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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ________.
Commission File Number 0-11936
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LAFARGE CORPORATION
(Exact name of Company as specified in its charter)
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MARYLAND 58-1290226
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
11130 SUNRISE VALLEY DRIVE 20191
SUITE 300, RESTON, VIRGINIA (Zip Code)
(Address of principal executive offices)
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COMPANY'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 264-3600
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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<S> <C>
Common Stock, par value $1.00 per share New York Stock Exchange, Inc.
The Toronto Stock Exchange
Montreal Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K is not contained herein, and will not be contained, to
the best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by nonaffiliates
of the Company at March 8, 1999:
$1,058,737,119
Indicate the number of shares of each of the Company's classes of common
stock, as of the latest practicable date.
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CLASS OUTSTANDING AT MARCH 8, 1999
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Common Stock, par value $1.00 per share 72,386,782 shares (including 4,924,041
Exchangeable Preference Shares of
Lafarge Canada Inc.)
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive Proxy Statement for the 1999 Annual
Meeting of Stockholders, to be filed with the Securities and Exchange
Commission, are incorporated by reference in Part III of this Annual Report on
Form 10-K as indicated herein.
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LAFARGE CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 1
Executive Officers of the Company........................... 22
Item 2. Properties.................................................. 24
Item 3. Legal Proceedings........................................... 24
Item 4. Submission of Matters to a Vote of Security Holders......... 25
PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters......................................... 26
Item 6. Selected Consolidated Financial Data........................ 27
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 28
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 43
Item 8. Financial Statements and Supplementary Data................. 44
Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 72
PART III
Item 10. Directors and Executive Officers of the Company............. 73
Item 11. Executive Compensation...................................... 73
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 73
Item 13. Certain Relationships and Related Transactions.............. 73
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 74
Signatures.................................................. 78
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FORWARD-LOOKING STATEMENTS
Statements we make in this Annual Report on Form 10-K that are not
historical facts are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
statements are not guarantees of future performance and involve risks,
uncertainties and assumptions ("Factors") which are difficult to predict.
The Factors that could cause our actual results to differ materially from
those in the forward-looking statements include, but are not limited to:
- - the cyclical nature of our business
- - national and regional economic conditions in Canada and the United States
- - Canadian currency fluctuations
- - the outcome and impact of the Year 2000, including the Year 2000 readiness of
third parties
- - seasonality
- - levels of construction spending in major markets
- - supply/demand structure of our industry
- - competition from new or existing competitors
- - unfavorable weather conditions during peak construction periods
- - changes in and implementation of environmental and other governmental
regulations
In general, we are subject to the risks and uncertainties of the
construction industry and of doing business in the United States and Canada. The
forward-looking statements are made as of this date, and we undertake no
obligation to update them, whether as a result of new information, future events
or otherwise.
Throughout this discussion, when we refer to Lafarge, the Company, us, we,
or our, we mean Lafarge Corporation and its subsidiaries. Our executive offices
are located at 11130 Sunrise Valley Drive, Suite 300, Reston, Virginia 20191,
and our telephone number is (703) 264-3600.
PART I
ITEM 1. BUSINESS
Who are we?
Lafarge Corporation, together with its subsidiaries, is North America's
largest diversified supplier of construction materials. We provide the
construction industry with a full range of aggregates, concrete and concrete
products, cement and cementitious materials, and gypsum wallboard that build
your world.
We have more than 700 operations doing business in most states and
throughout Canada where we conduct our business through our subsidiary, Lafarge
Canada Inc. Our products are used in roads, hospitals, department stores, sports
stadiums, banks, museums, high-rise apartments, amusement parks, swimming pools,
bridges and even sewer pipes on which your world depends. In 1998, we generated
net sales of $2.45 billion, and we shipped 13.5 million tons of cement, 78.5
million tons of aggregates, 10.3 million cubic yards of ready-mixed concrete and
732 million square feet of gypsum wallboard.
Yet, our geographic and product diversity, although essential to increasing
and maintaining our leadership in the industry, is only part of Lafarge. The
other essential part of our business is the over 10,000 people we employ. Our
employees provide customers with technical, engineering, research and customer
service support to create, use and implement special types and applications of
our products to meet specified structural and stringent environmental demands.
How are we organized; what do we make?
Our business is organized into three operating segments. Each segment
represents a separately managed strategic business unit that has different
capital requirements and marketing strategies. We call these segments the Cement
Group, the Construction Materials Group and Lafarge Gypsum.
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- The Cement Group
- Produces and distributes portland and specialty cements;
- Distributes cementitious materials such as fly ash and silica fume;
and
- Processes fuel-quality waste and alternative raw materials for cement
kilns.
- The Construction Materials Group
- Produces and supplies aggregates (crushed stone, sand and gravel);
- Produces and supplies ready-mixed concrete, concrete products and
asphalt; and
- Provides road paving and construction services.
- Lafarge Gypsum
- Produces and distributes a full line of gypsum wallboard products for
commercial and residential construction.
In addition to this discussion of each segment, you will be able to
evaluate the financial performance of each segment by reviewing "Management's
Discussion of Income" in Management's Discussion and Analysis of Financial
Condition and Results of Operations set forth under Item 7, Part II of this
Annual Report and the "Segment and Related Information" of Notes to Consolidated
Financial Statements also set forth under Item 8, Part II of this Annual Report,
which are incorporated herein by reference.
What is the Lafarge Group?
We are part of the Lafarge Group, which includes Lafarge S.A. and its
consolidated subsidiaries. Lafarge S.A., a French company, holds over 50% of our
common stock. The Lafarge Group, a world leader in building materials, holds
leading positions in each of its five divisions: cement, aggregates and
concrete, roofing, gypsum and specialty materials. The Lafarge Group employs
66,000 people in 65 countries and generated sales in excess of $11.4 billion in
1998.
Among other things, Lafarge S.A. provides marketing, technical, research
and development, and managerial assistance to us. For example, Lafarge S.A.'s
30-year experience in the gypsum business and building new plants around the
world supported our entry into the gypsum industry.
How our company developed
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1956 Our majority shareholder, Lafarge S.A., entered the North
American cement market by building a cement plant in
Richmond, British Columbia and forming Lafarge Cement North
America.
1970 Our majority shareholder acquired Canada Cement Company (now
Lafarge Canada, our Canadian subsidiary), already Canada's
largest cement producer.
1974 Lafarge Canada entered the U.S. market by a joint venture to
operate three cement plants in the U.S.
1977 Although the joint venture terminated, we were incorporated
in Maryland in 1977 as Citadel Cement Corporation of
Maryland and operated two of the three U.S. cement plants.
1981 Lafarge Canada acquired the common stock of General Portland
Inc., the second largest cement producer in the U.S.
1983 A corporate reorganization established us as the parent of
Lafarge Canada and General Portland. We completed our
initial public offering of common stock.
1986 We acquired National Gypsum's Huron Cement Division,
consisting of the Alpena, Michigan cement plant, the largest
cement plant in North America, 13 inland cement terminals
and several Great Lakes distribution facilities. We also
acquired Systech which processes fuel-quality waste and
alternative raw materials for use in our cement kilns.
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1989 We acquired 32 plant facilities in five states and mineral
reserves from Standard Slag Holding Company, significantly
expanding our construction materials operations in the U.S.
1991 We acquired three cement plants, 15 cement terminals, two
quarries and more than 30 ready-mixed concrete and
aggregates operations in the Mississippi River Basin when we
acquired Missouri Portland Cement Company and Davenport
Cement Company.
1993 We reorganized our business into the three cement regions
and three construction materials regions. We divested our
Texas and Alabama assets.
1995 We acquired National Portland Cement's 600,000 ton capacity
cement grinding plant in Port Manatee, Florida.
1996 We entered the North American gypsum market when we bought
two gypsum wallboard plants located in Buchanan, New York
and Wilmington, Delaware, and created the new operating
segment Lafarge Gypsum.
1997 We began work on new state-of-the-art cement manufacturing
plants to replace existing facilities in Richmond, British
Columbia and Sugar Creek, Missouri. The $110 million
Richmond plant, expected to be completed in 1999, will
increase annual clinker production from approximately
600,000 tons to 1.1 million tons. The $140 million Sugar
Creek plant and an underground limestone quarry, expected to
be completed in late 2000, will have a rated capacity of
900,000 tons of cement a year.
</TABLE>
What were our acquisitions and capital improvements in 1998?
In 1998, we finalized the largest acquisition in our history when we bought
the construction materials businesses of Denver-based Western Mobile Inc.;
Redland Genstar Inc. of Towson, Maryland; and the Ontario and New York based
aggregates operations of Redland Quarries Inc. from Lafarge S.A. for $690
million in cash. This acquisition, which we refer to as Redland, made Lafarge
the largest diversified supplier of construction materials in North America with
over 10,000 employees and approximately 700 locations.
- Like us, Redland produces and sells aggregates, asphalt, ready-mixed
concrete and other concrete products, and performs paving and related
contracting services;
- Redland does business primarily in Colorado, New Mexico, Maryland and New
York and owns two quarry operations in Ontario, Canada;
- Redland increased our annual sales volumes of construction aggregates by
about 75% to approximately 75 million tons, expanded our ready-mixed
concrete sales volumes in North America by a third to approximately 10
million cubic yards and added more than 6 million tons of asphalt sales;
- The 125 Redland operations acquired posted combined revenues of
approximately $572 million in 1998.
On October 20, 1998, we acquired a cement plant in Seattle, Washington, two
cement distribution facilities, one of which we subsequently sold, and a
limestone quarry in British Columbia from Holnam, Inc. The Seattle plant has an
annual capacity of 420,000 tons of clinker and became the 15th cement plant in
our cement manufacturing network, which we believe is the largest in North
America.
On December 17, 1998, we announced a definitive agreement to acquire
Atlantic Group Limited, a Newfoundland, Canada gypsum wallboard manufacturing
plant, and Atlantic Gypsum Resources, Inc., a Newfoundland gypsum quarry. We
plan to upgrade and increase the manufacturing capacity of the plant and the
quarry.
Other major capital expenditures in 1998 included:
- continuing construction on new state-of-the-art cement manufacturing
plants to replace existing facilities in Richmond, British Columbia and
Sugar Creek, Missouri;
- acquiring a large supplier of fly ash in the United States which, when
combined with our existing business, makes us one of the largest
distributors of fly ash in the U.S.;
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- constructing a new cement terminal in Chicago;
- making numerous aggregates and concrete acquisitions to complement and
reinforce our existing market positions; and
- upgrading the mobile equipment in the Construction Materials Group.
Our business is relatively capital-intensive. During the three-year period
ended December 31, 1998, our capital expenditures were approximately $473
million, principally for the modernization or replacement of existing equipment.
Of this amount, the Cement Group, the Construction Materials Group and Lafarge
Gypsum represented approximately 66%, 33% and 1%, respectively. During the same
period, excluding Redland which was financed by the issuance, in July 1998, of
$650 million in public debt, we also invested approximately $192 million in
various acquisitions that expanded our market and product lines. Of this amount,
the Cement Group, the Construction Materials Group and Lafarge Gypsum
represented approximately 34%, 33% and 33%, respectively. During the three-year
period ended December 31, 1998, operating cash flows and divestment proceeds
totaled $991 million.
In 1998, operating cash flows and divestment proceeds totaled $399 million,
while investments (capital expenditures and acquisitions), excluding the $690
million Redland acquisition, reached $324 million. During 1998, Lafarge's
proceeds from the sale of nonstrategic assets, surplus land and other
miscellaneous items totaled $22.9 million.
In 1999, we expect capital expenditures to be approximately $450 million.
We intend to invest in projects that maintain or improve the performance of our
plants as well as in acquisition opportunities that will enhance our competitive
position in the U.S. and Canada. The 1999 capital expenditures will include a
portion of the $90 million state-of-the-art gypsum wallboard manufacturing
facility, we plan to build in Kentucky, that we announced on January 27, 1999.
The plant is expected to begin operations in the second quarter of 2000. This
facility will produce up to 900 million square feet of wallboard a year, which
currently would make it the largest single wallboard production line in the U.S.
What is our business strategy?
Our core business strategy continues to be defined by three fundamental
elements -- growth and development, operational excellence and commitment to
change.
- - GROWTH AND DEVELOPMENT, both through acquisition and internal development,
is one of our highest priorities. Along with the Redland acquisition in
1998, we strengthened our competitive position through acquisitions and
capital improvements in each of our three segments: the Cement Group, the
Construction Materials Group and Lafarge Gypsum. These acquisitions and
capital improvements are discussed in this Annual Report in "What were our
acquisitions and capital improvements in 1998?"
These actions and other internal developments (described in
Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth in Part II, Item 7 of this Annual Report) have changed
our financial structure appreciably. Our ratio of long-term debt to total
capitalization, which has been exceptionally low the past few years,
increased to 30% at the end of 1998, a level that is well within Lafarge's
internal target range.
Our basic objective is to maintain a strong balance sheet with
sufficient flexibility to capitalize on additional opportunities when they
arise. We continue to pursue such opportunities, particularly in aggregates
and related activities. It is worth noting that these less cyclical
businesses now account for approximately 30% of our revenue stream,
compared with only 17% in 1997.
- - OPERATIONAL EXCELLENCE encompasses the range of programs we have established
for manufacturing efficiency, cost control and continuous improvement.
Synergy is an overused term; nonetheless, it is relevant to our
concept of operational excellence. Lafarge is turning its size into a
competitive advantage, capitalizing not only on the inherent synergies in
our organization. One example is information technology. Lafarge Gypsum's
new customer service
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project will produce a system for forecasting, pricing and customer service
that can also be adapted for use in the Cement Group. Also, purchasing
activities and logistics now are coordinated across all product lines,
leveraging the buying power of a $2.4 billion company so we can achieve
substantial, permanent savings. Another example: having a large sales force
that's dispersed across the U.S. and Canada opens new doors to
cross-product sales and service. In the Maritimes and Quebec, for instance,
we can capitalize on an already strong brand identity by using our existing
cement and construction materials sales organizations to market gypsum
wallboard from the plant we just acquired in Newfoundland.
Our vision of operational excellence includes common operating models
and the rigorous application of best business practices. These types of
programs remain priorities for all of our product lines today and are
supported at the corporate level through our Corporate Technical Services
Department for the Cement Group and our new Business Performance Department
in the Construction Materials Group.
- - COMMITMENT TO CHANGE provides a third pathway to superior performance. As an
example, in 1999 we will open a new Shared Services Center to provide
low-cost, high-volume accounting and transaction services for our Cement
Group. Prior to this, we had these services in all three of our cement
regional offices.
A second change we made in the past year was to realign our
organizational structure to improve the efficiency of our business
development process. In essence, this realignment has allowed us to add
personnel who will support our field people in evaluating structural market
conditions and identifying viable development and acquisition
opportunities.
A third change involves a more formal process to monitor the various
business issues and concerns of our customer base. We have formed a new
Product Development function to harness innovation within Lafarge, organize
it and orient it in a more disciplined fashion to meet the demands of our
customers while creating value for us.
THE CEMENT GROUP
Who are we?
We are the largest cement-manufacturing company in Canada, the third
largest in the U.S., and we operate North America's broadest cement distribution
system by truck, rail, barge and freighter. Our Cement Group was formed by
combining several prominent North American cement groups -- Canada Cement
Lafarge, General Portland, National Gypsum's Huron Cement division, and the
Missouri Portland and Davenport Cement companies.
In 1998, net sales increased 7% to $1.12 billion and operating profit
increased 12% to $288.7 million. During 1998, the Cement Group accounted for 46%
of consolidated net sales, after the elimination of intracompany sales, and 60%
of consolidated income from operations.
We manufacture a diverse product line that includes basic cements in both
bulk and bags:
- Portland
- Masonry
And specialty cements:
- Oil well
- Low alkali
- High early strength
- Moderate heat of hydration
- Sulfate resistant cements
- Silica fume cement
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Our cements are used in every facet of residential, institutional,
commercial, industrial and public construction from offices and homes to dams,
factories, tunnels, roads, highways and airports.
In addition, our subsidiary, Systech Environmental Corporation, processes
industrial hazardous and non-hazardous waste for use as fuel substitutes for
coal, natural gas and petroleum coke used in heating cement kilns. Substitute
fuels preserve natural resources and manage selected waste materials, while at
the same time reducing fuel cost for manufacturing cement. At December 31, 1998,
Systech had waste processing and storage facilities at three of Lafarge's U.S.
cement plants. Systech processed approximately 63 million gallons of
supplemental fuel in 1998. Waste-derived fuels supplied by Systech constituted
approximately 11% of all fuel used by Lafarge in our cement operations during
1998.
Another subsidiary, Mineral Solutions Inc., engages in the management and
marketing of fly ash, a coal combustion by-product which is the residue produced
by coal burning, electricity generating plants. One use of fly ash is as a
cement supplement (replacing a portion of the portland cement) to enhance the
performance of concrete used in large construction projects such as high-rise
buildings, bridges and parking garages. We believe that Mineral Solutions is a
leading North American supplier of fly ash.
We include the financial results of Systech and Mineral Solutions in the
Cement Group's financial results.
How is cement made?
Processed cement was discovered by Joseph Aspdin in 1824 and was called
"portland cement" because it resembled a grey stone mined from the island of
Portland off the coast of England.
People often confuse cement with concrete. Concrete is a mixture of cement,
aggregates and water that hardens to form a building material used for
everything from sidewalks to skyscrapers. Cement is a fine powder that is the
principal strength-giving and property-controlling component of concrete.
While different types of cement vary in their ingredients, four common
elements are found in all types of cement. They are (from most to least):
calcium carbonates (limestone), silicates (sand), argillaceous material (clay,
shale or kaolin), and iron.
Cement is manufactured by a closely controlled chemical process:
- beginning with the crushing and mixing of limestone, sand, clay and
iron-rich materials;
- next, the crushed raw materials undergo a grinding process, which mixes
the various materials more thoroughly and increases fineness in
preparation for the kiln;
- mixing and grinding may be done by either the wet or the dry process;
- in the wet process, the materials are mixed with water to form "slurry",
which is heated in kilns, forming hard pellets called "clinker;"
- in the more fuel efficient dry process, the addition of water and the
formation of slurry are eliminated, and clinker is formed by heating the
dry raw materials;
- in the preheater process, which provides further fuel efficiencies, the
dry raw materials are preheated by air exiting the kiln, and part of the
chemical reaction takes place prior to entry of the materials into the
kiln;
- in the pre-calciner process, an extension of the preheater process, heat
is applied to the raw materials, increasing the proportion of the
chemical reaction taking place prior to heating in the kiln and, as a
result, increases clinker production capacity; and
- gypsum is added and the clinker is ground into an extremely fine powder,
which is the portland cement, a binding agent which, when mixed with
sand, stone or other aggregates and water, produces either concrete or
mortar.
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Where do we get the raw materials to make cement?
We obtain the limestone required to manufacture cement principally from
operations we own or in which we have long-term quarrying rights. These sources
are located close to our manufacturing plants, except for the Joppa, Richmond
and Seattle quarries which are located approximately 70, 80 and 180 miles,
respectively, from their plant sites. Quarried materials are delivered to Joppa,
Richmond and Seattle by barge. At Joppa, we own the reserves, but lease the
quarrying rights and purchase limestone from the lessee. At Whitehall and
Kamloops, we subcontract the quarry operations. Lafarge Canada's quarrying
rights for limestone used by cement manufacturing plants in the Canadian
provinces of Quebec, Nova Scotia, Ontario, Alberta and British Columbia are held
under quarry leases, some of which require annual royalty payments to the
provincial authorities.
We estimate that limestone reserves for all cement plants currently
producing clinker will be adequate to permit production at present capacities
for at least 20 years. Other raw materials, such as clay, shale, sandstone and
gypsum are either obtained from reserves owned by Lafarge or are purchased from
suppliers and are readily available.
Where is our cement made?
Our U.S. plants are primarily concentrated in the central and midwestern
states, extending from the northern Great Lakes southward along the Mississippi
River system. We are the only cement producer serving all regions of Canada. At
December 31, 1998, we operated 15 full-production cement manufacturing plants
with a combined rated annual clinker production capacity of approximately 12.1
million tons consisting of 5.2 million tons in Canada and 6.9 million tons in
the United States. We also operated two cement grinding facilities.
The Portland Cement Association's ("PCA") "U.S. and Canadian Portland
Cement Industry: Plant Information Summary" which was prepared as of December
31, 1997, the most recent date for which information is available, shows that
Lafarge Canada's capacity is the largest of the cement companies in Canada and
represented approximately 35% of the total active industry clinker production
capacity in Canada.
A similar report for the U.S. prepared as of December 31, 1997, shows that
our operating cement manufacturing plants in the United States accounted for an
estimated 8.5% of total U.S. active industry clinker production capacity.
The following table indicates the location, types of process and rated
annual clinker production capacity (based on management's estimates) of each of
Lafarge's operating cement manufacturing plants at December 31, 1998. The total
clinker production of a cement plant might be less than its rated capacity due
principally to product demand and seasonal factors. Generally, a plant's cement
production capacity is greater than its clinker production capacity.
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RATED ANNUAL CLINKER PRODUCTION CAPACITY OF
CEMENT MANUFACTURING PLANTS
(IN SHORT TONS)*
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UNITED STATES PLANTS
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CLINKER
LOCATION PROCESS CAPACITY
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Paulding, OH......... Wet 471,200
Fredonia, KS......... Wet 376,200
Whitehall, PA........ Dry*** 785,900
Alpena, MI........... Dry 2,275,500
Davenport, IA........ Dry** 943,600
Sugar Creek, MO...... Dry 517,500
Joppa, IL............ Dry*** 1,172,900
Seattle, WA.......... Wet 420,000
---------
Total Capacity.............. 6,962,800
=========
Total 1998 clinker
production............... 6,495,000
=========
1998 production as a
percentage of total
capacity****............. 98%
=========
</TABLE>
<TABLE>
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CANADIAN PLANTS
- ----------------------------------------------
CLINKER
LOCATION PROCESS CAPACITY
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Brookfield, N.S...... Dry 504,300
St. Constant, QUE.... Dry 1,046,200
Bath, ONT............ Dry*** 1,120,700
Woodstock, ONT....... Wet 560,200
Exshaw, ALTA......... Dry** 1,185,500
Kamloops, B.C........ Dry 211,700
Richmond, B.C........ Wet 558,100
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Total Capacity.............. 5,186,700
=========
Total 1998 clinker
production............... 4,683,000
=========
1998 production as a
percentage of total
capacity................. 90%
=========
</TABLE>
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* One short ton equals 2,000 pounds.
** Preheater, pre-calciner plants. The capacity of Exshaw's preheater,
pre-calciner kiln is 65% of the plant's clinker production capacity.
*** Preheater plants. The capacity of Joppa's preheater kiln is 55% of the
plant's clinker production capacity.
**** Calculated based on partial year ownership and operation of the Seattle
plant.
All of our cement plants are fully equipped with raw grinding mills, kilns,
finish grinding mills, environmental dust collection systems and storage
facilities. We own all of our cement plants and the land on which they are
located free of major encumbrances, except the Exshaw cement plant and the
Kamloops limestone and cinerite quarries.
- The Exshaw plant is built on land leased from the province of Alberta.
The original lease has been renewed for a 42-year term commencing in
1992. Annual payments under the lease are presently based on a fixed fee
per acre.
- The Kamloops limestone and cinerite quarries are on land leased from the
province of British Columbia until March 2022.
We believe that each of our cement manufacturing plants is in satisfactory
operating condition.
At December 31, 1998, we owned cement grinding plants for the processing of
clinker into cement at Fort Whyte, Manitoba; Edmonton, Alberta; Montreal East,
Quebec; Superior, Wisconsin; and Port Manatee and Tampa, Florida. The Fort Whyte
grinding plant was shutdown in 1994; furthermore, the Edmonton, Montreal East
and Superior grinding plants have been shutdown for several years because cement
grinding has not been cost effective at these locations. These plants were used
during 1998 for the storage of cement. The Port Manatee and Tampa plants include
facilities for receiving clinker and cement by water. We also own clinker
producing plants that have been shutdown in Havelock, New Brunswick and Fort
Whyte, Manitoba.
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The significance of fuel in making cement
Fuel represents a significant portion of the cost of manufacturing cement.
We place special emphasis on becoming, and have become, more efficient in our
sourcing and use of fuel. In general, dry process plants consume significantly
less fuel per ton of output than do wet process plants. At December 31, 1998,
approximately 78% and 82% of our clinker production capacity in Canada and the
U.S., respectively, used the dry process.
As an additional means of reducing energy costs, most of our cement plants
are equipped to convert from one form of fuel to another with very little
interruption in production, thus avoiding dependence on a single fuel and
permitting us to take advantage of price variations between fuels.
Our use of fuel-quality waste supplied by Systech also has resulted in
substantial fuel cost savings. At December 31, 1998, we used fuel-quality waste
materials obtained and processed by Systech as fuel at three of our cement
plants in the U.S. Fuel-quality waste supplied by Systech constituted
approximately 11% of the fuel used by us in all of our cement operations during
1998.
Our three U.S. cement plants which utilize fuel-quality waste are subject
to emission limits and other requirements under the Federal Resource
Conservation and Recovery Act ("RCRA") and Boiler and Industrial Furnaces
("BIF") regulations. See "Environmental Matters -- Resource Conservation and
Recovery Act -- Boiler and Industrial Furnaces Regulations."
The following table shows the possible alternative fuel sources of
Lafarge's cement manufacturing plants in the U.S. and Canada at December 31,
1998.
<TABLE>
<CAPTION>
PLANT LOCATION FUELS
-------------- ------------------------------
<S> <C>
United States:
Paulding, Ohio......................................... Coal, Coke, Fuel-Quality Waste
Fredonia, Kansas....................................... Coal, Fuel-Quality Waste,
Natural Gas, Coke
Whitehall, Pennsylvania................................ Coal, Oil, Coke, Tire Derived
Fuel
Alpena, Michigan....................................... Coal, Coke, Fuel-Quality
Waste, Natural Gas
Davenport, Iowa........................................ Coal, Coke
Sugar Creek, Missouri.................................. Coal, Coke, Natural Gas
Joppa, Illinois........................................ Coal, Coke, Natural Gas
Seattle, Washington.................................... Natural Gas, Coal, Coke, Fuel-
Quality Waste, Tire Derived
Fuel
Canada:
Brookfield, Nova Scotia................................ Coal, Oil, Fuel-Quality Waste
St. Constant, Quebec................................... Natural Gas, Oil, Coke, Pitch
Fuel, Tire Derived Fuel
Bath, Ontario.......................................... Natural Gas, Coke, Coal
Woodstock, Ontario..................................... Natural Gas, Coal, Coke, Oil
Exshaw, Alberta........................................ Natural Gas
Kamloops, British Columbia............................. Natural Gas, Coal, Coke
Richmond, British Columbia............................. Natural Gas, Coke, Coal
Tailings, Bio Gas
</TABLE>
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<PAGE> 12
Who buys our cement?
We sell cement to several thousand unaffiliated customers. Our primary
customers are:
- manufacturers of ready-mixed concrete and other concrete products
- contractors throughout Canada and in many areas of the U.S.
The states in which we had the most significant U.S. sales in 1998 were
Florida and Michigan. Other states in which we had significant sales included:
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota,
Missouri, Nebraska, New York, North Dakota, Ohio, Pennsylvania, Tennessee,
Wisconsin and Washington.
In Canada, we made our most significant sales of cement products in Ontario
and Alberta, which together accounted for approximately 50% of our total
Canadian cement shipments in 1998. Other provinces in which we had significant
sales included British Columbia and Quebec. Approximately 24% of our cement
shipments in Canada were made to affiliates.
No single unaffiliated customer accounted for more than 10% of Lafarge's
consolidated sales during 1998, 1997 or 1996.
How do we distribute our products to our customers?
At December 31, 1998, our sales offices in the U.S. were located in
Buffalo, New York; Port Manatee, Florida; Whitehall, Pennsylvania; Maumee and
Avon Lake, Ohio; Lansing, Michigan; Milwaukee, Wisconsin; Seattle and Spokane,
Washington; Kansas City, Missouri; Davenport, Iowa; Valley City, Bismarck and
Grand Forks, North Dakota; and Nashville, Tennessee.
At December 31, 1998, our sales offices in Canada were located in Moncton,
New Brunswick; Quebec City and Montreal, Quebec; Richmond Hill, Ontario;
Winnipeg, Manitoba; Regina and Saskatoon, Saskatchewan; Edmonton, Alberta; and
Kamloops and Vancouver, British Columbia.
Distribution and storage facilities are maintained at all cement
manufacturing and finishing plants and at approximately 80 other locations
including four deep water ocean terminals. These facilities are strategically
located to extend the marketing areas of each plant. Because of freight costs,
most cement is sold within a radius of 250 miles from the producing plant,
except for waterborne shipments which can be economically shipped considerably
greater distances. Our cement is distributed primarily in bulk but also in paper
bags.
We utilize trucks, rail cars and waterborne vessels to transport cement
from our plants to distribution facilities or directly to our customers.
Transportation equipment is owned, leased or contracted as required. In
addition, some of our customers in the U.S. make their own transportation
arrangements and take delivery of cement at our manufacturing plant or
distribution facility.
Each cement plant has facilities for shipping by rail and by truck. The
Richmond, Alpena, Bath, Davenport, Sugar Creek, Seattle and Joppa plants have
facilities for transportation by water.
How do changes in the seasons affect our business?
Our business is affected significantly by seasonal variations in weather
conditions. Information with respect to quarterly financial results is set forth
in "Notes to Consolidated Financial Statements -- Quarterly Data (Unaudited)" in
Part II, Item 8, Financial Statements and Supplementary Data of this Annual
Report.
Who are our competitors?
The competitive marketing radius of a typical cement plant for common types
of cement is approximately 250 miles except for waterborne shipments which can
be economically transported considerably greater distances. Consequently, even
cement producers with global operations compete on a regional basis in each
market in which that company manufactures and distributes products. No single
cement company in the U.S. has a production and distribution system extensive
enough to serve all U.S. markets. A company's competitive
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<PAGE> 13
position in a given market depends largely on the location and operating costs
of its plants and associated distribution terminals. Vigorous price, service and
quality competition is encountered in each of our primary marketing areas.
Our operating cement plants located in Canada represent an estimated 35% of
the rated annual active clinker production capacity of all Canadian cement
plants. We are the only cement producer serving all regions of Canada. Our
largest competitor in Canada accounted for approximately 20% of rated annual
active clinker production capacity. Our cement plants operating in the U.S.,
including the recently acquired Seattle plant, represented an estimated 8.5% of
the rated annual active clinker production capacity of all U.S. cement plants.
Our three largest competitors in the U.S. accounted for approximately 12%, 11%
and 6%, respectively, of the rated annual active clinker production capacity.
Our statements regarding Lafarge's ranking and competitive position in the
cement industry are based on the PCA's "U.S. and Canadian Portland Cement
Industry: Plant Information Summary" which was prepared as of December 31, 1997.
Customer orders
Sales of cement, as stated above, are made on the basis of competitive
prices in each market area, generally pursuant to telephone orders from
customers who purchase quantities sufficient for their immediate requirements.
Our sales of these products do not typically involve long-term contractual
commitments. The amount of backlog orders, as measured by written contracts, is
normally not significant.
THE CONSTRUCTION MATERIALS GROUP
Who are we?
We became one of the largest producers of aggregates in the U.S. after we
completed our acquisition of more than 100 aggregates, road paving, concrete and
other operations that were once part of the UK-based Redland PLC group. This
gave us leading market positions in the western mountain states and Maryland,
plus operations that complemented existing businesses in New York and
southwestern Ontario. It also increased Lafarge's aggregates sales by
approximately 75%.
Our U.S. construction materials operations are located primarily in
Colorado, New Mexico, Kansas, Louisiana, Missouri, Ohio, Maryland, Pennsylvania,
West Virginia and Wisconsin. In Canada, we are the largest producer of
concrete-related building materials. We are the only producer of ready-mixed
concrete and construction aggregates in Canada that has operations extending
from coast to coast. Our operations include ready-mixed concrete plants, crushed
stone and sand and gravel sites, and concrete product and asphalt plants. During
1998, Lafarge's Construction Materials Group accounted for 55% of consolidated
net sales, after the elimination of intracompany sales, and 36% of consolidated
income from operations.
We offer a broad range of products including:
- Aggregates (crushed stone, sand and gravel)
- Concrete and masonry sand
- Slag aggregates
- Asphalt for road paving and construction
- Ready-mixed concrete
- Roller compacted concrete
- Gravity and pressure pipe
- Pipe couplings, pipeline weights and coatings
- Concrete brick, block and paving stones
- Reinforcing steel
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<PAGE> 14
- Dry bagged products
- Structural and architectural precast products
- Concrete drainage systems and
- Other building supplies
Our aggregates are used as a base material in roads and buildings and as
the raw materials for concrete, masonry, asphalt and many industrial processes.
Our ready-mixed concrete (a blend of aggregates, water and cement) is used for a
variety of applications from curbs and sidewalks to foundations, highways and
buildings.
Where are our aggregates, ready-mixed concrete and concrete products
facilities located?
In the U.S. and in Canada, we own substantially all of our aggregates,
ready-mixed concrete and concrete products plants and believe that all of our
plants are in satisfactory operating condition.
In the U.S., we own or have a majority interest in approximately 200
construction materials locations at December 31, 1998, including:
- 78 ready-mixed concrete plants of which 36% of the plants are
concentrated in Colorado, with similar concentrations of the remaining
plants in Missouri, Louisiana, Maryland and Wisconsin, and to a lesser
extent in Kansas and New Mexico;
- 84 U.S. construction aggregates facilities of which 48% are in Colorado,
14% are in Ohio, with the remainder located in Pennsylvania, Washington,
West Virginia, Wisconsin, New Mexico, New York and Maryland; and
- 33 U.S. asphalt facilities concentrated in Colorado and Maryland with the
remaining plants in New York, New Mexico and Missouri.
We owned or had a majority or joint interest in approximately 380
construction materials facilities in Canada at December 31, 1998, including:
- 145 ready-mixed concrete plants concentrated in the provinces of Ontario
(where approximately 71% of the plants are located), Alberta, Quebec and
British Columbia and to a lesser extent in New Brunswick, Nova Scotia,
Saskatchewan and Manitoba;
- 162 construction aggregates facilities in Canada, approximately 42% of
which are located in Ontario and other aggregates facilities located in
Alberta, Saskatchewan, British Columbia, Quebec, Manitoba, New Brunswick
and Nova Scotia; and
- 28 Canadian asphalt facilities also concentrated primarily in Ontario
with the remaining plants in Alberta, Nova Scotia, New Brunswick and
Quebec.
Where do we get the raw materials for our aggregates and ready-mixed concrete
operations?
The aggregates business consists of the mining, extraction, production and
sale of stone, sand, gravel and lightweight aggregates such as expanded shale
and clay. Aggregates are employed in virtually all types of construction,
including highway construction and maintenance.
The concrete business involves the mixing of cement with sand, gravel,
crushed stone or other aggregates, and water to form concrete which is
subsequently marketed and distributed to customers.
We own the majority of our aggregates quarries and pits and facilities for
production of ready-mixed concrete. We believe our reserves for our operations
are adequate at current production levels. Moreover, even in our pits and
quarries where the reserves are lower, we believe that new sources of aggregates
would be available and obtainable without any interruption to our business.
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<PAGE> 15
Who buys our aggregates, ready-mixed concrete and concrete products?
Aggregates are sold primarily to road building contractors and ready-mixed
concrete producers. Ready-mixed concrete is sold primarily to building
contractors and delivered to construction sites by mixer trucks. Precast
concrete products and concrete pipe are sold primarily to contractors engaged in
all types of construction activity.
The states in which we had our most significant U.S. sales of construction
materials in 1998 were Colorado and Maryland. Other states in which we had
significant sales of construction materials included: Wisconsin, Ohio, New
Mexico, Missouri, Louisiana, and Kansas. In Canada, we had our most significant
sales of construction materials in Ontario and Alberta.
In 1998, no single unaffiliated customer accounted for more than 10% of
Lafarge's construction materials sales.
How do we distribute our products to our customers?
The cost of transportation of aggregates, ready-mixed concrete and concrete
products is high, and consequently, producers are typically limited to a market
area within 100 miles of their production facilities. We primarily utilize
trucks and railroads to transport our aggregates and concrete products to
customers.
How do changes in the seasons and weather affect our business?
Demand for aggregates, ready-mixed concrete and concrete products is
seasonal because construction activity may diminish during the winter. Demand
also may be adversely impacted by unfavorable weather conditions, including, for
example, hurricanes. Information with respect to quarterly financial results is
set fourth in "Notes to Consolidated Financial Statements -- Quarterly Data
(Unaudited)" in Part II, Item 8, Financial Statements and Supplementary Data of
this Annual Report.
Who are our competitors?
Most local markets are highly competitive and are made up of both large
multi-national companies as well as many small producers. Most ready-mixed
concrete companies are comprised of 10 to 20 mixer trucks with annual sales in
the $1.5 to $3.0 million range. Large ready-mixed concrete producers have over
300 mixer trucks. Some companies are vertically integrated and own cement plants
and aggregates operations.
Like the market for ready-mixed concrete, the market for aggregates is
highly competitive and is made up of numerous aggregates producers including
large multi-national, integrated producers and many small producers.
Demand for both aggregates and ready-mixed concrete largely depends on
regional levels of construction activity. Both the aggregates and concrete
industries are highly fragmented, with numerous participants operating in
localized markets. Both aggregates and concrete products are sold in competition
with offerings by other suppliers of the same product and with other substitute
products. The size of the market area for an aggregates quarry and a ready-mixed
concrete plant is similar; therefore, the ability to compete is limited by the
relatively high cost of truck and rail transportation compared with the value of
the product. Proximity to customers is an important criterion. Most sales of
ready-mixed concrete and aggregates are made on the basis of competitive prices
in each market area, generally pursuant to telephone orders from customers who
purchase quantities sufficient for their immediate requirements. In addition to
price, we compete on the basis of service, quality and reliability.
Customer orders
Our sales of ready-mixed concrete and aggregates do not typically involve
long-term contractual commitments. In addition, we believe our reserves of
aggregates and inventories of products are sufficient to fill customer orders in
the normal course of business.
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<PAGE> 16
LAFARGE GYPSUM
Who are we?
With the acquisition of two gypsum wallboard manufacturing plants in
September 1996, Lafarge Gypsum was created. The Buchanan plant, located 30 miles
outside of New York City, and the Wilmington plant in Delaware produce a
wide-ranging line of gypsum wallboard products.
On January 1, 1999, we acquired Atlantic Group Ltd., a supplier of gypsum
wallboard in Newfoundland, Canada. Sales, marketing and distribution support
will be provided by Lafarge's Cement and Construction Materials Groups to help
the Atlantic Group reach new customers in Quebec and the Maritime Provinces. At
the same time, we purchased a gypsum quarry, which has enough reserves to
potentially supply our three existing plants for an extended period of time.
We announced in late January 1999 our plans to construct a $90 million
gypsum wallboard plant in northern Kentucky, just outside of Cincinnati.
Scheduled to begin operations in the first half of 2000, this facility will have
the capacity to produce up to 900 million square feet of wallboard a year, which
would make it the largest single production line in the U.S. The
state-of-the-art plant will use 100% recycled materials, including synthetic
gypsum generated from scrubbers of a nearby power plant.
We offer a full line of gypsum wallboard products for:
- Partitions
- Paneling
- Linings
- Ceilings
- Floors
Our products are used for both new residential and commercial construction
and for repair and remodeling.
How is gypsum wallboard made?
Gypsum is the common term for calcium sulfate dihydrate. The water
molecules are physically locked inside the crystal structure of the gypsum
molecule.
To make wallboard:
- Gypsum rock is fed into a dryer, where surface moisture is removed.
- Then the rock is ground to a flour-like consistency known as land
plaster.
- The land plaster is then calcined, or heated, into calcium sulfate
hemihydrate, also known as stucco. (Gypsum is unique because it is the
only mineral that can be calcined, and yet go back to its original
state when rehydrated. It is this property that is being exploited in
the manufacturing process.)
- The stucco is blended with water and other ingredients in a mixer to
form a slurry.
- This slurry is extruded between two continuous sheets of paper at the
forming station.
- The extended product travels down a long line in order to give the
stucco molecules time to rehydrate and recrystallize into gypsum.
- As it travels, the gypsum crystals grow into each other and into the
liner paper, giving the product 3-dimensional strength.
- When the product has achieved initial "set" or firmness (approximately
3 minutes), the product is cut into lengths.
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<PAGE> 17
- The individual boards are then dried in a kiln to remove excess water.
- The boards are packaged face to face and stored until ready for
shipment.
Where do we make our gypsum wallboard?
We own two gypsum wallboard manufacturing plants with a combined rated
annual production capacity of approximately 730 million square feet (MSF). The
Buchanan, New York plant has a rated capacity of 330 MSF. Lafarge's Wilmington,
Delaware plant has a rated capacity of 400 MSF.
Both plants are fueled primarily by natural gas. Natural gas is purchased
on a contract basis with transportation negotiated under long-term contracts.
The Wilmington facility is located at the Port of Wilmington. The site is leased
through November 2020. We own the Buchanan plant site. We believe that each of
our manufacturing plants is in satisfactory operating condition.
Where do we get the raw materials to make our wallboard?
Currently, we have ten-year requirements contracts with an unaffiliated
third party for gypsum rock and paper used in the production of gypsum
wallboard. Both contracts terminate in September 2006. The Atlantic Group gypsum
acquisition also included the purchase of a gypsum quarry, which has enough
reserves to potentially supply our three existing plants for an extended period
if required.
Who buys our wallboard?
Our gypsum wallboard products are sold to a variety of:
- residential and commercial building materials dealers
- individual and regional/national gypsum distributors
- original equipment manufacturers
- building materials distribution companies
- lumber yards and "Do-It-Yourself" home centers
The Buchanan, New York plant's principal markets include New York,
Pennsylvania and New Jersey. The Wilmington, Delaware plant's largest markets
are Pennsylvania and North Carolina followed closely by Maryland and Virginia.
Sales are made on the basis of competitive prices in each market area, generally
pursuant to telephone orders from customers who purchase quantities sufficient
for their requirements. Customer orders are taken at a centralized customer
service facility.
During 1998, our gypsum wallboard operations accounted for 4% of
consolidated net sales, after the elimination of intracompany sales and 4% of
consolidated income from operations.
How do we distribute our products to our customers?
We utilize contracted trucks to transport finished gypsum board to
distributors and other customers. Additionally, Wilmington is fully equipped to
ship by rail. The Buchanan plant is in close proximity to its key markets
resulting in over 90% of its production being shipped within 100-200 miles of
the plant. The Wilmington plant ships over 50% of its production within 200
miles of the plant.
How do changes in the seasons and in the weather affect our business?
Our gypsum wallboard business is seasonal because construction activity may
diminish during the winter. Demand also may be adversely impacted by unfavorable
weather conditions, including, for example, hurricanes. Information with respect
to quarterly financial results is set forth in "Notes to Consolidated Financial
Statements -- Quarterly Data (Unaudited)" in Part II, Item 8, Financial
Statements and Supplementary Data of this Annual Report.
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<PAGE> 18
Who are our competitors?
The gypsum industry is a large, integrated industry in which a few large
companies are predominant. These companies operate gypsum wallboard plants and
usually own the gypsum reserves used in manufacturing the wallboard. These
companies also sell gypsum for use in portland cement production and agriculture
and other manufactured gypsum products.
The gypsum wallboard industry is highly competitive. Competition among
wallboard producers is primarily on a regional basis. Producers whose customers
are located close to their wallboard plants benefit from lower transportation
costs. We have this competitive advantage because the Buchanan plant is in close
proximity to its key markets resulting in over 90% of its production being
shipped within 100-200 miles of the plant. The Wilmington plant ships over 50%
of its production within 200 miles of the plant.
In addition to price, we compete on the basis of product quality and
customer service.
Customer orders
Sales of gypsum wallboard products are made on the basis of competitive
prices in each market area, generally pursuant to telephone orders from
customers. In the United States, plant capacity utilization is currently at 100%
and there is an industry-wide allocation of product to all customer segments. At
December 31, 1998, our backlog was 4 to 6 weeks.
TRADEMARKS AND PATENTS
As of December 31, 1998, Lafarge owns, has the right to use, or has pending
applications for approximately 40 patents granted by the United States and
Canada and 76 trademarks related to each of the Cement Group, the Construction
Materials Group and Lafarge Gypsum and Lafarge's trademarked, high performance
concrete, cement and gypsum products for commercial, agricultural, industrial
and public works construction. For example, trademarked precast concrete
products such as SPLITROCK(TM) retaining wall modules and paving stones are
commonly used in municipal, commercial and residential landscaping designs. In
addition, our trademarked concrete mix designs, including Futurecrete(TM),
Agrifarge(TM) and WeatherMix(TM), provide customers with enhanced performance
for specific applications. Specialty cements like Lafarge's trademarked SF(TM)
cement are designed for durable applications such as bridges, underwater
structures, skyscrapers and industrial floors. We believe that our rights under
existing trademarks are of value to our operations, but no one trademark or
group of trademarks is material to the conduct of our business as a whole.
RESEARCH, DEVELOPMENT AND ENGINEERING
We conduct research and development activities for the Cement Group's
products at our laboratory located in Montreal, Canada, which we believe is one
of the largest private laboratories in the North American cement industry. In
addition, we have access to the state-of-the-art research and development
resources of Lafarge S.A.
We and Lafarge S.A. are parties to three agreements concerning the sharing
of costs for research and development, strategic planning and marketing. In
addition, we are involved in research and development through our participation
in the Portland Cement Association. Our subsidiary, Systech, is engaged in
research and development in an effort to further develop the technology to
handle additional waste materials. Research and development costs, which are
charged to expense as incurred, were $7.4 million, $7.2 million and $6.3 million
for 1998, 1997, and 1996, respectively. This includes amounts accrued for
technical services rendered by Lafarge S.A. to us, under the terms of the
agreements discussed above, of $6.1 million during 1998, $6.3 million during
1997 and $5.7 million during 1996.
WHO ARE OUR EMPLOYEES?
As of December 31, 1998, we employed 10,400 individuals of which 6,840 were
hourly employees. Approximately 1,070 of these hourly employees were employed by
the Cement Group, 5,538 were employed by the Construction Materials Group and
150 were employed by Lafarge Gypsum. Salaried employees totaled
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<PAGE> 19
3,560. These employees generally act in administrative, managerial, marketing,
professional and technical capacities. Overall, we consider our relations with
our employees to be satisfactory.
The Cement Group
-- U.S. Cement Operations
The majority of Lafarge's 569 U.S. hourly employees are represented by
labor unions. During 1998, labor agreements were negotiated at the Paulding,
Ohio and Sugar Creek, Missouri cement plants and at the Detroit, Michigan;
Saginaw, Michigan; and Waukegan, Illinois distribution terminals. In addition,
labor agreements at the Vancouver, Washington terminal and the recently acquired
Seattle, Washington plant were successfully renegotiated without a work
stoppage. During 1999, labor agreements will expire at the Davenport, Iowa
cement plant and the Cleveland, Ohio; Toledo, Ohio; Duluth, Minnesota and
Superior, Wisconsin distribution terminals. We expect the agreements to be
successfully concluded without work stoppages.
