 2,319,837 $ 17.33
========== ========== ========== ========== ========== ==========
Options exercisable at
end of year 886,650 $ 18.35 1,452,937 $ 16.83 1,379,037 $ 16.09
========== ========== ========== ========== ========== ==========
Weighted-average fair
value of options
granted during the
year $ 6.50 $ 6.65 $ 7.09
========== ========== ==========
</TABLE>
As of December 31, 1997, the 1.98 million fixed stock options outstanding under
the plans have an exercise price between $12.63 and $24.13 and a
weighted-average remaining contractual life of 6.93 years.
The Company's employee stock purchase plan permits substantially all employees
to purchase the Company's common equity interests through payroll deductions at
90 percent of the lower of the beginning or end of plan year market prices. In
1997, 59,316 shares were issued to employees under the plan at a share price of
$19.24 and in 1996, 64,345 shares were issued at a share price of $17.33. At
December 31, 1997 and 1996, $.7 million was subscribed for future share
purchases.
F-70
<PAGE> 75
EARNINGS PER SHARE
<TABLE>
<CAPTION>
Per-Share
Income Shares Amount
-----------------------------------------------
For the Year Ended 1997
-----------------------------------------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net Income $181,976 71,128 $2.56
=====
DILUTED EARNINGS PER SHARE
Options -- 567
-------- ------
Income available to common stockholders
plus assumed conversions $181,976 71,695 $2.54
======== ====== =====
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended 1996
-----------------------------------------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net Income $140,866 69,783 $2.02
=====
DILUTED EARNINGS PER SHARE
Options -- 309
Add after tax interest expense applicable
to convertible debentures 4,153 4,285
-------- ------
Income available to common stockholders
plus assumed conversions $145,019 74,377 $1.95
======== ====== =====
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended 1995
-----------------------------------------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net Income $129,613 68,666 $1.89
=====
DILUTED EARNINGS PER SHARE
Options -- 318
Add after tax interest expense applicable
to convertible debentures 4,473 4,520
-------- ------
Income available to common stockholders
plus assumed conversions $134,086 73,504 $1.82
======== ====== =====
</TABLE>
Basic earnings per common share were computed by dividing net income by the
weighted-average number of shares of common stock outstanding during the year.
Diluted earnings per common share assumed the exercise of stock options and in
1996 and 1995, assumed conversion of the convertible debentures. The Company's
reported earnings per share for 1996 and 1995 were restated as a result of
adopting SFAS No. 128, "Earnings Per Share" in 1997.
F-71
<PAGE> 76
INCOME TAXES
Pre-tax income is summarized by country in the following table (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
United States* $ 151,634 $ 97,267 $ 57,908
Canada* 142,600 125,061 112,259
---------- ---------- ----------
Pre-tax income $ 294,234 $ 222,328 $ 170,167
========== ========== ==========
</TABLE>
* The 1997, 1996 and 1995 amounts shown for Canada and the United States
include $6.1 million, $13.7 million and $30.1 million, respectively, of
adjustments resulting from an agreement reached with Revenue Canada
Taxation (as described below). If these adjustments were not reflected,
1997, 1996 and 1995 pre-tax income in Canada would be decreased and
pre-tax income in the U.S. would be increased by $6.1 million, $13.7
million and $30.1 million, respectively.
The provision for income taxes includes the following components (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Current
United States $ 46,012 $ 27,600 $ 25,300
Canada 56,431 45,371 40,355
---------- ---------- ----------
Total current 102,443 72,971 65,655
---------- ---------- ----------
Deferred
United States 12,200 8,800 (26,300)
Canada (2,385) (309) 1,199
---------- ---------- ----------
Total deferred 9,815 8,491 (25,101)
---------- ---------- ----------
Total income taxes $ 112,258 $ 81,462 $ 40,554
========== ========== ==========
</TABLE>
The Company's U.S. federal tax liability has not been finalized by the Internal
Revenue Service for any year subsequent to 1983 due to the existence prior to
1995 of significant tax net operating loss and credit carryforwards. During
1995, an agreement was reached with Revenue Canada Taxation related to the
pricing of certain cement sales between the Company's operations in Canada and
the U.S. for the years 1984 through 1994. The result was an increase in net
sales and pre-tax income in Canada by U.S. $30.1 million with corresponding
adjustments in the U.S. During 1997 and 1996 the Company recorded $6.1 million
and $13.7 million adjustments for the years 1996 and 1995, respectively, based
on the aforementioned agreement with Revenue Canada Taxation. The impact of
these adjustments was immaterial to consolidated net income. Under the terms of
the Canada-U.S. Income Tax Convention, the agreement has been submitted to the
Competent Authorities of Canada and the U.S. and is subject to adjustment. The
purpose of the Competent Authorities is to reach agreement for the elimination
of double taxation that is not in accordance with the Convention. The Company's
F-72
<PAGE> 77
Canadian federal tax liability for all taxation years through 1994 has been
reviewed and finalized by Revenue Canada Taxation.
A reconciliation of taxes at the U.S. federal income tax rate to the Company's
actual income taxes is as follows (in millions):
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Taxes at the U.S. federal income tax rate $ 103.0 $ 77.8 $ 59.6
U.S./Canadian tax rate differential 4.3 3.7 3.4
Canadian tax incentives (8.8) (8.0) (7.0)
State and Canadian provincial income taxes,
net of federal benefit 11.4 8.6 8.2
Change in valuation allowance -- -- (23.0)
Tax effect of certain operating losses and
other tax credits, primarily U.S. -- -- (1.8)
Other items 2.4 (0.6) 1.2
---------- ---------- ----------
Provision for income taxes $ 112.3 $ 81.5 $ 40.6
========== ========== ==========
</TABLE>
Deferred income taxes reflect the tax consequences of "temporary differences"
between the amounts of assets and liabilities, including deferred taxes related
to the Redland acquisition, for financial reporting purposes and such amounts as
measured by tax law. These temporary differences are determined in accordance
with SFAS No. 109.
Temporary differences and carryforwards that give rise to deferred tax assets
and liabilities, including deferred taxes related to the Redland acquisition,
are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Reserves and other liabilities $ 73,226 $ 48,980
Other postretirement benefits 60,074 49,785
Tax loss carryforwards 7,621 4,745
Tax credit carryforwards 69 2,558
--------- ---------
Gross deferred tax assets 140,990 106,068
Valuation allowance (24,525) (23,296)
--------- ---------
Net deferred tax assets 116,465 82,772
--------- ---------
Deferred tax liabilities:
Property, plant and equipment 160,739 85,875
Prepaid pension asset 28,168 27,587
Other 6,401 4,505
--------- ---------
Gross deferred tax liabilities 195,308 117,967
--------- ---------
Net deferred tax liability 78,843 35,195
Net deferred tax asset--current 33,126 13,514
--------- ---------
Net deferred tax liability--noncurrent $ 111,969 $ 48,709
========= =========
</TABLE>
F-73
<PAGE> 78
A valuation allowance is provided to reduce the deferred tax assets to a level
which, more likely than not under the rules of SFAS No. 109, will be realized.
At December 31, 1997, the Company had net operating loss carryforwards of $10.5
million, excluding Redland. Redland had federal net operating loss carryforwards
of approximately $5.9 million and state net operating loss carryforwards of
approximately $28.9 million. The net operating loss carryforwards are limited to
use in varying annual amounts through 2012.
Deferred tax assets include approximately $9.2 million that represents the tax
effect of transfer pricing adjustments that have not been deducted in the U.S.
pending settlement between the U.S. and Canadian Competent Authorities as
previously noted.
At December 31, 1997, cumulative undistributed earnings of LCI were $796.8
million. No provision for U.S. income taxes or Canadian withholding taxes has
been made since the Company considers the undistributed earnings to be
permanently invested in Canada. The Company's management has decided that the
determination of the amount of any unrecognized deferred tax liability for the
cumulative undistributed earnings of LCI is impracticable since it would depend
on a number of factors that cannot be known until such time as a decision to
repatriate the earnings might be made.
SEGMENT INFORMATION
The Company's single business segment includes the manufacture and sale of
cement and ready-mixed concrete, precast and prestressed concrete components,
concrete block and pipe, aggregates, reinforcing steel and gypsum wallboard. In
addition, the Company is engaged in road building and other construction that
use many of its own products, and in supplying cement plants with substitute
fuels and raw materials.
Sales between the United States and Canada are accounted for at fair market
value. Income from operations equals net sales plus other income less cost of
goods sold, and selling and administrative expenses. It excludes interest
expense, interest income and income taxes. Financial information by country is
as follows (in millions):
F-74
<PAGE> 79
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net Sales (1)
United States $1,046.8 $ 953.6 $ 821.1
Canada 828.9 777.5 722.3
Eliminations (69.3) (81.8) (71.2)
-------- -------- --------
Total net sales $1,806.4 $1,649.3 $1,472.2
======== ======== ========
Income from operations (1)
United States $ 170.7 $ 131.7 $ 109.9
Canada 130.2 104.7 75.5
-------- -------- --------
Total income from operations $ 300.9 $ 236.4 $ 185.4
======== ======== ========
Identifiable assets (2)
United States $1,737.8 $ 889.7 $ 868.3
Canada 1,037.1 923.3 845.6
-------- -------- --------
Total identifiable assets $2,774.9 $1,813.0 $1,713.9
======== ======== ========
</TABLE>
(1) The 1997, 1996 and 1995 amounts shown as income from operations for Canada
and the United States exclude $6.1 million, $13.7 million and $30.1
million, respectively, of adjustments resulting from an agreement reached
with Revenue Canada Taxation (as described in the Income Taxes note). If
these adjustments were reflected, net sales and income from operations in
Canada would be increased with corresponding adjustments in the U.S. There
would be no impact on consolidated income from operations.
(2) Assets for the year ended December 31, 1997 include the assets acquired in
the Redland acquisition.
SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities included the issuance of 296,000,
859,000 and 851,000 common equity shares on the reinvestment of dividends
totaling $7.0 million, $15.8 million and $15.8 million in 1997, 1996 and 1995,
respectively. Also, the acquisition of certain Redland construction materials
businesses discussed in the Acquisition footnote, which is accounted for similar
to a pooling-of-interests, does not impact cash except for $11.1 million of cash
in the acquired businesses at December 31, 1997. A payable to Lafarge S.A. was
recorded in connection with the transfer of Redland assets and liabilities to
the Company.
Cash paid during the year for interest and income taxes is as follows (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31
------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Interest $ 20,415 $ 17,595 $ 15,944
Income taxes
(net of refunds) $ 93,045 $ 74,188 $ 75,218
============ ============ ============
</TABLE>
F-75
<PAGE> 80
PENSION PLANS
The Company has several defined benefit and defined contribution retirement
plans covering substantially all employees. Benefits paid under the defined
benefit plans are generally based on either years of service and the employee's
compensation over the last few years of employment or years of service
multiplied by a contractual amount. The Company's funding policy is to
contribute amounts that are deductible for income tax purposes.
The following table summarizes the consolidated funded status of the Company's
defined benefit retirement plans and provides a reconciliation to the
consolidated prepaid pension asset and accrued pension liability recorded on the
Company's Consolidated Balance Sheets at December 31, 1997 and 1996 (in
millions). For 1997, the assumed settlement interest rates for the Company's
U.S. plans ranged from 6.75 percent to 7.0 percent while the 1996 rate was 7.5
percent. The assumed settlement interest rates for the Canadian plans for 1997
and 1996 were 6.75 percent and 7.5 percent, respectively. For 1997 and 1996, the
assumed rates of increase in future compensation levels used in determining the
actuarial present values of the projected benefit obligations ranged from 4.0
percent to 4.5 percent for the Company's U.S. plans and 4.25 percent for the
Canadian plans. The expected long-term rate of investment return on pension
assets, which includes listed stocks, fixed income securities and real estate,
for each country ranged from 8.5 percent to 9.0 percent for each year presented.
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
-----------------------------------------------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Exceed Accumulated Benefits Exceed
Benefits Assets Benefits Assets
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligations $ 368.1 $ 50.7 $ 316.4 $ 36.0
Accumulated benefit obligations 375.3 52.6 319.7 39.4
=============== =============== =============== ===============
Projected benefit obligation
for service rendered to date $ 457.3 $ 57.0 $ 354.5 $ 43.1
Market value of plan assets 546.7 24.8 433.4 17.2
--------------- --------------- --------------- ---------------
Plan assets in excess of (less than)
projected benefit obligations 89.4 (32.2) 78.9 (25.9)
Unrecognized net (gain) loss due to
past experience different from prior
assumptions made (.3) 9.0 6.3 6.7
Unrecognized prior service costs 9.5 .8 11.1 1.2
Unrecognized net (assets)
obligations at transition
to SFAS No. 87 (5.7) .6 (8.1) 1.1
--------------- --------------- --------------- ---------------
Prepaid pension asset
(accrued pension liability) $ 92.9 $ (21.8) $ 88.2 $ (16.9)
=============== =============== =============== ===============
</TABLE>
F-76
<PAGE> 81
Net retirement cost for the years indicated includes the following components
(in millions):
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost of benefits earned during the period $ 10.7 $ 9.7 $ 8.5
Interest cost on projected benefit obligation 28.9 28.5 28.1
Actual gain on plan assets (70.9) (50.9) (61.3)
Net amortization and deferral 37.0 17.3 26.4
------- ------- -------
Total defined benefit plans cost 5.7 4.6 1.7
Defined contribution plans cost 3.8 3.8 3.6
------- ------- -------
Net retirement cost $ 9.5 $ 8.4 $ 5.3
======= ======= =======
</TABLE>
Certain employees are also covered under multi-employer pension plans
administered by unions. Amounts included in the preceding table as defined
benefit plans retirement cost include contributions to such plans of $4.0
million, $3.7 million and $3.2 million for 1997, 1996 and 1995, respectively.
The data available from administrators of the multi-employer plans are not
sufficient to determine the accumulated benefit obligation nor the net assets
attributable to the multi-employer plans in which Company employees participate.
The defined contribution plans costs in the preceding table relate to thrift
savings plans for eligible U.S. and Canadian employees. Under the provisions of
these plans, the Company matches a portion of each participant's contribution.
OTHER POSTRETIREMENT BENEFITS
The Company provides certain retiree health and life insurance benefits to
eligible employees who retire in the U.S. or Canada. Salaried participants
generally become eligible for retiree health care benefits when they retire from
active service at age 55 or later, although there are some variances by plan or
unit in Canada and the U.S. Benefits, eligibility and cost-sharing provisions
for hourly employees vary by location and/or bargaining unit. Generally, the
health plans pay a stated percentage of most medical/dental expenses reduced for
any deductible, copayment and payments made by government programs and other
group coverage. These plans are unfunded. An eligible retiree's health care
benefit coverage is coordinated in Canada with Provincial Health and Insurance
Plans and in the U.S., after attaining age 65, with Medicare. Certain retired
employees of businesses acquired by the Company are covered under other care
plans that differ from current plans in coverage, deductibles and retiree
contributions.
In the U.S., salaried retirees and dependents under age 65 have a $1,000,000
health care lifetime maximum benefit. At age 65 or over, the maximum is $50,000.
Lifetime maximums for hourly retirees are governed by the location and/or
bargaining agreement in effect at the time of retirement. In Canada, some units
have maximums, but in most cases there are no lifetime maximums. In some units
in Canada, spouses of retirees have lifetime medical coverage.
F-77
<PAGE> 82
In Canada, both salaried and nonsalaried employees are generally eligible for
life insurance benefits. In the U.S., life insurance is provided for a number of
hourly retirees as stipulated in their hourly bargained agreements but not for
salaried retirees except those of certain acquired companies.
The following table sets forth the plans' combined status reconciled with the
accrued postretirement benefit cost included in the Company's Consolidated
Balance Sheets (in thousands):
<TABLE>
<CAPTION>
December 31
-------------------
1997 1996
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 99,073 $ 74,832
Fully eligible active participants 17,766 13,417
Other active participants 24,890 19,646
-------- --------
Total accumulated postretirement benefit obligation 141,729 107,895
Unrecognized net gain 2,871 13,320
Unrecognized prior service cost 3,047 3,652
-------- --------
Accrued postretirement benefit cost $147,647 $124,867
======== ========
</TABLE>
Net periodic postretirement benefit cost includes the following components (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost of benefits earned during the period $ 1,624 $ 1,412 $ 1,285
Interest cost on accumulated postretirement
benefit obligation 7,989 7,683 8,046
Net amortization (846) (1,109) (1,390)
-------- -------- --------
Net periodic postretirement benefit cost $ 8,767 $ 7,986 $ 7,941
======== ======== ========
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation differs between U.S. and Canadian plans. For
plans in both the U.S. and Canada, the pre-65 assumed rate ranged from 7.1 to
9.5 percent, decreasing to 5.5 percent over 10 years. For post-65 retirees in
the U.S., the assumed rate ranged from 7.0 to 7.5 percent, decreasing to 5.5
percent over 10 years with a Medicare assumed rate for the same group of 6.8 to
6.9 percent, decreasing to 5.5 percent over 10 years. For post-65 retirees in
Canada the assumed rate ranged from 8.8 to 9.2 percent, decreasing to 5.5
percent over 10 years. If the health care cost trend rate assumptions were
increased by one percent, the accumulated postretirement benefit obligation as
of December 31, 1997 would be increased by 0.5 to 21.1 percent. The effect of
this change on the net periodic postretirement benefit cost for 1997 would be an
increase ranging from 9.0 to 23.8 percent.
F-78
<PAGE> 83
For 1997 and 1996, the weighted average discount rates used to determine the
accumulated postretirement benefit obligations were 7.0 and 7.5 percent,
respectively, for U.S. plans and 6.75 and 7.5 percent, respectively, for
Canadian plans.
COMMITMENTS AND CONTINGENCIES
The Company leases office space and certain equipment. Total lease expenses for
1997, 1996 and 1995 were $12.0 million, $15.1 million and $14.1 million,
respectively. Future minimum annual lease commitments for all noncancelable
leases are as follows (in thousands):
<TABLE>
<S> <C> <C>
1998 $15,766
1999 13,998
2000 11,808
2001 10,508
2002 10,892
Thereafter 35,405
--------
Total $ 98,377
========
</TABLE>
The Company self insures for workers' compensation, automobile and general
liability claims up to a maximum per claim. The undiscounted estimated liability
is accrued based on a determination by an outside actuary. This determination is
impacted by assumptions made and actual experience.
Since 1992, a number of owners of buildings located in eastern Ontario, Canada,
most of whom are residential homeowners, filed actions in the Ontario Court
(General Division) against Bertrand & Frere Construction Company Limited
(Bertrand) and a number of other defendants seeking damages as a result of
allegedly defective footings, foundations and floors made with ready-mixed
concrete supplied by Bertrand. There are presently approximately 168 plaintiffs
whose claims involve 104 foundations, which are embodied in ten lawsuits. In two
of these actions, the plaintiffs have added LCI as a party defendant; in the
others, LCI is either a third or fourth party. The damages claimed total more
than Cdn. $62 million. In the largest of these actions, approximately 119
plaintiffs are complaining about 81 basement foundations, including a 20-unit
condominium, and claiming approximately Cdn. $51.7 million, each plaintiff
seeking Cdn. $200,000 for costs of repairs and loss of capital value of their
respective home or building, Cdn. $200,000 for punitive and exemplary damages
and Cdn. $20,000 for hardship, inconvenience and mental distress, together with
interest and costs. LCI has also been served with cross-claims or third or
fourth party claims by Bertrand in the referenced lawsuits. Bertrand is seeking
indemnity for its liability to the owners as a result of the supply by LCI of
allegedly defective flyash. Bertrand amended its claims to allege that the
cement supplied by LCI is also defective. In 1995, the Ontario New Home
Warranty Program instituted a lawsuit against Bertrand, LCI and certain other
defendants to recover approximately Cdn. $3 million in costs for replacing or
repairing the foundations of 29 houses which were covered under the warranty
program. The amount of LCI's liability, if any, is uncertain. LCI has denied
liability and is defending the lawsuits vigorously. It has introduced third and
fourth party claims against its insurers to have the insurance coverage issues
dealt with by the Court at the same time as the liability case. The Company
believes it has substantial insurance coverage that will respond to defense
expenses and liability, if any, in the lawsuits. Trial on this matter convened
in early September 1997 and is expected to continue during 1998.
F-79
<PAGE> 84
In late August 1996 the Company, among others, was served with original
petitions from two sets of plaintiffs in two similar lawsuits brought in state
courts in Starr and Duval Counties, Texas. In the first suit, approximately 180
plaintiffs sued approximately 170 defendants involved in the production,
transportation and use of cement, concrete, additives, sand and gravel alleging
that these materials contain toxic substances, that the plaintiffs were exposed
to the toxic substances in their work areas where they breathe the fumes, inhale
the particles and absorb the materials from them which caused injury to their
respiratory and nervous systems and brain damage. The plaintiffs claim
negligence, gross negligence, and products and strict liability and seek, among
other things, both past and future damages, exemplary damages and cost of the
suit in an unspecified amount. In the second suit, approximately 70 plaintiffs
sued approximately 225 defendants alleging claims similar to those contained in
the first suit with an added claim that plaintiffs suffered exposure to
defendants' toxic substances in their homes. While the amount of liability, if
any, to the Company is uncertain, the Company filed general denials to both
suits in late October 1996 and is vigorously defending the lawsuits. Although
significant discovery and venue issues have been decided, plaintiffs have filed
motions in both cases seeking recusal of the presiding judge, this has
effectively stayed all progress in both cases pending resolution of the motions.
On March 18, 1998, a shareholder derivative lawsuit was filed in Circuit Court
for Montgomery County, Maryland against all of the directors of the Company
alleging breach of fiduciary duty, corporate waste, and gross negligence in
connection with the Company's planned purchase of a number of construction
materials businesses in North America from Lafarge S.A., its majority
shareholder (the "Transaction"). Lafarge S.A. took control of these businesses
in late 1997 when it acquired the British construction materials firm Redland
PLC. A special committee of independent directors of the Company's Board of
Directors was appointed to evaluate the Transaction. Based upon extensive due
diligence and the advice of independent professionals retained by the special
committee, including an investment banking firm which advised the committee
regarding the fairness of the price and terms of the proposed Transaction, the
special committee recommended the Transaction for approval by the full Board of
Directors of the Company. On March 16, 1998, the full Board, consisting of a
majority of independent directors, approved the Transaction and the Company
publicly announced the Transaction on March 17, 1998. The Company has been
advised that the directors believe that the lawsuit against them with respect to
the Transaction is without merit and intend to vigorously defend the lawsuit.
The Company has been notified by the EPA that it is one of several potentially
responsible parties for clean-up costs at waste disposal sites. The ultimate
costs related to such matters and the Company's degree of responsibility in some
of these matters is not presently determinable.
When the Company determines that it is probable that a liability for
environmental matters or other legal actions has been incurred, an estimate of
the required remediation costs is recorded as a liability in the financial
statements. As of December 31, 1997 and 1996, the liabilities recorded for
environmental obligations are not material. Management has concluded that the
possibility of material liability in excess of the amounts reported in the
balance sheet is remote.
In addition, the Company is involved in certain other legal actions and claims.
It is the opinion of management that all legal and environmental matters will be
resolved without material effect on the Company's consolidated financial
statements.
F-80
<PAGE> 85
RELATED PARTY TRANSACTIONS
The Company is a participant to agreements with Lafarge S.A. for the sharing of
certain costs incurred for marketing, technical, research and managerial
assistance and for the use of certain trademarks. The net expenses accrued for
these services were $6.3 million, $5.7 million and $5.5 million during 1997,
1996 and 1995, respectively. In addition, the Company purchases various products
from Lafarge S.A. Such purchases totaled $52.5 million, $52.1 million and $27.7
million in 1997, 1996 and 1995, respectively. All transactions with Lafarge S.A.
were conducted on an arms-length basis.
Lafarge S.A. reinvested a portion of dividends it was entitled to receive on the
Company's common shares during 1997, 1996 and 1995. These reinvestments totaled
$3.9 million, $13.2 million and $12.4 million, respectively. The Company's $50
million of short-term borrowings from Lafarge S.A. and its subsidiaries at
December 31, 1996 were repaid in 1997.
QUARTERLY DATA (UNAUDITED)
The following table summarizes financial data by quarter for 1997 and 1996 (in
millions, except per share information):
<TABLE>
<CAPTION>
First Second Third Fourth Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1997
Net sales $ 244 $ 477 $ 612 $ 473 $ 1,806
Gross profit (loss) (11) 143 202 137 471
Net income (loss) (34) 60 97 59 182
Net income (loss) per
common equity share (a)
Basic (0.48) 0.84 1.36 0.83 2.56
Diluted (0.48) 0.84 1.35 0.82 2.54
======== ======== ======== ======== ========
1996
Net sales $ 204 $ 421 $ 576 $ 448 $ 1,649
Gross profit (loss) (20) 114 182 121 397
Net income (loss) (38) 43 85 51 141
Net income (loss) per
common equity share (a)
Basic (0.55) 0.62 1.21 0.73 2.02
Diluted (0.55) 0.59 1.15 0.70 1.95
======== ======== ======== ======== ========
</TABLE>
(a) The sum of these amounts does not equal the annual amount because of changes
in the average number of common equity shares outstanding during the year.
F-81
<PAGE> 86
Schedule II
LAFARGE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996, 1995
(In Thousands)
<TABLE>
<CAPTION>
Additions Deductions
------------ ------------------------------
From Reserve
for Purposes
Balance at Charge to for Which
Beginning of Cost and Reserve Was Balance at End
Descriptions Year Expenses Created Other (1) of Year
- ---------------------------------------- ------------ ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Reserve applicable to current receivable
For doubtful accounts:
1997 $ 18,793 $ 2,365 $ (3,177) $ 6,918(2) $ 24,899
1996 $ 20,685 $ 255 $ (2,108) $ (39) $ 18,793
1995 $ 22,698 $ 588 $ (2,843) $ 242 $ 20,685
For cash and other discounts:
1997 $ 3,750 $ 37,147 $ (36,786) $ (929) $ 3,182
1996 $ 3,542 $ 30,909 $ (30,583) $ (118) $ 3,750
1995 $ 5,649 $ 30,691 $ (32,985) $ 187 $ 3,542
</TABLE>
- -----------------------------
(1) Primarily foreign currency translation adjustments
(2) Includes $7,299 of allowance for doubtful accounts at December 31, 1997
related to the acquisition of Redland
F-82
<PAGE> 87
LAFARGE CORPORATION
UNAUDITED SUPPLEMENTAL CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
F-83
<PAGE> 88
UNAUDITED SUPPLEMENTAL CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
The following financial information is included on the pages indicated:
Page
----
Supplemental Condensed Consolidated Statements of Income F-85
Supplemental Condensed Consolidated Balance Sheets F-86
Supplemental Condensed Consolidated Statements of Cash Flows F-87
Supplemental Condensed Consolidated Geographical Information F-88
Notes to Supplemental Condensed Consolidated Financial Statements F-89
Managements' Discussion and Analysis of Supplemental Financial
Condition and Results of Operations F-94
F-84
<PAGE> 89
PART I. FINANCIAL INFORMATION
SUPPLEMENTAL FINANCIAL STATEMENTS
LAFARGE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
----------------------
1998 1997
--------- ---------
<S> <C> <C>
NET SALES $ 334,776 $ 244,034
--------- ---------
COST AND EXPENSES
Cost of goods sold 333,407 255,323
Selling and administrative 53,682 37,456
Amortization of intangibles 3,748 945
Other expense, net 5,018 2,947
--------- ---------
Total income (loss) from operations (61,079) (52,637)
--------- ---------
Interest expense 7,627 5,559
Interest income (3,831) (2,917)
--------- ---------
PRE-TAX INCOME (LOSS) (64,875) (55,279)
Income tax benefit (expense) 25,121 21,158
--------- ---------
NET INCOME (LOSS) $ (39,754) $ (34,121)
========= =========
NET INCOME (LOSS) PER COMMON EQUITY SHARE-BASIC $ (.55) $ (.48)
--------- ---------
NET INCOME (LOSS) PER COMMON EQUITY SHARE-DILUTED $ (.55) $ (.48)
--------- ---------
DIVIDENDS PER COMMON EQUITY SHARE $ 0.12 $ 0.10
========= =========
Weighted average number of common equity shares and equivalents outstanding 71,737 70,517
========= =========
</TABLE>
See Notes to Supplemental Condensed Consolidated Financial Statements.
F-85
<PAGE> 90
LAFARGE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
(UNAUDITED) (AUDITED)
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 121,900 $ 174,163
Short-term investments 164,423 155,368
Receivables, net 252,869 327,612
Inventories 258,339 233,972
Other current assets 66,622 58,331
----------- -----------
Total current assets 864,153 949,446
Property, plant and equipment, (less accumulated depreciation and depletion
of $1,091,096 and $1,067,927) 1,311,036 1,290,182
Excess of cost over net assets of businesses acquired, net 345,567 335,487
Other assets 212,416 199,736
----------- -----------
TOTAL ASSETS $ 2,733,172 $ 2,774,851
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities 306,459 321,450
Income taxes payable 3,656 35,364
Short-term borrowing and current portion of long-term debt 71,643 29,770
Payable to Lafarge S.A. 690,000 690,000
----------- -----------
Total current liabilities 1,071,758 1,076,584
Long-term debt 124,233 135,243
Other long-term liabilities 310,306 307,336
----------- -----------
Total liabilities $ 1,506,297 $ 1,519,163
----------- -----------
Common equity interests
Common shares 66,276 65,268
Exchangeable shares 39,494 45,259
Additional paid-in-capital 666,975 649,082
Retained earnings 545,042 593,438
Foreign currency translation adjustments (90,912) (97,359)
----------- -----------
Total shareholders' equity 1,226,875 1,255,688
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,733,172 $ 2,774,851
=========== ===========
</TABLE>
See Notes to Supplemental Condensed Consolidated Financial Statements.
F-86
<PAGE> 91
LAFARGE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
----------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Loss $ (39,754) $ (34,121)
Adjustments to reconcile net loss to net cash provided by operations:
Depreciation, depletion and amortization 37,460 27,060
Provision for doubtful accounts 815 695
Gain on sale of assets (165) (1,279)
Other post-retirement benefits 847 470
Other non-cash charges and credits, net (6,327) (4,107)
Changes in working capital (4,537) 18,831
--------- ---------
Net cash (used in) provided by operations (11,661) 7,549
--------- ---------
CASH FLOWS FROM INVESTING
Capital expenditures (42,329) (40,553)
Acquisitions (30,434) --
Short-term investments (9,055) 8,464
Proceeds from property, plant and equipment dispositions 7,087 4,147
Other (2,820) (1,574)
--------- ---------
Net cash used for investing (77,551) (29,516)
--------- ---------
CASH FLOWS FROM FINANCING
Net increase in short-term and long-term borrowings (includes current 38,077 25,594
portion)
Issuance of equity securities 2,258 3,103
Dividends, net of reinvestments (7,745) (2,870)
--------- ---------
Net cash provided by financing 32,590 25,827
--------- ---------
Effect of exchange rate changes 4,359 (1,767)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (52,263) 2,093
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 174,163 116,847
--------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 121,900 $ 118,940
========= =========
</TABLE>
See Notes to Supplemental Condensed Consolidated Financial Statements.
F-87
<PAGE> 92
LAFARGE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATED GEOGRAPHIC INFORMATION
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
NET SALES
Canada $ 100,825 $ 91,340
United States 233,951 152,694
----------- -----------
TOTAL NET SALES $ 344,776 $ 244,034
=========== ===========
INCOME (LOSS) FROM OPERATIONS (SEE NOTE 7)
Canada $ (26,284) $ (30,259)
United States (34,795) (22,378)
----------- -----------
TOTAL INCOME (LOSS) FROM OPERATIONS (61,079) (52,637)
Interest expense, net (7,627) (5,559)
Interest income 3,831 2,917
----------- -----------
PRE-TAX INCOME (LOSS) $ (64,875) $ (55,279)
=========== ===========
</TABLE>
See Notes to Supplemental Condensed Consolidated Financial Statements.
F-88
<PAGE> 93
LAFARGE CORPORATION AND SUBSIDIARIES
Notes to Supplemental Condensed Consolidated Financial Statements
(unaudited)
1. The Company is engaged in the production and sale of cement, ready-mixed
concrete, other concrete products, asphalt, gypsum wallboard and related
products, and aggregates. The Company operates in the U.S. and, through
its major operating subsidiary, Lafarge Canada Inc. ("LCI"), in Canada.
The Company's wholly-owned subsidiary, Systech Environmental Corporation,
supplies cement plants with substitute fuels and raw materials. Lafarge
S.A., a French corporation, and certain of its affiliates own a majority
of the Company's outstanding voting securities.
Lafarge S.A., the majority shareholder of the Company, acquired Redland
PLC in December 1997. The Company acquired certain Redland PLC businesses
in North America (Redland) from Lafarge S.A. on June 3, 1998 for $690
million, subject to working capital adjustments. Since the Company
acquired Redland from its parent, the acquisition is accounted for similar
to a pooling of interests for financial reporting purposes. Accordingly,
Redland assets and liabilities acquired by the Company from Lafarge S.A.
were transferred to the Company at Lafarge S.A.'s historical cost, which
approximates the purchase price paid by the Company. The accompanying
supplemental condensed consolidated balance sheet as of December 31, 1997
includes a combination of the accounts of Redland and the Company
retroactive to the date of acquisition by Lafarge S.A.(December 1997). A
payable to Lafarge S.A. for $690 million was recorded as part of the
acquisition. The 1998 supplemental condensed consolidated financial
statements consolidate the accounts of Redland along with the Company.
Generally accepted accounting principles prohibit giving effect to a
business combination accounted for similar to a pooling of interests in
financial statements that do not include the date of the combination's
consummation. The accompanying supplemental financial statements do not
extend through the date of consummation of the business combination (June
3, 1998). However, they will become the historical consolidated financial
statements of Lafarge Corporation after financial statements covering the
date of consummation of the business combination are issued (i.e., upon
release of the Company's second quarter 1998 financial statements).
The Redland businesses acquired consist of the businesses of Western
Mobile Inc. of Denver, Colorado; Redland Genstar Inc. of Towson, Maryland;
and the aggregate operations of Redland Quarries Inc. of Hamilton,
Ontario. The operations being acquired posted combined revenues of
approximately $517 million in 1997.
F-89
<PAGE> 94
Redland is engaged in the production and sale of aggregates, ready-mixed
concrete and asphalt and performs paving and related contracting services.
Redland operates primarily in the U.S. and own two quarry operations in
Ontario, Canada. The primary U.S. markets are in the western states of
Colorado and New Mexico and the northeast (Maryland and New York).
2. The supplemental condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. As a result, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. The Company believes that the disclosures made are
adequate to make the information presented not misleading. These
supplemental condensed consolidated financial statements should be read in
conjunction with the supplemental consolidated financial statements and
related notes as of December 31, 1997 included in this Form 8-K.
3. Because of seasonal, weather-related conditions in most of the Company's
marketing areas, earnings of any one quarter should not be considered as
indicative of results to be expected for a full fiscal year or any other
interim period.
4. U.S. cement inventories other than maintenance and operating supplies are
costed using the last-in, first-out ("LIFO") method, and all other
inventories are valued at average cost. At March 31, 1998 and at December
31, 1997, inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
------------ ------------
<S> <C> <C>
Finished products $ 131,521 $ 123,774
Work in process 23,746 8,483
Raw materials and fuel 57,301 55,341
Maintenance and operating supplies 45,771 46,374
------------ ------------
Total inventories $ 258,339 $ 233,972
============ ============
</TABLE>
F-90
<PAGE> 95
5. Cash paid during the period for interest and taxes, is as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months
Ended March 31
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Interest $ 3,326 $ 1,476
Income Taxes (net of refunds) 14,162 9,815
</TABLE>
6. Earnings per share for the three months ended March 31, 1998 and 1997
includes the following components (unaudited and in thousands, except per
share amounts):
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
BASIC CALCULATION
Net income (loss) $ (39,754) $ (34,121)
========== ==========
Weighted average number of
common equity shares 71,737 70,517
========== ==========
Basic net income (loss)
per common equity share $ (.55) $ (.48)
========== ==========
DILUTED CALCULATION
Net income (loss) assuming dilution $ (39,754) $ (34,121)
========== ==========
Weighted average number of common
equity shares assuming full conversion
of all potentially dilutive securities 71,737 70,517
========== ==========
Diluted net income (loss) per
common equity share $ (.55) $ (.48)
========== ==========
</TABLE>
F-91
<PAGE> 96
7. In 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130). SFAS 130 requires that an enterprise display comprehensive
income which for the Company is the total of net income (loss) and the
current year foreign currency translation adjustment.
Comprehensive income consists of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net income (loss) $ (39,754) $ (34,121)
Foreign currency translation
adjustments 6,447 (7,355)
---------- ----------
Comprehensive income (loss) $ (33,307) $ (41,476)
========== ==========
</TABLE>
8. The Company expects to finance the acquisition of Redland's U.S. operations
through the issuance of $650 million in long-term public debt. A short-term
bridge loan of $650 million was obtained from Lafarge S.A. Interest on the
loan is at LIBOR plus 30 basis points. Through June 3, 1998, in order to
reduce the Company's risk of interest rate fluctuations, the Company
entered into several forward treasury lock agreements totaling a notional
$600 million. These agreements are designated as hedges and lock the
Company into an effective long-term interest rate of approximately 6.7
percent.
9. In December 1997, the Company announced that it was in discussions with
Holnam, Inc. to acquire its cement plant in Seattle, Washington and related
assets including a limestone quarry in Texada Island, British Columbia and
two cement terminals. In February 1998, the Company and Holnam, Inc.
entered into a letter of intent regarding the foregoing transaction.
Closing on the acquisition is subject to due diligence, regulatory
approvals and execution of a definitive asset purchase agreement.
10. As discussed in its 1997 Annual Report on Form 10-K, LCI is a defendant in
lawsuits in Canada arising from claims regarding alleged defective fly ash
and cement. The amount of LCI's liability, if any, is uncertain. LCI has
denied liability and is defending the lawsuits vigorously. The trial of
this matter commenced in September 1997 and is expected to continue during
1998. LCI believes that it has substantial insurance coverage that will
respond to defense expenses and liability, if any, in the lawsuits. Also,
the Company, among others, has been named in two lawsuits in Texas alleging
exposure to toxic substances. The amount of liability, if any, to the
Company is uncertain. The Company filed general denials to both suits and
is vigorously defending the lawsuits. Finally, the Company has been
notified by the Environmental Protection Agency that it is one of several
potentially responsible parties for clean-up costs at certain waste
disposal sites. When the Company determines that it is probable that a
liability for environmental
F-92
<PAGE> 97
matters or other legal actions has been incurred, an estimate of the
required remediation costs is recorded as a liability in the financial
statements.
In addition, the Company is involved in certain other legal actions and
claims. It is the opinion of management that all legal and environmental
matters will be resolved without material effect on the Company's
consolidated financial statements.
11. In the opinion of management, the accompanying supplemental condensed
consolidated financial statements reflect all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
Company's financial position as of the applicable dates and the results of
its operations and its cash flows for the interim periods.
F-93
<PAGE> 98
LAFARGE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF SUPPLEMENTAL FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Historically, the Company incurs a loss in the first quarter because sales and
operating results are negatively impacted by weather conditions which reduce
construction activity. In addition, a substantial portion of the year's major
maintenance projects are performed during this period of low plant utilization
with the associated costs being charged to expense as incurred.
THREE MONTHS ENDED MARCH 31, 1998
Lafarge S.A., the majority shareholder of the Company acquired Redland PLC in
December 1997. The Company acquired certain Redland PLC businesses in North
America (Redland) from Lafarge S.A. on June 3, 1998 for $690 million, subject to
working capital adjustments. Since the Company acquired Redland from its parent,
the acquisition is accounted for similar to a pooling of interests for financial
reporting purposes. Accordingly, Redland assets and liabilities acquired by the
Company from Lafarge S.A. were transferred to the Company at Lafarge S.A.'s
historical cost, which approximates the purchase price paid by the Company. The
accompanying supplemental condensed consolidated balance sheet as of December
31, 1997 includes a combination of the accounts of Redland and the Company
retroactive to the date of acquisition by Lafarge S.A.(December 1997). The 1998
supplemental condensed consolidated financial statements consolidate the
accounts of Redland along with the Company. Redland is engaged in the production
and sale of aggregates, ready-mixed concrete and asphalt and paving and related
contracting services. The significant changes in the financial statements
between March 31, 1998 and March 31, 1997 are due primarily to the acquisition.