-- Canadian Cement Operations
Substantially all of our 469 hourly employees are covered by labor
agreements. In 1998, the labor agreements at the Bath, Ontario plant, the
Brookfield, Nova Scotia plant and the Montreal-East terminal in Quebec were all
successfully renegotiated without a work stoppage. Labor agreements at the
Winnepeg terminal were successfully renegotiated without a work stoppage. In the
fourth quarter of 1999, the Kamloops plant, and the Edmonton and Toronto
terminals will have contracts that expire. All are expected to be renewed
without a work stoppage.
The Construction Materials Group
-- U.S. Construction Materials Operations
Lafarge's 3,652 U.S. construction materials employees consist of 2,809
hourly employees and 843 salaried employees.
In the U.S., approximately 40% of our hourly workforce is covered by 20
collective bargaining agreements with eight major labor unions. During 1998, two
collective bargaining and benefit agreements were successfully negotiated with
union bargaining groups without a work stoppage. In 1999, six labor and benefit
agreements will expire. All of these agreements are expected to be successfully
negotiated without a work stoppage.
-- Canadian Construction Materials Operations
Lafarge's employees in the Canadian construction materials operations
totaled 3,379 at the end of 1998 with 2,552 hourly employees and 827 salaried
employees.
In eastern Canada, hourly employees are covered by 84 collective bargaining
agreements with a number of unions. There are 42 non-union business units in
which discussions are held directly with employees. During 1998, 28 collective
bargaining agreements were renegotiated with union bargaining agents, incurring
a work stoppage at one location of four weeks. There was also one unsuccessful
union organizing drive. Twenty-six collective bargaining agreements will expire
during 1999 throughout eastern Canada and are expected to be successfully
concluded without a work stoppage.
In western Canada there are 35 collective labor agreements with several
different unions. Six agreements are through employer associations. During 1998,
12 collective labor agreements were successfully negotiated. In addition,
following a strike at the Vancouver Island location, a closure agreement was
negotiated for the location. We continue to negotiate seven collective
agreements that have expired, with no work stoppages anticipated. Three of these
are through employer associations. During 1999, nine collective labor agreements
will expire. These agreements are expected to be renewed without a work
stoppage.
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<PAGE> 20
Lafarge Gypsum
-- Gypsum Wallboard Operations
Substantially all of Lafarge's 150 gypsum wallboard hourly employees are
covered by labor agreements. There are four local labor agreements with two
unions. Three of the labor agreements have been renegotiated, two agreements for
two years at Buchanan and one at Wilmington for three years. The other agreement
is in the fourth year of a six-year contract. The Buchanan and Wilmington plants
have no recent history of labor disputes.
ENVIRONMENTAL MATTERS
The following discusses the environmental laws and their application to
Lafarge, and sets forth the proposed changes to or new environmental laws or
regulations that could affect us.
Our 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. Our
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 our facilities, environmental guidance on key
issues confronting us, routine training and exchange of information by
environmental professionals, environmental recognition award program, and
routine and emergency reporting systems.
The current environmental laws affecting Lafarge are summarized below and
our policies regarding environmental expenditures are discussed in "Other
Factors Affecting the Company -- Environmental Matters" in Management's
Discussion and Analysis of Financial Condition and Results of Operations set
forth under Item 7 of Part II of this Annual Report, which is incorporated
herein by reference. For the years ended December 31, 1998, 1997 and 1996, total
capital expenditures and remediation expenses incurred are not material to the
financial position, results of operations, or liquidity of Lafarge. However, our
expenditures for environmental matters have increased and are likely to increase
in the future. Because of different requirements in the environmental laws of
the U.S. and Canada, the complexity and uncertainty of existing and future
requirements of environmental laws, permit conditions, costs of new and existing
technology, potential preventive and remedial costs, insurance coverages and
enforcement related activities and costs, we cannot determine at this time
whether capital expenditures and other remedial actions that we may be required
to undertake in the future will materially affect our financial position,
results of operations or liquidity. With respect to known environmental
contingencies, we have recorded provisions for estimated probable liabilities
and do not believe that the ultimate resolution of such matters will have a
material adverse effect on the financial condition, results of operations or
liquidity of Lafarge.
Some of the proposed changes to or new environmental laws or regulations
that could affect us are discussed below.
Resource Conservation and Recovery Act -- Boiler and Industrial Furnaces
Regulations
We currently operate 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. Our 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 completed its trial burn in 1995
to establish permit limitations to be incorporated into the second step, the
final Part B permit. A draft of the proposed Part B permit was reviewed during
1998; a public hearing was held on March 26, 1999. The Paulding
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plant conducted its trial burn in May 1998. We expect a draft permit in mid-1999
for review and comment. On October 22, 1998, we announced that the Alpena plant
will cease using fuel-quality wastes no later than June 1, 2001. During the
interim, the plant will continue to use waste-derived fuels and comply with the
applicable RCRA and BIF requirements.
The U.S. Environmental Protection Agency ("EPA") is in the process of
revising its BIF regulations. Proposed revision of the BIF regulations were
initially published in May 1996, citing both RCRA and Clean Air Act authority.
The proposal relied heavily on maximum achievable control technology ("MACT")
requirements of Title III of the Clean Air Act Amendments of 1990 with certain
elements of the risk-based authority of RCRA incorporated into the proposal. 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. Our 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 a bypass system that will likely enable it to meet the
final standards when they are promulgated. We have actively participated in the
regulatory process to help formulate revised BIF standards that are reasonable,
cost-effective, and comply with the RCRA and the Clean Air Act. In the past two
years, EPA has reopened the rulemaking process on several occasions to solicit
public comment on new data and proposed regulatory approaches, i.e., new limits
for semi-volatile metals and a particulate matter continuous emission monitoring
system. Our Fredonia plant is currently conducting, in conjunction with the EPA,
a voluntary test program to evaluate the reliability and variability of various
particulate matter continuous emissions monitoring systems to be used for the
purpose of determining compliance with the revised BIF standards. A final
revised regulation is not anticipated before mid-1999. Existing BIF facilities
would then have up to three years to meet the new standards or cease using
hazardous waste as a supplemental fuel.
Cement kiln dust ("CKD") is a by-product of many of our cement
manufacturing plants. CKD has been excluded from regulation 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, we joined other cement manufacturers in submitting to the EPA a
proposed enforceable agreement for managing CKD that included specific CKD
management standards. After a lengthy legal review, the EPA decided that it
lacks the legal authority to enter into an enforceable agreement. In 1996, the
EPA announced that it was recommending the process of developing CKD management
standards using industry standards as the technical starting point and Subtitle
C of RCRA as its legal authority. We believe it is inappropriate for the EPA to
develop CKD standards under Subtitle C of RCRA. Lafarge and other cement
manufacturers, through our trade association, continue to work with the EPA and
various states to develop a consensus approach for implementing CKD management
standards using state solid waste authority as the primary legal authority
rather than federal Subtitle C authority.
The EPA has revised its schedule and indicated that it will likely propose
CKD management standards in 1999. Should the EPA ultimately proceed to
promulgate highly tailored CKD management standards, we are likely to incur some
additional capital costs and operational expenses to meet these new standards.
In order to mitigate the anticipated future costs of CKD regulation at the
federal and/or state levels, we continue to implement a program to assess our
management practices for CKD at operational and inactive facilities in the both
the U.S. and Canada. We also have 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.
Historical waste disposal and/or contaminated sites
As with many industrial companies in the U.S. and Canada, we have been
involved in certain remedial actions to clean up or to close certain historical
waste disposal and/or contaminated sites, as required by
19
<PAGE> 22
federal, provincial, and/or state laws. In addition, we have voluntarily
initiated cleanup activities at certain of our properties in order to mitigate
long-term liability exposure and/or to facilitate the sale of such property. We
routinely review all of our active properties, as well as our idle properties,
to determine whether remediation is required, the adequacy of accruals for such
remediation, and the status of all remedial activities. It has been our
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.
Federal environmental laws that impose liability for remediation include
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986,
which together are referred to as "Superfund." Currently, we are involved in
only two Superfund remediations. At one site where we have been named a PRP (a
potentially responsible party) the remedial activities are complete and
long-term maintenance and monitoring are under way. Partial contribution has
been obtained from financially viable parties, including ourselves. The EPA will
delist this site from the National Priority List in 1999. At the other site,
also on the National Priority List, some of the PRPs named by the EPA have
initiated a third-party action against 47 other parties, including us. We have
also been named a PRP at this site. The suit alleges that in 1969 a predecessor
company of Lafarge sold equipment containing 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. We
believe that neither matter is material to the financial condition, results of
operations or liquidity of Lafarge. In addition, during the year ended December
31, 1998, no enforcement matters were initiated or resolved or are outstanding
that have a material effect on our financial statements.
Clean Air Act
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. We are actively
participating with other cement manufacturers in working with the EPA to define
test protocols, better define the scope of the 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. EPA proposed standards for existing and new facilities
were subject to review and public comment in 1998. It is anticipated that final
MACT regulations will be promulgated in the first half of 1999, and existing
facilities will then have three years to meet the standards or close down
operations. Our Sugar Creek, Missouri plant that is being modernized and
expanded will have to meet the new MACT standards at the time of startup. We
believe that several of our other U.S. 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. Although the costs of such new
equipment may be significant, the actual plant specific costs will vary
depending on the level of existing controls and/or emissions monitoring
equipment and whether or not it can be modified or new equipment will be
required to meet the final MACT standards. We will not be able to make a firm
determination of costs and its materiality until the final MACT standards are
promulgated.
Title V of 1990 Clean Air Act Amendments may result in significant capital
expenditures and operational expenses for us. The Clean Air Act Amendments
established a new federal operating permit and fee program for many
manufacturing operations. Under the Act, our U.S. operations deemed to be "major
sources" of air pollution were required to submit detailed permit applications
and pay recurring permit fees. Our "major sources" have been routinely paying
permit fees for several years. The permitting requirements primarily affect our
cement manufacturing, gypsum wallboard and waste-fuel operations. We have
submitted all applicable permit applications. During 1999, we expect to begin
reviewing several draft Title V permits for several of our facilities. We
anticipate that it will be many years before all the initial title V permits are
drafted and issued.
20
<PAGE> 23
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 Lafarge'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 pollutant 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 meets the
standards, it will then be required to modify its state 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 we operate 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 the cost impact on our operations. In 1998, the U.S.
Congress clarified the time schedule for implementation of the particulate
matter 2.5 program. The EPA is prohibited from requiring states to revise their
implementation plan until after the next 5-year review of the particulate matter
2.5 and ozone standards in 2001. In 1998, the EPA also clarified its
expectations of states in the ozone transport region (22 states east of the
Mississippi River) in revising their NO(x) control strategies and standards to
demonstrate future attainment of the ozone ambient air quality standards. In
this regard, the EPA has recommended that states only require a 30% reduction of
NO(x) from cement plants. The EPA recommendation allows cement plants to
consider all NO(x) reductions that have occurred from a 1995 baseline. The EPA
has requested that all corrections to the existing baseline be submitted no
later than the first quarter of 1999. We do not believe that the costs
associated with revised NO(x) standards will have a material impact on us.
Global Climate Change
An evolving issue of significance to Lafarge in the U.S. and Canada is
global climate change, or CO(2) stabilization/reduction. In December 1997, the
United Nations held an international convention in Kyoto, Japan to take further
international action to ensure CO(2) 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 Kyoto
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 was available for signature by
member countries starting in the spring of 1998. Even though President Clinton
signed the Kyoto Protocol in November of 1998, it will require Senate
ratification and enactment of implementing legislation before it becomes
effective in the United States. The consequences of CO(2) reduction measures for
cement producers are potentially significant because CO(2) is generated from
combustion of fuels such as coal and coke in order to generate the high
temperatures necessary to manufacture clinker (which is then ground with gypsum
to make cement). In addition, CO(2) is generated in the calcining of limestone
to make 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 Lafarge, 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.
in 1996, we joined the EPA's Climate Wise program. This voluntary program
promotes energy efficiency in industrial operations and reduces or stabilizes
the CO(2) emissions that result from the generation of electricity.
The Conference of the Parties reconvened in November of 1998 to continue
work on issues not clearly resolved in the Kyoto Protocol. The primary focus was
on developing more details on the flexible mechanisms provisions, i.e.,
country-to-country emissions trading, joint implementation and a clean
development mechanism. These provisions are potentially important to us as an
option for meeting potential CO(2) reductions other than by reducing production,
should the U.S. Senate ratify the Kyoto Protocol, and the Protocol goes into
force and effect. It will not be possible to determine the impact on Lafarge
until international, U.S. and Canadian governmental requirements are defined and
we can determine whether emission offsets or credits are obtainable and whether
alternative cementitious products can be substituted.
21
<PAGE> 24
EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth the name, age and business experience for the last
five years of each of the executive officers of the Company and indicates all
positions and offices with the Company held by them.
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
Bertrand P. Collomb............... Chairman of the Board 56
Bernard L. Kasriel................ Vice Chairman of the Board 52
John M. Piecuch................... President and Chief Executive Officer 50
Edward T. Balfe................... Executive Vice President and 57
President -- Construction Materials Group
Duncan S. Gage.................... Executive Vice President and President -- U.S. 49
Cement Operations
Peter H. Cooke.................... Executive Vice President and President -- Canadian 50
Cement Operations
Larry J. Waisanen................. Executive Vice President and Chief Financial 48
Officer
Michael J. Balchunas.............. Senior Vice President and President -- Western 51
Cement Region
Alain Bouruet-Aubertot............ Senior Vice President and President -- Lafarge 42
Gypsum Division
Patrick Demars.................... Senior Vice President -- Corporate Technical 50
Services
Guillaume Roux.................... Senior Vice President -- Planning and Marketing 39
James J. Nealis III............... Senior Vice President -- Human Resources 51
Joseph B. Sherk................... Vice President and Controller 50
David C. Jones.................... Vice President -- Legal Affairs and Secretary 57
David W. Carroll.................. Vice President -- Environment and Government 52
Affairs
Kevin C. Grant.................... Vice President and Treasurer 43
</TABLE>
Bertrand P. Collomb was appointed to his current position in January 1989.
He has also served as Chairman of the Board and Chief Executive Officer of
Lafarge S.A. since August 1, 1989. From January 1, 1989 to August 1, 1989 he was
Vice Chairman of the Board and Chief Operating Officer of Lafarge S.A., and from
1987 until January 1, 1989 he was Senior Executive Vice President of Lafarge
S.A. He served as Vice Chairman of the Board and Chief Executive Officer of the
Company from February 1987 to January 1989.
Bernard L. Kasriel was elected to his current position in May 1996. He has
also served as Vice Chairman and Chief Operating Officer of Lafarge S.A. since
January 1995. Prior to that he served as Managing Director of Lafarge S.A. from
1989 to 1994, Senior Executive Vice President of Lafarge S.A. from 1987 to 1989
and Executive Vice President of Lafarge S.A. from 1982 until 1987.
John M. Piecuch was appointed to his current position effective October 1,
1996. He previously served as Group Executive Vice President of Lafarge S.A.
from July 1994 until October 1996. He served as Senior Executive Vice President
of the Company from 1992 to June 1994 and as Executive Vice President of the
Company from 1989 to 1992.
Edward T. Balfe was appointed to his current position in July 1994. Prior
to that he served as Senior Vice President of the Construction Materials Group.
He served as President of the Company's Construction Materials Eastern Region
and President and General Manager of Permanent Lafarge, a construction materials
affiliate of the Company, from 1990 to 1993.
Duncan S. Gage was elected to his current position effective March 1, 1996.
From October 1994 to February 1996 he was Senior Vice President and President of
the Company's U.S. Cement Region. He
22
<PAGE> 25
previously served as Senior Vice President -- Planning and Development from
January 1994 to September 1994.
Peter H. Cooke was elected to his current position effective March 1, 1996.
He previously served as Senior Vice President and President of the Company's
Eastern Cement Region from July 1990 to February 1996.
Larry J. Waisanen was appointed to his current position effective February
10, 1998. He previously served as Senior Vice President and Chief Financial
Officer of the Company from January 1996 to February 1998. He served as
Assistant General Manager of Lafarge S.A.'s interests in Turkey from May 1992 to
December 1995. Prior to that he served as Vice President Controller of Lafarge
S.A. from March 1989 to April 1992.
Michael J. Balchunas was appointed to his current position effective July
1, 1996. From March 1992 to July 1996 he was President of Systech Environmental
Corporation, a wholly-owned subsidiary of the Company. Prior to that he served
as Vice President of Operations of the Company's Great Lakes Region from July
1990 to March 1992.
Alain Bouruet-Aubertot was appointed to his current position effective
September 1, 1996. He served as Senior Vice President of Strategy & Development
for Lafarge Platres, a division of Lafarge S.A., from December 1994 to September
1996. Prior to that, he was Project Director & Business Manager for
Rhone-Poulenc Chemicals from November 1993 to November 1994 and
Technical/Manufacturing Director for Rhone-Poulenc, Thann & Mulhouse from
January 1992 to October 1993.
Patrick Demars was appointed to his current position effective February
1991. He previously served as Vice President -- Products and Process of the
Company's Corporate Technical Services operations from July 1990 to January
1991. He was a Regional Vice President at CNCP, a Brazilian subsidiary of
Lafarge S.A., from July 1986 to June 1990.
Guillaume Roux was appointed to his current position effective February 1,
1996. From May 1994 to January 1996 he served as Deputy General Manager of
Clause Semences, a former subsidiary of Lafarge S.A. Prior to that, he served as
a Vice President in the Lafarge S.A. Finance Department from November 1992 to
May 1994. He was Chief Financial Officer of Harris Moran Seeds Company, a former
subsidiary of Lafarge S.A., from May 1989 to November 1992.
James J. Nealis III was appointed to his current position effective January
1, 1999. From August 1996 to December 1998 he served as Vice President --
International Human Resources for the Lafarge Group in Paris. From January 1994
to August 1996 he served as Vice President -- Human Resources, Cement Group.
Joseph B. Sherk was appointed to his current position effective August 1,
1998. From January 1, 1994 to August 31, 1998 he was Vice President and
Controller Eastern Region for Lafarge Canada Inc.
David C. Jones was appointed to his current position in February 1990. He
served as Corporate Secretary of the Company from November 1987 to February
1990.
David W. Carroll was appointed to his current position in February 1992. He
served as Director Environmental Affairs of the Company from February 1990 to
February 1992. Prior to that he was Director Environmental Programs for the
Chemical Manufacturers Association from 1978 to 1990.
Kevin C. Grant was appointed to his current position effective February 10,
1998. He previously served as Treasurer of the Company from June 1995 to
February 1998. He served as Vice President -- Human Resources Development from
June 1994 to June 1995. He also was Sales Manager from June 1992 to June 1994
and Manager of Strategic Studies from June 1991 to June 1992 for Lafarge Fondu
International, a subsidiary of Lafarge S.A.
There is no family relationship between any of the executive officers of
the Company or its subsidiaries. None was selected as an officer pursuant to any
arrangement or understanding between him and any other person. The term of
office for each executive officer of the Company expires at the first meeting of
the Board
23
<PAGE> 26
of Directors after the next annual meeting of stockholders following his or her
election or appointment and until his or her successor is chosen and qualifies.
ITEM 2. PROPERTIES
Information set forth in Item 1 of this Annual Report that relates to the
location and general character of the principal plants, mineral reserves and
other significant physical properties owned in fee or leased by the Company is
incorporated herein by reference in answer to this Item 2.
All of the Company's cement plant sites (active and closed) and quarries
(active and closed), as well as terminals, grinding plants, gypsum wallboard
plants and miscellaneous properties, are owned by the Company free of major
encumbrances, except the Exshaw cement plant, the Kamloops limestone and
cinerite quarries, and the Wilmington gypsum wallboard plant.
- The Exshaw plant is built on land leased from the province of Alberta.
The original lease has been renewed for a 42-year term commencing in
1992. Annual payments under the lease are presently based on a fixed fee
per acre.
- The Kamloops limestone and cinerite quarries are on land leased from the
province of British Columbia until March 2022.
- The Wilmington gypsum wallboard facility is located at the Port of
Wilmington, Delaware. The site is leased from Diamond State Port
Corporation, an entity of the Delaware Department of Transportation. The
lease expires in November 2020.
Limestone quarry sites for the cement manufacturing plants in the United
States are owned and are conveniently located near each plant, except for the
Joppa, Richmond and Seattle quarries which are located approximately 70, 80 and
180 miles, respectively, from their plant sites.
LCI's quarrying rights for limestone used by cement manufacturing plants in
the Canadian provinces of Quebec, Nova Scotia, Ontario, Alberta and British
Columbia are held under quarry leases, some of which require annual royalty
payments to the provincial authorities. Management of the Company estimates that
limestone reserves for the cement plants currently producing clinker will be
adequate to permit production at present capacities for at least 20 years. Other
raw materials, such as clay, shale, sandstone and gypsum are either obtained
from reserves owned by the Company or are purchased from suppliers and are
readily available.
We have ready-mixed concrete and construction aggregates operations
extending from coast-to-coast in Canada. Our U.S. activities are concentrated in
the Rocky Mountain, midwestern, north-central and northeast states and
Louisiana. We have approximately 600 locations that offer an extensive line of
construction materials, consisting primarily of crushed stone, sand, gravel and
other aggregates; ready-mixed concrete; concrete products such as pipe, brick,
block, paving stones and utility structures; asphalt paving and road
construction services; and dry bagged goods.
Deposits of raw materials for the Company's aggregates producing plants are
located on or near the plant sites. These deposits are either owned by the
Company or leased upon terms which permit orderly mining of reserves.
ITEM 3. LEGAL PROCEEDINGS
In 1992, the Company's Canadian subsidiary, Lafarge Canada Inc., along with
the Bertrand & Frere Construction Company Limited and others, became a defendant
in lawsuits instituted in the Ontario (Canada) Court (General Division) arising
from claims brought by building owners, the Ontario New Home Warranty Program
and other plaintiffs regarding alleged defective concrete, fly ash and cement
used in
24
<PAGE> 27
defective footings, foundations and floors. The damages claimed total more than
Canadian $65 million. The amount of Lafarge Canada's liability, if any, in these
lawsuits is uncertain. Lafarge Canada has denied liability and is defending the
lawsuits vigorously. Lafarge Canada has also introduced claims against some of
its primary and excess insurers for defense costs and indemnity, if any. The
lawsuits were joined and the hearing was completed in December 1998. The matter
was taken under advisement by the presiding judge and a decision is expected in
1999. Lafarge Canada believes that it has insurance coverage that will respond
to defense expenses and liability, if any, in the lawsuits.
On March 18, 1998, a shareholder derivative lawsuit was filed in the
Circuit Court for Montgomery County, Maryland. The lawsuit, filed against all of
the directors of the Company, alleges that they committed breach of fiduciary
duty, corporate waste, and gross negligence in connection with the Company's
purchase of a number of construction materials businesses in North America from
Lafarge S.A., its majority stockholder (the "Redland Transaction"). Lafarge S.A.
took control of these businesses in late 1997, when it acquired the British
construction materials firm Redland PLC.
The Redland Transaction was proposed to the Company in late 1997. The
Company's Board of Directors appointed a special committee of independent
directors to evaluate the Redland Transaction. The special committee conducted
extensive due diligence and retained independent professionals to assist with
its evaluation, including an investment banking firm which advised the committee
regarding the fairness of the price and terms of the proposed Redland
Transaction. Based on its due diligence and the opinions of its
specially-retained advisers, the special committee recommended the Redland
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 Redland Transaction. The Redland Transaction was publicly announced
on March 17, 1998.
The Company has been advised by its directors that the lawsuit against
them, which challenges their conduct in evaluating and approving the Redland
Transaction, is without merit. The directors have been vigorously defending
against the lawsuit. The initial complaint was filed on March 18, 1998. The
directors filed a motion to dismiss on May 19, 1998, which was granted on July
20, 1998. With the court's permission, the plaintiff filed an amended complaint
on August 28, 1998. The directors filed a motion to dismiss the amended
complaint on September 10, 1998. That motion was argued on February 22, 1999,
and is currently under advisement with the court.
On August 26, 1996, the Company, among others, was named in two similar
lawsuits brought in the District Courts of Starr and Duval counties in Texas by
plaintiffs alleging exposure to toxic substances. The plaintiffs alleged
negligence, gross negligence, and products and strict liability and sought,
among other things, both past and future damages, exemplary damages and cost of
the suit in an unspecified amount. After extensive discovery and motion practice
in these two cases, the plaintiffs in both cases have agreed to dismiss their
claims without prejudice.
Currently, the Company is involved in two remediations under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, which
together are referred to as Superfund. At one site where the Company had been
named a potentially responsible party ("PRP"), the remedial activities are
complete, long-term maintenance and monitoring are under way, and partial
contribution has been obtained from financially viable parties, including the
Company. The United States Environmental Protection Agency ("EPA") will delist
this site from the National Priority List in 1999. At the other site, also on
the National Priority List, some of the PRPs named by the EPA have initiated a
third-party action against some 47 other parties including the Company. The
Company also has been named a PRP at this site. The suit alleges that in 1969 a
predecessor company of the Company sold equipment containing 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 numerous other large disposers of hazardous substances are associated with
this site. Management believes that neither matter is material to the financial
condition, results of operations or liquidity of the Company.
When the Company determines that it is probable that a liability for
environmental matters or other legal actions has been incurred and the amount of
the loss is reasonably estimable, an estimate of the required remediation costs
is recorded as a liability in the financial statements. As of December 31, 1998,
1997 and 1996, the liabilities recorded for environmental obligations are not
material to the financial statements of the Company. Although the Company
believes its environmental accruals are adequate, environmental costs may be
incurred that exceed the amounts provided at December 31, 1998. However,
management has concluded that the possibility of material liability in excess of
the amount reported in the December 31, 1998 Consolidated Balance Sheets is
remote.
In the ordinary course of business, the Company is involved in certain
other legal actions and claims, including proceedings under laws and regulations
relating to environmental and other matters. Because such matters are subject to
many uncertainties and the outcomes are not predictable with assurance, the
total amount of these legal actions and claims cannot be determined with
certainty. Management believes that all legal and environmental matters will be
resolved without material adverse impact to the Company's financial condition,
results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter ended December 31, 1998.
25
<PAGE> 28
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information required in response to Item 5 is reported in Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations under the caption "Management's Discussion of Shareholders' Equity"
of this Annual Report and is incorporated herein by reference.
On March 8, 1999, 67,462,741 shares of Common Stock ("Common Stock") were
outstanding and held by 2,715 record holders. In addition, on March 8, 1999,
4,924,041 Exchangeable Preference Shares of Lafarge Canada Inc., which are
exchangeable at the option of the holder into Common Stock on a one-for-one
basis and have rights and privileges that parallel those of the shares of Common
Stock, were outstanding and held by 6,238 record holders.
The Company may obtain funds required for dividend payments, expenses and
interest payments on its debt from its operations or from external sources,
including bank or other borrowings.
26
<PAGE> 29
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The table below summarizes selected financial information for the Company.
For further information, refer to the Company's consolidated financial
statements and notes thereto presented under Item 8 of this Annual Report.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(IN MILLIONS EXCEPT AS INDICATED BY AN *)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net Sales...................... $2,448.2 $1,806.4 $1,649.3 $1,472.2 $1,563.3
======== ======== ======== ======== ========
INCOME BEFORE THE FOLLOWING
ITEMS........................ $ 407.0 $ 300.9 $ 236.4 $ 185.4 $ 141.9
Interest expense, net.......... (27.2) (6.6) (14.1) (15.2) (28.8)
Income taxes................... (144.3) (112.3) (81.4) (40.6) (32.5)
-------- -------- -------- -------- --------
NET INCOME..................... 235.5 182.0 140.9 129.6 80.6
Depreciation, depletion and
amortization................. 156.8 106.3 100.5 94.3 103.6
Other items not affecting
cash......................... (16.2) 47.7 (33.4) (105.6) (36.2)
-------- -------- -------- -------- --------
NET CASH PROVIDED BY
OPERATIONS................... $ 376.1 $ 336.0 $ 208.0 $ 118.3 $ 148.0
======== ======== ======== ======== ========
TOTAL ASSETS.............. $2,904.8 $2,774.9 $1,813.0 $1,713.9 $1,651.4
======== ======== ======== ======== ========
FINANCIAL CONDITION AT DECEMBER
31
Working capital................ $ 522.9 $ (127.1)(A) $ 394.9 $ 448.6 $ 402.3
Property, plant and equipment,
net.......................... 1,400.8 1,296.0 867.7 797.0 751.9
Other assets................... 566.1 529.4 213.0 198.3 192.4
-------- -------- -------- -------- --------
TOTAL NET ASSETS.......... $2,489.8 $1,698.3 $1,475.6 $1,443.9 $1,346.6
======== ======== ======== ======== ========
Long-term debt................. $ 751.2 $ 135.2 $ 161.9 $ 268.6 $ 290.7
Other long-term liabilities.... 323.4 307.4 203.2 194.3 214.5
Shareholders' equity........... 1,415.2 1,255.7 1,110.5 981.0 841.4
-------- -------- -------- -------- --------
TOTAL CAPITALIZATION...... $2,489.8 $1,698.3 $1,475.6 $1,443.9 $1,346.6
======== ======== ======== ======== ========
COMMON EQUITY SHARE INFORMATION
Net income -- basic*........... $ 3.27 $ 2.56 $ 2.02 $ 1.89 $ 1.19
Net income -- diluted*......... $ 3.24 $ 2.54 $ 1.95 $ 1.82 $ 1.18
Dividends*..................... $ 0.51 $ 0.42 $ 0.40 $ 0.375 $ 0.30
Book value at December 31*..... $ 19.57 $ 17.52 $ 15.79 $ 14.17 $ 12.34
Average shares and equivalents
outstanding.................. 72.1 71.1 69.8 68.7 67.7
Shares outstanding at December
31........................... 72.3 71.7 70.4 69.2 68.2
======== ======== ======== ======== ========
STATISTICAL DATA
Capital expenditures........... $ 224.3 $ 124.0 $ 124.8 $ 121.9 $ 95.4
Acquisitions................... $ 99.3(B) $ 8.8 $ 83.5 $ 29.3 $ 4.7
Net income as a percentage of
net sales*................... 9.6% 10.1% 8.5% 8.8% 5.2%
Return on average shareholders'
equity*...................... 17.6% 15.4% 13.5% 14.2% 9.9%
Long-term debt as a percentage
of total capitalization*..... 30.2% 8.0% 11.0% 18.6% 21.6%
Number of employees at December
31*.......................... 10,400 10,100 6,800 6,600 6,500
Exchange rate at December 31
(Cdn. to U.S.)*.............. 0.654 0.699 0.730 0.733 0.713
Average exchange rate for the
year (Cdn. to U.S.)*......... 0.674 0.722 0.733 0.729 0.732
======== ======== ======== ======== ========
</TABLE>
- ---------------
(A) Includes a liability of $690 million to Lafarge S.A for the Redland
acquisition, of which $40 million was repaid in 1998 and the remaining $650
million was financed with long-term public debt in 1998.
(B) Excludes the Redland acquisition which was accounted for similar to a
pooling of interests.
27
<PAGE> 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto:
MANAGEMENT'S DISCUSSION OF INCOME
The Consolidated Statements of Income included in Item 8. Financial
Statements and Supplementary Data of this Annual Report summarize Lafarge
Corporation's (the "Company's") operating performance for the past three years.
To facilitate analysis, net sales and operating profit are discussed by
operating segment and are summarized in the following table. (See "Segment and
Related Information" in the Notes to Consolidated Financial Statements for
further segment information.)
The Company's three operating segments are:
Cement Group -- 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 Group -- the production and distribution of
construction aggregates, ready-mixed concrete, other concrete products and
asphalt and the construction and paving of roads.
Lafarge Gypsum -- the production and distribution of gypsum wallboard and
related products.
28
<PAGE> 31
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------
1998 1997 1996
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
NET SALES
Cement..................................................... $1,123.7 $1,050.5 $ 996.2
Construction materials..................................... 1,342.3 785.4 750.0
Gypsum..................................................... 102.4 92.1 24.0
Eliminations............................................... (120.2) (121.6) (120.9)
-------- -------- --------
TOTAL............................................ $2,448.2 $1,806.4 $1,649.3
======== ======== ========
GROSS PROFIT
Cement..................................................... $ 367.7 $ 329.9 $ 291.2
Construction materials..................................... 250.9 119.8 101.5
Gypsum..................................................... 30.6 21.5 4.7
-------- -------- --------
TOTAL............................................ 649.2 471.2 397.4
-------- -------- --------
OPERATIONAL OVERHEAD AND OTHER EXPENSES
Cement..................................................... (79.0) (71.1) (66.3)
Construction materials..................................... (79.6) (39.8) (41.6)
Gypsum..................................................... (10.6) (8.3) (2.3)
-------- -------- --------
TOTAL............................................ (169.2) (119.2) (110.2)
-------- -------- --------
INCOME FROM OPERATIONS
Cement..................................................... 288.7 258.8 224.9
Construction materials..................................... 171.3 80.0 59.9
Gypsum..................................................... 20.0 13.2 2.4
-------- -------- --------
TOTAL............................................ 480.0 352.0 287.2
Corporate and unallocated expenses......................... (73.0) (51.1) (50.8)
-------- -------- --------
EARNINGS BEFORE INTEREST AND TAXES......................... $ 407.0 $ 300.9 $ 236.4
======== ======== ========
ASSETS
Cement..................................................... $ 956.4 $ 795.2 $ 777.0
Construction materials..................................... 1,095.3 1,136.6 615.6
Gypsum..................................................... 70.6 71.8 70.7
Corporate, Redland goodwill and unallocated assets......... 782.5 771.3 349.7
-------- -------- --------
TOTAL............................................ $2,904.8 $2,774.9 $1,813.0
======== ======== ========
</TABLE>
YEAR ENDED DECEMBER 31, 1998
NET SALES
The Company's net sales increased by 36 percent in 1998 to $2,448.2 million
from $1,806.4 million in 1997. U.S. net sales increased 64 percent to $1,700.3
million. The improvement in U.S. sales was primarily due to the Company's
acquisition of certain North American construction materials operations of
Redland PLC ("Redland"). Other positive factors impacting sales were higher
sales volumes and prices in both cement and gypsum. Canadian net sales were
$747.9 million, a decrease of $21.6 million or 3 percent. The decrease was due
to a decline of 7 percent in the average value of the Canadian dollar relative
to the U.S. dollar that offset an underlying 4 percent improvement in Canadian
dollar net sales.
29
<PAGE> 32
Cement
Net sales from cement operations increased by 7 percent to $1,123.7 million
from $1,050.5 million in 1997 due to higher sales volumes and prices. Cement
sales volumes increased by 0.6 million tons to 13.5 million tons, which
represents a 5 percent increase, while the delivered price per ton to customers
net of freight costs ("net realization") and excluding exchange rate fluctuation
increased by 4 percent. U.S. net sales increased by $93.9 million to $850.8
million, a 12 percent improvement reflective of high levels of road paving and
other infrastructure spending as well as strength in both the residential and
nonresidential construction sectors. Cement shipments advanced 7 percent as most
major markets posted gains. Net realization in the U.S. increased 4 percent. In
Canada, net sales remained stable in local currency but declined 7 percent when
converted to U.S. dollars. Cement shipments decreased by 1 percent while net
realization (excluding exchange rate fluctuation) increased by 3 percent. In
eastern Canada, cement sales volumes and net realization increased by 6 percent
and 3 percent, respectively. Higher shipments in Ontario of 3 percent were due
to an increase in residential and commercial construction combined with a mild
autumn, an extended construction season and a strengthening economy. Cement
shipments in Quebec and the Atlantic Provinces were both 8 percent higher than
last year. In western Canada, cement shipments were 8 percent lower than 1997,
reflecting weaker demand in all major markets. The two major factors were the
negative impact on British Columbia of the depressed Asian economy and lower
sales of oil well cement in the western provinces due to the negative impact of
lower world oil prices on drilling activity.
Construction Materials
Net sales from construction materials operations increased by 71 percent to
$1,342.3 million from $785.4 million in 1997. The major cause of this increase
was the Company's acquisition of Redland from Lafarge S.A. for $690 million on
June 3, 1998. Lafarge S.A., the majority shareholder of the Company, acquired
Redland PLC in December 1997. Since the Company acquired Redland from its
majority shareholder, the acquisition was accounted for similar to a pooling of
interests for financial reporting purposes. Accordingly, Redland assets and
liabilities were transferred to the Company at Lafarge S.A.'s historical cost,
which approximates the purchase price paid by the Company. The accompanying
consolidated balance sheets as of December 31, 1998 and December 31, 1997
include the balance sheets of Redland. The 1998 consolidated statements of
income and cash flows include the full year results of Redland.
Redland is engaged in the production and sale of aggregates, ready-mixed
concrete, asphalt and performs paving and related contracting services primarily
in Colorado, New Mexico, Maryland, New York and Ontario, Canada. The significant
changes in the consolidated statements of income and cash flows between 1998 and
1997 are primarily due to this acquisition.
Excluding Redland, net sales of construction materials operations in the
U.S. and Canada were $770.2 million, which represents a 2 percent decrease from
1997, due to the decline in value of the Canadian dollar. Ready-mixed concrete
shipments to customers in the U.S. and Canada were 7.5 million cubic yards in
1998, 1 percent higher than 1997, while aggregates sales volumes increased 3
percent to 44.5 million tons. In Canada, net sales in local currency increased
by $13.1 million or 2 percent. The Redland operations had net sales of $572.1
million. The U.S. Redland operations contributed $547.6 million or 96 percent of
total Redland net sales, while the Canadian operations contributed 4 percent or
$24.5 million. In 1998, the Redland acquisition contributed 2.7 million cubic
yards of ready-mixed concrete and 34.0 million tons of aggregates.
The 2 percent increase in Canadian sales expressed in Canadian dollars,
excluding Redland operations, reflects an increase in the price of most
products. Ready-mixed concrete sales volumes were unchanged from 1997 levels,
while prices increased by 3 percent. In eastern Canada, sales volumes were 7
percent higher and prices were equal to 1997 levels. A mild fall and winter
extended the construction season which increased sales. Western Canada
ready-mixed concrete volumes were off 6 percent; however, prices increased by 6
percent. The volume decline was primarily due to the weak economy in British
Columbia. Aggregates sales volumes were 1 percent ahead of 1997 levels, while
prices increased 6 percent. Volumes in eastern Canada increased by 11 percent
with a price reduction of 1 percent. The price reduction was mainly due to a
shift in the product mix to lower priced products. Aggregates volumes in the
West declined by 11 percent largely due
30
<PAGE> 33
to weak economic conditions in British Columbia. The volume decline was offset
by an increase in the price of aggregates and a more favorable product mix of
higher quality concrete and premium aggregates sales in Alberta.
In the U.S., net sales, excluding Redland operations, increased by $14.0
million or 7 percent to $227.9 million. Ready-mixed concrete sales volumes
increased by 1 percent as all major markets posted gains. Prices in the U.S.
region increased by 2 percent due to increased sales of higher value ready-mixed
concrete. Aggregates sales volumes in the U.S. increased by 8 percent while
prices increased by 4 percent. Due to acquisitions, the Missouri division saw a
volume increase of 45 percent. The strong Cleveland and Youngstown, Ohio markets
helped increase volumes in the Northern division by 3 percent. The Milwaukee
division saw a decrease of 11 percent due to slowing economic conditions.
Gypsum
Net sales from gypsum operations increased by 11 percent to $102.4 million
from $92.1 million in 1997. Strong market demand in the residential and
commercial construction sectors resulted in price increases of 8 percent.
Volumes increased 4 percent to 732 million square feet. Both gypsum plants
achieved record production levels due to productivity improvements.
GROSS PROFIT AND COST OF GOODS SOLD
The Company's average gross profit as a percentage of net sales increased
modestly to 26.5 percent, reflecting significant improvements in all major
product lines and a change in the Company's product portfolio resulting from the
Redland acquisition.
Cement gross profit was 33 percent compared with 31 percent. The
improvement was the result of higher prices as well as a 1 percent reduction in
cash production cost per ton. The Company's cement cost per ton is heavily
influenced by plant capacity utilization. The following table summarizes the
Company's cement and clinker production (in millions of tons) and the clinker
production capacity utilization rate:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
--------------
1998 1997
----- -----
<S> <C> <C>
Cement production........................................... 12.77 12.15
Clinker production.......................................... 11.18 10.40
Clinker capacity utilization................................ 95% 89%
===== =====
</TABLE>
Cement and clinker production were 5 and 8 percent higher than 1997,
respectively. U.S. cement production totaled 7.9 million tons, up 7 percent.
Clinker capacity utilization at U.S. plants increased to 98 percent from 94
percent as six of the eight U.S. plants established clinker production records.
The largest production increase was at the Whitehall, Pennsylvania plant where a
second kiln was restarted. Canadian cement production was 4.9 million tons, up 4
percent. Canadian clinker capacity utilization increased to 90 percent from 82
percent. These improvements were due to higher clinker production at six of the
seven Canadian cement plants, while cement production was better at four of the
seven.
Construction materials gross profit increased by 4 percentage points to 19
percent. Higher ready-mixed concrete prices in the U.S. and western Canada were
partially offset by lower aggregates prices and higher material costs. Operating
costs were lower in eastern Canada and the U.S. Excluding Redland, ready-mixed
concrete operating gross profit per cubic yard rose 8 percent while aggregates
gross profit per ton improved 27 percent.
Lafarge Gypsum's gross profit as a percentage of sales increased by 7
percentage points to 30 percent. This was primarily due to a price increase of
$9 per thousand square feet. Both plants set production records in 1998.
31
<PAGE> 34
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses were $216.8 million in 1998 compared
with $161.0 million in 1997. The increase was mainly due to the consolidation of
the Redland operations as well as one-time costs associated with its acquisition
and integration and certain other organizational changes related to the
management structure. Selling and administrative expenses as a percentage of net
sales were 8.9 percent in 1997 and 1998.
GOODWILL AMORTIZATION
Amortization of goodwill was $17.6 million in 1998 compared with $3.7
million in 1997. The increase was primarily due to amortization of $327.8
million of goodwill associated with the Redland acquisition. 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. The Company
expects to amortize the remaining goodwill over periods ranging from 15 to 40
years, based on the expected economic lives of the assets purchased.
OTHER EXPENSE, NET
Other expense, net which consists of items such as equity income and gains
and losses from divestitures, was $7.8 million in 1998 compared with $5.5
million in 1997. The $2.3 million increase in 1998 was due to lower gains on
divestments and asset sales of $3.1 million.
PERFORMANCE BY LINE OF BUSINESS
Cement
The Company's operating profit from its cement operations (before corporate
and unallocated expenses) was $288.7 million, a $29.9 million or 12 percent
improvement from 1997. The Company's Canadian cement operations reported an
operating profit in local currency of $152.1 million, $12.4 million better than
in 1997 due to a 3 percent rise in domestic net realization and higher prices
for exports to U.S. operations, which were partially offset by a 1 percent
decrease in domestic cement shipments. These positive factors were largely
offset by a 7 percent reduction in the value of the Canadian dollar, which
resulted in a net increase in profits of $1.6 million denominated in U.S.
dollars. Canadian cement cash cost per ton was 5 percent lower than 1997 levels
mainly due to improvements in operating efficiencies at the St-Constant and
Woodstock plants in eastern Canada. In the U.S., operating profit was $186.2
million, $28.3 million or 18 percent higher than 1997. The improvement was due
to 7 percent higher shipments and a 4 percent increase in net realization partly
offset by higher plant costs, clinker purchases (to supplement production) and
higher prices for cement imports from Canadian operations.
Construction Materials
The Company's operating profit from construction materials operations
(excluding Redland and before corporate and unallocated expenses) was $93.4
million, $13.4 million higher than 1997. The improvement was due to higher
ready-mixed concrete and aggregates sales volumes in both the U.S and Canada.
Higher prices for ready-mixed concrete and aggregates in the U.S. and western
Canada, partially offset by higher material costs, also contributed to the
improvement. The Canadian operations earned $64.7 million, $11.6 million better
than 1997, primarily reflecting higher ready-mixed concrete and aggregates
prices. In eastern Canada, higher shipments in all markets were offset by lower
prices. Earnings in the West increased due to higher prices in most markets
somewhat offset by lower demand and higher material and operating costs. U.S.
operations earned $28.7 million, $1.8 million better than 1997 due to a 9
percent increase in aggregates sales volumes, a 2 percent improvement in
ready-mixed concrete prices and a 1 percent increase in concrete volumes.
32
<PAGE> 35
Gypsum
The Company's gypsum wallboard operations reported an operating profit of
$20.0 million due to the strength of the U.S. commercial and residential
construction sectors, price increases and record production at both plants.
EARNINGS BEFORE INTEREST AND TAXES (EBIT)
In 1998, EBIT was $407.0 million, a $106.1 million or 35 percent
improvement from 1997. The acquisition of Redland, net of non-recurring
acquisition and integration costs but before amortization of goodwill,
contributed more than $75 million. Included in EBIT is $12.1 million of
amortization of Redland goodwill. Better results in all operations, partially
offset by the $13.0 million impact of the lower Canadian dollar exchange rate,
added $28.2 million. Operating profit from Canadian operations was $147.5
million, $11.2 million better than 1997. The operating profit in the U.S. was
$259.5 million, $94.9 million better than 1997.
INTEREST EXPENSE
Interest expense increased by $27.7 million in 1998 to $47.7 million due to
the issuance of $650.0 million of external debt (See Notes to Consolidated
Financial Statements) to finance the Redland acquisition. Interest capitalized
was $3.6 million and $1.4 million in 1998 and 1997, respectively.
INTEREST INCOME
Interest income increased $7.1 million in 1998 due to higher levels of
short-term investments throughout the year.
INCOME TAXES
Income tax expense increased from $112.3 million in 1997 to $144.3 million
in 1998 due to higher profits in both the U.S. and Canada. The Company's
effective income tax rate was 38 percent in 1998 and 38.2 percent in 1997.
NET INCOME
The Company reported net income of $235.5 million in 1998 compared with
$182.0 million in 1997. The 29.4 percent improvement resulted from the
acquisition of Redland and higher volumes in all of the Company's product lines.
Higher cement, ready-mixed concrete, aggregates and gypsum wallboard prices also
contributed to the improvement. These increases were partially offset by higher
interest expense, higher cement plant fixed costs, goodwill amortization related
to Redland and other acquisitions, and higher selling and administrative
expenses.
GENERAL OUTLOOK
The Company's general outlook for 1999 in all operating segments is
favorable, particularly in the U.S. In the U.S., low interest rates and healthy
levels of building activity in several sectors are expected to keep demand for
construction materials at or near historically high levels. Also, in 1999, we
anticipate an acceleration of construction spending for highways and related
projects because of the enactment in 1998 of a six-year, $217 billion federal
transportation funding program. Housing starts and sales increased in the fourth
quarter of 1998, which should provide momentum into 1999. This is in line with
other construction industry forecasts. In Canada, improving conditions in
eastern Canada should offset expected softness in the western provinces. The oil
and gas and agriculture economies of Alberta and Saskatchewan will likely be
affected by low prices, lower drilling activity and lower farm incomes. The
British Columbia economy, with its strong ties to the economies of Asia and the
Pacific Rim, will likely be weak in 1999.
The U.S. Portland Cement Association is forecasting a modest 0.9 percent
increase in cement consumption in 1999. The Canadian Portland Cement Association
predicts that Canadian cement consump-
33
<PAGE> 36
tion will increase by 3 percent. The Company's operations in the U.S. and Canada
should benefit from these generally favorable trends in construction.
The outlook for 1999 in the Company's gypsum wallboard operations remains
positive because of the high level of residential and commercial construction
activity that is expected to continue. The start-up of new domestic production
capacity during the year could increase competitive activity.
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 in local currency increased 9
percent to $769.5 million. 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 were acquired in September
1996, added $92.1 million of sales in the U.S.
Cement
Net sales from 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 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 due to a softening of demand.
Construction Materials
Net sales from construction materials operations were $785.4 million, a 5
percent increase. The improvement was attributed to higher ready-mixed concrete
and aggregates shipments and increased ready-mixed concrete prices partially
offset by the divestment at mid-year of the Quebec construction operations.
Ready-mixed concrete and aggregates sales volumes both increased 7 percent.
Ready-mixed concrete shipments reached 7.4 million cubic yards in 1997, while
aggregates volumes rose to 43.1 million tons. In Canada, net sales increased 7
percent reflecting 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.
Aggregates 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 concrete sales volumes increased slightly
(1 percent) as all major markets posted gains except Milwaukee, Wisconsin where
shipments dropped 10 percent due to a slowdown in the residential construction
sector. Aggregates 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
34
<PAGE> 37
the termination of operations at a plant in Cleveland, Ohio. These declines were
partially offset by aggregate shipments of approximately 0.4 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.
Gypsum
Net sales from 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 aggregates volumes, coupled with higher
ready-mixed concrete prices in the U.S. and western Canada, were partially
offset by lower aggregates prices and increased material costs. Operating costs
were lower in the U.S. and eastern Canada. Ready-mixed concrete operations gross
profit per cubic yard rose 10 percent while aggregates 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 and clinker
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 production.......................................... 10.40 9.89
Clinker capacity utilization................................ 89% 85%
===== =====
</TABLE>
Cement and clinker production were 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.
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.
GOODWILL AMORTIZATION
Amortization of goodwill was $3.7 million in 1997 compared with $3.0
million in 1996. 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.
35
<PAGE> 38
The Company expects to amortize the remaining goodwill over periods ranging from
15 to 40 years, based on the expected economic lives of the assets purchased.
OTHER EXPENSE, NET
Other expense, net consists of items such as equity income, amortization of
intangibles and gains and losses from divestitures. Other expense, net was $5.5
million in 1997 compared with $6.6 million in 1996.
PERFORMANCE BY LINE OF BUSINESS
Cement
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, a 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.
Construction Materials
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
aggregates 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 aggregates 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
aggregates operating costs were lower by 3 percent and 7 percent, respectively.
These improvements were partially offset by a 6 percent reduction in aggregates
volumes.
Gypsum
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, a favorable pricing environment and record-setting
production at both plants.
EARNINGS BEFORE INTEREST AND TAXES (EBIT)
In 1997, EBIT was $300.9 million, $64.5 million better, reflecting better
performance in all major product lines. The gypsum wallboard operations
contributed $13.2 million in its first full year of operation. EBIT from
Canadian operations was $136.3 million, $31.6 million better. EBIT in the U.S.
was $164.6 million, $32.9 million better.
36
<PAGE> 39
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.
OTHER FACTORS AFFECTING THE COMPANY
Year 2000
Year 2000 computer issues may affect the Company's business application
software and supporting computer infrastructure ("IT Systems") and embedded
technology systems such as process control equipment, instrumentation and other
field systems ("Non-IT Systems"). The Year 2000 computer problem originated from
programmers writing software code that used two digits instead of four to
represent the year. Computer systems using the "two-digit" format may experience
problems handling date sensitive calculations beyond the year 1999. This could
cause many computer systems to fail or to produce inaccurate results and could
result in an interruption in, or a failure of, certain business activities or
operations, which could materially and adversely affect the Company's results of
operations, liquidity or financial condition.
Although the Company believes it has an effective plan to address Year 2000
issues, certain Year 2000 issues are beyond the Company's control. Because these
issues concern, for example, the Year 2000 readiness of third parties, including
customers as well as utilities and other suppliers, the Company is unable to
determine the likelihood of a material impact on its financial condition,
results of operations or liquidity. However, the Company's Year 2000 compliance
program (the "Year 2000 Program") is expected to significantly reduce the
Company's level of uncertainty about Year 2000 issues, including readiness of
third parties. The Company believes that after completion of the projects as
scheduled, the possibility of significant interruptions of its normal operations
should be reduced.
In the first half of 1997, the Company organized and implemented its Year
2000 Program, which includes a program management office staffed with full time
professionals dedicated to the resolution of Year 2000 issues. The objective of
the Year 2000 Program is to avoid loss of revenues, unplanned downtime or other
adverse impacts on the business. Each of the Company's major operating locations
has a designated point of contact who is responsible for the development and
implementation of the location's Year 2000 strategy. The Year 2000 Program
addresses the essential phases, activities and tasks that the Company must
undertake for the successful execution of its Year 2000 Program. The Company has
identified four phases to describe its process of achieving Year 2000 readiness:
(1) inventory and assessment, (2) optimum scenario definition, (3) transition
plan definition and (4) implementation.
37
<PAGE> 40
The Company has completed the first three phases and has determined the
potential impact of the Year 2000 on its IT Systems and Non-IT Systems. As a
result, the Company has developed a transition plan to resolve any issues. The
plan includes the replacement of certain equipment and modification of certain
software to recognize the turn of the century.
IT Systems that were not Year 2000 ready are in the process of being
replaced by software applications or upgraded to Year 2000 ready systems. The IT
Systems implementation phase is expected to be completed by September 30, 1999.
As of December 31, 1998, approximately 60 percent of Non-IT Systems are Year
2000 ready. The other systems are scheduled for upgrade or replacement during
the first nine months of 1999. Other computer system projects have not been
significantly postponed due to the Year 2000 efforts. The dates on which the
Company believes the Year 2000 projects will be completed are based on the best
estimates of management, which were derived utilizing numerous assumptions of
future events, including the continued availability of certain resources,
third-party modification plans and other factors. There can be no guarantee that
these estimates will be achieved or that there will not be a delay in, or
increased costs associated with, the implementation of the Year 2000 Program.
Operating locations have identified their most critical suppliers to whom
letters have been sent requesting information on their Year 2000 readiness
programs and their state of readiness. The Company evaluates the responses and
develops contingency plans as necessary. Other contingency plans are currently
being developed with an estimated completion date of August 31, 1999. The plans
address information processing and reporting, operations and personnel. The
contingency plans will also include trigger dates (the dates on which the
contingency plan will replace the original action plan if a milestone is not
met) for each non-compliant system.
The Year 2000 Program is expected to result in estimated non-recurring
spending of approximately $18 million to $20 million. As of December 31, 1998,
the Company has incurred approximately $5.7 million ($3.2 million capital and
$2.5 million expense) for upgrading or replacing its IT and Non-IT Systems. Of
the expenditures remaining, approximately 75 percent will be capitalized.
Internal resource requirements are estimated at 50,000 hours of which
approximately 27,000 hours have been incurred through December 31, 1998. The
Company believes, with appropriate system replacement or modification, it will
be able to operate its time-sensitive IT Systems and Non-IT Systems through the
turn of the century. However, certain Year 2000 issues are beyond the Company's
control including the Year 2000 readiness of third parties.
Environmental Matters
The Company's operations, like those of its competitors, are subject to
state, federal, local and Canadian environmental laws and regulations, which
impose liability for cleanup or remediation of environmental pollution and
hazardous waste arising from past acts; and require pollution control and
prevention, site restoration and operating permits to conduct certain of the
Company's operations. Federal environmental laws that impose liability for
remediation include the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, which together are referred to as "Superfund," and
the corrective action provisions of the Resource Conservation and Recovery Act
of 1976 ("RCRA"). Under Superfund's current broad liability provisions, the
United States Environmental Protection Agency ("EPA") may commence a civil
action against potentially responsible parties ("PRPs") or order PRPs to
remediate sites containing hazardous substances and pollution associated with
past or ongoing practices. Under Superfund, strict liability for cleanup costs
can be imposed even if a PRP was not directly responsible for site conditions.
In addition, the liability is joint and several, which means that the EPA can
seek the entire cost of cleaning up a site from one PRP, even if other PRPs were
responsible for a substantial portion of the contamination. Some of the
environmental laws intended to control or prevent pollution include the
pollution control provisions of RCRA (controlling solid and hazardous wastes),
the Clean Water Act (controlling discharge of pollutants into the waters of the
United States) and the Clean Air Act (controlling emission of pollutants into
the atmosphere). Proposed changes to or new environmental laws or regulations
that could affect Lafarge are discussed in "Item 1. Business -- Environmental
Matters" set forth in Part I of this Annual Report, which is incorporated herein
by reference.
38
<PAGE> 41
To prevent, control and remediate environmental problems and maintain
compliance with permitting requirements, the Company maintains an environmental
program designed to monitor and control environmental matters. This program
includes recruitment, training and retention of personnel experienced in
environmental matters. Employees of the Company are responsible for identifying
potential environmental issues and bringing these issues to the attention of
management who are responsible for addressing environmental matters. If
necessary, the Company engages outside consultants to determine an appropriate
course of action and estimate the likely financial exposure presented by the
environmental matter. The Company routinely reviews all of its properties to
determine whether remediation is required, the adequacy of accruals for such
remediation, the status of all remedial activities and whether improvements to
the site are required to meet current and future permit or other requirements
under the environmental laws.
Currently, the Company is involved in only two Superfund remediations. At
one site where the Company had been named a PRP the remedial activities are
complete and long-term maintenance and monitoring are under way. Partial
contribution has been obtained from financially viable parties, including the
Company. The EPA will delist this site from the National Priority List in 1999.
At the other site, also on the National Priority List, some of the PRPs named by
the EPA have initiated a third-party action against 47 other parties, including
the Company. The Company also has been named a PRP at this site. The suit
alleges that in 1969 a predecessor company of the Company sold equipment
containing 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. Management of the Company believes
that neither matter is material to the financial condition, results of
operations or liquidity of the Company. In addition, the Company may be involved
in certain environmental enforcement matters in both the U.S. and Canada. During
the year ended December 31, 1998, no enforcement matters were initiated or
resolved or are outstanding that have a material effect on the Company's
financial statements.
The Company records an environmental accrual when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated. The accruals recorded for environmental remediation are based on
internal studies and estimates, including shared financial liability with other
third parties. The accruals are adjusted if further information or additional
studies indicate an adjustment may be warranted. The environmental accruals are
the undiscounted estimate of the required remediation costs without offset of
potential insurance or other claims. When the amount of insurance or third party
recoveries become probable, those amounts are reflected as receivables in the
financial statements. Insurance or third party recoveries, if any, are not
netted against the accruals. The liabilities recorded for environmental
obligations are not material to the financial statements of the Company.
Although the Company believes its environmental accruals are adequate,
environmental costs may be incurred that exceed the amounts provided at December
31, 1998. However, management believes that the possibility of material
liability in excess of the amounts included in the balance sheet is remote.
Environmental expenditures that extend the life, increase the capacity,
improve the safety or efficiency of Company-owned assets, or are incurred to
mitigate or prevent future environmental contamination may be capitalized. Other
environmental costs are expensed when incurred. For the years ended December 31,
1998, 1997 and 1996, total capital expenditures and remediation expenses
incurred are not material to the financial position, results of operations or
liquidity of the Company. However, the Company's expenditures for environmental
matters have increased and are likely to increase in the future. Currently,
proposed changes to or new environmental laws or regulations include: revisions
to the EPA's Boiler and Industrial Furnaces regulations under RCRA; promulgation
of new cement kiln dust management standards under RCRA; promulgation of final
Clean Air Act maximum achievable control technology regulations governing air
toxic emissions from cement plants; new permit requirements under Title V of the
Clean Air Act which may affect the Company's cement, gypsum and waste-fuel
operations; and U.S. Senate ratification and enactment of implementing
legislation of the Kyoto Protocol which may require the Company to reduce CO(2)
emissions. The Company cannot determine at this time whether capital
expenditures or other remedial actions may be required to comply with these
proposed changes, if implemented, or the effect such changes may have on the
Company's financial statements. Because of different requirements in the
environmental laws of the U.S. and
39
<PAGE> 42
Canada, the complexity and uncertainty of existing and future requirements of
environmental laws, permit conditions, costs of new and existing technology,
potential preventive and remedial costs, insurance coverages and
enforcement-related activities and costs, the Company cannot determine at this
time whether capital expenditures and other remedial actions that the Company
may be required to undertake in the future will materially affect its financial
position, results of operations or liquidity. 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 adverse effect on the financial condition, results
of operations or liquidity of the Company.
MANAGEMENT'S DISCUSSION OF CASH FLOWS
The 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 Consolidated Statements of Income and liquidity and
financial resources depicted in the 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 generally meets its operating liquidity needs through
internal generation of cash except in the event of significant acquisitions.
Short-term borrowings are generally used to fund seasonal operating
requirements, particularly in the first two calendar quarters.
The net cash provided by operations for each of the three years presented
reflects the Company's net income adjusted for noncash items. Depreciation,
depletion and amortization increased in 1998 due to goodwill amortization and
depreciation associated with the Redland acquisition and other capital projects
completed in 1997 and in 1998. Depreciation, depletion and amortization
increased from 1996 to 1997 primarily due to the full year impact of the gypsum
wallboard acquisition. The changes in working capital are discussed in
Management's Discussion of Financial Position.
Capital expenditures are expected to be approximately $450 million in 1999.
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. The Company is building cement plants to replace existing
facilities in Richmond, British Columbia and Sugar Creek, Missouri. The Richmond
plant will cost approximately $110 million and is expected to be completed in
1999. The Sugar Creek plant and an underground limestone quarry are expected to
cost approximately $140 million and to become operational in late 2000. On
October 20, 1998 the Company completed the acquisition of a cement plant in
Seattle, Washington and a limestone quarry in British Columbia from Holnam, Inc.
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 in cash. This use of cash is reflected in the Consolidated
Statements of Cash Flows as a repayment of a $690 million payable to Lafarge
S.A., which was replaced in July 1998 with long-term senior notes with a face
value of $650 million and proceeds, net of original issue discount, of $643
million. The interest expense on the debt associated with Redland will be
approximately $12 million greater in 1999 compared with 1998.
On January 27, 1999, the Company announced that it will build a $90 million
gypsum wallboard manufacturing facility in Kentucky. Completion is scheduled for
the second quarter of 2000.
During 1998 and 1997, the Company's proceeds from the sale of nonstrategic
assets, surplus land and other miscellaneous items totaled $22.9 million and
$18.9 million, respectively. 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 December 1996, the Company redeemed all the $100 million outstanding 7
percent Convertible Debentures dated July 1, 1988.
40
<PAGE> 43
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 a syndicated,
committed, five-year revolving credit facility with nine participants totaling
$300 million. At December 31, 1998, no amounts were outstanding under these
credit facilities.
MANAGEMENT'S DISCUSSION OF FINANCIAL POSITION
The Consolidated Balance Sheets summarize the Company's financial position
at December 31, 1998 and 1997.
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. Since the Company acquired Redland from its majority
shareholder, the acquisition was accounted for similar to a pooling of interests
for financial reporting purposes. Accordingly, Redland assets and liabilities
were transferred to the Company at Lafarge S.A.'s historical cost, which
approximates the purchase price paid by the Company. The accompanying
Consolidated Balance Sheets as of December 31, 1998 and December 31, 1997
include the balance sheets of Redland.
The Company is exposed to foreign currency exchange rate risk inherent in
its Canadian revenues, expenses, assets and liabilities denominated in Canadian
dollars, as well as interest rate risk inherent in the Company's debt. As more
fully described in the Notes to Consolidated Financial Statements, the Company
primarily uses fixed rate debt instruments to reduce the risk of exposure to
changes in interest rates and has used forward treasury lock agreements to hedge
interest rate changes on anticipated debt issuances. The value reported for
Canadian dollar denominated net assets decreased from December 31, 1997 as a
result of a decline in the value of the Canadian dollar relative to the U.S.
dollar. At December 31, 1998, the U.S. dollar equivalent of a Canadian dollar
was $0.65 versus $0.70 at December 31, 1997. Based on 1998 results, if the value
of the Canadian dollar relative to the U.S. dollar changed by 10 percent, the
consolidated net assets of the Company would change by approximately 3.7 percent
and net income would change by approximately 4.4 percent. Liquidity is not
materially impacted, however, since Canadian earnings are considered to be
permanently invested in Canada.
Working capital, excluding cash, short-term investments, current portion of
long-term debt and the impact of exchange rate changes ($10.6 million),
increased $26.7 million from December 31, 1997 to December 31, 1998. Accounts
receivable excluding an exchange rate impact of $10.6 million increased $18.2
million primarily due to higher levels of sales in November and December. The
increase of $32.3 million in accounts payable and accrued liabilities is mainly
due to the growth of the Company and the timing of purchases and payments.
Net property, plant and equipment increased $104.7 million during 1998,
primarily due to the acquisition of the Seattle cement plant and the
modernization of the Richmond, British Columbia cement plant. Capital
expenditures and acquisitions of fixed assets totaled $323.6 million. The excess
of cost over net tangible assets of businesses acquired relates primarily to an
acquisition in the U.S. and the acquisition of the Redland operations.
The Company's capitalization, after considering the Redland acquisition, is
summarized in the following table:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1998 1997
----- -----
<S> <C> <C>
Long-term debt.............................................. 30.2% 8.0%
Other long-term liabilities................................. 13.0% 18.1%
Shareholders' equity........................................ 56.8% 73.9%
----- -----
Total capitalization.............................. 100.0% 100.0%
===== =====
</TABLE>
41
<PAGE> 44
The decrease in shareholders' equity as a percentage of total
capitalization is discussed in Management's Discussion of Shareholders' Equity.
The increase in long-term debt is discussed in Management's Discussion of Cash
Flows.
MANAGEMENT'S DISCUSSION OF SHAREHOLDERS' EQUITY
The Consolidated Statements of Shareholders' Equity summarize the activity
in each component of shareholders' equity for the three years presented. In
1998, shareholders' equity increased by $159.5 million, mainly from net income
of $235.5 million and $10.6 million from the exercise of stock options. These
were partially offset by an increase in foreign currency translation adjustments
of $55.3 million (resulting from a 7 percent decrease in the value of the
Canadian dollar relative to the U.S. dollar) and dividend payments, net of
reinvestments, of $33.1 million.
Shareholders' equity increased $145.1 million in 1997 due to net income of
$182.0 million and $18.7 million from exercise of stock options partially offset
by foreign currency translation adjustments of $34.0 million and dividend
payments, net of reinvestments, of $23.0 million.
Common equity interests include the Company's common stock, $1.00 par value
per share ("Common Stock") and the Lafarge Canada Inc. Exchangeable Preference
Shares ("Exchangeable Shares"), which are exchangeable into Common Stock of the
Company and have comparable voting, dividend and liquidation rights. The
Company's Common Stock is 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 Company adopted the Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"). Comprehensive income,
defined as the total of net income and all other non-owner changes in equity
(such as foreign currency translation adjustments), is reported on an annual
basis in the Consolidated Statements of Comprehensive Income and Accumulated
Other Comprehensive Income (accumulated foreign currency translation
adjustments) is reported in the Consolidated Balance Sheets and in the
Consolidated Statements of Shareholders' Equity.
The following table reflects the range of high and low closing prices of
Common Stock by quarter for 1998 and 1997 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>
1998 Stock Prices
High................................... $39 1/16 $41 7/8 $39 13/16 $40 1/2
Low.................................... 29 7/8 35 27 1/2 24 5/16
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
</TABLE>
Dividends are summarized in the following table (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------
1998 1997 1996
------- ------- --------
<S> <C> <C> <C>
Common equity dividends......................... $36,880 $30,019 $ 28,008
Less dividend reinvestments..................... (3,736) (7,010) (15,843)
------- ------- --------
Net cash dividend payments...................... $33,144 $23,009 $ 12,165
======= ======= ========
Common equity dividends per share............... $ 0.51 $ 0.42 $ 0.40
======= ======= ========
</TABLE>
The Company increased the quarterly dividend per share to $0.15 at its
October 1998 Board of Directors meeting.
42
<PAGE> 45
MANAGEMENT'S DISCUSSION OF SELECTED CONSOLIDATED FINANCIAL DATA
The information provided in Item 6. Selected Consolidated Financial Data
highlights certain significant trends in the Company's financial condition and
results of operations.
The Company's 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
the first full year of operations of the gypsum wallboard business. In 1998, net
sales increased by 36 percent primarily due to the addition of the Redland
operations as well as increased shipments and prices. See Management's
Discussion of Income for additional details.
Inflation rates in recent years have not been a significant factor in the
Company's net sales or earnings growth. 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 Company competes with other suppliers of its products in all of its
markets. 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, the number, size and strength of competitors 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. The Company is in a capital-intensive industry and as a result recognizes
large amounts of depreciation. The Company has used its cash provided by
operations to expand its markets, improve the performance of its plants and
other operating equipment, and for the years prior to the Redland acquisition,
to reduce debt.
During 1998, the Company acquired Redland for $690.0 million. Since the
acquisition was from the Company's majority shareholder, it was treated similar
to a pooling of interests and Redland's balance sheet was consolidated with the
Company's balance sheet at December 31, 1997, and Redland's operating results
were consolidated with the Company for the full year 1998.
Capital expenditures and acquisitions, excluding Redland, totaled $916.1
million over the past five years, which included: the purchase of two gypsum
wallboard manufacturing facilities; a cement plant and related limestone quarry;
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this Item is contained in "Management's Discussion
of Financial Position" in Management's Discussion and Analysis of Financial
Condition and Results of Operations reported in Item 7 of Part II of this Annual
Report and is incorporated herein by reference, and in the "Debt" note of Notes
to Consolidated Financial Statements reported in Item 8 of Part II of this
Annual Report and is incorporated herein by reference.
43
<PAGE> 46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Report:
Report of Independent Public Accountants, Arthur Andersen
LLP.................................................... 45
Consolidated Financial Statements:
Consolidated Balance Sheets for the Years Ended December
31, 1998 and 1997...................................... 46
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1997 and 1996....................... 47
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996........... 48
Consolidated Statements of Comprehensive Income for the
Years Ended December 31, 1998, 1997 and 1996........... 49
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996....................... 50
Notes to Consolidated Financial Statements................ 51
Financial Statement Schedule:
Schedule II -- Consolidated Valuation and Qualifying
Accounts for the Years Ended December 31, 1998, 1997
and 1996............................................... 72
All other schedules are omitted because they are not
applicable.
</TABLE>
44
<PAGE> 47
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Lafarge Corporation:
We have audited the accompanying consolidated balance sheets of Lafarge
Corporation (a Maryland corporation) and subsidiaries as of December 31, 1998
and 1997, and the related consolidated statements of income, cash flows,
shareholders' equity and comprehensive income for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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 financial statements referred to above present fairly,
in all material respects, the financial position of Lafarge Corporation and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II in this Item 8 of Part II of
the Annual Report is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic 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 financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.
January 26, 1999
45
<PAGE> 48
LAFARGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 271,138 $ 174,163
Short-term investments...................................... 17,070 155,368
Receivables, net............................................ 335,229 327,612
Inventories................................................. 247,944 233,972
Deferred tax assets......................................... 40,738 33,126
Other current assets........................................ 25,772 25,205
---------- ----------
Total current assets.............................. 937,891 949,446
Property, plant and equipment, net.......................... 1,400,753 1,296,020
Excess of cost over net tangible assets of businesses
acquired, net............................................. 353,548 335,487
Other assets................................................ 212,605 193,898
---------- ----------
TOTAL ASSETS...................................... $2,904,797 $2,774,851
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities.................... $ 353,736 $ 321,450
Income taxes payable........................................ 16,681 35,364
Short-term borrowings and current portion of long-term
debt...................................................... 44,560 29,770
Payable to Lafarge S.A...................................... -- 690,000
---------- ----------
Total current liabilities......................... 414,977 1,076,584
Long-term debt.............................................. 751,151 135,243
Other long-term liabilities................................. 323,495 307,336
---------- ----------
Total Liabilities................................. 1,489,623 1,519,163
---------- ----------
Common Equity
Common stock ($1.00 par value; authorized 110.1 million
shares; issued 67.4 and 65.3 million shares,
respectively).......................................... 67,370 65,268
Exchangeable shares (no par or stated value; authorized
24.3 million shares; issued 4.9 and 6.4 million shares,
respectively).......................................... 35,814 45,259
Additional paid-in capital.................................. 672,555 649,082
Retained earnings........................................... 792,058 593,438
Accumulated other comprehensive income (loss)............... (152,623) (97,359)
---------- ----------
Total Shareholders' Equity........................ 1,415,174 1,255,688
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $2,904,797 $2,774,851
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
46
<PAGE> 49
LAFARGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except amounts per common equity share)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES........................................ $2,448,205 $1,806,351 $1,649,280
---------- ---------- ----------
Costs and expenses
Cost of goods sold............................. 1,798,986 1,335,206 1,251,886
Selling and administrative..................... 216,829 160,963 151,442
Amortization of goodwill....................... 17,586 3,748 2,996
Other expense, net............................. 7,757 5,536 6,578
Interest expense............................... 47,652 19,949 24,118
Interest income................................ (20,429) (13,285) (10,068)
---------- ---------- ----------
Total costs and expenses............... 2,068,381 1,512,117 1,426,952
---------- ---------- ----------
Earnings before income taxes..................... 379,824 294,234 222,328
Income taxes..................................... 144,324 112,258 81,462
---------- ---------- ----------
NET INCOME....................................... $ 235,500 $ 181,976 $ 140,866
========== ========== ==========
NET INCOME PER SHARE-BASIC....................... $ 3.27 $ 2.56 $ 2.02
========== ========== ==========
NET INCOME PER SHARE-DILUTED..................... $ 3.24 $ 2.54 $ 1.95
========== ========== ==========
DIVIDENDS PER SHARE.............................. $ 0.51 $ 0.42 $ 0.40
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
47
<PAGE> 50
LAFARGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------------------------------
1998 1997 1996
------------------- ------------------- -------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
COMMON EQUITY INTERESTS
COMMON STOCK
Balance at January 1........ $ 65,268 65,268 $ 62,590 62,590 $ 60,735 60,735
Issuance of shares for:
Dividend reinvestment
plans.................. 83 83 256 256 814 814
Employee stock purchase
plan................... 31 31 33 33 36 36
Conversion of Exchangeable
Shares.................... 1,527 1,527 1,421 1,421 810 810
Exercise of stock options... 461 461 968 968 195 195
---------- ------ ---------- ------ ---------- ------
Balance at December 31...... $ 67,370 67,370 $ 65,268 65,268 $ 62,590 62,590
========== ====== ========== ====== ========== ======
EXCHANGEABLE SHARES
Balance at January 1........ $ 45,259 6,409 $ 53,817 7,764 $ 58,311 8,501
Issuance of shares for:
Dividend reinvestment
plans.................. 966 29 1,035 40 827 45
Employee stock purchase
plan................... 172 25 180 26 190 28
Conversion of shares........ (10,583) (1,527) (9,773) (1,421) (5,511) (810)
---------- ------ ---------- ------ ---------- ------
Balance at December 31...... $ 35,814 4,936 $ 45,259 6,409 $ 53,817 7,764
========== ====== ========== ====== ========== ======
ADDITIONAL PAID-IN CAPITAL
Balance at January 1........... $ 649,082 $ 615,993 $ 593,310
Issuance of Common Stock and/or
Exchangeable Shares for:
Dividend reinvestment
plans.................. 2,687 5,719 14,203
Employee stock purchase
plan................... 1,923 1,241 1,154
Conversion of Exchangeable
Shares...................... 9,056 8,352 4,701
Exercise of stock options...... 10,170 17,777 2,625
Other.......................... (363) -- --
---------- ---------- ----------
Balance at December 31......... $ 672,555 $ 649,082 $ 615,993
========== ========== ==========
RETAINED EARNINGS
Balance at January 1........... $ 593,438 $ 441,481 $ 328,623
Net income..................... 235,500 181,976 140,866
Dividends -- common equity
interests................... (36,880) (30,019) (28,008)
---------- ---------- ----------
Balance at December 31......... $ 792,058 $ 593,438 $ 441,481
========== ========== ==========
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
Balance at January 1........... $ (97,359) $ (63,342) $ (60,001)
Foreign currency translation
adjustments................. (55,264) (34,017) (3,341)
---------- ---------- ----------
Balance at December 31......... $ (152,623) $ (97,359) $ (63,342)
========== ========== ==========
TOTAL SHAREHOLDERS' EQUITY....... $1,415,174 $1,255,688 $1,110,539
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
48
<PAGE> 51
LAFARGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
NET INCOME...................................... $235,500 $181,976 $140,866
Foreign currency translation adjustments...... (55,264) (34,017) (3,341)
-------- -------- --------
COMPREHENSIVE INCOME............................ $180,236 $147,959 $137,525
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
49
<PAGE> 52
LAFARGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net income.............................................. $ 235,500 $ 181,976 $ 140,866
Adjustments to reconcile net income to net cash provided
by operations
Depreciation, depletion, and amortization............ 156,782 106,304 100,507
Provision for bad debts.............................. 3,395 2,365 255
Deferred income taxes................................ 17,331 9,815 8,491
Gain on sale of assets............................... (2,964) (6,038) (4,085)
Other noncash charges and credits, net............... (9,948) 2,512 (156)
Net change in operating working capital (see
below)*............................................ (23,971) 39,052 (37,847)
--------- --------- ---------
NET CASH PROVIDED BY OPERATIONS........................... 376,125 335,986 208,031
--------- --------- ---------
CASH FLOWS FROM INVESTING
Capital expenditures.................................... (224,353) (123,970) (124,790)
Acquisitions............................................ (99,280) (8,817) (83,484)
Redemptions (purchases) of short-term investments,
net.................................................. 138,298 (62,872) (7,980)
Proceeds from property, plant and equipment
dispositions......................................... 22,910 18,947 29,126
Other................................................... (541) 7,110 (203)
--------- --------- ---------
NET CASH USED FOR INVESTING............................... (162,966) (169,602) (187,331)
--------- --------- ---------
CASH FLOWS FROM FINANCING
Repayment of Lafarge S.A. payable....................... (690,000) -- --
Issuance of senior notes, net of discount............... 643,464 -- --
Other repayment of long-term debt....................... (30,636) (16,758) (109,021)
Issuance (repayment) of short-term borrowings, net...... 14,730 (77,850) 77,850
Issuance of equity securities, net...................... 12,757 20,199 4,201
Dividends, net of reinvestments......................... (33,144) (23,009) (12,165)
Financing costs and other............................... (12,818) -- --
--------- --------- ---------
NET CASH CONSUMED BY FINANCING............................ (95,647) (97,418) (39,135)
--------- --------- ---------
Effect of exchange rate changes........................... (20,537) (11,650) (1,153)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... 96,975 57,316 (19,588)
CASH AND CASH EQUIVALENTS AT JANUARY 1.................... 174,163 116,847 136,435
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT DECEMBER 31.................. $ 271,138 $ 174,163 $ 116,847
========= ========= =========
*ANALYSIS OF CHANGES IN OPERATING WORKING CAPITAL ITEMS
Receivables, net........................................ $ (18,217) $ 22,779 $ (20,015)
Inventories............................................. (16,566) (7,692) 11,249
Other current assets.................................... (822) (2,287) (97)
Accounts payable and accrued liabilities................ 28,789 19,262 (25,479)
Income taxes payable.................................... (17,155) 6,990 (3,505)
--------- --------- ---------
NET CHANGE IN OPERATING WORKING CAPITAL................... $ (23,971) $ 39,052 $ (37,847)
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
50
<PAGE> 53
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lafarge Corporation, together with its subsidiaries ("Lafarge" or the
"Company"), is North America's largest diversified supplier of construction
materials. The Company's major operating subsidiary, Lafarge Canada Inc.
("LCI"), operates in Canada. The Company's core businesses are organized into
three operating segments: the Cement Group; the Construction Materials Group;
and Lafarge Gypsum. For information regarding the Company's operating segments
and products, see the "Segment and Related Information" note herein.
Lafarge operates in the U.S. and throughout Canada. The primary U.S.
markets are in the northeast, midsouth, midwest, northcentral, mountain and
northwest 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, including the
Company's outstanding Common Stock, par value $1.00 per share (the "Common
Stock") and LCI's Exchangeable Preference Shares ("Exchangeable Shares").
On June 3, 1998, the Company acquired certain Redland PLC businesses in
North America ("Redland") from Lafarge S.A. for $690 million. Redland produces
and sells 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.
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 and the
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses. Actual
results may differ from these estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of Lafarge and
all of its wholly and majority-owned subsidiaries, after the elimination of
intercompany balances and transactions. 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 prior years to conform to
the 1998 presentation.
Foreign Currency Translation
The Company uses the U.S. dollar as its functional currency. The assets and
liabilities of LCI are translated at the exchange rate prevailing at the balance
sheet date. Related revenue and expense accounts for this subsidiary are
translated using the average exchange rate during the year. Foreign currency
translation adjustments are included in "accumulated other comprehensive income
(loss)" in the Consolidated Balance Sheets and in the Consolidated Statements of
Shareholders' Equity.
Revenue Recognition
Revenue from the sale of cement, concrete, concrete products, aggregates
and gypsum wallboard is recorded when the products are shipped. Revenue from
waste recovery and disposal is recognized 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.
51
<PAGE> 54
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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 of "interest expense" in the Consolidated Statements of Income.
The Company also enters into forward contracts used to hedge interest rate
changes on anticipated debt issuances. 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.
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.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily receivables, cash equivalents and
short-term investments. The Company performs ongoing credit evaluations of its
customers' financial condition and generally requires no collateral from its
customers. The allowance for non-collection of receivables is based upon
analysis of economic trends in the construction industry and the expected
collectibility of overall receivables. The Company places its cash equivalents
and short-term investments in investment grade, short-term debt instruments and
limits the amount of credit exposure to any one commercial issuer.
Inventories
Inventories are valued at lower of cost or market. The majority of 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 using 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 with depletion 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
52
<PAGE> 55
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
acquired will be amortized over lives averaging 27 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,
1998. The amortization recorded for 1998, 1997 and 1996 was $17.6 million, $3.7
million and $3.0 million, respectively. Accumulated amortization at December 31,
1998 and 1997 was $61.9 million and $44.3 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 consolidated
financial statements, without offset of potential insurance recoveries. Costs
that extend the life, 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. 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 $7.4 million, $7.2 million
and $6.3 million for 1998, 1997 and 1996, respectively.
Interest
Interest of $3.6 million, $1.4 million and $1.2 million was capitalized in
1998, 1997 and 1996, respectively.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130") in 1998. Comprehensive income
as presented in the Consolidated Statements of Comprehensive Income is defined
as the total of net income and all other non-owner changes in equity (foreign
currency translation adjustment in Lafarge's case).
53
<PAGE> 56
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Net Income Per Common Equity Share
The calculation of basic net income per common equity share is in
accordance with Statement of Financial Accounting Standards No. 128, "Earnings
per Share," ("SFAS No. 128") which the Company adopted in 1997 and is based on
the weighted average number of shares of Common Stock and the Exchangeable
Shares outstanding in each period. The weighted average number of shares and
share equivalents outstanding was (in thousands) 72,071, 71,128 and 69,783 in
1998, 1997 and 1996, respectively.
The weighted average number of shares and share equivalents outstanding,
assuming dilution, was (in thousands) 72,665, 71,695 and 74,377 in 1998, 1997
and 1996, respectively, and assumed conversion in 1996 of the Convertible
Subordinated Debentures which were redeemed in December 1996.
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.
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), the Company
discloses the compensation cost based on the estimated fair value of the options
at the grant dates.
Accounting Pronouncements Not Yet Effective
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). The Company must adopt this statement
no later than January 1, 2000. SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement and requires that a company
formally document, designate and assess the effectiveness of transactions that
receive hedge accounting. The Company is reviewing SFAS No. 133 and does not
currently expect it to materially impact its financial condition or results of
operations.
Acquisitions
Lafarge S.A., the majority stockholder of the Company, acquired Redland PLC
in December 1997. Since the Company acquired Redland from its majority
stockholder, the acquisition is accounted for similar to a pooling of interests
for financial reporting purposes. Accordingly, as of December 31, 1997, 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 $690 million purchase price paid by the Company. The Company's consolidated
balance sheets as of December 31, 1998 and 1997 include the balance sheets of
Redland. The 1998 consolidated statements of income and cash flows include
Redland, but the 1997 and 1996 consolidated statements of income and cash flows
exclude Redland. A payable to Lafarge S.A. for $690 million was recorded as part
of the acquisition. A portion of this payable ($40 million) was repaid in June
1998 and the balance of $650 million was financed in June 1998 with an
interest-bearing short-term note to Lafarge S.A. This note was refinanced in
July 1998 with long-term public debt.
54
<PAGE> 57
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The Redland businesses acquired by the Company consist 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 acquired posted combined revenues of approximately $572 million in
1998.
Redland is engaged in the production and sale of aggregates, asphalt,
ready-mixed concrete, other concrete products 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 states of
Colorado, New Mexico, Maryland and New York.
The final allocation of the purchase price includes adjustments to the
preliminary allocation primarily in the areas of property, plant and equipment,
goodwill and deferred taxes. The final allocation, based on outside appraisals
of the fair market value of Redland's net tangible assets as of December 31,
1997 is as follows (in thousands):
<TABLE>
<S> <C>
Current assets.............................................. $128,655
Property, plant and equipment, including $152,899 of mineral
deposits.................................................. 399,147
Goodwill (to be amortized over an average life of 27
years).................................................... 327,815
Other long-term assets...................................... 11,754
Current liabilities......................................... (93,824)
Long-term debt.............................................. (2,906)
Other long-term liabilities................................. (80,641)
--------
Total............................................. $690,000
========
</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 per share amounts). These pro forma
results have been prepared for comparative purposes only and include certain
adjustments, such as depreciation and depletion on the revalued property, plant
and equipment and amortization of goodwill. The pro forma results of operations
are not necessarily indicative of the combined earnings and results of
operations had the acquisition been completed at the beginning of 1997, nor is
such information necessarily indicative of future results of operations.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (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>
In September 1996, the Company acquired two gypsum wallboard plants,
located in Buchanan, New York and Wilmington, Delaware.
On October 20, 1998, the Company completed the acquisition from Holnam,
Inc. of a cement plant in Seattle, Washington and a related limestone quarry
operation located on Texada Island, British Columbia.
55
<PAGE> 58
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
RECEIVABLES
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Trade and notes receivable.................................. $349,478 $342,760
Retainage on long-term contracts............................ 13,602 12,933
Allowances.................................................. (27,851) (28,081)
-------- --------
Total receivables, net............................ $335,229 $327,612
======== ========
</TABLE>
INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Finished products........................................... $129,838 $123,774
Work in process............................................. 10,878 8,483
Raw materials and fuel...................................... 55,760 55,341
Maintenance and operating supplies.......................... 51,468 46,374
-------- --------
Total inventories................................. $247,944 $233,972
======== ========
</TABLE>
Included in the finished products, work in process and raw materials and
fuel categories are inventories valued using the LIFO method of $64.1 million
and $72.3 million at December 31, 1998 and 1997, respectively. If these
inventories were valued using the average cost method, such inventories would
have decreased by $4.4 million and $5.1 million, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Land and mineral deposits................................. $ 391,532 $ 370,111
Buildings, machinery and equipment........................ 1,973,392 1,914,491
Construction in progress.................................. 184,748 79,345
----------- -----------
Property, plant and equipment, at cost.................... 2,549,672 2,363,947
Accumulated depreciation and depletion.................... (1,148,919) (1,067,927)
----------- -----------
Total property, plant and equipment, net........ $ 1,400,753 $ 1,296,020
=========== ===========
</TABLE>
56
<PAGE> 59
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
OTHER ASSETS
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
Long-term receivables....................................... $ 25,791 $ 20,328
Investments in unconsolidated companies..................... 22,913 22,301
Prepaid pension asset....................................... 93,519 92,900
Property held for sale...................................... 19,510 24,042
Other....................................................... 50,872 34,327
-------- --------
Total other assets................................ $212,605 $193,898
======== ========
</TABLE>
Property held for sale represents 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
-------------------
1998 1997
-------- --------
<S> <C> <C>
Trade accounts payable...................................... $123,063 $117,777
Accrued payroll expense..................................... 47,454 49,385
Bank overdrafts............................................. 21,266 10,076
Other accrued liabilities................................... 161,953 144,212
-------- --------
Total accounts payable and accrued liabilities.... $353,736 $321,450
======== ========
</TABLE>
DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
Senior notes in the amounts of $250,000, $200,000 and
$200,000, maturing in 2005, 2008 and 2013, respectively,
bearing interest at fixed rates of 6.4 percent, 6.5
percent and 6.9 percent, respectively, stated net of
original issue discount. The average effective interest
rate is 6.9 percent....................................... $643,464 $ --
Medium-term notes maturing in various amounts between 1999
and 2006, bearing interest at fixed rates which range from
9.3 percent to 9.8 percent................................ 93,500 122,000
Tax-exempt bonds maturing in various amounts between 1999
and 2026, bearing interest at floating rates which range
from 4.0 percent to 5.1 percent........................... 38,383 38,917
Short-term borrowings....................................... 14,730 --
Other....................................................... 5,634 4,096
-------- --------
Subtotal............................................... 795,711 165,013
Less short-term borrowings and current portion of long-term
debt...................................................... (44,560) (29,770)
-------- --------
Total long-term debt.............................. $751,151 $135,243
======== ========
</TABLE>
57
<PAGE> 60
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The fair value of debt at December 31, 1998 and 1997, respectively, was
approximately $819.7 million and $179.1 million compared with $795.7 million and
$165.0 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.
The scheduled annual principal payment requirements on debt for each of the
five years in the period ending December 31, 2003 are as follows (in thousands):
<TABLE>
<CAPTION>
REPAYMENTS
----------
<S> <C>
1999..................................................... $ 44,560
2000..................................................... $ 34,841
2001..................................................... $ 29,872
2002..................................................... $ 15,194
2003..................................................... $ 620
Thereafter............................................... $670,624
</TABLE>
The Company has a syndicated, committed revolving credit facility totaling
$300 million extending through December 8, 2003. At the end of 1998, 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 federal funds rate and are subject
to certain conditions.
In July 1998, the Company issued $650 million in long-term senior notes to
finance the acquisition of Redland's U.S. operations. Proceeds from the issuance
of these notes were used to repay the $650 million balance of the note payable
to Lafarge S.A. on July 15, 1998. The all-in average cost of these notes
including the original issue discount, a treasury lock hedge and all issuance
costs is 6.9 percent. In order to hedge the risk of interest rate fluctuations,
the Company entered into forward treasury lock agreements in May and June, 1998
totaling a notional $640 million. Losses on these agreements have been deferred
and are being amortized over the life of the debt.
The Company's debt agreements require the maintenance of certain financial
ratios relating to fixed charge coverage and leverage. At December 31, 1998, the
Company was in compliance with these requirements.
At December 31, 1998, the Company maintained one $25 million (notional
amount) Interest Swap contract which matures in 1999. As of December 31, 1998,
it required the Company to pay a fixed rate of 8.7 percent in exchange for a
floating rate receipt of 5.3 percent. Throughout 1998, 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 contract,
it does not anticipate nonperformance.
Based on interest rates at December 31, 1998, the net termination cost for
the Company to unwind its Interest Swap was approximately $0.4 million.
58
<PAGE> 61
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
Deferred income taxes....................................... $110,398 $111,969
Minority interests.......................................... 6,058 6,252
Accrued postretirement benefit cost......................... 149,794 147,647
Accrued pension liability................................... 24,660 21,800
Other....................................................... 32,585 19,668
-------- --------
Total other long-term liabilities................. $323,495 $307,336
======== ========
</TABLE>
COMMON EQUITY INTERESTS
Holders of Exchangeable Shares have voting, dividend and liquidation rights
that parallel those of holders of the Company's Common Stock. The Exchangeable
Shares may be converted to the Company's Common Stock 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 Stock. The Company has agreed
not to pay dividends on its Common Stock 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, 1998, the Company had reserved for issuance approximately
6.7 million shares of Common Stock for the exchange of outstanding Exchangeable
Shares. Additional common equity shares are reserved to cover grants under the
Company's stock option program (7.8 million), employee stock purchase plan (0.6
million) and issuances pursuant to the Company's optional stock dividend plan
(2.0 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.
STOCK OPTION AND PURCHASE PLANS
At December 31, 1998, 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, 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
59
<PAGE> 62
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
No. 123, the Company's net income and earnings per share would have been reduced
to the pro forma amounts indicated as follows (in thousands except per share
amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
NET INCOME
As reported......................................... $235,500 $181,976 $140,866
Pro forma........................................... $232,567 $180,402 $139,803
BASIC EARNINGS PER SHARE
As reported......................................... $ 3.27 $ 2.56 $ 2.02
Pro forma........................................... $ 3.23 $ 2.54 $ 2.00
DILUTED EARNINGS PER SHARE
As reported......................................... $ 3.24 $ 2.54 $ 1.95
Pro forma........................................... $ 3.19 $ 2.51 $ 1.94
</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 shares of the Company's
Common Stock 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 is 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 1998, 1997 and 1996, respectively: dividend yield of 1.45, 1.90
and 2.12 percent; expected volatility of 25.8, 26.0 and 37.0 percent; risk-free
interest rates of 5.80, 6.47 and 5.65 percent; and expected lives of 5.4 for all
three years.
A summary of the status of the Company's fixed stock option plans as of
December 31, 1998, 1997 and 1996, and changes during the years ended on these
dates is presented below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------------------------------
1998 1997 1996
------------------- ------------------- -------------------
AVERAGE AVERAGE AVERAGE
OPTION OPTION OPTION
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance outstanding at
January 1.................. 1,984,050 $19.43 2,481,287 $17.87 2,319,837 $17.33
Options granted.............. 843,500 33.98 541,000 21.43 492,000 18.88
Options exercised............ (471,250) 18.88 (967,612) 16.50 (194,925) 14.47
Options canceled............. (22,500) 35.21 (70,625) 20.05 (135,625) 19.11
--------- ------ --------- ------ --------- ------
Balance outstanding at
December 31................ 2,333,800 $24.74 1,984,050 $19.43 2,481,287 $17.87
========= ====== ========= ====== ========= ======
Options exercisable at
December 31................ 839,725 $19.33 886,650 $18.35 1,452,937 $16.83
========= ====== ========= ====== ========= ======
Weighted average fair value
of options granted during
the year................... $10.32 $ 6.50 $ 6.65
====== ====== ======
</TABLE>
60
<PAGE> 63
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
As of December 31, 1998, the 2.3 million fixed stock options outstanding
under the plans have an exercise price between $14.25 and $36.50 and a weighted
average remaining contractual life of 7.38 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 1998, 56,000 shares were issued to employees under the plan at
a share price of $22.28, and in 1997, 59,300 shares were issued at a share price
of $19.24. At December 31, 1998 and 1997, $ 0.7 million was subscribed for
future share purchases.