The seasonal pattern was evident during the three months ended March 31, 1998
when the Company incurred a net loss of $39.8 million, or $0.55 per common
diluted equity share (including a net loss of $11.6 million, or $0.16 per common
diluted equity share, related to the newly acquired Redland operations.) This
compares with a net loss of $34.1 million, or $0.48 per common diluted equity
share, for the first quarter of 1997. Operating results improved in all of the
Company's main product lines (cement, ready-mixed concrete, aggregates and
gypsum wallboard) reflecting higher sales volumes and prices. The Company's
Canadian operations reported a net loss of $14.3 million, $3.0 million better
than 1997, whereas the U.S. net loss was $25.5 million, $8.7 million worse. The
significant increase in the U.S. loss is a result of the seasonal loss incurred
during the first quarter by Redland.
The Company's net sales increased 41 percent to $344.8 million, up from $244.0
million in 1997. Canadian net sales were $100.8 million, up 10 percent, while
U.S. net sales
F-94
<PAGE> 99
increased 53 percent to $234.0 million. A relatively mild winter across most of
the United States and Canada boosted product shipments in all principal product
categories and prices trended upward in all main product lines of cement,
concrete, aggregate and gypsum wallboard. Cement shipments increased 7 percent
while ready-mixed concrete, aggregate, and gypsum wallboard volumes
(pre-acquisition) rose 4 percent, 24 percent, and 5 percent, respectively. The
first quarter of 1998 includes Redland sales of $67.5 million.
The first quarter loss from the Company's cement and waste management operations
was $18.2 million, $5.6 million better than last year. The improvement is
primarily due to an increase in cement shipments and prices partially offset by
higher plant costs due to the timing of major maintenance projects. Net sales
increased 10 percent reflecting the rise in shipments and prices. The Canadian
loss was $6.4 million, $.5 million better than 1997 due to a 7 percent increase
in cement shipments and a 3 percent escalation in net realization (delivered
price per ton to customers less freight) partially offset by the timing of major
maintenance projects. Net sales in Canada increased 3 percent. In eastern
Canada, despite the historic January ice storm, cement shipments were 15 percent
better than 1997 as lower shipments in the Atlantic provinces were more than
offset by stronger demand in Quebec and Ontario. The U.S. loss was $11.8
million, $5.1 million better than a year ago. Increases in shipments (7 percent)
and net realization (3 percent) were partially offset by the timing of major
maintenance spending. Net sales increased 13 percent reflecting the increase in
shipments and prices, and the acquisition of a U.S. flyash operation in January
1998.
The Company's construction materials operations lost $28.4 million in the first
quarter of 1998, including an $11.6 million loss incurred by Redland.
The Company's construction materials operations (pre-acquisition) lost $16.8
million, $3.6 million better than 1997. Net sales were 5 percent higher
reflecting an increase in ready-mixed concrete and aggregate shipments and
prices. In Canada, the loss was $14.5 million, $3.2 million better than last
year. Net sales in Canada were 7 percent higher than 1997. Stronger demand in
Ontario, Quebec, and Alberta resulted in a 13 percent rise in Canadian
ready-mixed concrete volumes. Aggregate volumes were also strong in Canada,
increasing by 23 percent. In eastern Canada, higher volumes from ready-mixed
concrete and aggregates coupled with higher aggregate prices were somewhat
offset by lower ready-mixed concrete prices and higher operating costs. In
western Canada, higher prices, in both ready-mixed concrete and aggregates,
along with higher aggregates volumes, were partially offset by lower ready-mixed
concrete volumes and higher material and operating costs. In the U.S., the loss
was $2.3 million, $0.4 million better than last year. Net sales in the U.S. were
1 percent higher than 1997. Ready-mixed concrete volumes declined 9 percent due
to poor weather in the Midwest while robust demand in the Ohio and Missouri
markets helped drive aggregate volumes up 26 percent.
Operating profit from the Company's gypsum wallboard operations was $3.3
million, $.4 million better than 1997 due to higher shipments and prices. Mill
net (net selling price to
F-95
<PAGE> 100
customers less freight) and shipments were 4 and 5 percent higher which boosted
net sales by 9 percent.
For the quarters ended March 31, 1998 and 1997 the Company recorded an income
tax benefit as a result of the seasonal loss from its Canadian and U.S.
operations. The Company's effective income tax rate was 38.7 percent in 1998,
compared to 38.3 percent in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $11.7 million used by operating activities in the first quarter of
1998 compared to $7.5 million net cash provided by operations in 1997. Net cash
used for investing activities in 1998 was $48.0 million higher than the same
period last year due to the acquisition of a flyash operation in the U.S., the
purchase of short-term investments and Redland activities. In 1998, net cash
provided by financing activities was $32.6 million compared to $25.8 million in
1997 with the change relating to Redland activities.
Capital expenditures (including acquisitions already completed or in process)
are expected to be approximately $1.07 billion in 1998. The acquisition of
Redland from Lafarge S.A. at a purchase price of $690 million, subject to
working capital adjustments, will be financed with $650 million of fixed rate
debt. Until financing is put in place, bridge financing will be obtained through
a short-term loan from the seller, Lafarge S.A. In order to reduce the Company's
risk of interest rate fluctuations, the Company entered into several forward
treasury lock agreements totaling a notional $600 million. These agreements are
designated as hedges and lock the Company into an effective long-term interest
rate of approximately 6.7%.
The Company also has committed bank lines of credit totaling $150 million under
which no amounts were outstanding.
OTHER FACTORS AFFECTING THE COMPANY - YEAR 2000
As discussed in the Company's 1997 Annual Report on Form 10-K, the Company has
business application software programs that were developed over the years and
computer infrastructure including computerized devices that could be affected by
the "Year 2000" issue.
Excluding the construction materials businesses acquired from Lafarge S.A.
("Redland acquisition"), the Company has completed an initial Compliance
Assessment of the potential impact of the Year 2000 on computer applications,
operating software and hardware and has developed an implementation plan to
resolve the issue. The plan includes the replacement of certain equipment and
modification of certain software to recognize the turn of the century. The plan
is currently expected to result in estimated non-recurring spending over the
next two years of approximately $9 million to $15 million.
F-96
<PAGE> 101
The Company is currently completing the process of identifying the systems and
infrastructure within the Redland operations that could be affected by the Year
2000 and developing an implementation program.
The Company believes, with appropriate replacement or modification, it will be
able to operate its time-sensitive business-application software programs and
infrastructure through the turn of the century.
F-97
<PAGE> 102
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL DATA
REFLECTING THE ACQUISITION
F-98
<PAGE> 103
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following financial information is included on the pages indicated:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Unaudited Pro Forma Condensed Consolidated Income Statement for
the Year Ended December 31, 1997 F-101
Unaudited Pro Forma Condensed Consolidated Income Statement for
the Three Months Ended March 31, 1998 F-102
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1998 F-103
Notes to Pro Forma Condensed Consolidated Financial Information F-104
</TABLE>
F-99
<PAGE> 104
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
Lafarge S.A., the majority shareholder of the Company, acquired Redland PLC
in December, 1997. As discussed herein, the Company acquired certain Redland PLC
businesses in North America, referred to herein as "Redland", from Lafarge S.A.
effective as of May 31, 1998. Since the Company acquired Redland from the holder
of a majority of its voting securities, the acquisition will be accounted for
similar to a pooling of interests. Accordingly, Redland assets and liabilities
acquired by the Company from Lafarge S.A. are transferred to the Company at
Lafarge S.A.'s historical cost, which approximates the purchase price paid by
the Company. The unaudited pro forma condensed consolidated financial data
reflect the impact of Lafarge S.A.'s preliminary purchase price adjustments on
Redland, the impact of the Company's purchase of Redland accounting adjustments,
and the impact of debt financing of the Company's acquisition of Redland from
Lafarge S.A.
The following Unaudited Pro Forma Condensed Consolidated Income Statements
for the year ended December 31, 1997, the Last Twelve Months ("LTM") ended March
31, 1998 and the three months ended March 31, 1998 give effect to the
acquisition of Redland, the Offering of the Notes hereby, and the application of
the net proceeds therefrom, assuming these transactions occurred at January 1,
1997. The Unaudited Pro Forma Balance Sheet as of March 31, 1998 gives effect to
the acquisition of Redland and the Offering, and the application of the net
proceeds therefrom, assuming the offering occurred on March 31, 1998.
The Unaudited Pro Forma Condensed Consolidated Financial Data, which are
based on the historical financial information of the Company and the Redland
Operations for the year ended December 31, 1997 and the three months ended March
31, 1998, are presented for informational purposes only and are not necessarily
indicative of the combined earnings and results of operations had the Company
completed the acquisition of Redland at the beginning of the periods presented,
nor is such information intended necessarily to be indicative of the future
results of operations. The Unaudited Pro Forma Condensed Consolidated Financial
Data should be read in conjunction with the financial statements and other
financial data of the Company and the Redland Operations incorporated by
reference or included herein.
F-100
<PAGE> 105
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
LTM
ENDED
MARCH 31,
YEAR ENDED DECEMBER 31, 1997 1998
------------------------------------------------------------------------------- ----------
REDLAND
---------------------------------------
PUSH-DOWN SUB-TOTAL
HISTORICAL OF OF REDLAND
BASIS OF LAFARGE S.A. AND LAFARGE S.A.
LAFARGE REDLAND PURCHASE PURCH. PRO PRO
CORPORATION OPERATIONS ACCOUNTING(A) ACCTING. FINANCING FORMA FORMA
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $1,806,351 $517,056 $ -- $517,056 $ -- $2,323,407 $2,357,139
Cost of goods sold...... 1,335,206 406,310 2,905(c) 409,215 -- 1,744,421 1,761,997
---------- -------- ------- -------- -------- ---------- ----------
Gross profit................ 471,145 110,746 (2,905) 107,841 -- 578,986 595,142
Selling, general and
administrative........ 160,963 51,632 -- 51,632 -- 212,595 217,890
Goodwill amortization... 3,748 7,177 3,139(d) 10,316 14,064 14,593
Other (income) expense,
net................... 5,536 (5,200) -- (5,200) -- 336 2,155
---------- -------- ------- -------- -------- ---------- ----------
Operating income (loss)..... 300,898 57,137 (6,044) 51,093 -- 351,991 360,504
Interest (income)
expense, net.......... 6,664 16,936 -- 16,936 43,550(f) 50,514 48,083
(16,636)(f) --
---------- -------- ------- -------- -------- ---------- ----------
Income (loss) before
taxes..................... 294,234 40,201 (6,044) 34,157 (26,914) 301,477 312,421
Income taxes expense
(benefit)................. 112,258 16,473 (1,191)(e) 15,282 (10,496)(e) 117,044 121,211
---------- -------- ------- -------- -------- ---------- ----------
Net income (loss)........... $ 181,976 $ 23,728 $(4,853) $ 18,875 $(16,418) $ 184,433 $ 191,210
========== ======== ======= ======== ======== ========== ==========
Net income per Common
Equity
Share -- Basic........ $ 2.56 $ 2.59 $ 2.68
Net income per Common
Equity
Share -- Diluted...... $ 2.54 $ 2.57 $ 2.65
Dividends Per Common Equity
Share..................... $ 0.42 $ 0.42 $ 0.44
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed consolidated financial statements.
F-101
<PAGE> 106
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE QUARTER DATA ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
REDLAND
---------------------------------------
SUB-TOTAL
HISTORICAL PUSH-DOWN OF OF REDLAND
BASIS OF LAFARGE S.A. AND LAFARGE
LAFARGE REDLAND PURCHASE S.A. PURCH.
CORPORATION OPERATIONS ACCOUNTING(A) ACCTING.(B) FINANCING PRO FORMA
<S> <C> <C> <C> <C> <C> <C>
Net sales....................................... $267,292 $ 67,484 $ -- $ 67,484 $ -- $334,776
Cost of goods sold.......................... 265,196 67,398 813(c) 68,211 -- 333,407
-------- -------- ------- -------- ------- --------
Gross profit.................................... 2,096 86 (813) (727) -- 1,369
Selling, general and administrative......... 42,251 11,431 -- 11,431 -- 53,682
Goodwill amortization....................... 1,167 1,739 842(d) 2,581 -- 3,748
Other (income) expense, net................. 4,288 730 -- 730 -- 5,018
-------- -------- ------- -------- ------- --------
Operating income (loss)......................... (45,610) (13,814) (1,655) (15,469) -- (61,079)
Interest (income) expense, net.............. 211 3,585 -- 3,585 10,888(f) 11,174
(3,510)(f)
-------- -------- ------- -------- ------- --------
Income (loss) before taxes...................... (45,821) (17,399) (1,655) (19,054) (7,378) (72,253)
Income taxes expense (benefit).................. (17,654) (7,134) (333)(e) (7,467) (2,877)(e) (27,998)
-------- -------- ------- -------- ------- --------
Net income (loss)............................... $(28,167) $(10,265) $(1,322) $(11,587) $(4,501) $(44,255)
======== ======== ======= ======== ======= ========
Net income per Common Equity Share -- Basic..... $ (0.39) $ (0.62)
Net income per Common Equity Share -- Diluted... $ (0.39) $ (0.62)
Dividends Per Common Equity Share............... $ 0.12 $ 0.12
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed consolidated financial statements.
F-102
<PAGE> 107
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
REDLAND
--------------------------------------------
SUBTOTAL OF
PUSH DOWN OF LAFARGE S.A.
LAFARGE S.A. REDLAND AND LAFARGE CORP.
LAFARGE HISTORICAL PURCHASE PURCHASE PURCHASE
CORPORATION REDLAND ACCOUNTING(g) ACCOUNTING(h) ACCOUNTING(l) FINANCING(n) PRO FORMA
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash.................... $ 121,001 $ 899 $ -- $ 899 $ -- $ (40,000)(o) $ 76,700
(5,200)(p)
Short-term investments. 164,423 -- -- -- -- -- 164,423
Accounts receivable,
net.................. 194,118 58,578 173(i) 58,751 -- -- 252,869
Inventory.............. 227,093 31,096 150(i) 31,246 -- -- 258,339
Other current assets... 34,227 32,361 34(i) 32,395 -- -- 66,622
---------- -------- -------- -------- --------- --------- ----------
Total current assets... 740,862 122,934 357 123,291 -- (45,200) 818,953
---------- -------- -------- -------- --------- --------- ----------
Property, plant and
equipment, net....... 899,249 415,026 (2,426)(i) 411,787 -- -- 1,311,036
---------- -------- -------- --------- --------- ----------
(813)(m)
--------
Other Assets
Excess of cost
over net tangible
assets of
business
acquired, net... 40,284 73,919 231,364(j) 305,283(j) -- -- 345,567
Other.............. 190,650 14,254 7,512(i) 21,766 -- 5,200(q) 217,616
---------- -------- -------- -------- --------- --------- ----------
Total assets... $1,871,045 $626,133 $235,994 $862,127 -- $ (40,000) $2,693,172
========== ======== ======== ======== ========= ========= ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Total current
liabilities.......... $ 301,751 $218,325 $ (2,467)(i) $219,430 550,577 (l) $(690,000)(r) $ 381,758
3,572(k)
Long-term debt......... 121,327 83,141 -- 83,141 (80,235)(l) -- 774,233
650,000(s)
Other long-term
liabilities.......... 219,988 95,503 (5,185)(i) 90,318 -- 310,306
---------- -------- -------- -------- --------- --------- ----------
Total
liabilities.. 643,066 396,969 (4,080) 392,889 470,342 (40,000) 1,466,297
---------- -------- -------- -------- --------- --------- ----------
Common shares.......... 66,276 5 (5)(i) -- -- -- 66,276
Exchangeable shares.... 39,494 -- -- -- -- -- 39,494
Additional paid-in
capital.............. 656,994 170,239 310,084 (i) 480,323 (470,342)(l) -- 666,975
Retained earnings...... 556,629 67,844 (79,431)(i)(t) (11,587) -- -- 545,042
Cumulative foreign
currency translation
adjustment........... (91,414) (8,924) 9,426(i)(t) 502 -- -- (90,912)
---------- -------- -------- -------- --------- --------- ----------
Total
shareholders'
equity....... 1,227,979 229,164 240,074 469,238 (470,342) -- 1,226,875
---------- -------- -------- -------- --------- --------- ----------
Total
liabilities &
shareholders'
equity....... $1,871,045 $626,133 $235,994 $862,127 -- $ (40,000) $2,693,172
========== ======== ======== ======== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed consolidated financial statements.
F-103
<PAGE> 108
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(a) Lafarge S.A. acquired Redland PLC in December 1997 and accounted for the
transaction using the purchase method. This column reflects the pro forma
purchase accounting adjustments assuming Lafarge S.A. purchased Redland PLC
on January 1, 1997.
(b) This column represents the pro forma total of Redland historical results
of operations and associated purchase accounting adjustments assuming
Lafarge S.A. purchased Redland PLC on January 1, 1997.
(c) The purchase accounting described in note (a) resulted in a change in the
carrying amounts of fixed assets and mineral reserves of Redland to new
estimated fair values. As a result, the associated depreciation and
depletion of these assets will increase by approximately $2,905 on a pro
forma basis for 1997 and $813 for the three months ended March 31, 1998.
(d) The purchase accounting described in note (a) resulted in additional
goodwill that will be amortized over an average of 30 years. As a result,
the associated amortization will increase by approximately $3,139 on a pro
forma basis for 1997 and $842 for the three months ended March 31, 1998.
(e) Reflects the impact of the pro forma adjustments on income taxes at the
appropriate effective rate of Redland or the Company.
(f) Adjustment reflects increased interest expense of $43,550 for 1997 and
$10,888 for the three months ended March 31, 1998 related to an additional
$650 million in borrowings with an assumed fixed blended interest rate of
approximately 6.7%. This is offset by a reduction in interest expense of
approximately $16,636 for 1997 and $3,510 for the three months ended March
31, 1998, for debt associated with Redland that will not be assumed by the
Company.
(g) Lafarge S.A. acquired Redland PLC in December 1997 and accounted for the
transaction using the purchase method. The adjustments in this column
reflect the preliminary purchase accounting adjustments for Redland
recorded by Lafarge S.A.
(h) This column represents the total of Redland historical balance sheet and
associated preliminary purchase accounting adjustments of Lafarge S.A.
Since the Company acquired Redland from its parent, the balance sheet in
this column is combined with the Company's historical balance sheet similar
to a pooling of interests.
(i) Reflects Lafarge S.A.'s adjustments to record the assets and liabilities
acquired at preliminary estimated fair market values.
(j) The preliminary calculations of the excess of cost over fair value of the
net assets acquired (goodwill) by Lafarge S.A. is as follows:
<TABLE>
<S> <C>
Purchase price of Redland .................................. $690,000
Value of net assets acquired:
Historical net book value at December 31, 1997,
excluding related party debt of $209,677 not
assumed by the Company ............................... 448,604
Less historical goodwill.................................... (75,422)
Liabilities associated with employee termination benefits
and restructuring costs directly related to the
acquisition............................................... (3,572)
Add estimated increase in fair values of mineral reserves
and other net assets acquired............................. 12,762
--------
Estimated fair value of net assets acquired................. 382,372
--------
</TABLE>
F-104
<PAGE> 109
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
Excess purchase price over fair value of net assets acquired
(goodwill) at December 31, 1997........................... 307,628
--------
First quarter 1998 activity................................. (2,345)
--------
Balance, March 31, 1998..................................... $305,283
========
</TABLE>
(k) Preliminary purchase accounting adjustment to current liabilities reflect a
$3,572 adjustment to record termination benefits and restructuring costs
directly related to the acquisition. Management began to assess these plans
at the consummation of the acquisition of Redland and is currently taking
steps to implement them.
(l) This column reflects purchase accounting adjustments recorded by Lafarge
Corporation in connection with its acquisition of Redland from Lafarge
S.A. for $690,000, subject to certain working capital adjustments as
defined in the purchase agreement. The adjustments eliminate Redland
related party debt which was not assumed by Lafarge Corporation, eliminates
Redland paid in capital and records the payable to Lafarge S.A. for the
$690,000 purchase price.
(m) Reflects the depreciation and depletion of property, plant and equipment
related to purchase accounting adjustments for the three months ended March
31, 1998.
(n) This column reflects the pro forma adjustments for the financing of the
$690,000 acquisition of Redland by the Company (subject to certain working
capital adjustments as defined in the purchase agreement).
(o) Pro forma adjustment to reduce cash by $40,000 represents $690,000 in cash
which will be paid by the Company to purchase Redland from Lafarge S.A.,
net of $650,000 in proceeds received to finance the acquisition.
(p) Pro forma adjustment to reduce cash by $5,200 represents the cash expected
to be paid by the Company for financing and other fees associated with the
issuance of $650,000 in Notes.
(q) Reflects the $5,200 deferred financing fees associated with the issuance of
the Notes that will be amortized as interest expense over the life of the
debt.
(r) Reflects the refinancing of the $690,000 payable to Lafarge S.A. for the
acquisition of Redland.
(s) Reflects the issuance of $650,000 in the Notes offered hereby with the
proceeds used to purchase Redland from Lafarge S.A.
(t) Included in adjustments to retained earnings and cumulative foreign
currency translation adjustment are Redland net loss and foreign currency
translation adjustment for the three months ended March 31, 1998.
F-105
<PAGE> 110
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
2.1 -- Stock Purchase Agreement dated June 3, 1998 among Redland
International Limited, Lafarge Corporation and Lafarge S.A.
2.2 -- Acquisition Agreement dated June 3, 1998 among Redland
Quarries Inc., 3489264 Canada Inc., 3489949 Canada Inc.,
Lafarge Canada Inc. and Lafarge S.A.
23.1 -- Consent of Arthur Andersen LLP, independent public
accountants
27 -- Supplemental Financial Data Schedule
(a) December 31, 1997
(b) March 31, 1998
<PAGE> 1
================================================================================
STOCK PURCHASE AGREEMENT
DATED AS OF
JUNE 3, 1998
AMONG
REDLAND INTERNATIONAL LIMITED,
LAFARGE CORPORATION
AND
LAFARGE S.A.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II PURCHASE AND SALE OF THE STOCK
2.1 Sale and Transfer of the Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Closing Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5 Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6 Correction of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.7 Redland Insurance Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
SELLER AND LAFARGE S.A.
3.1 Corporate Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4 Sufficiency of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.5 Conflicts and Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.6 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.7 Legal Proceedings and Governmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.8 Labor and Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.11 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.12 Ownership of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.13 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.14 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.15 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.16 Other Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.17 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.18 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.19 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.20 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.23 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR
4.1 Corporate Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.2 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.3 Conflicts and Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.5 Investment Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.6 Funds for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V CERTAIN COVENANTS OF SELLER, LAFARGE S.A.
AND ACQUIROR
5.1 Conduct of Seller, Lafarge S.A. and the Companies . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2 Forbearances by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.3 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.4 Current Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.5 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.6 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.8 Notice of Breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.9 Access to Books, Records and Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.10 Lafarge S.A. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.11 FIRPTA Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.13 Tax Allocation Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.14 Section 338 Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.15 Employee Benefit Matters Related to Excluded Companies. . . . . . . . . . . . . . . . . . . . . . . 47
5.16 Aggregate Mining Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VI CONDITIONS TO THE TRANSFER
6.1 Condition to the Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.2 Conditions to the Obligations of Seller and Lafarge S.A. . . . . . . . . . . . . . . . . . . . . . . 50
6.3 Conditions to the Obligations of Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VII TERMINATION
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VIII TRANSFER TAXES
8.1 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX SURVIVAL; INDEMNIFICATION
9.1 Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . 55
9.2 Indemnity by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.3 Indemnity by Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9.4 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.5 Exclusive Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.6 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE X MISCELLANEOUS
10.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.3 Amendments; No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.6 Certain Interpretive Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.8 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.9 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.10 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
(iii)
<PAGE> 5
Schedule 1 Subsidiaries
Schedule 1.1 Agreed Working Capital Amount
Schedule 1.2 Excluded Assets and Excluded Companies
Schedule 3.5 Conflicts and Defaults of Sellers
Schedule 3.6 Audits of Income Tax and Tax Returns
Schedule 3.7(a) Pending Legal Proceedings
Schedule 3.7(b) Outstanding Legal Proceedings
Schedule 3.7(c) Governmental Compliance
Schedule 3.7(d) Scheduled Permits
Schedule 3.7(d)-1 Significant Properties
Schedule 3.7(e) Environmental Compliance
Schedule 3.8 Labor Unions, Collective Bargaining
Agreements and Employment Contracts
Schedule 3.9 Employee Benefit Plans
Schedule 3.10 Financial Statements
Schedule 3.11 Required Filings and Permits
Schedule 3.12(b) Real Property Owned and Leased
Schedule 3.12(d) Personal Property in Excess of $100,000
Schedule 3.13 Material Adverse Change
Schedule 3.15 Material Contracts
Schedule 3.18 Exceptions to Accounts Receivable
Schedule 3.19 Affiliate Transactions
Schedule 3.20 Customers and Suppliers
Schedule 4.3 Conflicts and Defaults of Acquiror
Schedule 5.1 Exceptions from Ordinary Course
Schedule 6.2(d) Form of Opinion of Thompson and Knight, P.C.
Schedule 6.3(d) Form of Non-Competition Agreement
Schedule 6.3(e) Form of Lafarge S.A. Guarantee
Schedule 6.3(i) Form of Opinion of Jones, Day, Reavis & Pogue
and Form of Opinion of Counsel to Lafarge S.A.
Schedule 10.9(a) Knowledge of Seller
Schedule 10.9(b) Knowledge of Acquiror
(iv)
<PAGE> 6
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "AGREEMENT") dated as of June 3, 1998,
among Redland International Limited, a corporation organized and existing under
the laws of England and Wales ("SELLER"), Lafarge Corporation, a Maryland
corporation ("ACQUIROR") and Lafarge S.A., a corporation organized and existing
under the laws of France ("LAFARGE S.A.").
RECITALS:
A. Seller owns directly or indirectly all of the issued and
outstanding capital stock (the "STOCK") of Redland, Inc., a Delaware
corporation ("REDLAND, INC."), which owns, directly or indirectly, all of the
issued and outstanding capital stock of the entities listed on Schedule 1 (a
"SUBSIDIARY" or the "SUBSIDIARIES" and, together with Redland, Inc., the
"COMPANIES").
B. Lafarge S.A. owns, directly or indirectly, all of the issued
and outstanding capital stock of Seller.
C. Seller, Lafarge S.A. and Acquiror have determined to enter
into this Agreement which, among other things, provides for Seller to sell,
transfer and convey ("TRANSFER") to Acquiror, and Acquiror to purchase and
receive from Seller, all of the Stock.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
<PAGE> 7
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms used herein shall have the
following meanings:
"ACCOUNTS RECEIVABLE" has the meaning set forth in Section 3.18.
"ACQUIROR" means Lafarge Corporation, a Maryland corporation.
"ACT" means the United States Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"AFFILIATE" means, with respect to any Person, any other Person who is
directly or indirectly controlling, controlled by or under the common control
with such Person. For the purposes of this definition, the term "control,"
when used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"AFFILIATE TRANSACTIONS" has the meaning set forth in Section 3.19.
"AGGREGATE LOSSES" has the meaning set forth in Section 9.4(a).
"AGREED WORKING CAPITAL AMOUNT" means, for each Operating Subsidiary
(and their subsidiaries) and the Other Companies, the respective amounts set
forth in Schedule 1.1 calculated in the manner set forth on Schedule 1.1.
"AGREEMENT" means this Stock Purchase Agreement, together with the
Schedules hereto.
"ASSETS" has the meaning set forth in Section 3.12.
"BALANCE SHEET DATE" means December 31, 1997.
"BASE AMOUNT" has the meaning set forth in Section 2.2.
"BIDS" has the meaning set forth in Section 2.7(a).
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"BUSINESS DAY" means a day (excluding Saturday and Sunday) on which
banks generally are open for the transaction of normal business in New York
City, New York.
"CANADIAN ASSET PURCHASE AGREEMENT" means that certain Acquisition
Agreement of even date herewith among Redland Quarries, Inc., Lafarge Canada
Inc., Lafarge S.A., 3489264 Canada Inc. and 348949 Canada Inc.
"CLOSING" has the meaning set forth in Section 2.3.
"CLOSING BALANCE SHEETS" means balance sheets of each of the Operating
Subsidiaries (consolidated with their respective subsidiaries) and the Other
Companies as of the Closing Date prepared in accordance with Section 2.4.
"CLOSING DATE" has the meaning set forth in Section 2.3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANIES" has the meaning set forth in Recital "A."
"COMPANY RESERVES" has the meaning set forth in Section 2.7(a).
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement
between Lafarge S.A. and Acquiror.
"ESTIMATED FUNDED INDEBTEDNESS AMOUNT" has the meaning set forth in
Section 2.3(a).
"EMPLOYEE PLANS OR POLICIES" has the meaning set forth in Section 3.9.
"ENVIRONMENTAL CLAIM" means, with respect to any Person, any action,
cause of action, investigation or written notice or claim by any person or
entity alleging potential liability (including, without limitation, potential
liability for investigatory costs, clean-up costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or release into
the
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<PAGE> 9
environment, of any Hazardous Material at any location, whether or not owned or
operated by such Person or (b) any violation of an Environmental Law.
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 3.7.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED ASSETS" means the Assets listed on Schedule 1.2.
"EXCLUDED COMPANIES" means the companies listed on Schedule 1.2.
"FINANCIAL STATEMENTS" means the balance sheets and income statements
as of and for the period ended December 31, 1997 attached hereto as Schedule
3.10 for the following Companies: Western Mobile, Inc. (consolidated with its
subsidiaries), Redland Genstar (consolidated with its subsidiaries), Redland
Quarries (consolidated with its subsidiaries), Redland Credit Corporation,
Redland Finance, Inc., Redland Funding Corporation, Redland America
Corporation, RANA Holdings, Inc., Redland Aggregates North America, Inc.,
Redland Holdings, Inc. and Redland, Inc.; provided, however, that there shall
be excluded from such Financial Statements any matters relating to the Excluded
Companies.
"FIRM" has the meaning set forth in Section 2.4(f).
"FUNDED INDEBTEDNESS" means any obligations of the Companies,
including Intra-Group Indebtedness, for borrowed monies other than such
obligations for borrowed monies owed by one of the Companies to another one of
the Companies.
"GOVERNMENTAL ENTITY" means any national, federal, state, local,
provincial or municipal government, court, administrative agency or commission
or other governmental or other regulatory authority or agency of Canada,
England, the United States or France or any state, province, municipality or
any subdivision thereof.
"GUARANTEE" has the meaning set forth in Section 5.10.
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<PAGE> 10
"HAZARDOUS MATERIALS" means all substances defined as "Hazardous
Substances," "oils," "pollutants" or "contaminants" in the National Oil and
Hazardous Substances Contingency Plan, 40 C.F.R. Section 300.5 or defined as
such by, or regulated as such under, any Environmental Law.
"INTELLECTUAL PROPERTY" means, with respect to any Person, all
patents, trademarks, trade names, assumed names, copyrights, and other similar
intangible property rights and interests applied for, issued to or presently
owned or used by such Person or under which such Person is licensed or
franchised.
"INTRA-GROUP INDEBTEDNESS" means all obligations (other than
Intra-Group Trading Indebtedness) outstanding between (i) the Companies, or any
of them, on the one hand, and (ii) Lafarge S.A. or any Affiliate of Lafarge
S.A. (other than the Companies), on the other hand; provided, however, that
all cash, cash equivalents and marketable securities held by the Companies
shall be deemed to be a reduction in the Intra-Group Indebtedness owed by the
Companies.
"INTRA-GROUP TRADING INDEBTEDNESS" means all debts outstanding between
(i) the Companies, or any of them, on the one hand, and (ii) Lafarge S.A. or
any Affiliate of Lafarge S.A. (other than the Companies), on the other hand, in
respect of intra-group sales of goods and services in the ordinary and usual
course of business.
"LAFARGE S.A." means Lafarge S.A., a corporation organized and
existing under the laws of France.
"LAWS" means all applicable laws, statutes, regulations, rules,
judgments, rulings, orders, writs, injunctions and decrees of Governmental
Entities.
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"LIABILITIES" means any and all claims, actions, suits, demands,
assessments, judgments, losses, liabilities, damages, costs, royalties,
payments, license fees and expenses (including interest, penalties, attorneys'
fees, accounting fees and investigation costs).
"LIEN" means any mortgage, lien, pledge, charge, security interest,
restriction on voting or transfer, or other encumbrance.
"MATERIAL ADVERSE EFFECT" means, with respect to the Companies, such
state of facts, event, change or effect as has had, or would reasonably be
expected to have, a material adverse effect (i) on the business, results of
operations, or financial condition of any of the Operating Subsidiaries
(considered on a consolidated basis with such Operating Subsidiary's
subsidiaries taken as a whole), or (ii) on the ability of Seller or Lafarge
S.A. to consummate the transactions contemplated by this Agreement.
"NON-COMPETITION AGREEMENTS" has the meaning set forth in Section
6.3(d).
"OPERATING SUBSIDIARIES" means Redland Genstar, Redland Quarries and
Western Mobile.
"OTHER COMPANIES" means the Companies other than the Operating
Subsidiaries and their subsidiaries.
"PENSION PLANS" has the meaning set forth in Section 3.9.
"PERMITS" has the meaning set forth in Section 3.7(d).
"PERMITTED LIENS" has the meaning set forth in Section 3.12.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including without limitation, a Governmental Entity.
"PREMIUM" has the meaning set forth in Section 2.7(a).
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<PAGE> 12
"PURCHASE PRICE" has the meaning set forth in Section 2.2.
"REAL PROPERTY" has the meaning set forth in Section 3.7(e).
"REDLAND 401(k) PLAN" has the meaning set forth in Section 5.15(a).
"REDLAND GENSTAR" means Redland Genstar, Inc., a Delaware corporation.
"REDLAND, INC." has the meaning set forth in Recital "A."
"REDLAND 401(k) PARTICIPANTS" has the meaning set forth in Section
5.15(a).
"REDLAND PENSION PARTICIPANTS" has the meaning set forth in Section
5.15(b).
"REDLAND PENSION PLAN" has the meaning set forth in Section 5.15(b).
"REDLAND QUARRIES" means Redland Quarries (USA), Inc., a Delaware
corporation.
"SCHEDULED PERMITS" has the meaning set forth in Section 3.7(d).
"SELLER" means Redland International Limited, a corporation organized
and existing under the laws of England and Wales.
"SEVERANCE AMOUNT" means the net present value, determined using a 6%
per annum (compounded monthly) discount rate, of amounts payable by the
Companies after the Closing to William S. Yearsley or Thomas L. Bury in respect
of the termination, prior to the Closing, of their employment with any of the
Companies.
"STOCK" has the meaning set forth in Recital "A."
"SUBSIDIARIES" has the meaning set forth in Recital "A."
"SURPLUS ASSETS" has the meaning set in Section 5.15(c).
"TAXES" means any United States, United Kingdom, French or other
foreign, federal, state, local, provincial or municipal net income, gross
income, gross receipts, sales, goods and services, use, ad valorem, transfer,
franchise, profits, withholding, payroll, employment, excise, stamp,
occupation, property, customs, duties or other type of fiscal levy and all
other
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governmental charges of any kind whatsoever, together with any interest and
penalties imposed or assessed with respect thereto.
"TRANSFER" has the meaning set forth in Recital "B."
"TRANSFEREE 401(k) PLAN" has the meaning set forth in Section 5.15(a).
"TRANSFEREE PENSION PLAN" has the meaning set forth in Section
5.15(b).
"UNADJUSTED PURCHASE PRICE" has the meaning set forth in Section 2.2.
"VALUATION DATE" has the meaning set forth in Section 5.15(b).
"WESTERN MOBILE" means Western Mobile, Inc., a Delaware corporation.
"WORKING CAPITAL AMOUNT" means the consolidated amount for each
Operating Subsidiary (and its subsidiaries) and for the Other Companies
calculated in the manner set forth on Schedule 1.1 (excluding, however, an
amount equal to the amount (calculated as of the date of the particular
acquisition) of any working capital purchased, or assumed, on or after January
1, 1998 and prior to the Closing Date, in connection with the acquisition of a
business as a going concern) using Closing Date values obtained from the
Closing Balance Sheets; provided, however, that the Working Capital Amount of
Western Mobile shall be reduced by the Severance Amount; and provided further
that, to avoid double counting, no Working Capital Amount shall include any
liability for Taxes or any other item to the extent that Seller is required to
pay or provide indemnity for under this Agreement.
"WRITTEN NOTICE" has the meaning set forth in Section 9.1
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<PAGE> 14
ARTICLE II
PURCHASE AND SALE OF THE STOCK
2.1 Sale and Transfer of the Stock. Subject to the provisions of
this Agreement, Seller agrees to sell, and Acquiror agrees to purchase, the
Stock, free and clear of all Liens, at the Closing.
2.2 Payment. The total purchase price payable by Acquiror to
Seller for the Stock shall be the sum of $648,200,000.00 (the "BASE AMOUNT")
less the amount of any Funded Indebtedness as of the Closing (the "UNADJUSTED
PURCHASE PRICE"). The Unadjusted Purchase Price shall be adjusted in
accordance with Section 2.5 (as so adjusted, the "PURCHASE PRICE"). The Base
Amount shall be decreased by the amount of cash proceeds received by any
Company from the sale of businesses as going concerns or real estate on or
after January 1, 1998 and prior to the Closing Date and increased by the amount
of cash paid by the Companies on or after January 1, 1998 and prior to the
Closing Date for acquisitions of businesses as going concerns or real estate.
Acquiror shall withhold and remit to the United States Internal Revenue Service
all Taxes required to be withheld pursuant to Sections 1442 and 1445 of the
Code; provided, however, that Seller and Lafarge S.A. shall indemnify and hold
harmless Acquiror with respect to any such Taxes required to be withheld but
not actually withheld.
2.3 Closing. Unless this Agreement has been terminated and the
transactions contemplated under this Agreement have been abandoned pursuant to
Section 7.1, and subject to the fulfillment or, if permitted, waiver of the
conditions set forth in Article VI, the closing of the Transfer of the Stock
(the "CLOSING") will take place at the offices of Jones, Day, Reavis & Pogue at
2300 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas, at 9:00 a.m. on
June 3,
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<PAGE> 15
1998 (the "CLOSING DATE"). The Closing will be effective as of 11:59 p.m. on
May 31, 1998. At the Closing,
(a) Seller shall deliver to Acquiror a certificate
setting forth Seller's estimate of the amount of the net Funded Indebtedness
(the "ESTIMATED FUNDED INDEBTEDNESS AMOUNT") and the calculation thereof;
(b) Acquiror shall pay to Seller or its designee the Base
Amount less the Estimated Funded Indebtedness Amount (and agreed adjustment and
withholding) via wire transfer of immediately available funds to an account
designated by Seller;
(c) Seller shall deliver to Acquiror the Stock free and
clear of all Liens with the certificate or certificates evidencing the Stock
duly endorsed for transfer by Seller, together with all powers of attorney
and/or other evidence of transfer necessary to convey valid and unencumbered
title thereto to Acquiror as contemplated herein;
(d) Acquiror shall cause the Companies to pay to Seller
an amount equal to the Estimated Funded Indebtedness Amount via wire transfer
of immediately available funds to an account designated by Seller and Acquiror,
which Seller shall hold in escrow on behalf of Acquiror and Lafarge S.A. and
its Affiliates and use to first pay the Funded Indebtedness (other than the
Intra Group Indebtedness) and then to settle the Intra Group Indebtedness;
provided, however, that upon Seller's request, Acquiror shall defer the payment
of the Estimated Funded Indebtedness Amount until June 8, 1998 or any later
date designated by Seller; and
(e) Seller, Lafarge S.A. and Acquiror shall deliver the
documents contemplated by Article VI hereof.