NET INCOME PER COMMON EQUITY SHARE
<TABLE>
<CAPTION>
(FOR THE YEARS ENDED DECEMBER 31)
(IN THOUSANDS EXCEPT PER SHARE AMOUNT) INCOME SHARES
-------------------------------------- ------ ---------
<S> <C> <C> <C>
1998
BASIC
Net Income............................................. $235,500 72,071 $3.27
=====
DILUTED
Options................................................ 594
-------- ------
Income available to common stockholders plus assumed
conversions......................................... $235,500 72,665 $3.24
======== ====== =====
1997
BASIC
Net Income............................................. $181,976 71,128 $2.56
=====
DILUTED
Options................................................ 567
-------- ------
Income available to common stockholders plus assumed
conversions......................................... $181,976 71,695 $2.54
======== ====== =====
1996
BASIC
Net Income............................................. $140,866 69,783 $2.02
=====
DILUTED
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>
Basic earnings per common equity share were computed by dividing net income
by the weighted average number of shares of Common Stock and Exchangeable Shares
outstanding during the year. Diluted earnings per common equity share assumed
the exercise of stock options for all years presented and, in 1996, assumed
conversion of the convertible debentures.
61
<PAGE> 64
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
INCOME TAXES
Earnings before income taxes is summarized by country in the following
table (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
United States......................................... $214,608 $151,634 $ 97,267
Canada................................................ 165,216 142,600 125,061
-------- -------- --------
Earnings before income taxes.......................... $379,824 $294,234 $222,328
======== ======== ========
</TABLE>
The provision for income taxes includes the following components (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Current
United States....................................... $ 68,434 $ 46,012 $27,600
Canada.............................................. 58,559 56,431 45,371
-------- -------- -------
Total current.................................... 126,993 102,443 72,971
-------- -------- -------
Deferred
United States....................................... 14,083 12,200 8,800
Canada.............................................. 3,248 (2,385) (309)
-------- -------- -------
Total deferred................................... 17,331 9,815 8,491
-------- -------- -------
Total income taxes.......................... $144,324 $112,258 $81,462
======== ======== =======
</TABLE>
The federal statute of limitations has closed for all U.S. income tax
returns through 1994. The Company's Canadian federal tax liability for all
taxation years through 1994 has been reviewed and finalized by Revenue Canada
Taxation. 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. 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.
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
-----------------------
1998 1997 1996
------ ------ -----
<S> <C> <C> <C>
Taxes at the U.S. federal income tax rate................... $133.4 $103.0 $77.8
U.S./Canadian tax rate differential......................... 5.0 4.3 3.7
Canadian tax incentives..................................... (10.4) (8.8) (8.0)
State and Canadian provincial income taxes, net of federal
benefit................................................... 17.0 11.4 8.6
Other items................................................. (0.7) 2.4 (0.6)
------ ------ -----
Provision for income taxes.................................. $144.3 $112.3 $81.5
====== ====== =====
</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.
62
<PAGE> 65
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Temporary differences and carryforwards that give rise to deferred tax
assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Reserves and other liabilities............................ $ 75,274 $ 73,226
Other postretirement benefits............................. 59,553 60,074
Tax loss carryforwards.................................... 5,910 7,621
Tax credit carryforwards.................................. 18,994 69
-------- --------
Gross deferred tax assets................................... 159,731 140,990
Valuation allowance......................................... (23,296) (24,525)
-------- --------
Net deferred tax assets..................................... 136,435 116,465
-------- --------
Deferred tax liabilities:
Property, plant and equipment............................. 171,661 160,739
Prepaid pension asset..................................... 28,743 28,168
Other..................................................... 5,691 6,401
-------- --------
Gross deferred tax liabilities.............................. 206,095 195,308
-------- --------
Net deferred tax liability.................................. 69,660 78,843
Net deferred tax asset -- current........................... 40,738 33,126
-------- --------
Net deferred tax liability -- noncurrent.................... $110,398 $111,969
======== ========
</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, 1998, the Company had net operating loss and tax credit
carryforwards of $14.7 million and $19.0 million, respectively. The net
operating loss carryforwards are limited to use in varying annual amounts
through 2006. The tax credit carryforwards are alternative minimum tax credits
that have no expiration date.
Deferred tax assets include approximately $9.2 million that represent 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, 1998, cumulative undistributed earnings of LCI were $893.6
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 not practical to determine 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 AND RELATED INFORMATION
Lafarge adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"), during the fourth quarter of 1998. SFAS No. 131 established standards for
reporting information about operating segments in annual financial statements
and requires selected information about operating segments in interim financial
reports issued to shareholders. It also established standards for related
disclosures about products and geographic areas.
63
<PAGE> 66
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Lafarge's two geographic areas consist of the United States and Canada for
which it reports revenues and fixed assets.
Revenues from the major products sold to external customers include:
cement, ready-mixed concrete, aggregates, gypsum wallboard and other
miscellaneous products.
Operating segments are defined as components of an enterprise that engage
in business activities which earn revenues, incur expenses and prepare separate
financial information that is evaluated regularly by the Company's chief
operating decision makers in order to allocate resources and assess performance.
Lafarge's three reportable operating segments, which represent separately
managed strategic business units that have different capital requirements and
marketing strategies, are the Cement Group, the Construction Materials Group and
Lafarge Gypsum. The Cement Group produces portland, masonry and mortar cements,
as well as slag, and distributes silica fume and fly ash. It also includes
Systech Environmental Corporation, a subsidiary that supplies fuel-quality waste
and raw materials to cement kilns. The Construction Materials Group produces and
distributes construction aggregates, ready-mixed concrete, other concrete
products (gravity and pressure pipe, precast structures, pavers and masonry
units), asphalt and constructs and paves roads. Lafarge Gypsum produces
wallboard for the commercial and residential construction sectors.
The accounting policies of the operating segments are described in the
summary of significant accounting policies. Lafarge evaluates operating
performance based on profit or loss from operations before the following items:
other postretirement benefit expense for retirees, goodwill amortization related
to the Redland acquisition, income taxes, interest and foreign exchange gains
and losses.
Lafarge accounts for intersegment sales and transfers at market prices.
Revenues are attributed to geographic areas based on the location of the assets
producing the revenues. Operating segment information consists of the following
(in millions):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Cement
Revenues from external customers........................ $1,005.8 $ 932.0 $ 879.8
Intersegment revenues................................... 117.9 118.5 116.4
Construction Materials
Revenues from external customers........................ 1,340.0 782.3 745.5
Intersegment revenues................................... 2.3 3.1 4.5
Gypsum
Revenues from external customers........................ 102.4 92.1 24.0
Eliminations.............................................. (120.2) (121.6) (120.9)
-------- -------- --------
Total revenue...................................... $2,448.2 $1,806.4 $1,649.3
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Income from operations:
Cement (a)................................................ $ 288.7 $ 258.8 $ 224.9
Construction Materials (a)................................ 171.3 80.0 59.9
Gypsum (a)................................................ 20.0 13.2 2.4
Corporate and other....................................... (73.0) (51.1) (50.8)
-------- -------- --------
Earnings before interest and income taxes................... $ 407.0 $ 300.9 $ 236.4
Interest expense, net....................................... (27.2) (6.7) (14.1)
-------- -------- --------
Earnings before income taxes................................ $ 379.8 $ 294.2 $ 222.3
======== ======== ========
</TABLE>
- ---------------
(a) Excludes other postretirement benefit expense for retirees, goodwill
amortization related to the Redland acquisition, income taxes, interest and
foreign exchange gains and losses.
64
<PAGE> 67
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Assets:
Cement............................................... $ 956.4 $ 795.2 $ 777.0
Construction Materials............................... 1,095.3 1,136.6 615.6
Gypsum............................................... 70.6 71.8 70.7
Corporate, Redland goodwill and other................ 782.5 771.3 349.7
-------- -------- --------
Total assets................................. $2,904.8 $2,774.9 $1,813.0
======== ======== ========
Capital expenditures:
Cement............................................... $ 146.3 $ 74.2 $ 74.5
Construction Materials............................... 66.3 43.6 47.0
Gypsum............................................... 3.0 3.3 0.1
Corporate and other.................................. 8.7 2.9 3.2
-------- -------- --------
Total capital expenditures................... $ 224.3 $ 124.0 $ 124.8
======== ======== ========
Depreciation, depletion and amortization:
Cement............................................... $ 66.2 $ 59.9 $ 58.6
Construction Materials............................... 71.6 39.9 39.3
Gypsum............................................... 4.6 4.3 1.2
Corporate and goodwill amortization.................. 14.4 2.2 1.4
-------- -------- --------
Total depreciation, depletion and
amortization............................... $ 156.8 $ 106.3 $ 100.5
======== ======== ========
</TABLE>
Information concerning product information was as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues from external customers:
Cement............................................... $1,005.8 $ 932.0 $ 879.8
Ready-mixed concrete................................. 535.9 373.8 340.9
Aggregates........................................... 307.8 130.0 132.9
Gypsum wallboard..................................... 102.4 92.1 24.0
Other miscellaneous products......................... 496.3 278.5 271.7
-------- -------- --------
Total revenues............................... $2,448.2 $1,806.4 $1,649.3
======== ======== ========
</TABLE>
No single customer represented more than 10 percent of Lafarge's revenues.
Information concerning principal geographic areas was as follows (in
millions):
<TABLE>
<CAPTION>
1998 1997 1996
----------------------- ----------------------- ------------
FIXED FIXED
NET REVENUES ASSETS NET REVENUES ASSETS NET REVENUES
------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
United States................. $1,700.3 $ 937.5 $1,036.9 $ 884.9 $ 942.9
Canada........................ 747.9 463.3 769.5 411.1 706.4
-------- -------- -------- -------- --------
Total............... $2,448.2 $1,400.8 $1,806.4 $1,296.0 $1,649.3
======== ======== ======== ======== ========
</TABLE>
Net revenues exclude intersegment revenues.
65
<PAGE> 68
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities included the issuance of
112,000, 296,000 and 859,000 common equity shares on the reinvestment of
dividends totaling $3.7 million, $7.0 million and $15.8 million in 1998, 1997
and 1996, respectively. The cash paid for acquisitions does not reflect the
business combination with Redland since it was accounted for similar to a
pooling of interests. The December 31, 1997 balance sheet included the $690
million liability to Lafarge S.A. as part of the Redland transaction. The
Company refinanced this loan through a $650 million public debt issuance in
1998, and paid the remaining balance in cash.
Cash paid during the year for interest and income taxes is as follows (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Interest................................................ $ 40,435 $20,415 $17,595
Income taxes (net of refunds)........................... $152,945 $93,045 $74,188
======== ======= =======
</TABLE>
PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
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.
For 1998 and 1997, the assumed settlement interest rates for pension plans
and other postretirement benefits were 6.75 and 7.0 percent, respectively, for
the Company's U.S. plans and 6.25 and 6.75 percent, respectively, for the
Canadian plans. For 1998 and 1997, the assumed rates of increase in future
compensation levels used in determining the actuarial present values of the
projected benefit obligations was 4.0 and 4.5 percent, respectively, for the
Company's U.S. plans and 3.5 and 4.25 percent, respectively, for the Canadian
plans. The benefit multiplier increase rate was 2.0 percent for the Company's
U.S. hourly plans and 4.5 percent for the Canadian hourly 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 was 9.0
percent for each year presented.
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 the U.S. and Canada. Benefits, eligibility and cost-sharing provisions
for hourly employees vary by location and/or bargaining unit. Generally, the
health care plans pay a stated percentage of most medical and 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
health 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.
66
<PAGE> 69
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In Canada, both salaried and nonsalaried employees are generally eligible
for postretirement life insurance benefits. In the U.S., postretirement life
insurance is provided for a number of hourly employees as stipulated in their
hourly bargained agreements but it is not provided for salaried employees except
those of certain acquired companies.
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 was 9.1 percent,
decreasing to 5.5 percent over nine years. For post-65 retirees in the U.S., the
assumed rate was 7.3 percent, decreasing to 5.5 percent over nine years with a
Medicare assumed rate for the same group of 6.8 percent, decreasing to 5.5
percent over nine years. For post-65 retirees in Canada the assumed rate was 8.8
percent, decreasing to 5.5 percent over nine years.
The following table summarizes the consolidated funded status of the
Company's defined benefit retirement plans and other postretirement benefits and
provides a reconciliation to the consolidated prepaid pension asset, accrued
pension liability and accrued postretirement benefit cost recorded on the
Company's Consolidated Balance Sheets at December 31, 1998 and 1997 (in
millions).
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------------ -------------------------
1998 1997 1996 1998 1997 1996
------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
AMOUNTS RECOGNIZED IN THE STATEMENT OF
FINANCIAL POSITION CONSIST OF:
Prepaid pension asset................... $ 93.5 $ 92.9 $ -- $ --
Accrued pension liability............... (24.6) (21.8) (149.8) (147.6)
------ ------ ------- -------
Net amount recognized at December 31.... $ 68.9 $ 71.1 $(149.8) $(147.6)
====== ====== ======= =======
COMPONENTS OF NET PERIODIC PENSION COST
Service cost............................ $ 15.7 $ 10.7 $ 9.7 $ 2.1 $ 1.6 $ 1.4
Interest cost........................... 34.1 28.9 28.5 9.5 8.0 7.7
Expected return on plan assets.......... (45.4) (37.5) (35.9) -- -- --
Amortization of prior service cost...... 1.3 1.4 1.2 (0.6) (0.6) (0.6)
Amortization of transition asset........ (1.4) (1.2) (1.6) -- -- --
Amortization of actuarial (gain) or
loss................................. 4.0 3.4 2.7 0.1 (0.2) (0.5)
Settlement gain......................... (0.1) -- -- -- -- --
------ ------ ------ ------- ------- -----
NET PERIODIC PENSION COST................. 8.2 5.7 4.6 11.1 8.8 8.0
DEFINED CONTRIBUTION PLAN COST............ 4.2 3.8 3.8 -- -- --
------ ------ ------ ------- ------- -----
NET RETIREMENT COST....................... $ 12.4 $ 9.5 $ 8.4 $ 11.1 $ 8.8 $ 8.0
====== ====== ====== ======= ======= =====
</TABLE>
67
<PAGE> 70
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------ --------------------
1998 1997 1998 1997
------ ------ ------- -------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Projected benefit obligation at January 1......... $514.3 $397.6 $ 141.7 $ 107.8
Exchange rate changes.......................... (18.0) (13.9) (1.5) (0.9)
Service cost................................... 15.7 10.7 2.1 1.6
Interest cost.................................. 34.1 28.9 9.5 8.0
Employee contributions......................... 1.5 1.5 -- --
Plan amendments................................ 2.1 -- -- --
Acquisitions................................... -- 81.1 -- 21.2
Curtailment.................................... (0.1) -- -- --
Settlement..................................... (0.6) -- -- --
Benefits paid.................................. (34.9) (30.6) (7.7) (6.4)
Actuarial loss................................. 15.3 39.0 6.8 10.4
------ ------ ------- -------
PROJECTED BENEFIT OBLIGATION AT DECEMBER 31......... 529.4 514.3 150.9 141.7
------ ------ ------- -------
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1............ 598.3 474.1
Exchange rate changes.......................... (15.0) (8.3)
Actual return on plan assets................... 63.9 78.0
Acquisitions................................... -- 82.5
Employer contributions......................... 2.3 1.7
Employee contributions......................... 1.6 1.4
Benefits paid.................................. (34.9) (30.6)
Settlement..................................... (0.6) --
Administrative expenses........................ (0.8) (0.5)
------ ------
FAIR VALUE OF PLAN ASSETS AT DECEMBER 31............ 614.8 598.3
------ ------
RECONCILIATION OF PREPAID (ACCRUED) BENEFIT COST
Funded status.................................. 85.4 84.0 (150.9) (141.7)
Exchange rate changes.......................... -- -- (0.2) (0.1)
Unrecognized actuarial (gain) or loss.......... (23.8) (18.2) 3.7 (2.7)
Unrecognized transition asset.................. (3.4) (5.0) -- --
Unrecognized prior service cost................ 10.7 10.3 (2.4) (3.1)
------ ------ ------- -------
PREPAID (ACCRUED) BENEFIT COST AT DECEMBER 31....... $ 68.9 $ 71.1 $(149.8) $(147.6)
====== ====== ======= =======
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $43.1 million, $39.0 million and $8.2 million,
respectively, as of December 31, 1998 and $41.4 million, $37.6 million and $8.2
million, respectively, as of December 31, 1997.
68
<PAGE> 71
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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 $4.5
million, $4.0 million and $3.7 million for 1998, 1997 and 1996, respectively.
The data available from administrators of the multi-employer plans are not
sufficient to determine the accumulated benefit obligation or the net assets
attributable to these plans.
The defined contribution plans' cost 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.
The net retirement costs were $12.4 million, $9.5 million and $8.4 million
for each of the years ended December 31, 1998, 1997 and 1996, respectively for
the Company's pension plans and $11.1 million, $8.8 million and $8.0 million for
1998, 1997 and 1996, respectively, for the Company's other postretirement
benefit plans.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point increase or
decrease in assumed health care cost trend rates would have the following
effects (stated in millions of dollars):
<TABLE>
<CAPTION>
ONE-PERCENTAGE-POINT
-----------------------
INCREASE DECREASE
-------- --------
<S> <C> <C>
Increase (decrease) in postretirement benefit obligation at
December 31, 1998......................................... 13.9 (12.8)
Increase (decrease) in the total of service and interest
cost components for 1998.................................. 1.2 (1.1)
</TABLE>
COMMITMENTS AND CONTINGENCIES
The Company leases certain land, buildings and equipment. Total rental
expenses under operating leases were $15.7 million, $14.9 million and $15.1
million for each of the three years ended December 31, 1998, 1997 and 1996,
respectively. The table below shows the future minimum lease payments (in
millions) due under noncancelable operating leases at December 31, 1998. Such
payments total $86.2 million.
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31
--------------------------------------------------
1999 2000 2001 2002 2003 LATER YEARS
----- ----- ----- ----- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Operating leases........................ $13.7 $11.8 $10.0 $10.2 $7.9 $32.6
</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.
In 1992, the Company's Canadian subsidiary, LCI, along with the Bertrand &
Frere Construction Company Limited and others, became a defendant in lawsuits
instituted in the Ontario (Canada) Court (General Division) arising from claims
brought by building owners, the Ontario New Home Warranty Program and other
plaintiffs regarding alleged defective concrete, fly ash and cement used in
defective footings, foundations and floors. The damages claimed total more than
Canadian $65 million. The amount of LCI's liability, if any, in these lawsuits
is uncertain. LCI has denied liability and is defending the lawsuits vigorously.
LCI has also introduced claims against some of its primary and excess insurers
for defense costs and indemnity, if any. The lawsuits were joined and the
hearing was completed in December 1998. The matter was taken under advisement by
the presiding judge and a decision is expected in 1999. LCI believes that it has
insurance coverage that will respond to defense expenses and liability, if any,
in the lawsuits.
69
<PAGE> 72
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
On August 26, 1996, the Company, among others, was named in two similar
lawsuits brought in the District Courts of Starr and Duval counties in Texas by
plaintiffs alleging exposure to toxic substances. The plaintiffs alleged
negligence, gross negligence, and products and strict liability and sought,
among other things, both past and future damages, exemplary damages and cost of
the suit in an unspecified amount. After extensive discovery and motion practice
in these two cases, the plaintiffs in both cases have agreed to dismiss their
claims without prejudice.
Currently, the Company is involved in two remediations under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, which
together are referred to as Superfund. At one site where the Company had been
named a potentially responsible party ("PRP"), the remedial activities are
complete, long-term maintenance and monitoring are under way, and partial
contribution has been obtained from financially viable parties, including the
Company. The United States Environmental Protection Agency ("EPA") will delist
this site from the National Priority List in 1999. At the other site, also on
the National Priority List, some of the PRPs named by the EPA have initiated a
third-party action against some 47 other parties including the Company. The
Company also has been named a PRP at this site. The suit alleges that in 1969 a
predecessor company of the Company sold equipment containing 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 numerous other large disposers of hazardous substances are associated with
this site. Management believes that neither matter is material to the financial
condition, results of operations or liquidity of the Company.
When the Company determines that it is probable that a liability for
environmental matters or other legal actions has been incurred and the amount of
the loss is reasonably estimable, an estimate of the required remediation costs
is recorded as a liability in the financial statements. As of December 31, 1998,
1997 and 1996, the liabilities recorded for environmental obligations are not
material to the financial statements of the Company. Although the Company
believes its environmental accruals are adequate, environmental costs may be
incurred that exceed the amounts provided at December 31, 1998. However,
management has concluded that the possibility of material liability in excess of
the amounts reported in the December 31, 1998 Consolidated Balance Sheet is
remote.
In the ordinary course of business, the Company is involved in certain
other legal actions and claims, including proceedings under laws and regulations
relating to environmental and other matters. Because such matters are subject to
many uncertainties and the outcomes are not predictable with assurance, the
total amount of these legal actions and claims cannot be determined with
certainty. Management believes that all legal and environmental matters will be
resolved without material adverse impact to the Company's financial condition,
results of operations or liquidity.
The Year 2000 issue resulted from programmers writing software codes that
used two digits instead of four to represent the year. Before, on or after
December 31, 1999, computers and software may incorrectly assume that the year
is "1900" rather than "2000," which could lead to systems failures and
disruptions. In addition, the Year 2000 is a leap year, which may further
exacerbate incorrect calculations, functions or system failures. It is difficult
to predict the impact of such failures and disruptions. Moreover, companies must
consider not only their own products and computer systems, but also the Year
2000 readiness of any third parties, including vendors, suppliers and customers.
Due to the uncertain nature of Year 2000 issues and their impact on all
entities, it is not possible to fully assess the likelihood or magnitude of
consequences of Year 2000 issues or the impact of reliance on any third parties.
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
70
<PAGE> 73
LAFARGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
expenses accrued for these services were $6.1 million, $6.3 million and $5.7
million during 1998, 1997 and 1996, respectively. In addition, the Company
purchases various products from Lafarge S.A. which were $60.6 million, $52.5
million and $52.1 million in 1998, 1997 and 1996, 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 Stock and Exchangeable Shares during 1997 and 1996.
These reinvestments totaled $3.9 million and $13.2 million, respectively.
SUBSEQUENT EVENT
Subsequent to year-end the Company finalized its decision to build a $90
million gypsum wallboard manufacturing facility in Silver Grove, Kentucky, near
Cincinnati. Completion of the plant with 900 million square feet of annual
capacity is expected during the first half of the year 2000. Its primary raw
material requirements will be met using recycled materials including synthetic
gypsum, a byproduct from the Zimmer power plant, owned by Cinergy Corp. in
nearby Moscow, Ohio.
QUARTERLY DATA (UNAUDITED)
The following table summarizes financial data by quarter for 1998 and 1997
(in millions, except per share information):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
1998
Net sales...................................... $ 335 $ 675 $ 810 $ 628 $2,448
Gross profit................................... 1 201 267 180 649
Net income (loss).............................. (39) 85 124 66 236
Net income (loss) per common equity share (a)
Basic........................................ (0.55) 1.18 1.71 0.92 3.27
Diluted...................................... (0.55) 1.17 1.70 0.91 3.24
====== ===== ===== ===== ======
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
====== ===== ===== ===== ======
</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.
71
<PAGE> 74
SCHEDULE II
LAFARGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
--------- -----------------------
FROM RESERVE
FOR PURPOSES
BALANCE AT CHARGE TO FOR WHICH
BEGINNING OF COST AND RESERVE WAS OTHER BALANCE AT END
DESCRIPTIONS YEAR EXPENSES CREATED (1) OF YEAR
------------ ------------ --------- ------------ -------- --------------
<S> <C> <C> <C> <C> <C>
Reserve applicable to current
receivable
For doubtful accounts:
1998............................. $24,899 $ 3,395 $ (3,328) $ (347) $24,619
1997............................. $18,793 $ 2,365 $ (3,177) $ 6,918(2) $24,899
1996............................. $20,685 $ 255 $ (2,108) $ (39) $18,793
For cash and other discounts:
1998............................. $ 3,182 $41,107 $(40,025) $(1,032) $ 3,232
1997............................. $ 3,750 $37,147 $(36,786) $ (929) $ 3,182
1996............................. $ 3,542 $30,909 $(30,583) $ (118) $ 3,750
</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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
72
<PAGE> 75
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The section captioned "Election of Directors" in the Company's Proxy
Statement for the 1999 Annual Meeting of Stockholders sets forth certain
information with respect to the directors and nominees for election as directors
of the Company and is incorporated herein by reference. Pursuant to General
Instruction G(3) of Form 10-K and Instruction 3 to Item 401(b) of Regulation
S-K, certain information with respect to persons who are or may be deemed to be
executive officers of the Company is set forth under the caption "Executive
Officers of the Company" in Part I of this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
The section captioned "Executive Compensation" in the Company's Proxy
Statement for the 1999 Annual Meeting of Stockholders sets forth certain
information with respect to the compensation of management of the Company, and
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The sections captioned "Voting Securities," "Security Ownership of Certain
Beneficial Owners," "Security Ownership of Management" and "Election of
Directors" in the Company's Proxy Statement for the 1999 Annual Meeting of
Stockholders set forth certain information with respect to the ownership of the
Company's Voting Securities, and are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections captioned "Executive Compensation -- Compensation Committee
Interlocks and Insider Participation," "Executive Compensation -- Indebtedness
of Management" and "Executive Compensation -- Transactions with Management and
Others" in the Company's Proxy Statement for the 1999 Annual Meeting of
Stockholders set forth certain information with respect to relations of and
transactions by management of the Company, and are incorporated herein by
reference.
73
<PAGE> 76
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS -- The financial statements listed in the
accompanying Index to Consolidated Financial Statements and
Financial Statement Schedule are filed as part of this Annual Report
and such Index to Consolidated Financial Statements and Financial
Statement Schedule is incorporated herein by reference.
2. FINANCIAL STATEMENT SCHEDULES -- The financial statement schedule
listed in the accompanying Index to Consolidated Financial
Statements and Financial Statement Schedule is filed as part of this
Annual Report and such Index to Consolidated Financial Statements
and Financial Statement Schedule is incorporated herein by
reference.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Report:
Report of Independent Public Accountants, Arthur Andersen
LLP.................................................... 45
Consolidated Financial Statements:
Consolidated Balance Sheets for the Years Ended December
31, 1998 and 1997...................................... 46
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1997 and 1996....................... 47
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996........... 48
Consolidated Statements of Comprehensive Income for the
Years Ended December 31, 1998, 1997 and 1996........... 49
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996....................... 50
Notes to Consolidated Financial Statements................ 51
Financial Statement Schedule:
Schedule II -- Consolidated Valuation and Qualifying
Accounts for the Years Ended December 31, 1998, 1997
and 1996............................................... 72
All other schedules are omitted because they are not
applicable.
</TABLE>
3. EXHIBITS -- The exhibits listed on the accompanying List of Exhibits
are filed as part of this Annual Report and such List of Exhibits is
incorporated herein by reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
2.1 Stock Purchase Agreement dated June 3, 1998 among Redland
International Limited, the Company and Lafarge S.A.
[incorporated by reference to Exhibit 2.1 to the Form 8-K
filed by the Company with the Securities and Exchange
Commission on June 18, 1998].
2.2 Acquisition Agreement dated June 3, 1998 among Redland
Quarries Inc., Lafarge Canada Inc. and Lafarge S.A.
[incorporated by reference to Exhibit 2.2 to the Form 8-K
filed by the Company with the Securities and Exchange
Commission on June 18, 1998].
3.1 Articles of Amendment and Restatement of the Company, filed
May 29, 1992 [incorporated by reference to Exhibit 3.1 to
the Annual Report on Form 10-K filed by the Company for the
fiscal year ended December 31, 1992].
*3.2 Amended By-Laws of the Company, amended on February 9, 1999.
4.1 Form of Indenture dated as of October 1, 1989 between the
Company and Citibank, N.A., as Trustee, relating to $250
million of debt securities of the Company [incorporated by
reference to Exhibit 4.1 to the Registration Statement on
Form S-3 (Registration No. 33-31333) of the Company, filed
with the Securities and Exchange Commission on October 3,
1989].
</TABLE>
74
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
4.2 Form of Fixed Rate Medium-Term Note of the Company
[incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form S-3 (Registration No.
33-31333) of the Company, filed with the Securities and
Exchange Commission on October 3, 1989].
4.3 Instruments with respect to long-term debt which do not
exceed 10 percent of the total assets of the Company and its
consolidated subsidiaries have not been filed. The Company
agrees to furnish a copy of such instruments to the
Commission upon request.
9.1 Trust Agreement dated as of October 13, 1927 among Canada
Cement Company Limited, Montreal Trust Company, Henry L.
Doble and Alban C. Bedford-Jones, as amended (composite
copy) [incorporated by reference to Exhibit 10.5 to the
Registration Statement on Form S-1 (Registration No.
2-82548) of the Company, filed with the Securities and
Exchange Commission on March 21, 1983].
9.2 Amendment dated June 10, 1983 to Trust Agreement filed as
Exhibit 9.1 [incorporated by reference to Exhibit 9.2 to the
Registration Statement of Form S-1 (Registration No.
2-86589) of the Company, filed with the Securities and
Exchange Commission on September 16, 1983].
10.1 Exchange Agency and Trust Agreement dated as of May 1, 1983
among the Company, Canada Cement Lafarge, Lafarge Coppee and
Montreal Trust Company, as trustee [incorporated by
reference to Exhibit 10.1 to Amendment No. 1 to the
Registration Statement on Form S-1 (Registration No.
2-82548) of the Company, filed with the Securities and
Exchange Commission on May 5, 1983]. Canada Cement Lafarge
changed its name in 1988 to Lafarge Canada Inc. Lafarge
Coppee changed its name in 1995 to Lafarge S.A.
10.2 Guarantee Agreement dated as of May 1, 1983 between the
Company and Canada Cement Lafarge [incorporated by reference
to Exhibit 10.2 to Amendment No. 1 to the Registration
Statement of Form S-1 (Registration No. 2-82548) of the
Company, filed with the Securities and Exchange Commission
on May 5, 1983].
10.3 Special Surface Lease dated as of August 1, 1954 between the
Province of Alberta and Canada Cement Lafarge, as amended
[incorporated by reference to Exhibit 10.7 to the
Registration Statement on Form S-1 (Registration No.
2-82548) of the Company, filed with the Securities and
Exchange Commission on March 21, 1983].
+10.4 Director Fee Deferral Plan of the Company [incorporated by
reference to Exhibit 10.21 to the Registration Statement on
Form S-1 (Registration No. 2-86589) of the Company, filed
with the Securities and Exchange Commission on September 16,
1983].
+10.5 1993 Stock Option Plan of the Company, as amended and
restated February 7, 1995 [incorporated by reference to
Exhibit 10.5 to the Annual Report on Form 10-K filed by the
Company for the fiscal year ended December 31, 1997].
+10.6 1983 Stock Option Plan of the Company, as amended and
restated May 2, 1989 [incorporated by reference to Exhibit
28 to the Company's report on Form 10-Q for the quarter
ended June 30, 1989].
10.7 Optional Stock Dividend Plan of the Company [incorporated by
reference to Exhibit 10.22 to the Annual Report on Form 10-K
filed by the Company for the fiscal year ended December 31,
1987].
+10.8 Director Fee Deferral Plan of General Portland, assumed by
the Company on January 29, 1988 [incorporated by reference
to Exhibit 10(g) to the Annual Report on Form 10-K filed by
General Portland for the fiscal year ended December 31,
1980].
10.9 Option Agreement for Common Stock dated as of November 1,
1993 between the Company and Lafarge Coppee [incorporated by
reference to Exhibit 10.11 to the Annual Report on Form 10-K
filed by the Company for the fiscal year ended December 31,
1993].
+10.10 Deferred Compensation Program of Canada Cement Lafarge
[incorporated by reference to Exhibit 10.57 to Amendment No.
1 to the Registration Statement on Form S-1 (Registration
No. 2-86589) of the Company, filed with the Securities and
Exchange Commission on November 23, 1983].
</TABLE>
75
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
10.11 Agreement dated November 8, 1983 between Canada Cement
Lafarge and Standard Industries Ltd. [incorporated by
reference to Exhibit 10.58 to Amendment No. 1 to the
Registration Statement on Form S-1 (Registration No.
2-86589) of the Company, filed with the Securities and
Exchange Commission on November 23, 1983].
10.12 Stock Purchase Agreement dated September 17, 1986 between
the Company and Lafarge Coppee, S.A. [incorporated by
reference to Exhibit B to the Company's report on Form 10-Q
for the quarter ended September 30, 1986].
10.13 Cost Sharing Agreement dated December 2, 1988 between
Lafarge Coppee, LCI and the Company relating to expenses for
research and development, strategic planning and human
resources and communication techniques [incorporated by
reference to Exhibit 10.42 to the Annual Report on Form 10-K
filed by the Company for the fiscal year ended December 31,
1988].
10.14 Royalty Agreement dated December 2, 1988 between Lafarge
Coppee, LCI and the Company relating to access to the
reputation, logo and trademarks of Lafarge Coppee
[incorporated by reference to Exhibit 10.43 to the Annual
Report on Form 10-K filed by the Company for the fiscal year
ended December 31, 1988].
10.15 Amendment dated January 1, 1993 to Royalty Agreement filed
as Exhibit 10.14 [incorporated by reference to Exhibit 10.21
to the Annual Report on Form 10-K filed by the Company for
the fiscal year ended December 31, 1992].
+10.16 Description of Nonemployee Director Retirement Plan of the
Company, effective January 1, 1989 [incorporated by
reference to Exhibit 10.40 to the Annual Report on Form 10-K
filed by the Company for the fiscal year ended December 31,
1989].
10.17 Reimbursement Agreement dated January 1, 1990 between
Lafarge Coppee and the Company relating to expenses for
Strategic Planning and Communication techniques
[incorporated by reference to Exhibit 10.41 to the Annual
Report on Form 10-K filed by the Company for the fiscal year
ended December 31, 1990].
10.18 Form of Revolving Credit Facility Agreements, dated as of
September 1, 1994, among the Company and nine separate
banking institutions [incorporated by reference to Exhibit
10.27 to the Annual Report on Form 10-K filed by the Company
for the fiscal year ended December 31, 1994].
10.19 Amendment dated September 13, 1991 to Cost Sharing Agreement
filed as Exhibit 10.13 [incorporated by reference to Exhibit
10.31 to the Annual Report on Form 10-K filed by the Company
for the fiscal year ended December 31, 1994].
10.20 Amendments dated June 1 and August 1, 1996 to Revolving
Credit Facility Agreements among the Company and six
separate banking institutions filed as Exhibit 10.18
[incorporated by reference to Exhibit 10.20 to the Annual
Report on Form 10-K filed by the Company for the fiscal year
ended December 31, 1996].
10.21 Cost Sharing Agreement dated January 2, 1996 between Lafarge
Materiaux de Specialities and the Company related to costs
of a new unit established for researching potential
profitable markets for their respective products in North
America [incorporated by reference to Exhibit 10.21 to the
Annual Report on Form 10-K filed by the Company for the
fiscal year ended December 31, 1996].
10.22 Marketing and Technical Assistance Agreement dated October
1, 1996 between Lafarge S.A. and the Company related to
research and development, marketing, strategic planning,
human resources and communication techniques in relation to
gypsum activities [incorporated by reference to Exhibit
10.22 to the Annual Report on Form 10-K filed by the Company
for the fiscal year ended December 31, 1996].
</TABLE>
76
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
+10.23 Consulting Agreement between the Company and Robert Murdoch
dated October 1, 1997 [incorporated by reference to Exhibit
10.23 to the Annual Report on Form 10-K filed by the Company
for the fiscal year ended December 31, 1997].
+10.24 1998 Stock Option Plan of the Company [incorporated by
reference to Exhibit 4.1 to the Registration Statement on
Form S-8 (Regulation No. 333-65897) of the Company, filed
with the Securities and Exchange Commission on October 20,
1998].
*10.25 Credit Agreement dated as of December 8, 1998 between the
Company and nine separate banking institutions.
+*10.26 Amendment dated August 1, 1998 to Nonemployee Director
Retirement Plan of the Company filed as Exhibit 10.16.
*11 Statement regarding computation of net income per common
equity share.
*21 Subsidiaries of the Company.
*23 Consent of Arthur Andersen LLP, independent public
accountants.
*27 Financial Data Schedule.
</TABLE>
- ---------------
* Filed herewith
+ Represents a management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 14(c) of this Annual Report.
(b) Reports on Form 8-K.
A Form 8-K/A was filed by the Company on October 2, 1998, to amend the
Form 8-K, dated June 3, 1998. The Form 8-K/A was filed to discuss and
present Lafarge Corporation's financial statements updated for the
acquisition of certain Redland PLC businesses in North America from
Lafarge S.A. for $690 million.
77
<PAGE> 80
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS ANNUAL REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
LAFARGE CORPORATION
By: /s/ LARRY J. WAISANEN
------------------------------------
LARRY J. WAISANEN
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: March 29, 1999
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
ANNUAL REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
COMPANY AND IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOHN M. PIECUCH President and Chief Executive Officer March 29, 1999
- ------------------------------------------- and Director
JOHN M. PIECUCH
/s/ LARRY J. WAISANEN Executive Vice President and Chief March 29, 1999
- ------------------------------------------- Financial Officer
LARRY J. WAISANEN
/s/ JOSEPH B. SHERK Vice President and Controller March 29, 1999
- -------------------------------------------
JOSEPH B. SHERK
/s/ BERTRAND P. COLLOMB Chairman of the Board March 29, 1999
- -------------------------------------------
BERTRAND P. COLLOMB
/s/ THOMAS A. BUELL Director March 29, 1999
- -------------------------------------------
THOMAS A. BUELL
/s/ MARSHALL A. COHEN Director March 29, 1999
- -------------------------------------------
MARSHALL A. COHEN
/s/ PHILIPPE P. DAUMAN Director March 29, 1999
- -------------------------------------------
PHILIPPE P. DAUMAN
/s/ BERNARD L. KASRIEL Director March 29, 1999
- -------------------------------------------
BERNARD L. KASRIEL
/s/ JACQUES LEFEVRE Director March 29, 1999
- -------------------------------------------
JACQUES LEFEVRE
</TABLE>
78
<PAGE> 81
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PAUL W. MACAVOY Director March 29, 1999
- -------------------------------------------
PAUL W. MACAVOY
/s/ CLAUDINE B. MALONE Director March 29, 1999
- -------------------------------------------
CLAUDINE B. MALONE
/s/ ROBERT W. MURDOCH Director March 29, 1999
- -------------------------------------------
ROBERT W. MURDOCH
/s/ BERTIN F. NADEAU Director March 29, 1999
- -------------------------------------------
BERTIN F. NADEAU
/s/ JOHN D. REDFERN Director March 29, 1999
- -------------------------------------------
JOHN D. REDFERN
/s/ JOE M. RODGERS Director March 29, 1999
- -------------------------------------------
JOE M. RODGERS
/s/ MICHEL ROSE Director March 29, 1999
- -------------------------------------------
MICHEL ROSE
/s/ RONALD D. SOUTHERN Director March 29, 1999
- -------------------------------------------
RONALD D. SOUTHERN
</TABLE>
79
<PAGE> 82
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
2.1 Stock Purchase Agreement dated June 3, 1998 among Redland
International Limited, the Company and Lafarge S.A.
[incorporated by reference to Exhibit 2.1 to the Form 8-K
filed by the Company with the Securities and Exchange
Commission on June 18, 1998].
2.2 Acquisition Agreement dated June 3, 1998 among Redland
Quarries Inc., Lafarge Canada Inc. and Lafarge S.A.
[incorporated by reference to Exhibit 2.2 to the Form 8-K
filed by the Company with the Securities and Exchange
Commission on June 18, 1998].
3.1 Articles of Amendment and Restatement of the Company, filed
May 29, 1992 [incorporated by reference to Exhibit 3.1 to
the Annual Report on Form 10-K filed by the Company for the
fiscal year ended December 31, 1992].
*3.2 Amended By-Laws of the Company, amended on February 9, 1999.
4.1 Form of Indenture dated as of October 1, 1989 between the
Company and Citibank, N.A., as Trustee, relating to $250
million of debt securities of the Company [incorporated by
reference to Exhibit 4.1 to the Registration Statement on
Form S-3 (Registration No. 33-31333) of the Company, filed
with the Securities and Exchange Commission on October 3,
1989].
4.2 Form of Fixed Rate Medium-Term Note of the Company
[incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form S-3 (Registration No.
33-31333) of the Company, filed with the Securities and
Exchange Commission on October 3, 1989].
4.3 Instruments with respect to long-term debt which do not
exceed 10 percent of the total assets of the Company and its
consolidated subsidiaries have not been filed. The Company
agrees to furnish a copy of such instruments to the
Commission upon request.
9.1 Trust Agreement dated as of October 13, 1927 among Canada
Cement Company Limited, Montreal Trust Company, Henry L.
Doble and Alban C. Bedford-Jones, as amended (composite
copy) [incorporated by reference to Exhibit 10.5 to the
Registration Statement on Form S-1 (Registration No.
2-82548) of the Company, filed with the Securities and
Exchange Commission on March 21, 1983].
9.2 Amendment dated June 10, 1983 to Trust Agreement filed as
Exhibit 9.1 [incorporated by reference to Exhibit 9.2 to the
Registration Statement of Form S-1 (Registration No.
2-86589) of the Company, filed with the Securities and
Exchange Commission on September 16, 1983].
10.1 Exchange Agency and Trust Agreement dated as of May 1, 1983
among the Company, Canada Cement Lafarge, Lafarge Coppee and
Montreal Trust Company, as trustee [incorporated by
reference to Exhibit 10.1 to Amendment No. 1 to the
Registration Statement on Form S-1 (Registration No.
2-82548) of the Company, filed with the Securities and
Exchange Commission on May 5, 1983]. Canada Cement Lafarge
changed its name in 1988 to Lafarge Canada Inc. Lafarge
Coppee changed its name in 1995 to Lafarge S.A.
10.2 Guarantee Agreement dated as of May 1, 1983 between the
Company and Canada Cement Lafarge [incorporated by reference
to Exhibit 10.2 to Amendment No. 1 to the Registration
Statement of Form S-1 (Registration No. 2-82548) of the
Company, filed with the Securities and Exchange Commission
on May 5, 1983].
10.3 Special Surface Lease dated as of August 1, 1954 between the
Province of Alberta and Canada Cement Lafarge, as amended
[incorporated by reference to Exhibit 10.7 to the
Registration Statement on Form S-1 (Registration No.
2-82548) of the Company, filed with the Securities and
Exchange Commission on March 21, 1983].
+10.4 Director Fee Deferral Plan of the Company [incorporated by
reference to Exhibit 10.21 to the Registration Statement on
Form S-1 (Registration No. 2-86589) of the Company, filed
with the Securities and Exchange Commission on September 16,
1983].
+10.5 1993 Stock Option Plan of the Company, as amended and
restated February 7, 1995 [incorporated by reference to
Exhibit 10.5 to the Annual Report on Form 10-K filed by the
Company for the fiscal year ended December 31, 1997].
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
+10.6 1983 Stock Option Plan of the Company, as amended and
restated May 2, 1989 [incorporated by reference to Exhibit
28 to the Company's report on Form 10-Q for the quarter
ended June 30, 1989].
10.7 Optional Stock Dividend Plan of the Company [incorporated by
reference to Exhibit 10.22 to the Annual Report on Form 10-K
filed by the Company for the fiscal year ended December 31,
1987].
+10.8 Director Fee Deferral Plan of General Portland, assumed by
the Company on January 29, 1988 [incorporated by reference
to Exhibit 10(g) to the Annual Report on Form 10-K filed by
General Portland for the fiscal year ended December 31,
1980].
10.9 Option Agreement for Common Stock dated as of November 1,
1993 between the Company and Lafarge Coppee [incorporated by
reference to Exhibit 10.11 to the Annual Report on Form 10-K
filed by the Company for the fiscal year ended December 31,
1993].
+10.10 Deferred Compensation Program of Canada Cement Lafarge
[incorporated by reference to Exhibit 10.57 to Amendment No.
1 to the Registration Statement on Form S-1 (Registration
No. 2-86589) of the Company, filed with the Securities and
Exchange Commission on November 23, 1983].
10.11 Agreement dated November 8, 1983 between Canada Cement
Lafarge and Standard Industries Ltd. [incorporated by
reference to Exhibit 10.58 to Amendment No. 1 to the
Registration Statement on Form S-1 (Registration No.
2-86589) of the Company, filed with the Securities and
Exchange Commission on November 23, 1983].
10.12 Stock Purchase Agreement dated September 17, 1986 between
the Company and Lafarge Coppee, S.A. [incorporated by
reference to Exhibit B to the Company's report on Form 10-Q
for the quarter ended September 30, 1986].
10.13 Cost Sharing Agreement dated December 2, 1988 between
Lafarge Coppee, LCI and the Company relating to expenses for
research and development, strategic planning and human
resources and communication techniques [incorporated by
reference to Exhibit 10.42 to the Annual Report on Form 10-K
filed by the Company for the fiscal year ended December 31,
1988].
10.14 Royalty Agreement dated December 2, 1988 between Lafarge
Coppee, LCI and the Company relating to access to the
reputation, logo and trademarks of Lafarge Coppee
[incorporated by reference to Exhibit 10.43 to the Annual
Report on Form 10-K filed by the Company for the fiscal year
ended December 31, 1988].
10.15 Amendment dated January 1, 1993 to Royalty Agreement filed
as Exhibit 10.14 [incorporated by reference to Exhibit 10.21
to the Annual Report on Form 10-K filed by the Company for
the fiscal year ended December 31, 1992].
+10.16 Description of Nonemployee Director Retirement Plan of the
Company, effective January 1, 1989 [incorporated by
reference to Exhibit 10.40 to the Annual Report on Form 10-K
filed by the Company for the fiscal year ended December 31,
1989].
10.17 Reimbursement Agreement dated January 1, 1990 between
Lafarge Coppee and the Company relating to expenses for
Strategic Planning and Communication techniques
[incorporated by reference to Exhibit 10.41 to the Annual
Report on Form 10-K filed by the Company for the fiscal year
ended December 31, 1990].
10.18 Form of Revolving Credit Facility Agreements, dated as of
September 1, 1994, among the Company and nine separate
banking institutions [incorporated by reference to Exhibit
10.27 to the Annual Report on Form 10-K filed by the Company
for the fiscal year ended December 31, 1994].
10.19 Amendment dated September 13, 1991 to Cost Sharing Agreement
filed as Exhibit 10.13 [incorporated by reference to Exhibit
10.31 to the Annual Report on Form 10-K filed by the Company
for the fiscal year ended December 31, 1994].
10.20 Amendments dated June 1 and August 1, 1996 to Revolving
Credit Facility Agreements among the Company and six
separate banking institutions filed as Exhibit 10.18
[incorporated by reference to Exhibit 10.20 to the Annual
Report on Form 10-K filed by the Company for the fiscal year
ended December 31, 1996].
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
10.21 Cost Sharing Agreement dated January 2, 1996 between Lafarge
Materiaux de Specialities and the Company related to costs
of a new unit established for researching potential
profitable markets for their respective products in North
America [incorporated by reference to Exhibit 10.21 to the
Annual Report on Form 10-K filed by the Company for the
fiscal year ended December 31, 1996].
10.22 Marketing and Technical Assistance Agreement dated October
1, 1996 between Lafarge S.A. and the Company related to
research and development, marketing, strategic planning,
human resources and communication techniques in relation to
gypsum activities [incorporated by reference to Exhibit
10.22 to the Annual Report on Form 10-K filed by the Company
for the fiscal year ended December 31, 1996].