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2.4 Closing Balance Sheets.
(a) Seller shall produce, promptly after Closing, Closing
Balance Sheets for each of the Operating Subsidiaries (and their respective
subsidiaries) and the Other Companies prepared in accordance with the
provisions of this Section 2.4. The Closing Balance Sheets shall be prepared
on the basis of the accounting policies and methods used in the respective
Financial Statements and shall show the Working Capital Amounts for each of the
Operating Subsidiaries (and its subsidiaries) and the Other Companies as of the
Closing and the components of Intra-Group Indebtedness and the other Funded
Indebtedness outstanding immediately prior to the Closing.
(b) Seller shall arrange for the Closing Balance Sheets
to be prepared by Seller or Seller's accountants and shall deliver draft
Closing Balance Sheets to Acquiror within 60 days after the Closing.
(c) Acquiror shall notify Seller within 30 days of
receipt of such draft Closing Balance Sheets whether or not it accepts them for
the purposes of this Agreement. In making such determination, Acquiror shall
act in good faith.
(d) If Acquiror notifies Seller that it does not accept
such draft Closing Balance Sheets:
(i) Acquiror shall set out its reasons for such
non-acceptance and specify the adjustments
which, in its opinion, should be made to the
draft Closing Balance Sheets in order to
comply with the requirements of this
Agreement; and
(ii) the parties shall use all reasonable efforts
to meet and discuss the objections of
Acquiror and to reach agreement upon the
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adjustments (if any) required to be made to
the draft Closing Balance Sheets.
(e) If Acquiror is satisfied with the draft Closing
Balance Sheets (either as originally submitted or after adjustments agreed upon
between Acquiror and Seller) or if Acquiror fails to notify Seller of its non-
acceptance of the draft Closing Balance Sheets within the 30 day period
referred to in Section 2.4(c), then the draft Closing Balance Sheets
(incorporating any agreed adjustments) shall constitute the Closing Balance
Sheets for the purposes of this Agreement.
(f) If Acquiror and Seller do not reach agreement within
15 days of Acquiror's notice of non- acceptance under Section 2.4(d), then the
matters in dispute shall be referred, on the request of either party, for
determination by KPMG Peat Marwick L.L.P. (or, if they are unable or unwilling
to do so, another independent firm of internationally recognized public
accountants that does not provide material services to Acquiror or Seller or
their Affiliates) (the "FIRM"). The following provisions shall apply:
(i) Acquiror and Seller shall enter into an
engagement agreement with the Firm containing
customary terms and provisions including
customary indemnification of the Firm;
(ii) Acquiror and Seller shall each promptly
prepare a written statement on the matters in
dispute which (together with the relevant
documents) shall be submitted to the Firm as
soon as possible, and, in any event, within
15 days of its appointment, for determination
by the Firm within 30 days of its
appointment;
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(iii) in making such determination the Firm shall
state what adjustments (if any) are necessary
to the draft Closing Balance Sheets in order
to comply with the requirements of this
Agreement;
(iv) Seller and Acquiror shall each provide the
Firm with all information which it reasonably
requires and the Firm shall be entitled (to
the extent it considers appropriate) to base
its opinion on such information and on the
accounting and other records of the
Companies;
(v) the Firm shall act as an expert (and not as
an arbitrator) in making any such
determination which shall (in the absence of
manifest error) be final and binding on the
parties; and
(vi) the expenses of any such determination by the
Firm shall be shared equally by Seller and
Acquiror.
(g) Once Seller and Acquiror reach (or pursuant to
Section 2.4(e) are deemed to reach) agreement on the Closing Balance Sheets (or
the Closing Balance Sheets are finally determined at any stage in the
procedures set forth in this Section 2.4):
(i) the Closing Balance Sheets as so agreed or
determined shall be the Closing Balance
Sheets for the purposes of this Agreement and
shall be final and binding on the parties;
and
(ii) the Working Capital Amounts as of the Closing
shall be derived from the Closing Balance
Sheets; and
(iii) the Intra-Group Indebtedness and other Funded
Indebtedness as of the Closing shall be
derived from the Closing Balance Sheets.
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2.5 Purchase Price Adjustment. Seller and Acquiror agree that the
Unadjusted Purchase Price payable by Acquiror to Seller for the Stock shall be
adjusted as provided in Section 5.12 and as follows:
(a) if the Working Capital Amount for any Operating
Subsidiary (and its subsidiaries) or the Other Companies as of the Closing, as
determined in accordance with Section 2.4, is:
(i) less than the Agreed Working Capital Amount
for such Operating Subsidiary (and its
subsidiaries) or the Other Companies, then
the total price payable pursuant to Section
2.2 of this Agreement shall be reduced by the
amount of such shortfall;
(ii) more than the Agreed Working Capital Amount
for such Operating Subsidiary (and its
subsidiaries) or the Other Companies, then
the total price payable pursuant to Section
2.2 of this Agreement shall be increased by
the amount of such excess;
(b) if the total price payable pursuant to Section 2.2 of
this Agreement following adjustment pursuant to Section 2.5(a) is more than the
Unadjusted Purchase Price, Acquiror shall within seven Business Days following
agreement or determination of the Closing Balance Sheets in accordance with
Section 2.4 pay by wire transfer of immediately available funds to an account
designated by Seller the excess or, if the total price payable pursuant to
Section 2.2 of this Agreement following adjustment pursuant to Section 2.5(a)
is less than the Unadjusted Purchase Price, Seller shall within the same period
pay by wire transfer of immediately available funds to an account designated by
Acquiror an amount equal to the shortfall;
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<PAGE> 20
(c) if the aggregate balance of cash, cash equivalents
and marketable securities held by the Companies as of the Closing is:
(i) a positive number (i.e. greater than zero),
then the total price payable pursuant to
Section 2.2 of this Agreement shall be
increased by such amount;
(ii) a negative number (i.e. less than zero) due
to overdrafts or similar occurrences, then
the total price payable pursuant to Section
2.2 of this Agreement shall be decreased by
such amount.
(d) In connection with any payments pursuant to Sections
2.5(b), 2.5(c) and 2.6, Acquiror shall withhold and remit to the United States
Internal Revenue Service all Taxes required to be withheld pursuant to Sections
1442 and 1445 of the Code; provided, however, that Seller and Lafarge S.A.
shall indemnify and hold harmless Acquiror with respect to any such Taxes
required to be withheld but not actually withheld.
2.6 Correction of Purchase Price. If the actual Funded
Indebtedness as determined from the Closing Balance Sheets differs from the
Estimated Funded Indebtedness Amount such that the Companies actually owed more
to Lafarge S.A. and its Affiliates (other than the Companies) or to any other
third party, then (i) Acquiror shall cause the Companies to pay such amount via
wire transfer of immediately available funds to an account designated by Seller
and Acquiror, which Seller shall hold in escrow on behalf of Acquiror and
Lafarge S.A. and its Affiliates and use to settle any remaining Funded
Indebtedness, whereupon all Funded Indebtedness shall be discharged and (ii)
Seller shall refund such amount to Acquiror (as a refund of excess purchase
price paid under Section 2.2) via wire transfer of immediately available funds
to an account designated by Acquiror. If the actual amount of Funded
Indebtedness differs from
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<PAGE> 21
the Estimated Funded Indebtedness Amount such that the Companies actually owed
less to Lafarge S.A. and its Affiliates (other than the Companies) or to any
other third party, then (i) Acquiror shall pay such difference (as an increase
in the purchase price that should have been paid under Section 2.2) via wire
transfer of immediately available funds to an account designated by Seller and
(ii) Seller shall pay such difference to the Companies via wire transfer of
immediately available funds to an account designated by Acquiror, whereupon all
Intra-Group Indebtedness shall be discharged. All payments under this Section
2.6 shall be paid contemporaneously with the payments under Section 2.5.
2.7 Redland Insurance Corporation.
(a) Seller and Acquiror have engaged and shall continue
to engage the firm of Willis Carroon to obtain bids (on a company-by-company
basis for each of the Operating Subsidiaries, Redland Ohio, Inc., Redland Stone
Products Company and Monier, Inc. (and their respective subsidiaries)) for the
transfer of Redland Insurance Corporation's Liability portfolio to a third
party insurance company (collectively, the "BIDS"). Within 30 days following
the receipt of the Bids, Acquiror shall direct Seller to, and Seller shall
cause Redland Insurance Corporation to promptly, (i) accept a Bid with respect
to Redland Insurance Corporation's Liabilities relating to the Companies or
(ii) otherwise transfer to a third party insurance company (or a licensed
captive insurance company) designated by Acquiror all of Redland Insurance
Corporation's Liabilities relating to the Companies. The fee or premium (the
"PREMIUM") charged by the third party insurance company (or the licensed
captive insurance company) to which such Liabilities are transferred shall be
paid by (i) Seller causing Redland Insurance Corporation to pay to such third
party insurance company (or licensed captive insurance company) an amount equal
to the Premium (but not to exceed the amount of Redland Insurance Corporation's
reserves as of the
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<PAGE> 22
Closing relating to the Companies (the "COMPANY RESERVES")) and (ii) Acquiror
paying any part of the Premium not payable pursuant to clause (i).
(b) Acquiror shall cause the Companies to release,
immediately after the Closing, Redland Insurance Corporation for any
Liabilities for any matters relating to the Companies occurring after the
Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND LAFARGE S.A.
As a material inducement to Acquiror to enter into and perform its
obligations under this Agreement, and notwithstanding any examinations,
inspections, audits, and other investigations heretofore or hereafter made by
Acquiror, each of Seller and Lafarge S.A. hereby represents and warrants to
Acquiror as follows:
3.1 Corporate Organization and Qualification. Each of the
Companies is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and each of the
Companies is duly qualified to do business and is in good standing in all other
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, and has full corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as it is now being conducted. Seller has heretofore made
available to Acquiror complete and correct copies of the certificate or
articles of incorporation and the bylaws of each Company, as currently in
effect.
3.2 Corporate Authority. Each of Seller and Lafarge S.A. has full
corporate power and authority to execute and deliver this Agreement and each
other agreement and instrument contemplated hereby to be executed and delivered
by Seller and Lafarge S.A. and to consummate
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the transactions contemplated hereby and thereby. The execution and delivery
of this Agreement and each other agreement and instrument contemplated hereby
to be executed and delivered by each of Seller and Lafarge S.A. (including,
without limitation, the Non-Competition Agreements and the Guarantee) and the
consummation of the transactions contemplated to be performed hereunder or
thereunder have been duly and validly authorized by all necessary corporate
actions of each of Seller and Lafarge S.A. This Agreement has been duly and
validly executed and delivered by Seller and Lafarge S.A. and constitutes, and
each other agreement and instrument contemplated hereby to be executed and
delivered by Seller or Lafarge S.A. (including, without limitation, the
Non-Competition Agreements and the Guarantee) will constitute when executed and
delivered to Acquiror, a valid and binding agreement of each of Seller and
Lafarge S.A., as applicable, enforceable against each of them respectively, as
applicable, in accordance with the terms hereof and thereof except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar Laws affecting the enforcement of creditors' rights generally.
3.3 Capital Stock.
(a) The authorized capital stock of Redland, Inc.
consists of 1,000 shares of no par common stock, one hundred of which are
issued and outstanding, and 4,361 shares of preferred stock of which 1,904
shares are issued and outstanding. The Stock constitutes all of the issued and
outstanding capital stock of Redland, Inc. Seller is the registered and
beneficial owner of all of the Stock and has good and valid title to the Stock
free and clear of all Liens. Neither Seller nor Lafarge S.A. is a party to, or
bound by, any agreement or understanding, other than this Agreement,
restricting the voting or transfer of the Stock. Upon delivery of and payment
for the Stock pursuant to this Agreement, Acquiror will acquire good and valid
title to the Stock, free and clear of all Liens.
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(b) The Stock has been duly authorized and validly issued
and is fully paid and non-assessable and free of preemptive or similar rights.
Other than the Stock, there are no (i) securities of Seller or Redland, Inc. or
any other entity, or any other instruments or rights, convertible into or
exchangeable for shares of capital stock or any other securities of Redland,
Inc., (ii) warrants, options or other rights to acquire from Seller, Redland,
Inc., or any other entity, or other obligations of Seller, Lafarge S.A. or
Redland, Inc. to issue, any capital stock or other securities or securities
convertible into or exchangeable for capital stock or any other securities of
Redland, Inc., (iii) voting trusts or agreements relating to the capital stock
of Redland, Inc. or bonds, debentures, notes or other obligations or securities
of Seller or Redland, Inc. or any other entity the holders of which have the
right to vote with the stockholders of Redland, Inc. on any matter submitted
for the vote of Redland, Inc. stockholders or (iv) phantom security interests
in, or other agreements or commitments of any nature relating to, the capital
stock or other securities of Redland, Inc.
(c) The authorized and issued and outstanding capital
stock of each of the Subsidiaries is completely and accurately set forth on
Schedule 1, and no Subsidiaries have been omitted from Schedule 1 and there are
no other securities of any Subsidiary outstanding. Redland, Inc. owns,
directly or indirectly, all of such issued and outstanding capital stock, free
and clear of all Liens. Neither Seller nor Lafarge S.A. nor any Company is
party to, or bound by, any agreement or understanding restricting the voting or
transfer of the capital stock of any Subsidiary. All the issued and
outstanding capital stock of each Subsidiary has been duly authorized and
validly issued and is fully paid and non-assessable and free of preemptive or
similar rights. There are no (i) securities of Seller, any of the Companies,
or any other entity, or any other instruments or rights, convertible into or
exchangeable for shares of capital stock or
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any other securities of any Subsidiary, (ii) warrants, options or other rights
to acquire from Seller or any other entity (including any of the Companies), or
other agreements, arrangements or obligations of Seller or any of the Companies
to issue any capital stock or any other securities of any Subsidiary, or
securities, instruments or rights convertible into or exchangeable for capital
stock or any other securities of any Subsidiary, (iii) voting trusts or
agreements relating to the capital stock of any Subsidiary or bonds,
debentures, notes or other obligations or securities of Seller, any of the
Companies, or any other entity the holders of which have the right to vote with
the holders of any Subsidiary on any matter submitted for the vote of a
Subsidiary's stockholders or (iv) phantom security interests or any other
agreements or commitments of any nature relating to the capital stock or any
securities of any Subsidiary.
(d) Except for securities held pursuant to or in Employee
Plans or Policies and except as set forth in Schedule 1, no Company owns,
directly or indirectly, of record or beneficially, any capital stock or other
securities of any Person other than the Subsidiaries and the Excluded
Companies.
3.4 Sufficiency of Assets. The property, rights and assets owned
by or leased to the Companies comprise all the property, rights and assets
necessary for the carrying on of the business of the Companies, as and to the
extent to which it is presently conducted. No Person other than the Companies
has any right to the use or possession of any material property, rights or
assets (other than rights of lessors that may arise in the future following
termination of leases) that are necessary for the carrying on of the business
of the Companies. No Company uses in the conduct of its business any material
equipment, properties or assets owned by any other Person, except property
leased or licensed to such Company under valid and enforceable leases or
licenses.
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3.5 Conflicts and Defaults. Neither the execution, delivery and
performance by Seller or Lafarge S.A. of this Agreement or any of the
agreements contemplated hereby, nor the consummation of the transactions
contemplated hereby or thereby, nor compliance by Seller or Lafarge S.A. with
any of the provisions hereof or thereof will, except as set forth in Schedule
3.5, (a) violate, conflict with, or result in a breach of any provisions of, or
constitute a default which, with notice or lapse of time or both, would
constitute a default under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
of, or result in the creation of any Lien upon any of the properties or assets
of Seller, or any of the Companies under any of the terms, conditions, or
provisions of (i) their respective certificates of incorporation, articles of
association, memorandum of association, or by-laws, or (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement, or other
instrument, obligation or arrangement to which Seller or any of the Companies
is a party or by which it or they may be bound, or to which Seller or any of
the Companies or any of the properties or assets of Seller or any of the
Companies may be subject except where such violation would not have a Material
Adverse Effect, or (b) violate any judgment, ruling, order, writ, injunction,
decree, statute, rule, or regulation applicable to Lafarge S.A. or Seller, or
any of the Companies or any of their respective properties or assets except
where such violation would not have a Material Adverse Effect.
3.6 Taxes and Tax Returns.
(a) With respect to the federal income tax returns of the
Companies through December 31, 1995 either (i) such tax returns are closed or
(ii)(A) the Internal Revenue Service has completed the audit field work in
connection with its audit of such tax returns, (B) the Internal Revenue Service
has presented the revenue agent's report to the Companies, (C) the
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Companies and their tax advisors have reviewed and agreed with the revenue
agent's report and (D) the assessed Taxes and interest have been paid.
(b) Each of the Companies has timely filed all Tax
returns required to be filed by it, which Tax returns are correct and complete
in all material respects. Redland, Inc. has paid or caused to be paid all
Taxes required to be paid in respect of the periods covered by such returns.
None of the Companies is delinquent in the payment of any Tax. No waivers of
the time to assess any Taxes exist which have not, by their express terms,
previously expired. Except as set forth in Schedule 3.6, there are no pending
or unresolved audits of any income Tax or other Tax returns filed by any of the
Companies.
3.7 Legal Proceedings and Governmental Compliance.
(a) Except as set forth in Schedule 3.7(a), there is no
pending claim, action, suit, proceeding, or, to Seller's knowledge,
governmental investigation, or, to Seller's knowledge, threat of any of the
foregoing, against any of the Companies, or any of their respective businesses
or assets that involves an amount in controversy or seeks damages in excess of
$250,000, and, to the knowledge of Seller, there is no basis for any such
action. Schedule 3.7(a) indicates, with respect to each matter shown thereon,
whether the matter is covered (subject to applicable deductibles, policy limits
and co-insurance, if any) by insurance or not or whether there is a reservation
of rights.
(b) Except as set forth in Schedule 3.7(b), there are no
outstanding court orders, writs, judgments, injunctions or decrees issued
against, or settlements of litigation or threatened litigation made by, the
Companies or any Company that restrict the ability of the Companies or any
Company to conduct the business of any Company in any material respect.
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(c) Except as set forth in Schedule 3.7(c), to Seller's
knowledge the business of each of the Companies is in compliance in all
material respects with all applicable Laws.
(d) Except as set forth on Schedule 3.7(d), to Seller's
knowledge each of the Companies holds all governmental permits, business
licenses, certificates, franchises, and other similar items necessary for the
lawful conduct of its business as it is currently conducted (collectively, the
"PERMITS"). All Permits required to comply with Environmental Laws, all mining
Permits and all Permits existing with respect to the properties listed on
Schedule 3.7(d)-1 are listed in Schedule 3.7(d) (collectively, the "SCHEDULED
PERMITS"). Except as specifically otherwise indicated in Schedule 3.7(d), all
Scheduled Permits are in full force and effect and are being complied with in
all material respects.
(e) Except as set forth in Schedule 3.7(e):
(i) Seller and each of the Companies is in
compliance in all material respects with all applicable Environmental
Laws.
(ii) There is no Environmental Claim pending or,
to the Seller's knowledge, threatened against the Companies or, to
Seller's knowledge, pending or threatened against any other Person
with respect to the real property or any interest therein (including
leases) owned, used or held for use by any Company (collectively, the
"REAL PROPERTY") or for whose liability for any Environmental Claim
such Company has or may have retained or assumed by contract.
(iii) There are no administrative or judicial
judgments, orders or decrees that relate to violations of
Environmental Law with respect to any Company or to the release,
discharge, emission or disposal of Hazardous Materials on or under any
Real Property.
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(iv) To Seller's knowledge, (a) there have been no
releases, discharges, emissions or disposals of Hazardous Materials
with respect to the Real Property in violation of an Environmental Law
that have not been remediated to the satisfaction of the Governmental
Entity with jurisdiction over said release, discharge, emission or
disposal, and (b) no Real Property is or contains, in violation of an
Environmental Law, a hazardous waste treatment, storage, or disposal
facility as defined by the Federal Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901 et seq. or any analogous state hazardous
waste law.
As used in this Agreement, the term "ENVIRONMENTAL LAWS" means any Laws that
are in effect and applicable to the Operating Subsidiaries on the Closing Date,
and any judicial or administrative order, consent decree or judgment that is in
effect and applicable to the Operating Subsidiaries on the Closing Date, that
relates to pollution or the protection of the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq., the Solid Waste Disposal Act, 42
U.S.C. Section 6901 et seq., the Hazardous Material Transportation Act, 49
U.S.C. Section 801 et seq., the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Safe Drinking
Water Act, 42 U.S.C. Section 3803 et seq., the Oil Pollution Act, 33 U.S.C.
Section 2701 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. Section 136 et seq., and the regulations promulgated pursuant thereto,
and equivalent or similar local and state ordinances and statutory programs and
the regulations promulgated pursuant thereto.
3.8 Labor and Employment. No labor lockout, work stoppage or
organized slow down involving any of the Operating Subsidiaries exists or, to
Seller's knowledge, is threatened,
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nor has there been any such activity within the past three years. Except as
set forth on Schedule 3.8 (i), no employees of any of the Companies are
represented by any labor union nor are any collective bargaining agreements or
negotiations otherwise in effect with respect to such employees and (ii) Seller
has no knowledge of any union organizing activities with respect to employees
of the Companies within the past three years. Except as set forth on Schedule
3.8, there are no employment contracts with any employees of the Companies.
Except as set forth on Schedule 3.8, to Seller's knowledge, no Governmental
Entity is conducting or intends to conduct any investigation of employment
conditions or practices of Seller or any Company.
3.9 Employee Benefit Plans. Schedule 3.9 contains a true and
complete list of all pension, retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing, deferred
compensation, severance, employment, consulting, bonus, group insurance,
employee welfare and/or benefit policies, contracts, plans, and arrangements,
and all trust agreements relating thereto, maintained, sponsored or
administered by Seller or any Company, with respect to which Seller or any
Company contributes, is obligated to contribute or has or may have any
liability, or which covers any of the present or former directors, officers, or
other employees of any of the Companies (other than any "multiemployer plan"
within the meaning of Section 3(37) of ERISA) (collectively, "EMPLOYEE PLANS OR
POLICIES"). Seller has delivered to Acquiror true and complete copies of each
material Employee Plan or Policy, including all amendments thereto, and true
and complete copies of each of the following documents: (i) the most recent
Summary Plan Description, together with each Summary of Material Modifications,
with respect thereto, if required by ERISA; (ii) the most recent annual report
and actuarial report, if required under ERISA; (iii) any trust or other funding
agreement (including all amendments thereto) relating thereto and the latest
financial statements thereof and
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(iv) the most recent determination letter received from the IRS with respect to
each Employee Plan intended to qualify under Section 401 of the Code. Except
as set forth in Schedule 3.9, all Employee Plans or Policies currently comply
and have at all relevant times complied in all material respects with all
applicable laws, including without limitation ERISA and the Code.
(a) With respect to each Employee Plan or Policy which is
a pension plan (as defined in Section 3(2) of ERISA) (the "PENSION PLANS")
except as set forth in Schedule 3.9,
(i) no Pension Plan is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA and none of the Seller, any
Company and any ERISA Affiliate of Seller or any Company have incurred any
liability under Title IV of ERISA, which is not included in the Financial
Statements, arising in connection with the complete or partial withdrawal from
any plan covered or previously covered by Title IV of ERISA ("ERISA AFFILIATE"
for purposes of this Section 3.9 means any corporation or other trade or
business which may be treated as a single employer with Seller or any Company
pursuant to Section 414 of the Code);
(ii) each Pension Plan, that is intended to be
qualified within the meaning of Section 401(a) of the Code, is so qualified and
each related trust, if any, is exempt from taxation under Section 501(a) of the
Code;
(iii) the present value of all vested and unvested
benefits accrued under the Pension Plans which are subject to Title IV of ERISA
do not as of the last applicable annual valuation date (as indicated on
Schedule 3.9) exceed the value of the assets of the Pension Plans allocable to
such vested or accrued benefits, such valuation having been, to Seller's
knowledge, determined based on the standards set forth in Financial Accounting
Standards Board Statement No. 87;
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(iv) except as disclosed in an annual report, no
Pension Plan has been terminated, nor have there been any "reportable events"
with respect to any Pension Plan, as that term is defined in Section 4043 of
ERISA;
(v) no Pension Plan has incurred any "accumulated
funding deficiency," as such term is defined in Section 302 of ERISA (whether
or not waived) since the effective date of ERISA and all contributions required
to be made with respect thereto (whether pursuant to the terms of any ERISA
plan or otherwise) on or prior to the Closing Date have been timely made; and
(b) Except as set forth in Schedule 3.9, neither Seller
nor any Company and, to Seller's knowledge, no other "party in interest" within
the meaning of Section 3(14) of ERISA or "disqualified person" within the
meaning of Section 4975 of the Code, has engaged in a "prohibited transaction"
within the meaning of Section 4975 of the Code or Section 406 of ERISA which
could subject Seller or any Company to the tax or penalty on prohibited
transactions imposed by said Section 4975 or by Section 502(l) of ERISA either
directly or indirectly due to an indemnity or similar arrangement;
(c) Except as set forth in Schedule 3.9, with respect to
each of the Employee Plans or Policies:
(i) no amounts payable thereunder or under any
other agreement or arrangement with respect to which any of the
Companies may have any liability upon, in connection with, or
following the Closing, could give rise to the payment of any amount
that would fail to be deductible for federal income tax purposes by
virtue of section 280G or Section 162(m) of the Code; and
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(ii) none provides benefits, including without
limitation death or medical benefits (whether or not insured), with
respect to current or former employees after retirement or other
termination of service (other than (A) coverage mandated by applicable
Law, (B) death benefits or retirement benefits under any "employee
pension benefit plan," as that term is defined in section 3(2) of
ERISA, or (C) deferred compensation benefits accrued as liabilities on
the books of any of the Companies).
(d) Seller and the Companies and all ERISA Affiliates of
Seller and the Companies have paid and discharged promptly when due all
liabilities and obligations arising under ERISA or the Code of a character
which if unpaid or unperformed might result in the imposition of a lien against
any of the assets of any Company.
(e) There are no pending or, to Seller's knowledge,
threatened claims by or on behalf of the Employee Plans or Policies, or by any
participant therein (in their capacity as such participant), alleging a breach
or breaches of fiduciary duties or violations of applicable Laws which could
result in material liability on the part of any Company, its officers,
directors or employees, or such Employee Plans or Policies, under ERISA or any
other applicable Law and, to Seller's knowledge, there is no basis for any such
claim.
(f) Schedule 3.9 contains a true and complete list of all
"multiemployer plans" within the meaning of Section 3(37) of ERISA to which
Seller, any of the Companies or any ERISA Affiliate contributes, is required to
contribute, has contributed or been required to contribute during the five-year
period ending on the Closing Date, or with respect to which Seller, any of the
Companies or any ERISA Affiliate has any liability. Seller has delivered to
Acquiror true and complete copies of all documents and agreements which pertain
to and set forth any obligations or liabilities of Seller, any of the Companies
or any ERISA Affiliate with
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respect to any such multiemployer plan, and Seller, the Companies and all ERISA
Affiliates have complied in all material respects with all legal obligations
under such documents and agreements and all applicable laws relating to any
such multiemployer plan. None of Seller, any Company or any ERISA Affiliate of
Seller or any Company have incurred any liability under Title IV of ERISA that
is not included in the Financial Statements, arising in connection with the
complete or partial withdrawal from any plan covered or previously covered by
Title IV of ERISA. For purposes of this Section 3.9, "ERISA Affiliate" means
any corporation or other trade or business which may be treated as a single
employer with Seller or any Company pursuant to Section 414 of the Code.
3.10 Financial Statements. Attached hereto as Schedule 3.10 are
the Financial Statements. The Financial Statements have been prepared from the
books and records of the Companies. The Financial Statements for Western
Mobile, Inc. and its subsidiaries have been prepared in accordance with United
States generally accepted accounting principles (except for the failure to use
any "push-down" or purchase accounting required as a result of the acquisition
by Lafarge S.A. of Redland PLC) on a consistent basis and fairly present, in
all material respects, the consolidated financial position and results of
operations of Western Mobile, Inc. and its subsidiaries as of the date and for
the periods indicated therein. Each of the Financial Statements of the other
Companies as of and for the period ending on the Balance Sheet Date (i) are
internally prepared financial packages prepared in a format consistent with the
financial statements prepared in prior periods for use by Redland PLC, a
corporation organized and existing under the laws of England and Wales, to
prepare its consolidated annual report, but using a materiality standard
appropriate for the Companies as a whole on a consolidated basis, and (ii)
present fairly the financial condition and the results of the operations of
such Companies
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under United Kingdom generally accepted account principles (except for (i)
footnotes, (ii) the failure to use any "push- down" or purchase accounting
required as a result of the acquisition by Lafarge S.A. of Redland PLC and
(iii) as otherwise noted in such Financial Statements).
3.11 Consents. No filing with, and no Permit from, any
Governmental Entity or any other Person is necessary or required to be received
in connection with the consummation by Seller or any of the Companies of the
transactions contemplated by this Agreement other than as set forth in Schedule
3.11.
3.12 Ownership of Assets.
(a) Each of the Companies has, as of the date hereof, and
on the Closing Date will have, good and indefeasible title to all property and
assets of every kind, nature and description, personal or mixed, tangible or
intangible and wherever situated (the "ASSETS") owned by it, free and clear of
all Liens other than (i) Liens for Taxes, assessments or other governmental
charges not yet delinquent or being contested in good faith, (ii) materialman's
and mechanics Liens and other Liens arising as a matter of Law, (iii) purchase
money security interests and Liens securing Funded Indebtedness and (iv) such
other Liens, defects and other encumbrances as do not (individually or in the
aggregate) materially affect the use or value of such Assets or materially
interfere with the conduct of the business of each of the Companies as now
conducted (collectively, the "PERMITTED LIENS"). The Companies have valid and
binding leases in respect of each material Asset leased by them.
(b) Schedule 3.12(b) contains a list of all Real
Property, including, with respect to each Real Property, a statement as to
whether such Real Property is owned or leased by a Company.
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(c) To Seller's knowledge, there are no plans of any
Governmental Entity which would result in the imposition of a special
assessment relating to any of the Real Property that is not reserved in the
Financial Statements and that is individually in excess of $100,000.
(d) Schedule 3.12(d) contains a list of all items of
personal property of the Companies that individually have a net book value in
the Financial Statements in excess of $100,000.
3.13 Material Adverse Change. To Seller's knowledge, since the
Balance Sheet Date the Companies have, except as contemplated by this
Agreement, conducted their respective operations in the ordinary course of
business consistent with past practice. Except as set forth in Schedule 3.13,
since the Balance Sheet Date neither Seller nor any of the Companies has (i)
transferred, leased or otherwise disposed of any of its assets or properties,
other than in the ordinary course of business consistent with past practice;
(ii) suffered any material casualty loss or damage (whether or not such loss or
damage shall have been covered by insurance) or received any claim or claims in
excess of insurable limits, or canceled any insurance coverage; (iii) other
than in the ordinary course of business, surrendered, revoked or otherwise
terminated or had terminated any material license, permit, registration or
other approval, authorization or consent from any Governmental Entity or any
other Person relating to the conduct of the business of Seller or the
Companies; or (iv) entered into any agreement or arrangement to take any action
described in clauses (i) - (iii) of this Section 3.13. Except as expressly
contemplated by this Agreement or as set forth on Schedule 5.1 or Schedule
3.13, since the Balance Sheet Date there has been no Material Adverse Effect.
3.14 Reserves. To Seller's knowledge, the aggregate reserve
estimates for each of the Operating Subsidiaries contained in the Information
Disclosure Memorandum provided to
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Acquiror by Lafarge S.A. fairly and accurately describe such reserves of such
Companies; provided, however, that this representation shall not apply to any
matter known to Acquiror as of the Closing.
3.15 Contracts.
(a) Schedule 3.15 sets forth a true and complete list of
(i) each agreement to which any Company is a party that would be reasonably
expected to materially limit the freedom of Acquiror to continue the business
of any Company or compete with any Person or in any geographical area or
otherwise to conduct the business of any Company as currently conducted; (ii)
each collective bargaining or union contract or agreement applicable to any
employee of any Company; (iii) each employment or severance contract or
agreement applicable to any employee of any Company; (iv) each contract or
agreement for maintenance, consulting, engineering or other services which
requires the remaining payment of money by or to any Company in excess of
$200,000; (v) each sales contract or agreement with a customer which provides
for remaining payment in excess of $200,000 to any Company for products
produced pursuant to which any customer would be expected to pay in excess of
$200,000 to any Company for such products during the term of such contract or
agreement; (vi) each raw material purchase contract or agreement pursuant to
which raw materials were or would be purchased for use by any Company which
provides for remaining payments in excess of $200,000; (vii) each agreement or
commitment with any current or former shareholder, director, officer or
employee of any Company, or Affiliate of any such Person, other than agreements
or commitments which are not material to the business of the Companies or that
can be terminated without penalty on notice of one year or less; (viii) each
agreement with any Governmental Entity, other than agreements executed in the
ordinary course of business of the Companies, agreements for the sale or
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provision of goods or services and agreements otherwise referred to in clauses
(i) through (vii) of this Section 3.15(a) (subject to the limitations therein);
(ix) each agreement relating to the release or disposal of Hazardous Substances
other than customary agreements executed in the ordinary course of business of
the Companies; (x) each lease of properties or assets, other than leases which
provide for monthly rental of less than $8,000 or annual rentals of less than
$100,000; and (xi) each other agreement which is material to the business and
properties of the Companies, when taken as whole.
(b) Each agreement required to be listed on Schedule 3.15
is in full force and effect, and constitutes the legal, valid and binding
obligation of a Company and, to the knowledge of Seller, each other party
thereto, in accordance with the terms of such agreement, except that the
enforceability thereof may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar Laws affecting creditors' rights
generally and (ii) equitable principles that may limit the availability of
certain equitable remedies (such as specific performance) in certain instances;
and there exists no material default, event, occurrence or act, that with the
giving of notice or the lapse of time would result in a material default
thereunder by a Company as a party thereto.
3.16 Other Contingent Liabilities. None of the Companies has any
liabilities (whether absolute or contingent, known or unknown or otherwise),
except those liabilities (i) reflected in the Financial Statements, (ii)
disclosed in this Agreement including the Schedules and Exhibits hereto or
(iii) debts, liabilities or obligations incurred since the Balance Sheet Date
in the ordinary and usual course of business consistent with past practice;
provided, however, that if the specific factual matter relating to a Liability
giving rise to a claim under this Section 3.16 is also the subject of one or
more of the express representations or warranties contained in this
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Agreement, then the qualification as to knowledge of the Seller, if any, or to
a dollar amount, if any, contained in such express representations or warranty
shall also apply to a claim under this Section 3.16.
3.17 Inventory. Each item of inventory reflected in the Financial
Statements or in the books and records of Seller or the Companies is so
reflected on the basis of accounting procedures and valuation methods used on a
basis consistent with past practice.
3.18 Accounts Receivable. Except as set forth on Schedule 3.18,
all accounts receivable, notes receivable and other indebtedness due and owing
from any third party to the Companies that were included in the Financial
Statements ("ACCOUNTS RECEIVABLE") represent sales actually made, services
actually delivered or transactions actually completed by the Companies in bona
fide transactions in the ordinary course of business consistent with past
practice. Except as set forth on Schedule 3.18, none of the Accounts
Receivable represents accounts receivable from Seller or any of its Affiliates
(other than any of the Companies).
3.19 Affiliate Transactions. Schedule 3.19 discloses the dollar
amount and a brief description of each transaction and the date thereof between
any Company, on the one hand, and Seller or any Affiliate of Seller (other than
any of the Companies), on the other hand, between December 31, 1996 and the
date of this Agreement (the "AFFILIATE TRANSACTIONS").
3.20 Customers and Suppliers. Schedule 3.20 contains a true and
complete list of the names and addresses of the ten largest suppliers and
customers during 1997 of each Operating Subsidiary. Neither Seller nor any
Company has received notice of, and to Seller's knowledge there is no
reasonable basis for, any development which threatens to affect adversely any
Operating Subsidiary's arrangements with the customers and suppliers required
to be listed on Schedule 3.20.
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3.21 Insurance. Seller or a Company maintains, and has heretofore
maintained, and there are currently in full force and effect, policies of
insurance that are, in combination with Seller's and the Companies' self
insurance, reasonable for the conduct of business of the Companies as currently
and heretofore conducted.
3.22 Intellectual Property. To Seller's knowledge, neither Seller
nor any Company has violated or infringed any Intellectual Property held by
others or any license, authorization or permit relating to Intellectual
Property held by it. To Seller's knowledge, there are no proceedings pending
or threatened, alleging that the conduct of the business of the Companies
infringes upon or constitutes the unauthorized use of the proprietary rights of
any third party other than such violations or infringements which, individually
or collectively, would not have a Material Adverse Effect.
3.23 Condition of Assets. EXCEPT AS EXPRESSLY SET FORTH HEREIN,
NEITHER SELLER NOR LAFARGE S.A. MAKES ANY REPRESENTATION OR WARRANTY (EXPRESS
OR IMPLIED) AS TO THE CONDITION, REPAIR, QUANTITIES, SALABILITY,
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY OF THE COMPANIES'
ASSETS AND, EXCEPT AS EXPRESSLY SET FORTH HEREIN, ACQUIROR ACCEPTS SUCH ASSETS
"AS IS, WHERE IS."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
As a material inducement to Seller and Lafarge S.A. to enter into and
perform their respective obligations under this Agreement, and notwithstanding
any examinations, inspections,
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audits, and other investigations heretofore or hereafter made by Seller or
Lafarge S.A., Acquiror hereby represents and warrants to Seller and Lafarge
S.A. as follows:
4.1 Corporate Organization and Qualification. Acquiror is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland.
4.2 Corporate Authority. Acquiror has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Except for any shareholder approvals (or an
exemption therefrom) required under applicable Law, the execution and delivery
of this Agreement by Acquiror and the consummation by it of the transactions
contemplated to be performed hereunder have been duly authorized by all
necessary corporate actions of Acquiror. This Agreement is a valid and binding
obligation of Acquiror, enforceable against it in accordance with the terms
hereof except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar Laws affecting the enforcement of creditors'
rights generally.
4.3 Conflicts and Defaults. Neither the execution, delivery and
performance by Acquiror of this Agreement or any of the agreements contemplated
hereby, nor the performance by Acquiror of the transactions contemplated hereby
or thereby, nor compliance by Acquiror with any of the provisions hereof of
thereof will, except as set forth in Schedule 4.3, (a) violate, conflict with,
or result in a breach of any provisions of, or constitute a default which, with
notice or lapse of time or both, would constitute a default under, or result in
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration of, any of the terms, conditions or provisions
of (i) its certification of incorporation or bylaws, or (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement, or other
instrument, obligation or arrangement to which Acquiror is a party or by which
it may be bound, or to which
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Acquiror or any of its properties or assets may be subject, except where such
violation would not have a material adverse effect on the Acquiror, or (b)
violate any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Acquiror or any of its properties or assets except
where such violation would not have a material adverse effect on the Acquiror.
4.4 Consents and Approvals. Except for any shareholder approvals
(or an exemption therefrom) required under applicable Law, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity or Person is required with respect to Acquiror in
connection with the execution, delivery or performance by Acquiror of its
obligations under this Agreement except for consents, approvals, orders,
authorizations, registrations, declarations or filings the failure of which to
obtain or to make would not have, individually or in the aggregate, a material
adverse effect on Acquiror's ability to consummate the transactions
contemplated by this Agreement.
4.5 Investment Only. Acquiror is acquiring the Stock solely for
the purpose of investment and not with a view to, or for sale or other
disposition in connection with, any public distribution thereof. Acquiror
acknowledges that the Stock is not registered under the Act, or any applicable
foreign or state securities laws, and that the Stock may not be transferred,
pledged or sold except pursuant to the registration provisions of the Act and
such laws or pursuant to applicable exemptions therefrom.