+10.23 Consulting Agreement between the Company and Robert Murdoch
dated October 1, 1997 [incorporated by reference to Exhibit
10.23 to the Annual Report on Form 10-K filed by the Company
for the fiscal year ended December 31, 1997].
+10.24 1998 Stock Option Plan of the Company [incorporated by
reference to Exhibit 4.1 to the Registration Statement on
Form S-8 (Regulation No. 333-65897) of the Company, filed
with the Securities and Exchange Commission on October 20,
1998].
*10.25 Credit Agreement dated as of December 8, 1998 between the
Company and nine separate banking institutions.
+*10.26 Amendment dated August 1, 1998 to Nonemployee Director
Retirement Plan of the Company filed as Exhibit 10.16.
*11 Statement regarding computation of net income per common
equity share.
*21 Subsidiaries of the Company.
*23 Consent of Arthur Andersen LLP, independent public
accountants.
*27 Financial Data Schedule.
</TABLE>
- ---------------
* Filed herewith
+ Represents a management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 14(c) of this Annual Report.
<PAGE> 1
Exhibit 3.2
BY-LAWS
OF
LAFARGE CORPORATION
As amended February 9,1999
ARTICLE I
STOCKHOLDERS
SECTION 1.01. Annual Meetings. The Corporation shall hold each year an
annual meeting of the stockholders for the election of directors and the
transaction of any other business within the powers of the Corporation. Annual
meetings of stockholders shall be held on such day during the period April l5th
to May 14th of each calendar year as shall be designated by the Board of
Directors and at a time stated in the notice of meeting. Any business of the
Corporation may be considered at an annual meeting without the purpose of such
business being specified in the notice, except such business as is specifically
required by statute or by the Articles of Incorporation to be specified in the
notice. Failure to hold an annual meeting at the designated time shall not,
however, invalidate the corporate existence or affect any otherwise valid
corporate acts.
SECTION 1.02. Special Meetings. At any time in the interval between
annual meetings, special meetings of the stockholders may be called by the
Chairman of the Board, the Vice Chairman of the Board, the President and Chief
Executive Officer, a majority of the Board of Directors or by any other person
specified in the Charter. Special meetings of the stockholders shall also be
called by the Secretary upon the written request of stockholders entitled to
cast at least twenty-five per cent (25%) of all the votes entitled to be cast at
such meeting; provided, however, that a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on at any
special meeting of the stockholders held during the preceding twelve (12)
months, unless a meeting is requested by
<PAGE> 2
stockholders entitled to cast a majority of all the votes entitled to be cast at
such meeting. In any case in which a special meeting is called by written
request of the stockholders, such request shall state the purpose of the meeting
and the matters proposed to be acted on at it.
SECTION 1.03. Place of Meetings. Except as limited by statute, all
meetings of stockholders shall be held at such place within or without the State
of Maryland as shall be determined from time to time by the Board of Directors
and stated in the notice of meeting.
SECTION 1.04. Notice of Meetings. Except as provided below, not less than
ten (10) days nor more than ninety (90) days before the date of every
stockholders' meeting, the Secretary shall give to each stockholder entitled to
vote at such meeting, and to each stockholder not entitled to vote who is
entitled by statute to notice, written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or if otherwise
required by statute, the purpose or purposes for which the meeting is called,
either by mailing it to him at his address as it appears on the records of the
corporation or by delivering it to him personally or by leaving it at his
residence or usual place of business. If a special meeting is called by the
stockholders, the Secretary shall inform the stockholders who make the request
of the reasonably estimated cost of preparing and mailing a notice of the
meeting, and on payment of these costs to the Corporation shall notify each
stockholder entitled to notice of the meeting. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to the
stockholder at his post office address as it appears on the records of the
Corporation, with postage thereon prepaid. Notwithstanding the foregoing
provisions, a written waiver of any required notice regarding any stockholder
meeting, signed by the person or persons entitled to such notice, whether before
or after the holding thereof, and filed with the records of the meeting, or by
actual attendance at the meeting in person or by proxy, shall be deemed
equivalent to the giving of such notice to such person.
SECTION 1.05. Conduct of Meetings. Meetings of stockholders shall be
presided over by the Chairman of the Board, or, if he is not
2
<PAGE> 3
present, by the Vice Chairman of the Board, or, if he is not present, by the
President and Chief Executive Officer, or, if he is not present, by a Vice
President, or, if none of said officers is present, by a chairman to be elected
at the meeting. The Secretary or, if he is not present, any Assistant Secretary,
shall act as secretary of such meetings; in the absence of the Secretary and any
Assistant Secretary, the presiding officer may appoint a person to act as
secretary of the meeting.
SECTION 1.06. Quorum. Unless otherwise provided in the Charter, at any
meeting of stockholders the presence in person or by proxy of stockholders
entitled to cast a majority of the votes entitled to be cast thereat shall
constitute a quorum; but this Section shall not affect any requirement under
statute or under the Charter for the vote necessary for the adoption of any
measure. In the absence of a quorum, the stockholders present in person or by
proxy, by majority vote and without notice other than by announcement, may
adjourn the meeting from time to time until a quorum shall attend. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at any meeting as originally
notified. In the event that at any meeting a quorum exists for the transaction
of some business, but does not exist for the transaction of other business, the
business as to which a quorum is present may be transacted by the holders of
stock present in person or by proxy who are entitled to vote thereon. Any
meeting of stockholders, annual or special, may adjourn from time to time to
reconvene at the same or some other place at a date not to exceed more than 120
days after the original record date, and no notice need be given of any such
adjourned meeting other than by announcement.
SECTION 1.07. Proxies. A stockholder may vote the shares owned of record
by him either in person or by a written proxy signed by the stockholder or by
his duly authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months from its date, unless otherwise provided in the proxy. A proxy need not
be sealed, witnessed or acknowledged.
SECTION 1.08. Votes Required. A majority of the votes cast at a meeting
of stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may properly come
before the meeting, unless otherwise provided by statute or by the Charter.
3
<PAGE> 4
Unless the Charter provides for a greater or lesser number of votes per share or
limits or denies voting rights, each outstanding share of stock, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of stockholders.
SECTION 1.09. Voting. In all elections for directors every stockholder
shall have the right to vote, in person or by proxy, each share of stock owned
of record by him, for as many persons as there are directors to be elected and
for whose election the share is entitled to be voted. At all meetings of
stockholders, unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions touching the qualification of the
voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting. If demanded by a stockholder or
stockholders, present at a meeting, in person or by proxy, entitled to cast ten
per cent (10%) of the votes entitled to be cast thereat, or if ordered by the
chairman, the vote upon any election or question shall be taken by ballot and,
upon like demand or order, the voting shall be conducted by two inspectors, in
which event the proxies and ballots shall be received, and all questions
touching the qualification of voters and the validity of proxies and the
acceptance or rejection of votes, shall be decided by such inspectors. Unless so
demanded or ordered, no vote need be by ballot and voting need not be conducted
by inspectors. If inspections are demanded by the stockholders or ordered by the
chairman, the stockholders at any meeting may choose an inspector or inspectors
to act at such meeting, and in default of such election the chairman of the
meeting shall appoint such inspector or inspectors. No candidate for election as
a director at a meeting shall serve as an inspector thereat.
SECTION 1.10. Informal Action by Stockholders. Any action required or
permitted to be taken at any meeting of stockholders may be taken without a
meeting if there is filed with the minutes of proceedings of stockholders a
unanimous written consent which sets forth the action and is signed by each
stockholder entitled to vote on the matter; and a written waiver of any right to
dissent signed by each stockholder entitled to notice of the meeting, but not
entitled to vote at it.
4
<PAGE> 5
SECTION 1.11. Voting Rights of Certain Control Shares. Notwithstanding
any other provision of the Charter of the Corporation or these By-laws, Title 3,
Subtitle 7 of the Corporations and Associations Article of the Annotated Code of
Maryland (or any successor statute) shall not apply to any acquisition by any
person of shares of stock of the Corporation. This Section may be repealed, in
whole or in part, at any time, whether before or after an acquisition of control
shares and, upon such repeal, may, to the extent provided by any successor
by-law, apply to any prior or subsequent control share acquisition.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. Powers. The business and affairs of the Corporation shall
be managed under the direction of its Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors,
except as conferred upon or reserved to the stockholders by statute, the Charter
or the By-Laws.
SECTION 2.02. Number of Directors. The number of directors of the
Corporation which shall constitute the whole Board shall be fifteen (15). By
vote of a majority of the entire Board of Directors, the number of directors
fixed by the Charter or by the By-Laws may be increased or decreased, from time
to time, not to exceed seventeen (17) nor to be less than three (3) directors,
but the tenure of office of a director shall not be affected by any decrease in
the number of directors so made by the Board. Directors need not be stockholders
in the Corporation or residents of the State of Maryland.
SECTION 2.03. Election of Directors. At each annual meeting, the
stockholders shall elect directors to hold office until the next succeeding
annual meeting or until their successors are elected and qualify. At any meeting
of stockholders, duly called and at which a quorum is present, the stockholders
may, by the affirmative vote of the holders of a majority of the votes entitled
to be cast thereon, remove any director or directors from office, except as
otherwise provided by statute, and may elect a successor or successors to fill
any resulting vacancies for the unexpired terms of the removed directors. In
case
5
<PAGE> 6
such a removal occurs but the stockholders entitled to vote thereon fail to fill
any resulting vacancies, such vacancies may be filled by the Board of Directors
pursuant to Section 2.04. Any director may resign at any time upon written
notice to the Corporation.
SECTION 2.04. Vacancies. Subject to Section 2.03, any vacancy occurring
in the Board of Directors for any cause other than by reason of an increase in
the number of directors may be filled by a majority of the remaining members of
the Board of Directors, although such majority is less than a quorum. Any
vacancy occurring by reason of an increase in the number of directors may be
filled by action of a majority of the entire Board of Directors as constituted
prior to such increase. A director elected by the Board of Directors to fill a
vacancy shall be elected to hold office until the next annual meeting of the
stockholders or until his successor is elected and qualifies.
SECTION 2.05. Regular Meetings. After each meeting of stockholders at
which a Board of Directors shall have been elected, the Board of Directors so
elected shall meet as soon as practicable for the purpose of organization and
the transaction of other business; and in the event that no other time is
designated by the stockholders, the Board of Directors shall meet promptly
following the close of such meeting on the day of such meeting. Such first
meeting shall be held at such place within or without the State of Maryland as
may be designated by the stockholders, or in default of such designation at the
place designated by the Board of Directors for such first regular meeting, or in
default of such designation at the place of the holding of the immediately
preceding annual meeting of stockholders. No notice of such first meeting shall
be necessary if held as hereinabove provided. Other regular meetings of the
Board of Directors may be held on such dates and at such places within or
without the State of Maryland as may be designated from time to time by the
Board of Directors and no additional notice of such regular meetings shall be
required.
SECTION 2.06. Special Meetings. Special Meetings of the Board of
Directors may be called at any time by the Chairman of the Board, by the
President and Chief Executive Officer, or by a majority of the Board of
Directors by vote at a meeting, or in writing with or without a meeting. Such
special
6
<PAGE> 7
meetings shall be held at such place or places within or without the State of
Maryland as may be designated from time to time by the Board of Directors.
SECTION 2.07. Notice of Meetings. Notice of the place, day and hour of
every special meeting shall be given to each director at least forty-eight (48)
hours before the time of the meeting, by delivering the same to him personally,
by telephone, by telegraph, or by delivering the same at his residence or usual
place of business, or, in the alternative, by mailing such notice no later than
the seventh day preceding the day upon which the meeting is to be held, postage
paid, and addressed to him at his last known post office address, according to
the records of the Corporation; provided, however, that if the person calling
the meeting is of the opinion that the matters to be considered thereat involve
an emergency, notice of such meeting shall be given by such means and within
such time preceding the time at which the meeting is to be held as the person
calling the meeting shall in his discretion deem reasonable and appropriate
under the circumstances. Unless required by a resolution of the Board of
Directors, no notice of any meeting of the Board of Directors and no waiver of
notice of any such meeting need state the business to be transacted thereat. No
notice of any meeting of the Board of Directors need be given to any director
who attends such meeting, or to any director who signs a waiver of notice of
such meeting, either before or after the holding thereof, and such waiver is
filed with the records of the meeting. Any meeting of the Board of Directors,
regular or special, may adjourn from time to time to reconvene at the same or
some other place, and no notice need be given of any such adjourned meeting
other than by announcement.
SECTION 2.08. Quorum. At all meetings of the Board of Directors, a
majority of the entire Board of Directors, but in no event fewer than two (2)
directors, shall be necessary and sufficient to constitute a quorum for the
transaction of business. Except as otherwise provided by statute, by the Charter
or by the By-Laws, the affirmative vote of a majority of the directors present
at a meeting at which a quorum is present shall be necessary to elect and pass
any measure. In the absence of a quorum, the directors present by majority vote
and without notice other than by announcement may adjourn the
7
<PAGE> 8
meeting from time to time until a quorum shall attend. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted which
might have been transacted at the meeting as originally notified.
SECTION 2.09. Compensation. The Board of Directors may provide for the
payment to directors of stated amounts annually for services incident to serving
as directors and committee members, or in the alternative, a fixed sum for
attendance at each meeting of the Board of Directors or committees thereof,
Directors shall be reimbursed by the Corporation for reasonable expenses
incurred in attending such meetings. Except as otherwise provided by the Board
of Directors, the receipt of amounts or sums authorized hereby shall not
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 2.10. Informal Action by Directors. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if a unanimous written consent
which sets forth such action is signed by all members of the Board of Directors
or of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board of Directors or committee.
SECTION 2.11. Telephone Meetings. Members of the Board of Directors may
participate in a meeting of such Board by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time, and participation by such
means shall constitute presence in person at a meeting.
ARTICLE III
COMMITTEES
SECTION 3.01. Committees. The Board of Directors may appoint from among
the directors an Executive Committee and such other committees, to consist of
such numbers of directors, not less than two, as the Board of Directors may from
time to time determine. The Board of Directors shall have power at any time to
remove any members of the Executive Committee and of each other committee and
8
<PAGE> 9
to fill vacancies therein. When the Board of Directors is not in session, the
Executive Committee shall have and may exercise, in the absence of or subject to
any restrictions which the Board of Directors may from time to time impose, all
of the powers of the Board of Directors in the management of the business and
affairs of the Corporation, except the power to declare dividends or
distributions on stock, to issue stock (except as provided by statute), to
recommend to stockholders any action requiring stockholders' approval, to amend
the By-Laws, or to approve any merger or share exchange which does not require
stockholder approval. Other committees shall have such powers, subject to
applicable law, as shall be designated by the Board of Directors from time to
time.
SECTION 3.02. Advisory Committees. The Board of Directors may designate
such advisory committees from time to time as the Board of Directors, in its
discretion, deems necessary and proper, to perform such duties as may be
determined by the Board of Directors at the time of their designation or as may
be modified thereafter by the Board of Directors or the Executive Committee;
provided, however, that any such advisory committee or committees shall have and
may exercise only the power to recommend action to the Board of Directors or the
Executive Committee. Each advisory committee shall consist of two or more
individuals (with such alternates, if any, as may be deemed desirable) selected
by the Board of Directors, who may but need not be members of the Board of
Directors.
SECTION 3.03. Committee Meetings. Meetings of any committee of directors
or advisory committee may be called by the Chairman of the Board or the
President and Chief Executive Officer of the Corporation or by any member of the
committee and may be held at any office of the Corporation or elsewhere, as
specified in the notice or waiver of notice of the meeting, upon not less than
twenty-four (24) hours notice by telephone or telegram (notice by telegram shall
be deemed given upon delivery to the telegraph company), upon notice by mail if
such notice is mailed postage prepaid not later than the second day preceding
the day upon which the meeting is to be held, or upon written waiver of notice
given before or after the meeting; provided, however, that if the person calling
the meeting is of the opinion that the matters to be considered thereat involve
an emergency, notice of the meeting shall be
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given to each member by such means and within such time preceding the time the
meeting is to be held as the person calling the meeting shall in his discretion
deem reasonable and appropriate under the circumstances. Notice of any meeting
may be given by the Chairman of the Board or the President and Chief Executive
Officer of the Corporation, by any member of the committee or by the secretary
of the committee. Neither the business to be transacted at, nor the purpose of,
any meeting of a committee need be specified in the notice or the waiver of
notice of such meeting. Members of any committee may participate in a meeting of
the committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting through such means shall constitute
presence in person at such meeting. Any action required or permitted to be taken
at any meeting of a committee may be taken without a meeting if all members of
the committee consent thereto in writing filed with the minutes of the
proceedings of the committee. A majority of a committee shall constitute a
quorum for the transaction of business, and in the event a quorum is not present
at any meeting the member or members present may adjourn the meeting from time
to time without further notice until a quorum is present. Each committee shall
designate one of its members as chairman (except that the Chairman of the Board
of the Corporation shall act as Chairman of the Executive Committee) and shall
appoint a secretary (who need not be a member of the committee), who shall keep
minutes of its meetings. As soon as practicable, the minutes of each meeting and
any writing evidencing action by unanimous consent shall be submitted to the
Board of Directors, with or without a report, as such committee may deem
appropriate.
ARTICLE IV
OFFICERS
SECTION 4.01. Elected Officers. The elected officers of the Corporation
shall be a Chairman of the Board; a Vice Chairman of the Board; a President and
Chief Executive Officer; one or more Executive Vice Presidents, one or more
Senior Vice Presidents and one or more Vice Presidents as may be determined by
the Board of Directors; a Secretary; a Treasurer; and a Controller.
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SECTION 4.02. Election. The Board of Directors at its first meeting after
each annual meeting of stockholders shall elect a Chairman of the Board from
among its members, and a Vice Chairman of the Board, a President and Chief
Executive Officer, one or more Executive Vice Presidents, one or more Senior
Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer and a
Controller, none of whom need be a member of the Board. With the exception of
the President and Chief Executive Officer, who may not serve concurrently as a
Vice President, any officer may hold more than one office. A person who holds
more than one office in the Corporation may not act in more than one capacity to
execute, acknowledge or verify an instrument required by law to be executed,
acknowledged or verified by more than one officer.
SECTION 4.03. Appointed Officers. The Board of Directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 4.04. Compensation. The salaries of all officers and agents of
the Corporation shall be fixed by the Board of Directors, except to the extent
that the authority to fix such salaries has been delegated by the Board of
Directors to designated officers of the Corporation.
SECTION 4.05. Term of Office. Except as may be otherwise provided by the
Board of Directors or in the By-Laws, each officer of the Corporation shall hold
office until the first meeting of the Board of Directors after the next annual
meeting of stockholders following his election or appointment and until his
successor is chosen and qualifies. Any officer or agent elected or appointed by
the Board of Directors may be removed at any time by an action of the Board of
Directors. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors.
SECTION 4.06. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board of Directors and the stockholders. He shall
have and exercise such powers as are, from time to time, assigned to him by the
Board of Directors.
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SECTION 4.07. Vice Chairman of the Board. The Vice Chairman of the Board
shall, in the absence or disability of the Chairman of the Board, perform the
duties and exercise the powers of the Chairman of the Board and perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe.
SECTION 4.08. President and Chief Executive Officer. The President and
Chief Executive Officer shall be the chief executive officer of the Corporation
and shall report to the Executive Committee and the Board of Directors, shall
have and exercise general and active management of the business and affairs of
the Corporation and shall see that all orders and resolutions of the Board of
Directors and the Executive Committee are carried into effect.
SECTION 4.09. The Vice Presidents. The Executive Vice Presidents, the
Senior Vice Presidents and the Vice Presidents shall, in the absence or
disability of the President and Chief Executive Officer and in the order
determined by the Board of Directors, perform the duties and exercise the powers
of the President and Chief Executive Officer and shall perform such other duties
and have such other powers as the Board of Directors may from time to time
prescribe.
SECTION 4.10. The Secretary and Assistant Secretaries. The Secretary
shall attend all meetings of the Board of Directors and the Executive Committee
and all meetings of the stockholders and record all the proceedings of the
meetings of the Corporation and of the Board of Directors and the Executive
Committee in a book to be kept for that purpose and shall perform like duties
for the standing committees, if any. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform all of the duties incident to the office of
secretary of a corporation and such other duties as may be prescribed by the
Board of Directors or the President and Chief Executive Officer under whose
supervision he shall be. He shall have custody of the corporate seal of the
Corporation and he, or an Assistant Secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
his signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to
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affix the seal of the Corporation and to attest the affixing by his signature.
The Assistant Secretary, or if there be more than one, the Assistant Secretaries
in the order determined by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary, shall generally assist the Secretary and shall perform such other
duties and have such other powers as the President and Chief Executive Officer
or the Secretary may from time to time prescribe.
SECTION 4.11. The Treasurer and Assistant Treasurers. The Treasurer shall
have charge of and be responsible for the collection, receipt, custody and
disbursement of corporate funds and securities. Subject to the supervision and
direction of the President and Chief Executive Officer or such Vice President or
other officer as shall be designated as the Chief Financial Officer of the
Corporation, he shall be responsible for: (a) carrying out policies with respect
to the approving, granting or extending of credit by the Corporation, (b) the
preparation and filing of all income tax returns and all other regular and
special reports to governmental agencies, and (c) the maintenance of adequate
records of authorized appropriations and the determination that all sums
expended pursuant thereto are accounted for properly. In general, the Treasurer
shall perform the duties incident to the office of treasurer of a corporation
and such other duties as may from time to time be assigned to him by the Board
of Directors, the President and Chief Executive Officer or by such Vice
President or other officer as shall be designated as the Chief Financial Officer
of the Corporation. In the absence or disability of the Treasurer or in the
event the office of Treasurer is or becomes vacant for any reason, the duties of
the Treasurer shall be performed by the Assistant Treasurers in the order
designated by the Board of Directors or in the absence of any designation then
in the order of their election, unless otherwise determined by the Board of
Directors. Each Assistant Treasurer shall generally assist the Treasurer and
shall perform such other duties and have such other powers as the President and
Chief Executive Officer or the Treasurer may from time to time prescribe.
SECTION 4.12. Delegation of Duties of Officers. In case of the absence of
any officer of the Corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board of
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Directors may delegate, for the time being, the powers or duties, or any of
them, of such officer to any other officer, or to any director, provided that a
majority of the entire Board of Directors shall concur therein.
ARTICLE V
STOCK
SECTION 5.01. Certificates of Stock. The certificates of stock of the
Corporation shall be numbered and shall be entered in the books of the
Corporation as they are issued. Each stock certificate shall include on its face
the name of the Corporation, the name of the stockholder or other person to whom
it is issued, the class of stock and the number of shares represented thereby
and shall be signed by the Chairman of the Board, the President and Chief
Executive Officer or a Vice President and countersigned by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, or by a
facsimile or facsimiles of the signatures of any of such officers, and sealed
with the seal of the Corporation or a facsimile of such seal. If any certificate
is signed (1) by a transfer agent other than the Corporation or its employee, or
(2) by a registrar other than the Corporation or its employee, any other
signature on the certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of issue.
SECTION 5.02. Transfers of Stock. Transfers of stock shall be made on the
books of the Corporation upon the surrender to the Corporation or a transfer
agent of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, and the Corporation
shall thereupon issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books. The Board of
Directors may appoint one or more transfer agents and one or more registrars for
any one or more classes of the capital stock of the Corporation.
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SECTION 5.03. Registered Stockholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to, or interest in, such shares in the name of any other person,
whether or not it shall have express or other notice hereof, except as expressly
provided by the laws of the State of Maryland.
SECTION 5.04. Record Dates. The Board of Directors is hereby empowered to
fix, in advance, a date as the record date for the purpose of determining
stockholders entitled to notice of, or to vote at, any meeting of stockholders,
or stockholders entitled to receive payment of any dividend or the allotment of
any rights, or in order to make a determination of stockholders for any other
proper purpose. Except as otherwise provided by statute, such date shall not be
prior to the close of business on the day the record date is fixed, and in any
case shall be not more than ninety (90) days, and in case of a meeting of
stockholders, not less than ten (10) days, prior to the date on which the
particular action, requiring such determination of stockholders, is to be taken.
In lieu of fixing a record date, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period but not to exceed, in
any case, twenty (20) days. If the stock transfer books are closed for the
purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 5.05. Stock Ledgers. Original or duplicate stock ledgers,
containing the name and address of each stockholder of the Corporation and the
number of shares of each class held by each stockholder, shall be kept at the
principal executive office of the Corporation.
SECTION 5.06. Lost Certificates. A new certificate or certificates for
shares of stock of the Corporation may, upon the making of an affidavit of that
fact by the person claiming a certificate of stock to be lost, stolen or
destroyed, be issued in such manner and under such conditions as the Board of
Directors may at any time or from time to time prescribe, to replace the
certificate alleged to have been lost, stolen or destroyed, provided that the
Board of Directors may, in its discretion, require the owner of
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any such certificate, or his legal representatives, to give the Corporation a
bond, with sufficient surety to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of a new certificate. A new certificate may
be issued without requiring any bond when in the judgment of the directors it is
proper so to do.
ARTICLE VI
FINANCE; CONTRACTS
SECTION 6.01. Checks; Bank Accounts; Etc. Such officers or agents of the
Corporation as from time to time shall be designated by the Board of Directors
shall have authority to deposit any funds of the Corporation in such banks or
trust companies as from time to time shall be designated by the Board of
Directors. Such officers or agents of the Corporation as from time to time shall
be authorized by the Board of Directors may withdraw any or all of the funds of
the Corporation so deposited in any bank or trust company, upon checks, drafts
or other instruments or orders for the payment of money, drawn against the
account or in the name or behalf of the Corporation, and made or signed by such
officers or agents; and each bank or trust company with which funds of the
Corporation are so deposited is authorized to accept, honor, cash and pay,
without limit as to amount, all checks, drafts or other instruments or orders
for the payment of money, when drawn, made or signed by officers or agents so
designated by the Board of Directors until written notice of the revocation of
the authority of such officers or agents by the Board of Directors shall have
been received by such bank or trust company. From time to time there shall be
certified to the banks or trust companies in which funds of the Corporation are
deposited, the signatures of the officers or agents of the Corporation so
authorized to draw against the same. In the event that the Board of Directors
shall fail to designate the persons by whom checks, drafts and other instruments
or orders for the payment of money shall be signed, as hereinabove provided in
this Section, all of such checks, drafts and other instruments or orders for the
payment of money shall be signed by any one of the Chairman of the Board, the
Vice Chairman of the Board, the President and Chief Executive Officer, an
Executive Vice President, a Senior Vice President,
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a Vice President or an Assistant Vice President and countersigned by any one of
the Secretary, the Treasurer, an Assistant Secretary or an Assistant Treasurer.
SECTION 6.02. Loans. Such officers or agents of the Corporation as from
time to time shall be designated by the Board of Directors shall have authority
to effect loans, advances or other forms of credit at any time or times for the
Corporation from such banks, trust companies, institutions, corporations, firms
or persons, in such amounts and subject to such terms and conditions as the
Board of Directors from time to time shall designate; and, as security for the
repayment of any loans, advances, or other forms of credit so authorized, to
assign, transfer, endorse and deliver, either originally or in addition or
substitution, any or all personal property, real property, stocks, bonds,
deposits, accounts, documents, bills and accounts receivable and other
commercial paper and evidences of debt or other securities or any rights or
interest at any time held by the Corporation; and, in connection with any of the
foregoing, for any loans, advances or other forms of credit so authorized, such
officers or agents shall have authority to make, execute and deliver one or more
notes, mortgages, deeds of trust, financing statements, security agreements,
acceptances or written obligations of the Corporation, on such terms, and with
such provisions as to the security or sale or disposition thereof as such
officers or agents shall deem proper, and, also, to sell to, or discount or
rediscount with, such banks, trust companies, institutions, corporations, firms
or persons any and all commercial paper, bills and accounts receivable,
acceptances and other instruments and evidences of debt at any time held by the
Corporation, and to that end to endorse, transfer and deliver the same. From
time to time there shall be certified to each bank, trust company, institution,
corporation, firm or person so designated, the signatures of the officers or
agents so authorized; and each such bank, trust company, institution,
corporation, firm or person is authorized to rely upon such certification until
written notice of the revocation by the Board of Directors or the authority of
such officers or agents shall be delivered to such bank, trust company,
institution, corporation, firm or person.
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SECTION 6.03. Contracts. Contracts and other instruments in writing which
may be properly made or entered into by the Corporation may be executed in its
behalf and in its name by any one of the Chairman of the Board, the Vice
Chairman of the Board, the President and Chief Executive Officer, an Executive
Vice President, a Senior Vice President or a Vice President, under the corporate
seal, attested by the Secretary or an Assistant Secretary; provided, that the
Board of Directors may by resolution authorize the execution of contracts and
other instruments in writing generally or in specific instances in such manner
and by such persons as may therein be designated.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01. Fiscal Year. The fiscal year of the Corporation shall be
the calendar year beginning on the first calendar day of each year, unless
otherwise provided by the Board of Directors.
SECTION 7.02. Seal. The Board of Directors shall provide a suitable seal,
bearing the name of the Corporation, which shall be in the charge of the
Secretary. The Board of Directors may authorize one or more duplicate seals and
provide for the custody thereof. If the Corporation is required to place its
corporate seal to a document, it is sufficient to meet the requirement of any
law, rule or regulation relating to a corporate seal to place the word "(Seal)"
adjacent to the signature of the authorized officer of the Corporation.
SECTION 7.03. Annual Reports. There shall be prepared annually a full and
correct statement of the affairs of the Corporation, including a balance sheet
and a financial statement of operations for the preceding fiscal year, which
shall be submitted at the annual meeting of the stockholders and placed on file
within twenty (20) days thereafter at the principal office of the Corporation in
the State of Maryland. Such statement shall be prepared or caused to be prepared
by such executive officer of the Corporation as may be designated in an
additional or supplementary by-law adopted by the Board of Directors. If no
other executive officer is so designated, it shall be the duty of the President
and Chief Executive Officer to prepare or cause to be prepared such statement.
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SECTION 7.04. Bonds. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more sureties
and in such amount as may be satisfactory to the Board of Directors.
SECTION 7.05. Voting upon Shares in Other Corporations. Any shares in
other corporations or associations, which may from time to time be held by the
Corporation, may be voted at any meeting of the stockholders thereof by the
President and Chief Executive Officer or a Vice President of the Corporation or
by proxy or proxies appointed by the President and Chief Executive Officer or a
Vice President of the Corporation. A by-law or a resolution of the Board of
Directors may appoint some other person or persons to vote such shares, in which
case such person or persons shall be entitled to vote such shares upon the
production of a certified copy of such resolution.
SECTION 7.06. Amendments. (a) Any and all provisions of the By-Laws may
be altered or repealed and new by-laws may be adopted at any annual meeting of
the stockholders, or at any special meeting called for that purpose, and (b) the
Board of Directors shall have the power, at any regular or special meeting
thereof, to make and adopt new by-laws, or to amend, alter or repeal any of the
By-Laws of the Corporation.
SECTION 7.07. Books and Records. The Corporation shall keep correct and
complete books and records of its accounts (including its capital accounts in
the manner provided by statute) and transactions and minutes of the proceedings
of its stockholders and Board of Directors and of any executive or other
committee when exercising any of the powers of the Board of Directors. The books
and records of the Corporation may be in written form or in any other form which
can be converted within a reasonable time into written form for visual
inspection. Minutes shall be recorded in written form but may be maintained in
the form of a reproduction. The original or a certified copy of the By-Laws of
the Corporation, including any amendments to them, shall be kept at the
Corporation's principal office.
SECTION 7.08. Inspection of Books. The Board of Directors shall
determine, subject to law, from time to time, whether, and to what extent and at
what time and places and under what conditions
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and regulations the books, accounts and records of the Corporation or any of
them shall be open to the inspection of the stockholders; and no stockholder
shall have any right to inspect any book, record, account or document of the
Corporation, except as conferred by law or authorized by resolution of the
directors. Unless provided otherwise by statute, any request by a stockholder to
examine the books, accounts or records of the Corporation shall be referred to
the Board of Directors for action at the first meeting thereof following such
request to the end that proper consideration may be given to such request in the
light of existing circumstances and of applicable provisions of law.
SECTION 7.09. Dividends. The Corporation, if declared by the Board of
Directors at any meeting thereof, may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Corporation's
Charter.
SECTION 7.10. Reserves. Before payment of any dividend there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose or purposes as the directors shall think conducive to the
interest of the Corporation, and the directors may modify or abolish any such
reserve in the manner in which it was created.
SECTION 7.11. Severability. The invalidity of any provision of the
By-Laws shall not affect the validity of any other provision, and each provision
shall be enforced to the extent permitted by law.
SECTION 7.12. Gender. Whenever used herein, the masculine gender includes
all genders.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Required Indemnification of Directors. The Corporation
shall indemnify any director made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), unless it is proved that (1) the act or omission
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of the director was material to the cause of action adjudicated in the
Proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (2) the director actually received an improper
personal benefit in money, property or services, or (3) in the case of any
criminal proceeding, the director had reasonable cause to believe that the act
or omission was unlawful. Indemnification may be against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director in
connection with the Proceeding; provided, however, if the Proceeding was one by
or in the right of the Corporation, indemnification may not be made in respect
of any Proceeding in which the director shall have been adjudged to be liable to
the Corporation. The termination of any Proceeding by judgment, order or
settlement does not create a presumption that the director did not meet the
requisite standard of conduct set forth in this Section. The termination of any
Proceeding by conviction, or upon a plea of nolo contendere or its equivalent or
entry of an order of probation prior to judgment, creates a rebuttable
presumption that the director did not meet the requisite standard of conduct set
forth in this Section.
SECTION 8.02. Prohibited Indemnification of Directors. A director shall
not be indemnified under Section 8.01 in respect if any Proceeding charging
improper personal benefit to the director, whether or not involving action in
the director's official capacity, in which the director was adjudged to be
liable on the basis that personal benefit was improperly received.
SECTION 8.03. Indemnification for Successful Defense. Unless limited by
the Charter, a director who has been successful, on the merits or otherwise, in
the defense of any Proceeding referred to in Section 8.01 shall be indemnified
against reasonable expenses incurred by the director in connection with such
Proceeding.
SECTION 8.04. Determination that Indemnification is Proper.
Indemnification under Section 8.01 shall not be made by the Corporation unless
authorized for a specific Proceeding after a determination has been made that
indemnification of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in Section 8.01. Such
determination shall
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be made (1) by the Board of Directors by a majority vote of a quorum consisting
of directors not, at the time, parties to the Proceeding, or, if such a quorum
cannot be obtained, then by a majority vote of a committee of the Board
consisting solely of two or more directors not, at the time, parties to such
Proceeding and who were duly designated to act in the matter by a majority vote
of the full Board in which the designated directors who are parties may
participate, (2) by special legal counsel selected by the Board of Directors or
a committee of the Board by vote as set forth in (1) above, or, if the requisite
quorum of the full Board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full Board in which directors who are
parties may participate, or (3) by the stockholders. Authorization of
indemnification and determination as to reasonableness of expenses shall be made
in the same manner as the determination that indemnification is permissible.
However, if the determination that indemnification is permissible is made by
special legal counsel, authorization of indemnification and determination as to
reasonableness of expenses shall be made in the manner specified for selection
of such counsel. Shares held by directors who are parties to the Proceeding may
not be voted on the subject matter under this Section.
SECTION 8.05. Payment of Expenses in Advance of Final Disposition.
Reasonable expenses incurred by a director who is a party to a Proceeding may be
paid or reimbursed by the Corporation in advance of the final disposition of the
Proceeding upon receipt by the Corporation of (1) a written affirmation by the
director of the director's good faith belief that the standard of conduct
necessary for indemnification by the Corporation has been met and (2) a written
undertaking by or on behalf of the director to repay the amount if it shall
ultimately be determined that the standard of conduct has not been met. The
undertaking required shall be an unlimited general obligation of the director
but need not be secured and may be accepted without reference to financial
ability to make the repayment. Payments under this Section shall be made as
provided by the Charter, these By-Laws or contract or as specified in Section
8.04.
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SECTION 8.06. Expenses of Directors Incurred as a Witness. The
Corporation shall pay or reimburse expenses incurred by a director in connection
with an appearance as a witness in a Proceeding at a time when the director has
not been named as a defendant or respondent to the Proceeding.
SECTION 8.07. Director's Service to Employee Benefit Plan. For purposes
of this Article, (1) the Corporation shall be deemed to have requested a
director to serve an employee benefit plan where the performance of the
director's duties to the Corporation also imposes duties on, or otherwise
involves services by, the director to the plan or participants or beneficiaries
of the plan, (2) excise taxes assessed on a director with respect to an employee
benefit plan pursuant to applicable law shall be deemed fines; and (3) action
taken or omitted by the director with respect to an employee benefit plan in the
performance of the director's duties for a purpose reasonably believed by the
director to be in the interest of the participants and beneficiaries of the plan
shall be deemed to be for a purpose which is not opposed to the best interests
of the Corporation.
SECTION 8.08. Officers, Employees or Agents. Unless limited by the
Charter, (1) an officer of the Corporation shall be indemnified as and to the
extent provided in Section 8.03 for a director, (2) the Corporation may
indemnify and advance expenses to an officer, employee, or agent of the
Corporation or of any subsidiary of the Corporation or a director of such a
subsidiary to the same extent that it may indemnify directors of the Corporation
under this Article, and (3) the Corporation, in addition, may indemnify and
advance expenses to an officer, employee, or agent of the Corporation or of any
subsidiary of the Corporation or a director of such a subsidiary who is not a
director of the Corporation to such further extent, consistent with law as may
be provided by the Charter, the By-Laws, by action of the Board of Directors or
by contract.
SECTION 8.09. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the Corporation or of any subsidiary of the Corporation, or who,
while a director, officer, employee, or agent of the Corporation or of any
subsidiary of the Corporation, is or was serving at the request of the
Corporation as a director, officer,
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partner, trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position, whether or not the
Corporation would have the power to indemnify against liability under the
provisions of this Article. The Corporation may provide similar protection,
including a trust fund, letter of credit, or surety bond, not inconsistent with
this Section. The insurance or similar protection provided pursuant to this
Section may be provided by a subsidiary or an affiliate of the Corporation.
SECTION 8.10. Report of Indemnification to Stockholders. Any
indemnification of, or advance of expenses to, a director in accordance with
this Article, if arising out of a Proceeding by or in the right of the
Corporation, shall be reported in writing to the stockholders with the notice of
the next stockholders' meeting or prior to the meeting.
SECTION 8.11. Terms. Terms used in this Article, which are not otherwise
defined herein, shall have the meaning set forth in Section 2-418 of the General
Corporation Law of the State of Maryland.
SECTION 8.12. Scope. The indemnification and advancement of expenses
provided or authorized by this Article shall not be deemed exclusive of any
other rights, by indemnification or otherwise, to which a director, officer,
employee or agent of the Corporation or of a subsidiary of the Corporation may
be entitled under the Charter, the By-Laws, a resolution of stockholders or
directors, an agreement or statute or otherwise, as to action in an official
capacity or as to action in another capacity while holding such office, and the
provisions of this Article shall not be construed to in any way limit any such
other rights.
ARTICLE IX
NOTICES
SECTION 9.01. Manner of Giving Notice. Whenever under the provisions of
the statutes or of the Charter or of the By-Laws, notice is required to be given
to any director or stockholder of the Corporation, and no provision is made as
to how such notice shall be given, it shall not be construed to
24
<PAGE> 25
mean personal notice, but such notice may be given in writing, by mail, by
depositing the same in a post office or letter box, in a postpaid sealed
wrapper, addressed to such director or stockholder at such address as it appears
on the books of the Corporation, or, in default of other address, to such
director or stockholder at the General Post Office in the City of Baltimore,
Maryland, and such notice shall be deemed to be given at the time when the same
shall be thus mailed.
SECTION 9.02. Waiver of Notice. Whenever any notice is required to be
given under the provisions of the statutes or of the Charter, or of the By-Laws,
a waiver thereof in writing signed by the person or persons entitled to said
notice, whether before or after the holding of the meeting or the taking of any
other action referred to therein, shall be deemed equivalent thereto.
25
<PAGE> 1
Exhibit 10.25
EXECUTION COPY
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
dated as of December 8, 1998
among
LAFARGE CORPORATION,
THE LENDERS,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I: DEFINITIONS...........................................................................1
1.1. Definitions..........................................................................1
1.2. Accounting Terms and Determinations.................................................13
ARTICLE II: THE LOAN FACILITY...................................................................13
2.1. Commitment..........................................................................13
2.2. Required Payments...................................................................13
2.3. Ratable Loans; Types of Advances....................................................13
2.4. Fees................................................................................13
2.4.1. Facility Fee.................................................................13
2.4.2. Utilization Fee..............................................................14
2.4.3. Agent Fees...................................................................14
2.5. Reductions in Aggregate Commitment..................................................14
2.6. Minimum Amount of Each Advance......................................................14
2.7. Optional Principal Payments.........................................................14
2.8. Method of Selecting Types and Interest Periods for New Advances.....................14
2.9. Conversion and Continuation of Outstanding Advances.................................15
2.10. Changes in Interest Rate, etc.......................................................15
2.11. Rates Applicable After Default......................................................16
2.12. Method of Payment...................................................................16
2.13. Noteless Agreement; Evidence of Indebtedness........................................16
2.14. Telephonic Notices..................................................................17
2.15. Interest Payment Dates; Interest and Fee Basis......................................17
2.16. Notification of Advances, Interest Rates, Prepayments and Commitment
Reductions..........................................................................18
2.17. Lending Installations...............................................................18
2.18. Non-Receipt of Funds by the Agent...................................................18
2.19. Increase of Commitments.............................................................18
2.20. Extension of Termination Date.......................................................19
ARTICLE III: CHANGE IN CIRCUMSTANCES............................................................20
3.1. Taxes...............................................................................20
3.2. Yield Protection....................................................................22
3.3. Changes in Capital Adequacy Regulations.............................................23
3.4. Availability of Types of Advances...................................................23
3.5. Funding Indemnification.............................................................24
3.6. Mitigation of Additional Costs or Adverse Circumstances.............................24
3.7. Lender Statements; Survival of Indemnity............................................24
ARTICLE IV: CONDITIONS PRECEDENT................................................................25
4.1. Initial Advance.....................................................................25
4.2. Each Advance........................................................................26
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V: REPRESENTATIONS AND WARRANTIES......................................................26
5.1. Existence and Standing..............................................................26
5.2. Authorization and Validity..........................................................27
5.3. No Conflict; Government Consent.....................................................27
5.4. Financial Statements................................................................27
5.5. Material Adverse Change.............................................................27
5.6. Taxes...............................................................................27
5.7. Litigation and Contingent Obligations...............................................28
5.8. Subsidiaries........................................................................28
5.9. ERISA...............................................................................28
5.10. Accuracy of Information.............................................................29
5.11. Margin Stock Regulations............................................................29
5.12. Material Agreements.................................................................29
5.13. Compliance With Laws................................................................29
5.14. Ownership of Properties.............................................................29
5.15. Intellectual Property...............................................................29
5.16. Plan Assets; Prohibited Transactions................................................30
5.17. Environmental Matters...............................................................30
5.18. Investment Company Act..............................................................30
5.19. Public Utility Holding Company Act..................................................30
5.20. Year 2000 Issues....................................................................30
ARTICLE VI: COVENANTS...........................................................................30
6.1. Financial Reporting.................................................................31
6.2. Use of Proceeds.....................................................................32
6.3. Notice of Default...................................................................32
6.4. Corporate Existence; Conduct of Business............................................32
6.5. Taxes...............................................................................33
6.6. Insurance...........................................................................33
6.7. Compliance with Laws................................................................33
6.8. Inspection..........................................................................33
6.9. Maintenance of Properties...........................................................33
6.10. Consolidations, Mergers and Sale of Assets..........................................33
6.11. Liens. .............................................................................34
6.12 Subsidiary Debt.....................................................................35
6.13 Hedging Obligations.................................................................35
6.14 Leverage Ratio......................................................................35
6.15 Interest Coverage Ratio.............................................................35
6.16. Affiliates..........................................................................36
6.17 Year 2000 Issues....................................................................36
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VII: DEFAULTS...........................................................................36
ARTICLE VIII: ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES....................................38
8.1. Acceleration........................................................................38
8.2. Amendments..........................................................................38
8.3. Preservation of Rights..............................................................39
ARTICLE IX: GENERAL PROVISIONS..................................................................39
9.1. Governmental Regulation.............................................................39
9.2. Taxes. .............................................................................39
9.3. Headings............................................................................39
9.4. Entire Agreement....................................................................40
9.5. Several Obligations.................................................................40
9.6. Expenses; Indemnification...........................................................40
9.7. Numbers of Documents................................................................41
9.8. Severability of Provisions..........................................................41
9.9. Nonliability of Lenders. ...........................................................41
9.10. Confidentiality.....................................................................41
9.11. Nonreliance.........................................................................41
ARTICLE X: THE AGENT............................................................................41
10.1. Appointment.........................................................................41
10.2. Powers..............................................................................42
10.3. General Immunity....................................................................42
10.4. No Responsibility for Loans, Collateral, Recitals, etc. ............................42
10.5. Action on Instructions of Lenders...................................................42
10.6. Employment of Agents and Counsel....................................................43
10.7. Reliance on Documents; Counsel......................................................43
10.8. Agent's Reimbursement and Indemnification...........................................43
10.9. Notice of Default...................................................................44
10.10. Rights as a Lender..................................................................44
10.11. Lender Credit Decision..............................................................44
10.12. Successor Agent.....................................................................44
10.13. Delegation to Affiliates............................................................45
10.14. Co-Agents, Documentation Agent, Syndication Agent, etc. ............................45
ARTICLE XI: SETOFF; RATABLE PAYMENTS............................................................45
11.1. Setoff..............................................................................45
11.2. Ratable Payments....................................................................45
</TABLE>
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<TABLE>
<S> <C>
11.3 Application of Payments.............................................................45
ARTICLE XII: BENEFIT OF AGREEMENT; PARTICIPATIONS;
ASSIGNMENTS.......................................................................46
12.1. Successors and Assigns..............................................................46
12.2. Participations......................................................................47
12.2.1. Permitted Participants; Effect.............................................47
12.2.2. Voting Rights..............................................................47
12.2.3. Benefit of Setoff..........................................................47
12.3. Assignments.........................................................................47
12.3.1. Permitted Assignments......................................................47
12.3.2. Effect; Effective Date.....................................................48
12.4. Dissemination of Information........................................................48
12.5. Tax Treatment.......................................................................48
ARTICLE XIII: NOTICES...........................................................................49
13.1. Giving Notice.......................................................................49
13.2. Change of Address...................................................................49
ARTICLE XIV: COUNTERPARTS.......................................................................49
ARTICLE XV: CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL........................49
15.1. CHOICE OF LAW.......................................................................49
15.2. CONSENT TO JURISDICTION.............................................................49
15.3. WAIVER OF JURY TRIAL................................................................50
</TABLE>
<PAGE> 6
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
SCHEDULES
- ---------
<S> <C>
Schedule I -- Commitments
Schedule II -- Pricing Schedule
Schedule 5.8 -- Subsidiaries
Schedule 5.14 -- Liens
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
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<S> <C>
Exhibit A -- Form of Assignment Agreement
Exhibit B -- Form of Note
Exhibit C -- Form of Opinion of Counsel to the Company
Exhibit D -- Form of Opinion of Canadian Counsel to
Lafarge Canada Inc.
Exhibit E -- Form of Opinion of Counsel to the Agent
Exhibit F -- Form of Money Transfer Instructions
Exhibit G -- Form of Compliance Certificate
</TABLE>
<PAGE> 7
CREDIT AGREEMENT
This Credit Agreement (this "AGREEMENT"), dated as of December 8, 1998,
is among Lafarge Corporation, a Maryland corporation (the "COMPANY"), the
Lenders and The First National Bank of Chicago, as Administrative Agent (the
"AGENT").
The parties hereto agree as follows:
ARTICLE I: DEFINITIONS
1.1. DEFINITIONS. As used in this Agreement:
"ACQUISITION" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Company or any of its Subsidiaries (a) acquires any going business or all or
substantially all of the assets of any firm, corporation, limited liability
company or division thereof, whether through purchase of assets, merger or
otherwise or (b) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the Capital Stock of a corporation, partnership, or limited
liability company which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
ownership interests of a partnership or limited liability company.
"ADVANCE" means a borrowing hereunder, (i) made by the Lenders on the
same Borrowing Date, or (ii) converted or continued by the Lenders on the same
date of conversion or continuation, consisting, in either case, of the aggregate
amount of the several Loans of the same Type and, in the case of Eurodollar
Loans, for the same Interest Period.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of Capital Stock, by contract or otherwise.
"AGENT" means The First National Bank of Chicago in its capacity as
contractual representative for the Lenders pursuant to Article X, and not in its
individual capacity as a Lender, and any successor Agent appointed pursuant to
Article X.
"AGGREGATE COMMITMENT" means the aggregate of the Commitments of all the
Lenders, as the same may be reduced from time to time pursuant to Section 2.5 or
increased pursuant to Section 2.19. The initial Aggregate Commitment is Three
Hundred Million and 00/100 Dollars ($300,000,000).
<PAGE> 8
"AGREEMENT" means this Credit Agreement, as it may be amended, modified,
supplemented or restated and in effect from time to time.
"ALTERNATE BASE RATE" means, for any day, a rate of interest per annum
equal to (a) the higher of (i) the Corporate Base Rate for such day and (ii) the
sum of the Federal Funds Effective Rate for such day plus 1/2% per annum, plus
(b) the percentage indicated as the Applicable Margin in connection with
Alternate Base Rate Loans.
"ALTERNATE BASE RATE ADVANCE" means an Advance which bears interest at
the Alternate Base Rate.
"ALTERNATE BASE RATE LOAN" means a Loan which bears interest at the
Alternate Base Rate.
"APPLICABLE FEE RATE" means, at any time, the percentage rate per annum
at which facility fees and utilization fees are accruing on the Aggregate
Commitment (without regard to usage) at such time as set forth in the Pricing
Schedule.
"APPLICABLE MARGIN" means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in the Pricing Schedule.
"ARRANGER" means First Chicago Capital Markets, Inc.
"ARTICLE" means an article of this Agreement unless another document is
specifically referenced.
"AUTHORIZED OFFICER" means any of the Treasurer or any Assistant
Treasurer of the Company, acting singly.
"BENEFIT PLAN" means a defined benefit plan as defined in Section 3(35)
of ERISA (other than a Multiemployer Plan) subject to Title IV of ERISA in
respect of which the Company or any ERISA Affiliate is an "employer" as defined
in Section 3(5) of ERISA or with respect to which the Company or any ERISA
Affiliate has any potential liability.
"BORROWING DATE" means a date on which an Advance of any Type is made
hereunder.
"BORROWING NOTICE" is defined in Section 2.8.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for
2
<PAGE> 9
all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (howsoever designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing person, in each such case regardless
of class or designation.
"CAPITALIZED LEASE" means any lease the obligation for rentals with
respect to which is required to be capitalized on a balance sheet of the lessee
in accordance with U.S. GAAP.
"CHANGE IN CONTROL" means Lafarge S.A. shall cease to own directly or
indirectly at least 50% of the outstanding shares of voting stock of the Company
on a fully diluted basis.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COMMITMENT" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth on Schedule I hereof or as set
forth in the applicable Assignment Agreement in the form of Exhibit A hereto
received by the Agent under the terms of Section 12.3, as such amount may be
modified from time to time pursuant to the terms of this Agreement or to give
effect to any applicable assignment and acceptance.
"COMPANY" means Lafarge Corporation, a Maryland corporation, and its
successors and assigns, including a debtor-in-possession on behalf of the
Company.
"CONSOLIDATED EBITDA" means, for any period, EBITDA of the Company and
its Consolidated Subsidiaries for such period, determined on a consolidated
basis in accordance with U.S. GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the amount of
interest expense, net of interest income, of the Company and its Consolidated
Subsidiaries for such period, determined on a consolidated basis in accordance
with U.S. GAAP.
"CONSOLIDATED NET WORTH" means, at any date as of which the same is to be
determined, the total shareholders' equity of the Company and its Consolidated
Subsidiaries, determined on a consolidated basis as of such date in accordance
with U.S. GAAP.
"CONSOLIDATED SUBSIDIARY" means, at any date as of which the same is to
be determined, any Subsidiary or other entity the accounts of which would be
consolidated with those of the Company
3
<PAGE> 10
in its consolidated financial statements if such statements were prepared as of
such date in accordance with U.S. GAAP.
"CONSOLIDATED TOTAL DEBT" means, at any date as of which the same is to
be determined, the Debt of the Company and its Consolidated Subsidiaries,
determined on a consolidated basis as of such date in accordance with U.S. GAAP.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"CONVERSION/CONTINUATION NOTICE" is defined in Section 2.9.
"CORPORATE BASE RATE" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes.
"DEBT" means, with respect to any Person at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such Person as lessee
under Capitalized Leases, (v) all obligations of such Person to purchase
securities (or other property) which arise out of or in connection with the sale
of the same or substantially similar securities or property, (vi) all
obligations of such Person to reimburse any bank or other person in respect of
amounts paid under a letter of credit or similar instrument, (vii) all Debt of
others secured by a lien on any asset of such Person to the extent of the fair
market value of such asset, whether or not such Debt is assumed by such Person,
(viii) all Synthetic Lease Liabilities of such Person, and (ix) all Debt of
others guaranteed by such Person to the extent such Debt represents a liability
of such Person; provided that liabilities resulting from the recognition of
other postretirement benefits required by Financial Accounting Standard No. 106
shall not constitute "Debt."
"DEFAULT" means an event described in Article VII.
"DERIVATIVE CONTRACT" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
4
<PAGE> 11
"DERIVATIVE TERMINATION VALUE" means, in respect of any one or more
Derivative Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Derivative Contracts, (a) for any
date on or after the date such Derivative Contracts have been closed out and
termination value(s) determined in accordance therewith, such termination
value(s), and (b) for any date prior to the date referenced in clause (a) the
amount(s) determined as the mark-to-market value(s) for such Derivative
Contracts, as determined by the Company based upon one or more mid-market or
other readily available quotations provided by any recognized dealer in such
Derivative Contracts (which may include any Lender).
"DOL" means the United States Department of Labor and any successor
department or agency.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"EBITDA" means, for any period, pre-tax income (loss) plus interest
expense, net of interest income, as set forth in the consolidated statement of
income of the Company and its Consolidated Subsidiaries, plus depreciation,
depletion and amortization, as set forth in the consolidated statement of cash
flows of the Company and its Consolidated Subsidiaries, in each case for such
period, taking into account, on a pro-forma basis, any such amounts in
connection with any permitted Acquisition (as if such Acquisition had occurred
at the beginning of such period).
"ENVIRONMENTAL LAWS" means any and all federal, state, local, regional,
departmental and foreign statutes, laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, decrees, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and other governmental
restrictions relating to (i) the protection of the environment, (ii) the effect
of the environment on human health, (iii) emissions, discharges or releases of
pollutants, contaminants, hazardous substances or wastes into surface water,
ground water or land, or (iv) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
hazardous substances or wastes or the clean-up or other remediation thereof,
including, without limitation, relating to releases, discharges, emissions or
disposals to air, water, land or ground water, to the withdrawal or use of
ground water, to the use, handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the treatment, storage, disposal or
management of hazardous or dangerous substances (including, without limitation,
petroleum, crude oil or any fraction thereof, or other hydrocarbons), pollutants
or contaminants, to exposure to toxic, hazardous or other controlled, prohibited
or regulated substances or emissions.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA AFFILIATE" means any (i) corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Internal Revenue Code) as the Company, (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Company, and
5
<PAGE> 12
(iii) member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as the Company, any corporation described
in clause (i) above or any partnership or trade or business described in clause
(ii) above.
"EURODOLLAR ADVANCE" means an Advance which bears interest at the
Eurodollar Rate.
"EURODOLLAR BASE RATE" means, with respect to any Eurodollar Advance for
the relevant Interest Period, the rate determined by the Agent to be the rate at
which First Chicago offers to place deposits in Dollars with first-class banks
in the London interbank market at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, in the approximate
amount of First Chicago's relevant Eurodollar Loan and having a maturity equal
to such Interest Period.
"EURODOLLAR LOAN" means a Loan which bears interest at a Eurodollar Rate
requested by the Company pursuant to Section 2.2.
"EURODOLLAR RATE" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) the Applicable Margin. The Eurodollar Rate shall be rounded to the next
higher multiple of 1/16 of 1% if the rate is not such a multiple.
"EXCLUDED TAXES" means, in the case of each Lender or applicable Lending
Installation and the Agent, taxes imposed on its overall net income, and
franchise taxes based on net income imposed on it, by (i) the jurisdiction under
the laws of which such Lender or the Agent is incorporated or organized or (ii)
the jurisdiction in which the Agent's or such Lender's principal executive
office or such Lender's applicable Lending Installation is located.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to (i) the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York; or (ii) if such rate is
not so published for any day which is a Business Day, the average of the
quotations at approximately 10:00 a.m. (New York time) for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by the Agent.
"FEE LETTER" is defined in Section 2.4.3.
"FINANCIAL OFFICER" means the Chief Financial Officer or the Treasurer of
the Company.
"FOREIGN EMPLOYEE BENEFIT PLAN" means any employee benefit plan as
defined in Section 3(3) of ERISA which is maintained or contributed to for the
benefit of the employees of the
6
<PAGE> 13
Company, any of its Subsidiaries or any members of its Controlled Group and is
not covered by ERISA pursuant to ERISA Section 4(b)(4).
"FOREIGN PENSION PLAN" means any employee benefit plan as described in
Section 3(3) of ERISA which (i) is maintained or contributed to for the benefit
of employees of the Company, any of its Subsidiaries or any of its ERISA
Affiliates, (ii) is not covered by ERISA pursuant to Section 4(b)(4) of ERISA,
and (iii) under applicable local law, is required to be funded through a trust
or other funding vehicle.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative authority or
functions of or pertaining to government including any authority or other
quasi-governmental entity established to perform any of such functions.
"GROSS NEGLIGENCE" means either recklessness or actions taken or omitted
with conscious indifference to or the complete disregard of consequences. Gross
Negligence does not mean the absence of ordinary care or diligence, or an
inadvertent act or inadvertent failure to act. If the term "gross negligence" is
used with respect to the Agent or any Lender or any indemnitee in any of the
other Loan Documents, it shall have the meaning set forth herein.
"HEDGING OBLIGATIONS" of a Person means any and all net obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, or any similar derivative
transactions and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any of the foregoing.
"INTEREST PERIOD" means, with respect to a Eurodollar Advance or a
Eurodollar Loan, a period of one, two, three or six months commencing on a
Business Day selected by the Company pursuant to this Agreement. Such Interest
Period shall end on (but exclude) the day which corresponds numerically to such
date of commencement one, two, three or six months thereafter, provided,
however, that if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month, such Interest Period shall end on the
last Business Day of such next, second, third or sixth succeeding month. If an
Interest Period would otherwise end on a day which is not a Business Day, such
Interest Period shall end on the next succeeding Business Day, provided,
however, that if said next succeeding Business Day falls in a new month, such
Interest Period shall end on the immediately preceding Business Day.
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"IRS" means the Internal Revenue Service and any Person succeeding to the
functions thereof.
"LENDERS" means the financial institutions listed on the signature pages
of this Agreement and their respective successors and assigns including, without
limitation, any Lender which becomes party to this Agreement pursuant to Section
12.3.
"LENDING INSTALLATION" means any office, branch, subsidiary or affiliate
of any Lender or the Agent.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, encumbrance or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, the interest of a vendor or lessor under any
conditional sale, Capitalized Lease or other title retention agreement).
"LOAN" means, with respect to any Lender, such Lender's loan made
pursuant to Article II (or any conversion or continuation thereof).
"LOAN DOCUMENTS" means this Agreement, any Notes issued pursuant to
Section 2.13 and the Fee Letter.
"MATERIAL ADVERSE CHANGE" means any change in the business, property,
condition (financial or otherwise) or results of operations or prospects of the
Company and its Subsidiaries taken as a whole which could reasonably be expected
to have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, property, condition (financial or otherwise) or results of operations
or prospects of the Company and its Subsidiaries taken as a whole, the ability
of the Company to perform its obligations under the Loan Documents, or the
validity or enforceability of any of the Loan Documents or the rights or
remedies of the Agent or the Lenders thereunder.
"MATERIAL DEBT" means Debt (other than the Obligations hereunder or under
the Notes) of the Company and/or one or more of its Subsidiaries, arising in one
or more related or unrelated transactions, in an aggregate principal or face
amount exceeding $10,000,000.
"MOODY'S" means Moody's Investors Service, Inc. or any rating agency
which is generally recognized as a successor thereto.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA subject to Title IV of ERISA and which is contributed to by
either the Company or any ERISA Affiliate or with respect to which the Company
or any ERISA Affiliate has potential liability.
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"NOTE" means any promissory note issued by the Company at the request of
a Lender pursuant to Section 2.13 in the form of Exhibit B.
"NOTICE OF ASSIGNMENT" is defined in Section 12.3.2.
"OBLIGATIONS" means all Loans, Advances, debts, liabilities, obligations,
covenants and duties owing by the Company or any of its Subsidiaries to the
Agent, any Lender, any Affiliate of the Agent or any Lender or any indemnitee,
of any kind or nature, present or future, arising under this Agreement, the
Notes issued hereunder, any other Loan Document, whether or not evidenced by any
note, guaranty or other instrument, whether or not for the payment of money,
whether arising by reason of an extension of credit, loan, guaranty,
indemnification, or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes, without
limitation, all interest charges, expenses, fees, attorneys' fees and
disbursements, paralegals' fees, and any other sum chargeable to the Company or
any of its Subsidiaries under this Agreement or any other Loan Document.
"OTHER TAXES" is defined in Section 3.1(i).
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the function thereof.
"PAYMENT DATE" means the last Business Day of each calendar quarter.
"PERCENTAGE" means, with respect to any Lender, the percentage obtained
by dividing (A) such Lender's Commitment at such time (in each case, as adjusted
from time to time in accordance with the provisions of this Agreement) by (B)
the Aggregate Commitment at such time; provided, however, if all of the
Commitments are terminated pursuant to the terms of this Agreement, then
"Percentage" means the percentage obtained by dividing (i) the aggregate
principal amount of such Lender's outstanding Loans at such time by (ii) the
aggregate principal amount of all outstanding Loans at such time.
"PERSON" means any corporation, limited liability company, natural
person, firm, joint venture, partnership, trust, unincorporated organization,
enterprise, government or any department or agency of any government.
"PLAN" means any employee benefit plan defined in Section 3(3) of ERISA
in respect of which the Company or any ERISA Affiliate is an "employer" as
defined in Section 3(5) of ERISA or with respect to which the Company or any
ERISA Affiliate has any potential liability.
"PLAN ASSET RATIO" means the ratio (expressed as a percentage) of (a) the
fair market value of all assets of all Single Employer Plans allocable to
currently accrued vested nonforfeitable benefits under such Plans to (b) the
present value of all such currently accrued vested nonforfeitable Plan
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<PAGE> 16
benefits, all determined on an ongoing Plan basis as set forth in the then most
recent actuarial valuation for such Plans.
"PRICING SCHEDULE" means the Schedule attached hereto as Schedule II.
"PURCHASERS" is defined in Section 13.2.1.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of the
Federal Reserve System.
"REGULATION T" means Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by and to brokers and dealers of Securities for the purpose
of purchasing or carrying margin stock (as defined therein).
"REGULATIONS U AND X" means Regulations U and X of the Board of Governors
of the Federal Reserve System from time to time in effect and shall include any
successor or other regulations or official interpretations of said Board of
Governors relating to the extension of credit by banks for the purpose of
purchasing or carrying margin stocks applicable to member banks of the Federal
Reserve System.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"REQUIRED LENDERS" means Lenders having, in the aggregate, Percentages of
more than fifty-one percent (51%).
"RESERVE REQUIREMENT" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"S&P" means Standard and Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc., or any rating agency which is generally recognized
as a successor thereto.
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"SEC FILINGS" means the Company's annual and quarterly reports on Forms
10-K and 10-Q as filed with the U.S. Securities and Exchange Commission for the
fiscal year ended December 31, 1997 and the fiscal quarter ended September 30,
1998, respectively.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of the
Controlled Group.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary of the Company
or group of Subsidiaries of the Company which, in either case, holds or owns
total assets with a book value in excess of $10,000,000 or has annual revenues
in excess of $10,000,000.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Company.
"SUBSTANTIAL PORTION" means, with respect to the property of the Company
and its Subsidiaries, property which represents more than 20% of the
consolidated assets of the Company and its Subsidiaries as would be shown in the
consolidated financial statements of the Company and its Subsidiaries as at the
beginning of the twelve-month period ending with the month in which such
determination is made.
"SYNTHETIC LEASE LIABILITIES" of a Person means any liability under any
tax retention operating lease or so-called "synthetic" lease transaction, or any
obligations arising with respect to any other similar transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the consolidated balance sheets of such Person and its
Subsidiaries (other than leases which do not have an attributable interest
component that are not Capitalized Leases).
"TAXES" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities
(including but not limited to interest and penalties) with respect to the
foregoing, imposed by any Governmental Authority, but excluding Excluded Taxes.
"TERMINATION DATE" means the earlier of (i) the December 8, 2003 and (ii)
the date the Loans may be accelerated in accordance with this Agreement.
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<PAGE> 18
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Company or any ERISA Affiliate from a
Benefit Plan during a plan year in which the Company or such ERISA Affiliate was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA or the
cessation of operations which results in the termination of employment of 20% of
Benefit Plan participants who are employees of the Company or any ERISA
Affiliate; (iii) the imposition of an obligation on the Company or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties written notice
of intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC or any similar
foreign governmental authority of proceedings to terminate a Benefit Plan or a
Foreign Pension Plan; (v) any event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Benefit Plan; (vi) a foreign governmental authority
shall appoint or institute proceedings to appoint a trustee to administer any
Foreign Pension Plan; or (vii) the partial or complete withdrawal of the Company
or any ERISA Affiliate from a Multiemployer Plan or a Foreign Pension Plan.
"TOTAL CAPITALIZATION" means, at any date, the sum of Consolidated Total
Debt and Consolidated Net Worth as of such date.
"TYPE" means, with respect to any Loan or Advance, its nature as an
Alternate Base Rate Advance or Loan or Eurodollar Advance or Loan.
"UNFUNDED LIABILITIES" means the amount (if any) by which the present
value of all currently accrued vested nonforfeitable benefits under all Single
Employer Plans exceeds the fair market value of all such Plan assets allocable
to such benefits, all determined on an ongoing Plan basis as set forth in the
then most recent actuarial valuation for such Plans.
"UNMATURED DEFAULT" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"U.S. GAAP" means accounting principles generally accepted in the United
States of America as recommended by the Financial Accounting Standards Board as
in effect as of the date hereof applied consistently with the audited financial
statements of the Company and its Consolidated Subsidiaries for the year ended
December 31, 1997.
"WHOLLY-OWNED," when used in connection with any Subsidiary, means (i)
any Subsidiary all of the outstanding voting securities of which (other than
nominal shares consisting of directors' qualifying shares) shall at the time be
owned or controlled, directly or indirectly, by such Person or one or more
Wholly-Owned Subsidiaries of such Person, or by such Person and one or more
Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited
liability company, association, joint venture or similar business organization
100% of the ownership interests having ordinary voting power of which shall at
the time be so owned or controlled.
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"YEAR 2000 ISSUES" means, with respect to any Person, anticipated costs,
problems and uncertainties associated with the inability of certain computer
applications and imbedded systems to effectively handle data, including dates,
on and after January 1, 2000, as it affects the business, operations, and
financial condition of such Person, and such Person's customers, suppliers and
vendors.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
1.2. Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with U.S. GAAP.
ARTICLE II: THE LOAN FACILITY
2.1. Commitment. From and including the date of this Agreement and
prior to the Termination Date, each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to make Loans to the Company from time
to time in amounts not to exceed in the aggregate at any one time outstanding
the amount of its Commitment. Subject to the terms of this Agreement, the
Company may borrow, repay and reborrow at any time prior to the Termination
Date. The Commitments to lend hereunder shall expire on the Termination Date.
2.2. Required Payments. Any outstanding Advances and all other unpaid
Obligations shall be paid in full by the Company on the Termination Date.
2.3. Ratable Loans; Types of Advances. Each Advance hereunder shall
consist of Loans made from the several Lenders ratably in proportion to the
ratio that their respective Commitments bear to the Aggregate Commitment. The
Advances may be Alternate Base Rate Advances or Eurodollar Advances, or a
combination thereof, selected by the Company in accordance with Sections 2.8 and
2.9.
2.4. Fees.
2.4.1. Facility Fee. The Company agrees to pay to the Agent for the
account of each Lender a facility fee at a per annum rate equal to the
Applicable Fee Rate on such Lender's Commitment (without regard to usage) from
the date hereof to and including the Termination Date, payable in arrears on
each Payment Date hereafter and on the Termination Date or earlier termination
of the Commitments. All accrued facility fees shall be payable on the effective
date of any termination of the obligations of the Lenders to make Loans
hereunder.
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2.4.2. Utilization Fee. If, at the end of any fiscal quarter, the
average daily aggregate principal amount of outstanding Loans during such
quarter exceeded thirty-three percent (33%) of the average daily amount of the
Aggregate Commitment during such quarter, the Company hereby agrees to pay to
the Agent, for the ratable account of each Lender in accordance with its
Percentage, a utilization fee at a rate per annum equal to the Applicable Fee
Rate on the average daily Aggregate Commitment (without regard to usage) during
such quarter, payable quarterly in arrears on each Payment Date hereafter and on
the Termination Date or earlier termination of the Commitments.
2.4.3. Agent Fees. The Company agrees to pay certain fees to the
Agent and the Arranger, solely for their account (to be allocated among the
Agent and the Arranger in their discretion), on the dates and in the amounts set
forth in the fee letter among the Company, the Arranger and First Chicago, dated
October 16, 1998 (the "FEE LETTER").
2.5. Reductions in Aggregate Commitment. The Company may permanently
reduce the Aggregate Commitment in whole, or in part ratably among the Lenders
in a minimum amount of $5,000,000 and in integral multiples of $1,000,000, upon
at least three Business Days' written notice to the Agent, which notice shall
specify the amount of any such reduction, provided, however, that the amount of
the Aggregate Commitment may not be reduced below the aggregate principal amount
of the outstanding Advances.
2.6. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in
the minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess
thereof), and each Alternate Base Rate Advance shall be in the minimum amount of
$5,000,000 (and in multiples of $1,000,000 if in excess thereof), provided,
however, that any Alternate Base Rate Advance may be in the amount of the unused
Aggregate Commitment.
2.7. Optional Principal Payments. The Company may from time to time pay,
without penalty or premium, all outstanding Alternate Base Rate Advances, or, in
a minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000
in excess thereof, any portion of the outstanding Alternate Base Rate Advances
upon written notice to the Agent prior to 10:00 a.m. (Chicago time) on the date
of such prepayment. The Company may from time to time pay, subject to the
payment of any funding indemnification amounts required by Section 3.5 but
without penalty or premium, all outstanding Eurodollar Advances, or, in a
minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in
excess thereof, any portion of the outstanding Eurodollar Advances upon three
Business Days' prior written notice to the Agent.
2.8. Method of Selecting Types and Interest Periods for New Advances. The
Company shall select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable thereto from time to time. The Company
shall give the Agent irrevocable notice (a "BORROWING NOTICE") not later than
10:00 a.m. (Chicago time) on the Borrowing Date of each Alternate Base Rate
Advance and three Business Days before the Borrowing Date for each Eurodollar
Advance, specifying:
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(i) the Borrowing Date, which shall be a Business Day, of such Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of each Eurodollar Advance, the Interest Period
applicable thereto.
Not later than noon (Chicago time) on each Borrowing Date, each Lender shall
make available its Loan or Loans in funds immediately available in Chicago to
the Agent at its address specified pursuant to Article XIII. Not later than 1:00
p.m. (Chicago time) on each Borrowing Date, the Agent will make the funds so
received from the Lenders available to the Company at the Agent's aforesaid
address.
2.9. Conversion and Continuation of Outstanding Advances. Alternate Base
Rate Advances shall continue as Alternate Base Rate Advances unless and until
such Alternate Base Rate Advances are converted into Eurodollar Advances
pursuant to this Section 2.9 or are repaid in accordance with Section 2.7. Each
Eurodollar Advance shall continue as a Eurodollar Advance until the end of the
then applicable Interest Period therefor, at which time such Eurodollar Advance
shall be automatically converted into a Alternate Base Rate Advance unless (x)
such Eurodollar Advance is or was repaid in accordance with Section 2.7 or (y)
the Company shall have given the Agent a Conversion/Continuation Notice (as
defined below) requesting that, at the end of such Interest Period, such
Eurodollar Advance continue as a Eurodollar Advance for the same or another
Interest Period. Subject to the terms of Section 2.6, the Company may elect from
time to time to convert all or any part of a Alternate Base Rate Advance into a
Eurodollar Advance. The Company shall give the Agent irrevocable notice (a
"CONVERSION/CONTINUATION NOTICE") of each conversion of a Alternate Base Rate
Advance into a Eurodollar Advance or continuation of a Eurodollar Advance not
later than 10:00 a.m. (Chicago time) at least three Business Days prior to the
date of the requested conversion or continuation, specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Advance which is to be
converted or continued, and
(iii) the amount of such Advance which is to be converted into or
continued as a Eurodollar Advance and the duration of the Interest
Period applicable thereto.
2.10. Changes in Interest Rate, etc. Each Alternate Base Rate Advance
shall bear interest on the outstanding principal amount thereof, for each day
from and including the date such Advance is made or is automatically converted
from a Eurodollar Advance into a Alternate Base Rate Advance pursuant to Section
2.9, to but excluding the date it is paid or is converted into a Eurodollar
Advance pursuant to Section 2.9 hereof, at a rate per annum equal to the
Alternate Base Rate for such day.
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Changes in the rate of interest on that portion of any Advance maintained as a
Alternate Base Rate Advance will take effect simultaneously with each change in
the Alternate Base Rate. Each Eurodollar Advance shall bear interest on the
outstanding principal amount thereof from and including the first day of the
Interest Period applicable thereto to (but not including) the last day of such
Interest Period at the interest rate determined by the Agent as applicable to
such Eurodollar Advance based upon the Company's selections under Sections 2.8
and 2.9 and otherwise in accordance with the terms hereof. No Interest Period
may end after the Termination Date.
2.11. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.8 or 2.9, during the continuance of a Default or
Unmatured Default the Required Lenders may, at their option, by notice to the
Company (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous consent of the
Lenders to changes in interest rates), declare that no Advance may be made as,
converted into or continued as a Eurodollar Advance. During the continuance of a
Default the Required Lenders may, at their option, by notice to the Company
(which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous consent of the
Lenders to changes in interest rates), declare that (i) each Eurodollar Advance
shall bear interest for the remainder of the applicable Interest Period at the
rate otherwise applicable to such Interest Period plus 2% per annum and (ii)
each Alternate Base Rate Advance shall bear interest at a rate per annum equal
to the Alternate Base Rate in effect from time to time plus 2% per annum,
provided that, during the continuance of a Default under Section 7.6 or 7.7, the
interest rates set forth in clauses (i) and (ii) above shall be applicable to
all Advances without any election or action on the part of the Agent or any
Lender.
2.12. Method of Payment. All payments of the Obligations hereunder shall
be made, without setoff, deduction, or counterclaim, in immediately available
funds to the Agent at the Agent's address specified pursuant to Article XIII, or
at any other Lending Installation of the Agent specified in writing by the Agent
to the Company, by noon (local time) on the date when due and shall be applied
ratably by the Agent among the Lenders. Each payment delivered to the Agent for
the account of any Lender shall be delivered promptly by the Agent to such
Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIII or at any Lending Installation specified in a
notice received by the Agent from such Lender. The Agent is hereby authorized to
charge the account of the Company maintained with First Chicago for each payment
of principal, interest and fees as it becomes due hereunder.
2.13. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Company to such Lender resulting from each Loan made by
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder.
(ii) The Agent shall also maintain accounts in which it will record (a)
the amount of each Loan made hereunder, the Type thereof and the Interest Period
with respect thereto, (b) the amount of any principal or interest due and
payable or to become due and payable from the Company to each
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<PAGE> 23
Lender hereunder and (c) the amount of any sum received by the Agent hereunder
from the Company and each Lender's share thereof.
(iii) The entries maintained in the accounts maintained pursuant to
paragraphs (i) and (ii) above shall be prima facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however, that the failure
of the Agent or any Lender to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Company to repay the Obligations
in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by a promissory
note (a "NOTE"). In such event, the Company shall prepare, execute and deliver
to such Lender a Note payable to the order of such Lender in the form of Exhibit
B. Thereafter, the Loans evidenced by such Note and interest thereon shall at
all times (including after any assignment pursuant to Section 12.3) be
represented by one or more Notes payable to the order of the payee named therein
or any assignee pursuant to Section 12.3, except to the extent that any such
Lender or assignee subsequently returns any such Note for cancellation and
requests that such Loans once again be evidenced as described in paragraphs (i)
and (ii) above.
2.14. Telephonic Notices. The Company hereby authorizes the Lenders and
the Agent to extend, convert or continue Advances, effect selections of Types of
Advances and to transfer funds based on telephonic notices made by any person or
persons the Agent or any Lender in good faith believes to be acting on behalf of
the Company, it being understood that the foregoing authorization is
specifically intended to allow Borrowing Notices and Conversion/Continuation
Notices to be given telephonically. The Company agrees to deliver promptly to
the Agent a written confirmation, if such confirmation is requested by the Agent
or any Lender, of each telephonic notice signed by an Authorized Officer. If the
written confirmation differs in any material respect from the action taken by
the Agent and the Lenders, the records of the Agent and the Lenders shall govern
absent manifest error.
2.15. Interest Payment Dates; Interest and Fee Basis. Interest accrued on
each Alternate Base Rate Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof, on any date
on which the Alternate Base Rate Advance is prepaid, whether due to acceleration
or otherwise, and at maturity. Interest accrued on that portion of the
outstanding principal amount of any Alternate Base Rate Advance converted into a
Eurodollar Advance on a day other than a Payment Date shall be payable on the
date of conversion. Interest accrued on each Eurodollar Advance shall be payable
on the last day of its applicable Interest Period, on any date on which the
Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at
maturity. Interest accrued on each Eurodollar Advance having an Interest Period
longer than three months shall also be payable on the last day of each
three-month interval during such Interest Period. Interest on Eurodollar
Advances and commitment fees shall be calculated for actual days elapsed on the
basis of a 360-day year, and interest on Alternate Base Rate Advances shall be
calculated for actual days elapsed on the basis of a 365, or when appropriate
366, day year. Interest shall be payable for the day an Advance is made but not
for the day of any payment on the amount paid if
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payment is received prior to noon (local time) at the place of payment. If any
payment of principal of or interest on an Advance shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.
2.16. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Aggregate Commitment reduction notice,
Borrowing Notice, Conversion/Continuation Notice, and repayment notice received
by it hereunder. The Agent will notify each Lender of the interest rate
applicable to each Eurodollar Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate.
2.17. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Loans and any Notes issued hereunder shall be
deemed held by each Lender for the benefit of any such Lending Installation.
Each Lender may, by written notice to the Agent and the Company in accordance
with Article XIII, designate replacement or additional Lending Installations
through which Loans will be made by it and for whose account Loan payments are
to be made.
2.18. Non-Receipt of Funds by the Agent. Unless the Company or a Lender,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Company, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Company, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (x) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day for the first three days and,
thereafter, the interest rate applicable to the relevant Loan or (y) in the case
of payment by the Company, the interest rate applicable to the relevant Loan.
2.19. Increase of Commitments. (a) Not more than twice during the term of
this Agreement and not earlier than six months after the date hereof, the
Company may, upon at least thirty (30) days' prior written notice to the Agent
and on the terms set forth below, request that the Aggregate Commitment
hereunder be increased to an amount not to exceed $400,000,000; provided,
however, that an increase in the Aggregate Commitment hereunder may only be made
at a time when no Default or Unmatured Default shall have occurred and be
continuing. Each of the Lenders shall be given the opportunity to participate in
the increased Commitments (x) initially ratably in the proportions that their
respective Commitments bear to the Aggregate Commitment and (y) to the
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extent that the requested increase of Commitments is not fulfilled pursuant to
the preceding clause (x), in such additional amounts as a Lender desires, and to
the extent that the Lenders do not elect so to participate in such increased
Commitments after being afforded an opportunity to do so, then the Company shall
consult with the Agent as to the number, identity and requested Commitments of
additional financial institutions which the Company may, upon the written
consent of the Agent (which consent shall not be unreasonably withheld), invite
to participate in the Commitments.
(b) No Lender shall have any obligation to increase its Commitment
pursuant to a request by the Company hereunder. No Lender shall be deemed to
have approved an increase in its Commitment unless such approval is in writing.
Failure on the part of a Lender to respond to a request by the Company hereunder
shall be deemed a rejection of such request. In no event shall any Lender's
Commitment, after giving effect to an increase in its Commitment hereunder,
exceed 33 1/3% of the Aggregate Commitment under this Agreement.
(c) In the event that the Company and one or more of the Lenders (or
other financial institutions) shall agree upon such an increase in the Aggregate
Commitments, the Company, the Agent and each Lender or other financial
institution increasing its Commitment or extending a new Commitment shall enter
into an amendment to this Agreement setting forth the amounts of the
Commitments, as so increased, providing that the financial institutions
extending new Commitments shall be Lenders for all purposes of this Agreement,
and setting forth such additional provisions as the Agent shall consider
reasonably appropriate to implement the foregoing changes. No such amendment
shall require the approval or consent of any Lender whose Commitment is not
being increased. Upon the execution and delivery of such amendment as provided
above, and upon satisfaction of such other conditions as the Agent may
reasonably specify upon the request of the financial institutions that are
increasing or extending new Commitments (including the delivery of certificates,
evidence of corporate authority and legal opinions on behalf of the Company),
this Agreement shall be deemed to be amended accordingly.
2.20. Extension of Termination Date. The Company may request an extension
of the Termination Date by submitting a request for an extension to the Agent
(an "EXTENSION REQUEST") no more than 90 days prior to the Termination Date. The
Extension Request must specify the date (which must be at least 30 days after
the Extension Request is delivered to the Agent) by which the Lenders must
respond to the Extension Request (the "RESPONSE DATE"). The new Termination Date
shall be one year after the Termination Date in effect at the time the Extension
Request is received. Promptly upon receipt of an Extension Request, the Agent
shall notify each Lender of the contents thereof. Each Lender approving the
Extension Request shall deliver its written consent to the Agent no later than
the Response Date, which consent may be given or withheld by each Lender in its
sole and absolute discretion. Any Lender that fails to notify the Agent of its
consent or non-consent by the Response Date shall be deemed to have withheld
consent (each such Lender together with each Lender that has provided notice of
its non-consent is referred to herein as a "NON-CONSENTING LENDER"). If as of
the close of business on the Response Date, any Lender is a Non-Consenting
Lender, the Agent shall immediately so advise the Company. During the period
beginning on the first
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day following the Response Date and ending on the existing Termination Date,
each Non-Consenting Lender shall, at the request of the Company, either (a)
assign without recourse or warranty all of its rights and obligations under this
Agreement (i) first, to the Lenders who have consented to the extension and are
willing to accept such assignment, subject to ratable allocation by the Agent
among such Lenders, and (ii) to the extent such Non-Consenting Lender's rights
and obligations hereunder have not been assigned to an existing Lender as
contemplated in the foregoing clause (i), to another financial institution,
nominated by the Company and acceptable to the Agent, that is willing to become
a Lender hereunder through the Termination Date as extended in accordance with
the relevant Extension Request or (b) terminate its Commitment hereunder;
provided, that upon such Non-Consenting Lender's replacement or cancellation of
such Non-Consenting Lender's Commitment, such Non-Consenting Lender shall cease
to be a party hereto but shall continue to be entitled to the benefits of
Sections 3.1, 3.2, 3.3, 3.5 and 9.6, as well as to any fees accrued for its
account hereunder and not yet paid, and shall continue to be obligated under
Section 10.8 to the extent such obligations relate to the period such
Non-Extending Lender is a Lender hereunder. The obligation of a Non-Consenting
Lender to assign its rights and obligations hereunder or terminate its
Commitment hereunder as contemplated by this Section 2.20 is subject to the
requirements that (x) all amounts owing to that Non-Consenting Lender under the
Loan Documents, including, without limitation, any amounts owing pursuant to
Section 3.5, are paid in full upon the completion of such assignment or prior to
such termination and (y) any assignment is effected in accordance with the terms
of Section 12.3 and on terms otherwise satisfactory to the Non-Consenting Lender
(it being understood that the Company shall pay the processing fee payable to
the Agent pursuant to Section 12.3.2 in connection with any such assignment). A
requested extension of the Termination Date shall become effective only if (1)
it has been approved by the Required Lenders as of the close of business on the
Response Date, and (2) prior to the expiration of the ensuing period described
above, each Non-Consenting Lender has either (A) assigned all of its rights and
obligations hereunder to a successor financial institution or (B) terminated its
Commitment hereunder and the Aggregate Commitment has been reduced accordingly.
In any other event, the requested extension will be deemed to have been denied,
and the Termination Date will remain unchanged without liability to any
Non-Consenting Lender. The Company may request no more than two (2) successive
one-year extensions pursuant to this Section 2.20.
ARTICLE III: CHANGE IN CIRCUMSTANCES
3.1. Taxes. (i) All payments by the Company to or for the account of any
Lender or the Agent hereunder or under any Note shall be made free and clear of
and without deduction for any and all Taxes. If the Company shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder to any
Lender or the Agent, (a) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.1) such Lender or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (b) the Company shall make such deductions, (c) the
Company shall pay the full amount deducted to the relevant authority
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in accordance with applicable law and (d) the Company shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within 30 days after
such payment is made.
(ii) In addition, the Company hereby agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any Note ("OTHER TAXES").
(iii) The Company hereby agrees to indemnify the Agent and each Lender
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed on amounts payable under this Section 3.1) paid by
the Agent or such Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. Payments due under this
indemnification shall be made within 30 days of the date the Agent or such
Lender makes demand therefor pursuant to Section 3.7.
(iv) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof (each a "NON-U.S. LENDER") agrees that it
will, not less than ten (10) Business Days after the date of this Agreement, (i)
deliver to each of the Company and the Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in either case
that such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, and (ii)
deliver to each of the Company and the Agent a United States Internal Revenue
Form W-8 or W-9, as the case may be, and certify that it is entitled to an
exemption from United States backup withholding tax. Each Non-U.S. Lender
further undertakes to deliver to each of the Company and the Agent (x) renewals
or additional copies of such form (or any successor form) on or before the date
that such form expires or becomes obsolete, and (y) after the occurrence of any
event requiring a change in the most recent forms so delivered by it, such
additional forms or amendments thereto as may be reasonably requested by the
Company or the Agent. All forms or amendments described in the preceding
sentence shall certify that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes, unless an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form or amendment with respect to it and such Lender advises the Company and the
Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
(v) For any period during which a Non-U.S. Lender has failed to provide
the Company with an appropriate form pursuant to clause (iv), above (unless such
failure is due to a change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any Governmental Authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 3.1 with respect to U.S. federal income taxes imposed by the United
States; provided that, should a Non-U.S. Lender which is otherwise exempt from
or subject to a reduced rate of withholding tax become subject to
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Taxes because of its failure to deliver a form required under clause (iv),
above, the Company shall take such steps as such Non-U.S. Lender shall
reasonably request to assist such Non-U.S. Lender to recover such Taxes.
(vi) Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Note
pursuant to the law of any relevant jurisdiction or any treaty upon written
request from the Company shall deliver to the Company (with a copy to the
Agent), at the time or times prescribed by applicable law, such properly
completed and executed documentation prescribed by applicable law and specified
in the Company's written request as will permit such payments to be made without
withholding or at a reduced rate.
(vii) If the U.S. Internal Revenue Service or any other governmental
authority of the United States or any other country or any political subdivision
thereof asserts a claim that the Agent did not properly withhold tax from
amounts paid to or for the account of any Lender (because the appropriate form
was not delivered or properly completed, because such Lender failed to notify
the Agent of a change in circumstances which rendered its exemption from
withholding ineffective, or for any other reason), such Lender shall indemnify
the Agent fully for all amounts paid, directly or indirectly, by the Agent as
tax, withholding therefor, or otherwise, including penalties and interest, and
including taxes imposed by any jurisdiction on amounts payable to the Agent
under this subsection, together with all costs and expenses related thereto
(including attorneys fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent). The obligations of the Lenders under
this Section 3.1(vii) shall survive the payment of the Obligations and
termination of this Agreement.
3.2. Yield Protection. If, on or after the date of this Agreement, the
adoption of any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
change in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(i) subjects any Lender or any applicable Lending Installation to any
Taxes, or changes the basis of taxation of payments (other than with
respect to Excluded Taxes) to any Lender in respect of its Loans, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended
by, any Lender or any applicable Lending Installation (other than
reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Advances), or
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(iii) imposes any other condition the result of which is to increase the
cost to any Lender or any applicable Lending Installation of making,
funding or maintaining its Loans or reduces any amount receivable by
any Lender or any applicable Lending Installation in connection
with its Loans, or requires any Lender or any applicable Lending
Installation to make any payment calculated by reference to the
amount of Loans held or interest received by it, by an amount deemed
material by such Lender,
and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation of making or maintaining its Loans or Commitment
or to reduce the return received by such Lender or applicable Lending
Installation in connection with such Loans or Commitment, then, within 15 days
of demand by such Lender, the Company shall pay such Lender such additional
amount or amounts as will compensate such Lender for such increased cost or
reduction in amount received.
3.3. Changes in Capital Adequacy Regulations. If a Lender determines
the amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change, then, within 15 days of demand by such
Lender, the Company shall pay such Lender, as applicable, the amount necessary
to compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender determines is attributable to this
Agreement, its Loans or its Commitment to make Loans hereunder (after taking
into account such Lender's policies as to capital adequacy). "CHANGE" means (i)
any change after the date of this Agreement in the Risk-Based Capital
Guidelines or (ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or any Lending Installation or any corporation
controlling any Lender. "RISK-BASED CAPITAL GUIDELINES" means (i) the
risk-based capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (ii) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.4. Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (i) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to Eurodollar Advances does not
accurately reflect the cost of making or maintaining Eurodollar Advances, then
the Agent shall suspend the availability of Eurodollar Advances and require any
affected Eurodollar Advances to be repaid or converted to Alternate Base Rate
Advances, subject to the payment of any funding indemnification amounts
required by Section 3.5.
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3.5. Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Company for any reason other
than default by the Lenders, the Company will indemnify each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain such Eurodollar Advance, provided that such Lender shall have
delivered to the applicable Company a certificate as to the amount of such loss
or expense, which certificate shall be conclusive in the absence of manifest
error.
3.6. Mitigation of Additional Costs or Adverse Circumstances. If, in
respect of any Lender, circumstances arise which would or would upon the giving
of notice result in:
(a) an increase in the liability of the Company to such Lender
under Section 3.1, 3.2 or 3.3 or
(b) the unavailability of a Type of Loan under Section 3.4;
then, without in any way limiting, reducing or otherwise qualifying the
Company's obligations under any of the clauses referred to above in this
Section 3.6, such Lender shall promptly upon becoming aware of the same notify
the Agent thereof and shall, in consultation with the Agent and the Company and
to the extent that it can do so in a manner that is not, in the judgment of
such Lender, disadvantageous to such Lender, take such reasonable steps as may
be reasonably available to it to mitigate the effects of such circumstances. If
and so long as a Lender has been unable to take, or has not taken, steps
acceptable to the Company to mitigate the effect of the circumstances in
question, such Lender shall be obliged, at the request of the Company, to
assign all its rights and obligations hereunder to a financial institution
nominated by the Company with the approval of the Agent and willing to
participate in the facility in place of such Lender; provided that such
financial institution satisfies all of the requirements of this Agreement,
including, but not limited to, providing the forms required by Sections 3.1(iv)
and 12.3.2. Notwithstanding any such assignment, the obligations of the Company
under Sections 3.1, 3.2, 3.3 and 9.6 shall survive any such assignment and be
enforceable by such Lender.
3.7. Lender Statements; Survival of Indemnity. Each Lender shall
deliver a written statement of such Lender to the Company (with a copy to the
Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.3 or 3.5. Such
written statement shall set forth in reasonable detail the event by reason of
which such Lender is entitled to make a claim for such amount and the
calculations upon which such Lender determined such amount, which shall be
final, conclusive and binding on the Company in the absence of demonstrable
error. Determination of amounts payable under such Sections in connection with
a Eurodollar Loan shall be calculated as though each Lender funded such Loan
through the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the interest rate applicable to such
Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement shall be payable within
three (3) Business Days of demand after receipt by the Company of the written
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statement. The obligations of the Company under Sections 3.1, 3.2, 3.3 and 3.5
shall survive payment of any other of the Company's Obligations and the
termination of this Agreement.
ARTICLE IV: CONDITIONS PRECEDENT
4.1. Initial Advance. No Lender shall be required to make the initial
Loans to the Company unless the Company has furnished or caused to be furnished
to the Agent with sufficient copies for the Lenders:
(i) Copies of the articles or certificate of incorporation (or other
similar constituting documents) of the Company, together with all
amendments, and a certificate of good standing, each certified by
the appropriate governmental officer in its jurisdiction of
incorporation;
(ii) Copies, certified by the Secretary or Assistant Secretary of the
Company, of the Company's by-laws (or other similar governing
documents) and Board of Directors' resolutions and of resolutions
or actions of any other body authorizing the execution of the
Loan Documents;
(iii) An incumbency certificate, executed by the Secretary or Assistant
Secretary of the Company, which shall identify by name and title
and bear the signatures of the officers of the Company authorized
to sign the Loan Documents to which the Company is a party and to
request Advances, upon which certificate the Agent and the
Lenders shall be entitled to rely until informed of any change in
writing by the Company;
(iv) A certificate, signed by a Financial Officer of the Company,
stating that on the date hereof no Default or Unmatured Default
has occurred and is continuing and the representations and
warranties contained in the Loan Documents are true and correct;
(v) A written opinion of counsel to the Company, addressed to the
Lenders in substantially the form of Exhibit C, and a written
opinion of counsel to Lafarge Canada Inc., addressed to the
Lenders in substantially the form of Exhibit D;
(vi) A written opinion of counsel to the Agent, addressed to the
Lenders in substantially the form of Exhibit E;
(vii) The Notes, if any, requested by a Lender pursuant to Section 2.13
payable to the order of each such requesting Lender;
(viii) Written money transfer instructions, in substantially the form of
Exhibit F, addressed to the Agent and signed by a Financial
Officer, together with such other related money transfer
authorizations as the Agent may have reasonably requested;
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(ix) Evidence reasonably satisfactory to the Agent that the bilateral
credit agreements, each dated as of September 1, 1994 and amended
as of June 1, 1996, between the Company and the respective
lenders party thereto have been terminated, and all indebtedness,
liabilities and obligations thereunder have been paid in full;
and
(x) Such other documents as any Lender or its counsel may have
reasonably requested.