4.6 Funds for the Acquisition. Acquiror will, as of the Closing
Date, have sufficient unencumbered funds to pay in cash the Purchase Price and
all of its fees and expenses relating to this Agreement and the transactions
contemplated hereby.
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ARTICLE V
CERTAIN COVENANTS OF SELLER, LAFARGE S.A. AND ACQUIROR
5.1 Conduct of Seller, Lafarge S.A. and the Companies. During the
period from the date of this Agreement and continuing until the Closing, Seller
and Lafarge S.A. shall, except as otherwise contemplated by this Agreement or
as described on Schedule 5.1, cause each of the Companies, in all material
respects, to conduct its business in the ordinary course thereof consistent
with past and current practices, and Seller and Lafarge S.A. shall use their
reasonable best efforts to maintain and preserve the business organization and
assets of each of the Companies and their respective employees and business
relationships with suppliers, customers and others and retain the services of
the officers and key employees of the Companies. Notwithstanding the
foregoing, on or before the Closing Date, Seller shall, or shall cause the
Companies to, convey, transfer and assign all of the Excluded Assets and
Excluded Companies to a Person that is not controlled by Redland Inc.
5.2 Forbearances by Seller. Except as expressly contemplated by
this Agreement, without the prior written consent of Acquiror, during the
period from the date of this Agreement to the Closing Date, Seller shall not
(and shall ensure that the Companies do not):
(a) sell, lease, transfer, assign or otherwise dispose of
any real property or any other material assets of the Companies, other than (i)
a disposal of real property in the ordinary course that has a value of $100,000
or less and, together with all such disposals, has a value of $1,000,000 or
less and (ii) sales of personal property in the ordinary course of business;
(b) make any capital expenditure or commitment for
capital expenditures in excess of $50,000 without prior notice to Acquiror or
its designee;
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(c) create, incur, guaranty or assume any obligations or
liabilities, except to the extent created, incurred, guaranteed or assumed in
the ordinary course of business and consistent with past practice;
(d) discharge or satisfy any encumbrance or liability
(whether absolute, accrued, contingent or otherwise and whether due, or to
become due), other than encumbrances or current liabilities incurred in the
ordinary course of business and consistent with past practice, and discharged
or satisfied in the ordinary course of business and consistent with past
practice;
(e) permit or allow any of the Assets to be mortgaged,
pledged or subjected to any Lien, except Permitted Liens;
(f) enter into or amend any employment, severance, or
similar agreements or arrangements with any director, officer, key employee or
consultant in respect of any of the Companies other than in the ordinary course
of business consistent with past practices;
(g) cancel, release, waive or assign any indebtedness
owed or rights or claims held by any Company that is individually in excess of
$100,000;
(h) propose or adopt any amendments to the certificate or
articles of incorporation, or by-laws of any of the Companies;
(i) issue any shares of capital stock or other securities
or effect any stock split or otherwise change the capitalization of any of the
Companies as they existed as of the date hereof or declare, set aside, make or
pay any non-cash dividend or make any other non-cash distribution in respect of
any of the capital stock of the Companies;
(j) grant, confer or award any options, warrants,
conversion rights or other rights not existing on the date hereof to acquire
any shares of the capital stock or other securities of any of the Companies;
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(k) amend or cancel or default under any of the contracts
required to be set forth in Schedule 3.15 other than amendments and
cancellations in the ordinary course of business that would not reasonably be
expected to result in a material loss to any of the Operating Subsidiaries;
(l) purchase or redeem any shares of the capital stock of
any of the Companies;
(m) other than in the ordinary course, take any actions,
or fail to take any actions which alone, or together with any other action or
inaction, shall create, alter or eliminate any rights, benefits, obligations or
liabilities of any Person (including, but not limited to the participants,
beneficiaries or any of the Companies) with respect to any Employee Plans or
Policies;
(n) operate Redland Insurance Company other than in the
ordinary course of business, and furthermore, without the prior consent of
Acquiror, allow, except as may be required by applicable Law, Redland Insurance
Company to pay any dividends, dispose, other than in the ordinary course, of
any assets, reduce any reserves (whether excess or otherwise) except in payment
of any claims in the ordinary course, or otherwise alter its operations; or
(o) agree in writing or otherwise to take any of the
foregoing actions or engage in any activity or enter into any transaction with
respect thereto.
5.3 Access and Information. Between the date hereof and the
Closing Date, Lafarge S.A. and Seller shall, and each of them shall cause each
Company to, afford to Acquiror and its officers, employees, accountants,
counsel and other authorized representatives full and complete access during
normal business hours to their respective officers, employees, accountants,
counsel, properties, facilities, contracts (including true and complete copies
of the contracts
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required to be listed on Schedule 3.15), commitments, books and records
(including, but not limited to, Tax returns) and any material report, schedule
or other document filed or received by them during such period pursuant to the
requirements of law and shall cause their respective representatives to furnish
promptly such additional financial and operating data and other information as
to their respective businesses and properties as Acquiror or its duly
authorized representatives may from time to time reasonably request. All
information obtained by Acquiror under this Section shall be subject to the
Confidentiality Agreement heretofore entered into by or on behalf of the
Acquiror and Lafarge S.A. which agreement may be shown to any Person.
5.4 Current Information. During the period from the date of this
Agreement to the Closing Date, Seller and Lafarge S.A. shall cause one or more
of their designated representatives to confer on a regular and frequent basis
with representatives of Acquiror. Seller or Lafarge S.A. shall promptly notify
Acquiror of any material change known to Seller or Lafarge S.A. in Seller's
business or operations including, without limitation, the loss or destruction
of any material asset and of any material governmental complaints,
investigations, or hearings or the institution of material litigation or
administrative or other claims involving Seller or any of the Companies, and
shall keep Acquiror fully informed of such events.
5.5 Satisfaction of Conditions.
(a) Each party to this Agreement shall use its reasonable
efforts to satisfy promptly all conditions precedent to the obligations of the
other party to consummate the transactions contemplated by this Agreement.
(b) Seller and Lafarge S.A. shall use their reasonable
best efforts and pay all expenses necessary to obtain any licenses, permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Entities and parties to contracts as are required in
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connection with the consummation of the transactions contemplated hereby.
Subject to the terms and conditions hereof, each of the parties hereto agrees
to use its reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all other things necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement as soon as practicable. The parties hereto shall cooperate in the
defense of any lawsuits or other legal proceedings, whether judicial or
administrative, whether brought derivatively or on behalf of third parties
(including governmental agencies or officials), challenging this Agreement or
the consummation of the transactions contemplated hereby.
5.6 Public Announcements. Except as may be required by applicable
Law, the Rules of the New York Stock Exchange, The Toronto Stock Exchange, the
Montreal Exchange, the Societe des Bourses Francaises, the London Stock
Exchange or a Governmental Entity or as agreed by the parties hereto, none of
Acquiror, Lafarge S.A. or Seller will issue any press release or make any
public statement relating to the transactions contemplated by this Agreement
prior to the Closing Date; provided that after the Closing Date or with respect
to public statements as may be required by applicable Law, the Rules of the New
York Stock Exchange, The Toronto Stock Exchange, the Montreal Exchange, the
Societe des Bourses Francaises, the London Stock Exchange or a Governmental
Entity, Acquiror, Lafarge S.A. and Seller will consult with each other prior to
the issuance of any such press release or making of any such public statement
as to the content of any such press release or public statement.
5.7 Further Assurances. From and after the Closing, the parties
hereto shall execute and deliver, in the name and on behalf of the parties
hereto, as appropriate, any assignments or assurances and take and do, in the
name and on behalf of the parties hereto, as appropriate, any other actions and
things reasonably necessary to carry out the intention of this Agreement.
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Except for the lease of rail cars from Western Mobile to Redland Stone Products
Company, the parties hereto shall take and do any actions and things reasonably
necessary to transfer all obligations relating to assets (whether Excluded
Assets, on the one hand, or Assets, on the other hand) to the party owning,
leasing or utilizing such assets after Closing in order to eliminate related
party transactions between the Companies, on the one hand, and the Excluded
Companies, on the other hand, regarding the ownership or lease of assets or the
rendering of services.
5.8 Notice of Breaches. Seller will promptly, and in any event
prior to the Closing, notify Acquiror in writing if Seller becomes aware prior
to the Closing that any representation or warranty made by Seller in this
Agreement is inaccurate or untrue in any material respect. Said notice shall
set forth the facts and circumstances causing such inaccuracy or untruth.
Lafarge S.A. and Seller each expressly acknowledges and agrees that Acquiror's
actual or constructive knowledge of any inaccuracy or untruth in any
representation or warranty prior to Closing shall not be deemed to have cured
or otherwise excused any breach of such representation or warranty that
otherwise might have existed by reason of such inaccuracy or untruth or
otherwise waive any right Acquiror may have with respect to such representation
or warranty.
5.9 Access to Books, Records and Personnel. Following the
Closing, Acquiror shall, and shall cause the Companies and the employees of
Acquiror and the Companies to, upon Seller's reasonable written request and at
Seller's expense, fully cooperate with Seller and afford to Seller and its
counsel, accountants and other authorized representatives reasonable access
during normal business hours to all books, records, data, facilities,
properties and personnel (and permit Seller and its counsel, accountants and
other authorized representatives to make copies of such books, records and
other data), to the extent that such access may be reasonably requested
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by Seller (i) to facilitate the investigation, litigation or final disposition
of any claim which may have been or may be made against Seller or any of its
Affiliates in connection with this Agreement, the transaction contemplated
hereby or the Companies, (ii) to facilitate the preparation by Seller of
materials necessary for any audit, examination or proceeding or (iii) to
facilitate the preparation and the audit of the Closing Balance Sheets.
5.10 Lafarge S.A. Guarantee. Lafarge S.A. agrees to execute and
deliver to Acquiror at Closing a Guarantee, in substantially the form and
content attached as Schedule 6.3(e).
5.11 FIRPTA Matters.
(a) Seller shall, on or prior to, but no earlier than
thirty (30) days preceding, the Closing Date, cause Redland, Inc. to (i)
deliver to Acquiror a written statement which, in form and substance, satisfies
the requirements of section 1.897-2(h)(1) of the Income Tax Regulations
certifying that, as of the date of such written statement, Redland, Inc. has
determined that it is not and, at all times during the five year period
preceding the date of such written statement, has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code, and that the shares of common and preferred stock of Redland, Inc.
outstanding as of the date of such written statement do not constitute a United
States real property interest within the meaning of Section 897(c)(1)(A) of the
Code, and (ii) deliver to the Internal Revenue Service a written notification
which, in form and substance, satisfies the requirements of section
1.897-2(h)(2) of the Income Tax Regulations with respect to the determinations
referred to in clause (i) above, together with any of the supplemental
statements specified in section 1.897-2(h)(5) of the Income Tax Regulations
which Redland, Inc. is required to submit to the Internal Revenue Service in
connection therewith. Acquiror shall rely on the written statement referred to
in clause (i) above for purposes of availing itself of the exception to
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withholding set forth in Section 1445(b)(3) of the Code, and the Purchase Price
shall be paid by the Acquiror to Seller without any reduction therefrom for the
withholding tax imposed by Section 1445(a) of the Code.
(b) Acquiror shall, on or prior to, but no earlier than
thirty (30) days preceding, the Closing Date, (i) deliver to Seller a written
statement which, in form and substance, satisfies the requirements of section
1.897-2(h)(1) of the Income Tax Regulations certifying that, as of the date of
such written statement, Acquiror has determined that it is not and, at all
times during the five year period preceding the date of such written statement,
has not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code, and that the shares of capital stock
of Acquiror outstanding as of the date of such written statement do not
constitute a United States real property interest within the meaning of Section
897(c)(1)(A) of the Code, and (ii) deliver to the Internal Revenue Service a
written notification which, in form and substance, satisfies the requirements
of section 1.897-2(h)(2) of the Income Tax Regulations with respect to the
determinations referred to in clause (i) above, together with any of the
supplemental statements specified in section 1.897-2(h)(5) of the Income Tax
Regulations which Acquiror is required to submit to the Internal Revenue
Service in connection therewith. Seller may rely on the written statement
referred to in clause (i) above.
5.12 Taxes. Seller shall be solely responsible for and shall
timely pay to Acquiror as a refund of a part of the purchase price for the
Stock an amount equal to the after-tax cost to Acquiror of any Taxes of the
Companies that are due for periods (or the portion of any Straddle Period)
ending on or prior to the Closing Date. Acquiror shall pay to Seller as
additional purchase price for the Stock an amount equal to all refunds of Taxes
of the Companies for any period ending on or prior to the Closing Date. Seller
shall prepare or cause to be prepared, and
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Acquiror shall cause to be signed and timely filed, all Tax returns for the
Companies that are required to be filed for periods ending on or before the
Closing Date which have a due date or an extended due date that falls after the
Closing Date; provided, however, that Seller shall furnish copies of such
returns to Acquiror for its review, at least 30 days prior to the required
filing date. Seller shall promptly remit to Acquiror the Taxes with respect to
such returns prior to the date such returns are required to be filed. In order
to assist Seller in the preparation of all Tax returns that Seller is required
to prepare, Acquiror will provide or cause to be provided to Seller such
information that Seller may reasonably request. Acquiror shall cause the
Companies to timely file all Tax returns for the Companies for any Straddle
Period. Upon notice from Acquiror, Seller shall promptly pay to Acquiror prior
to the date any payment for Taxes for any Straddle Period is due, as a refund
of a portion of the purchase price for the Stock, Seller's share of after-tax
cost of Taxes for such Straddle Period; provided, however, that Seller's share
of such Taxes shall not to any extent be affected by any elections made by the
Acquiror or any of the Companies after the Closing. In the case of any Taxes
payable for a Straddle Period, the portion of such Tax which relates to the
portion of such Straddle Period ending on the Closing Date shall (a) in the
case of any Taxes other than Taxes based upon or related to income or receipts,
be deemed to be the amount of such Tax for the entire taxable period multiplied
by a fraction, the numerator of which is the number of days in the taxable
period ending on the Closing Date and the denominator of which is the number of
days in the entire taxable period, and (b) in the case of any Tax based upon or
related to income or receipts, be deemed equal to the amount which would be
payable if the relevant taxable period ended on the Closing Date. "Straddle
Period" means any taxable year or taxable period commencing before and ending
after the Closing Date,
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including the 1999 Texas franchise tax privilege period to the extent that the
Tax for such period relates to the 1998 calendar year.
5.13 Tax Allocation Agreements. Effective as of the Closing Date,
all liabilities and obligations between Seller or Lafarge, S.A. (or any
Affiliate of Seller or Lafarge, S.A., including but not limited to the Excluded
Companies) and the Companies under any tax allocation agreement or other
similar arrangements in effect prior to the Closing Date shall be extinguished
in full and shall no longer be enforceable.
5.14 Section 338 Election. If (and only if) requested by Acquiror,
Seller and Lafarge S.A. shall make, or cause to be made, a timely election
under Section 338 of the Code with respect to Lafarge S.A.'s deemed acquisition
of Seller; provided, however, that Seller and Lafarge S.A. shall not have any
liability hereunder to Acquiror if such election is timely filed in proper form
but is nevertheless ineffective. No election under Section 338 of the Code
shall be made with respect to Seller's deemed acquisition of Redland, Inc.
5.15 Employee Benefit Matters Related to Excluded Companies.
(a) Effective as of the Closing Date, Acquiror will cause
the portion of the Redland North America 401(k) Plan or any successor plan (the
"REDLAND 401(k) PLAN") attributable to persons employed or formerly employed by
Redland Stone Products Company or Redland Ohio, Inc. (other than persons
employed as of the date of the transfer by a participating employer in the
Redland 401(k) Plan other than Redland Stone Products Company or Redland Ohio,
Inc.) (the "REDLAND 401(k) PARTICIPANTS") to be transferred in a manner that
satisfies Section 414(l) of the Code to one or more defined contribution plans
designated by Lafarge S.A. (a "TRANSFEREE 401(k) PLAN"); provided, however,
that no transfer will occur until Lafarge S.A. and Acquiror have received such
assurances as may be reasonable that the applicable provisions
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of the Code have been satisfied. The assets transferred from the Redland
401(k) Plan to a Transferee 401(k) Plan will be equal to the vested and
nonvested account balances of the transferring Redland 401(k) Participants as
of the day preceding the date of transfer, Lafarge S.A. will take such action
as may be necessary to cause each Transferee 401(k) Plan to provide each
Redland 401(k) Participant participating in the Transferee 401(k) Plan after
the transfer with an initial account balance that is at least equal to the
account balance transferred from the Redland 401(k) Plan and to provide all
benefits protected by law, including optional forms of benefit. Lafarge S.A.
will reimburse Acquiror for all reasonable costs incurred by Acquiror to effect
the foregoing transfers.
(b) On or before December 31, 1998, Acquiror and Lafarge
S.A. agree that the Redland North America Retirement Plan or its successor (the
"REDLAND PENSION PLAN" ) will be amended to cease benefit accruals for
employment with Redland Stone Products Company and Redland Ohio, Inc. on and
after December 31, 1998 or such earlier date as may be agreed upon by Acquiror
and Lafarge S.A. At the request of Lafarge S.A., provided such request is made
on or before March 31, 1999, Acquiror will cause the vested and nonvested
accrued benefits of participants in the Redland Pension Plan employed as of
December 31, 1998 (the "VALUATION DATE") by Redland Stone Products Company or
Redland Ohio, Inc. (the "REDLAND PENSION PARTICIPANTS") and assets (cash or
cash equivalents) equal to the present value of such benefits or, if less, such
amount as may be permitted pursuant to Section 414(l) of the Code, to be
transferred in a manner that satisfies Section 414(l) of the Code to one or
more defined benefit pension plans designated by Lafarge S.A. (a "TRANSFEREE
PENSION PLAN"). The transfer will be made as soon as practicable after receipt
of such request, provided, however, that no transfer will occur until Lafarge
S.A. and Acquiror agree as to the amounts to be transferred and have
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received such assurances as may be reasonable that the applicable provisions of
the Code have been satisfied. The present value of vested and nonvested
accrued benefits of Redland Pension Participants under the Redland Pension Plan
will be determined by Acquiror's actuary as of the Valuation Date on the basis
of the mortality table prescribed by and an interest rate or rates permitted by
Part 4044 of the Pension Benefit Guaranty Corporation regulations effective as
of the Valuation Date, and such other actuarial assumptions and methods agreed
to by both Acquiror's actuary and an actuary designated by Lafarge S.A. On the
date of the actual transfer from the Redland Pension Plan to a Transferee
Pension Plan, the amount so determined will be increased at the initial
interest rate effective as of the Valuation Date as set forth for Annuity
Valuations in Table I of Appendix B to Part 4044 of the Pension Benefit
Guaranty Corporation regulations, unless the actual transfer occurs more than
180 days after the Valuation Date, in which case the initial interest rate
shall be adjusted for each month following the Valuation Date to reflect the
rate in effect for that month under Table I of Appendix B, and reduced by the
amount of any benefit payments made to Redland Pension Participants for the
period between the Valuation Date and the date of transfer. Lafarge S.A. will
take such action as may be necessary to cause each Transferee Pension Plan to
provide each Redland Pension Participant participating in the Transferee
Pension Plan after the transfer with an accrued benefit that is not less than
the accrued benefit transferred from the Redland Pension Plan and to provide
all benefits protected by law, including optional forms of benefit. Lafarge
S.A. will reimburse Acquiror for all reasonable costs incurred by Acquiror to
continue the participation of the Redland Pension Participants following the
Closing Date in the Redland Pension Plan and to effect the foregoing transfers.
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(c) The Acquiror and Lafarge S.A. understand that the
Redland Pension Plan may have assets in excess of the amount needed to effect a
transfer to the Transferee Pension Plan that would satisfy the minimum
requirements of Code Section 414(I). In the event that the Redland Pension
Plan has assets, as of the date of a transfer to a Transferee Pension Plan for
the employees of Redland Ohio, Inc., in excess of the amount needed to effect a
transfer to such Transferee Pension Plan that would satisfy Subsection (b)
above and the minimum requirements of Code Section 414(I) (the "SURPLUS
ASSETS"), a portion of the Surplus Assets shall be transferred to such
Transferee Pension Plan, but only to the extent such transfer would not violate
the requirements of Code Section 414(I). The portion of the Surplus Assets so
transferred shall be equal to the ratio that the benefit liability transferred
to the Transferee Pension Plan with respect to the employees of Redland Ohio,
Inc. bears to the total benefit liabilities of the Redland Pension Plan
immediately prior to the transfer.
5.16 Aggregate Mining Agreement. After the Closing, the parties
will use their best efforts to enter into an agreement, upon mutually
acceptable terms, providing for the mining or purchase by Acquiror, for a fee,
of stone from the two quarries owned by Redland Ohio, Inc., a subsidiary of
Seller, for purposes of producing and marketing construction aggregates.
ARTICLE VI
CONDITIONS TO THE TRANSFER
6.1 Condition to the Obligations of Each Party. The obligations
of each of Seller, Lafarge S.A. and Acquiror to consummate the Transfer of the
Stock are subject to the satisfaction of the condition that the purchase and
sale contemplated by the Canadian Asset Purchase Agreement shall be consummated
simultaneously with the Closing.
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6.2 Conditions to the Obligations of Seller and Lafarge S.A. The
obligation of Seller and Lafarge S.A. to consummate the Transfer of the Stock
is subject to the satisfaction (or written waiver by Seller) of each of the
following further conditions:
(a) Acquiror shall have performed and complied with in
all material respects all obligations and covenants required to be performed or
complied with by it under this Agreement at or prior to the Closing Date, and
Seller shall have received a certificate signed by an authorized officer of
Acquiror on behalf of Acquiror, to the foregoing effect.
(b) The representations and warranties of Acquiror made
herein shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date except (i) to the extent such representations and warranties are
by their express provisions made as of a specified date, and (ii) for the
effect of transactions contemplated by this Agreement, and Seller shall have
received a signed certificate of an authorized officer of Acquiror, on behalf
of Acquiror, to the foregoing effect.
(c) None of Seller, Lafarge S.A., Acquiror or any of the
Companies shall be subject to any order, decree (others than consent decrees to
which Seller or Lafarge S.A. has agreed), or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the consummation of the
Transfer.
(d) Seller shall have received an opinion of Thompson &
Knight, P.C., counsel to Acquiror, substantially in the form attached hereto as
Schedule 6.2(d).
6.3 Conditions to the Obligations of Acquiror. The obligation of
Acquiror to consummate the Transfer of the Stock is subject to the satisfaction
(or written waiver by Acquiror) of each of the following further conditions:
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(a) Seller and Lafarge S.A. shall have performed and
complied with in all material respects all obligations and covenants required
to be performed or complied with by them under this Agreement at or prior to
the Closing Date.
(b) None of Seller, Lafarge S.A., Acquiror or any of the
Companies shall be subject to any order, decree (other than consent decrees to
which Acquiror has agreed), or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the Transfer.
(c) The representations and warranties of Seller and
Lafarge S.A. made herein shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date except (i) to the extent such representations and
warranties are by their express provisions made as of a specified date (which
need only be true and correct in all material respects as of such date) and
(ii) if the inaccuracy of such representations and warranties does not
constitute a Material Adverse Effect.
(d) Seller and Lafarge S.A. shall have delivered to
Acquiror Non-Competition Agreements in substantially the form as attached
hereto as Schedule 6.3(d), which agreements shall provide that Seller and
Lafarge S.A. will not compete, in the United States markets in which the
Companies currently operate, with the businesses conducted by the Companies as
of the Closing Date for a period of five (5) years after the Closing.
(e) Lafarge S.A. shall have delivered to Acquiror the
Guarantee in substantially the form attached hereto as Schedule 6.3(e).
(f) Except for the transactions contemplated by this
Agreement, there shall not have been any changes in the business, prospects or
financial condition of Seller or any
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Operating Subsidiary that, individually or in the aggregate, have had or are
reasonably likely to have a Material Adverse Effect.
(g) The Board of Directors of Acquiror shall have
received from SBC Warburg Dillon Read Inc., independent investment bankers, an
opinion, in form reasonably satisfactory to such Board of Directors, as to the
fairness, from a financial point of view, of the transactions contemplated by
this Agreement.
(h) Acquiror shall have received all necessary
shareholder approvals relating to the Transfer.
(i) Acquiror shall have received an opinion of Jones,
Day, Reavis & Pogue, counsel to Seller, and an opinion of in-house or other
counsel to Lafarge S.A., substantially in the forms attached hereto as Schedule
6.3(i).
(j) Acquiror shall have received from each of Seller and
Lafarge S.A. a certificate, dated as of the Closing Date, duly executed by an
authorized officer of each, to the effect of (a) and (c) above.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by written consent of Seller, Lafarge S.A. and
Acquiror;
(b) by the Board of Directors of either Seller or
Acquiror at any time after June 30, 1998, if the Transfer shall not theretofore
have been consummated; provided, that Seller or Acquiror, as the case may be,
may not seek termination pursuant to this Section 7.1(b) if the
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failure to consummate the Transfer is caused by the action or inaction in
violation of this Agreement of the party seeking such termination;
(c) by either Seller or Acquiror if a condition to its
obligation to perform becomes incapable of fulfillment; provided, that Seller
or Acquiror, as the case may be, may not seek termination pursuant to this
Section 7.1(c) if such condition is incapable of fulfillment due to the failure
of Seller or Acquiror, as the case may be, to perform any of the agreements set
forth herein required to be performed by such party, at or before the Closing;
or
(d) by the Board of Directors of either Seller or
Acquiror if any Governmental Entity whose approval is required for the
consummation of the transactions contemplated hereby shall have denied approval
of such transactions and such denial has, after exhaustion of any and all
available appellate procedures, become final.
7.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1 hereof, this Agreement, except for the
provisions of Sections 7.1(c), 9.6, 10.4, 10.7 and 10.10, shall forthwith
become null and void and have no effect, without any liability on the part of
either party or their respective directors, officers or stockholders. Nothing
in this Article VII shall, however, relieve either party to this Agreement of
liability for breach of this Agreement occurring prior to such termination, or
for breach of any provision of this Agreement which specifically survives
termination hereunder.
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ARTICLE VIII
TRANSFER TAXES
8.1 Transfer Taxes. Acquiror shall be responsible for the payment
of all national, state, local, municipal and other transfer, stamp, sales, use
or other similar Taxes (and all recording or filing fees) resulting from the
transactions contemplated by this Agreement, except with respect to any Taxes
imposed on Seller in respect of the income or gain of Seller arising in
connection with the transactions contemplated hereunder.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.1 Survival of Representations, Warranties and Covenants. The
several representations and warranties of the parties contained in this
Agreement, and the covenants of Seller contained in Sections 9.2(a) (except as
set forth in the following proviso), 9.2(b) (except as set forth in the
following proviso), and 9.2(f), will survive the Closing until the expiration
of 18 months after the Closing Date, except with respect to claims asserted by
Written Notice by Acquiror or Seller with respect to such representations,
warranties and covenants prior to such expiration in which case they will
survive until the resolution of such claims; provided, however, that (i) the
representations and warranties of Seller contained in Sections 3.2, 3.3, 3.6
and 3.12 (but only to the extent relating to title), the covenants of Seller
contained in Sections 9.2(a) (to the extent relating to a breach of Section
5.12 or the last sentence of Section 2.2), 9.2(b) (to the extent relating to a
breach of the foregoing specified representations), 9.2(c), 9.2(d), 9.2(e) and
9.2(h), the representations and warranties of Acquiror contained in Sections
4.2 and 4.5, and the covenants of Acquiror contained in Section 9.3, will
remain operative and in full force and effect
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until the expiration of any applicable statute of limitations (giving effect to
any tolling, waiver or extension thereof) and, if there is no applicable
statute of limitations, then without any time limitation, except with respect
to claims asserted by Written Notice by Acquiror or Seller with respect to such
representations, warranties and covenants prior to such expiration in which
case they will survive until the resolution of such claims, and (ii) the
representations and warranties contained in Section 3.7(e) and the covenants
contained in Section 9.2(g) shall survive until the fifth anniversary of the
Closing Date, except with respect to claims asserted by Written Notice by
Acquiror or Seller with respect to such representations, warranties and
covenants prior to such expiration in which case they will survive until the
resolution of such claims. The other covenants of the parties contained in
this Agreement (or in any document delivered in connection herewith) will
remain operative and in full force and effect without any time limitation,
except as any such other covenant will be limited in duration by the express
terms hereof. Any claim asserted under or in respect of this Agreement must be
made by written notice (the "WRITTEN NOTICE") containing specific details of
the claim, including a reasonable estimate (on a without prejudice basis) by
the party asserting the claim of the amount of such claim.
9.2 Indemnity by Seller. Seller agrees to indemnify and hold
harmless Acquiror against any Liabilities suffered by Acquiror, its successors
or assigns resulting from:
(a) any breach by Seller or Lafarge S.A. of any
covenants, undertakings or agreements of Seller or Lafarge S.A. contained in
this Agreement;
(b) any inaccuracy in or breach of any of the
representations or warranties made by Seller or Lafarge S.A. in this Agreement;
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(c) any Liabilities of, or arising from the direct or
indirect ownership or transfer of the ownership of any of the Excluded
Companies (or any of their subsidiaries) or relating to the assets or
operations of such entities;
(d) any Liabilities of, or arising from the direct or
indirect ownership or transfer of the ownership by any of the Companies of,
Redland Insurance Company (or any of its subsidiaries) relating to the assets
or operations of such entity, except for any such Liabilities owed to, incurred
in respect of, arising from or relating to the assets or operations of, any of
the Companies;
(e) any Liabilities of, or arising from the direct or
indirect ownership or transfer of the ownership by any of the Companies of,
Redland Funding Corporation, Redland Finance, Inc., Redland Credit Corporation,
SC Holding, Inc., RGI-RP, Inc., Genstar Carbonates, Inc., MJ Grove Lime
Company, Harry T. Campbell & Sons Corporation or Genstar Illinois, Inc. (or any
of their subsidiaries) or relating to the assets or operations of such
entities, except for any such Liabilities owed to any of the Companies;
(f) any Liabilities to the extent arising from any
liabilities or obligations (whether absolute, contingent, accrued or otherwise)
of any Company relating to any time on or prior to the Closing, which are not
(i) included in the Financial Statements or the Working Capital Amounts, (ii)
disclosed in the Schedules hereto or otherwise under this Agreement, (iii)
known to Acquiror as of the Closing, or (iv) incurred by any Company in the
ordinary course of business consistent with past practice since the Balance
Sheet Date as permitted by this Agreement; provided, however, that Seller shall
not be obligated to indemnify or hold harmless Acquiror for any claim under
this Section 9.2(f) unless (i) the Liabilities from such claim exceed $100,000
or (ii) the aggregate Liabilities of all claims under this Section 9.2(f) and
under Section
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9.2(g) exceed, in the aggregate, an amount equal to (x) $1,000,000 less (y) the
aggregate amount of Liabilities with respect to claims that could be made under
Sections 11.2(e) and 11.2(f) of the Canadian Asset Purchase Agreement but for
the application of the $1,000,000 provision therein; or
(g) any Liabilities not included in either the Financial
Statements or the Working Capital Amounts to the extent arising from the
following, whether or not disclosed by Seller to Acquiror in the Schedules
hereto or otherwise under this Agreement and whether or not Seller, the
Companies and/or Acquiror had any actual knowledge of such Liabilities: (i)
the release, discharge, or disposal of any Hazardous Materials (or allegations
of same) prior to the Closing Date (A) on or from the Real Property or (B) on
or from any other property where Hazardous Material are or were (or are or were
alleged to be) released, discharged or disposed of in connection with the
operation of the business of the Companies, whether or not, in any case, such
release, discharge or disposal was in compliance with Environmental Law; (ii)
the violation of any Environmental Law prior to the Closing Date (or allegation
of same) by any Company or any other Person in connection with the Real
Property; or (iii) any Environmental Claim against any Person whose liability
for such Environmental Claim Seller or any Company or any Affiliate of Seller
or any Company has, in connection with the Real Property or real property
previously owned by any Company, assumed or retained either contractually or by
operation of law prior to the Closing Date; provided, however, that Seller
shall not be obligated to indemnify or hold harmless Acquiror for any claim
under this Section 9.2(g) unless (i) the Liabilities from such claim exceed
$100,000 or (ii) the aggregate Liabilities of all claims under Section 9.2(f)
and under this Section 9.2(g) exceed an amount equal to (x) $1,000,000 less (y)
the aggregate amount
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of Liabilities with respect to claims that could be made under Sections 11.2(e)
and 11.2(f) of the Canadian Asset Purchase Agreement but for the application of
the $1,000,000 provision therein.
(h) any Liabilities to the extent arising from that
certain guarantee or guarantees (referred to in Schedule 3.15) by Redland
America Corporation, guaranteeing all unfunded portions of the Canadian
Deferred Compensation Agreement in place with certain executives of Redland
Quarries, Inc.
9.3 Indemnity by Acquiror. Acquiror agrees to indemnify and hold
harmless Seller against any Liabilities suffered by Seller resulting from:
(a) any breach by Acquiror of any covenants, undertakings
or agreements of Acquiror contained in this Agreement; or
(b) any inaccuracy in or breach of any of the
representations or warranties made by Acquiror in this Agreement.
9.4 Limitations.
(a) Notwithstanding anything to the contrary in this
Agreement, Seller shall not be required to indemnify Acquiror or its successors
or assigns under this Article IX in respect of any claims under Sections
9.2(a), 9.2(b), 9.2(f) or 9.2(g), except to the extent of one-half of all
Liabilities less than $20 million and to the extent of all Liabilities in
excess of $20 million, it being understood that Acquiror shall bear
responsibility for one-half of the first $20 million of such Liabilities. The
parties understand and agree that the limitations of the immediately preceding
sentence shall not apply to Liabilities arising out of Sections 9.2(a) (to the
extent relating to Section 5.12 or the last sentence of Section 2.2), 9.2(b)
(to the extent relating to the representations and warranties of Seller
contained in Sections 3.2, 3.3 (but only to the extent relating to title), 3.6
and 3.12 (but only to the extent relating to title)), 9.2(c), 9.2(d), 9.2(e) or
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9.2(h). The $20 million amounts referenced in this Section 9.4(a) are
intended to be, and shall be, calculated using the aggregate of the Liabilities
within the scope of this Section 9.4(a) and Liabilities within the scope of
Section 11.4(a) of the Canadian Asset Purchase Agreement.
(b) The amount of any Liabilities shall be calculated net
of any resulting tax benefit or net insurance recovery (including net of any
increase in insurance premiums which may arise therefrom) actually received by
the indemnified party on account of such Liabilities.
9.5 Exclusive Remedies. From and after the Closing, the right of
each party hereto to indemnification under this Article IX with respect to any
Liabilities shall be its sole and exclusive remedy under or with respect to
this Agreement or the transactions contemplated hereby, and it shall not be
entitled to pursue, and hereby expressly waives to the fullest extent permitted
by law, any and all rights that may otherwise be available either at law or in
equity with respect thereto. Without limiting the generality of the foregoing,
each party hereto waives to the fullest extent permitted by Law any claim or
cause of action which it might otherwise assert, including, without limitation,
under the common law or federal or state securities, trade regulations or other
Laws, by reason of this Agreement or the transactions contemplated hereby,
except for claims and causes of action brought pursuant to this Article IX. In
no event shall the parties hereto be entitled to rescind this Agreement.
9.6 Arbitration. In the event of any dispute concerning this
Agreement, its effect or the transactions contemplated by it, such dispute
shall be settled by arbitration conducted in New York City, New York, before a
panel of three arbitrators in accordance with the then applicable provisions of
the American Arbitration Association ("AAA") using the rules of procedure of
the State of New York. Each of Acquiror and Seller will appoint one
arbitrator, and those two arbitrators will appoint a third arbitrator. In the
event that the two arbitrators cannot agree on a
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third arbitrator within 10 days following the appointment of the second
arbitrator, then the third arbitrator shall be appointed by the AAA in
accordance with its then applicable rules. If either Acquiror or Seller fails
to appoint an arbitrator within 45 days after written notice from one party to
the other party detailing the dispute, the arbitrator chosen by that other
party shall act as the sole arbitrator. Punitive or exemplary damages will not
be permitted under any circumstances. All determinations made by a majority of
the arbitrators shall be final, conclusive and binding on Acquiror and Seller
with costs paid by the party who does not prevail in the arbitration.
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement. This Agreement, including the Schedules
hereto and the Confidentiality Agreement constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and thereof and
supersede all prior agreements and undertakings, both written and oral, with
respect to the subject matter hereof and thereof. It is agreed that neither
party has entered into this Agreement in reliance upon any representation,
warranty or undertaking of the other party which is not expressly set forth in
this Agreement.
10.2 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile) and signed by or
on behalf of the party giving it and shall be given by personal delivery,
certified or registered mail or telecopy,
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if to Seller, to:
Lafarge S.A.
61, rue des Belles Feuilles
B.P.40
75782 Paris, cedex 16
France
Attention: Directeur des Affaires Juridiques
Telecopy: (33-1) 44-34-11-48
with a copy to:
Jones, Day, Reavis & Pogue
3500 Sun Trust Plaza
303 Peachtree Street, N.E.
Atlanta, GA 30308-3242
Attention: William S. Paddock
Telecopy: (404) 581-8330
if to Acquiror, to:
Lafarge Corporation
11130 Sunrise Valley Drive, Suite 300
P.O. Box 4600
Reston, VA 20195-1415
Attention: General Counsel
Telecopy: (703) 264-0634
with a copy to:
Thompson & Knight
1700 Pacific Avenue, Suite 3300
Dallas, TX 75201
Attention: Jack M. Little
Telecopy: (214) 969-1751
or such other address or facsimile number as such party may hereafter specify
for that purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile
transmission, three hours after the time of dispatch to the facsimile number
specified in this Section 10.2 provided the appropriate confirmation is
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received, or (ii) if given by any other means allowed under this Section 10.2,
twenty-four hours after being sent to the address specified in this Section
10.2.
10.3 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or
waived prior to the Closing Date if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by Seller and Acquiror or
in the case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
10.4 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
10.5 Successors and Assigns.
(a) The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. No party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the consent of
the other parties hereto.
(b) Notwithstanding anything contained in this Agreement
to the contrary, nothing in this Agreement, expressed or implied, is intended
to confer on any Person other than the parties hereto or their respective
successors and permitted assigns, any rights, remedies obligations or
liabilities under or by reason of this Agreement.
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10.6 Certain Interpretive Matters.
(a) Unless the context otherwise requires, (i) all
references in this Agreement to Sections, Articles or Schedules are to
Sections, Articles or Schedules of or to this Agreement, (ii) each term defined
in this Agreement has the meaning ascribed to it, (iii) each accounting term
not otherwise defined in this Agreement has the meaning assigned to it in
accordance with United States generally accepted accounting principles for
Western Mobile, Inc. and its subsidiaries and United Kingdom generally accepted
accounting principles for the other Companies and (iv) words in the singular
include the plural and vice versa. All references to "$" or dollar amounts
will be to lawful currency of the United States of America. The Schedules
referenced in this Agreement are incorporated in this Agreement as of the date
of its execution and constitute an integral part hereof. No investigation by
the parties hereto made heretofore or hereafter shall affect the
representations and warranties of the parties which are contained herein, and
each such representation and warranty shall survive such investigation.
(b) Titles and headings to Articles and Sections herein
are inserted for convenience of reference only, and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement. No
provision of this Agreement will be interpreted in favor of, or against, any of
the parties hereto by reason of the extent to which any such party or its
counsel participated in the drafting thereof or by reason of the extent to
which any such provision is inconsistent with any prior draft hereof or
thereof.
10.7 Governing Law. This Agreement shall be construed in
accordance with and governed by the internal substantive law of New York
regardless of the laws that might otherwise govern under principles of conflict
of laws applicable thereto. Subject to Section 9.6,
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each of Seller and Acquiror agrees that the Courts of New York are to have
nonexclusive jurisdiction to settle any disputes which may arise in connection
with this Agreement.
10.8 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received counterparts hereof signed by all of the other parties hereto.
10.9 Knowledge. For purposes of this Agreement, "to the knowledge
of Seller" or similar phrases shall mean the knowledge of the persons
identified on Schedule 10.9(a) and "to the knowledge of Acquiror" or similar
phrases shall mean the knowledge of the persons identified on Schedule 10.9(b).
10.10 Confidentiality. Each of Seller and Acquiror agrees to
maintain in strict confidence any and all information each party learns or
discovers about the other or its respective Affiliates during the course of the
negotiation, execution and delivery of this Agreement and agrees to abide by
the terms and conditions set forth in the Confidentiality Agreement. This
Section 10.10 shall not apply to any information that is, or could reasonably
be, learned or discovered through any independent source that is not obligated
to maintain such information as confidential.
10.11 Severability. If any term, provision, covenant or restriction
of this Agreement is determined by a Governmental Entity to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired or invalidated.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
REDLAND INTERNATIONAL LIMITED
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
LAFARGE CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
LAFARGE S.A.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE> 1
SIGNATURE COPY - JUNE 3, 1998
================================================================================
ACQUISITION AGREEMENT
DATED AS OF
JUNE 3, 1998
AMONG
REDLAND QUARRIES INC.,
3489264 CANADA INC.,
3489949 CANADA INC.,
LAFARGE CANADA INC.,
AND
LAFARGE S.A.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.3 Arm's Length . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.4 Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.5 Statutory Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.6 Provincial Tax Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.7 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.8 Liabilities and Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS
2.1 Purchase and Sale of Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.3 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.4 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.5 Non-Assignable Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.6 Asset Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.7 Payment of Asset Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.8 Stated Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.9 Allocation of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.10 Election under subsection 85(1) of ITA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.11 Election under section 22 of ITA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.12 Election under subsection 167(1) of ETA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.13 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.14 Adjustment of Elected Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.15 Working Capital Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III
PURCHASE AND SALE OF PURCHASED SHARES
3.1 Purchase and Sale of Purchased Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2 Share Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.3 Payment of Share Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.4 Stated Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.5 Election under subsection 85(1) of ITA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.6 Share Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV
REDEMPTION OF PREFERENCE SHARES
4.1 Redemption of Preference Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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4.2 Payment of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND LAFARGE S.A.
5.1 Corporate Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.4 Sufficiency of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.5 Conflicts and Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.6 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.7 Legal Proceedings and Governmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.8 Labour and Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.11 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.12 Ownership of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.13 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.14 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.15 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.16 Other Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.17 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.18 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.19 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.20 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.23 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.24 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.25 Location of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.26 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.27 Guarantees and Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.28 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.29 No Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.30 Expropriation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.31 Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.32 GST Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.33 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.34 Worker's Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.35 Health and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.36 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SHARE ACQUIROR AND LAFARGE CANADA
6.1 Corporate Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.2 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.3 Conflicts and Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.5 GST Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.6 Funds for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII
CERTAIN COVENANTS OF THE PARTIES
7.1 Conduct of the Seller and Lafarge S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.2 Forbearances by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.3 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.4 Current Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.5 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.6 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.8 Notice of Breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.9 Access to Books, Records and Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.10 Delivery of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.11 Lafarge S.A. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.12 Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.13 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.14 Removal of Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.15 Retail Sales Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.16 Consents Required in Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.17 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.18 Workers' Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.19 Group Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.20 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.21 Revised Dewatering Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.22 Repayment of Obligations to the Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.23 Lease of Lime Plant Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VIII
CONDITIONS TO THE TRANSACTIONS
8.1 Condition to the Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.2 Conditions to the Obligations of Seller and Lafarge S.A. . . . . . . . . . . . . . . . . . . . . . . 64
8.3 Conditions to the Obligations of Share Acquiror and Lafarge Canada . . . . . . . . . . . . . . . . . 65
ARTICLE IX
TERMINATION
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
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ARTICLE X
CLOSING
10.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.1 Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . 68
11.2 Indemnity by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.3 Indemnity by Lafarge Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.4 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.5 Exclusive Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.6 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE XII
MISCELLANEOUS
12.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12.3 Amendments; No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
12.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.6 Certain Interpretive Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.8 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
Schedule 1.1 - Agreed Working Capital Amount
Schedule 1.1(k) - Assumption Agreement
Schedule 1.1(t) - Collective Agreements
Schedule 1.1(w) - Contracts
Schedule 1.1(cc) - Equipment Leases
Schedule 1.1(ee)(ii) - Lime Plant Site
Schedule 1.1(ee)(ii)B - Lime Plant Assets
Schedule 1.1(ee)(iii) - Operating Systems
Schedule 1.1(ee)(iv) - Moxley Road Property Description
Schedule 1.1(ee)(v) - Brow Landfill Site Description
Schedule 1.1(ff)(x) - Excepted Excluded Liabilities
Schedule 1.1(mm) - Group Plans
Schedule 1.1(rr) - Intellectual Property Rights
Schedule 1.1(aaa) - Licenses
Schedule 1.1(ggg) - Non-Competition Agreement from
Seller and Lafarge S.A.
Schedule 1.1 - Agreed Working Capital Amount
(iv)
<PAGE> 6
Schedule 1.1(k) - Assumption Agreement
Schedule 1.1(t) - Collective Agreements
Schedule 1.1(w) - Contracts
Schedule 1.1(cc) - Equipment Leases
Schedule 1.1(ee)(ii) - Lime Plant Site
Schedule 1.1(ee)(ii)B - Lime Plant Assets
Schedule 1.1(ee)(iii) - Operating Systems
Schedule 1.1(ee)(iv) - Moxley Road Property Description
Schedule 1.1(ee)(v) - Brow Landfill Site Description
Schedule 1.1(ff)(x) - Excepted Excluded Liabilities
Schedule 1.1(mm) - Group Plans
Schedule 1.1(rr) - Intellectual Property Rights
Schedule 1.1(aaa) - Licenses
Schedule 1.1(jjj) - Pension Plans
Schedule 1.1(nnn)(iv) - Fixed Assets and Equipment
Schedule 1.1(nnn)(xiii) - Other Purchased Assets
Schedule 1.1(ooo)(i) - North Quarry Site
Schedule 1.1(ooo)(ii) - South Quarry Site
Schedule 1.1(ooo)(iii) - Queenston Quarry Site
Schedule 1.1(ooo)(iv) - Aggregate / Lime Processing Site
Schedule 1.1(www)(a) - Persons with Knowledge - Seller
Schedule 1.1(www)(b) - Persons with Knowledge - Lafarge
Canada et. al.
Schedule 2.6 - Fair Market Values of Purchased
Assets
Schedule 3.3 - Articles of Incorporation of
Share Acquiror
Schedule 5.4 - Qualification re: Sufficiency of
Assets
Schedule 5.5 - Conflicts and Defaults of Seller
Schedule 5.7(a) - Pending Legal Proceedings
Schedule 5.7(b) - Governmental Compliance
Schedule 5.7(c) - Missing Licenses /
Transferability of Licenses
Schedule 5.7(d) - Environmental Compliance
Schedule 5.8 - Employment Contracts
Schedule 5.9 - Benefit Plans
Schedule 5.10 - Financial Statements
Schedule 5.11 - Required Filings and Permits
Schedule 5.12(a) - Liens
Schedule 5.13 - Material Adverse Change
Schedule 5.14 - Reserves
Schedule 5.15 - Material Agreements /
Transferability of Agreements
Schedule 5.16 - Assumed Liabilities
Schedule 5.18 - Exceptions to Accounts Receivable
Schedule 5.19 - Affiliate Transactions
Schedule 5.20 - Customers and Suppliers
Schedule 5.25 - Locations of Material Tangible
Assets
Schedule 5.27 - Guarantees and Indemnitees
(v)
<PAGE> 7
Schedule 6.3 - Conflicts and Defaults of Share
Acquiror and Lafarge Canada
Schedule 7.1 - Out of the Ordinary Course
Exceptions
Schedule 7.17 - Employees
Schedule 7.20(a) - Form of Pension Assumption
Agreement
Schedule 7.20(b) - Actuarial Methods, Assumptions
and Principles
Schedule 7.23 - Form of Lime Plant Lease
Schedule 8.2(g) - Form of Opinion of McCarthy
Tetrault
Schedule 8.3(e) - Form of Lafarge S.A. Guarantee
Schedule 8.3(i) - Form of Opinion of Miller Thomson
and Form of opinion of
Andre-Gilles Taithe, corporate
counsel to Lafarge S.A.
(vi)
<PAGE> 8
SIGNATURE COPY - JUNE 3, 1998
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT (this "AGREEMENT") dated as of June 3, 1998, among
Redland Quarries Inc., a corporation incorporated under the laws of the
Province of Ontario ("SELLER"), 3489264 Canada Inc., a Canadian corporation
("ASSET ACQUIROR"), 3489949 Canada Inc., a Canadian corporation ("SHARE
ACQUIROR"), Lafarge Canada Inc., a Canada corporation ("LAFARGE CANADA") and
Lafarge S.A., a corporation organized and existing under the laws of France
("LAFARGE S.A.")
RECITALS:
A. The Seller carries on the businesses at the Dundas Site and the
Queenston Quarry Site (both as defined herein) of operating quarries and
extracting and processing construction aggregate and metallurgical limestone
therefrom (the "AGGREGATE BUSINESS") and at and from the Dundas Site of the
manufacturing, processing and burning of limestone to produce lime products and
the distribution and sale of lime products and the production and sale of
limestone by- products (the "LIME BUSINESS").
B. The Seller has conveyed legal title to the Purchased Properties (as
defined herein) to Lafarge Canada as bare trustee for the Seller and its
successors and assigns.
C. The Seller has agreed to sell to the Asset Acquiror and the Asset
Acquiror has agreed to purchase from the Seller the assets, property and
undertakings of and pertaining to the Aggregate Business which are more
specifically described in this Agreement, upon and subject to the terms and
conditions of this Agreement.
D. The Seller has agreed to sell to the Share Acquiror and the Share
Acquiror has agreed to purchase from the Seller all of the issued and
outstanding shares in the Asset Acquiror subsequent to the purchase and sale
referred to in recital B, upon and subject to the terms and conditions of this
Agreement.
<PAGE> 9
SIGNATURE COPY - JUNE 3, 1998
NOW THEREFORE in consideration of the representations, warranties,
covenants and agreements set forth herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions. The following terms used herein shall have the following
meanings:
(a) "ACCEPTING EMPLOYEE" means any Employee (as defined in Section 7.17)
who accepts the offer of employment extended by Asset Acquiror or Lafarge
Canada, as the case may be, under Section 7.17(a) or who otherwise becomes
employed by Asset Acquiror or Lafarge Canada on the Closing Date in accordance
with Section 7.17(a).
(b) "ACT" means the Securities Act (Ontario), as amended, and the rules
and regulations promulgated thereunder.
(c) "AFFILIATE" means, with respect to any Person, any other Person who is
directly or indirectly controlling, controlled by or under the common control
with such Person. For the purposes of this definition, the term "control,"
when used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
(d) "AFFILIATE TRANSACTIONS" has the meaning set forth in Section 5.18.
(e) "AGGREGATE BUSINESS" has the meaning ascribed in the recitals to this
Agreement.
(f) "AGGREGATE LOSSES" has the meaning set forth in Section 11.4(a).
(g) "AGGREGATE/LIME PROCESSING SITE" has the meaning set forth in
Section 1.1(ooo)(iv).
(h) "AGREED WORKING CAPITAL AMOUNT" means, for the Aggregate Business, the
amount set forth in Schedule 1.1 calculated in the manner set forth on Schedule
1.1.
(i) "AGREEMENT" means this Acquisition Agreement, together with the
Schedules hereto.
(j) "ASSET ACQUIROR" means 3489264 Canada Inc., a corporation incorporated
under the laws of Canada.
(k) "ASSET PURCHASE PRICE" means the total purchase price to be paid by
the Asset Acquiror to the Seller for the Purchased Assets, all as provided in
Section 2.6.
2
<PAGE> 10
SIGNATURE COPY - JUNE 3, 1998
(l) "ASSUMED LIABILITIES" means the Disclosed Liabilities existing,
incurred, due or accruing due on or before the Closing Date.
(m) "ASSUMPTION AGREEMENT" means the assumption and indemnity agreement to
be issued by the Asset Acquiror to the Seller in the form attached as Schedule
1.1(k).
(n) "BENEFIT PLANS" has the meaning set forth in Section 5.9.
(o) "BROW SITE" has the meaning set forth in Section 1.1(ee)(v).
(p) "BUSINESS DAY" means a day (excluding Saturday and Sunday) on which
banks generally are open for the transaction of normal business in Toronto,
Ontario.
(q) "CLOSING" has the meaning set forth in Section 10.1.
(r) "CLOSING DATE" has the meaning set forth in Section 10.1.
(s) "CLOSING DOCUMENTS" means collectively the documents referred to in
Article 7.
(t) "COLLECTIVE AGREEMENTS" means the collective agreements and related
documents including all benefit agreements, letters of understanding, letters
of intent and other written communications with bargaining agents which impose
any obligations upon the Seller or set out the understanding of the parties
with respect to the meaning of any provisions of the collective agreements
entered into by the Seller with respect to the Aggregate Business which are
listed in Schedule 1.1(t).
(u) "COMMON SHARES" has the meaning set forth in Section 2.7(b).
(v) "CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement
between Lafarge S.A. and Lafarge Corporation, with respect to, among other
things, the transactions addressed in this Agreement and under the United
States Stock Purchase Agreement.
(w) "CONTRACTS" means the contracts, agreements, commitments, entitlements
and engagements of the Seller relating to the Aggregate Business and the
Purchased Assets including those listed in Schedule 1.1(w) and the regulator
site lease and agreement dated the 6th day of December, 1995 between Seller and
Union Gas Limited and all unfilled orders from customers and forward
commitments and unfilled orders for supplies or materials incurred in the
ordinary course of business of the Seller and relating to the Aggregate
Business and the Purchased Assets and all other contracts relating to the
Aggregate Business and the Purchased Assets whether or not described in
Schedule 1.1(w).
(x).2 "DISCLOSED LIABILITIES" has the meaning ascribed thereto in Section
5.16.
3
<PAGE> 11
SIGNATURE COPY - JUNE 3, 1998
(x) "DUNDAS SITE" means the freehold property owned by the Seller in
Flamborough, Ontario which comprises the North Quarry Site, the South Quarry
Site and the Aggregate / Lime Processing Site.
(y) "ELECTED AMOUNT" in respect of a particular property means the amount
elected pursuant to subsection 85(1) of the ITA in respect thereof pursuant to
the terms of this Agreement.
(z) "EMPLOYEES" has the meaning ascribed in Section 7.17.
(aa) "ENVIRONMENTAL CLAIM" means, with respect to any Person, any action,
cause of action, investigation, suit, proceeding, judgment, award, fine,
penalty, assessment or written notice or claim by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, clean-up costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, discharge, migration or
release into the environment, of any Hazardous Material at any location,
whether or not owned or operated by such Person; (b) the generation, handling,
use, treatment, recycling, storage, disposal or transport of any Hazardous
Material; or (c) any violation of an Environmental Law.
(bb) "ENVIRONMENTAL LAWS" has the meaning set forth in Section 5.7.
(cc) "EQUIPMENT LEASES" means those equipment leases, conditional sales
contracts, title retention agreements and other agreements between the Seller
and third Persons relating to equipment used by the Seller in connection with
the Aggregate Business that are listed in Schedule 1.1(cc).
(dd) "ETA" means the Excise Tax Act (Canada) as amended from time to time;
(ee) "EXCLUDED ASSETS" means the following assets, property and undertaking
of Seller:
(i) all cash, bank balances, moneys in possession of banks and
other depositaries, term or time deposits and similar cash
items of, owned or held by or for the account of the Seller;
(ii) the assets, undertaking and property (including goodwill) of,
used in or relating to the Lime Business which comprise the
following assets, undertaking and property:
1) those assets, undertaking and property of, used in or
relating to the Lime Business that are otherwise
described in this Section 1.1(ee), and
4
<PAGE> 12
SIGNATURE COPY - JUNE 3, 1998
2) the leasehold title to the lands and premises
together with all rights of way, easements and
similar rights appurtenant thereto as described in
Schedule 1.1(ee)(ii) (the "LIME PLANT SITE") and all
rights set out in the Lime Plant Lease (as defined in
Section 7.23), and
3) the beneficial right, title and interest, and to the
extent possible the legal right, title and interest,
in and to all kilns, plant, equipment, machinery,
chattels, vehicles, buildings, sidings, parking lots,
roadways, structures, erections, improvements,
appurtenances and fixtures situate at or on or
forming part of the Lime Plant Site, and
4) the assets, undertaking and property of, used in or
relating to the Lime Business as set forth in the
Financial Statements, and
5) the accounts receivable, inventory, prepaid expenses
and other current assets of, used in or relating to
the Lime Business which have accrued, been created or
arisen in the ordinary and usual course of business
since January 1, 1998, and
6) the contracts, agreements, commitments, entitlements
and engagements of the Seller relating to the Lime
Business and all unfilled orders from customers and
forward commitments and unfilled orders for supplies
or materials incurred in the ordinary course of
business of the Seller and relating to the Lime
Business and the equipment leases, conditional sales
contracts, title retention agreements and other
agreements between the Seller and third Persons
relating to equipment used by the Seller in
connection with the Lime Business, and
7) the other assets, undertaking and property of, used
in or relating to the Lime Business that are listed
or described in Schedule 1.1(ee)(ii)B;
(iii) the administrative and financial operating systems relating to
the Aggregate Business and/or the Lime Business, the
components of which are described in Schedule 1.1(ee)(iii);
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(iv) the freehold title to the land and the office building
municipally known as 447 Moxley Road, Dundas, Ontario (the
"MOXLEY ROAD SITE"), forming part of the Dundas Site, and all
contents thereof as described in Schedule 1.1(ee)(iv);
(v) the freehold title to the land, building, structures and
improvements known as the Brow Landfill Site (the "BROW
SITE"), forming part of the Dundas Site as described in
Schedule 1.1(ee)(v);
(vi) the leasehold interest, including all fixtures and
improvements relating to the lease of the Seller, as tenant,
of the fifth floor and part of the third floor of the office
building at 605 James Street North, Hamilton, Ontario (the
"LEASE") and all chattels, inventory, furniture, machinery,
equipment and supplies located on or at those premises;
(vii) indebtedness of, and all shares, securities or other interests
in, and all assets and liabilities of Redland France S.A.;
(viii) the corporate, financial, taxation and other records of the
Seller not pertaining exclusively or primarily to the
Aggregate Business or Purchased Assets;
(ix) all sales, excise or other similar registrations issued to or
held by the Seller, whether in respect of the Aggregate
Business or otherwise, but excluding the Scheduled Permits;
and
(x) all income taxes recoverable.
(ff) "EXCLUDED LIABILITIES" means all debts, liabilities and obligations
(whether absolute, contingent, accrued or otherwise) of the Seller existing,
incurred, due or accruing due on or before the Closing Date, but specifically
excluding the Assumed Liabilities. Subject to the exception of the Assumed
Liabilities, the Excluded Liabilities, include, without limitation, the
following:
(i) all deferred income taxes of the Seller;
(ii) except as specifically contemplated in Section 2.13 of this
Agreement or as set out in Schedule 5.16, all Taxes collected,
collectible or payable by the Seller;
(iii) those liabilities and obligations, whether accrued, absolute
or contingent, liquidated or unliquidated or disclosed or
undisclosed, which relate to the Excluded Assets;
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(iv) all costs and expenses of the Seller incurred in the
preparation, execution and delivery of this Agreement and the
transactions contemplated by this Agreement;
(v) any liability of the Seller arising on or after the date of
this Agreement out of any misrepresentation or breach of any
warranty or covenant of the Seller contained in this Agreement
or any other document delivered pursuant hereto;
(vi) any obligation or liability of the Seller relating to the Brow
Site, including Environmental Claims;
(vii) any liability with respect to the manufacture, processing and
burning of limestone on or before the Closing Date, including
with respect to any lime residue or waste by-product arising
therefrom on or before the Closing Date;
(viii) except as specifically contemplated in this Agreement, any
obligation or liability of the Seller under the Pension Plans;
(ix) any liability of the Seller to any bank or other financial
institution by way of loan or other credit facility; and
(x) any liability of the Seller to its shareholders, Affiliates or
associates (as defined in the Act) or any other Person not
dealing at arm's length with any of them including, for
greater certainty, the liability of the Seller to Redland
International, but excluding trade accounts payable for goods
or services provided in connection with the Aggregate Business
as described in Schedule 1.1(ff)(x);
(gg) "FINANCIAL STATEMENTS" means the non-consolidated financial statements
of the Seller for its fiscal period ended on December 31, 1997.
(hh) "FIRM" has the meaning set forth in Section 2.15(f).
(ii) "FIRST CLOSING TIME" means 10:00 o'clock in the forenoon on the
Closing Date or such other time on such date as the Parties may agree as the
time at which the Closing shall take place.
(jj) "GAAP" has the meaning ascribed in Section 1.7.
(kk) "GOVERNMENTAL ENTITY" means any national, federal, state, local,
provincial or municipal government, court, administrative agency, board, body,
instrumentality or commission or other governmental or other regulatory
authority or agency of Canada, England, the United States or France or any
state, province, municipality or any subdivision thereof.
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(ll) "GROUP PLAN" means the group insurance, deferred compensation and
other benefit plans or arrangements maintained by the Seller that are listed on
Schedule 1.1(mm);
(mm) "GST" means the Goods and Services Tax payable under the ETA.
(nn) "GUARANTEE" has the meaning set forth in Section 7.11.
(oo) "HAZARDOUS MATERIALS" means any pollutant, waste, toxic substance,
radioactive substance, dangerous substance or dangerous goods as defined or
identified in or pursuant to any Environmental Law.
(pp) "INCORPORATOR SHARE" means the one common share in the capital stock
of Asset Acquiror issued initially to the Seller.
(qq) "INTELLECTUAL PROPERTY RIGHTS" means all patents and inventions, trade
marks, trade names and styles, logos and designs, trade secrets, technical
information, engineering procedures, designs, formulae, technology, industrial
property, knowhow and processes (whether confidential or otherwise), software,
and other industrial property (including applications for any of these) in each
case used or employed in the operation of the Aggregate Business as presently
constituted and which are described in Schedule 1.1(rr).
(rr) "INVENTORIES" means all inventories of every kind and nature and
wheresoever situate owned by the Seller and pertaining to the Aggregate
Business including, without limitation, all inventories of raw materials,
work-in-progress, finished goods, operating supplies and packaging materials of
or pertaining to the Aggregate Business.
(ss) "ITA" means the Income Tax Act (Canada) as amended from time to time.
(tt) "LAFARGE CANADA" means Lafarge Canada Inc., a corporation organized
and existing under the laws of Canada.
(uu) "LAFARGE CORPORATION" means Lafarge Corporation, a corporation
organized and existing under the laws of the State of Maryland.
(vv) "LAFARGE S.A." means Lafarge S.A., a corporation organized and
existing under the laws of France.
(ww) "LAWS" means all applicable laws, regulations, rules, judgments,
rulings, writs, injunctions, orders and decrees of Governmental Entities.
(xx) "LEASE" has the meaning ascribed thereto in Section 1.1(ee)(vi).
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(yy) "LIABILITIES" means any and all claims, actions, suits, demands,
assessments, judgments, losses, liabilities, damages, costs, royalties,
payments, license fees and expenses (including interest, penalties, attorneys'
fees, accounting fees and investigation costs).
(zz) "LICENSES" means all licenses, registrations, qualifications, permits,
consents, authorizations and approvals, issued by any Governmental Entity,
relating to the Aggregate Business, including those listed in Schedule
1.1(aaa), together with all applications for any of the foregoing.
(aaa) "LIEN" means any mortgage, lien, pledge, charge, security interest,
restriction on voting or transfer, or other encumbrance.
(bbb) "LIME BUSINESS" has the meaning ascribed in the recitals to this
Agreement.
(ccc) "LIME PLANT SITE" has the meaning set forth in Section 1.1(ee)(ii).
(ddd) "LIME SUPPLY AGREEMENT" has the meaning ascribed thereto in Section
8.2.
(eee) "MATERIAL ADVERSE EFFECT" means, with respect to the Aggregate
Business, such state of facts, event, change or effect as has had, or would
reasonably be expected to have, a material adverse effect (i) on the business,
results of operations, or financial condition of the Aggregate Business, or
(ii) on the ability of Seller to consummate the transactions contemplated by
this Agreement.
(fff) "MOXLEY ROAD SITE" has the meaning set forth in Section 1.1(ee)(iv).
(ggg) Deleted.
(hhh) "NORTH QUARRY SITE" has the meaning set forth in Section 1.1(ooo)(i).
(iii) "PARTIES" means the Seller, the Asset Acquiror, the Share Acquiror,
Lafarge Canada and Lafarge S.A., collectively, and "PARTY" means any one of
them.
(jjj) "PENSION PLAN(S)" means the pensions plans maintained by the Seller
for the benefit of its employees or former employees as listed in Schedule
1.1(jjj).
(kkk) "PERMITTED LIENS" has the meaning set forth in Section 5.12.
(lll) "PERSON" means an individual, corporation, body corporate,
partnership, limited liability company, association, trust or other entity or
organization, including without limitation, a Governmental Entity.
(mmm) "PREFERENCE SHARES" has the meaning ascribed in Section 3.3.
(nnn) "PURCHASED ASSETS" means all right, title, benefit and interest of the
Seller in and to the assets, undertaking and properties of the Seller relating
to the Aggregate Business, but specifically
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excluding the Excluded Assets. Subject to the exception of the Excluded
Assets, the Purchased Assets include, without limitation;
(i) REAL PROPERTY - all of the Purchased Properties;
(ii) INVENTORIES - all the Inventories;
(iii) CONTRACTS AND EQUIPMENT LEASES - the full benefit and
advantage of the Contracts and the Equipment Leases and all
options, including, without limitation, options to purchase,
under the Contracts or Equipment Leases;
(iv) ASSETS, EQUIPMENT, ETC. - all assets, machines, machinery,
equipment, fixtures, furniture, furnishings, vehicles, dies,
tools, and other tangible property and facilities owned or
held by the Seller and used in the Aggregate Business,
including those described in Schedule 1.1(nnn)(iv);
(v) the full benefit of all manufacture, service or licence
agreements to which Seller is entitled in relation to any
Equipment Leases or other assets or machinery forming part of
the Purchased Assets;
(vi) GOODWILL OF AGGREGATE BUSINESS - the right, title and interest
of the Seller in the goodwill of the Aggregate Business;
(vii) PREPAID EXPENSES - all prepaid expenses and deposits
including, without limitation, taxes, business taxes, rents,
telephone and insurance incurred by the Seller in connection
with the Aggregate Business but excluding income, capital and
other taxes which are personal to the Seller and not incurred
in connection with the Aggregate Business;
(viii) ACCOUNTS RECEIVABLE - all accounts receivable, bills
receivable, trade accounts, book debts, and other amounts due,
owing or accruing due to the Seller in connection with the
Aggregate Business, including for greater certainty, the
benefit of all security (including cash deposits), guarantees
and other collateral held by the Seller in respect of any
accounts receivable;
(ix) INTELLECTUAL PROPERTY RIGHTS - all right, title and interest
of the Seller in the Intellectual Property Rights;
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(x) INVESTMENTS - the 3,750 issued and outstanding common shares
of National Slag Limited;
(xi) LICENSES - all the Licenses;
(xii) BOOKS AND RECORDS - all business books and records used in the
conduct of the Aggregate Business, including without
limitation, all financial, operating, inventory, legal,
personnel, payroll, and customer records and all sales and
promotional literature, correspondence and files and all plans
and specifications, if any, relating to the Real Property or
the plant, buildings and improvements thereon; and,
(xiii) GENERAL - the assets relating to the Aggregate Business listed
in Schedule 1.1(nnn)(xiii).
(ooo) "PURCHASED PROPERTIES" means the freehold, leasehold, and other
interests (whether beneficial or legal or both) in real and immoveable
properties owned by or on behalf of or used by the Seller in connection with
the Aggregate Business, and described as follows:
(i) the freehold lands and premises described in Schedule
1.1(ooo)(i) (the "NORTH QUARRY SITE");
(ii) the freehold lands and premises described in Schedule
1.1(ooo)(ii) (the "SOUTH QUARRY SITE");
(iii) the freehold lands and premises described in Schedule
1.1(ooo)(iii) (the "QUEENSTON QUARRY SITE");
(iv) the freehold lands and premises described in Schedule
1.1(ooo)(iv) (the "AGGREGATE/LIME PROCESSING SITE")
and all plant, buildings, sidings, parking lots, roadways, structures,
erections, improvements, appurtenances and fixtures situate on or forming part
of such lands and premises, except for the Excluded Assets.
(ppp) "PURCHASED SHARES" means, collectively, the Incorporator Share and the
Common Shares.
(qqq) "QUEENSTON QUARRY SITE" has the meaning set forth in Section
1.1(ooo)(iii).
(rrr) "REAL PROPERTIES" means, collectively, the Purchased Properties, the
Moxley Road Site and the Brow Site.
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(sss) "REDEMPTION PRICE" means the total redemption price for the Preference
Shares, being an amount equal to the Share Purchase Price.
(ttt) "SCHEDULED PERMITS" has the meaning set forth in Section 5.7(c).
(uuu) "SECOND CLOSING TIME" means 10:30 o'clock in the forenoon on the
Closing Date or such other time on such date as the Parties may agree as the
time at which the Closing shall take place.
(vvv) "SELLER" means Redland Quarries Inc., a corporation organized and
existing under the laws of the Province of Ontario.
(www) "SHARE ACQUIROR" means 3489949 Canada Inc., a corporation incorporated
under the laws of Canada.
(xxx) "SHARE PURCHASE PRICE" means the purchase price to be paid by the
Share Acquiror to the Seller for the Purchased Shares, all as provided in
Section 3.2.
(yyy) "SOUTH QUARRY SITE" has the meaning set forth in Section 1.1(ooo)(ii).
(zzz) "TAXES" means any Canadian, United States, United Kingdom, French or
other foreign, federal, state, local, provincial or municipal net income, gross
income, gross receipts, sales, goods and services, use, ad valorem, transfer,
franchise, profits, withholding, capital, payroll (including, for greater
certainty, Canada Pension Plan and Employment Insurance Act premiums),
employment, excise, stamp, occupation, property, customs, duties or other type
of fiscal levy and all other taxes of any kind whatsoever, together with any
interest, penalties or fines imposed or assessed with respect thereto and "TAX"
shall have a corresponding meaning.
(aaaa) "THIRD CLOSING TIME" means 11:00 o'clock in the forenoon on the
Closing Date or such other time on such date as the Parties may agree as the
time at which the Closing shall take place.
(bbbb) "TO THE KNOWLEDGE" or similar phrases, when used in reference to:
(A) the Seller means the knowledge of persons identified in
Schedule 1.1(www) (a); and,
(B) the Asset Acquiror, Share Acquiror or Lafarge Canada means the
knowledge of persons identified in Schedule 1.1(www)(b).
(cccc) "UNADJUSTED PURCHASE PRICE" has the meaning set forth in Section 3.2.
(dddd) "UNITED STATES STOCK PURCHASE AGREEMENT" has the meaning set forth in
Section 8.1.
(eeee) "WORKING CAPITAL AMOUNT" means the amount for the Aggregate Business
calculated in the manner set forth on Schedule 1.1, excluding, however, an
amount equal to the amount (calculated
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as of the date of the particular acquisition) of any working capital purchased,
or assumed, on or after January 1, 1998 and before the Closing Date in
connection with the acquisition by Seller of an aggregate business as a going
concern, using Closing Date values obtained from the Working Capital Statement.
(ffff) "WRITTEN NOTICE" has the meaning set forth in Section 11.1.
(gggg) "WORKING CAPITAL STATEMENT" means the working capital statement for
the Aggregate Business as at the Closing Date, prepared in accordance with
Section 2.15.
1.2 Schedules. The following Schedules are an integral part of this
Agreement:
Schedule 1.1 - Agreed Working Capital Amount
Schedule 1.1(k) - Assumption Agreement
Schedule 1.1(t) - Collective Agreements
Schedule 1.1(w) - Contracts
Schedule 1.1(cc) - Equipment Leases
Schedule 1.1(ee)(ii) - Lime Plant Site
Schedule 1.1(ee)(ii)B - Lime Plant Assets
Schedule 1.1(ee)(iii) - Operating Systems
Schedule 1.1(ee)(iv) - Moxley Road Property Description
Schedule 1.1(ee)(v) - Brow Landfill Site Description
Schedule 1.1(ff)(x) - Excepted Excluded Liabilities
Schedule 1.1(mm) - Group Plans
Schedule 1.1(rr) - Intellectual Property Rights
Schedule 1.1(aaa) - Licenses
Schedule 1.1(jjj) - Pension Plans
Schedule 1.1(nnn)(iv) - Fixed Assets and Equipment
Schedule 1.1(nnn)(xiii) - Other Purchased Assets
Schedule 1.1(ooo)(i) - North Quarry Site
Schedule 1.1(ooo)(ii) - South Quarry Site
Schedule 1.1(ooo)(iii) - Queenston Quarry Site
Schedule 1.1(ooo)(iv) - Aggregate / Lime Processing Site
Schedule 1.1(www)(a) - Persons with Knowledge - Seller
Schedule 1.1(www)(b) - Persons with Knowledge - Lafarge
Canada et. al.
Schedule 2.6 - Fair Market Values of Purchased
Assets
Schedule 3.3 - Articles of Incorporation of Share
Acquiror
Schedule 5.4 - Qualification re: Sufficiency of
Assets
Schedule 5.5 - Conflicts and Defaults of Seller
Schedule 5.7(a) - Pending Legal Proceedings
Schedule 5.7(b) - Governmental Compliance
Schedule 5.7(c) - Missing Licenses/Transferability
of Licenses
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Schedule 5.7(d) - Environmental Compliance
Schedule 5.8 - Employment Contracts
Schedule 5.9 - Benefit Plans
Schedule 5.10 - Financial Statements
Schedule 5.11 - Required Filings and Permits
Schedule 5.12(a) - Liens
Schedule 5.13 - Material Adverse Change
Schedule 5.14 - Reserves
Schedule 5.15 - Material Agreements/Transferability
of Agreements
Schedule 5.16 - Assumed Liabilities
Schedule 5.18 - Exceptions to Accounts Receivable
Schedule 5.19 - Affiliate Transactions
Schedule 5.20 - Customers and Suppliers
Schedule 5.25 - Locations of Material Tangible
Assets
Schedule 5.27 - Guarantees and Indemnitees
Schedule 6.3 - Conflicts and Defaults of Share
Acquiror and Lafarge Canada
Schedule 7.1 - Out of the Ordinary Course
Exceptions
Schedule 7.17 - Employees
Schedule 7.20(a) - Form of Pension Assumption
Agreement
Schedule 7.20(b) - Actuarial Methods, Assumptions and
Principles
Schedule 7.23 - Form of Lime Plant Lease
Schedule 8.2(g) - Form of Opinion of McCarthy
Tetrault
Schedule 8.3(e) - Form of Lafarge S.A. Guarantee
Schedule 8.3(i) - Form of Opinion of Miller Thomson
and Form of opinion of
Andre-Gilles Taithe, corporate
counsel to Lafarge S.A.
1.3 Arm's Length. For purposes of this Agreement, Persons are not dealing
"at arm's length" with one another if they would not be dealing at arm's length
with one another for purposes of the ITA.
1.4 Business Days. Whenever any action or payment to be taken or made
under this Agreement shall be stated to be required to be taken or made on a
day other than a Business Day, such payment shall be made or such action shall
be taken on the next succeeding Business Day.
1.5 Statutory Instruments. Unless otherwise specifically provided in this
Agreement, any reference in this Agreement to any law, by-law, rule,
regulation, order, act or statute of any government, governmental body or other
regulatory body shall be construed as a reference to those as amended or
re-enacted from time to time or as a reference to any successor to those.
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1.6 Provincial Tax Legislation. For the purposes of this Agreement, where
the context so permits, any reference to the ITA includes a reference to any
analogous provincial legislation, any reference to any provision of the ITA
includes a reference to the corresponding provision of any such analogous
provincial legislation, any reference to Revenue Canada includes a reference to
any relevant provincial taxation authority and any reference to a filing or
similar requirement imposed under the ITA includes a reference to any
corresponding filing or requirement imposed under any such analogous provincial
legislation.
1.7 Accounting Terms. All accounting terms not otherwise defined have the
meanings assigned to them, and all calculations are to be made and all
financial data to be submitted are to be prepared, in accordance with the
generally accepted accounting principles ("GAAP") approved from time to time by
the Canadian Institute of Chartered Accountants, or any successor institute
applied on a consistent basis.
1.8 Liabilities and Obligations. Lafarge Canada, Asset Acquiror and Share
Acquiror acknowledge that Asset Acquiror and Share Acquiror are, or will upon
Closing, become wholly-owned subsidiaries of Lafarge Canada and that it is
essential to Seller in entering into this Agreement that the covenant of
Lafarge Canada extends to all the liabilities and obligations of Asset Acquiror
and Share Acquiror under this Agreement and the Acquiror Other Agreements. The
Parties therefore confirm their intention, and the Parties hereby agree, that
each of Lafarge Canada, Asset Acquiror and Share Acquiror are jointly and
severally liable for the payment and performance of all the liabilities and
obligations under this Agreement and under the Acquiror Other Agreements of
Lafarge Canada, Asset Acquiror and Share Acquiror, whether or not those
liabilities and obligations are expressed as the liabilities and obligations of
one or more of them.
ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS
2.1 Purchase and Sale of Purchased Assets. Upon and subject to the terms
and conditions of this Agreement, the Seller shall sell, transfer, assign and
set over to the Asset Acquiror and the Asset Acquiror shall purchase and
acquire from the Seller at the First Closing Time, the Purchased Assets for the
Asset Purchase Price payable as provided in Section 2.7.
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2.2 Excluded Assets. For greater certainty, the Excluded Assets shall be
specifically excluded from the Purchased Assets whether or not they may be
considered to form part of the property and assets of the Aggregate Business.
Within 30 days following the Closing Date, the Seller shall at its own expense
remove all tangible Excluded Assets, if any, from the premises of the Aggregate
Business except for the PH neutralization plant.
2.3 Assumed Liabilities. The Asset Acquiror agrees to assume and become
liable only for the Assumed Liabilities at the First Closing Time by executing
and delivering the Assumption Agreement to the Seller.
2.4 Excluded Liabilities. For greater certainty, it is understood that
the Asset Acquiror will assume no liabilities other than those described in or
forming part of the Assumed Liabilities that, without limitation, do not
include the Excluded Liabilities.
2.5 Non-Assignable Contracts. This Agreement and any document delivered
under this Agreement shall not constitute an assignment or an attempted
assignment of any Contract, Equipment Lease or Licence contemplated to be
assigned to the Asset Acquiror under this Agreement:
(a) which is not assignable without the consent of a third party
if such consent has not been obtained and such assignment or
attempted assignment would constitute a breach of such
contract or agreement; or
(b) in respect of which the remedies for the enforcement of such
contract or agreement available to the Seller would not pass
to the Asset Acquiror.
The Seller shall use its best efforts to obtain the consents of third
parties as may be necessary for the assignment of the Contracts, the Equipment
Leases and the Licenses except that the Seller shall not be obliged to make any
payments to those third parties in addition to those required to be made under
those contracts or agreements in order to obtain such consents, unless the
Asset Acquiror agrees in writing to reimburse the Seller for such payments at
the time that they are made. To the extent that any of the foregoing items are
not assignable by their terms or where consents to their assignment cannot be
obtained as provided in this Section 2.5, such items shall be held by the
Seller in trust for the Asset Acquiror and the covenants and obligations under
those contracts or agreements shall be performed by the Asset Acquiror in the
name of the Seller and all benefits and obligations
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existing therein shall be for the account of the Asset Acquiror. The Seller
shall take or cause to be taken such action in its name or otherwise as the
Asset Acquiror may reasonably require so as to provide the Asset Acquiror with
the benefits of those contracts or agreements and to effect collection of money
to become due and payable under such items and the Seller shall promptly pay
over to the Asset Acquiror all money received by the Seller in respect of all
of the foregoing items. Upon the Closing, the Seller and the Asset Acquiror
shall execute and deliver a general assignment of contracts, leases and
licenses agreement, under which the Seller shall authorize the Asset Acquiror,
at the Asset Acquiror's expense, to perform all of the Seller's obligations
under the foregoing items and constitute the Asset Acquiror its attorney to act
in the name of the Seller with respect to those items, and the Asset Acquiror
shall agree to assume those obligations.