4.2. Each Advance. The Lenders shall not be required to make any Advance
(including the initial Advance hereunder) unless on the applicable Borrowing
Date:
(i) Prior to and after giving effect to such Advance, there exists no
Default or Unmatured Default;
(ii) After giving effect to such Advance and to the application of the
proceeds thereof, if such Advance increases the aggregate amount
of outstanding Advances, the representations and warranties
contained in Sections 5.5 and 5.7 are true and correct in all
material respects as of such Borrowing Date;
(iii) The other representations and warranties contained in the Loan
Documents are true and correct in all material respects as of
such Borrowing Date (except such representations and warranties
which expressly relate solely to, and were true and correct in
all material respects as of, an earlier date); and
(iv) All legal and regulatory matters incident to the making of such
Advance shall be satisfactory to the Lenders and their counsel.
Each Borrowing Notice with respect to each such Advance shall constitute a
representation and warranty by the Company that the applicable conditions
contained in Sections 4.1 and 4.2 have been satisfied. Any Lender may require a
duly completed compliance certificate in substantially the form of Exhibit G as
a condition to making an Advance.
ARTICLE V: REPRESENTATIONS AND WARRANTIES
The Company represents and warrants as follows to each Lender and the
Agent as of the date hereof and thereafter on each date as required by Section
4.2:
5.1. Existence and Standing. Each of the Company and its Subsidiaries
is a corporation, partnership (in the case of Subsidiaries only) or limited
liability company duly and properly incorporated or organized, as the case may
be, validly existing and (to the extent such concept applies to such entity) in
good standing under the laws of its jurisdiction of incorporation or
organization and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted
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except to the extent that the failure to have such authority could not
reasonably be expected to result in a Material Adverse Effect.
5.2. Authorization and Validity. The Company has the power and
authority and legal right to execute and deliver the Loan Documents and to
perform its obligations thereunder. The execution and delivery by the Company
of the Loan Documents and the performance of its obligations thereunder have
been duly authorized by proper corporate proceedings, and the Loan Documents
constitute legal, valid and binding obligations of the Company enforceable
against it in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
5.3. No Conflict; Government Consent. Neither the execution and
delivery by the Company of the Loan Documents, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate (i) any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Company or any of its Subsidiaries or (ii) the
Company's articles or certificate of incorporation or organization, by-laws, or
operating or other management agreement, as the case may be, or (iii) the
provisions of any indenture, instrument or agreement to which the Company or
any of its Subsidiaries is a party or is subject, or by which any of them, or
any of their property, is bound, or conflict with or constitute a default
thereunder, or result in or require the creation or imposition of any Lien in,
of or on the property of the Company or any of its Subsidiaries pursuant to the
terms of any such indenture, instrument or agreement, in any such case which
violation, conflict, default, creation or imposition could reasonably be
expected to have a Material Adverse Effect. No order, consent, adjudication,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, which has not been obtained by the
Company or any of its Subsidiaries, is required to authorize, or is required in
connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, any of the Loan Documents.
5.4. Financial Statements. The December 31, 1997 and June 30, 1998
financial statements of the Company and its Consolidated Subsidiaries
heretofore delivered to the Lenders were prepared in accordance with U.S. GAAP
in effect on the date such statements were prepared and fairly present the
financial condition of the Company and its Consolidated Subsidiaries at such
date and the results of their operations for the periods then ended.
5.5. Material Adverse Change. Since June 30, 1998 there has been no
change in the business, property, prospects, condition (financial or otherwise)
or results of operations of the Company and its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect.
5.6. Taxes. The Company and its Subsidiaries have filed all United
States federal tax returns (or extensions therefor) and all other material tax
returns (or extensions therefor) which are required to be filed by any
Governmental Authority and have paid all taxes due pursuant to said
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returns or pursuant to any assessment received by the Company or any of its
Subsidiaries, except such taxes, if any, as are being contested in good faith
and as to which adequate reserves have been provided in accordance with U.S.
GAAP and as to which no Lien exists. The United States income tax returns of
the Company and its Subsidiaries have been audited by the Internal Revenue
Service through the fiscal year ended December 31, 1982. No tax liens have
been filed and no claims are being asserted with respect to any such taxes. The
charges, accruals and reserves on the books of the Company and its Subsidiaries
in respect of any taxes or other governmental charges are adequate.
5.7. Litigation and Contingent Obligations. Except as disclosed in the
SEC Filings, there is no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the knowledge of any of their officers,
threatened against or affecting the Company or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect or which seeks
to prevent, enjoin or delay the making or repayment of any Loans. Other than
any liability incident to any litigation, arbitration or proceeding which could
not reasonably be expected to have a Material Adverse Effect, the Company and
its Subsidiaries have no material contingent obligations not provided for or
disclosed in the financial statements referred to in Section 5.4 or in the SEC
Filings.
5.8. Subsidiaries. Schedule 5.8 contains an accurate list of all
Significant Subsidiaries of the Company as of the date of this Agreement,
setting forth their respective jurisdictions of organization and the percentage
of their respective Capital Stock or other ownership interests owned by the
Company or other Subsidiaries. All of the issued and outstanding shares of
Capital Stock or other ownership interests of such Significant Subsidiaries
have been (to the extent such concepts are relevant with respect to such
ownership interests) duly authorized and issued and are fully paid and
non-assessable.
5.9. ERISA. (a) the Company and each of its ERISA Affiliates has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. Neither the Company nor any
ERISA Affiliate has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA.
(b) Each Foreign Employee Benefit Plan is in compliance in all respects
with all laws, regulations and rules applicable thereto and the respective
requirements of the governing documents for such Plan, except for any
non-compliance the consequences of which, in the aggregate, would not result in
a material obligation to pay money. The aggregate of the accumulated benefit
obligations under all Foreign Pension Plans does not exceed the current fair
market value of the assets held in the trusts or similar funding vehicles for
such Plans or reasonable reserves have been established in
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accordance with prudent business practices or as required by U.S. GAAP with
respect to any shortfall. With respect to any Foreign Employee Benefit Plan
maintained or contributed to by the Company or any Subsidiary or any member of
its Controlled Group (other than a Foreign Pension Plan), reasonable reserves
have been established in accordance with prudent business practice or where
required by ordinary accounting practices in the jurisdiction in which such
Plan is maintained. There are no actions, suits or claims (other than routine
claims for benefits) pending or, to the knowledge of the Company, threatened
against the Company or any Subsidiary or any ERISA Affiliate with respect to
any Foreign Employee Benefit Plan.
5.10. Accuracy of Information. No information, exhibit or report
furnished by the Company or any of its Subsidiaries to the Agent or to any
Lender in connection with the negotiation of, or compliance with, the Loan
Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein
not misleading.
5.11. Margin Stock Regulations. The Company and its Subsidiaries are in
compliance with Regulations T, U and X. Margin stock (as defined in Regulation
U) constitutes less than 25% of the value of those assets of the Company and
its Subsidiaries which are subject to any limitation on sale, pledge, or other
restriction hereunder.
5.12. Material Agreements. Neither the Company nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect.
5.13. Compliance With Laws. The Company and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof having jurisdiction over the conduct of their respective
businesses or the ownership of their respective property, except for any
failure to comply with any of the foregoing which could not reasonably be
expected to have a Material Adverse Effect.
5.14. Ownership of Properties. Except as set forth on Schedule 5.14, on
the date of this Agreement, the Company and its Subsidiaries have good title,
free of all Liens other than those permitted by Section 6.11, to all of the
property and assets reflected in the Company's most recent consolidated
financial statements provided to the Agent as owned by the Company and its
Subsidiaries.
5.15. Intellectual Property. The Company and each of its Subsidiaries
owns or possesses all material patents, trademarks, trade names, service marks,
copyright, licenses and rights with respect to the foregoing necessary for the
future conduct of its business, without any known material conflict with the
rights of others.
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5.16. Plan Assets; Prohibited Transactions. Neither the Company nor any
of its Subsidiaries is an entity deemed to hold "plan assets" within the
meaning of 29 C.F.R. Section 2510.3-101 of an employee benefit plan (as defined
in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan
(within the meaning of Section 4975 of the Code), and neither the execution of
this Agreement nor the making of Loans hereunder gives rise to a prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code.
5.17. Environmental Matters. In the ordinary course of its business,
the officers of the Company consider the effect of Environmental Laws on the
business of the Company and its Subsidiaries, in the course of which they
identify and evaluate potential risks and liabilities accruing to the Company
and its Subsidiaries due to Environmental Laws. On the basis of this
consideration, the Company has concluded that Environmental Laws cannot
reasonably be expected to have a Material Adverse Effect. Except as disclosed
in the SEC Filings, neither the Company nor any Subsidiary has received any
notice to the effect that its operations are not in material compliance with
any of the requirements of applicable Environmental Laws or are the subject of
any foreign or domestic, federal, state or local investigation evaluating
whether any remedial action is needed to respond to a release of any toxic or
hazardous waste or substance into the environment, which non-compliance or
remedial action could reasonably be expected to have a Material Adverse Effect.
5.18. Investment Company Act. Neither the Company nor any Subsidiary is
an "investment company" or a company "controlled" by an "investment company" or
an "affiliated person" thereof or an "affiliated person" of such affiliated
person, in each case within the meaning of the Investment Company Act of 1940,
as amended.
5.19. Public Utility Holding Company Act. Neither the Company nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
5.20. Year 2000 Issues. The Company and its Subsidiaries have made a
full and complete assessment of the Year 2000 Issues and have a realistic and
achievable program for remediating the Year 2000 Issues on a timely basis, as
described in the SEC Filings. Based on this assessment and program, the Company
reasonably believes that Year 2000 Issues cannot be expected to have a Material
Adverse Effect.
ARTICLE VI: COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
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6.1. Financial Reporting. The Company will maintain, for itself and
each Consolidated Subsidiary, a system of accounting established and
administered in accordance with generally accepted accounting principles, and
furnish to the Agent, for distribution to the Lenders:
(i) Within 100 days after the close of each of its fiscal years, an
unqualified audit report (with all amounts stated in Dollars)
certified by Arthur Andersen LLP or any other independent
certified public accountants of recognized international
standing, prepared in accordance with U.S. GAAP on a consolidated
basis for itself and the Consolidated Subsidiaries, including a
consolidated balance sheet and the related consolidated
statements of income, cash flows and statements of changes in
common shareholders' equity, setting forth in each case in
comparative form the figures for such fiscal year and the
previous fiscal year (it being understood that the requirement to
deliver such information may be satisfied by the delivery of the
Company's annual report on Form 10-K for such fiscal year so long
as such annual report continues to include such information).
(ii) Within 50 days after the close of the first three quarterly
periods of each of its fiscal years, for itself and the
Consolidated Subsidiaries, an unaudited consolidated balance
sheet as at the close of each such period and a consolidated
income statement and a statement of cash flows for the period
from the beginning of such fiscal year to the end of such
quarter, setting forth in the case of such statements of income
and cash flows in comparative form the figures for the
corresponding quarter and the corresponding portion of the
Company's previous fiscal year (it being understood that the
requirement to deliver such information may be satisfied by the
delivery of the Company's quarterly report on Form 10-Q for such
fiscal quarter so long as such quarterly report continues to
include such information), all certified (subject to normal
year-end adjustments) as to fairness of presentation, preparation
in accordance with U.S. GAAP and consistency by a Financial
Officer of the Company.
(iii) Together with the financial statements required hereunder, a
compliance certificate in substantially the form of Exhibit G
hereto signed by its Financial Officer showing the calculations
necessary to determine compliance with this Agreement and stating
that no Default or Unmatured Default exists, or if any Default or
Unmatured Default exists, stating the nature and status thereof.
(iv) Promptly upon the furnishing thereof to the shareholders of the
Company, or to the shareholders of any other Person in connection
with an Acquisition, copies of all financial statements, reports
and proxy statements so furnished.
(v) Promptly upon the filing thereof, copies of all registration
statements, tender offer documents and annual, quarterly, monthly
or other regular reports which the Company or any of its
Subsidiaries files with the Securities and Exchange Commission.
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(vi) On or before October 31 of each fiscal year, a statement of the
Unfunded Liabilities of each Single Employer Plan, certified as
correct by an actuary enrolled under ERISA, for the prior fiscal
year.
(vii) As soon as possible and in any event within 30 days after the
Company knows that any Reportable Event has occurred with respect
to any Plan, a statement, signed by a Financial Officer of the
Company, describing said Reportable Event and the action which
the Company proposes to take with respect thereto.
(viii) As soon as possible and in any event within 30 days after receipt
by the Company, a copy of (a) any notice or claim to the effect
that the Company or any of its Subsidiaries is or may be liable
to any Person as a result of the release by the Company, any of
its Subsidiaries, or any other Person of any toxic or hazardous
waste or substance into the environment, and (b) any notice
alleging any violation of any federal, state or local
environmental, health or safety law or regulation by the Company
or any of its Subsidiaries, which, in either case, could
reasonably be expected to have a Material Adverse Effect.
(ix) Such other information (including non-financial information) as
the Agent or any Lender may from time to time reasonably request.
6.2. Use of Proceeds. The Company will, and will cause each Subsidiary
to, use the proceeds of the Advances to provide funds for working capital
purposes (including to repay outstanding Advances) and other general corporate
purposes. None of the proceeds of the Advances shall be used in any manner
which would violate or cause any Lender to be in violation of Regulations T, U
or X of the Board of Governors of the Federal Reserve System. None of the
proceeds of the Advances shall be used in connection with any Acquisition
unless (i) such Acquisition is consummated on a non-hostile basis pursuant to a
negotiated acquisition agreement approved by the board of directors or other
applicable governing body of the applicable seller or entity to be acquired
prior to the commencement thereof, and (ii) such Acquisition is in
substantially the same fields of enterprise as the business of the Company and
its Subsidiaries is presently conducted or reasonably related thereto.
6.3. Notice of Default. The Company will, and will cause each
Subsidiary to, give prompt notice (and in any event within five (5) Business
Days of occurrence) in writing to the Agent of the occurrence of any Default or
Unmatured Default and of any other development, financial or otherwise
(including, without limitation, developments with respect to Year 2000 Issues),
which could reasonably be expected to have a Material Adverse Effect.
6.4. Corporate Existence; Conduct of Business. The Company will, and
will cause each Subsidiary to, do all things reasonably necessary to remain
duly organized, validly existing and in good standing in its jurisdiction of
organization and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted, except as otherwise
permitted by
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Section 6.10(b) and except to the extent that the failure to maintain such
authority could not reasonably be expected to result in a Material Adverse
Effect. The Company will, and will cause each Subsidiary to, carry on and
conduct its business in substantially the same manner and in substantially the
same fields of enterprise as it is presently conducted or lines of business
reasonably related thereto.
6.5. Taxes. The Company will, and will cause each Subsidiary to, timely
file complete and correct United States federal, state and local and applicable
foreign tax returns (or extensions therefor) required by laws and to pay when
due all material taxes, assessments and governmental charges and levies upon it
or its income, profits or property, except those which are being contested in
good faith by appropriate proceedings, with respect to which adequate reserves
have been set aside in accordance with U.S. GAAP and as to which no Lien
exists.
6.6. Insurance. The Company will, and will cause each Subsidiary to,
maintain (either in the name of the Company or in such Subsidiary's own name)
with financially sound and responsible insurance companies or through a program
of self-insurance, insurance on all their respective properties in at least
such amounts and against at least such risks (and with such risk retention) as
are usually insured against in the same general area by companies of
established repute engaged in the same or a similar business; and will furnish
to any Lender, upon request from such Lender, information presented in
reasonable detail as to the insurance so carried.
6.7. Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject,
including, without limitation, laws relating to pension funds and Environmental
Laws, which, if violated, could reasonably be expected to have a Material
Adverse Effect.
6.8. Inspection. The Company will, and will cause each Subsidiary to,
permit the Agent and the Lenders, by their respective representatives and
agents, to inspect any of the properties, corporate books and financial records
of the Company and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Company and each Subsidiary, and to
discuss the affairs, finances and accounts of the Company and each Subsidiary
with, and to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Lenders may designate.
6.9. Maintenance of Properties. The Company will, and will cause each
Subsidiary to, do all things reasonably necessary to maintain, preserve,
protect and keep its property in good repair, working order and condition, and
make all necessary and proper repairs, renewals and replacements so that its
business carried on in connection therewith may be properly conducted at all
times in accordance with past practices.
6.10. Consolidations, Mergers and Sale of Assets. (a) The Company will
not consolidate or merge with or into any other Person or sell, lease or
otherwise transfer all or any Substantial Portion of its assets to any other
Person; provided that the Company may merge with another Person
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if (A) the Company is the corporation surviving such merger and (B) immediately
after giving effect to such merger, no Default shall have occurred and be
continuing.
(b) The Company will not permit any Significant Subsidiary to
consolidate or merge with or into any Person, or to sell, lease or otherwise
transfer all or any Substantial Portion of its assets to any Person unless the
surviving corporation or transferee, as the case may be, is the Company or a
Wholly-Owned Subsidiary.
6.11. Liens. The Company will not, nor will it permit any Subsidiary
to, create, incur, or suffer to exist any Lien in, of or on the property of the
Company or any Subsidiary, except:
(i) Liens for taxes, assessments or governmental charges or levies on
its property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in
good faith and by appropriate proceedings and for which adequate
reserves in accordance with U.S. GAAP shall have been set aside
on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary
course of business which secure payment of obligations not more
than 60 days past due or which are being contested in good faith
by appropriate proceedings and for which adequate reserves in
accordance with U.S. GAAP shall have been set aside on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar
legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar
character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in
the business of the Company or its Subsidiaries.
(v) Liens existing on the date hereof and described in Schedule 5.14
and securing Debt outstanding on the date of this Agreement in an
aggregate principal or face amount not exceeding $6,862,000.
(vi) Liens existing on any asset of any corporation at the time such
corporation becomes a Subsidiary of the Company and not created
in contemplation of such event.
(vii) Liens on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring
such asset, provided that such Lien attaches to such asset
concurrently with or within 90 days after the acquisition
thereof.
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(viii) Liens on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Company or
a Subsidiary of the Company and not created in contemplation of
such event.
(ix) Liens existing on any asset prior to the acquisition thereof by
the Company or a Subsidiary of the Company and not created in
contemplation of such acquisition.
(x) Liens arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that such Debt is not
increased and is not secured by any additional assets.
(xi) Liens on cash and cash equivalents securing Hedging Obligations,
provided that the aggregate amount of cash and cash equivalents
subject to such Liens may at no time exceed $5,000,000.
(xii) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount at
any date not to exceed $25,000,000.
6.12 Subsidiary Debt. Other than pursuant to this Agreement, the
Company will not permit any of its Subsidiaries to incur or at any time be
liable with respect to any Debt, or to issue or have outstanding any preferred
stock, except: (i) Debt or preferred stock outstanding on the date hereof; (ii)
Debt or preferred stock of a Subsidiary issued to and held by the Company or a
Wholly-Owned Subsidiary; (iii) Debt or preferred stock of any corporation
existing at the time such corporation becomes a Subsidiary of the Company and
not created in contemplation of such event; (iv) refinancing, extension,
renewal or refunding of any Debt or preferred stock permitted by the foregoing
clauses (i) through (iii); and (v) Debt or preferred stock in addition to that
set forth in clauses (i) through (iv), if, after giving effect thereto, the
aggregate outstanding principal amount of Debt of all Subsidiaries pursuant to
this clause (v) does not exceed $250,000,000 at any time.
6.13 Hedging Obligations. The Company shall not and shall not permit
any of its Subsidiaries to enter into any interest rate, commodity or foreign
currency exchange, swap, collar, cap, leveraged derivative or similar
agreements other than interest rate, foreign currency or commodity exchange,
swap, collar, cap or similar agreements pursuant to which the Company or any
Subsidiary has hedged its reasonably estimated interest rate, foreign currency
or commodity exposure.
6.14 Leverage Ratio. At any and all times, the Company shall not permit
the ratio of Consolidated Total Debt to Total Capitalization to exceed fifty
percent (50%).
6.15 Interest Coverage Ratio. The Company shall not, as of the last day
of each fiscal quarter, permit the ratio of Consolidated EBITDA for the
12-month period ending on such date to Consolidated Interest Expense for such
period to be less than 3.00 to 1.00.
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6.16. Affiliates. The Company will not, and will not permit any
Subsidiary to, enter into any transaction (including, without limitation, the
purchase or sale of any property or service) with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of the Company's or such Subsidiary's
business and upon fair and reasonable terms not materially less favorable to
the Company or such Subsidiary than the Company or such Subsidiary would obtain
in a comparable arms-length transaction.
6.17 Year 2000 Issues. The Company shall, and shall cause each of its
Subsidiaries to, take all actions reasonably necessary to assure that the Year
2000 Issues will not have a Material Adverse Effect. The Company shall
promptly notify the Agent in writing if any Year 2000 Issues will have or could
reasonably be expected to have a Material Adverse Effect.
ARTICLE VII: DEFAULTS
The occurrence and continuance of any one or more of the following
events shall constitute a Default:
7.1. Any representation or warranty made or deemed made under Article
V by the Company or any Subsidiary to the Lenders or the Agent under or in
connection with this Agreement or any certificate or other document delivered
in connection with this Agreement or any other Loan Document shall be
materially false on the date as of which made or deemed made.
7.2. Nonpayment of principal of any Loans when due, or nonpayment of
interest upon any Loan or of any facility fee, utilization fee or other
obligations under any of the Loan Documents within three (3) Business Days
after the same becomes due.
7.3. The breach by the Company of any of the terms or provisions of
Sections 6.2, 6.10, 6.11, 6.12, 6.14 or 6.15.
7.4. The breach by the Company (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of
this Agreement which is not remedied within thirty (30) days after written
notice from the Agent or any Lender.
7.5. Failure of the Company or any of its Subsidiaries to pay any
Material Debt when due; or the default by the Company or any of its
Subsidiaries in the performance of any term, provision or condition contained
in any agreement under which any Material Debt was created or is governed, or
any other event shall occur or condition exist, the effect of which is to
cause, or to permit the holder or holders of such Material Debt to cause such
Material Debt to become due prior to its stated maturity; or Material Debt of
the Company or any of its Subsidiaries shall be declared to be due and payable
or required to be prepaid (other than by a regularly scheduled payment or as a
result of the sale of an asset securing such Material Debt) prior to the stated
maturity thereof; or there shall occur under any Derivative Contract an Early
Termination Date (as defined in such Derivative Contract
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resulting from (1) any event of default under such Derivative Contract as to
which the Company or any Subsidiary is the Defaulting Party (as defined in such
Derivative Contract) or (2) any Termination Event (as defined in such
Derivative Contract) as to which the Company or any Subsidiary is an Affected
Party (as defined in such Derivative Contract), and, in either event, the
Derivative Termination Value owed by the Company or such Subsidiary as a result
thereof is greater than $10,000,000.
7.6. The Company or any Significant Subsidiary shall (i) commence a
voluntary case under any bankruptcy, insolvency or other similar law as now or
hereafter in effect, (ii) make an assignment for the benefit of creditors,
(iii) fail to pay, or admit in writing its inability to pay, its debts
generally as they become due, (iv) apply for, seek, consent to, or acquiesce
in, the appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any Substantial Portion of its property, (v)
institute any proceeding seeking an order for relief under any bankruptcy,
insolvency or other similar law as now or hereafter in effect or seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or
its debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (vi) take any
corporate action to authorize or effect any of the foregoing actions set forth
in this Section 7.6 or (vii) fail to contest in good faith any appointment or
proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Company or any
Significant Subsidiary, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Company or any Significant Subsidiary or
any Substantial Portion of the property of any such Person, or a proceeding
described in Section 7.6(iv) shall be instituted against the Company or any
Significant Subsidiary and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of 60 consecutive
days.
7.8. Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of (each a
"CONDEMNATION"), all or any portion of the property of the Company or any
Subsidiary which, when taken together with all other property of the Company
and the Subsidiaries so condemned, seized, appropriated, or taken custody or
control of, during the twelve-month period ending with the month in which any
such Condemnation occurs, constitutes a Substantial Portion.
7.9. The Company or any of its Subsidiaries shall fail within 30 days
to pay, bond or otherwise discharge any judgment or order for the payment of
money in excess of $10,000,000, which is not stayed on appeal or otherwise
being appropriately contested in good faith.
7.10. The Plan Asset Ratio shall be less than 91.0% for a period of 60
consecutive days, or any Reportable Event shall occur in connection with any
Plan which could reasonably be expected to have a Material Adverse Effect.
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7.11. The Company or any of its Subsidiaries shall be the subject of
any proceeding or proceedings pertaining to the spill, release or disposal by
the Company or any of its Subsidiaries, or any other Person of any toxic,
dangerous or hazardous waste or substance into the environment, or to any
violation of any federal, state, regional, departmental or local environmental,
health or safety law or regulation, which could reasonably be expected to
result in total liability to the Company or any of its Subsidiaries, in the
aggregate, in excess of an amount equal to the value of a Substantial Portion
of the property of the Company and its Subsidiaries.
7.12. Any Change in Control shall occur.
7.13. Any Termination Event occurs which could reasonably be expected
to subject either the Company or any ERISA Affiliate to liability individually
or in the aggregate in excess of $10,000,000 and, in the case of a Termination
Event described in clause (i) or (ii) of the definition of "Termination Event"
only, such event shall not have been cured within 60 days after such
occurrence.
7.14. The plan administrator of any Plan applies under Section 412(d)
of the Code for a waiver of the minimum funding standards of Section 412(a) of
the Code.
ARTICLE VIII: ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or 7.7
occurs with respect to the Company or any of its Subsidiaries, the obligations
of the Lenders to make Loans hereunder shall automatically terminate and the
Obligations shall immediately become due and payable without presentment,
demand, protest or notice of any kind (all of which the Company hereby
expressly waives) or any other election or action on the part of the Agent or
any Lender. If any other Default occurs and is continuing, the Required
Lenders may terminate or suspend the obligations of the Lenders to make Loans
hereunder, or declare the Obligations to be due and payable, or both, in either
case upon written notice to the Company, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or further
notice of any kind, all of which the Company hereby expressly waives.
8.2. Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders, or the Agent and each Lender or other financial institution increasing
its Commitment or extending a new Commitment in accordance with Section
2.19(c)) and the Company may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Company hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement
shall, without the consent of each Lender affected thereby:
(i) Postpone or extend the Termination Date (except with respect
to any modifications of the provisions relating to prepayments of Loans
and other Obligations).
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(ii) Reduce the principal amount of any Loans, or reduce the rate
or extend the time of payment of interest or fees thereon.
(iii) Reduce the percentage specified in the definition of
Required Lenders or any other percentage of Lenders specified to be the
applicable percentage in this Agreement to act on specified matters or
amend the definitions of "Required Lenders" or "Percentage".
(iv) Increase the amount of the Commitment of any Lender hereunder
or increase any Lender's Percentage.
(v) Permit the Company to assign its rights under this Agreement.
(vi) Amend or modify Section 8.1 or this Section 8.2.
No amendment of any provision of this Agreement relating in any way to the
Agent shall be effective without the written consent of the Agent. The Agent
may waive payment of the fees required under Section 2.4.3 or Section 12.3.2
without obtaining the consent of any of the Lenders.
8.3. Preservation of Rights. No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Company to satisfy the conditions precedent to such Loan or such issuance
shall not constitute any waiver or acquiescence. Any single or partial exercise
of any such right shall not preclude other or further exercise thereof or the
exercise of any other right, and no waiver, amendment or other variation of the
terms, conditions or provisions of the Loan Documents whatsoever shall be valid
unless in writing signed by the Lenders required pursuant to Section 8.2, and
then only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to the Agent and the Lenders until the Obligations have been
paid in full.
ARTICLE IX: GENERAL PROVISIONS
9.1. Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to
the Company in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.2. Taxes. Any recording or documentary taxes or other similar
assessments or charges payable or ruled payable by any governmental authority
in respect of the Loan Documents shall be paid by the Company.
9.3. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any
of the provisions of the Loan Documents.
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9.4. Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Company, the Agent and the Lenders and supersede
all prior agreements and understandings among the Company, the Agent and the
Lenders relating to the subject matter thereof except as contemplated in
Section 2.4.3.
9.5. Several Obligations. The respective obligations of the Lenders
hereunder are several and not joint and no Lender shall be the partner or agent
of any other (except to the extent to which the Agent is authorized to act as
Agent hereunder). The failure of any Lender to perform any of its obligations
hereunder shall not relieve any other Lender from any of its obligations
hereunder. No Lender shall have any liability for the failure of any other
Lender to perform its obligations hereunder. This Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the
parties to this Agreement and their respective successors and assigns,
provided, however, that the parties hereto expressly agree that the Arranger
shall enjoy the benefits of the provisions of Sections 9.6, 9.9 and 10.11 to
the extent specifically set forth therein and shall have the right to enforce
such provisions on its own behalf and in its own name to the same extent as if
it were a party to this Agreement.
9.6. Expenses; Indemnification. The Company shall reimburse (i) the
Agent and the Arranger for any reasonable costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and, in connection
with the preparation, execution and delivery of the Loan Documents, time
charges of attorneys for the Agent and/or the Arranger, which attorneys may be
employees of the Agent and/or the Arranger) including title insurance premiums,
lien search charges, recording taxes, filing charges and other similar expenses
paid or incurred by the Agent or the Arranger in connection with the
preparation, review, execution, delivery, amendment, modification and
administration of the Loan Documents, and (ii) the Agent, the Arranger and the
Lenders for any costs, internal charges and out-of-pocket expenses (including
attorneys' fees and time charges of attorneys for the Agent, the Arranger or
the Lenders) paid or incurred by the Agent, the Arranger or any Lender in
connection with the collection and enforcement of the Loan Documents (except to
the extent that a court of competent jurisdiction rules against the Agent, the
Arranger or the Lenders in a final non-appealable judgment in any such
collection or enforcement action), any refinancing or restructuring of the
credit arrangements provided under this Agreement in the nature of a "work-out"
or any insolvency or bankruptcy proceedings in respect of the Company or any
Subsidiary. The Company further agrees to indemnify the Agent, the Arranger,
each Lender and their respective directors, officers and employees (the
"INDEMNITEES") against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all reasonable
expenses of litigation or preparation therefor whether or not the Agent, the
Arranger or any Lender is a party thereto) (collectively, the "INDEMNIFIED
AMOUNTS") which any of them may pay or incur arising out of or relating to this
Agreement, the Notes or any transaction contemplated herein; provided, however,
that the Company shall not be liable to any Indemnitee for any Indemnified
Amounts to the extent that a court of competent jurisdiction has determined in
a final non-appealable judgment that the foregoing resulted from such
Indemnitee's Gross Negligence or willful misconduct. The Company further
agrees (a) to assert no claims for special, indirect, consequential or punitive
damages on any theory of liability in connection in any way with the Loan
Documents or the transactions evidenced thereby
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and (b) not to settle any claim, litigation or proceeding relating to the Loan
Documents or the transactions evidenced thereby unless such settlement releases
all Indemnitees from any and all liability in respect of such transaction or
unless each Indemnitee approves such settlement. The obligations of the
Company under this Section 9.6 shall survive the termination of this Agreement.
9.7. Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
9.8. Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.9. Nonliability of Lenders. The relationship between the Company and
the Lenders and the Agent shall be solely that of borrower and lender. Neither
the Agent, the Arranger nor any Lender shall have any fiduciary
responsibilities to the Company. Neither the Agent, the Arranger nor any Lender
undertakes any responsibility to the Company to review or inform the Company of
any matter in connection with any phase of the Company's business or
operations.
9.10. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Company or any Subsidiary pursuant to
this Agreement in confidence, except for disclosure (i) to other Lenders and
their respective affiliates, (ii) to legal counsel, accountants, and other
professional advisors to that Lender who agree to hold such information
confidential in accordance with the terms hereof, (iii) to regulatory
officials, (iv) as requested pursuant to or as required by law, regulation, or
legal process, (v) in connection with any legal proceeding to which that Lender
is a party, and (vi) permitted by Section 12.4. The restrictions in this
Section 9.10 shall not apply to any information which is or becomes generally
available to the public other than as a result of disclosure by a Lender or a
Lender's representatives.
9.11. Nonreliance. Each of the Lenders represents to the Agent and each
of the other Banks that it in good faith is not relying upon any "margin stock"
(as defined in Regulation U) as collateral in the extension or maintenance of
the credit provided for in this Agreement.
ARTICLE X: THE AGENT
10.1. Appointment. First National Bank of Chicago is hereby appointed
Agent hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Agent to act as the contractual representative of
such Lender. The Agent agrees to act as such upon the express conditions
contained in this Article X. The Agent shall not have a fiduciary relationship
in respect of the Company or any Lender by reason of this Agreement or the Loan
Documents. Notwithstanding the use of the defined term "Agent," it is
expressly understood and agreed that the
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Agent shall not have any fiduciary responsibilities to any Lender by reason of
this Agreement and that the Agent is merely acting as the representative of the
Lenders with only those duties as are expressly set forth in this Agreement
and the other Loan Documents. In its capacity as the Lenders' contractual
representative, the Agent (i) does not assume any fiduciary duties to any of
the Lenders, (ii) is a "representative" of the Lenders within the meaning of
Section 9-105 of the Uniform Commercial Code and (iii) is acting as an
independent contractor, the rights and duties of which are limited to those
expressly set forth in this Agreement and the other Loan Documents. Each of
the Lenders agrees to assert no claim against the Agent on any agency theory or
any other theory of liability for breach of fiduciary duty, all of which claims
each Lender waives.
10.2. Powers. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders or any obligation to the
Lenders to take any action thereunder except any action specifically provided
by the Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Company or any Lender for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement or any other Loan Document except to the extent such action
or inaction is found in a final non-appealable judgment by a court of competent
jurisdiction to have arisen from the Gross Negligence or willful misconduct of
such Person or an Affiliate thereof.
10.4. No Responsibility for Loans, Collateral, Recitals, etc. Neither
the Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder, including statements made in any offering
memorandum or "Bank Book"; (ii) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document, including,
without limitation, any agreement by an obligor to furnish information directly
to each Lender; (iii) the satisfaction of any condition specified in Article
IV, except receipt of items required to be delivered solely to the Agent; (iv)
the existence or possible existence of any Default or Unmatured Default; or (v)
the validity, effectiveness or genuineness of any Loan Document or any other
instrument or writing furnished in connection therewith, except for the
authority of the Agent's signatory to this Agreement. The Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or in any of the other Loan Documents, for the perfection or
priority of any of the Liens on any collateral, if any, or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any of the other Loan Documents or the
transactions contemplated thereby, or for the financial condition of any
guarantor of any or all of the Obligations, the Company or any of its
Subsidiaries.
10.5. Action on Instructions of Lenders. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance
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with written instructions signed by the Required Lenders or all the Lenders, as
applicable, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and on all holders of
Notes. The Lenders hereby acknowledge that the Agent shall be under no duty to
take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement or any other Loan Document unless it shall be
requested in writing to do so by the Required Lenders. The Agent shall be
fully justified in failing or refusing to take any action hereunder and under
any other Loan Document unless it shall first be indemnified to its
satisfaction by the Lenders pro rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to take any such
action, provided that, such indemnity need not include liability, costs and
expenses which a court of competent jurisdiction has determined in a final
non-appealable judgment arose from the Gross Negligence or willful misconduct
of the Agent.
10.6. Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Percentages (i) for any amounts not reimbursed by the Company for which the
Agent is entitled to reimbursement by the Company under the Loan Documents,
(ii) for any other expenses not reimbursed by the Company incurred by the Agent
on behalf of the Lenders in connection with the preparation, execution,
delivery, administration and enforcement of the Loan Documents (including ,
without limitation, for any expenses incurred by the Agent in connection with
any dispute between the Agent and any Lender or between two or more of the
Lenders) and (iii) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever and not reimbursed by the Company which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any
of the terms thereof or of any such other documents, provided that (i) no
Lender shall be liable for any of the foregoing to the extent any of the
foregoing is found in a final non-appealable judgment by a court of competent
jurisdiction to have arisen from the Gross Negligence or willful misconduct of
the Agent and (ii) any indemnification required pursuant to Section 3.1(vii)
shall, notwithstanding the provisions of this Section 10.8, be paid by the
relevant Lender in accordance with the provisions thereof. The
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obligations of the Lenders under this Section 10.8 shall survive payment of the
Obligations and termination of this Agreement.
10.9. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder unless the Agent has received written notice from a Lender or the
Company referring to this Agreement describing such Default or Unmatured
Default and stating that such notice is a "notice of default." In the event
that the Agent receives such a notice, the Agent shall give prompt notice
thereof to the Lenders.
10.10. Rights as a Lender. With respect to its Commitment, Loans made
by it and the Notes issued hereunder issued to it held by it, the Agent shall
have the same rights and powers hereunder and under any other Loan Document as
any Lender and may exercise the same as though it were not the Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. The Agent may accept deposits
from, lend money to, and generally engage in any kind of trust, debt, equity or
other transaction, in addition to those contemplated by this Agreement or any
other Loan Document, with the Company or any of its Subsidiaries.
10.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Company and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent, the Arranger or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
10.12. Successor Agent. The Agent may resign at any time by giving at
least 30 days' prior written notice thereof to the Lenders and the Company and
such resignation shall be effective at the end of such 30-day period or upon
the earlier appointment of a successor agent, and the Agent may be removed at
any time with or without cause by written notice received by the Agent from the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint, on behalf of the Lenders, a successor Agent.
If no successor Agent shall have been so appointed by the Required Lenders and
shall have accepted such appointment within thirty days after the retiring
Agent's removal or giving notice of resignation, then the retiring Agent may
appoint, on behalf of the Lenders, a successor Agent. Such successor Agent
shall be a commercial bank having capital and retained earnings of at least
$500,000,000. The retiring Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents upon the effectiveness
of its removal or resignation hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Article X
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent hereunder and under
the other Loan Documents. In the event that there is a successor to the Agent
by merger, then the term
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"Corporate Base Rate" as used in this Agreement shall mean the prime rate, base
rate or other analogous rate of the new Agent.
10.13. Delegation to Affiliates. The Company and the Lenders agree that
the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate's directors, officers,
agents and employees) which performs duties in connection with this Agreement
shall be entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles IX and X.
10.14. Co-Agents, Documentation Agent, Syndication Agent, etc. Neither
any of the Lenders identified in this Agreement as a "co-agent" nor the
Documentation Agent or the Syndication Agent shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Lenders as such. Without limiting the foregoing, none
of such Lenders shall have or be deemed to have a fiduciary relationship with
any Lender. Each Lender hereby makes the same acknowledgments with respect to
such Lenders as it makes with respect to the Agent in Section 10.11.
ARTICLE XI: SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights of
the Lenders under applicable law, if the Company becomes insolvent, however
evidenced, or any Default occurs, any Debt from any Lender to the Company
(including all account balances, whether provisional or final and whether or
not collected or available) may be offset and applied toward the payment of the
Obligations owing to such Lender whether or not the Obligations, or any part
thereof, shall then be due.
11.2. Ratable Payments. If, after the occurrence of a Default, any
Lender, whether by setoff or otherwise, has payment made to it upon its share
of any Advance (other than payments received which are for the account of the
Agent or pursuant to Article III) in a greater proportion than that received by
any other Lender, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans comprising that Advance held by the other Lenders so that
after such purchase each Lender will hold its ratable proportion of Loans
comprising that Advance. If any Lender, whether in connection with setoff or
amounts which might be subject to setoff or otherwise, receives collateral or
other protection for its Obligations or such amounts which may be subject to
setoff, such Lender agrees, promptly upon demand, to take such action necessary
such that all Lenders share in the benefits of such collateral ratably in
proportion to their Loans. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.
11.3 Application of Payments. The Agent shall, unless otherwise
specified at the direction of the Required Lenders which direction shall be
consistent with the last sentence of this Section 11.3, apply all payments and
prepayments in respect of any Obligations in the following order:
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(A) first, to pay interest on and then principal of any portion of
the Loans which the Agent may have advanced on behalf of any Lender for
which the Agent has not then been reimbursed by such Lender or the
Company;
(B) second, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Agent;
(C) third, to pay Obligations in respect of any fees, expenses,
reimbursements or indemnities then due to the Lenders;
(D) fourth, to pay interest due in respect of Loans; and
(E) fifth, to the ratable payment of all other Obligations.
Unless otherwise designated (which designation shall only be applicable prior
to the occurrence of a Default) by the Company, all principal payments in
respect of Loans shall be applied first, to repay outstanding Alternate Base
Rate Loans, and then to repay outstanding Eurodollar Loans with those Loans
which have earlier expiring Interest Periods being repaid prior to those which
have later expiring Interest Periods. The order of priority set forth in this
Section 11.3 and the related provisions of this Agreement are set forth solely
to determine the rights and priorities of the Agent and the Lenders as among
themselves. The order of priority set forth in clauses (D) and (E) of this
Section 11.3 may at any time and from time to time be changed by the Required
Lenders without necessity of notice to or consent of or approval by the Company
or any other Person. The order of priority set forth in clauses (A) through (C)
of this Section 11.3 may be changed only with the prior written consent of the
Agent.
ARTICLE XII: BENEFIT OF AGREEMENT; PARTICIPATIONS; ASSIGNMENTS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Company, the
Lenders and their respective successors and assigns, except that (i) the
Company shall have no right to assign its rights or obligations under the Loan
Documents and (ii) any assignment by any Lender must be made in compliance with
Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may at
any time, without the consent of the Company or the Agent, assign all or any
portion of its rights under this Agreement and its Notes to a Federal Reserve
Bank; provided, however, that no such assignment shall release the transferor
Lender from its obligations hereunder. The Agent may treat the payee of any
Note as the owner thereof for all purposes hereof unless and until such payee
complies with Section 12.3 in the case of an assignment thereof or, in the case
of any other transfer, a written notice of the transfer is filed with the
Agent. Any assignee or transferee of a Note or any other interest in the
Obligations agrees by acceptance thereof to be bound by all the terms and
provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving
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such authority or consent is the holder of any Note, shall be conclusive and
binding on any subsequent holder, transferee or assignee of such Note or of any
Note or Notes issued in exchange therefor.
12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time sell to one or more financial institutions ("PARTICIPANTS") participating
interests in any Loan owing to such Lender, any Note held by such Lender, the
Commitment of such Lender, or any other interest of such Lender under the Loan
Documents. In the event of any such sale by a Lender of participating interests
to a Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Lender shall
remain the holder of any such Note for all purposes under the Loan Documents,
all amounts payable by the Company under this Agreement shall be determined as
if such Lender had not sold such participating interests, and the Company and
the Agent and the Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under the Loan
Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment, modification
or waiver of any provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan or Commitment in which such
Participant has an interest which forgives principal, interest or fees or
reduces the interest rate or fees payable with respect to any such Loan or
Commitment, postpones any date fixed for any regularly-scheduled payment (but
not prepayments) of principal of, or interest or fees on, any such Loan or
Commitment, releases any guarantor of any such Loan (other than as contemplated
hereunder or under any other Loan Document), if any, or releases all or
substantially all of the collateral, if any, securing any such Loan.
12.2.3. Benefit of Setoff. The Company agrees that each
Participant shall be deemed to have the right of setoff provided in Section
11.1 in respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under the Loan Documents, provided that
each Lender shall retain the right of setoff provided in Section 11.1 with
respect to the amount of participating interests sold to each Participant. The
Lenders agree to share with each Participant, and each Participant, by
exercising the right of setoff provided in Section 11.1, agrees to share with
each Lender, any amount received pursuant to the exercise of its right of
setoff, such amounts to be shared in accordance with Section 12.2 as if each
Participant were a Lender.
12.3. Assignments.
12.3.1. Any Lender may, in the ordinary course of its business
and in accordance with applicable law, at any time assign to one or more
financial institutions ("PURCHASERS") all or a portion of its rights and
obligations under the Loan Documents,
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which assignment shall (unless (i) such assignment is to another Lender or an
Affiliate thereof or (ii) each of the Agent and, if no Default has occurred and
is continuing, the Company otherwise consents) be in amounts equal to or
greater than $5,000,000 or, if less, all of such assigning Lender's remaining
Loans and Commitments hereunder. Such assignment shall be substantially in the
form of Exhibit A hereto. The consent of the Agent and, if no Default has
occurred and is continuing, the Company (which consent shall not be
unreasonably withheld or delayed) shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not a Lender or an
Affiliate thereof. It shall not be considered to be unreasonable if such
consent is withheld because the rating issued by Moody's and then in effect
with respect to the prospective Purchaser's senior unsecured long-term debt
securities without third party credit enhancement is below Aa3 or the rating
issued by S&P and then in effect with respect to the prospective Purchaser's
senior unsecured long-term debt securities without third party credit
enhancement is below AA-.
12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent
of a notice of assignment, substantially in the form attached as Exhibit I to
Exhibit A hereto (a "NOTICE OF ASSIGNMENT"), together with any consent required
by Section 12.3.1 (provided however, that no consent shall be required for an
assignment from a Lender to an Affiliate of the Lender), and (ii) payment of a
$3,500 fee to the Agent by the assigning Lender for processing such assignment,
such assignment shall become effective on the effective date specified in such
Notice of Assignment. On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Lender party to this Agreement and any
other Loan Document executed by the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent as if it
were an original party hereto, and no further consent or action by the Company,
the Lenders or the Agent shall be required to release the transferor Lender
with respect to the percentage of the Aggregate Commitment and Loans assigned
to such Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this Section 12.3.2, the transferor Lender, the Agent and the
Company shall, if the transferor Lender or the Purchaser desires that its Loans
be evidenced by Notes, make appropriate arrangements so that new Notes or, as
appropriate, replacement Notes are issued to such transferor Lender and new
Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in
each case in principal amounts reflecting their respective Commitments, as
adjusted pursuant to such assignment.
12.4. Dissemination of Information. The Company authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "TRANSFEREE") and
any prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Company and its Subsidiaries; provided
that each Transferee and prospective Transferee agrees to be bound by Section
9.10 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Purchaser which is organized under the laws of any
jurisdiction other than the United States of America or any State thereof, the
transferor Lender shall cause such Purchaser, concurrently with the
effectiveness of such transfer, to comply with the provisions of Section
3.1(iv).
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ARTICLE XIII: NOTICES
13.1. Giving Notice. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as
may be designated by such party in a notice to the other parties. Any notice,
if mailed and properly addressed with postage prepaid, shall be deemed given
when received; any notice, if transmitted by telex or facsimile, shall be
deemed given when transmitted (answerback confirmed in the case of telexes).