Nothing in this Section 2.5 shall limit the effect of Subsection
8.3(1) regarding consents to assignments.
2.6 Asset Purchase Price. The Asset Purchase Price payable by the Asset
Acquiror under this Agreement for the Purchased Assets shall be the aggregate
of the respective fair market values as at the First Closing Time of the
Purchased Assets which, subject to the adjustments provided in this Article II,
shall be the aggregate of the amounts set forth in Schedule 2.6.
The Asset Purchase Price shall be allocated amongst the Purchased
Assets in accordance with the foregoing and the Seller and the Asset Acquiror
hereby agree to report the purchase and sale of the Purchased Assets for all
Tax purposes in a manner consistent with the foregoing calculation.
2.7 Payment of Asset Purchase Price. At the First Closing Time, the Asset
Acquiror shall pay and satisfy the Asset Purchase Price as follows:
(a) as to a portion of the Asset Purchase Price equal to the
aggregate book value of the Assumed Liabilities, by the
assumption by the Asset Acquiror of the Assumed Liabilities,
as at and from the Closing Time; and
(b) as to the balance of the Asset Purchase Price, by the
allotment, issuance and delivery to the Seller as fully paid
and non-assessable of 999 common shares in the capital of the
Asset Acquiror (the "COMMON SHARES").
The Asset Acquiror acknowledges that the Asset Purchase Price does not
include GST payable, if any, as a result of the purchase and sale of the
Purchased Assets.
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2.8 Stated Capital Account. In accordance with the provisions of
subsection 26(3) of the Canada Business Corporations Act, the Asset Acquiror
agrees that it shall add to the stated capital account maintained by it for its
common shares in respect of the Common Shares to be issued by it pursuant to
subsection 2.7(b) an amount equal to $1.00.
2.9 Allocation of Consideration. The aggregate consideration for the
Purchased Assets, as set out in section 2.7, shall be allocated among, and
shall be applied in payment and satisfaction of the applicable portion of the
Asset Purchase Price for each of the Purchased Assets as follows:
(a) the Assumed Liabilities shall be allocated:
(i) firstly, to the Accounts Receivable to the extent of
the portion of the Asset Purchase Price (for greater
certainty, net of any allowance for doubtful
accounts) attributable thereto;
(ii) secondly, to prepaid expenses and deposits included
in the Purchased Assets to the extent of the portion
of the Asset Purchase Price attributable thereto; and
(iii) thirdly, to those of the Purchased Assets which
constitute "eligible property" (other than accounts
receivable) within the meaning of subsection 85(1.1)
of the ITA to the extent of the Elected Amount for
each such Purchased Asset computed in accordance with
Section 2.10 until the full amount of the Assumed
Liabilities has been allocated; and
(b) the Common Shares shall be allocated in payment and
satisfaction of the balance of the Asset Purchase Price for the
Purchased Assets.
2.10 Election under subsection 85(1) of ITA. The Seller and the Asset
Acquiror agree to file jointly and on a timely basis an election in prescribed
form under the provisions of subsection 85(1) of the ITA in respect of the
purchase and sale of those Purchased Assets which are "eligible property" as
defined in subsection 85(1.1) of the ITA, whereby the Elected Amount in respect
of each such Purchased Asset shall be the minimum amount permissible under
section 85 of the ITA (calculated solely for this purpose on the assumption
that no portion of the Assumed Liabilities is allocated in payment of the
portion of the Asset Purchase Price attributable to such Purchased Asset) and
provided that the Elected Amount in respect of each such Purchased Asset shall
not be less than
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the minimum amount of $1.00. With respect to depreciable property and eligible
capital property as defined in the ITA, an election shall be made in respect of
each item of depreciable property and eligible capital property separately, the
order of disposition to be designated by the Seller. The Seller and the Asset
Acquiror agree that no election under subsection 85(1) of the ITA shall be made
in respect of accounts receivable which form part of the Purchased Assets as
described in Section 1.1(nnn)(viii). The Seller shall provide to the Asset
Acquiror upon request all available background information in its possession
which is necessary to enable the Asset Acquiror to verify the information
contained in such elections. The Seller and the Asset Acquiror agree that the
foregoing provisions of this section shall apply, mutatis mutandis, to the
election available under the Corporations Tax Act (Ontario) and under any other
comparable legislation.
2.11 Election under section 22 of ITA. The Seller and the Asset Acquiror
hereto agree to file such elections as are required to elect, pursuant to
subsection 22(1) of the ITA, an amount equal to the book value (net of
allowance for doubtful accounts) of the accounts receivable which form part of
the Purchased Assets as described in Section 1.1(nnn)(viii) purchased hereunder
to be the consideration paid therefor.
2.12 Election under subsection 167(1) of ETA. The Seller and the Asset
Acquiror hereby agree to elect jointly under subsection 167(1) of the ETA, in
the prescribed form and within the prescribed time for purposes of the ETA, in
connection with the sale of the Purchased Assets hereunder.
2.13 Transfer Taxes. The Asset Acquiror shall be liable for and shall pay
all Taxes properly payable in connection with the conveyance and transfer of
the Purchased Assets to the Asset Acquiror other than taxes calculated on or
with reference to the income or capital of the Seller (collectively, "TRANSFER
TAXES"). For greater certainty, the liability for Transfer Taxes shall not
constitute Assumed Liabilities for purposes of this Agreement and shall not
reduce the Asset Purchase Price or the Working Capital Amount.
2.14 Adjustment of Elected Amount. In the event that Revenue Canada
disputes the Elected Amount of any of the Purchased Assets, the Seller and the
Asset Acquiror hereby agree to amend the elections referred to in Section 2.10
in accordance with the provisions of the ITA and regulations thereunder so that
the Elected Amount for such Purchased Asset shall be the amount finally
determined as such Elected Amount, whether by a court of competent jurisdiction
or by a settlement
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approved by the Seller, the Asset Acquiror and Revenue Canada. In the event of
any such adjustment, the consideration allocated to the relevant Purchased
Assets shall be adjusted as of the First Closing Time so that the portion of
the Assumed Liabilities allocated as full or partial consideration for each
such Purchased Asset shall not exceed the Elected Amount.
2.15 Working Capital Statement.
(a) Seller shall prepare, promptly after Closing, the Working
Capital Statement prepared in accordance with the provisions of this Section
2.15. The Working Capital Statement shall be prepared on the basis of the
accounting policies and methods used in the Financial Statements and shall show
the Working Capital Amount as of the Closing Date.
(b) Seller shall use commercially reasonable efforts to cause a
draft Working Capital Statement to be delivered to Asset Acquiror within 60
days after the Closing.
(c) Asset Acquiror shall notify Seller within 30 days of receipt
of such draft Working Capital Statement whether or not it accepts it for the
purposes of this Agreement. In making such determination, Asset Acquiror shall
act in good faith.
(d) If Asset Acquiror notifies Seller that it does not accept such
draft Working Capital Statement:
(i) Asset Acquiror shall set out its reasons for such
non-acceptance and specify the adjustments which, in
its opinion, should be made to the draft Working
Capital Statement in order to comply with the
requirements of this Agreement; and
(ii) the Seller and the Asset Acquiror shall use all
reasonable efforts to meet and discuss the objections
of Asset Acquiror and to reach agreement upon the
adjustments (if any) required to be made to the draft
Working Capital Statement.
(e) If Asset Acquiror is satisfied with the draft Working Capital
Statement (either as originally submitted or after adjustments agreed upon
between Asset Acquiror and Seller) or if Asset Acquiror fails to notify Seller
of its non-acceptance of the draft Working Capital Statement within the 30 day
period referred to in Section 2.15(c), then the draft Working Capital Statement
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(incorporating any agreed adjustments) shall constitute the Working Capital
Statement for the purposes of this Agreement.
(f) If Asset Acquiror and Seller do not reach agreement within 15
days of Asset Acquiror's notice of non- acceptance under Section 2.15(d), then
the matters in dispute shall be referred, on the request of either party, for
determination by KPMG in Toronto (or, if they are unable or unwilling to do so,
another independent firm of internationally recognized public accountants that
does not provide material services to Asset Acquiror or Seller or their
respective Affiliates) (the "FIRM"). The following provisions shall apply:
(i) Asset Acquiror and Seller shall enter into an
engagement agreement with the Firm containing
customary terms and provisions, including customary
indemnification of the Firm;
(ii) Asset Acquiror and Seller shall each promptly prepare
a written statement on the matters in dispute which
(together with the relevant documents) shall be
submitted to the Firm as soon as possible, and, in
any event, within 15 days of its appointment, for
determination by the Firm within 30 days of its
appointment;
(iii) in making such determination the Firm shall state
what adjustments (if any) are necessary to the draft
Working Capital Statement in order to comply with the
requirements of this Agreement;
(iv) Seller and Asset Acquiror shall each provide the Firm
with all information which it reasonably requires and
the Firm shall be entitled (to the extent it
considers appropriate) to base its opinion on such
information and on the accounting and other records
of the Seller and Asset Acquiror;
(v) the Firm shall act as an expert (and not as an
arbitrator) in making any such determination which
shall (in the absence of manifest error) be final and
binding on the Seller and the Asset Acquiror; and
(vi) the expenses of any such determination by the Firm
shall be shared equally by Seller and Asset Acquiror.
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(g) Once Seller and Asset Acquiror reach (or pursuant to Section
2.15(e) are deemed to reach) agreement on the Working Capital Statement (or the
Working Capital Statement is finally determined at any stage in the procedures
set forth in this Section 2.15):
(i) the Working Capital Statement as so agreed or
determined shall be the Working Capital Statement for
the purposes of this Agreement and shall be final and
binding on the Seller and the Asset Acquiror; and
(ii) the Working Capital Amount as of the Closing shall be
derived from the Working Capital Statement for
purposes of computing the Share Purchase Price.
ARTICLE III
PURCHASE AND SALE OF PURCHASED SHARES
3.1 Purchase and Sale of Purchased Shares. Upon and subject to the terms
and conditions of this Agreement, the Seller shall sell, transfer, assign and
set over to the Share Acquiror and the Share Acquiror shall purchase and
acquire from the Seller at the Second Closing Time, the Purchased Shares for
the Share Purchase Price payable as provided in Section 3.3.
3.2 Share Purchase Price. The Share Purchase Price payable by the Share
Acquiror under this Agreement for the Purchased Shares shall be, subject to the
adjustments provided in this Section 3.2 and in Section 3.6, the sum of
$41,800,000 (the "UNADJUSTED PURCHASE PRICE"). The Unadjusted Purchase Price
shall be adjusted on the Closing Date or no later than 30 days after the
Closing Date as follows:
(a) the Unadjusted Purchase Price shall be decreased by the amount
of any cash proceeds received by Seller from the sale of any
capital assets relating to the Aggregate Business on or after
January 1, 1998 and before the Closing Date; and
(b) the Unadjusted Purchase Price shall be increased by:
(i) the amount of cash paid by the Seller on or after
January 1, 1998 and before the Closing Date for
acquisitions of aggregate businesses as going
concerns; and
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(ii) the amount of cash paid by the Seller on or after
January 1, 1998 and before the Closing Date in
respect of capital expenditures relating to the
Aggregate Business.
3.3 Payment of Share Purchase Price. At the Second Closing Time, the
Share Acquiror shall pay and satisfy the Share Purchase Price for the Purchased
Shares by the allotment, issuance and delivery to the Seller, as fully paid and
non-assessable, of 100,000 redeemable, retractable preference shares in the
capital of the Share Acquiror having the rights, privileges, restrictions and
conditions set forth in the articles of incorporation of the Share Acquiror a
true copy of which is annexed as Schedule 3.3 hereto (the "PREFERENCE SHARES").
3.4 Stated Capital Account. In accordance with subsection 26(3) of the
Canada Business Corporations, the Share Acquiror shall add to the stated
capital account maintained for its issued preference shares in respect of the
issuance of the Preference Shares pursuant to this Agreement, an amount equal
to the Elected Amount in respect of the Purchased Shares.
3.5 Election under subsection 85(1) of ITA. The Seller and the Share
Acquiror agree to file jointly and on a timely basis an election in prescribed
form under the provisions of subsection 85(1) of the ITA in respect of the
purchase and sale of the Purchased Shares, whereby the Elected Amount shall be
an amount equal to the adjusted cost base to the Seller of the Purchased Shares
immediately before the disposition thereof pursuant to this Agreement. In the
event that Revenue Canada disputes the Elected Amount in respect of the
Purchased Shares, the Seller and the Share Acquiror hereby agree to amend the
elections referred to in Section 3.5 in accordance with the provisions of the
ITA and regulations thereunder so that the Elected Amount for such Purchased
Shares shall be the amount finally determined as such Elected Amount, whether
by a court of competent jurisdiction or by a settlement approved by the Seller,
the Share Acquiror and Revenue Canada.
3.6 Share Purchase Price Adjustment. The parties hereto agree that the
Unadjusted Purchase Price, as adjusted under Section 3.2, shall be adjusted
after Closing as follows such that if the Working Capital Amount as of the
Closing, as determined in accordance with Section 2.15(g) is:
(i) less than the Agreed Working Capital Amount, then the
total price payable pursuant to Section 3.2 of this
Agreement shall be reduced by the amount of such
shortfall; or
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(ii) more than the Agreed Working Capital Amount, then the
total price payable pursuant to Section 3.2 of this
Agreement shall be increased by the amount of such
excess.
ARTICLE IV
REDEMPTION OF PREFERENCE SHARES
4.1 Redemption of Preference Shares. At the Third Closing Time, the Share
Acquiror shall redeem all of the Preference Shares at the Redemption Price.
4.2 Payment of Redemption Price. The Redemption Price for the Preference
Shares shall be paid and satisfied in accordance with the redemption provisions
contained in the rights, privileges, restrictions and conditions of the
Preference Shares set forth in Schedule 3.3 hereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND LAFARGE S.A.
As a material inducement to Asset Acquiror, Share Acquiror and Lafarge
Canada to enter into and perform their respective obligations under this
Agreement, and notwithstanding any examinations, inspections, audits, and other
investigations heretofore or hereafter made by Asset Acquiror, Share Acquiror
or Lafarge Canada, each of Seller and Lafarge S.A. hereby represents and
warrants to Share Acquiror and Lafarge Canada as follows, but subject to the
limitation that the representations and warranties in Sections 5.18 and 5.19
are qualified to the extent of any actions taken by Lafarge Canada or its
Affiliates in connection therewith on and after April 27, 1998 whether or not
the Seller knows of those actions:
5.1 Corporate Organization and Qualification. Each of Seller,
Lafarge S.A. and Asset Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and Seller is, and Asset Acquiror will be at the First Closing
Time, duly qualified to do business and is in good standing in all other
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, and has full corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business
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as it is now being conducted. Seller has heretofore made available to Asset
Acquiror, Share Acquiror and Lafarge Canada complete and correct copies of the
certificate or articles of incorporation and the bylaws of Seller and Asset
Acquiror, as currently in effect. Asset Acquiror has not prior to the First
Closing Time carried on any business.
5.2 Corporate Authority. Each of Seller, Lafarge S.A. and Asset
Acquiror has full corporate power and authority to execute and deliver this
Agreement and each of the other agreements and instruments contemplated hereby
to be delivered by Seller, Lafarge S.A. and Asset Acquiror and to consummate
the transactions contemplated hereby and thereby. The execution and delivery
of this Agreement and each other agreement and instrument contemplated hereby
to be executed and delivered by each of Seller, Lafarge S.A. and Asset Acquiror
(including, without limitation, the Non-Competition Agreements and the
Guarantee) (collectively, the "SELLER OTHER AGREEMENTS") and the consummation
of the transactions contemplated to be performed hereunder or thereunder have
been duly and validly authorized by all necessary corporate actions of each of
Seller, Lafarge S.A. and Asset Acquiror. This Agreement has been duly and
validly executed and delivered by Seller, Lafarge S.A. and Asset Acquiror and
constitutes, and each Seller Other Agreement will constitute when executed and
delivered to Share Acquiror and Lafarge Canada, a valid and binding agreement
of each of Seller, Lafarge S.A. and Asset Acquiror, as applicable, enforceable
against each of them respectively, as applicable, in accordance with the terms
hereof and thereof except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar Laws affecting the enforcement of
creditors' rights generally.
5.3 Capital Stock.
(a) The authorized capital stock of Asset Acquiror
consists of an unlimited number of common shares, of which only the
Incorporator Share is issued and outstanding on the date of this Agreement and
only the Purchased Shares will be issued and outstanding on the Closing Date.
The Incorporator Share constitutes the only issued and outstanding capital
stock of Asset Acquiror as at the date of this Agreement. Seller is the
registered and beneficial owner of the Incorporator Share and will become the
registered and beneficial owner of the remaining Purchased Shares at the First
Closing Time. Neither Seller nor Lafarge S.A. is a party to, or bound by, any
agreement or understanding, other than this Agreement, restricting the voting
or transfer of the
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Purchased Shares. Upon delivery of and payment for the Purchased Shares
pursuant to this Agreement, Share Acquiror will acquire good and valid title to
the Purchased Shares, free and clear of all Liens.
(b) The Incorporator Share has been and the remaining
Purchased Shares at the Second Closing Time will be duly authorized and validly
issued and are fully paid and non-assessable and free of preemptive or similar
rights. There are no (i) securities of Seller or any other entity, or any
other instruments or rights, convertible into or exchangeable for shares of
capital stock or any other securities of Asset Acquiror, (ii) warrants, options
or other rights to acquire from Seller, or any other entity, or other
obligations of Seller or Lafarge S.A. to issue, any capital stock or other
securities or securities convertible into or exchangeable for capital stock or
any other securities of Asset Acquiror, (iii) voting trusts or agreements
relating to the capital stock of Asset Acquiror or bonds, debentures, notes or
other obligations or securities of Seller or Asset Acquiror or any other entity
the holders of which have the right to vote with the stockholders of Asset
Acquiror on any matter submitted for the vote of Asset Acquiror shareholders or
(iv) phantom security interests in, or other agreements or commitments of any
nature relating to, the capital stock or other securities of Asset Acquiror.
(c) The Seller is the registered and beneficial owner of
3,750 common shares of National Slag Limited, representing 50% of the issued
and outstanding shares of National Slag Limited.
5.4 Sufficiency of Assets. Except to the extent that any Excluded
Assets are employed by Seller in the operation of the Aggregate Business,
including those Excluded Assets set forth in Schedule 5.4, the Purchased Assets
comprise all the property, rights and assets necessary for the carrying on of
the Aggregate Business, as and to the extent to which it is presently
conducted. No Person, other than the Seller, has any right to the use or
possession of any material property, rights or assets (other than rights of
lessors under the Lease and the Equipment Leases that may arise in the future
following termination thereof) that are necessary for the carrying on of the
Aggregate Business. Seller does not use in the conduct of the Aggregate
Business any material equipment, properties or assets owned by any other
Person, except property leased or licensed to Seller under the valid and
enforceable Lease and Equipment Leases.
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5.5 Conflicts and Defaults. Neither the execution, delivery and
performance by Seller or Lafarge S.A. of this Agreement or any of the Seller
Other Agreements, nor the consummation of the transactions contemplated hereby
or thereby, nor compliance by Seller, Lafarge S.A. or Asset Acquiror with any
of the provisions hereof or thereof will, except as set forth in Schedule 5.5,
(a) violate, conflict with, or result in a breach of any provisions of, or
constitute a default which, with notice or lapse of time or both, would
constitute a default under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
of, or result in the creation of any Lien upon any of the properties or assets
of Seller under any of the terms, conditions, or provisions of (i) its
certificates of incorporation, or by-laws, or (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, or other instrument,
obligation or arrangement to which Seller is a party or by which it may be
bound or to which Seller or any of the properties or assets of Seller may be
subject except where such violation would not have a Material Adverse Effect
and except where the consent to the transfer or assignment thereof by a Person
other than Seller is required (as described in Schedule 5.11) and such consent
is not obtained on or before the Closing Date, or (b) violate any Law
applicable to Lafarge S.A. or Seller, or any of their respective properties or
assets except where such violation would not have a Material Adverse Effect.
5.6 Tax Returns. Seller has provided Lafarge Canada with true
copies of its federal and provincial income tax returns for its 1994 to 1996
taxation years.
5.7 Legal Proceedings and Governmental Compliance.
(a) Except as set forth in Schedule 5.7(a) or Schedule
5.7(d), there is no pending claim, action, suit, grievance, complaint,
prosecution or other proceeding, or, to Seller's knowledge, governmental
investigation, or, to Seller's knowledge, threat of any of the foregoing,
against Seller in respect of the Aggregate Business or Purchased Assets that
involves an amount in controversy or seeks damages, penalties or fines in
excess of $50,000 or that concerns the revocation or suspension of any
Scheduled Permit, and, to the knowledge of Seller, there is no basis for any
such action. Schedule 5.7(c) also indicates, with respect to each matter shown
thereon, whether the matter is covered (subject to applicable deductibles,
policy limits and co-insurance, if any) by insurance or not or whether there is
a reservation of rights.
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(b) Except as set forth in Schedule 5.7(b), to Seller's
knowledge the Aggregate Business is in compliance in all material respects with
all applicable Laws.
(c) Except as set forth on Schedule 5.7(c), to Seller's
knowledge, the Licenses listed in Schedule 1.1(aaa) constitute all governmental
permits, business licenses, certificates, approvals, authorizations,
franchises, and other similar items necessary for the lawful conduct of the
Aggregate Business as it is currently conducted, including all licenses
required to comply with applicable Environmental Laws and all mining permits
and all other licenses relating to the Aggregate Business or the Purchased
Assets (collectively, the "SCHEDULED PERMITS"). Except as set forth in
Schedule 5.7(c), all Scheduled Permits are in full force and effect and are
being complied with in all material respects. Schedule 5.7(c) also identifies
all the Licenses that are freely assignable or transferable, the Licenses that
are not assignable or transferable and the Licenses that are assignable or
transferable upon receipt of the consent of a Governmental Entity.
(d) Except as set forth in Schedule 5.7(d):
(i) Seller has been, and the Aggregate Business
is being operated, in compliance in all material respects with all
applicable Environmental Laws.
(ii) There is no Environmental Claim pending or,
to the Seller's knowledge, threatened against Seller or, to Seller's
knowledge, pending or threatened by or against any other Person with
respect to the Purchased Assets or the Aggregate Business or for whose
liability for any Environmental Claim the Seller has or may have
retained or assumed by contract or otherwise.
(iii) There are no administrative or judicial
judgments, orders or decrees that relate to violations of
Environmental Law with respect to Seller or the Aggregate Business or
to the release, discharge, emission or disposal of Hazardous Materials
on, to, from or under the Purchased Properties.
(iv) To Seller's knowledge, (a) there have been no
releases, discharges, emissions or disposals of Hazardous Materials
on, to, from or under the Purchased Properties in violation of an
Environmental Law that have not been remediated to the satisfaction of
the Governmental Entity with jurisdiction over said release,
discharge, emission or disposal, and (b) no part of the Purchased
Properties is or contains, in violation of an Environmental Law,
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a waste disposal site for non-hazardous or hazardous waste as defined
by the Environmental Protection Act (Ontario).
As used in this Agreement, the term "ENVIRONMENTAL LAWS" means any Laws,
including written policies and guidelines and directives, administrative
rulings or interpretations, that are in effect, as well as the common law and
any judicial or administrative order, consent decree or judgment that is in
effect, and that are applicable within the Province of Ontario and which relate
to pollution or the protection of the environment, including, without
limitation, the Atomic Energy Control Act (Canada), the Canadian Environmental
Protection Act (Canada), the Pest Control Products Act (Canada), the
Transportation of Dangerous Goods Act (Canada), the Environmental Protection
Act (Ontario), the Environmental Assessment Act (Ontario), the Ontario Water
Resources Act (Ontario) and the Occupational Health & Safety Act (Ontario), and
the regulations promulgated pursuant thereto or issued by any Governmental
Entity in respect thereof, and equivalent or similar local and provincial
ordinances and statutory programs and the regulations promulgated pursuant
thereto.
5.8 Labour and Employment. No labour lockout, work stoppage or
organized slow down involving Seller exists or, to Seller's knowledge, is
threatened, nor has there been any such activity within the past three years.
Except for the Collective Agreements (i) no employees of the Seller are
represented by any labour union nor are any collective bargaining agreements or
negotiations otherwise in effect with respect to such employees and (ii) Seller
has no knowledge of any union organizing activities with respect to employees
of the Seller within the past three years. Except as set forth on Schedule
5.8, there are no employment contracts with any Employees of Seller that
contain terms and conditions of employment different than those previously
disclosed by Seller to Lafarge Canada. To Seller's knowledge, no Governmental
Entity is conducting or intends to conduct any investigation of or prosecution
regarding employment conditions or practices of Seller. None of the Employees
is presently on temporary leave of absence, layoff or disability.
5.9 Employee Benefit Plans. Schedules 1.1(mm) and 5.9
collectively contain true and complete lists of all pension, retirement,
supplementary retirement, stock option, stock purchase, stock ownership,
savings, stock appreciation right, profit sharing, deferred compensation,
severance, employment, consulting, bonus, group insurance, employee welfare
and/or benefit policies, contracts, plans, and arrangements, and all trust
agreements or insurance contracts or other similar
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documents relating thereto, maintained, sponsored or administered by Seller and
with respect to which Seller contributes, is obligated to contribute or has or
may have any liability, or which covers any of the present or former directors,
officers, or other employees of the Seller (collectively, "BENEFIT PLANS").
Seller has delivered to Lafarge Canada true and complete copies of each Benefit
Plan, including all amendments thereto, and true and complete copies of each of
the following documents (collectively, the "BENEFIT PLAN DOCUMENTS"): (i) all
Benefit Plan summaries, booklets and manuals describing or giving particulars
of the plan or, where such Benefit Plan is an oral commitment, a written
summary of the terms thereof; (ii) the two most recently completed annual
information returns and/or actuarial reports, if any, prepared in respect of
each Benefit Plan together with all of the annual information returns in the
possession of Seller for the Queenston Hourly-Rated Employees Pension Plan; and
(iii) any trust or other funding agreement or contract (including all
amendments thereto) relating to any Benefit Plan and the latest financial
statements thereof. Except as set forth in Schedule 5.9 all Benefit Plans
currently comply and have at all relevant times complied in all material
respects with all applicable Laws, including, without limitation, the ITA. All
material terms and conditions of the Benefit Plans are reflected in the Benefit
Plan Documents and, without limiting the foregoing, no promises or commitments
have been made by the Seller to amend any Benefit Plan or to provide increased
benefits thereunder to any employee, except as required by Law.
(a) Each of the Benefit Plans is duly registered, where
required, with all applicable regulatory authorities, and has at all relevant
times been funded and administered in all material respects in accordance with
all Laws applicable to the plan, and in accordance with the terms of the plan
and all employee plan summaries, booklets and manuals relating thereto.
(b) Except as disclosed in Schedule 5.9, there are no
pending or, to Seller's knowledge, threatened or anticipated claims by or on
behalf of the Benefit Plans or by any participant therein, alleging a breach or
breaches of fiduciary duties or violations of applicable Laws which could
result in any material liability on the part of the Seller, or its officers,
directors or employees, or on the part of such Benefit Plans under any
applicable Laws and, to Seller's knowledge, there is no basis for such claim.
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(c) Except as disclosed in Schedule 5.9 all obligations
of Seller under the Benefit Plans with respect to the making and remittance of
contributions or premiums have been satisfied in accordance with such plan
terms. All employee contributions to any of the Benefit Plans which have been
received by Seller or deducted by it from the remuneration of employees have
been fully paid into the funding arrangement for the respective plan.
(d) Each of the Benefit Plans which is a Pension Plan is
duly registered under and has been administered in all material respects in
compliance with all applicable federal and provincial legislation and all
reports, returns and filings required to be made thereunder have been made.
All contributions required to be made by Seller to each of the Pension Plans in
order to comply with the minimum funding standards imposed by applicable
federal or provincial legislation have been made or properly accrued, and each
Pension Plan is being funded in accordance with the requirements of such plan
and the most recent actuarial report prepared in respect thereof. No funds
have been withdrawn by Seller from any of the Pension Plans and no application
for approval of a withdrawal of plan funds has been made to any applicable
regulatory authority. None of the Pension Plans is a multi-employer pension
plan as defined under the provisions of any applicable federal or provincial
legislation.
(e) With respect only to the Queenston Hourly Rated
Employees Pension Plan:
(i) to the best of the knowledge of Seller, all
employer contribution holidays, if any, that have been taken have been
permitted by the terms thereof and have been in accordance with
applicable Laws;
(ii) no event has occurred and no condition or
circumstance exists that has resulted or, to the best of the knowledge
of the Seller could reasonably result in, any order or requirement by
any Governmental Entity of termination or winding-up in whole or in
part, or refusal or revocation of registration under any applicable
Law, or placement under administration of any trustee or receiver or
any Governmental Entity or requirement to pay any material Taxes under
any applicable Law;
(iii) no event has occurred and there has been no
failure to act on the part of the Seller, any funding agent or any
administrator thereof that could subject the Seller or
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the fund of the pension plan to the imposition of any Tax or
disability, whether by way of indemnity or otherwise; and
(iv) as at Closing, such Plan will not have an
unfunded liability on either a solvency or on a going-concern basis.
5.10 Financial Statements. Attached hereto as Schedule 5.10 are
the Financial Statements. The Financial Statements have been prepared from the
books and records of the Seller. The Financial Statements have been prepared
in accordance with GAAP (except for the treatment of Seller's holding of shares
in the capital stock of Redland France S.A. and the use of "push-down" or
purchase accounting required as a result of the acquisition by Redland PLC of
Steetley Quarries Inc.) on a consistent basis and fairly present, in all
material respects, the financial position and results of operations of Seller
as of the date and for the periods indicated therein.
5.11 Consents. No filing with, and no consent, licence, permit or
franchise from any Governmental Entity or any other Person is necessary or
required to be received in connection with the consummation by Seller and Asset
Acquiror of the transactions contemplated by this Agreement and the Seller
Other Agreements other than as set forth in Schedule 5.11 or Schedule 5.7(c).
5.12 Ownership of Assets.
(a) Seller has, as of the date hereof, and on the Closing
Date Seller and Asset Acquiror will have, good and indefeasible title to the
Purchased Assets free and clear of all Liens other than (i) materialman's and
mechanics Liens and other Liens arising as a matter of Law which are listed in
Schedule 5.12(a), (ii) purchase money security interests which are listed in
Schedule 5.12(a) and (iii) such other Liens, defects and other encumbrances as
do not (individually or in the aggregate) materially affect the use or value of
the Purchased Assets or materially interfere with the conduct of the Aggregate
Business as now conducted (collectively, the "PERMITTED LIENS"). All Equipment
Leases are valid and binding leases.
(b) Other than the market value re-assessment imposed in
1997 in relation to the Real Property, to Seller's knowledge there are no plans
of any Governmental Entity which would result in the imposition of a special
assessment relating to any of the Real Properties that is not reserved in the
Financial Statements and that is in excess of $20,000.
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5.13 Material Adverse Change. To Seller's knowledge, since
December 31, 1997 the Seller has, except as contemplated by this Agreement,
conducted its Aggregate Business in the ordinary course of business consistent
with past practice. Except as set forth in Schedule 5.13, since December 31,
1997 Seller has not (i) transferred, leased or otherwise disposed of any of
its assets or properties relating to the Aggregate Business, other than in the
ordinary course of business consistent with past practice; (ii) in respect of
the Aggregate Business or the Purchased Assets, suffered any material casualty
loss or damage (whether or not such loss or damage shall have been covered by
insurance) or received any claim or claims in excess of insurable limits, or
canceled any insurance coverage; (iii) other than in the ordinary course of
business, surrendered, revoked or otherwise terminated or had terminated any
material license, permit, registration or other approval, authorization or
consent from any Governmental Entity or any other Person relating to the
conduct of the Aggregate Business; or (iv) entered into any agreement or
arrangement to take any action described in clauses (i) - (iii) of this Section
5.13. Except as expressly contemplated by this Agreement or as set forth on
Schedule 7.1 or Schedule 5.13, since December 31, 1997 there has been no
Material Adverse Effect.
5.14 Reserves. To Seller's knowledge, the aggregate reserve
estimates for the Aggregate Business contained in Schedule 5.14 to this
Agreement fairly and accurately describe such reserves; provided, however, that
this representation shall not apply to any matter known to Lafarge Corporation
or Lafarge Canada as of the Closing.
5.15 Contracts.
(a) Schedule 5.15 sets forth a true and complete list of
(i) each agreement to which Seller is a party that would be reasonably expected
to materially limit the freedom of Asset Acquiror to continue the Aggregate
Business or compete with any Person or in any geographical area or otherwise to
conduct the Aggregate Business as currently conducted; (ii) each contract or
agreement for maintenance, consulting, engineering or other services relating
to the Aggregate Business or the Purchased Assets which requires the remaining
payment of money by Seller in excess of $50,000; (iii) each sales contract or
agreement with a customer of the Aggregate Business which provides for
remaining payment in excess of $50,000 to Seller for products produced pursuant
to which any customer would be expected to pay in excess of $50,000 to Seller
for such products
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during the term of such contract or agreement; (iv) each raw material purchase
contract or agreement pursuant to which raw materials were or would be
purchased for use by Seller in connection with the Aggregate Business which
provides for remaining payments in excess of $50,000; (v) each agreement or
commitment with any current or former shareholder, director, officer, employee,
or Affiliate of any such Person concerning the Aggregate Business other than
agreements or commitments which are not material to the business of the Seller
or that can be terminated without penalty on notice of six months or less; (vi)
each agreement with any Governmental Entity concerning the Aggregate Business
or any Purchased Asset, other than agreements executed in the ordinary course
of business of the Seller, agreements for the sale or provision of goods or
services and agreements otherwise referred to in clauses (i) through (v) of
this Section 5.15(a) (subject to the limitations therein); (vii) each agreement
relating to the release, or disposal of Hazardous Materials relating to the
Aggregate Business or the Purchased Assets other than customary agreements
executed in the ordinary course of business of the Seller; (viii) each
Equipment Lease; and (ix) each other agreement relating to the Aggregate
Business or the Purchased Assets which is material to the Aggregate Business.
With respect to each contract or agreement described in Section 5.15, Schedule
5.15 indicates whether such contract or agreement is freely assignable or
transferable or whether it is not freely assignable or transferable or whether
it is assignable or transferable subject to receipt of the consent of the other
party or parties to such contract or agreement. Except with respect to the
Lease the Seller is not a tenant under any lease of real property.
(b) Each agreement required to be listed on Schedule 5.15
is in full force and effect, and constitutes the legal, valid and binding
obligation of Seller and, to the knowledge of Seller, each other party thereto,
in accordance with the terms of such agreement, except that the enforceability
thereof may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar Laws affecting creditors' rights
generally and (ii) equitable principles that may limit the availability of
certain equitable remedies (such as specific performance) in certain instances;
and, to the knowledge of Seller, there exists no material default, event,
occurrence or act, that with the giving of notice or the lapse of time would
result in a material default thereunder by Seller, as a party thereto.
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5.16 Disclosed Liabilities. Seller does not have any liabilities
relating to the Aggregate Business (whether absolute, contingent, accrued or
otherwise), except for Excluded Liabilities, if any, relating to the Aggregate
Business and except for those (i) debts, liabilities and obligations reflected
in the Financial Statements, (ii) debts, liabilities and obligations disclosed
in Schedule 5.16 and Schedule 1.1(ff)(x), (iii) debts, liabilities and
obligations otherwise disclosed, described or referred to in Sections
7.17(d),(e) and(f) and 7.20(a) and (b)(x) as being liabilities and obligations
to be assumed by Asset Acquiror and/or Lafarge Canada in accordance with their
respective terms , and (iv) debts, liabilities or obligations incurred since
December 31, 1997 in the ordinary and usual course of the Aggregate Business
consistent with past practice (the debts, liabilities and obligations relating
to the Aggregate Business described in Sections 5.16(i), (ii), (iii) and (iv)
are referred to in this Agreement collectively as, the "DISCLOSED LIABILITIES",
and for greater certainty do not include the Excluded Liabilities); provided,
however, that if the specific factual matter relating to a Liability giving
rise to a claim under this Section 5.16 is also the subject of one or more
express representations or warranties contained in this Agreement, then the
qualification as to knowledge of the Seller, if any, or to a dollar amount, if
any, contained in such express representation and warranty shall also apply to
a claim under this Section 5.16.
5.17 Inventory. Each item of the Inventories is reflected in the
Financial Statements or in the books and records of Seller on the basis of
accounting procedures and valuation methods used on a basis consistent with
past practice.
5.18 Accounts Receivable. Except as set forth on Schedule 5.18,
the accounts receivable forming part of the Purchased Assets (the "ACCOUNTS
RECEIVABLE") are in respect of sales actually made, services actually delivered
or transactions actually completed by the Seller in bona fide transactions in
the ordinary course of business consistent with past practice. Except as set
forth on Schedule 5.18, none of the Accounts Receivable represents accounts
receivable from any of the Affiliates of Seller. All Accounts Receivable
arising on or before December 31, 1997 are good and collectable.
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5.19 Affiliate Transactions. With respect to the Aggregate
Business, Schedule 5.19 discloses the dollar amount and a brief description of
each transaction and the date thereof between the Seller, on the one hand, and
any Affiliate of Seller, on the other hand, between December 31, 1996 and the
date of this Agreement (the "AFFILIATE TRANSACTIONS").
5.20 Customers and Suppliers. Schedule 5.20 contains a true and
complete list of the names and addresses of the 50 largest suppliers and
customers during 1997 of Seller relating to the Aggregate Business. As at
December 31, 1997, the Seller had not received notice of, and to Seller's
knowledge, there was no reasonable basis for, any development which threatened
to affect adversely any arrangements with the customers and suppliers listed on
Schedule 5.20.
5.21 Insurance. Seller maintains, and has heretofore maintained,
and there are currently in full force and effect, policies of insurance that
are, in combination with Seller's self insurance, reasonable for the conduct of
the Aggregate Business as currently and heretofore conducted.
5.22 Intellectual Property. To Seller's knowledge, Seller has not
violated or infringed any patents, trademarks, trade names, assumed names,
copyright and other similar intangible property rights and interests applied
for, issued to or presently owned or used by any Person or under which any such
Person is licensed or franchised or any license, authorization or permit
relating to the Intellectual Property Rights. To Seller's knowledge, there are
no proceedings pending or threatened, alleging that the conduct of the
Aggregate Business infringes upon or constitutes the unauthorized use of the
proprietary rights of any third party other than such violations or
infringements which, individually or collectively, would not have a Material
Adverse Effect.
5.23 Condition of Assets. EXCEPT AS EXPRESSLY SET FORTH HEREIN,
NEITHER SELLER NOR LAFARGE S.A. MAKES ANY REPRESENTATION OR WARRANTY (EXPRESS
OR IMPLIED) AS TO THE CONDITION, REPAIR, QUANTITIES, SALABILITY,
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY OF THE PURCHASED
ASSETS AND, EXCEPT AS EXPRESSLY SET FORTH HEREIN, LAFARGE CANADA, ASSET
ACQUIROR AND SHARE ACQUIROR ACCEPTS SUCH ASSETS "AS IS, WHERE IS."
5.24 Purchased Assets. The Purchased Assets referred to in any
Schedule to this Agreement are accurately described.
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5.25 Location of Assets. All material tangible assets of the
Seller used in or in connection with the Aggregate Business are all normally
situate only in the Province of Ontario; the location at which such assets are
normally situate is set forth in Schedule 5.25.