13.2. Change of Address. The Company, the Agent and each Lender may
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XIV: COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Company, the
Agent and the Lenders and each party has notified the Agent by telex or
telephone, that it has taken such action.
ARTICLE XV: CHOICE OF LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL
15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (INCLUDING 735 ILCS 105/5-1 ET SEQ. BUT OTHERWISE
WITHOUT REGARD TO THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING
EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
15.2. CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS
STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE COMPANY HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
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ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
LENDER TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE COMPANY AGAINST THE AGENT OR ANY
LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
15.3. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH,
RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
50
<PAGE> 57
IN WITNESS WHEREOF, the Company, the Lenders and the Agent have executed
this Agreement as of the date first above written.
LAFARGE CORPORATION
By: /s/ KEVIN GRANT
-------------------------
Kevin Grant
Vice President and
Treasurer
11130 Sunrise Valley Drive, Suite 300
Reston, VA 20191
Attention: Kevin Grant, Treasurer
Telephone: 703-264-3673
Facsimile: 703-264-0634
Signature Page to Lafarge Corporation
Credit Agreement dated as of December 8, 1998
51
<PAGE> 58
THE FIRST NATIONAL BANK OF
CHICAGO, as Administrative Agent
and as a Lender
By: /s/ MARGUERITE BURTZLAFF
---------------------------------
Title: AS AGENT
------------------------------
153 West 51st Street, Suite 400
New York, NY 10019
Attention: Marguerite Burtzlaff
Telephone: 212-373-1057
Facsimile: 212-373-1639
Signature Page to Lafarge Corporation
Credit Agreement dated as of December 8, 1998
52
<PAGE> 59
FIRST UNION NATIONAL BANK, as
Documentation Agent and as a Lender
By: /s/ FRANK S. KAULBACK III
--------------------------------
Title: VICE PRESIDENT
----------------------------
1970 Chain Bridge Road
3rd Floor (VA-1937)
McLean, VA 22102
Attention: Frank S. Kaulback III
Telephone: 703-760-6259
Facsimile: 703-760-5457
Signature Page to Lafarge Corporation
Credit Agreement dated as of December 8, 1998
53
<PAGE> 60
WACHOVIA BANK, N.A., as
Syndication Agent and as a Lender
By: /s/ ROBERTS A. BASS
------------------------------
Title: VICE PRESIDENT
---------------------------
100 North Main Street
(P.O. Box 3099)
Winston Salem, NC 27150
Attention: Roberts A. Bass
Telephone: 336-732-7235
Facsimile: 336-732-6935
Signature Page to Lafarge Corporation
Credit Agreement dated as of December 8, 1998
54
<PAGE> 61
SUNTRUST BANK, CENTRAL FLORIDA, N.A.,
as Co-Agent and as a Lender
By: /s/ Ronald K. Rueve
------------------------------
Title: VP
---------------------------
200 South Orange Avenue
Orlando, FL 32801
Attention: Andrew J. Hines
Telephone: 407-237-4839
Facsimile: 407-237-6894
STATE OF GEORGIA
COUNTY OF FULTON
AFFIDAVIT OF OUT-OF-STATE EXECUTION
On the 4 day of December, 1998 personally appeared Ronald K. Rueve, as
the Vice President of SunTrust Banks, Inc. and before me executed the
attached Credit Agreement, dated as of December 8, 1998, among Lafarge
Corporation, a Maryland corporation the Lenders and The First National Bank of
Chicago, as Administrative Agent
IN WITNESS WHEREOF,
/s/ CHERI JACOBS
----------------------------
Signature
Affiant sayeth naught Cheri Jacobs
Typed or Printed Name
Title: Corporate Officer
Subscribed to and sworn to before me this 4 day of December 1998 by Cheri
Jacobs, who is personally known to me or produced _______________ as
identification.
/s/ TONYA ADAMS
----------------------------------
Signature of Notary Public,
State of Georgia
TONYA ADAMS
----------------------------------
Typed or Printed Name of Notary Public
My Commission No:
My Commission Expires:
[stamp]
55
Signature Page to Lafarge Corporation
Credit Agreement dated as of December 8, 1998
<PAGE> 62
BANK OF MONTREAL, CHICAGO BRANCH,
as a Lender
By: [sig] Bruce A. Pietka
------------------------------
Title: Director
---------------------------
115 South LaSalle Street
Chicago, IL 60603
Attention: Craig Reynolds, Team Leader
Telephone: 312-750-6047
Facsimile: 312-750-6061
with a copy to:
Bank of Montreal
430 Park Avenue, 14th Floor
New York, NY 10022
Attention: Glen Pole
Telephone: 212-605-1462
Facsimile: 212-605-1454
56
Signature Page to Lafarge Corporation
Credit Agreement dated as of December 8, 1998
<PAGE> 63
BANQUE NATIONALE DE PARIS, as a
Lender
By: /s/ RICHARD PACE
--------------------------------
Title: Vice President,
Corporate Banking Division
-----------------------------
By: /s/ BONNIE G. EISENSTAT
--------------------------------
Title: Vice President
-----------------------------
499 Park Avenue, 9th Floor
New York, NY 10022
Attention: Bonnie Eisenstat
Telephone: 212-415-9708
Facsimile: 212-415-9606
57
Signature Page to Lafarge Corporation
Credit Agreement dated as of December 8, 1998
<PAGE> 64
BAYERISCHE LANDESBANK
GIROZENTRALE, Cayman Islands Branch,
as a Lender
By: /s/ PETER OBERMANN
------------------------------
Title: Senior Vice President
---------------------------
By: /s/ OLIVER HILDENBRAND
------------------------------
Title: Second Vice President
---------------------------
560 Lexington Avenue, 17th Floor
New York, NY 10022
Attention: Oliver Hildenbrand
Telephone: 212-310-9835
Facsimile: 212-310-9868
Signature Page to Lafarge Corporation
Credit Agreement dated as of December 8, 1998
58
<PAGE> 65
CITIBANK, N.A., as a Lender
By: /s/ STUART G. MILLER
----------------------------
Title: Attorney-in-Fact
-------------------------
399 Park Avenue
8th Floor, Zone 11A
New York, NY 10043
Attention: Anne Serewicz
Telephone: 212-559-0802
Facsimile: 212-793-3053
Signature Page to Lafarge Corporation
Credit Agreement dated as of December 8, 1998
59
<PAGE> 66
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, as a Lender
By: /s/ RICHARD J. PEARSE
--------------------------------
Title: Managing Director
-----------------------------
By: /s/ ELISABETH R. WILDS
--------------------------------
Title: Associate
-----------------------------
1211 Avenue of the Americas
New York, NY 10036
Attention: Andreas Schroeter
Telephone: 212-852-5949
Facsimile: 212-852-6307
Signature Page to Lafarge Corporation
Credit Agreement dated as of December 8, 1998
60
<PAGE> 67
SCHEDULE I
COMMITMENTS
<TABLE>
<CAPTION>
Lender Commitment
------ ----------
<S> <C>
The First National Bank of Chicago $48,000,000
First Union National Bank 46,000,000
Wachovia Bank, N.A. 46,000,000
SunTrust Bank, Central Florida, N.A. 35,000,000
Bank of Montreal, Chicago Branch 25,000,000
Banque Nationale de Paris 25,000,000
Bayerische Landesbank Girozentrale, 25,000,000
Cayman Islands Branch
Citibank, N.A. 25,000,000
Westdeutsche Landesbank Girozentrale 25,000,000
------------
Total $300,000,000
</TABLE>
61
<PAGE> 68
SCHEDULE II
PRICING SCHEDULE
<TABLE>
<CAPTION>
APPLICABLE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI
MARGIN STATUS STATUS STATUS STATUS STATUS STATUS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Eurodollar 0.145% 0.16% 0.175% 0.20% 0.275% 0.50%
Rate
- -------------------------------------------------------------------------------------------
Alternate 0% 0% 0% 0% 0% 0%
Base
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPLICABLE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI
MARGIN STATUS STATUS STATUS STATUS STATUS STATUS
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Facility 0.09% 0.10% 0.11% 0.125% 0.15% 0.20%
Fee
- -------------------------------------------------------------------------------------------
Utilization 0.05% 0.05% 0.075% 0.10% 0.125% 0.15%
Fee
- -------------------------------------------------------------------------------------------
</TABLE>
For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:
"LEVEL I STATUS" exists at any date if, on such date, the Company's
Moody's Rating is A2 or better or the Company's S&P Rating is A or better.
"LEVEL II STATUS" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status and (ii) the Company's Moody's Rating is
A3 or better or the Company's S&P Rating is A- or better.
"LEVEL III STATUS" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status or Level II Status and (ii) the Company's
Moody's Rating is Baa1 or better or the Company's S&P Rating is BBB+ or better.
"LEVEL IV STATUS" exists at any date if, on such date (i) the Company
has not qualified for Level I Status, Level II Status or Level III Status and
(ii) the Company's Moody's Rating is Baa2 or better or the Company's S&P Rating
is BBB or better.
62
<PAGE> 69
"LEVEL V STATUS" exists at any date if, or on such date, (i) the Company
has not qualified for Level I Status, Level II Status, Level III Status or
Level IV Status and (ii) the Company's Moody's Rating is Baa3 or better or the
Company's S&P Rating is BBB- or better.
"LEVEL VI STATUS" exists at any date if, on such date, the Company has
not qualified for Level I Status, Level II Status, Level III Status, Level IV
Status or Level V Status.
"MOODY'S RATING" means, at any time, the rating issued by Moody's
Investors Service, Inc. and then in effect with respect to the Company's senior
unsecured long-term debt securities without third-party credit enhancement.
"S&P RATING" means, at any time, the rating issued by Standard & Poor's
Rating Services, a division of The McGraw-Hill Companies, Inc. and then in
effect with respect to the Company's senior unsecured long-term debt securities
without third-party credit enhancement.
"STATUS" means either Level I Status, Level II Status, Level III Status,
Level IV Status, Level V Status or Level VI Status.
The Applicable Margin and Applicable Fee Rate shall be determined in
accordance with the foregoing table based on the Company's Status as determined
from its then-current Moody's and S&P Ratings. The credit rating in effect on
any date for the purposes of this Schedule is that in effect at the close of
business on such date. If at any time the Company has no Moody's Rating or no
S&P Rating, Level VI Status shall exist. If the Company is split-rated and the
ratings differential is one level, the higher rating will apply. If the Company
is split-rated and the ratings differential is two levels, the intermediate
rating at the midpoint will apply. If the Company is split-rated and the
ratings differential is more than two levels, the rating that is one level
above the lowest rating will apply.
63
<PAGE> 70
Schedule 5.8
LIST OF SIGNIFICANT SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENT OF JURISDICTION OF
NAME OWNERSHIP INCORPORATION
- --------------------------------- --------------- -----------------
<S> <C> <C>
Friday Harbor Sand and Gravel Co. 100% Washington
International Atlantins Insurance 100% Vermont
Company
Lafarge Canada Inc. 100% Canada
Lafarge Dakota Inc. 100% North Dakota
Lafarge Florida Inc. 100% Florida
Mineral Solutions Inc. 100% Delaware
Systech Environmental Corporation 100% Delaware
Redland Genstar Inc. 100% Delaware
Redland Quarries (USA) Inc. 100% Delaware
Redland Quarries NY Inc. 100% Delaware
Redland Frontier Inc. 100% New York
Western Mobile Inc. 100% Delaware
Richvale York Block Inc. 61.8% Ontario
Valley Rite-Mix Ltd. 100% British Columbia
</TABLE>
64
<PAGE> 71
Schedule 5.14
PERMITTED LIENS
LAFARGE CORPORATION SUGAR CREEK PLANT, SUGAR CREEK, MO.
Title to this plan has been conveyed to the City of Sugar Creek, which
will hold title to the property and improvements for a period of 22
years pursuant to a local tax abatement procedure. Subsequently, title
will revert to Lafarge Corporation.
K & H CONCRETE (READY-MIX) LTD. (1)
$600,000 Operating Line
Secured By: $1,000,000 Fixed and Floating Charge
General Security Agreement covering all assets of K & H Concrete
(Ready-Mix) Ltd. in favor of the Royal Bank of Canada
RICHVALE YORK BLOCK INC. (1)
$4,000,000 Operating Line
Secured By: $10,000,000 Fixed Charge Debenture
General Security Agreement covering all assets of Richvale York Block
Inc. in favor of the Royal Bank of Canada.
PERIMETER CONCRETE LTD. (1)
$1,250,000 Operating Line
$ 12,000 Corporate Visa Expense
Secured By: $2,000,000 Fixed Charge Debenture
General Security Agreement covering all assets of Perimeter Concrete
Ltd. in favor of the Royal Bank of Canada.
WESTERN MOBILE INC.
$1,000,000 Capitalized Lease Obligation for the Quivas Office Building
which is leased by Western Mobile Inc. from Mr. Burt Boothby.
- -----------
(1) All amounts in Canadian Dollars.
65
<PAGE> 72
EXHIBIT A
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
_____________________________________ (the "Assignor") and _____________________
(the "Assignee") is dated as of ____________, ____. The parties hereto agree as
follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
(which, as it may be amended, modified, renewed or extended from time to time
is herein called the "Credit Agreement") described in Item 1 of Schedule 1
attached hereto. Capitalized terms used herein and not otherwise defined herein
shall have the meanings attributed to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if
the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of
Schedule 1 or two Business Days (or such shorter period agreed to by the Agent)
after a Notice of Assignment substantially in the form of Exhibit I attached
hereto has been delivered to the Agent. Such Notice of Assignment must include
any consents required to be delivered to the Agent by Section 12.3.1 of the
Credit Agreement. In no event will the Effective Date occur if the payments
required to be made by the Assignee to the Assignor on the Effective Date under
Sections 4 and 5 hereof are not made on the proposed Effective Date. The
Assignor will notify the Assignee of the proposed Effective Date no later than
the Business Day prior to the proposed Effective Date. As of the Effective
Date, (i) the Assignee shall have the rights and obligations of a Lender under
the Loan Documents with respect to the rights and obligations assigned to the
Assignee hereunder and (ii) the Assignor shall relinquish its rights and be
released from its corresponding obligations under the Loan Documents with
respect to the rights and obligations assigned to the Assignee hereunder.
4. PAYMENT OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Agent all payments of principal, interest
and fees with respect to the interest assigned hereby. The Assignee shall
advance funds directly to the Agent with respect to all Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby. [In consideration for the sale and assignment of Loans
hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an
amount equal to the principal amount of the portion of all Alternate Base Rate
Loans assigned to the Assignee hereunder and (ii) with respect to each
66
<PAGE> 73
Eurodollar Loan made by the Assignor and assigned to the Assignee hereunder
which is outstanding on the Effective Date, (a) on the last day of the Interest
Period therefor or (b) on such earlier date agreed to by the Assignor and the
Assignee or (c) on the date on which any such Eurodollar Loan becomes due (by
acceleration or otherwise)(the date as described in the foregoing clauses (a),
(b) or (c) being hereinafter referred to as the "Payment Date"), the Assignee
shall pay the Assignor an amount equal to the principal amount of the portion
of such Eurodollar Loan assigned to the Assignee which is outstanding on the
Payment Date. If the Assignor and the Assignee agree that the Payment Date for
such Eurodollar Loan shall be the Effective Date, they shall agree to the
interest rate applicable to the portion of such Loan assigned hereunder for the
period from the Effective Date to the end of the existing Interest Period
applicable to such Eurodollar Loan (the "Agreed Interest Rate") and any
interest received by the Assignee in excess of the Agreed Interest Rate shall
be remitted to the Assignor. In the event interest for the period from the
Effective Date to but not including the Payment Date is not paid by the Company
with respect to any Eurodollar Loan sold by the Assignor to the Assignee
hereunder, the Assignee shall pay to the Assignor interest for such period on
the portion of such Eurodollar Loan sold by the Assignor to the Assignee
hereunder at the applicable rate provided by the Credit Agreement. In the event
a prepayment of any Eurodollar Loan which is existing on the Payment Date and
assigned by the Assignor to the Assignee hereunder occurs after the Payment
Date but before the end of the Interest Period applicable to such Eurodollar
Loan, the Assignee shall remit to the Assignor the excess of the prepayment
penalty paid with respect to the portion of such Eurodollar Loan assigned to
the Assignee hereunder over the amount which would have been paid if such
prepayment penalty was calculated based on the Agreed Interest Rate. The
Assignee will also promptly remit to the Assignor (i) any principal payments
received from the Agent with respect to Eurodollar Loans prior to the Payment
Date and (ii) any amounts of interest on Loans and fees received from the Agent
which relate to the portion of the Loans assigned to the Assignee hereunder for
periods prior to the Effective Date, in the case of Alternate Base Rate Loans
or fees, or the Payment Date, in the case of Eurodollar Loans, and not
previously paid by the Assignee to the Assignor.](1) In the event that either
party hereto receives any payment to which the other party hereto is entitled
under this Assignment Agreement, then the party receiving such amount shall
promptly remit it to the other party hereto.
5. FEES PAYABLE BY THE ASSIGNEE. [The Assignee shall pay to the Assignor
a fee on each day on which a payment of interest, facility fees or utilization
fees is made under the Credit Agreement with respect to the amounts assigned to
the Assignee hereunder (other than a payment of interest, facility fees or
utilization fees for the period prior to the Effective Date or, in the case of
Eurodollar Loans, the Payment Date, which the Assignee is obligated to deliver
to the Assignor pursuant to Section 4 hereof). The amount of such fee shall be
the difference between (i) the interest or fee, as applicable, paid with
respect to the amounts assigned to the Assignee hereunder and (ii) the interest
or fee, as applicable, which would have been paid with respect to the amounts
assigned to the Assignee hereunder if each interest rate was of 1% less than
the interest rate paid by the Company or if the facility fee was of 1% less
than the facility fee paid by the Company or if the utilization fee was ___ of
1% less than the utilization fee paid by the Company, as applicable. In
- ---------------
(1) Each Assignor may insert its standard payment provisions in lieu of
the payment terms included in this Exhibit.
67
<PAGE> 74
addition,] the Assignee agrees to pay % of the recordation fee required to be
paid to the Agent in connection with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Company or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Company or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
property, books or records of the Company, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral
securing or purporting to secure the Loans or (vii) any mistake, error of
judgment, or action taken or omitted to be taken in connection with the Loans
or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information at it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents, (iii) appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto, (iv) agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of the Loan Documents are required to be performed by it as a Lender, (v)
agrees that its payment instructions and notice instructions are as set forth
in the attachment to Schedule 1, (vi) confirms that none of the funds, monies,
assets or other consideration being used to make the purchase and assumption
hereunder are "plan assets" as defined under ERISA and that its rights,
benefits and interests in and under the Loan Documents will not be "plan
assets" under ERISA, [and (vii) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying that the Assignee is entitled
to receive payments under the Loan Documents without deduction or withholding
of any United States federal income taxes].(2)
- --------
(2) To be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
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<PAGE> 75
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the
Assignor in connection with or arising in any manner from the Assignee's
non-performance of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Section 12.3.1 of the Credit Agreement to assign the
rights which are assigned to the Assignee hereunder to any entity or person,
provided that (i) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied,
including, without limitation, its obligations under Sections 4, 5 and 8
hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Commitment occurs between the date of this Assignment Agreement and
the Effective Date, the percentage interest specified in Item 3 of Schedule 1
shall remain the same, but the dollar amount purchased shall be recalculated
based on the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
of Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the
parties hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall
be the address set forth in the attachment to Schedule 1.
69
<PAGE> 76
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:
------------------------------------
Title:
---------------------------------
[NAME OF ASSIGNEE]
By:
------------------------------------
Title:
---------------------------------
70
<PAGE> 77
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement: Credit
Agreement dated as of December 8, 1998 among Lafarge
Corporation, the financial institutions from time to
time party thereto as lenders (the "Lenders") and The
First National Bank of Chicago, as Administrative
Agent for the Lenders (as the same may be amended,
restated, supplemented or otherwise modified from time
to time, the "Credit Agreement").
2. Date of Assignment Agreement: ____________, ____
3. Amounts (As of Date of Item 2 above):
a. Total of Commitments (Loans)(3) under
Credit Agreement $
------------
b. Assignee's Percentage of the facility
purchased under the Assignment Agreement(4) %
-------
c. Amount of Assigned Share in the facility
purchased the Assignment Agreement $
------------
4. Assignee's Aggregate (Loan Amount)(3) Commitment
Amount Purchased Hereunder: $
------------
5. Proposed Effective Date:
--------------, ----
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
--------------------------- ---------------------------
Title: Title:
------------------------ ------------------------
- ---------------
(3) If a Commitment has been terminated, insert outstanding Loans in place of
Commitment.
(4) Percentage taken to 10 decimal places.
71
<PAGE> 78
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
ADMINISTRATIVE INFORMATION SHEET
Attach Assignor's Administrative Information Sheet, which must
include notice addresses for the Assignor and the Assignee
72
<PAGE> 79
EXHIBIT I
to Assignment Agreement
NOTICE
OF ASSIGNMENT
[Date]
To: [Lafarge Corporation
11130 Sunrise Valley Drive
Suite 300
Reston, Virginia 20191](5)
The First National Bank of Chicago, as Agent
One First National Plaza
Chicago, Illinois 60670
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement") described
in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to
[the Company and](5) the Agent pursuant to Section 12.3.2 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of __________________, ____ (the "Assignment"), pursuant to
which, among other things, the Assignor has sold, assigned, delegated and
transferred to the Assignee, and the Assignee has purchased, accepted and
assumed from the Assignor the percentage interest specified in Item 3 of
Schedule 1 of all outstandings, rights and obligations under the Credit
Agreement relating to the facilities listed in Item 3 of Schedule 1. The
Effective Date of the Assignment shall be the later of the date specified in
Item 5 of Schedule 1 or two Business Days (or such shorter period as agreed to
by the Agent) after this Notice of Assignment and any consents and fees
required by Sections 12.3.1 and 12.3.2 of the Credit Agreement have been
delivered to the Agent, provided that the Effective Date shall not occur if any
condition precedent agreed to by the Assignor and the Assignee has not been
satisfied.
- -----------
(5) To be included only if consent must be obtained from the Company pursuant
to Section 12.3.1 of the Credit Agreement.
73
<PAGE> 80
4. The Assignor and the Assignee hereby give to the Company and the
Agent notice of the assignment and delegation referred to herein. The Assignor
will confer with the Agent before the date specified in Item 5 of Schedule 1 to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof, and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter. The
Assignor shall notify the Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee. At the
request of the Agent, the Assignor will give the Agent written confirmation of
the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before the
Effective Date the processing fee of $3,500 required by Section 12.3.2 of the
Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and the
Assignee request and direct that the Agent prepare and cause the Company to
execute and deliver new Notes or, as appropriate, replacement notes, to the
Assignor and the Assignee. The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Note received by it from the Company
upon its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment instructions
are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the funds,
monies, assets or other consideration being used to make the purchase pursuant
to the Assignment are "plan assets" as defined under ERISA and that its rights,
benefits, and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the Loan
Documents in accordance with the terms thereof. The Assignee acknowledges that
the Agent has no duty to supply information with respect to the Company or the
Loan Documents to the Assignee until the Assignee becomes a party to the Credit
Agreement.(6)
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
----------------------------- -----------------------------
Title: Title:
-------------------------- --------------------------
- -----------
(6) May be eliminated if Assignee is a party to the Credit Agreement prior to
the Effective Date.
74
<PAGE> 81
ACKNOWLEDGED AND [ACKNOWLEDGED AND
CONSENTED TO: CONSENTED TO:
THE FIRST NATIONAL BANK LAFARGE CORPORATION]
OF CHICAGO, as Agent
By: By:
------------------------------- --------------------------
Title: Title:
---------------------------- -----------------------
75
<PAGE> 82
[Attach photocopy of Schedule 1 to Assignment]
76
<PAGE> 83
EXHIBIT B
NOTE
$ ,
-------------- ------------
- ----------
LAFARGE CORPORATION, a Maryland corporation (the "Company"), promises to
pay to the order of ____________________________________ (the "Lender") the
lesser of the principal sum of ______________________________ Dollars or the
aggregate unpaid principal amount of all Loans made by the Lender to the
Company pursuant to Article II of the Credit Agreement (as hereinafter
defined), in immediately available funds at the main office of The First
National Bank of Chicago in Chicago, Illinois, as Agent, together with interest
on the unpaid principal amount hereof at the rates and on the dates set forth
in the Credit Agreement. The Company shall pay the principal of and accrued and
unpaid interest on the Loans in full on the Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Credit Agreement dated as of December 8, 1998 (which, as it
may be amended or modified and in effect from time to time, is herein called
the "Credit Agreement"), among the Company, the lenders party thereto,
including the Lender, and The First National Bank of Chicago, as Administrative
Agent, to which Credit Agreement reference is hereby made for a statement of
the terms and conditions governing this Note, including the terms and
conditions under which this Note may be prepaid or its maturity date
accelerated. Capitalized terms used herein and not otherwise defined herein are
used with the meanings attributed to them in the Credit Agreement.
LAFARGE CORPORATION
By:
----------------------------
Title:
-------------------------
77
<PAGE> 84
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF LAFARGE CORPORATION
DATED ____________, ___
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- -------------------------------------------------------------------------
78
<PAGE> 85
EXHIBIT C
OPINION OF DAVID C. JONES,
VICE PRESIDENT - LEGAL AFFAIRS
AND SECRETARY OF THE COMPANY
[Date]
To each of the Lenders party to
the Credit Agreement referred to
below and to The First National
Bank of Chicago, as Agent
Ladies and Gentlemen:
As Vice President - Legal Affairs and Secretary for Lafarge
Corporation, a Maryland corporation (the "Company"), I have acted as counsel
for the Company in connection with the Credit Agreement dated as of December 8,
1998 (the "Credit Agreement") among the Company, the financial institutions
from time to time party thereto as Lenders and The First National Bank of
Chicago, as Administrative Agent. Unless otherwise defined herein, capitalized
terms defined in the Credit Agreement are used herein as therein defined.
I have reviewed a copy of the Credit Agreement and the Notes and have
examined the Articles of Incorporation and by-laws of the Company and such
other corporate records, certificates, agreements and other documents as I
deemed necessary for the opinions hereinafter expressed.
Based upon the foregoing and subject to the qualifications and
exceptions hereinafter set forth, I am of the opinion that:
1. The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Maryland.
2. The Company is duly qualified to do business in the State of
Maryland and is duly qualified as a foreign corporation in each of the
jurisdictions set forth on Schedule 1 hereto, which jurisdictions, to the best
of my knowledge, are all of the jurisdictions in which the Company has a
significant business presence.
3. The execution, delivery and performance by the Company of the
Credit Agreement and the Notes are within the Company's corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene any provision of the Articles of Incorporation or by-
79
<PAGE> 86
laws of the Company, or contravene or constitute a default under any provision
of applicable law or regulation or, to the best of my knowledge, of any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Company or, except as permitted by the Credit Agreement, result in the
creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries.
4. The Credit Agreement constitutes the valid and binding agreement of
the Company and the Notes constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms except to the extent that enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by equity principles (regardless of whether
enforcement is sought in equity or at law).
5. Except as set forth in the Company's Forms 10-K and 10-Q as filed
with the Securities and Exchange Commission for the fiscal year ended December
31, 1997 and the fiscal quarter ended September 30, 1998, respectively, there
is no action, suit or proceeding pending or, to the best of my knowledge,
threatened against or affecting the Company or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision that could have a
Material Adverse Effect.
The opinions expressed above are based in part upon the assumptions and
are subject to the exceptions, limitations and qualifications set forth below:
(a) The foregoing opinions are limited in all respects to the laws of
the Commonwealth of Virginia and, to the extent applicable, the Annotated
Code of Maryland, Corporations and Associations (without regard to case
law), with respect to the State of Maryland. I am licensed to practice law
in the Commonwealth of Virginia and I am not an expert on, and, except for
applicable federal law and the Maryland law referred to above, have not in
connection with this opinion made any investigation of, the laws of any
other jurisdiction. Insofar as this opinion relates to matters of Illinois
law, I have, with your permission, relied upon the opinion dated
______________ of Sidley & Austin, special Illinois counsel for the Agent,
a copy of which opinion has been delivered to you.
(b) In rendering the opinion set forth in paragraph 4 above, I have
assumed that (i) the Agent and each of the Lenders is duly authorized to
and has executed and delivered the Credit Agreement and (ii) upon the
execution and delivery of the Credit Agreement by the Agent and each of the
Lenders, such agreement will constitute the valid and binding obligation of
each of such parties.
(c) In rendering the opinion set forth in paragraph 2 above as to the
Company's qualification to do business and good standing in each state
listed on Schedule 1 hereto, I have relied solely upon certificates of
public officials of such states dated as of ___________, 1998 together with
a certificate of an officer of the Company dated the date hereof as to the
Company's continued qualification to do business and good standing in such
states.
80
<PAGE> 87
(d) No opinion is expressed herein with respect to the securities laws
of the United States or of any state or jurisdiction other than the
Commonwealth of Virginia.
(e) This opinion is limited to, and no opinion is implied or may be
inferred beyond, the matters expressly stated herein.
(f) This opinion is provided to you pursuant to Section 4.1 of the
Credit Agreement and for no other purpose. This opinion is to be limited in
its use to reliance by you in connection with the transactions contemplated
by the Credit Agreement. In rendering their opinion referred to above,
Sidley & Austin may rely on this opinion as if it were addressed to them.
No other person or entity may rely upon any opinion set forth herein except
with my prior written consent.
Respectfully submitted,
81
<PAGE> 88
SCHEDULE 1
STATES OF FOREIGN QUALIFICATION
LAFARGE CORPORATION
Illinois 1-28-88
Iowa 1-15-91
Kansas 1-22-88
Michigan 1-21-88
Missouri 1-17-91
Ohio 1-22-88
Pennsylvania 1-25-88
Washington 3-7-88
82
<PAGE> 89
EXHIBIT D
OPINION OF CANADIAN COUNSEL
FOR LAFARGE CANADA, INC.
[Date]
To each of the Lenders party to
the Credit Agreement referred to
below and to The First National
Bank of Chicago, as Agent
Ladies and Gentlemen:
As Director, Legal Services and Secretary of Lafarge Canada Inc., a
Canadian corporation (the "Corporation"), I have acted as counsel for the
Corporation in connection with the Credit Agreement dated as of December 8,
1998 (the "Credit Agreement"), among Lafarge Corporation, the financial
institutions from time to time party thereto as Lenders and The First National
Bank of Chicago, as Administrative Agent.
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records, extra-provincial
licenses and other similar documents issued by governmental authorities and
other documents, and have conducted such other investigations of fact and law
as I have deemed necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1) the Corporation is duly incorporated, validly existing and in good
standing under the laws of Canada; and
2) the Corporation has all governmental licenses, authorizations,
consents and approvals required to carry on its business and is in good
standing in each province or other jurisdiction in which the nature of its
business or properties requires such qualification, except for those provinces
or jurisdictions in which the failure to be so qualified or be in good standing
could not reasonably be expected to have a Material Adverse Effect (as defined
in the Credit Agreement).
In rendering this opinion, I am not purporting to opine as to any laws
other than the laws of the Province of Quebec and the federal laws of Canada
applicable therein in effect on the date hereof.
83
<PAGE> 90
This opinion is provided to you pursuant to Section 4.1 of the Credit
Agreement and for no other purpose. This opinion is to be limited and to be
used in reliance by you in connection with the transactions contemplated by the
Credit Agreement. No other person or entity may rely upon any opinion set forth
herein except with my prior written consent.
Very truly yours,
------------------------------
Alain Fredette
Director, Legal Services
and Secretary
84
<PAGE> 91
EXHIBIT E
OPINION OF SIDLEY & AUSTIN
COUNSEL TO THE AGENT
[Date]
To each of the Lenders party to
the Credit Agreement referred to
below and to The First National
Bank of Chicago, as Agent
Re: Lafarge Corporation
Ladies and Gentlemen:
We have acted as counsel to The First National Bank of Chicago, as
Administrative Agent, in connection with that certain Credit Agreement, dated
as of December 8, 1998 (the "Credit Agreement"), among Lafarge Corporation, a
Maryland corporation (the "Company"), the financial institutions from time to
time party thereto as Lenders and The First National Bank of Chicago, as
Administrative Agent. Capitalized terms used herein and not otherwise defined
are used as defined in the Credit Agreement.
In connection with this opinion, we have examined and relied upon
originals or copies, certified or otherwise, of the following documents:
(a) the Credit Agreement;
(b) [the Notes]; and
(c) the opinion of even date herewith of David C. Jones, Vice
President - Legal Affairs and Secretary of the Company (the
"Opinion").
In our examination of the Credit Agreement [and the Notes], we have assumed the
authenticity of all such documents submitted to us as originals, the conformity
to authentic originals of all such documents submitted to us as copies, the
genuineness of all signatures, the due authorization, execution and delivery by
each of the parties executing such documents and such other legal and factual
assumptions as are described in the Opinion. We have also assumed the accuracy
of the legal conclusions set forth in the Opinion, except as to the matters on
which we expressly opine below. We have further assumed that the execution,
delivery and performance of the Credit Agreement [and
85
<PAGE> 92
the Notes] by the Company (i) do not require any action by any governmental
agency or private party except for those which have been obtained, (ii) do not
violate any provision of law applicable to the and (iii) do not conflict with,
result in a breach of or constitute a default under any indenture, agreement,
or other instrument to which the Company or any of its Subsidiaries is a party
or by which any of them is bound.
Based upon the foregoing assumptions and examination of documents and
upon such investigation as we have deemed necessary, and subject to the
qualifications set forth in subparagraphs (a) through (d) below, we are of the
opinion as of the date hereof that the Credit Agreement [and the Notes]
constitute[s] the legal, valid and binding obligation[s] of the Company
enforceable against the Company in accordance with [its] [their respective]
terms.
Our opinion is expressly qualified as follows:
(a) Our opinion is subject to the effect of applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and other laws affecting
creditors' rights generally and to the effect of general equitable principles
(whether considered in a proceeding in equity or at law). In applying such
principles, a court, among other things, might not allow a creditor to
accelerate maturity of a debt upon the occurrence of a default deemed
immaterial or for non-credit reasons or might decline to order a debtor to
perform covenants. Such principles applied by a court might include a
requirement that a creditor act with reasonableness and in good faith.
Furthermore, a court may refuse to enforce a covenant or any provision
providing for indemnification if and to the extent that it deems such covenant
or indemnification provision to be violative of applicable public policy.
(b) We render no opinion with respect to the enforceability of Section
12.2.3 of the Credit Agreement.
(c) Our opinions expressed are limited to the law of the State of
Illinois and the federal laws of the United States, and we do not express any
opinion herein concerning any other laws.
(d) We express no opinion as to the effect of the compliance or
noncompliance by the Agent or any of the Lenders with any federal or state laws
or regulations applicable to the Agent or any of the Lenders because of any
such entity's legal or regulatory status or the nature of such entity's
business or requiring the Agent or any of the Lenders to qualify to conduct
business in any jurisdiction.
In rendering the Opinion, David C. Jones, Vice President - Legal Affairs
and Secretary of the Company, may rely on this opinion as if it were addressed
to him.
The opinions expressed herein are being delivered to you as of the date
hereof and are solely for your benefit in connection with the transactions
contemplated in the Credit Agreement and,
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<PAGE> 93
except as set forth above, may not be relied on in any manner or for any
purpose by any other person, nor any copies published, communicated or
otherwise made available in whole or in part to any other person or entity
without our express prior written consent, except that you may furnish copies
thereof (1) to any party that becomes a Lender after the date hereof pursuant
to the Credit Agreement and to a prospective assignee of the Loans, (2) to your
independent auditors and attorneys, (3) upon the request of any state or
federal authority or official having regulatory jurisdiction over you, and (4)
pursuant to order or legal process of any court or governmental agency or in
any legal proceedings involving the Credit Agreement or this opinion. We do not
express any opinion, either implicitly or otherwise, on any issue not expressly
addressed above. The opinions expressed above are based solely on factual
matters in existence as of the date hereof and laws and regulations in effect
on the date hereof. We assume no obligation to revise or supplement this
opinion should such factual matters change or should such laws or regulations
be changed by legislative or regulatory action, judicial decision or otherwise.
Very truly yours,
87
<PAGE> 94
EXHIBIT F
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To The First National Bank of Chicago,
as Administrative Agent (the "Agent")
under the Credit Agreement
described below
Re: Credit Agreement dated as of December 8, 1998 (as the same may be
amended or modified, the "Credit Agreement"), among Lafarge Corporation
(the "Company"), the Lenders named therein and the Agent. Capitalized
terms used herein and not otherwise defined herein shall have the
meanings assigned thereto in the Credit Agreement.
The Agent is specifically authorized and directed to act upon the
following standing money transfer instructions with respect to the proceeds of
Advances or other extensions of credit from time to time until receipt by the
Agent of a specific written revocation of such instructions by the Company,
provided, however, that the Agent may otherwise transfer funds as hereafter
directed in writing by the Company in accordance with Section 13.1 of the
Credit Agreement or based on any telephonic notice made in accordance with
Section 2.14 of the Credit Agreement.
Facility Identification Number(s)
---------------------------------------
Customer/Account Name
---------------------------------------------------
Transfer Funds To
-------------------------------------------------------
For Account No.
---------------------------------------------------------
Reference/Attention To
--------------------------------------------------
Authorized Officer (Customer Representative) Date
-------------
- --------------------------------- ------------------------------------
(Please Print) Signature
88
<PAGE> 95
Bank Officer Name Date
-----------------------------
- --------------------------------- ----------------------------------
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
89
<PAGE> 96
EXHIBIT G
COMPLIANCE CERTIFICATE
To: The Lenders party to the
Credit Agreement described below
This Compliance Certificate (this "Certificate") is furnished pursuant
to that certain Credit Agreement dated as of December 8, 1998 among Lafarge
Corporation, the Lenders and The First National Bank of Chicago, as
Administrative Agent (as the same may be amended and in effect from time to
time, the "Credit Agreement"). Unless otherwise defined herein, capitalized
terms used in this Certificate have the meanings ascribed thereto in the Credit
Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected or appointed ___________ of the Company;
2. I have reviewed the terms of the Credit Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Company and its Consolidated Subsidiaries
during the accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
a Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the Company's compliance with Sections 6.14 and 6.15 of the
Agreement, all of which data and computations are true, complete and correct.
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<PAGE> 97
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Company has taken, is taking, or proposes to
take with respect to each such condition or event:
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
The foregoing certifications, together with the computations set forth
in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this ____ day of
____________, _____.
--------------------------
91
<PAGE> 98
[SAMPLE]
SCHEDULE I TO COMPLIANCE CERTIFICATE
Schedule of Compliance as of ___________, ____with
Provisions of Sections 6.14 and 6.15 of
of the Credit Agreement
A. Leverage Ratio (Section 6.14).
1. Consolidated Total Debt $
------------
2. Consolidated Net Worth $
------------
3. Total Capitalization $
(Consolidated Debt +Consolidated Net Worth) ------------
4. Ratio of Line 1 to Line 3 %
(may not exceed 50%) -------
B. Interest Coverage Ratio (Section 6.15)
1. Consolidated EBITDA for 12 month period $
(pre-tax income (loss) + interest expense, ------------
net of interest income + depreciation,
depletion and amortization)
2. Consolidated Interest Expense $
------------
3. Ratio of Line 1 to Line 2 to 1.00
(may not be less than 3.00 to 1.00) -----
92
<PAGE> 1
Exhibit 10.26
LAFARGE CORPORATION
NONEMPLOYEE DIRECTOR RETIREMENT PLAN, AS AMENDED
1. Effective Date. The effective date of the Plan shall be January 1, 1989.
2. Eligibility. All members of the Board of Directors of Lafarge Corporation
who are not employees of Lafarge Corporation or any wholly-owned or
majority-owned subsidiary of Lafarge Corporation, and who meet all other
eligibility requirements set forth in the Plan, shall be entitled to receive
the benefits specified in the Plan.
3. (a) Normal Retirement. A director who is 70 years of age or older (or,
with the approval of the Board Governance Committee of the Board, between the
ages of 65 and 69, inclusive) and has seven or more years of Credited Service
(as described below) at the date of retirement shall receive U.S. $15,000 per
year for the remainder of his/her life, and his/her surviving spouse, if any,
shall receive a survivor's benefit of U.S. $7,500 per year for the remainder of
her/his life following such director's death.
(b) Early Retirement. A director who does not meet the requirements of
paragraph (a) above but who is 55 years of age or older and has three or more
years of Credited Service at the date of retirement shall receive U.S. $15,000
per year for a period of time equal to his/her Credited Service at the date of
retirement and, in the event of his/her death prior to the end of such period,
his/her surviving spouse, if any, shall receive a survivor's benefit of U.S.
$7,500 per year for the balance of such period (or until such spouse's death,
if earlier).
(c) Survivor's Benefits Following Death in Office. If a director who meets
the requirements of paragraph (a) or (b) above dies in office, his/her
surviving spouse, if any, shall receive the survivor's benefit described in the
applicable paragraph beginning as of the date of such director's death.
(d) Pension Increase. Pension and survivor's benefit amounts described in
paragraphs (a), (b), and (c) above shall be increased to $20,000 and $10,000,
respectively, for eligible directors who retire or die in office on or after
August 1, 1998.
4. Credited Service. The number of years of Credited Service under the Plan
for each Nonemployee Director shall be determined at the date of his/her
retirement as a director of Lafarge Corporation or his/her death while in
office and shall equal the number of full years that he/she has served
(including service prior to the effective date of the Plan), without
interruption, as a director of Lafarge Corporation and/or General Portland
Inc., formerly a Delaware corporation and wholly-owned subsidiary of the
Corporation, and/or Lafarge Canada Inc.
<PAGE> 2
(formerly Canada Cement Lafarge Ltd.), a Canadian corporation and a
wholly-owned subsidiary of the Corporation, provided, however, that if a
Nonemployee Director was at any time an employee of Lafarge Corporation or any
wholly-owned or majority-owned subsidiary of Lafarge Corporation, the number of
years of Credited Service under the Plan for such Nonemployee Director shall
include only the period of time beginning after the date on which he/she ceased
to be such an employee.
5. Payment of Benefits. The obligation of Lafarge Corporation to pay benefits
in accordance with the Plan shall be a general obligation of the Corporation
and shall not be funded in advance.
<PAGE> 1
EXHIBIT 11
LAFARGE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON EQUITY SHARE
(Unaudited and in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------------------
1998 1997 1996
---------------------------------------------------
<S> <C> <C> <C>
Basic Calculation
Net income applicable to common equity shareholders $ 235,500 $ 181,976 $ 140,866
===================================================
Weighted average number of common equity shares outstanding 72,071 71,128 69,783
===================================================
Basic net income per common equity share $ 3.27 $ 2.56 $ 2.02
===================================================
Diluted Calculation
Net income $ 235,500 $ 181,976 $ 140,866
Add after tax interest expense applicable to 7% Convertible Debentures - - 4,153
===================================================
Net income assuming Dilution $ 235,500 $ 181,976 $ 145,019
===================================================
Weighted average number of common equity shares outstanding 72,071 71,128 69,783
Net effect of dilutive stock options based on the treasury stock method 594 567 309
Add additional shares assuming conversion of 7% Convertible Debentures - - 4,285
---------------------------------------------------
Weighted average number of common equity shares assuming full conversion
of all potentially dilutive securities 72,665 71,695 74,377
===================================================
Diluted net income per common equity share $ 3.24 $ 2.54 $ 1.95
===================================================
</TABLE>
<PAGE> 1
Exhibit 21
MAJOR SUBSIDIARIES OF LAFARGE CORPORATION
The following indicates the corporate names (and all other significant names,
if any, under which business is conducted) and jurisdictions of incorporation
of the subsidiaries of Lafarge Corporation, all of which are wholly owned or
majority owned. Indirect subsidiaries of Lafarge Corporation are indented and
listed following their direct parent corporations.
Jurisdiction
Name(s) of Incorporation
- -------------------------------- ----------------
American Transport Leasing, Inc. Delaware
Cement Transport, Ltd. North Dakota
Friday Harbor Sand & Gravel Co. Washington
International Atlantins Insurance Company Vermont
Lafarge Dakota Inc. North Dakota
Lafarge Florida Inc. Florida
Mineral Solutions Inc. Delaware
Mountain Prairie Insurance Company, Inc. Vermont
Systech Environmental Corporation Delaware
Tews Company Delaware
Redland, Inc. Delaware
Redland Genstar, Inc. Delaware
Redland Quarries NY Inc. Delaware
Western Mobile, Inc. Delaware
Lafarge Canada Inc. Canada
International Atlantins Agencies Inc. British Columbia
Johnson Concrete & Material Ltd. Saskatchewan
Lafarge Gypsum Canada Inc. Newfoundland
Logan Paving Ltd. New Brunswick
Lulu Transport Inc. British Columbia
Mitchell Park Ash Ltd. Ontario
N C Rubber Products Inc. Ontario
National Slag Limited Ontario
Quality Ready-Mix Limited Ontario
Re-Wa Holdings Ltd. Alberta
Richvale York Block Inc. Ontario
Les sablieres Forestville Inc. Quebec
Valley Rite-Mix Ltd. British Columbia
W.M. Rogers Custom Mobile Concrete Ltd. Ontario
Lafarge Corporation also does business under the following names: Florida
Portland Cement Company, Lafarge Construction Materials, Lafarge Gypsum, Mobile
Premix Concrete, Inc., Redland Frontier, Inc., Trinity Portland Cement Company,
Western-Mobile Northern, Inc., Western Mobile Southern, Inc., Western-Mobile
New Mexico, Inc., Western Mobile Santa Fe, Inc.
Lafarge Canada Inc. also does business under the following names: Alberta
Concrete Products, Apex Gravel, Bestpipe, Canada Concrete, Capital Concrete,
Challenge Concrete, Champion Concrete, Cinq Concrete, Coldstream Concrete,
Columbia Concrete, Conmac Western Industries, Consolidated Sand & Gravel
Company, Construction Chemicals, Country Building Supplies, Crown Equipment,
Crown Paving and Engineering, Duracon, Forbes Ready Mix, Francon-Lafarge,
Guelph Sand and Gravel, Great Lakes Flyash, High River Concrete, Johnston Ready
Mix, Lafarge Concrete, Lafarge Construction Materials, Lethbridge Concrete
Products, Manitoulin Precast, Maritime Cement, Nelson Aggregate Co., O.K.
Construction Materials, Permanent-Lafarge, Red-D-Mix Block, Richvale - McCord,
Richvale - York, Rocky Mountain Precast, Spartan Explosives, Standard
Aggregates, Standard Asphalt, Supercrete, Trans-Alta Flyash.
Information regarding 63 additional subsidiaries of the Registrant has been
omitted because such subsidiaries, considered in the aggregate as a single
subsidiary, do not constitute a "significant subsidiary" as defined in Rule
1-02(w) of Regulation S-X [17 CFR 210.1-02(w)].
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-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, File No. 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), (vii) Registration
Statement on Form S-8, File No. 33-51873, (viii) Registration Statement on Form
S-8, File No. 333-65897, (ix) Registration Statement on Form S-8, File No.
333-65899, and (x) Registration Statement on Form S-3, File No. 333-57333.
ARTHUR ANDERSEN LLP
Washington, D.C.
March 26, 1999
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