5.26 Real Property. The Purchased Properties and their existing
and prior uses comply with, and at all material times have complied with, and
the Seller is not in violation of or has not violated in connection with the
ownership, use, maintenance or operation of the Purchased Properties, any
applicable Laws. There are no currently outstanding work orders or directions
requiring any work, repairs, construction or capital expenditures with respect
to the Purchased Properties and no such orders or directions are pending or
threatened. All physical plant and operations of the Aggregate Business and
the Lime Business that are located at or carried on from Dundas Site and
Queenston Site are located at or carried on from within the legal boundaries of
the Purchased Properties. The Seller is not aware of any encroachments,
easements or rights of way affecting the Purchased Properties except as
disclosed in Schedules 1.1(ooo)(i), (ii), (iii) and (iv) hereof.
5.27 Guarantees and Indebtedness. Except as disclosed in Schedule
5.27, the Seller is not a party to or bound by any guarantee, indemnification,
surety or similar obligation (except for product warranties and guarantees
granted in the ordinary course of business ) in respect of the Aggregate
Business.
5.28 Material Contracts. Except for the Contracts, the Equipment
Leases, the Lease and agreements with the Seller's bank concerning a Cdn.
$1,000,000 overdraft credit facility and Seller's acceptance of payments by
VISA credit card, the Seller is not a party to or bound by any material
contract or commitment relating to the Aggregate Business whether oral or
written.
5.29 No Options. No Person other than the Asset Acquiror has any
agreement or option or any right capable of becoming an agreement or option for
the purchase from the Seller of any of the Purchased Assets, other than
purchase orders accepted by the Seller in the ordinary course of business.
5.30 Expropriation. No part of the Purchased Assets has been taken
or expropriated by any Governmental Entity nor has any notice or proceeding in
respect thereof been given or
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commenced nor is the Seller aware of any intent or proposal to give such notice
or commence any such proceedings.
5.31 Residence. The Seller is not a non-resident of Canada for
purposes of section 116 of the ITA.
5.32 GST Registration. The Seller is a registrant for purposes of
GST and Seller's GST registration number is R136027851.
5.33 Tax Matters. Seller is not in arrears or in default in
respect of the filing of any Tax or other return; and,
(i) all Taxes due and payable have been paid to the
appropriate Governmental Entity and all Taxes
required to be remitted have been remitted in the
ordinary course and, to the extent required, have
been remitted to the appropriate Governmental Entity;
(ii) no claim for additional Taxes, filing fees, or other
amounts and assessments has been made that has not
been paid;
(iii) to the best of the Seller's knowledge, no such return
contains any misstatement or conceals any statement
that should have been included therein; and
(iv) the Purchased Assets have not previously been
transferred on a tax-exempt basis under section 13 of
Ontario Regulation 1013 or any predecessor thereof.
5.34 Worker's Compensation. All levies under the Workplace Safety
and Insurance Act, 1997 (Ontario) have been paid by the Seller.
5.35 Health and Safety. The business premises located on the
Purchased Properties are in compliance with applicable Laws relating to
sanitation and health and safety and are not subject to any orders or
directions of a sanitation or occupational health and safety authority or
similar body including the Ontario Ministry of Labor, nor is the Seller subject
to any prosecution for any alleged violation of any such legislation or
regulations in respect of the said business premises, or any act or omission
which occurred on or in connection with the said business premises.
5.36 Consents. Except for Contracts and Equipment Leases requiring
the consent to assignment of third parties as provided in Schedule 5.15 and
with respect to the Licenses as provided
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in Schedule 5.7(c), there are no consents, authorizations, approvals or orders
of any Person or Governmental Entity required in connection with the conveyance
by the Seller to the Asset Acquiror of the Purchased Assets.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SHARE
ACQUIROR AND LAFARGE CANADA
As a material inducement to Seller and Lafarge S.A. to enter into and
perform their respective obligations under this Agreement, and notwithstanding
any examinations, inspections, audits, and other investigations heretofore or
hereafter made by Seller or Lafarge S.A., Share Acquiror and Lafarge Canada
hereby represent and warrant to Seller and Lafarge S.A. as follows:
6.1 Corporate Organization and Qualification. Each of Share
Acquiror and Lafarge Canada is a body corporate duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation.
6.2 Corporate Authority. Each of Share Acquiror and Lafarge
Canada has the requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. Except
for any shareholder approvals (or an exemption therefrom) required under
applicable Law, the execution and delivery of this Agreement and each other
agreement and instrument contemplated hereby to be executed and delivered by
each of Share Acquiror and Lafarge Canada (collectively, the "ACQUIROR OTHER
AGREEMENTS") and the consummation by them of the transactions contemplated to
be performed hereunder or thereunder have been duly authorized by all necessary
corporate actions of Share Acquiror and Lafarge Canada. This Agreement and the
Acquiror Other Agreements to which they are a party are each valid and binding
obligations of Share Acquiror and Lafarge Canada, enforceable against them
respectively in accordance with the terms hereof or thereof except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar Laws affecting the enforcement of creditors' rights generally.
6.3 Conflicts and Defaults. Neither the execution, delivery and
performance by Share Acquiror or Lafarge Canada of this Agreement or any of the
Acquiror Other Agreements, nor the
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performance by Share Acquiror or Lafarge Canada of the transactions
contemplated hereby or thereby, nor compliance by Share Acquiror or Lafarge
Canada with any of the provisions hereof of thereof will, except as set forth
in Schedule 6.3: (a) violate, conflict with, or result in a breach of any
provisions of, or constitute a default which, with notice or lapse of time or
both, would constitute a default under, or result in termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration of, any of the terms, conditions or provisions of (i) its articles
of incorporation or bylaws, or (ii) any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement, or other instrument, obligation or
arrangement to which Share Acquiror or Lafarge Canada is a party or by which
they may be bound, or to which Share Acquiror or Lafarge Canada or any of their
respective properties or assets may be subject, except where such violation
would not have a material adverse effect on the Share Acquiror or Lafarge
Canada or (b) violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Share Acquiror or Lafarge Canada or
any of their respective properties or assets except where such violation would
not have a material adverse effect on the Share Acquiror or Lafarge Canada.
6.4 Consents and Approvals. Except for any shareholder approvals
(or an exemption therefrom) required under applicable Law, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity or Person is required with respect to Share
Acquiror or Lafarge Canada in connection with the execution, delivery or
performance by Share Acquiror or Lafarge Canada of their respective obligations
under this Agreement or the Acquiror Other Agreements except for consents,
approvals, orders, authorizations, registrations, declarations or filings the
failure of which to obtain or to make would not have, individually or in the
aggregate, a material adverse effect on Share Acquiror's or Lafarge Canada's
ability to consummate the transactions contemplated by this Agreement.
6.5 GST Registration. The Asset Acquiror is a registrant for
purposes of GST and Asset Acquiror's GST registration number is R868904590.
6.6 Funds for the Acquisition. Share Acquiror will, as of the
Closing Date, have sufficient unencumbered funds to pay in cash the Unadjusted
Purchase Price and all of its fees and expenses relating to this Agreement and
the transactions contemplated hereby.
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ARTICLE VII
CERTAIN COVENANTS OF THE PARTIES
7.1 Conduct of the Seller and Lafarge S.A. During the period from the date
of this Agreement and continuing until the First Closing Time, Seller and
Lafarge S.A. shall, except as otherwise contemplated by this Agreement or as
described on Schedule 7.1, in all material respects, conduct the Aggregate
Business and the Lime Business in the ordinary course thereof consistent with
past and current practices, and, Seller and Lafarge S.A. shall use their
reasonable best efforts to maintain and preserve the business organization of
the Aggregate Business and the Purchased Assets and the Employees and business
relationships thereof and to retain the services of the officers and key
Employees thereof.
7.2 Forbearances by Seller. Except as expressly contemplated by this
Agreement, without the prior written consent of Lafarge Canada, during the
period from the date of this Agreement to the Closing Date, Seller shall not:
(a) sell, lease, transfer, assign or otherwise dispose of
any real property or any other material assets of the Aggregate Business, other
than sales of personal property in the ordinary course of business of the
Seller;
(b) make any capital expenditure or commitment for
capital expenditures in connection with the Aggregate Business in excess of
$50,000;
(c) create, incur, guarantee or assume any obligation or
liabilities in connection with the Aggregate Business, except to the extent
created, incurred, guaranteed or assumed in the ordinary course of business and
consistent with past practice;
(d) discharge or satisfy any encumbrance or liability in
connection with the Aggregate Business (whether absolute, accrued, contingent
or otherwise and whether due or to become due), other than encumbrances or
current liabilities incurred in the ordinary course of business and consistent
with past practice, and discharged or satisfied in the ordinary course of
business and consistent will past practice;
(e) permit or allow any of the Purchased Assets to be
mortgaged, pledged or subjected to any Lien, except Permitted Liens;
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(f) enter into or amend any employment, severance, or
similar agreements or arrangements with any director, officer, key employee or
consultant in respect of the Aggregate Business;
(g) cancel, release or assign any indebtedness owed or
rights of claims held by Seller in respect of the Aggregate Business that is
individually in excess of $20,000;
(h) propose or adopt any amendments to the certificates
or articles of incorporation, or by-laws of the Asset Acquiror;
(i) issue any shares of capital stock or other securities
or effect any stock split or otherwise change the capitalization of the Asset
Acquiror as it existed as of the date hereof;
(j) grant, confer or award any options, warrants,
conversion rights or other rights not existing on the date hereof to acquire
any shares of the capital stock of the Asset Acquiror;
(k) amend or cancel or default under any of the contracts
required to be set forth in Schedule 5.15 other than amendments and
cancellations in the ordinary course of business that would not reasonably be
expected to result in a Material Adverse Effect;
(l) purchase or redeem any shares in the capital stock of
the Asset Acquiror;
(m) other than in the ordinary course of business of the
Seller, take any actions, or fail to take any actions which alone, or together
with any other action or inaction, shall create, alter or eliminate any rights,
benefits, obligations or liabilities of any Person (including, but not limited
to the participants, or beneficiaries) with respect to any Benefit Plans to the
extent that they relate to the Aggregate Business; or
(n) agree in writing or otherwise to take any of the
foregoing actions or engage in any activity or enter into any transaction with
respect thereto.
7.3 Access and Information. Between the date hereof and the Closing Date,
Lafarge S.A. and Seller shall afford to Share Acquiror and Lafarge Canada and
their officers, employees, accountants, counsel and other authorized
representatives full and complete access during normal business hours to their
respective officers, employees, accountants, counsel, properties, facilities,
contracts (including true and complete copies of contracts required to be
listed in Schedule 5.15), commitments, books and records (including, but not
limited to, Tax returns) and any material report, schedule or other document
filed or received by them during such period pursuant to the
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requirements of Laws and shall cause their respective representatives to
furnish promptly such additional financial and operating data and other
information relating to the Aggregate Business and Purchased Assets as Share
Acquiror, Lafarge Canada or their duly authorized representatives may from time
to time reasonably request. All information obtained by Share Acquiror and
Lafarge Canada under this Section shall be subject to the Confidentiality
Agreement heretofore entered into by or on behalf of Lafarge Corporation and
Lafarge S.A. which agreement may be shown to any Person.
7.4 Current Information. During the period from the date of this
Agreement to the Closing Date, Seller and Lafarge S.A. shall cause one or more
of their designated representatives to confer on a regular and frequent basis
with representatives of Share Acquiror and Lafarge Canada. Seller or Lafarge
S.A. shall promptly notify Share Acquiror and Lafarge Canada of any material
change known to Seller or Lafarge S.A. in the Aggregate Business or operations
including, without limitation, the loss or destruction of any material asset
and of any material governmental complaints, investigations, or hearings or the
institution of material litigation or administrative or other claim involving
Seller, and shall keep Share Acquiror and Lafarge Canada fully informed of such
events.
7.5 Satisfaction of Conditions.
(a) Each Party to this Agreement shall use reasonable
efforts to satisfy promptly all conditions precedent to the obligations of the
other Parties to consummate the transactions contemplated by this Agreement.
(b) In addition to the obligations set forth in Section
7.5(a), Lafarge Canada, at its expense, will timely and promptly make all
filings and obtain any approvals which are required under the Investment Canada
Act (Canada). Seller will furnish to Lafarge Canada such necessary information
and reasonable assistance as Lafarge Canada may reasonably request in
connection with the preparation of necessary filings or submissions to any
Governmental Entity including, without limitation, any filings or approvals
required under the Investment Canada Act (Canada). Lafarge Canada will supply
Seller with copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between Lafarge Canada or any of
its respective representatives, on the one hand, and the Minister of Industry
appointed under the Investment Canada Act (Canada) or any member of its staff,
on the other hand, with respect to the filings or
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approvals to be made under the Investment Canada Act (Canada) with respect to
this Agreement or the transactions contemplated hereby.
(c) Seller and Lafarge S.A. shall use their reasonable
best efforts and pay all expenses (other than in respect of filings or
approvals to be made under the Investment Canada Act (Canada) and any
shareholder approvals) necessary to obtain any licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Entities
and parties to contracts as are required in connection with the consummation of
the transactions contemplated hereby. Subject to the terms and conditions
hereof, each of the parties hereto agrees to use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement and the Seller Other Agreements
and the Acquiror Other Agreements as soon as practicable. The parties hereto
shall cooperate in the defense of any lawsuits or other legal proceedings,
whether judicial or administrative, whether brought derivatively or on behalf
of third parties (including governmental agencies or officials), challenging
this Agreement or the consummation of the transactions contemplated hereby.
7.6 Public Announcements. Except as may be required by applicable Laws,
the Rules of the New York Stock Exchange, the Societe des Bourses Francaises,
the London Stock Exchange, The Toronto Stock Exchange, the Montreal Exchange or
a Governmental Entity or as agreed by the parties hereto, none of Asset
Acquiror, Share Acquiror, Seller, Lafarge S.A. or Lafarge Corporation will
issue any press release or make any public statement relating to the
transactions contemplated by this Agreement prior to the Closing Date; provided
that after the Closing Date or with respect to public statements as may be
required by applicable Laws, the Rules of the New York Stock Exchange, the
Societe des Bourses Francaises, the London Stock Exchange, The Toronto Stock
Exchange, the Montreal Exchange or a Governmental Entity, Asset Acquiror, Share
Acquiror, Seller, Lafarge S.A. and Lafarge Corporation will consult with each
other prior to the issuance of any such press release or making of any such
public statement as to the content of any such press release or public
statement.
7.7 Further Assurances. From and after the Closing, the Parties shall
execute and deliver, in the name and on behalf of the Parties, as appropriate,
any assignments or assurances and take and do,
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in the name and on behalf of the Parties, as appropriate, any other actions and
things reasonably necessary to carry out the intention of this Agreement.
7.8 Notice of Breaches. Seller will promptly, and in any event prior to
the Closing, notify Share Acquiror and Lafarge Canada in writing if Seller
becomes aware prior to the Closing that any representation or warranty made by
Seller in this Agreement is inaccurate or untrue in any material respect,
whether or not the cause thereof relates to any actions taken by Lafarge Canada
or its Affiliates in connection with the management or conducting of the
Aggregate Business on or after April 27, 1998. Said notice shall set forth the
facts and circumstances causing such inaccuracy or untruth. Except if caused
by any actions taken by Lafarge Canada or its Affiliates in connection with the
management or conducting of the Aggregate Business on or after April 27, 1998,
Lafarge S.A. and Seller each expressly acknowledge and agree that Share
Acquiror's and Lafarge Canada's actual or constructive knowledge of any
inaccuracy or untruth in any representation or warranty prior to Closing shall
not be deemed to have cured or otherwise excused any breach of such
representation or warranty that otherwise might have existed by reason of such
inaccuracy or untruth or otherwise waive any right Share Acquiror and Lafarge
Canada may have with respect to such representation or warranty.
7.9 Access to Books, Records and Personnel. Following the Closing, Asset
Acquiror and Lafarge Canada shall, upon Seller's reasonable written request and
at Seller's expense, fully cooperate with Seller and afford to Seller and its
counsel, accountants and other authorized representatives reasonable access
during normal business hours to all books, records, data, facilities,
properties and personnel relating to the Aggregate Business or the Purchased
Assets (and permit Seller and its counsel, accountants and other authorized
representatives to make copies of such books, records and other data), to the
extent that such access may be reasonably requested by Seller: (i) to
facilitate the investigation, litigation or final disposition of any claim
which may have been or may be made by or against Seller or any of its
Affiliates in connection with this Agreement or the transactions contemplated
hereby or with respect to the Aggregate Business or the Purchased Assets
relating to the period before the Closing Date, (ii) to facilitate the
preparation by Seller of materials necessary for any audit, examination or
proceeding or (iii) to facilitate the preparation and the audit of the Working
Capital Statement.
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7.10 Delivery of Books and Records. At the Time of Closing, the Seller
shall deliver to the Asset Acquiror and Lafarge Canada the following documents:
(i) lists of suppliers and customers of the Seller which relate to the
Aggregate Business; (ii) employee records with respect to employees of Seller
hired by Asset Acquiror; (iii) advertising, promotional and marketing
materials which relate to the Aggregate Business; and (iv) files relating to
the Aggregate Business and the Purchased Assets including, without limitation,
the maintenance records for each item of equipment or machinery included in the
Purchased Assets. The Asset Acquiror and Lafarge Canada agree that they will
preserve all documents, data, books and records so delivered to it for a period
of six years from the Closing Date, or for such other period as is required by
any applicable Laws. The Seller agrees that it will preserve for a period of
six years from the Closing Date, or for such longer period as is required by
applicable Laws, all documents, data, books and records which relate in whole
or in part to the Aggregate Business and which are not delivered to the Asset
Acquiror and Lafarge Canada, and Seller will, upon the reasonable written
request of Asset Acquiror or Lafarge Canada and at their expense, fully
co-operate with and permit the Asset Acquiror and Lafarge Canada and their
counsel, accountants and other authorized representatives reasonable access
during normal business hours to those documents, data, books and records in
connection with the affairs of the Asset Acquiror and Lafarge Canada relating
to the Aggregate Business (and permit Share Acquiror and Lafarge Canada and
their counsel, accountants and other authorized representatives to make copies
of such documents, books, records and other data).
7.11 Lafarge S.A. Guarantee. Lafarge S.A. hereby agrees to execute and
deliver to Asset Acquiror and Lafarge Canada at Closing, a Guarantee, in
substantially the form and content attached as Schedule 8.3(e) (the
"GUARANTEE").
7.12 Deleted.
7.13 Bulk Sales. The Asset Acquiror and Lafarge Canada hereby waive
compliance with the provisions of the Bulk Sales Act (Ontario) or any other
applicable bulk sales legislation in respect of the purchase and sale of the
Purchased Assets and the Seller hereby agrees to indemnify and save harmless
the Asset Acquiror and Lafarge Canada from and against all losses suffered or
incurred by Asset Acquiror as a result of such non-compliance.
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7.14 Removal of Purchased Assets. The Seller shall permit access by the
Asset Acquiror following Closing to those locations not leased or transferred
to the Asset Acquiror to enable the Asset Acquiror to remove Purchased Assets
from such locations.
7.15 Retail Sales Tax. The Seller agrees to use its commercially
reasonable efforts to deliver to the Asset Acquiror after the Closing Date a
clearance certificate under section 6 of the Retail Sales Tax Act (Ontario).
7.16 Consents Required in Contracts. The Seller shall be responsible for
managing the process of obtaining any consent to assignment which may be
required for the assignment of any Licence, Contract or Equipment Lease which
are included in the Purchased Assets as a result of the consummation of
transactions contemplated by this Agreement. Lafarge Canada shall actively
assist and co-operate with Seller in seeking to obtain the necessary consents
to assignment, or, to the extent that any Licence is not by Law or by its terms
assignable, Lafarge Canada shall actively apply for and seek the issue of a
replacement Licence. If the Seller is unable to obtain such consent, such
Licence, Contract or Equipment Lease shall not be assigned and the Seller
shall, to the extent legally possible, hold its right, title and interest in,
to and under such Licence, Contract or Equipment Lease in trust for the benefit
of the Asset Acquiror until such consent is obtained in accordance with Section
2.5 of this Agreement.
7.17 Employees
(a) EMPLOYMENT BY ASSET ACQUIROR- The Asset Acquiror or Lafarge
Canada shall, effective from the First Closing Time,
(i) offer employment to all of the Seller's salaried
employees who are identified in Schedule 7.17 under
the heading "Salaried Staff @ May 1, 1998" or who
become, subject to Section 7.2(f), salaried employees
of the Seller working in the Aggregate Business on
or before the First Closing Time (collectively, the
"SALARIED EMPLOYEES"); and
(ii) employ all of the Seller's hourly employees, the
terms of employment of whom are governed under a
Collective Agreement, who are identified in Schedule
7.17 under the heading "Hourly Staff @ May 1, 1998"
or who become hourly employees of the Seller working
in the Aggregate Business
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on or before the First Closing Time or who may
exercise, on or at any time after the First Closing
Time, any right they may have under a Collective
Agreement to claim a job with Asset Acquiror or
Lafarge Canada in connection with any Purchased Asset
(collectively, the "HOURLY EMPLOYEES").
The Salaried Employees and the Hourly Employees are referred
to collectively in this Agreement as, the "EMPLOYEES". Asset
Acquiror or Lafarge Canada, as the case may be, shall offer to
employ the Salaried Employees on terms and conditions of
employment which are the same as the terms and conditions of
employment, including salary, incentive compensation,
benefits, provided by Lafarge Canada to its employees with
substantially identical employment status. Nothing in this
Agreement shall confer on any Employee the right to continue
in the employ of the Asset Acquiror or Lafarge Canada or
interfere with or restrict in any way the rights of Asset
Acquiror or Lafarge Canada to discharge any Employee who
becomes employed by Asset Acquiror or Lafarge Canada at any
time for any reason, with or without cause. The Asset
Acquiror and Lafarge Canada, as the case may be, shall
recognize the service of the Employees with the Seller or its
predecessors up to the First Closing Time for all purposes as
if such service had occurred with the Asset Acquiror and/or
Lafarge Canada. The Seller will cooperate with the Asset
Acquiror and Lafarge Canada in giving notice to the Employees
of the matters referred to in this Section 7.17 as is
considered necessary and reasonable in the circumstances by
the Asset Acquiror and Lafarge Canada.
(b) COLLECTIVE AGREEMENTS - The Asset Acquiror and Lafarge Canada
acknowledge and agree that they will be a successor to the
Seller to the Collective Agreements applicable to the Hourly
Employees pursuant to the provisions of the Labour Relations
Act (Ontario) as of the First Closing Time and will be bound
by the provisions of the Collective Agreements, as amended or
supplemented from time to time, as they apply to the Hourly
Employees.
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(c) REMUNERATION AND BENEFITS - The Seller shall be responsible
for the payment or performance of all salary, wages, bonuses,
earned vacations, vacation pay, sick leave, pensions, source
deductions, other remuneration and benefits, and all other
legal rights and entitlements of employment, including
maternity or parental benefits or pay equity obligations, if
any, for all the Employees accruing during or relating to the
period up to the First Closing Time (collectively, the
"RIGHTS, REMUNERATION AND BENEFITS") other than the Severance
Costs (as defined in Section 7.17(d)) for which Asset Acquiror
or Lafarge Canada, as the case may be, have assumed liability
under Sections 7.17(d), (e) and (f). Asset Acquiror and
Lafarge Canada, as the case may be, shall be responsible,
conditional on Closing, for the payment and performance of all
Rights, Remuneration and Benefits accruing during or relating
to the period after the First Closing Time for all the
Employees who become employed by Asset Acquiror or Lafarge
Canada other than the Severance Costs for which Seller has
assumed responsibility under Section 7.17(f).
(d) SALARIED EMPLOYEES REFUSING OFFER - Asset Acquiror or Lafarge
Canada, as the case may be, shall assume and be liable for the
payment of all legal obligations relating to the termination
of employment of any Salaried Employee who does not accept an
offer to become an employee of the Asset Acquiror or Lafarge
Canada, as the case may be ("REFUSING SALARIED EMPLOYEE"), and
who is not offered a substantially similar position by the
Seller (provided that it is acknowledged that the Seller is
under no obligation to do so) including severance pay, notice
of termination of employment or pay in lieu of such notice,
damages for wrongful dismissal and any interest, award,
judgment or costs relating thereto in respect of the periods
of employment of the employee both before and after the First
Closing Time (collectively, "SEVERANCE COSTS").
(e) SUBSEQUENT OBLIGATIONS TO SALARIED EMPLOYEES - The Asset
Acquiror or Lafarge Canada, as the case may be, shall assume
and be liable for the payment of all Severance Costs relating
to the termination of employment after the First Closing Time
of any Salaried Employee who becomes employed by the Asset
Acquiror or
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Lafarge Canada, as the case may be, and Seller shall assume
and be liable for the payment of all Severance Costs relating
to the termination of employment after the First Closing Time
of any Salaried Employee who becomes or remains in the employ
of the Seller.
(f) HOURLY EMPLOYEES - Asset Acquiror or Lafarge Canada, as the
case may be, shall assume and be liable for the payment of all
Severance Costs relating to the termination of employment,
after the First Closing Time, of any Hourly Employee employed
by Asset Acquiror or Lafarge Canada, as the case may be
("TERMINATED HOURLY EMPLOYEE"), unless that Terminated Hourly
Employee exercises a right under a Collective Agreement to
displace another hourly employee of Seller (a "BUMPING
RIGHT"), in which case Asset Acquiror or Lafarge Canada, as
the case may be, shall assume and be liable for the payment of
all Severance Costs relating to the termination of employment
of any hourly employee of Seller resulting from the exercise
of the Bumping Right by that Terminated Hourly Employee. If
in any other circumstance an Hourly Employee exercises a
Bumping Right, Asset Acquiror or Lafarge Canada, as the case
may be, shall assume and be liable for the payment of all
Severance Costs relating to the termination of employment of
any hourly employee of Seller resulting from the exercise of
the Bumping Right by that Hourly Employee. Similarly, if the
employment of any Hourly Employee with Asset Acquiror or
Lafarge Canada, as the case may be, is terminated because an
hourly employee of Seller has exercised a right under a
Collective Agreement to displace an Hourly Employee, Seller
shall assume and be liable for the payment of all Severance
Costs relating to the termination of employment of that Hourly
Employee.
7.18 Workers' Compensation. On or before Closing, the Seller shall provide
a clearance certificate or other similar documentary evidence from the Worker's
Compensation authority in Ontario certifying that there are no outstanding
assessments, penalties, fines, levies, charges, surcharges or other amounts due
or owing to those authorities or if such certification is not forthcoming from
the relevant authority, a certificate of a senior officer of Seller as to those
matters shall be sufficient. The Seller shall be and remain responsible for
any and all Worker's Compensation assessments,
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penalties, fines, levies, charges, surcharges or other amounts due or owing
with respect to the period prior to the Closing Date. Notwithstanding the
foregoing, the Seller shall be entitled to any rebate, refund or other payment
which is owed or may become due under workers' compensation or similar
legislation in respect of any period prior to Closing.
7.19 Group Plans.
(a) Effective as of the Closing Date, but subject to subsections
7.19(b) and 7.19(c) hereof and any applicable requirements of the Collective
Agreement, Accepting Employees shall cease to participate in and receive
benefits under the Group Plans other than the Seller's Pension Plans (which are
separately addressed under Section 7.20) and shall commence participation in
non-pension group benefit plans which shall be existing or be established by
Lafarge Canada and the Asset Acquiror (the "ACQUIROR'S NON-PENSION BENEFIT
PLANS").
(b) The Seller shall retain responsibility under the Seller's
Group Plans (other than Pension Plans) for all amounts payable by reason of or
in connection with any and all claims incurred by the Accepting Employees prior
to the Closing Date. The Seller shall also retain responsibility for the
benefits of all Sellers' employees who have retired or been terminated prior to
Closing. Lafarge Canada shall be responsible for any and all claims of
Accepting Employees under the Acquiror's Non-Pension Benefit Plans which relate
to claims which are incurred with respect to events after the Closing Date.
For the purposes of this subsection 7.19(b), a claim shall be deemed to have
been "incurred" on the date of occurrence of an injury, the diagnosis of an
illness or on the date of any other event giving rise to such claim or series
of related claims. The Seller shall pay all such invoices when due in
accordance with the provisions of the Seller's Group Plans.
(c) In administering the Acquiror's Non-Pension Benefit Plans for
the Accepting Employees after the Closing Date, Lafarge Canada will grant full
credit to each Accepting Employee for all years of service of such Accepting
Employees for all purposes (including determination of statutory, common law
and any other severance benefits) for which such years of service were
recognized by the Seller under the terms of the Seller's Group Plans. Any
deductibles and out-of-pocket maximums under the terms of the Acquiror's
Non-Pension Benefit Plans shall be reduced in proportion to that portion of the
calendar year preceding the Closing Date.
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7.20 Pension Plans. The following provisions shall apply with respect to
the Pension Plans:
(a) The Accepting Employees who participate in the Queenston
Hourly Rated Employees Pension Plan shall, from and after the Closing Date,
continue to participate in and accrue benefits thereunder. On the Closing
Date, the Seller shall enter into an assignment and assumption agreement in the
form set out in Schedule 7.20(a) so as to assign to the Asset Acquiror all
right, title and interest in and to the Queenston Hourly-Rated Employees
Pension Plan and the Asset Acquiror shall assume all duties, obligations and
liabilities relating to such Plan.
(b)(i) Defined Terms.
In this subsection 7.20(b), in addition to the definitions contained
elsewhere in this Agreement:
"ADJUSTED ASSET AMOUNT" has the meaning given to that term in
paragraph 7.20(b)(vi) of this Agreement.
"APPLICABLE PENSION LEGISLATION" means all legislation that applies to
the Seller's Plans or the Asset Acquiror's Plans as the case may be, including
the Pension Benefits Act (Ontario) and the Income Tax Act (Canada);
"ASSET ACQUIROR'S PLANS" means the Lafarge Canada Inc. Salaried
Employees' Pension Plan and a new plan, the name of which has not yet been
decided, in respect of the Accepting Employees who are presently members of the
Seller's Redland Quarries Inc. - Dundas Hourly-Rated Employees Pension Plan,
and "ASSET ACQUIROR'S PLAN" means either one of them.
"CLOSING DATE LIABILITIES" means, for each of the Seller's Plans, the
greater of going concern liabilities and solvency liabilities respecting the
Transferred Employees under the applicable Seller's Plan calculated in the
aggregate and for each Transferred Employee as of the Closing Date in
accordance with the actuarial methods, assumptions and principles set out in
Schedule 7.20(b);
"FINAL ASSET AMOUNT" means the amount of assets in each of the
Segregated Accounts on each of the respective Transfer Dates;
"INITIAL SEGREGATED AMOUNT" in respect of each of the respective
Seller's Plans has the meaning given to that term in paragraph 7.20(b)(iv) of
this Agreement;
"PRO-RATA EXPENSES" means the proportion of ordinary course fees
concerning administration of the Seller's Plans, respectively, and their
associated respective funds that Closing
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Date Liabilities is of the greater of going concern liabilities and solvency
liabilities as of the Closing Date of the respective Seller's Plans;
"REGULATORY AUTHORITIES" means the Pension Commission of Ontario, the
Superintendent of Pensions for Ontario, Revenue Canada, Customs, Excise and
Taxation and any other Governmental Entity responsible for or having
jurisdiction over the regulation of pension plans;
"REPORT" has the meaning given to that term in paragraph 7.20(b)(ii)
of this Agreement;
"SEGREGATED ACCOUNT" means a separate account for each of the Seller's
Plans established with the funding agency of the respective Seller's Plans to
hold assets of the pension fund of the Seller's Plans, respectively, in respect
of the Transferred Employees on a segregated basis within the pension fund and
in accordance with paragraph 7.20(b)(iv) of this Agreement;
"SEGREGATION DATES" has the meaning given to that term in paragraph
7.20(b)(iv) of this Agreement;
"SELLER'S PLANS" means the: (i) Redland Quarries Inc. - Dundas
Hourly-Rated Employees Pension Plan (Rev. Can. 0324640); and (ii) Redland
Quarries Inc. and Affiliated Companies Salaried Employee Pension Plan (Rev.
Can. 0243287); and "SELLER'S PLAN" means either one of them;
"TRANSFER DATES" means the respective dates upon which assets in
respect of the respective Transferred Employees are transferred from the
respective Seller's Plan to the corresponding Asset Acquiror's Plan pursuant to
paragraph 7.20(b)(vii) of this Agreement;
"TRANSFERRED EMPLOYEES" means the Accepting Employees who were
members of any of the Seller's Plans on the Closing Date or were employed in
service leading to eligibility for such membership;
(ii) Determination of Closing Date Liabilities. As soon as practicable
after the Closing Date, the Seller shall cause its actuaries to
update the pension records of all Transferred Employees and to prepare
and deliver to the Seller a report (the "REPORT") setting out the
Closing Date Liabilities in respect of each of the Seller's Plans.
Within 15 days of receiving each Report, the Seller shall
provide a copy of the Report to the Asset Acquiror together with
copies of all information and data used in connection with determining
the Closing Date Liabilities for the applicable Seller's Plan and
preparing
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such Report and any other information or data which the Asset Acquiror
or its agents may reasonably request.
The Asset Acquiror shall notify the Seller within 30 days of
receiving a copy of each Report from the Seller as to whether it
agrees or disagrees with any of the Closing Date Liabilities set out
in that particular Report. If the Asset Acquiror fails to provide
such notice to the Seller, the Asset Acquiror shall be deemed to have
approved of the Closing Date Liabilities for the applicable Seller's
Plan. If the Asset Acquiror notifies the Seller that it disagrees
with any of the Closing Date Liabilities set out in the Report, the
Seller and the Asset Acquiror shall forthwith negotiate in good faith
to reach agreement respecting such amount or amounts. If within 15
days after commencing negotiations, the Seller and the Asset Acquiror
are unable to agree on the disputed Closing Date Liabilities, the
matter shall forthwith be referred to an independent firm of actuaries
(acting as experts and not arbitrators) acceptable to both the Seller
and the Asset Acquiror with a direction to determine the disputed
amount or amounts within 60 days of the referral. The cost of the
independent firm of actuaries shall be borne equally by the Seller and
the Asset Acquiror. The determination by the independent firm of
actuaries of the disputed Closing Date Liabilities shall be final and
binding upon the Seller and the Asset Acquiror and the Seller and the
Asset Acquiror shall be deemed to have agreed on such amounts.
(iii) Application for Regulatory Approval of Asset Transfer As soon as
practicable after the Seller and Asset Acquiror agree or are deemed to
agree on the Closing Date Liabilities in respect of a Seller's Plan,
the Seller shall apply, where required by Applicable Pension
Legislation, to the relevant Regulatory Authorities for approval to
transfer the Final Asset Amount in respect of such Seller's Plan to
the corresponding Asset Acquiror's Plan. The Seller shall prepare all
applications, reports and other materials required under Applicable
Pension Legislation or by the applicable Regulatory Authority in
respect of each of the Seller's Plans to obtain such approval and
shall diligently pursue all applications. Before filing any
application to obtain approval for the transfer of any Final Asset
Amount, the
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Seller shall provide copies of the application materials to the Asset
Acquiror for its review. The Seller shall make any changes to the
application materials in respect of any of the Seller's Plans that the
Asset Acquiror shall reasonably request, provided that the Asset
Acquiror gives notice of the requested changes to the Seller within 30
days of receiving the relevant application materials.
(iv) Segregation of Assets As soon as practicable after the Seller and
Asset Acquiror agree or are deemed to agree on the Closing Date
Liabilities for each of the Seller's Plans, the Seller shall cause (i)
the Segregated Account for each Seller's Plan to be established, and
(ii) cash and such other assets which are acceptable to the Asset
Acquiror to be placed within each Segregated Account (the "INITIAL
SEGREGATED AMOUNTS") equal to the respective Closing Date Liabilities
less benefit and other payments made from the respective pension funds
of the Seller's Plans concerning the respective Transferred Employees
and respective Pro-Rata Expenses for the period from the Closing Date
to the respective dates of segregation (the "SEGREGATION DATES") and
plus or minus, as the case may be, an amount calculated with respect
to the Initial Segregation Amounts for the period from the Closing
Date to the respective Segregation Dates by applying the applicable
fund rate of return or loss for the same period, such rate of return
to be determined by Seller, in consultation with its actuary, in
accordance with generally accepted accounting and actuarial principles
for the respective Seller's Plan, and which calculation and
determination of the applicable fund rate of return or loss shall be
subject to review and confirmation by Asset Acquiror within 30 days of
the delivery to the Asset Acquiror of the pro forma calculation and
determination.
The administration of any amounts in any Segregated Account
shall at all times be the responsibility of the Seller, acting on
behalf of the Asset Acquiror. The Asset Acquiror shall provide to the
Seller such information as is in the possession or control of the
Asset Acquiror and is reasonably required by the Seller to administer
the amounts in the Segregated Accounts and to make benefit and other
payments to the Transferred Employees pursuant to paragraph 7.20(b)(v)
of this Agreement. The Seller may charge to the respective Segregated
Accounts all reasonable expenses arising in connection with the
respective Segregated Accounts together with the respective Pro-Rata
Expenses for the period from the
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respective Segregation Dates to the respective Transfer Dates. From
the respective Segregation Dates to the respective Transfer Dates, the
Asset Acquiror shall at its sole expense, which may be paid or
otherwise deducted from the Segregated Accounts, provide or arrange
for the investment management of all amounts in the Segregated
Accounts and the Seller shall ensure that the funding agent or agents
of the respective Seller's Plans follows the investment management
directions of the Asset Acquiror or its agents.
The Asset Acquiror agrees to indemnify the Seller in respect
of any claims, demands, actions, causes of actions, damages, losses,
costs, liabilities or expenses which the Seller may suffer as a result
of or in connection with the Asset Acquiror or its agents providing
investment management services respecting accounts in any Segregated
Account, save and except for circumstances involving the wilful
default or negligence of the Seller.
Prior to Closing or, in any event, no later than the first
Segregation Date, in order to enable Asset Acquiror to property invest
the Segregated Accounts without adversely affecting the Seller or the
Seller's Plans, the Seller shall provide to Asset Acquiror all
relevant information with respect to the structure and investments of
the Seller's Plans, including the Statement of Investment Policies and
Goals and any other document indicating any investment limitation with
respect to the Seller's Plans in effect at the Closing Date and shall
keep Asset Acquiror informed on a timely basis of any changes to any
of the foregoing through to the date that the Final Asset Amount or
Adjusted Asset Amounts, as the case may be, are transferred in
accordance with Section 7.20(b)(vii).
(v) Benefit Payments. The Seller shall ensure that, in respect of each of
the Seller's Plans, from the Closing Date to the Segregation Date any
benefit and other payments due and owing to, or in respect of, any
Transferred Employee from such Seller's Plan are paid to the
Transferred Employee or his or her named beneficiary. Before the
Segregation Date, such payments shall be made from the general assets
of the relevant Seller's Plan. After the Segregation Date, such
payments shall be made from the respective Segregated Account.
(vi) Refusal to Permit Transfer. The Seller shall forthwith notify the
Asset Acquiror if any Regulatory Authority to whom the Seller has
applied to approve the transfer of the Final Asset Amount from any
Seller's Plan to the corresponding Asset Acquiror's Plan refuses to
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approve such transfer and directs either that a different amount be
transferred or that an assumption or method of calculation used
pursuant to this Agreement to determine the respective Closing Date
Liabilities be changed. In such event, the Seller and Asset Acquiror
agree that the amount to be transferred (the "ADJUSTED ASSET AMOUNT")
shall be determined in accordance with the Regulatory Authority's
direction, subject to the Seller's and the Asset Acquiror's right to
appeal such direction until all rights of appeal are exhausted to any
Governmental Entity or court where the Seller or the Asset Acquiror,
as applicable, on the advice of their respective professional
advisors, is of the opinion that such direction is not required under
Applicable Pension Legislation.
(vii) Transfer to Asset Acquiror's Plans. Within 30 days of receiving the
written approval of the applicable Regulatory Authorities to transfer
the respective Final Asset Amounts or Adjusted Asset Amounts, as the
case may be, and of receiving notice from the Asset Acquiror of the
registration of the respective Asset Acquiror's Plan, the Seller shall
transfer or cause the funding agent of the respective Seller's Plan to
transfer to the funding agent of the corresponding Asset Acquiror's
Plan:
(A) in the case of approval to transfer the Final Asset Amount,
the Final Asset Amount;
(B) in the case of approval to transfer the Adjusted Asset Amount
where such amount exceeds the Final Asset Amount, the amount
of such excess from the pension fund of the applicable
Seller's Plan together with the Final Asset Amount; and
(C) in the case of approval to transfer the Adjusted Asset Amount
where such amount is less than the Final Asset Amount, only
the Adjusted Asset Amount from the applicable Segregated
Account.
Where subparagraph (C) applies, the balance in the
Segregated Account may be released within the applicable
Seller's Plan.
(viii) Accrual of Benefits. As of the Closing Date, those of the
Transferred Employees who are actively participating in any Seller's
Plan shall cease to participate actively in, and accrue benefits
under, the respective Seller's Plan and shall commence participation
in the corresponding Asset Acquiror's Plan.
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(ix) Recognition of Past Service. Subject to receipt by the funding agent
or agents of the respective Asset Acquiror's Plans of the Final Asset
Value or Adjusted Asset Amount, as the case may be, from the
corresponding Seller's Plan pursuant to paragraph 7.20(b)(vii) of this
Agreement, the Asset Acquiror shall ensure that the applicable Asset
Acquiror's Plan recognizes the period of service of the Transferred
Employees recognized under the corresponding Seller's Plan prior to
the Closing Date for all purposes relating to pension benefits as if
such service had been with the Asset Acquiror. Without limiting the
foregoing, Asset Acquiror covenants and agrees to establish or amend
or cause to be established or amended as applicable the respective
Asset Acquiror's Plans to the extent necessary to give effect to its
obligations under this Section 7.20(b)(ix). As soon as practicable
after the Closing Date, Asset Acquiror shall apply to the Regulatory
Authorities for registration or approval of all documents prepared for
the purposes of establishing or amending, as applicable, the Asset
Acquiror's Plans. The Asset Acquiror shall diligently pursue all
necessary applications to the Regulatory Authorities. The Asset
Acquiror shall forthwith notify the Seller of the registration of the
documents prepared in respect of each of the Asset Acquiror's Plans as
contemplated herein.
(x) Asset Acquiror Assumes Liabilities. Subject to receipt by the funding
agent or agents of the respective Asset Acquiror's Plan of the Final
Asset Amount or Adjusted Asset Amount, as the case may be, from the
corresponding Seller's Plan pursuant to paragraph 7.20(b)(vii) of this
Agreement, the Asset Acquiror and Lafarge Canada hereby assume
liability for, and indemnify and hold harmless the Seller against,
payment of pension and ancillary benefits (excluding, for greater
certainty, surplus) accrued by Transferred Employees or their
beneficiaries, as applicable, up to and including the Closing Date
under the respective Seller's Plans and payment of pension and other
benefits accrued by Transferred Employees or their beneficiaries, as
applicable, after the Closing Date under the respective Asset
Acquiror's Plan.
(xi) As soon as is practicable, but in any event within 120 days of the
Closing Date, the Seller and the Asset Acquiror and Lafarge Canada
shall enter into a reciprocal transfer agreement in respect of the
Redland Quarries Inc. - Dundas Hourly-Rated Employees Pension Plan and
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the corresponding Asset Acquiror's Plan which is to become a successor
thereto, which reciprocal transfer agreement shall provide, in respect
of bargaining unit employees who are plan members and who exercise a
Bumping Right to transfer to or from employment with either the Seller
or the Asset Acquiror or Lafarge Canada, as the case may be, for (A)
the recognition under the transferee plan of prior service recognized
under the transferor pension plan and an assumption of liabilities
thereunder; (B) a transfer of assets in respect of the foregoing on a
prescribed actuarial basis (both assumptions and methods) to be made
annually within 90 days of the calendar year of the transfer; (C) the
termination of the agreement on 60 days advance notice by either the
Seller or the Asset Acquiror or Lafarge Canada, as the case may be, or
immediately upon the occurrence of mutually agreeable events; and (D)
such other terms and conditions as the parties shall agree are
necessary or desirable to address the relevant pension issues which
arise in connection with the exercise or possible exercise of Bumping
Rights by Plan members, provided that all transfers which have
occurred prior to such termination will be processed in accordance
with the terms of such reciprocal transfer agreement.
7.21 Revised Dewatering Permit.
(a) In this section 7.21, in addition to the definitions contained
elsewhere in this Agreement:
"10 YEAR RESERVES" means 43 million tonnes of aggregate, including
dolomitic metallurgical limestone, reserves in the first bench of the North
Quarry Site, which the Parties have agreed is the estimated amount of such
reserves that have yet to be mined on the Closing Date.
"BASE RESERVES" means 119.6 million tonnes of aggregate, including
dolomitic metallurgical limestone, reserves in the first and second bench of
the North Quarry Site, which the Parties have agreed is the estimated amount of
such reserves that have yet to be mined on the Closing Date.
"DRY MINING" means quarry mining for dolomitic metallurgical stone and
aggregates using mining techniques and methods other than the techniques and
methods that would customarily be used for the quarry mining of submerged
dolomitic metallurgical stone and aggregates and "DRY MINED" or "DRY MINE"
shall have a corresponding meaning.
"DRY RESERVES" has the meaning ascribed thereto in Section 7.21(d).
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"ENGINEER" has the meaning ascribed thereto in Section 7.21(c).
"EVALUATION DAY" means the earlier of the following days:
(i) the day of the issue of a final unappealable decision
of the Ministry not to issue any revised permit to
take water from the North Quarry Site which permits
dewatering in addition to that authorized by Seller's
permit to take water from the North Quarry Site in
effect immediately before the Closing Date; and
(ii) the day which is two years after the Closing Date.
For purposes of this definition, "unappealable" means that
Seller, Asset Acquiror and Lafarge Canada are also prohibited
by Law from further applying or re-applying for a revised
permit to take water from the North Quarry Site.
"ISSUED DEWATERING PERMIT" means, failing the issue of the Required
Dewatering Permit on or before the Evaluation Day, the highest volume (measured
in imperial gallons per minute) permit or revised permit to take water from the
North Quarry Site issued by the Ministry on, before or within two years after
the Closing Date.
"MINISTRY" means the Ontario Ministry of Environment and Energy
"REPORT" means the report of the Engineer as provided under Section
7.21(d).
"REQUIRED DEWATERING PERMIT" means a revised permit to take water from
the North Quarry Site issued by the Ministry, either in the name of or validly
assigned to Lafarge Canada, for a dewatering volume of not less than 2400
imperial gallons per minute.
"RESERVES COMPENSATION PAYMENT" has the meaning ascribed thereto in
Section 7.21(e).
(b) The Parties acknowledge that as at the date of this Agreement,
Seller has already submitted to the Ministry its application for the Required
Dewatering Permit. If the Required Dewatering Permit is issued at any time on
or before the Evaluation Date, subsections 7.21(c), (d), (e), (f) and (g) of
this Section 7.21 shall cease to apply and, in particular, the provisions of
Section 7.21(e) regarding the Reserves Compensation Payment shall be of no
force or effect, and Seller shall thereby be fully released and discharged from
its obligations under this Section 7.21. If the Required Dewatering Permit has
not issued by the Closing Date, then Seller shall have the period after the
Closing Date up to and including the Evaluation Date to continue seeking the
Required Dewatering
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Permit. During such period, Lafarge Canada shall and shall cause its
Affiliates to fully assist and co-operate with Seller in its efforts to obtain
the Required Dewatering Permit.
(c) Unless the Required Dewatering Permit has issued on the
earlier of: (i) the Evaluation Day; and (ii) the day that is one year after the
Closing Date, Seller and Lafarge Canada shall engage a qualified Ontario
professional mining engineer (the "ENGINEER") for purposes of preparing, if
necessary, the Report. If the Parties cannot agree as to the selection of the
Engineer, then the matter of the selection shall be referred to the Chairman
(or equivalent) of the professional body in Ontario governing engineers, whose
selection of the Engineer shall be determinative and binding on the Parties
without any right of appeal. The procedures applicable to the preparation of
the Report by the Engineer are set forth in Section 7.21(f). In preparing the
Report and carrying out its other duties under this Agreement, the Engineer
shall be acting as expert and not arbitrator and its decisions and
determinations, including, without limitation, the final Report, shall be final
and binding upon the Parties for all purposes and there shall be no appeal
therefrom.
(d) Unless the Required Dewatering Permit has issued, on the
earlier of : (i) the Evaluation Date; and (ii) that date that is 18 months
after the Closing Date, the Parties shall direct the Engineer to prepare a
report (the "REPORT") which sets forth the Engineer's determination of the
number of tonnes of aggregate, including dolomitic metallurgical stone,
reserves in the North Quarry Site which can be Dry Mined given the volume of
dewatering permitted under the Issued Dewatering Permit in effect at the time
of the commencement of the preparation of the Report (which amount shall
include the number of tonnes actually Dry Mined between the Closing Date and
the date of issue of the Report) (the "DRY RESERVES"). If the Report is
prepared before the Evaluation Date, the Report shall be updated as of the
Evaluation Date to account for any increased Issued Dewatering Permit issued
during the period in which the Report was in preparation.
(e) Not more than 10 days after receipt of the final Report or the
Evaluation Date, whichever is later, the Seller shall deliver to Lafarge
Canada, if applicable, a certified cheque or bank draft payable to Lafarge
Canada for the amount (the "RESERVES COMPENSATION PAYMENT"), if any, calculated
according to the following formula:
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(X-Y)-(Z-Y) x Cdn. $20,000,000 = Reserves Compensation Payment
-----------
(X-Y)
where:
X is the number of tonnes of the Base Reserves;
Y is the number of tonnes of the 10 Year Reserves; and
Z is the number of tonnes of Dry Reserves.
(f) The following provisions shall apply concerning the Engineer
and the preparation and delivery of the Report:
(i) Lafarge Canada and Seller shall enter into an
engagement agreement with the Engineer containing customary terms and
provisions, including customary indemnification of the Engineer. Any
procedural matters not addressed in this Section 7.21(f) shall be
determined by the Engineer in his discretion, and, to the extent that
submissions of the Parties are specified to be made in writing, the
Engineer shall, on his initiative, have the discretion to receive
submissions and information by any other method acceptable him
including oral submissions, meetings, site visits, etc.
(ii) Lafarge Canada and Seller shall each prepare a
written submission on the subject matters of the Report which
(together with the relevant documents) shall be submitted to the
Engineer and to each other as soon as possible after the date that the
Engineer is directed to proceed to prepare the Report (the
"COMMENCEMENT DATE"), and, in any event, within 15 days of the
Commencement Date, to facilitate the preparation and delivery of a
draft Report within 60 days of the Commencement Date.
(iii) Seller and Lafarge Canada shall each provide the
Engineer with all information which it reasonably requires and the
Engineer shall be entitled to prepare the Report based on such
information as it considers appropriate.
(iv) Within 60 days of the date of his appointment, the
Engineer shall issue a draft Report to each of the Parties. Each of
the Parties shall then have a further 21 day period to, at their
option, prepare and deliver to the Engineer and to the other Party a
written response to the draft Report.
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(v) Within 21 days after the later of: (A) the Evaluation
Date; and (B) the date that the Engineer has received the response of
both Parties to the draft Report, the Engineer shall issue its final
Report and shall deliver a copy to Seller and to Lafarge Canada,
provided that, if an increased Issued Dewatering Permit has issued and
is not reflected in the draft Report, the Engineer shall prepare and
issue a supplemented draft Report to the Parties and shall provide
them with a reasonable opportunity to comment on the supplemented
draft Report before finalizing the Report and in these circumstances,
the time lines regarding the delivery to the Parties of the final
Report shall be adjusted accordingly.
(vi) The expenses of the Engineer in preparing the Report
shall be shared equally by Seller and Lafarge Canada.
(g) Seller represents and warrants to Lafarge Canada that the
permit to take water presently in effect with respect to the retention ponds at
the Dundas Site at the rate of 4,300 imperial gallons per minute is sufficient
to fully utilize the Required Dewatering Permit, if and when issued, provided
that Lafarge Canada manages the water on the Dundas Site in a commercially
reasonable manner. Seller shall indemnify and hold harmless Lafarge Canada
against any Liabilities suffered or incurred by Lafarge Canada, its successors
or assigns, resulting from any inaccuracy in or breach of the foregoing
representation and warranty in this Section 7.21(g), to the maximum aggregate
limit of Cdn. $500,000 which amount shall include, without limitation, all
damages, interest, costs and expenses suffered or incurred by Lafarge Canada as
a result of such inaccuracy or breach.
7.22 Repayment of Obligations to the Companies. Immediately prior to the
Closing, the Seller shall pay all obligations owed to any of the Companies (as
such term is defined in the United States Stock Purchase Agreement), except for
all debts outstanding between (i) the Companies, or any of them, on the one
hand and (ii) Seller, on the other hand, in respect of intra-group sales of
goods and services in the ordinary and usual course of business.
7.23 Lease of Lime Plant Site. Seller, Asset Acquiror and Lafarge Canada
shall execute and deliver on the Closing Date the lease of the Lime Plant Site
in the form attached as Schedule 7.23 (the "LIME PLANT LEASE").
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ARTICLE VIII
CONDITIONS TO THE TRANSACTIONS
8.1 Condition to the Obligations of Each Party. The obligations of each
of the parties hereto to consummate the purchase and sale of the Purchased
Assets and the purchase and sale of the Purchased Shares are subject to the
condition that the purchase and sale contemplated by that certain Stock
Purchase Agreement of even date herewith among Redland International Limited,
Lafarge Corporation and Lafarge S.A. (the "UNITED STATES STOCK PURCHASE
AGREEMENT") shall be consummated simultaneously with the Closing.
8.2 Conditions to the Obligations of Seller and Lafarge S.A.. The
obligation of Seller to consummate the purchase and sale of the Purchased
Assets and the Purchased Shares is subject to the satisfaction (or written
waiver by Seller) of each of the following further conditions:
(a) Share Acquiror and Lafarge Canada shall have performed and
complied with in all material respects all obligations and covenants required
to be performed or complied with by them under this Agreement at or prior to
the Closing Date, and Seller shall have received a certificate signed by an
authorized officer of each of Share Acquiror and Lafarge Canada on behalf of
Share Acquiror and Lafarge Canada to the foregoing effect;
(b) The representations and warranties of Share Acquiror and
Lafarge Canada made herein shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date except: (i) to the extent such representations and
warranties are by their express provisions made as of a specified date, and
(ii) for the effect of transactions contemplated by this Agreement, and Seller
shall have received a signed certificate of an authorized officer of each of
Share Acquiror and Lafarge Canada, on behalf of Share Acquiror and Lafarge
Canada to the foregoing effect; and
(c) None of the Parties shall be subject to any order, decree, or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the transactions contemplated hereby and such
transactions shall not have been prohibited under any applicable Laws.
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(d) The Asset Acquiror and Lafarge Canada shall have executed and
delivered to the Seller a lime supply agreement (the "LIME SUPPLY AGREEMENT")
in form and content satisfactory to the Parties.
(e) Asset Acquiror and Lafarge Canada shall have executed and
delivered the Lime Plant Lease.
(f) Deleted.
(g) Seller shall have received an opinion of McCarthy Tetrault,
counsel to Share Acquiror and Lafarge Canada, substantially in the form of
Schedule 8.2(g).
8.3 Conditions to the Obligations of Share Acquiror and Lafarge Canada.
The obligation of Asset Acquiror, Share Acquiror and Lafarge Canada to
consummate the purchase and sale of the Purchased Assets and the Purchased
Shares is subject to the satisfaction (or written waiver by Share Acquiror and
Lafarge Canada) of each of the following conditions:
(a) Seller shall have performed and complied with in all material
respects all obligations and covenants required to be performed or complied
with by it under this Agreement at or prior to the Closing Date, and Share
Acquiror and Lafarge Canada shall have received a certificate signed by an
authorized officer of Seller, on behalf of Seller, to the foregoing effect.
(b) None of the Parties shall be subject to any order, decree
(other than consent decrees to which Share Acquiror has agreed), or injunction
of a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the transactions contemplated hereby.
(c) The representations and warranties of Seller and Lafarge S.A.
made herein shall be true and correct in all material respects as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date except: (i) to the extent such representations and warranties are
by their express provisions made as of a specified date, (which need only be
true and correct in all material respects as of such date) and (ii) if the
inaccuracy of such representations and warranties does not constitute a
Material Adverse Effect.
(d) Lafarge S.A. shall have delivered to Share Acquiror and
Lafarge Canada the Guarantee in substantially the form attached hereto as
Schedule 8.3(e).
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(e) Except for the transactions contemplated by this Agreement,
there shall not have been any changes in the business, prospects or financial
condition of Seller that, individually or in the aggregate, have had or are
reasonably likely to have a Material Adverse Effect.
(f) The Board of Directors of Lafarge Corporation shall have
received from SBC Warburg Dillon Read Inc., independent investment bankers, an
opinion, dated as of the date hereof and in form reasonably satisfactory to
such Board of Directors, as to the fairness, from a financial point of view, of
the transactions contemplated by this Agreement.
(g) Lafarge Corporation shall have received all necessary
shareholder approvals relating to the purchase transactions contemplated
hereunder.
(h) Lafarge Canada shall have received an opinion of Miller
Thomson counsel to Seller, and an opinion of in-house or other, counsel to
Lafarge S.A., substantially in the forms attached hereto as Schedule 8.3(i).
(i) Lafarge Canada shall have received from each of Seller and
Lafarge S.A. a certificate, dated as of the Closing Date, duly executed by an
authorized officer of each, to the effect of (a) and (c) above.
(j) Receipt of Closing Documentation. All instruments of
conveyance and other documentation and assurances relating to the sale and
purchase of the Purchased Assets and the Purchased Shares including, without
limitation, share certificates, assignments of the Contracts, the Equipment
Leases and the Licenses (and consents to such assignments, where required),
bills of sale, motor vehicle transfers and documentation, and all actions and
proceedings taken on or prior to the Closing in connection with performance by
the Seller of its obligations under this Agreement shall be satisfactory to the
Share Acquiror and Lafarge Canada and their counsel, acting reasonably, and the
Share Acquiror and Lafarge Canada shall have received copies of all such
documentation or other evidence as it may reasonably request in order to
establish the consummation of the transactions contemplated under this
Agreement and the taking of all corporate proceedings in connection with those
transactions in compliance with this Subsection 8.3(k), in form (as to
certification and otherwise) and substance satisfactory to the Share Acquiror
and Lafarge Canada and their respective counsel.
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(k) Consents to Assignment. All consents or approvals from or
notifications to any lessor or other third Person required under the terms of
any of the Contracts, Equipment Leases, or the Licenses with respect to their
assignment to the Asset Acquiror, or otherwise in connection with the
consummation of the transactions contemplated under this Agreement, shall have
been duly obtained or given, as the case may be, on or before the Closing Time.
(l) Lime Plant Lease. The Seller shall have executed and
delivered to the Asset Acquiror and Lafarge Canada the Lime Plant Lease.
(m) Directors of Asset Acquiror. There shall have been delivered
to the Share Acquiror and Lafarge Canada on or before the Closing, the
resignations, effective as and from Closing, of all of the directors and
officers of Asset Acquiror appointed by or at the request of Seller, together
with releases from each such person of all their claims respectively.
(n) Lime Supply Agreement. The Seller shall have executed and
delivered to the Asset Acquiror and Lafarge Canada the Lime Supply Agreement.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by written consent of Seller, Lafarge S.A. and Lafarge Canada
(b) by the Board of Directors of either Seller or Lafarge Canada
at any time after June 30, 1998, if the transactions contemplated hereunder
shall not theretofore have been consummated; provided, that Seller or Lafarge
Canada, as the case may be, may not seek termination pursuant to this Section
9.1(b) if the failure to consummate the transactions contemplated hereunder is
caused by the action or inaction, in violation of this Agreement, of the Party
seeking such termination.
(c) by either Seller or Lafarge Canada if a condition to its
obligation to perform becomes incapable of fulfillment; provided, that Seller
or Lafarge Canada, as the case may be, may not seek termination pursuant to
this Section 9.1(c) if such condition is incapable of fulfillment due to the
failure of Seller or Lafarge Canada, as the case may be, to perform any of the
agreements set forth herein required to be performed by such party, at or
before the Closing; or
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(d) by the Board of Directors of either Seller or Lafarge Canada
if any Governmental Entity whose approval is required for the consummation of
the transactions contemplated hereby shall have denied approval of such
transactions and such denial has, after exhaustion of any and all available
appellate procedures, become final.
9.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 9.1 hereof, this Agreement, except for the
provisions of Sections 9.1(c), 11.6, 12.4, 12.7 and 12.9, shall forthwith
become null and void and have no effect, without any liability on the part of
either party or their respective directors, officers or shareholders. Nothing
in this Article IX shall, however, relieve either party to this Agreement of
liability for breach of this Agreement occurring prior to such termination, or
for breach of any provision of this Agreement which specifically survives
termination hereunder.
ARTICLE X
CLOSING
10.1 Closing. Unless this Agreement has been terminated and the
transactions contemplated under this Agreement have been abandoned pursuant to
Section 9.1 and subject to the fulfillment or, if permitted, waiver of the
conditions set forth in Article VIII, the closing of the transactions
contemplated under this Agreement (the "CLOSING") will take place at the
offices of Miller Thomson, 20 Queen Street West, Suite 2500, Toronto, Ontario,
Canada M5H 3S1, commencing at 10:00 a.m. (Toronto time) on June 3, 1998 unless
another date or time is agreed to in writing by the parties to this Agreement
(the "CLOSING DATE"). The Closing will be effective as of 11:59 p.m. on May
31, 1998.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.1 Survival of Representations, Warranties and Covenants. The several
representations and warranties of the parties contained in this Agreement, and
the covenants of Seller contained in Sections 11.2(a) (except as set forth in
the following provisos),11.2(b) (except as set forth in the
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following provisos) and 11.2(e) will survive the Closing until the expiration
of 18 months after the Closing Date, except with respect to claims asserted by
Written Notice by Lafarge Canada or Seller with respect to such
representations, warranties and covenants prior to such expiration in which
case they will survive until the resolution of such claims; provided, however,
that (i) the representations and warranties of Seller contained in Sections
5.2, 5.3, 5.6, 5.9 (but only to the extent relating to the Seller's Plans),
5.12 (but only to the extent relating to title) and 5.33, and the covenants of
Seller contained in Sections 11.2(b) (to the extent relating to a breach of the
foregoing specified representations), 11.2(c) and 11.2(d) and the
representations and warranties of Lafarge Canada contained in Section 6.2 and
the covenants of Lafarge Canada contained in Section 11.3 will remain operative
and in full force and effect until the expiration of any applicable statute of
limitations (giving effect to any tolling, waiver or extension thereof) and, if
there is no applicable statute of limitations, then without any time
limitation, except with respect to claims asserted by Written Notice by Lafarge
Canada or Seller with respect to such representations, warranties and covenants
prior to such expiration in which case they will survive until the resolution
of such claims, and (ii) the representations and warranties contained in
Section 5.7(d) and the covenants contained in Section 11.2(f) shall survive
until the fifth anniversary of the Closing Date except with respect to claims
asserted by Written Notice by Lafarge Canada or Seller will respect to such
representations, warranties and covenants prior to such expiration in which are
they will survive until the resolution of and claims. The other covenants of
the parties contained in this Agreement (or in any document delivered in
connection herewith) will remain operative and in full force and effect without
any time limitation, except as any such other covenant will be limited in
duration by the express terms hereof. Any claim asserted under or in respect
of this Agreement must be made by written notice (the "WRITTEN NOTICE")
containing specific details of the claim, including a reasonable estimate (on a
without prejudice basis) by the party asserting the claim of the amount of such
claim.
11.2 Indemnity by Seller. Seller agrees to indemnify and hold harmless
Lafarge Canada against any Liabilities suffered or incurred by Lafarge Canada,
its successors or assigns resulting from:
(a) any breach by Seller or Lafarge S.A. of any covenants,
undertakings or agreements of Seller or Lafarge S.A. contained in this
Agreement;
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(b) any inaccuracy in or breach of any of the representations or
warranties made by Seller or Lafarge S.A. in this Agreement;
(c) any Liabilities relating to non-compliance with the provisions
of the Bulk Sales Act (Ontario);
(d) any Liabilities suffered or incurred by Asset Acquiror, Share
Acquiror or Lafarge Canada in respect of any Excluded Liabilities (which
Excluded Liabilities, for greater certainty, include without limitation any
Liabilities to the extent arising from any debts, liabilities and obligations
(whether absolute, contingent, accrued or otherwise) of the Seller relating to
the Lime Business), except that this Section 11.2(d) shall not apply to those
Excluded Liabilities that constitute debts, liabilities or obligations of the
types described in Section 11.2(e) with respect to which any claim asserted
shall be addressed under Sections 11.2(e) and 11.3(d), as the case may be, and
shall be subject to the thresholds and apportionments of liability provided
under Sections 11.2(e), 11.3(d) and 11.4(a);
(e) subject to Section 11.3(d), any Liabilities to the extent
arising from any debts, liabilities or obligations (whether absolute,
contingent, accrued or otherwise) of the Seller relating to the Aggregate
Business and to any time on or prior to the Closing which are not (i) included
in the Financial Statements or the Working Capital Amount (ii) disclosed in the
Schedules 5.16 and 1.1(ff)(x) hereto or otherwise under Sections 7.17(d),(e)
and(f) and 7.20(a) and (b)(x) as being liabilities and obligations to be
assumed by Asset Acquiror and/or Lafarge Canada in accordance with their
respective terms (iii) known to the Share Acquiror or Lafarge Canada as of the
Closing, or (iv) incurred by the Seller in the ordinary course of business
consistent with past business practice since December 31, 1997 as permitted by
this Agreement; provided, however, that the Seller shall not be obligated to
indemnify or hold harmless the Share Acquiror or Lafarge Canada for any claim
under this section 11.2(e) unless (i) the Liabilities from such claim exceed
$100,000, or (ii) the aggregate Liabilities of all claims under this Section
11.2(e) and under Section 11.2(f) exceeds, in the aggregate, an amount equal to
(x) $1,000,000 less (y) the aggregate amount of Liabilities with respect to
claims that could be made under sections 9.2(f) and 9.2(g) of the United States
Stock Purchase Agreement but for the application of the $1,000,000 provision
therein;
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(f) any Liabilities not included in either the Financial
Statements or the Working Capital Amount to the extent arising from the
following, whether or not disclosed by Seller to Lafarge Canada in the
Schedules hereto or otherwise under this Agreement and whether or not Seller,
and/or Lafarge Canada had any actual knowledge of such Liabilities: (i) the
release, discharge, or disposal of any Hazardous Materials (or allegations of
same) prior to the Closing Date (A) on or from the Real Properties or (B) on or
from any other property where Hazardous Material are or were (or are or were
alleged to be) released, discharged or disposed of in connection with the
operation of the business of the Seller, whether or not, in any case, such
release, discharge or disposal was in compliance with Environmental Law; (ii)
the violation of any Environmental Law prior to the Closing Date (or allegation
of same) by Seller or any other Person in connection with the Real Properties;
or (iii) any Environmental Claim against any Person whose liability for such
Environmental Claim Seller or any Affiliate of Seller has, in connection with
the Real Properties or any real property previously owned by the Seller,
assumed or retained either contractually or by operation of law prior to the
Closing Date; provided, however, that Seller shall not be obligated to
indemnify or hold harmless Lafarge Canada for any claim under this Section
11.2(f) unless (i) the Liabilities from such claim exceed $100,000 or (ii) the
aggregate Liabilities of all claims under Section 11.2(e) and this Section
11.2(f) exceeds an amount equal to (x) $1,000,000 less (y) the aggregate amount
of Liabilities will respect to claims that could be made under Sections 9.2(f)
and 9.2(g) of the United States Stock Purchase Agreement but for the
application of the $1,000,000 provision therein.
11.3 Indemnity by Lafarge Canada. Lafarge Canada agrees to indemnify and
hold harmless Seller against any Liabilities suffered or incurred by Seller
resulting from:
(a) any breach by Lafarge Canada, Share Acquiror or Asset Acquiror
of any of the respective covenants, undertakings or agreements contained in
this Agreement; or
(b) any inaccuracy in or breach of any of the representations or
warranties made by either of Lafarge Canada or Share Acquiror in this
Agreement; or
(c) any Liabilities suffered or incurred by Seller in respect of
any Assumed Liability; or
(d) any Liabilities to the extent arising from any debts,
liabilities or obligations (whether absolute, contingent, accrued or otherwise)
of the Seller relating to the Aggregate Business and to
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any time on or prior to the Closing which are not (i) included in the Financial
Statements or the Working Capital Amount (ii) disclosed in the Schedules 5.16
and 1.1(ff)(x) hereto or otherwise under Sections 7.17(d),(e) and(f) and
7.20(a) and (b)(x) as being liabilities and obligations to be assumed by Asset
Acquiror and/or Lafarge Canada in accordance with their respective terms (iii)
known to the Share Acquiror or Lafarge Canada as of the Closing, or (iv)
incurred by the Seller in the ordinary course of business consistent with past
business practice since December 31, 1997 as permitted by this Agreement;
provided, however, that the liabilities and obligations of Lafarge Canada under
this Section 11.3(d) shall be limited to one-half of the amount of any
Liabilities less than $20,000,000 suffered or incurred by Seller arising or
resulting from the matters described in Section 11.3(d), it being understood
that Seller shall bear responsibility for one-half of the first $20,000,000 of
Liabilities arising or resulting from the matters described in Section 11.3(d)
and all such Liabilities in excess of $20,000,000. The Parties further confirm
and agree that Lafarge Canada's contribution and liabilities and obligations
under Sections 11.3(d) and 11.4(a), although independent, shall not exceed the
aggregate amount of $10,000,000.
11.4 Limitations.
(a) Notwithstanding anything to the contrary in this Agreement,
Seller shall not be required to indemnify Lafarge Canada or its successors or
assigns under this Article XI in respect of any claims under Sections 11.2(a),
11.2(b), 11.2(e) or 11.2(f), except to the extent of one-half of all
Liabilities less than $20,000,000 and to the extent of all Liabilities in
excess of $20,000,000, it being understood that Lafarge Canada shall bear
responsibility for one- half of the first $20,000,000 of such Liabilities. The
parties understand and agree that the limitations of the immediately preceding
sentence shall not apply to Liabilities arising out of Sections 11.2(b) (to the
extent relating to the representations and warranties of Seller contained in
Sections 5.2, 5.3 (but only to the extent relating to title), 5.9(e)(iv), 5.12
(but only to the extent relating to title) and 5.33)), 11.2(c) or 11.2(d). The
$20,000,000 amounts referenced in Sections 11.3(d) and 11.4(a) are intended to
be, and shall be, calculated using the aggregate of the Liabilities within the
scope of Sections 11.3(d) and 11.4(a) and the Liabilities within the scope of
Section 9.4(a) of the United States Stock Purchase Agreement.
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SIGNATURE COPY - JUNE 3, 1998
(b) The amount of any Liabilities shall be calculated net of any
resulting net tax benefit or net insurance recovery (including net of any
increase in insurance premiums which may arise therefrom) actually received by
the indemnified party on account of such Liabilities.
11.5 Exclusive Remedies. From and after the Closing, the right of each
party hereto to indemnification under this Article XI with respect to any
Liabilities shall be its sole and exclusive remedy under or with respect to
this Agreement or the transactions contemplated hereby, and it shall not be
entitled to pursue, and hereby expressly waives to the fullest extent permitted
by Law, any and all rights that may otherwise be available either at law or in
equity with respect thereto. Without limiting the generality of the foregoing,
each party hereto waives to the fullest extent permitted by Law any claim or
cause of action which it might otherwise assert, including, without limitation,
under the common law or federal or provincial securities, trade regulations or
other Laws, by reason of this Agreement or the transactions contemplated
hereby, except for claims and causes of action brought pursuant to this Article
XI. In no event shall the parties hereto be entitled to rescind this
Agreement.
11.6 Arbitration. In the event of any dispute concerning this Agreement,
its effect or the transactions contemplated by it, such dispute shall be
settled by arbitration conducted in New York City, New York, before a panel of
three arbitrators in accordance with the then applicable provisions of the
American Arbitration Association ("AAA") using the rules of procedure of the
State of New York. Each of Lafarge Canada and Seller will appoint one
arbitrator, and those two arbitrators will appoint a third arbitrator. In the
event that the two arbitrators cannot agree on a third arbitrator within 10
days following the appointment of the second arbitrator, then the third
arbitrator shall be appointed by the AAA in accordance with its then applicable
rules. If either Lafarge Canada or Seller fails to appoint an arbitrator
within 45 days after written notice from one party to the other party detailing
the dispute, the arbitrator chosen by that other party shall act as the sole
arbitrator. Punitive or exemplary damages will not be permitted under any
circumstances. All determinations made by a majority of the arbitrators shall
be final, conclusive and binding on Lafarge Canada and Seller with costs paid
by the party who does not prevail in the arbitration.
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SIGNATURE COPY - JUNE 3, 1998
ARTICLE XII
MISCELLANEOUS
12.1 Entire Agreement. This Agreement, including the Schedules hereto and
the Confidentiality Agreement constitute the entire agreement of the Parties
hereto with respect to the subject matter hereof and thereof and supersede all
prior agreements and undertakings, both written and oral, with respect to the
subject matter hereof and thereof. It is agreed that none of the Parties has
entered into this Agreement in reliance upon any representation, warranty or
undertaking of the other Party which is not expressly set forth in this
Agreement.
12.2 Notices. All notices, requests and other communications to any Party
hereunder shall be in writing (including facsimile) and signed by or on behalf
of the Party giving it and shall be given by personal delivery, certified or
registered mail or telecopy,
if to Seller or Lafarge S.A., to:
Lafarge S.A.
61, rue des Belles Feuilles
B.P.40, 75782 PARIS, CEDEX 16
FRANCE
Attention: Directeur des Affaires Juridiques
Telecopy: (33-1) 44-34-11-48
with copies to:
Jones, Day, Reavis & Pogue
3500 Sun Trust Plaza, 303 Peachtree Street, N.E.
ATLANTA, GA 30308-3242
Attention: William S. Paddock
Telecopy: (404) 581-8330
and to:
Miller Thomson
2500-20 Queen Street West
TORONTO, ON M5H 3S1
Attention: Michael J. Pace
Telecopy: (416) 595-8695
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SIGNATURE COPY - JUNE 3, 1998
if to Asset Acquiror, Share Acquiror or Lafarge Canada to:
Lafarge Canada Inc.
606 Cathcart
MONTREAL, PQ H3B 1L7
Attention:Alain Fredette, Director Legal Services and Secretary
Telecopy: (514) 861-1123
with a copy to:
McCarthy Tetrault
Toronto-Dominion Bank Tower
Suite 4700
TORONTO, ON M5K 1E6
Attention: W. Iain Scott
Telecopy: (416) 868-0673
or such other address or facsimile number as such Party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile
transmission, three hours after the time of dispatch to the facsimile number
specified in this Section 12.2 provided the appropriate confirmation is
received and provided that the time of receipt is during normal business hours
on a Business Day at the place of receipt; or (ii) if given by certified or
registered mail, on the fifth Business Day after the date of dispatch; or
(iii) if given by any other means allowed under this Section 12.2, 24 hours
after being sent to the address specified in this Section 12.2 if such 24 hour
period ends on a Business Day at the place of receipt, or if not, on the next
following Business Day.
12.3 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or
waived prior to the Closing Date if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by the Parties hereto or in
the case of a waiver, by the Party against whom the waiver is to be effective.
(b) No failure or delay by any Party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
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SIGNATURE COPY - JUNE 3, 1998
12.4 Expenses. Except as otherwise provided herein, all costs and expenses
incurred in connection with this Agreement shall be paid by the Party incurring
such cost or expense.
12.5 Successors and Assigns.
(a) The provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their respective
successors and assigns. No Party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the consent of
the other Parties hereto.
(b) Notwithstanding anything contained in this Agreement
to the contrary, nothing in this Agreement, expressed or implied, is intended
to confer on any Person other than the Parties hereto or their respective
successors and permitted assigns, any rights, remedies obligations or
liabilities under or by reason of this Agreement.
12.6 Certain Interpretive Matters.
(a) Unless the context otherwise requires, (i) all
references in this Agreement to Sections, Articles or Schedules are to
Sections, Articles or Schedules of or to this Agreement, (ii) each term defined
in this Agreement has the meaning ascribed to it, (iii) words in the singular
include the plural and vice versa, (iv) unless otherwise expressly provided,
all references to "$" or dollar amounts will be to lawful currency of the
United States, (v) the Schedules referenced in this Agreement are incorporated
in this Agreement as of the date of its execution and constitute an integral
part hereof, (vi) no investigation by the Parties hereto made heretofore or
hereafter shall affect the representations and warranties of the Parties which
are contained herein, and each such representation and warranty shall survive
such investigation.
(b) Titles and headings to Articles and Sections herein
are inserted for convenience of reference only, and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement. No
provision of this Agreement will be interpreted in favor of, or against, any of
the Parties hereto by reason of the extent to which any such Party or its
counsel participated in the drafting thereof or by reason of the extent to
which any such provision is inconsistent with any prior draft hereof or
thereof.
12.7 Governing Law. This Agreement shall be construed in accordance with
and governed by the internal substantive laws of the Province of Ontario and
the applicable laws of Canada regardless
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SIGNATURE COPY - JUNE 3, 1998
of the laws that might otherwise govern under principles of conflict of laws
applicable thereto. Subject to Section 11.6, each of the Parties hereto agree
that the Courts of Ontario are to have nonexclusive jurisdiction to settle any
disputes which may arise in connection with this Agreement.
12.8 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each Party hereto shall have
received counterparts hereof signed by all of the other Parties hereto.
12.9 Confidentiality. Each of the Parties hereto agree to maintain in
strict confidence any and all information each party learns or discovers about
the other or its respective Affiliates during the course of the negotiation,
execution and delivery of this Agreement and agrees to abide by the terms and
conditions set forth in the Confidentiality Agreement. This Section 12.9 shall
not apply to any information that is, or could reasonably be, learned or
discovered through any independent source that is not obligated to maintain
such information as confidential.
12.10 Severability. If any term, provision, covenant or restriction of this
Agreement is determined by a Governmental Entity to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired or invalidated.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
REDLAND QUARRIES INC.
By:
------------------------------------
Name: Gary E. Dale
Title: Vice-President, Finance
3489264 CANADA INC.
By:
------------------------------------
Name: Gary E. Dale
Title: President
77
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SIGNATURE COPY - JUNE 3, 1998
3489949 CANADA INC.
By:
------------------------------------
Name: Joseph B. Sherk
Title: President
(signatures continued on page 78)
LAFARGE CANADA INC.
By:
------------------------------------
Name: Joseph B. Sherk
Title: Vice-President
LAFARGE S.A.
By:
------------------------------------
Name: Jean-Pierre Cloiseau
Title: Director, Finance
78
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 8-K into the following Registration Statements of
Lafarge Corporation previously filed with the Securities and Exchange
Commission: (i) Registration Statement on Form S-8, File No. 2-92414, (ii)
Registration Statement on Form S-8, Form 33-9813, (iii) Registration Statement
on Form S-8, File No. 33-32645, (iv) Registration Statement on Form S-3, File
No. 33-32644 (which also constitutes Post-Effective Amendment No. 6 to
Registration Statement on Form S-1, File No. 2-82548), (v) Registration
Statement on Form S-8, File No. 33-20865, (vi) Registration Statement on Form
S-3, File No. 33-46093 (which also constitutes Post-Effective Amendment No. 7 of
Registration Statement on Form S-1, File No. 2-82548), and (vii) Registration
Statement on Form S-8, File No. 33-51873.
ARTHUR ANDERSEN LLP
Washington, D.C.
June 18, 1998
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